Monday November 13 2017, Daily News Digest

p2p lending credit score

News Comments Today’s main news: SoFi cancels plans for Australia, Canada. SoFi completes largest consumer loan securitization to date. Elevate launching credit card for sub-prime consumers. Funding Circle posts record month. Zopa developing IFISA transfer features. PPDai debuts weakly in New York. WeLab raises $220M for expansion. Australia upgrades RateSetter. Today’s main analysis: Three Myths of Peer-to-Peer Lending. Today’s thought-provoking articles: Cleveland […]

p2p lending credit score

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Asia

MENA

Africa

News Summary

United States

SoFi drops plans to enter Australia, Canada (Death Rattle Sports), Rated: AAA

Online lender Social Finance Inc said on Thursday it is pulling back from expanding into Australia and Canada as previously planned, choosing instead to focus on improving its core lending products like student loans and mortgages in its home market.

The San Francisco-based company will also drop its plans to push into asset management, according to a letter from its interim CEO to shareholders and seen by Reuters.

SoFi Completes Largest Consumer Loan Securitization to Date (Crowdfund Insider), Rated: AAA

On Friday, SoFi announced it has completed a $727 million issuance of SoFi Consumer Loan Program 2017-6 (“SCLP 2017-6”) notes, making it the largest offering of securities backed by consumer loans and is SoFi’s 11th ABS transaction this year, bringing the lender’s total issuance for 2017 to $6.1 billion. 

Fintech Company Elevate Launching a Credit Card for Sub-Prime Consumers (LendEDU), Rated: AAA

Elevate, a fintech lender from Texas, recently announced it wants to try out the credit card business according to Business Insider. On Monday, the company released its plans for 2018 which included a variety of new products and a possible partnership with a bank.

One of the products that Elevate is looking to release is a credit card with a third-party bank by next year. The card would be potentially geared toward subprime borrowers, which constitutes a large group of Elevate’s customer base.

Another company, Petal, is trying to offer a new credit card in 2018. It’s goal is to increase the availability of credit cards to consumers who are lacking credit.

Fed researchers compare P2P lending to subprime mortgages (Finextra), Rated: AAA

The peer-to-peer lending industry has the potential to destabilise consumer balance sheets, with loan performances bearing a striking resemblance to the subprime mortgage market before the 2007 crisis, warns a new paper from the Cleveland Federal Reserve.

And things could get much worse, warn the Fed researchers after looking through credit bureau data on 90,000 people who took out P2P loans between 2007 and 2012 and comparing them to 10 million traditional borrowers.

The researchers conclude that, in fact, P2P loans do not achieve these things and actually resemble “predatory loans” in terms both of who takes them out and the impact on borrowers’ finances.

Source: Finextra

Peer-To-Peer Loans Remind The Cleveland Fed Of An Obscure Historical Episode Known As ‘The Subprime Mortgage Crisis’ (Dealbreaker), Rated: A

Are consumers really better off skipping the local BofA branch and instead filling in a few online forms and having an algorithm spit out an interest rate? Are all these newfangled credit-rating tools helping to serve those traditionally brushed aside by the big boys? Is P2P good?

Researchers at the Cleveland Fed have an answer to all these questions: No.

Source: Dealbreaker

The pattern is worse for those with credit card debt; compared to the control group, P2P borrowers see a 47 percent increase in credit card debt after getting an online loan.

Meanwhile LendingClub has posted exactly two quarters of profit since going public in 2014. Its last earnings report sent shares down 20 percent.

Federal Reserve Cautions on Peer to Peer Lending (Crowdfund Insider), Rated: AAA

According to the authors, Yuliya Demyanyk at the Cleveland Federal Reserve, Elena Loutskina at the University of Virginia, and Daniel Kolliner at the University of Maryland, peer to peer loans resemble predatory loans in terms of the consumer market they serve and impact on consumer finances.

Among their findings:

  • Credit scores of P2P borrowers fall substantially after taking out a loan when compared to peers who did not take out a P2P loan.
  • Loan delinquency rates are more than 50% higher for P2P borrowers two years after the loan origination when compared to peers who did not take out a P2P loan.
  • P2P borrowers exhibit a 47% increase in credit card balances after obtaining P2P credit when compared to similar non-P2P borrowers.

Read the full document here.

Federal Reserve of Cleveland Makes Some Dubious Claims in a Report on P2P Lending (Lend Academy), Rated: AAA

[Side note: This report seems to be using P2P lending to mean the broader online lending industry beyond just Lending Club and Prosper so keep that in mind when you see me using the P2P lending term in this article].

One of the things I disliked most about this new report was the how opaque their analysis was. They just said they used data provided by TransUnion “in which we observe about 90,000 distinct individuals who received their first P2P loan between 2007 and 2012.”. They provide no indication as to which platforms this data is based upon and then we see this very strange chart below showing supposed delinquency rates by year.

In 2006, the only consumer P2P lending (or any significant online lending) platform in existence in this country was Prosper and their 2006 vintage was terrible. This data was all publicly available at one point and I reported that of the 28,936 loans issued during those initial two and a half years 10,456 loans defaulted, a 36% default rate. Subsequent vintages at Prosper performed much better. When I see the table above showing those numbers I have to question the entire data set of the report because obviously their 2006 data is wrong.

Online loans leave consumers deeper in debt, Fed research says (American Banker), Rated: A

The study, published Thursday, is likely to spark intense debate. One of its findings is that consumers who take out online loans, sometimes called peer-to-peer loans or marketplace loans, likely have access to traditional banking services.

“We are scratching our heads,” Nathaniel Hoopes, executive director of the Marketplace Lending Association, an industry trade group, said in an email, “because the Philadelphia and Chicago Federal Reserve recently conducted a more granular study and reached the opposite conclusion as this Cleveland Fed research.”

In 2010, digital lenders originated $249 million in unsecured personal loans, according to a recent study by the credit bureau TransUnion. By last year, the annual loan volume had grown more than ninetyfold.

The study finds that the consumers who took out online loans grew their other debts by about 35% more over the next two years than did their counterparts who did not take out the loans.

Source: American Banker

 

Square’s new strategy is paying off. Its stock is up 175% this year (KITV), Rated: A

Square is trying to upend the way people pay for stuff and change the way businesses handle money.

Clearly, its strategy is working: Square’s stock is up 175% this year. That’s more than 11 times the S&P 500’s 15% growth.

The company cashed in on those subscription services, which generated around $65 million in revenue — up more than 80%.

It is also making big money from its largest merchants. Almost half of the $17.4 billion in payments Square handled last quarter came from merchants with more than $125,000 in annual sales.

It has lent small businesses more than $300 million.

The CFO of Goldman Sachs keeps talking about becoming the Google of Wall Street (Business Insider), Rated: A

A Harvard Business School case study on the bank’s digital strategy was presented as part of the executive MBA program last week.

The case study runs through some of the history of Goldman Sachs’ efforts to switch to thinking like a tech company, some of the tension it has caused, and the payoffs.

Travel Companies Start Lending Consumers Money to Book Trips (Skift), Rated: A

Several major sellers of travel, such as Expedia, United, JetBlue, Southwest, and Lufthansa, are testing extending credit to U.S. consumers to enable them to pay for their vacations over time rather than up-front.

Paying for a trip in monthly payments primarily appeals to consumers with average credit ratings who are willing to accept short-term, interest-based loans.

But consumers with high credit scores also appear to be getting tempted into splurging on luxury trips if companies lend them credit on attractive terms.

The new installment products — called layaway when paid off prior to trip and a loan if paid off after — have been common in developing countries.

A few fintech startups — most prominently Affirm, Airfordable, and UpLift — are hoping that their services will make delayed payment for travel fashionable.

THE DOWNLOW ON UPLIFT

This year, UpLift said that its average 12-month travel loan through travel brands was $2,420, said CEO Brian Barth in an interview. For “highly-qualified” borrowers, it has typically charged 8.99 percent annual percentage rate, he said.

Consumers participating in UpLift’s loans had an average FICO (Fair Isaac Corp.) score of 692. Scores range from 300 to 850. UpLift has lent money to customers with FICO scores as low as 475.

AFFIRM’S PROMISE

Affirm said that its travel partners see a 20 percent increase in customer conversions, on average, by offering its product.

PeerIQ’s Q3 Public Lender Tracker (PeerIQ Email), Rated: A

The tracker, a new release from PeerIQ’s research and analytics team, examines credit performance trends across publicly traded banks, FinTechs, and card issuers. We also deep-dive into the earnings of Lending Club and OnDeck. Stay tuned for a release this week and scroll down for an excerpt.

Real Estate Crowdfunding Platform Groundfloor Preps for Reg A+ Offer (Crowdfund Insider), Rated: A

Groundfloor has filed a Form 1-A with the Securities and Exchange Commission indicating its intent to sell shares in the real estate crowdfunding platform.  According to the filing, GroundFloor is offering up to 2.5 million in Common Stock at $10 per share. Interestingly, the Groundfloor offering circular indicates the company intends to limit the offer and sale solely to accredited investors – even though under Reg A+ issuers may sell to both accredited and non-accredited investors alike (although in other parts of the document it appears they will accept non-accredited investors).

Real Estate Crowdfunding: Trends to Watch in 2018 (Realty Biz News), Rated: A

Real estate crowdfunding is a growing industry of great interest for realtors and investors. A report on Crowdfunding for Real Estate by crowdsourcing.org anticipated a $3.5 billion growth for real estate crowdfunding in 2016, and experts project that the industry will grow to over $300 billion by 2025.

Source: Realty Biz News

Digital mortgages advancing, but borrowers still want more speed (National Mortgage News), Rated: A

Despite digital mortgage advances, borrowers think it still takes too long to get a loan, J.D. Power finds in its annual customer satisfaction ranking of originators.

The most frequently used method for submitting a mortgage application for both refinances and purchases was online for the first time, according to the survey. Forty-three percent applied digitally, up from 28% a year ago.

But satisfaction with online submissions declined 8 points and borrowers also gave online submission a satisfaction score 10 points below that of in-person applications.

Online Lender Pioneer, SellersFunding Launches Algorithm to Streamline Funding for Amazon Merchants (Sys-Con), Rated: A

As sales from Marketplace outpace Amazon’s own sales, sellers need increased funding for things like, advertising and purchasing inventory.

The SellersFunding model interprets data like products, prices, payments, customer reviews and feedback. With more than fifteen billion single data points on tap, all rigorously tasked, the company’s model can boast high levels of accuracy.

Small Banks Vow To Protect Regulations Keeping Retailers And Tech Giants Off Their Turf (PYMNTS), Rated: A

But those laws may be up for reconsideration, as Keith Noreika, the acting Comptroller of the Currency, has raised the possibility that those laws are in need of review and possibly revision.

Needless to say, the nation’s small banks and their representatives are less than thrilled.

“If Walmart wants to be a bank, that’s fine, as long as they make the appropriate investments to protect the parts of the banking system that are so critical,” said Kelly King, chief executive at regional lender BB&T Corp.

King added that he was “absolutely opposed” to the idea of a limited banking license.

LendingTree, Inc. to Host Analyst and Investor Event on December 13, 2017 (Business Insider), Rated: B

LendingTree, Inc. (NASDAQ: TREE) today announced it will host an Analyst and Investor Event on Wednesday, December 13, 2017 in New York.  The company will host in-person attendees at the Nasdaq MarketSite, 4 Times Square, New York, NY10036. Doors will open for registration at 10:00 a.m. Eastern Time and presentations will begin promptly at 10:30 a.m.

United Kingdom

Funding Circle posts record month (Bridging&Commercial), Rated: AAA

Funding Circle is celebrating a global record month after lending over £120m to businesses throughout October in the UK alone.

In total, 1,721 UK businesses accessed finance last month via the lending platform, which directly and indirectly created 4,400 jobs.

More than 8,900 small businesses have accessed finance through Funding Circle in the last six months, totalling over £630m in loans.

Funding Circle: Investors can expect 5pc returns in a recession (P2P Finance News), Rated: A

A FUNDING Circle loan portfolio would still deliver returns of close to five per cent in a severe recession, the platform claims.

The peer-to-peer business lender has stress-tested its loan book, using a model similar to what the Prudential Regulation Authority (PRA) uses for banks, to see how two example portfolios would stand up against a severe recession similar to the one in 2007/08.

Even with these assumptions, the projected annual returns after fees and bad debt but before tax were 5.3 per cent for portfolio A, and 4.9 per cent for portfolio B, Funding Circle said.

Unusual ways to invest when you don’t have much money (AOL.com), Rated: A

Microinvesting

The Money Box mobile app launched this time last year, allowing savers to invest in stocks including Netflix, Unilever and Disney with as little as £1 to spend.

There are, though, fees to pay: after three months, users must pay £1 a month to subscribe to the service, plus 0.45% a year on the value of their investments.

Other services for investing small amounts are available from Nutmeg, which has a minimum of just £500, while Hargreaves Lansdown has a minimum ISA investment of £25 a month.

Peer-to-peer lending
Peer-to-peer lending schemes can offer a high return, with some claiming rates of more than 7%.

Crowdfunding

Two of the bigger equity crowdfunding operators are Seedrs and Crowdcube, both of which allow a minimum investment of just £10.

Funding Circle joins Women in Finance Charter (P2P Finance News), Rated: B

FUNDING Circle is among the latest round of firms to have signed the Treasury’s Women in Finance Charter, which aims to tackle gender inequality in senior roles.

The Treasury announced on Friday that a further 26 companies have signed up to the Charter, increasing the number of employees covered by the Charter to over 600,000.

Zopa developing IFISA transfer features (P2P Finance News), Rated: AAA

ZOPA is working on ways to let investors transfer their existing holdings into its Innovative Finance ISA (IFISA).

Andrew Lawson (pictured), chief product officer for Zopa, said some investors have already been selling old loans and buying new ones to fund the tax-free product.

However, the lender is now working on a one-off option for customers with more than £1,000 in its Classic or Access account to move that money into an IFISA, keeping the Safeguard coverage intact and without paying sale fees.

How do P2P platforms balance investor and borrower numbers? (Bridging&Commercial), Rated: A

New peer-to-peer platforms should put as much effort into attracting borrowers as they do promoting and obtaining inward investment, according to Kuflink.

Stuart Law, chief executive at Assetz Capital, claimed: “A number of long-established peer-to-peer platforms have more investors than borrowers, meaning they have been closed to new investment, while the company tries to find more loans.

Stephen Findlay of BondMason added: “I think there is generally an oversupply of capital for the available investment opportunities, across most markets.”

Peer-to-peer lending: is it too late to profit? (The Telegraph), Rated: A

Peer-to-peer (P2P) lending has grown dramatically since the financial crisis. In 2005 when Zopa, the first lending “platform” was launched, loans totalled just £1.5m.

But last year total lending was £3.2bn with Zopa, Funding Circle (which counts the British government as an investor) and RateSetter controlling two-thirds of the market.

Rates offered by P2P firms have dropped: investors can earn 3.7pc with Zopa Core and 4.5pc with Zopa.

Risks are also rising. When Zopa launched it only offered loans to 0.5pc of applicants, said Neil Faulkner of 4thWay. Now its approval ratings are in line with traditional banks, which give loans to 20pc of applicants.

UK tech founders planning swift exits (AltFi), Rated: A

A new report from equity crowdfunder VentureFounders has found that most tech founders in the UK intend to exit within 2-5 years, despite recognising the risks of exiting too early. Fully 56 per cent of the entrepreneurs surveyed by VentureFounders expect to sell their business for £50m or less.

The UK Robo-Advice Innovation Forum: key takeaways (Banking Technology), Rated: B

Conclusions

  • The banks are coming and will quickly take market share. With Nutmeg claiming majority market share with less than 50,000 customers, banks accessing millions of customers will quickly grow the market.
  • Exchange-traded fund (ETF) providers and investment managers interacting with advisors can create even more value. The “man and machine” approach may be best.
  • Developing a pensions or SIPP product could triple the total addressable market (TAM) showing a clear route to profitability for the currently loss-making robo-advice community.
  • A pension offering could see LDI frameworks finally reach the retail market.
  • The digital asset management community doesn’t like the term “robo-advisor” as confusingly many do not give “regulated advice” and of course and disappointingly, there are no robots!
China

Ppdai Makes Weak Debut in New York (Caixin), Rated: AAA

Ppdai, which operates an online platform connecting small investors and lenders, priced its initial public offering at $13 a share, well below the $16-$19 target. At that level, the company raised about $220 million, compared with its maximum goal of $350 million.

The shares then opened higher and rose as much as 10% in early trading in New York. Ppdai finished its first day trading at $13.06.

Online Lender WeLab Raises $ 220 Million for Expansion (Caixin), Rated: AAA

WeLab, an online lender in Hong Kong and the Chinese mainland, said it has raised $220 million in new funds from investors including Alibaba Hong Kong Entrepreneurs Fund and International Finance Corp.

Part of the new funds will be used to expand outside Greater China, WeLab said in a statement.

China Fintech IPO Fever Wanes as Regulators Weigh Crackdown (Bloomberg), Rated: AAA

PPDAI priced its offering a week after news that Chinese regulators are considering a crackdown on the country’s cash microlenders in response to claims that some have charged excessive interest rates. The initial public offering of Qudian helped trigger the regulator’s review of the sector, people with knowledge of the matter said earlier this month.

PPDAI priced its sale of 17 million American depositary shares at $13 apiece, after marketing them at $16 to $19 each. The stock started trading Friday in the U.S.

While Chinese law already limits lending rates to 36 percent annually, regulators are considering drafting rules to specify the cap applies to the cash microlending sector, people with knowledge of the matter said this month. In its IPO prospectus, PPDAI said total borrowing costs for some of its loan products exceed that level after adding in transaction fees.

ZhongAn shares have risen 28 percent from their IPO price, outpacing the 5.3 percent gain in the Hang Seng Index over the same period.

CreditEase CEO Ning Tang Discussed Fintech-Driven SME Economy at APEC CEO Summit 2017 (Business Insider), Rated: A

CreditEase, a Beijing-based leading financial technology conglomerate specializing in inclusive finance and wealth management, announced that its Founder and CEO, Mr Ning Tang, participated in the annual Asia-Pacific Economic Cooperation (“APEC”) CEO Summit event, in Da Nang, Vietnam on November 9.

“Over the next decade, tens of millions of SMEs in China will focus more on the quality of their growth, technological innovation, and sustainable development. We at CreditEase has been committed to empowering these SMEs as well as the real economy with technology breakthroughs and new business models ever since the company’s establishment,” said Mr Tang. “Going forward, we will continue to leverage our FinTech strengths in inclusive finance and wealth management to enhance SMEs’ overall financial capabilities and create more value for society.”

Higher rates for addresses in caps – online lender WeLend reveals how it determines your creditworthiness (SCMP), Rated: A

If you are looking to take out a loan from online lending platform WeLend to buy the iPhone X, be warned – should you use only upper-case letters when filling out the address field in your application, you could be charged a higher interest rate.

“We actually match how people fill out addresses with the probability of [them] declaring bankruptcy after a certain number of years,” said Simon Loong, the founder and chief executive of WeLab, the Hong Kong company that operates WeLend.

“The probability of [an applicant] declaring bankruptcy is highest when they fill in their address in capital letters,” he said.

n Hong Kong, the company relies primarily on a user’s credit history and interaction data. In mainland China, where less than 30 per cent of the population has a credit score, WeLab relies much more on unstructured, mobile data.

Yet another observation WeLab has made is that delinquency rates tend to correlate with loan application times – if a user applies for a loan between 1am and 6am, they are more likely to default on a payment than users who apply in the day, Loong said.

Food Delivery Platform Ele.me is Heading to the Micro Lending Market (Crowdfund Insider), Rated: B

On November 8th, Chinese leading food delivery platform Ele.me quietly marched into the micro lending market. The loans ranges from RMB 500 yuan to RMB 2000 yuan with terms of either 7 days or 14 days. This is a collaborative product with Lixiadai.com which means borrowers apply this loan on Ele.me will be directly led to Lixiadai.com. 

Nearly two months ago, the stock app jointly set up by JD Finance and four other brokerages stopped operating. According to JD.com, the suspension of the operation is due to a system upgrade. Yet, as reported by the media, the app was actually halted for procedural noncompliance in account opening and trading.

Chinese FinTech CFO on IPO Day: Mobile, Blockchain Will Drive Industry Innovation (Cheddar), Rated: B

Ho fills Cheddar in on why there is such a massive opportunity in peer-to-peer lending in China. He notes that companies capitalized on the governments unwillingness to hand out small loans to individuals.

European Union

Klarna adds pay-later feature at Swedish stores (PaymentsSource), Rated: AAA

Sweden’s Klarna made its mark with a pay-later model for e-commerce shopping that’s spread to other European countries and the U.S., and now it’s piloting the same concept for in-store purchases.

In partnership with the Danish payments technology firm Nets, Klarna has developed a feature that appears on payment terminals at certain stores giving consumers the option to pay for a purchase later—fully or in part—before completing the transaction, Klarna said in a recent blog post.

FinScience Closes €1M Seed Funding Round (FINSMES), Rated: A

FinScience, a Milan, Italy-based fintech startup, closed €1m seed funding round.

FinScience has developed a platform that gives simple access to alternative data to people who work in financial industry.

USING AI TO FIND THE NEXT TECH UNICORN (BusinessCloud), Rated: A

A technology-focused venture capital firm is using artificial intelligence (AI) to look for new European investment opportunities and find the next tech unicorn.

Andreas Thorstensson is tech partner and investment adviser at EQT Ventures, which went live in 2016 and is part of global private equity group EQT.

EQT Ventures has been using Motherbrain internally for almost two years, with the platform now responsible for up to 30 per cent of the fund’s deal flow.

ETHERECASH TOKEN PRE-SALE A HUGE SUCCESS (Bitcoinist), Rated: B

Some of the Etherecash features and benefits:

  • Peer to Peer Lending Crypto Backed: Lend to borrowers internationally with Border Free Loans.
  • Get Higher Returns Than Typical Bank Deposits.Borrow 70-80% of crypto value, without needing to liquidate any assets.
  • Worldwide Money Transfer: Send money to anywhere in the world using Etherecash. Money transfer has never been easier, more secure and most of all private.
  • Multi-Crypto Debit Card:Etherecash is the first of its kind, enabling users to put multiple currencies on a single debit card. Use it just like a normal debit card for making payments, shopping online or ATM withdrawals in local currencies. It can be used in any country while traveling to mitigate international charges and conversion fees.
International

Disruptive innovation in equity crowdfunding (Deloitte), Rated: A

A 2017 report from Deloitte and the World Economic Forum, “Beyond Fintech: A pragmatic assessment of disruptive potential in financial services,” studies the disruptive forces shaping the future of equity crowdfunding. Read on to explore key takeaways for the equity crowdfunding segment, and consider what these findings mean for your business.

Get the full document here.

Kony Announces Digital Banking Marketplace Expansion (Crowdfund Insider), Rated: A

Kony, Inc., the leading enterprise mobility and digital applications company, today announced it is expanding its global partner ecosystem with financial technology solutions featured on the Kony Digital Banking Marketplace.

4 Emerging Fintech Trends Relevant to Every Entrepreneur (Elevator Pitch), Rated: B

FinTech is disrupting the traditional financial services, such as: money transfers, loans, mobile payments, asset management and fundraising. According to Statista, Transaction Value is expected to show an annual growth rate (CAGR 2017-2021. of 20.5 percent resulting in the total amount of U.S.$6.9 billion in 2021.

1. Multi-currency digital wallets

A recent example is CashDash, a mobile app that allows you to buy, collect and return foreign currency.

2. Payments security advances using biometrics

3. Cryptocurrencies

4. Robo-advisors and automated wealth management services.

According to the consulting firm A.T. Kearney, assets under management by robo-advisors will grow by 68 percent annually to a whopping $2.2 trillion in the next five years.

How Fitness Pros Are Pushing Payments (PYMNTS), Rated: A

In an effort to offer rideshare workers faster access to their wages, First Data recently launched a new solution that delivers the money directly onto a debit card.

collaboration between Ingo Money, Visa and digital lending platform OnDeck will allow SMBs that request loans through OnDeck to have the funds disbursed directly to their business debit cards in real time.

A group of 13 Australian banks announced a joint effort to allow customers to get real-time payments beginning on January 26, the nation’s Australia Day holiday. With the service in place, bank customers can exchange money between contacts in a matter of seconds using identifiers such as mobile numbers and email addresses, instead of sensitive data like bank accounts.

YES Bank’s fintech survey to study ecosystem worldwide (The Hindu Business Line), Rated: B

YES Bank is all set to launch a first-of-its-kind fintech survey. Called India Fintech Opportunities Review, the study will cover India and a few major fintech markets in the world.

A research initiative of YES FINTECH, which is the bank’s innovation programme to accelerate fintech start-ups, the survey will cover more than 1,000 firms globally, said Amit Shah, Head-Strategy, Yes Bank.

Australia

RateSetter gets upgraded Down Under (P2P Finance News), Rated: AAA

RATESETTER’S Australian operations have been given a higher rating by SQM Research.

The independent ratings agency upgraded the peer-to-peer lending platform to a “favourable” rating and described its lending product as “approved investment grade.”

This puts it just one step below SQM’s top rating of ‘high investment grade.’

Credible Labs wants to be an ASX tech darling (Financial Review), Rated: A

US-based online student loans marketplace owner Credible Labs Inc is seeking an Australian Securities Exchange listing which would value the company at more than $300 million.

Credible is expected to seek to raise $67.5 million in a deal valuing the company’s equity at $306.6 million. If successful, it would be Australia’s biggest tech IPO this year.

India

Fisdom Raises $ 4M in Series B Funding (FINSMES), Rated: A

Fisdom, a Bangalore, India-based personal finance management startup, raised $4m in Series B funding.

The round was led by Accion Frontier Inclusion Fund, managed by Quona Capital with participation from existing investor Saama Capital.

Fintech company Payoneer to support e-commerce exports from India (The Hindu Business Line), Rated: A

Payoneer, a global cross border B2B digital payments provider, has decided to expand the scope of its offering in the Indian market to e-commerce related export businesses, it’s visiting CEO Scott Galit has said.

Galit said that India is the fastest growing digital market in the world and that more people are going digital in India than anywhere in the world.

India will move faster than China for a while, but on much smaller scale. The B2C e-commerce exports in India is around $ 500 million a year, while in China it is $ 400 billion, according to industry insiders.

Asia

The Future of Branch.. Banking? (Fintech News), Rated: A

My opinion is that both views are problematic in its own way, branch banking is still quite a distance away from being dead largely fueled by face to face KYC requirements and the need to serve different segments of the customer.

However, there’s one reality that bankers cannot escape from, banks are increasingly under pressure to close their branches.

The Digitised Branch

The whole idea of digital banking is the ability to perform banking on-the-go, to go to the bank to perform banking-on-the-go (what a tongue twister) seems to defeat the point entirely.

This approach enables bankers to still serve the segment of their customers prefer to conduct their banking activities through the branch or customers who for whatever reason need to visit branch all while still keeping the costs at bay.

Fintech investors striking a match (Business Times), Rated: A

Among the fresh fintech funds that have come into this space is GTR Ventures (GTRV), the venture capital arm of trade finance intelligence firm Global Trade Review. Operating in both Singapore and London, it is the world’s first investment platform targeted specifically at fintechs operating in the global trade ecosystem.

Kelvin Tan, co-founder and chief investment officer, told The Business Times that the fund screens fintechs that can help to close the annual US$1.5 trillion trade finance gap, particularly for SMEs.

MENA

How 690-million customer China Construction Bank has digitally transformed (Tahawul Tech), Rated: A

China Construction Bank’s name may not be a household one in the Middle East, but the stats speak for themselves in evoking the bank’s vast resources and influence within China, and across the world. With 363,000 employees on its books, CCB is consistently ranked in the top 30 of the Global Fortune 500 and currently has over $3 trillion worth of assets. In 2015, it was the second largest bank in the world by market capitalisation, and the sixth largest company in the world by revenue.

Africa

KiaKia launches alternative credit scoring, virtual lending platform (Vanguard), Rated: AAA

Aside its numerous products that are void of the usual financial bureaucracy and also offer easy access capital to SMEs and individuals, KiaKia, a licensed online peer to peer and direct lending platform, has introduced ‘Mr. K’, an artificial intelligence (AI) and machine learning powered alternative credit scoring, customer service, Direct and P2P lending virtual agent.

Speaking further on the new product, Abiola said 80 percent of KiaKia high scoring borrowers access the same loans at between 7.5 percent and 15 percent as against the 30 percent of its competitors, as well as, connecting credible borrowers with lenders offering loans as low as 5.5 percent interest rate for longer tenured loans.

Authors:

George Popescu
Allen Taylor

Thursday October 6 2017, Daily News Digest

China mortgage loans

News Comments Today’s main news: SoFi surpasses $25B in originations. JPMorgan Chase rolls out mobile banking app. ID Analytics has 85% visibility into online consumer lending. Zopa prices new securitization. Fannie Mae expands digital mortgage platform. SEC investigated Bank of Internet. China’s cash loan market hits 1 trillion RMB. Lendified secures $60M credit facility. Facebook, Clearbanc partner on merchant cash advance. Today’s main […]

China mortgage loans

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United States

United Kingdom

China

European Union

International

Australia

India

Asia

Canada

News Summary

United States

A new milestone: we’ve surpassed $ 25b in loan originations! (@SoFi on Twitter), Rated: AAA

Thank you to our community of over 390,000 people for growing with us.

Will JPM’s millennial-app experiment grant access to new markets? (American Banker), Rated: AAA

JPMorgan Chase spent more than a year researching what millennials (and clients wanting to bank like them) desire in a financial relationship. The result is a new mobile-only app that lets people sign up for a bank account within minutes and also helps manage their spending.

The megabank made a splash on Monday debuting Finn by Chase, an app that includes a checking and savings account and a physical debit card.

ID Analytics Now Has 85% Visibility Into Online Consumer Lending (deBanked), Rated: AAA

At Money2020, deBanked caught up with Kevin King, Director of Product Marketing and Ken Meiser, VP of Identity Solutions for ID Analytics. The last time I crossed paths with the company was six months ago at the LendIt Conference in New York City. Since then, the company has increased its visibility into the online consumer lending market to 85%.

Fannie Mae goes all-out on fintech collaborations (Business Insider), Rated: AAA

Fannie Mae, a US government agency that funds mortgages for lenders, rolled out 

92.3% of acceptance partners said Behalf increased their sales 10-20% (Behalf), Rated: AAA

Behalf’s merchant acceptance partners have found a way to apply Amazon’s small business strategies to their own business models. By adding the Behalf instant credit approval tool to their ecommerce experience, they also unlock the power of flexible terms on every sale. Customers of our partners can get instant access to up to $50,000 in buying power with their choice of flexible payment terms. With this boost in working capital, small businesses are able to invest in their growth, which increases their business purchasing velocity. Case in point: 92.3% of the Behalf acceptance partners surveyed reported that adding Behalf to their checkout experience drove a 10-20% sales lift.

Source: Behalf

Download and read the full whitepaper here.

Bank of Internet was under 16-month SEC investigation (New York Post), Rated: AAA

Online lender Bank of Internet was the subject of a formal 16-month Securities and Exchange Commission investigation, according to a report.

The company, led by Chief Executive Greg Garrabrants, was the subject of scrutiny until June — when it ceased without the SEC taking any action.

The probe was focused on alleged conflicts of interests, auditing practices, and loans made to two entities, according to subpoenas and government documents obtained by Probes Reporter, a publisher of investment research.

Wealthier Depositors Pressure Banks to Pay Up (WSJ), Rated: AAA

Large U.S. banks are starting to pay up to keep depositors from moving their money, saying customers are becoming increasingly demanding as the stronger economy nudges interest rates higher.

The average interest rate paid by the biggest U.S. banks on interest-bearing deposits jumped to 0.40% in the third quarter, the highest level since 2012 and the biggest quarterly increase this year, from 0.34% in the second quarter, according to Autonomous Research.

Bank executives said that the newest pressure for higher rates is coming primarily from wealth-management customers, typically well-to-do individuals and families who deposit cash as part of their investment accounts.

Fifth Third executives said they were raising deposit rates for some of those customers, particularly those who had other relationships with the bank.

Source: The Wall Street Journal

FT Partners Advises Credit Sesame on its ,000,000 Growth Financing (FT Partners), Rated: A

  • On October 25, 2017, Credit Sesame announced it has raised over $42 million in equity and venture debt
    • The funding comes from existing and new investors including Menlo Ventures, Inventus Capital, Globespan Capital, IA Capital, SF Capital, among others, along with a strategic investor
  • The $42 million in funding is comprised of $26.6 million in equity and $15.5 million in venture debt, bringing the Company’s total funding to over $77 million
  • Headquartered in Mountain View, CA, Credit Sesame was founded in 2011 and has provided credit and loan management tools to over 12 million members
    • The mobile and web solution provides consumers with tools to build a path to achieve financial wellness, including free access to their credit profile complete with their credit score, credit report grades, credit monitoring, interactive step-by-step tools and recommendations for better lending options
Source: FT Partners

 

The 13 Chinese Companies That Listed On US Stock Exchanges In 2017 (Frontera), Rated: A

With about $2.4 billion raised in IPOs on US exchanges by Chinese companies so far this year, other China-based firms are increasingly vying for US investors and exchanges.

Qudian Inc (QD)

On October 18, Chinese online micro-credit provider Qudian Inc listed on the NYSE, raising $900 million in an IPO that was priced at $24, in the biggest ever US listing by a Chinese fintech firm. The financial sector firm’s stock, trading under the symbol QD, closed at $33 as of October 23. The stock commands a market capitalization of $8.8 billion in the US stock market.

Year-end Forward P/E for the depository receipt is estimated at 21.47. Estimated earnings-per-share stand at $8.21.

China Internet Nationwide Financial Services (CIFS)

This Beijing-based financial sector firm, trades under the ticker CIFS on the NASDAQ GM stock exchange, is engaged in providing financial advisory services in China. The company’s stock listed on the US stock market on August 8 at an initial offer price of $10 a share, raising $20.2 million for the company. The stock, trading at $31.5 (as of October 23rd), commands a market capitalization of $693 million in the US stock market.

China Rapid Finance Ltd (XRF)

Listed since April 28th on the NYSE stock market, China Rapid Finance Limited operates one of China’s largest online consumer lending marketplaces.  The company caters well to China’s 500 million EMMAs (Emerging Middle-class Mobile Active consumers), and has facilitated over 20 million loans to more than 2.7 million borrowers. Back in April, the company raised $69 million in an IPO, marking its listing on the US stock exchange under the ticker XRF. The shares initially offered at $6 a share, and now trade at $9.06 (as of October 23) with a market capitalization of $586.2 million.

Source: Frontera

Leading Banks are Embracing Digital Strategies More Than Ever (Lend Academy), Rated: A

JPMorgan was the first major US bank to partner with a fintech company when they launched their small business lending partnership with OnDeck in early 2016. That partnership was renewed earlier this year and has helped the bank to offer a seamless small business lending experience and reach customers it might not have otherwise. In recent months they have struck a new partnership with Mosaic Smart Data to help the slumping fixed income trading revenues and they have also completed an acquisition of WePay, a Silicon Valley company that offers payment capabilities to business platforms using APIs. Finally, just this week they launched Finn by Chase, an app aimed at millennials that allows people to use a phone to open a bank account, make deposits, issue checks, track spending and set up savings plans.

Bank of America saw more than 1 million users added to their digital channels and active digital banking users go from 32.8 million to 34.5 million in the last year. The main driver of this growth was through their mobile app. Customers are using the mobile deposit feature more than any other, mobile deposits now account for 21 percent of total bank deposits.

Wells Fargo’s digital growth, which includes web based and mobile users, saw a 2 percent increase from 2016. Branch and ATM interactions were down 6 percent while digital sessions through the web and mobile app increased 6 percent.

Citi is the first global bank to integrate banking, money movement and wealth management on mobile.

How Tech is Changing Multifamily Lending (Multi-Housing News), Rated: A

“Technology has helped us bring efficiency, speed and first-rate customer service to the small-loan space for all of our stakeholders, borrowers and brokers alike,” said Bonnie Habyan, executive vice president, marketing, at Arbor. Small-balance owners and operators need to work long hours to be successful, and the time and paperwork dedicated to obtaining financing is an inefficient use of time. Online multifamily financing platforms such as Arbor LoanExpress, or ALEX, address this by providing the ability to e-sign and upload documents.

“Crowdfunding was originally created to give average investors access to investments they normally wouldn’t have access to, and to give sponsors or borrowers easier access to capital,”said Bill Lanting, vice president, Commercial Debt at RealtyShares. “We were formed specifically with that idea in mind, to make borrowing easier and less cumbersome, and also to make investments in assets more available to everybody.”

AutoGravity Announces Partnership With Global Lending Services (PR Newswire), Rated: A

AutoGravity, a FinTech pioneer on a mission to transform car financing by harnessing the power of the smartphone, announced a partnership with Global Lending Services LLC, a South Carolina-based auto finance company, to provide access to finance offers through the innovative AutoGravity digital platform. Qualified car buyers gain access to an even broader set of car finance options through the AutoGravity iOS, Android and Web Apps.

Can employers help solve the student debt problem? (HRDive), Rated: A

The good news about student loans is that they allow millions of people to earn college degrees who otherwise wouldn’t be able to afford them. The bad news is that college graduates enter the workforce deeply mired in debt that deflates their net worth and keeps them cash-strapped for years, if not decades. The current wave of college graduates is facing debt in amounts far above previous generations.

Oliver Wyman, a global management consulting firm, sets the median figure for an undergraduate degree at more than $25,000. That figure rises with each advanced degree. Graduates with MBAs enter the workforce with a median debt of $45,000. Medical school graduates can expect to be $200,000 in debt.

Debt repayments for the typical college graduate will amount to $265 a month and for medical school graduates, $1,600 a month.

Target.com Introduces GiftNow (PYMNTS), Rated: B

Target announced that, starting this November, the retailer will integrate a wallet function in its Target mobile app. The purpose, says the retailer, is to allow customers to pay for purchases and redeem promotions through the use of a smartphone.

Legendary Investor Jim Rogers Believes FinTech Will Replace Banks and Cash (Cryptocoins News), Rated: B

Veteran investor Jim Rogers believes that banks must invest in the financial technology (fintech) space or they face being replaced.

According to the report, he has invested in Hong Kong-based ITF Corporation, the world’s first financial technology bank founded by Hui Jie Lim. Rogers has also invested in Tiger Broker, a Chinese online brokerage.

He also believes that digital currencies could change how we see money in the next 10 to 20 years. Even though he hasn’t invested in the crypto market Rogers is of the opinion that governments could issue their own cryptocurrencies in the future.

United Kingdom

New Zopa securitisation priced, highlights market confidence (AltFi), Rated: AAA

A securitisation of loans originated by peer-to-peer lending firm Zopa has received a warm reception in the market. The deal, which is the second securitisation of Zopa loans, has been priced significantly tighter than last year’s transaction.

The securitisation was led by P2P Global Investments PLC, the first UK listed investment trust to dedicate itself to investing in marketplace loans, and was arranged by Deutsche Bank. The most senior class of notes was priced at 70bps over one month Libor, compared to 145bps last year.

The senior tranche of the £209m securitisation, which represents 80 per cent of the portfolio, was rated AA by Moody’s.

Using the secondary market for above average returns on investment (P2P Banking), Rated: AAA

One central piece to understanding why trading (or flipping) strategies can be highly attractive is the effect of even small premiums pocketed on the portfolio yield. Take an investor that invests into a 100 (whatever currency) loan part and sells that part for 100.40 after holding it for 5 days. That is only a 0.4% premium, but the annualized yield is 33.8%.

Two main strategy approaches

Investors can
A) Invest on the primary market and then sell the loan later on the secondary market
or
B) Buy loan parts on the secondary market which they deem underpriced and then sell at a higher price. Be it buying at discount and selling at a lower discount, or already buying at premium and selling at an even higher premium.

One important point, is that market conditions change, usually good opportunities will stop working after a few months or weeks either because too many investors try to use them, or more general  the demand/supply ratio changes or the marketplace itself changes the rules how the market functions.

  1. First an investor will want to look how loan information is presented on the primary and secondary market.
  2. Understand the allocation mechanism on the primary market. How does the autoinvest feature work exactly?
  3. When is interest paid? Does it accrue for each of the day held, or does the investor holding the loan at the date of the interest payment gets full interest credited. This is important, because if in the example at the start of the article the investor not only makes a 0.40 capital gain but also collects interest for the 5 days he held the part, it will have a huge impact on yield
  4. Usually for this strategy longer duration loans are more attractive.
  5. Usually smaller loans are more attractive.
  6. Usually the time span a trading investor wants to hold on to a loan part, will be as short as possible (days). However there might be patterns observed where it could be desirable to hold for longer time spans.
  7. Strategies that allow to hold parts only at a time when the status of a loan cannot change can be attractive.

Monzo and Starling take bigger steps towards payment integration (AltFi), Rated: A

Monzo has announced today, after a week of dropping hints on various Twitter accounts, that it plans to integrate Android Pay into its user interface for current account users.

A few hours earlier, Starling Bank confirmed this morning that it will be the first bank in the UK to connect with Fitbit Pay.

Case study: the technology behind P2P (Banking Technology), Rated: A

The UK peer-to-peer (P2P) lending market has flourished in the last decade. Lending volumes among the major platforms are increasing rapidly, pushing the cumulative total above £7 billion for the first time, as the understanding of the investment model continues to grow.

New technology architectures, as well as the ability to quickly run up minimal viable products, mean that emerging P2P companies can turn ideas into reality much faster than their larger counterparts (“fail fast” or as I like to call it, “test quickly”).

This prioritisation of speed and efficiency, coupled with the ability to focus, means that P2P lenders can zero in on specific problems and provide what customers want and are increasingly expecting. At Landbay we can bring a new micro service up from scratch in 20 minutes, with the lag for code from committing to going live being about six to eight minutes whilst still maintaining the up time required.

Brokers should consider the P2P option (Mortgage Introducer), Rated: A

As the alternative finance market has become saturated with different funding options, it can be difficult for brokers to determine the best solution to suit their clients’ needs.

Loans can also be tailored to fit the specific needs of customers, with fixed rates available to allow customers to budget effectively for the full term of the loan. The flexibility of loans means borrowers can cover unexpected costs or finance planned purchases at more affordable rates, meaning P2P finance is a great option when situations happen to change at a company.

Whilst 25% of borrowers that apply to banks have their loan application rejected, according to British Business Bank, other forms of lending have paved the way for businesses to obtain cash, with P2P lending becoming one of the most prominent solutions in the current market.

Open letter to Andrew Bailey, chief executive of FCA (Specialist Banking), Rated: A

Dear Andrew, your comments on the BBC on Monday 16th October reflect the concerns that many share with the FCA about the effect of the high cost of credit impacting society widely and, in particular, the young.You cited concerns about certain aspects of credit card and payday lending practices, but you did not pass comment on the retail banks and their provision of overdraft credit at rates that may well exceed the rates of payday and credit card loans.It should be noted that at 1p per day for every £7 of overdraft, the fees for an overdraft of, for example, £2,000 pa, are in excess of 50% interest, uncompounded. This is certainly higher than many credit cards.Alex Letts
Founder and chief unbanking officer, U
China

Chinese Cash loan market grown to 1 trillion RMB in one year (Xing Ping She), Rated: AAA

Cash loan originated from the payday loan in America, and accelerated in China. In less than one year, the total volume increased from 600 billion RMB to 1 trillion RMB. As a branch of consumer finance, cash loan developed rapidly as much as P2P lending industry.

Early in this April, the regulator issued the first order to clean up the “cash loans”,while after six months the trend of compliance in the field is still unclear. Recently, with several relative businesses coming to the U.S. for IPO, the critical voice on the profiteering of cash loan becomes louder.

However, owing to the annual lending rate much more than the rate legal limited (36%), taking the consumer finance vents, cash loan still grow wildly under strict regulation.

Xi’s Neighborhood Watch (Bloomberg), Rated: AAA

Houses are for living in, not for speculation, Chinese President Xi Jinping said last week. The trouble is, fueling this speculation has been a surge in consumer lending, not only by banks but also by fintech firms such as recently listedQudian Inc.

Thanks to improved earnings and corporate debt that’s souring at a slower rate, Chinese bank shares have rallied this year.

Source: Bloomberg

What investors may be ignoring at their peril, however, is the spike in household advances. Consisting of mortgages, credit-card debt and auto loans, consumer lending as a share of the total is relatively low. Only 400 million Chinese had personal loans in 2016, or about 29 percent of the population. The ratio in the U.S. is about 82 percent, according to Bloomberg Intelligence. But it’s been growing fast and even People’s Bank of China Governor Zhou Xiaochuan is worried. China’s household debt-to-GDP ratio reached 47 percent in the first half, according to a recent Citigroup Inc. report.

Source: Bloomberg

Ali Microcredit Ltd. made 2.6 billion RMB in first half, exceeding 14 public banks (Xing Ping She), Rated: A

In the first half year of 2017, Chongqing Ali Microcredit Ltd. has made the revenue of 3.97 billion RMB, which increased 100 million RMB compared to the 3.86 billion RMB of 2016. The company’s net profit was 2.644 billion RMB, in a growth of about 700 million RMB from the end of 2016.

As one of the Ant Financial eco-system, Ali Microcredit takes the business of credit loan (Ant Jiebei). Therefore, Ali Microcredit is already the industry leader in the consumer finance field. Even compared to the listed banks, Ali Microcredit’s profit data can defeat many of them. Take the first half year for example, the company profit exceeded 14 of all the 38 listed banks in stock exchange of Shanghai, Hong Kong and Shenzhen, including Guangzhou Rural Commercial Bank (01551.HK, profit of 2.639 billion RMB), Bank of Tianjin(01578.HK,profit of 2.62 billion RMB), Bank of Hangzhou(600926.SH, profit of 2.53 billion RMB),etc.

Cash loan controversy (Global Times), Rated: A

Chinese people are becoming more and more willing to spend. But if they don’t have money, they borrow. This ever-growing phenomenon has recently thrown cash loans, also known as fast loans, right under the public spotlight.

Han, a 26-year-old white-collar worker in Shanghai, who preferred only to give her surname, borrowed a 6-month loan of 10,000 yuan ($1505.53) from Mayi Jiebei, the online cash loan service provided by e-commerce giant Alibaba’s subsidiary Ant Financial, at the end of September.

When borrowing the money, Han was informed by Mayi Jiebei that she will need to pay a monthly interest rate of slightly more than 100 yuan. In total, Han will need to pay an interest rate of 637 yuan to the provider.

Currently, the entire cash loan market is worth between 600 billion yuan and 1 trillion yuan, the wdzj.com report showed.

LendingClub of China: World’s no.2 economy is a fintech haven (MSN), Rated: A

China provides the infrastructure for financial technology to succeed, such as clearly-defined laws and good internet penetration, says Soul Htite, Dianrong CEO.
Watch the video interview here.

China Rapid Finance names Zhou Ji’an a non-executive independent director (Bankless Times), Rated: B

China Rapid Finance has named Zhou Ji’an a non-executive independent director. He becomes the seventh member of a board that includes former executives of Hewlett Packard, McKinsey & Company, Morgan Stanley, and UBS.

Mr. Zhou is the executive director and general manager of China United SME Guarantee Corporation aka Sino Guarantee. He previously served in senior roles with China Export & Credit Insurance Corporation, and China Life Insurance Co . and is a senior scholar of the Eisenhower Fellowships, an international nonprofit leadership corporation.

European Union

ECN Convention Debates Technology & Cross-border Future in EU Alternative Finance & Crowdfunding (Crowdfund Insider), Rated: AAA

Two main topics of the 6th Annual Convention of the European Crowdfunding Network (ECN) on October 19th and 20th were technology innovation and cross-border finance.

To retain their lead in innovation over banks and traditional finance’s Fintech, startups must keep delivering greater customer orientation and execution efficiency. The success of Initial Coin Offerings (ICOs) is a clear signal, and a red flag, that there exist gaps in technology and cross-border funding that finance has not filled.

Cross-border alternative finance is still hampered by the fragmentation of the European Union (EU) regulation at many levels: Not only do crowdfunding and crowdlending regulation differ from one country to the next, but so do investor taxation and corporate law.

Ingi Sigurdsson, CEO, Karolina Engine, claimed that artificial intelligence enables the platform to predict the success of crowdfunding campaigns with 80% accuracy. Mads Dalsgaar CMO, Funderbeam, explained how Funderbeam uses Bitcoin’s blockchain to register, clear and settle the trading of private companies’ shares. For Rein Ojavere, CFO of Bondora, technology enables his lending platform to “cut through the layers of fat” of multiple investment intermediaries. In the same vein, Lasse Mäkelä, CEO of Invesdor, called his company a “digital investment bank.”

Umberto Piattelli of law firm Osborne Clarke summarized the conclusion of ECN’s updated complete review of national crowdfunding and crowdlending regulations in 29 countries. He stressed the strong correlation between the growth of alternative finance and effective crowdfunding regulation. Only 11 out of the 28 EU markets researched have published specific regulations for crowdfunding and crowdlending. These markets have taken off rapidly after the issuing of such regulations.

Tink secures investment and bank partners as it plans European expansion (Banking Technology), Rated: A

Swedish fintech company Tink has signed with Nordic banks NordeaKlarna and Nordnet. Integrating in 2018, the banks will use Tink’s payment technology and personal finance management (PFM) platform within their existing customer channels.

In addition to the partnership agreements, SEB, Nordea, Nordnet, ABN Amro, Creades and Sunstone has invested €14 million in Tink.

International

DTCC: HOW TO THINK ABOUT FINTECH (All About Alpha), Rated: A

The Depository Trust and Clearing Corporation (DTCC), a provider of clearance, settlement, and a wide range of other services to the financial markets, has issued a new white paper on technological innovations and the disruptions fintech may generate.

By “core banking functions,” (1) the authors of the white paper have in mind credit, liquidity, and maturity transformation. The banks have more institutional experience handling these functions than upstart fintech firms and, to the extent the latter take over the core functions of the former, there may be reason to worry. Likewise, the fragmentation (2) of “the creation and delivery of financial services across additional providers and platforms” could cause errors and inefficiencies. And (3) if certain players could become too good at delivering these services in this way, they could pose systemic risks.

Source: DTCC

Read the full report here.

The Importance of Fintech Spreads Across the Financial Industry (PR Newswire), Rated: A

A research report by Transparency Market Research, predicts that the global peer-to-peer (P2P) market lending valuation will reach US$897.85 billion by 2024, as it expands at a significant CAGR of 48.2% from 2016 to 2024.

Dragon Victory International Limited (NASDAQ:  LYL) announced today that, the Company has entered into a Strategic Cooperation Agreement (the “Agreement”) with Shenzhen 708090 Investment and Development Co., Ltd (“708090”), a leading provider of shared workspace, community, and services for entrepreneurs, freelancers, startups and small businesses, to promote incubation services.

On October 24th, Fiserv announced that Regions Bank will expand their digital money movement capabilities with the addition of person-to-person payment and account-to-account transfer solutions from Fiserv.

On June 15th, Yirendai announced that it was awarded the Best P2P Lending Platform in ChinaAward at The Future of Finance Summit (the “Summit”) held in Singapore. Yirendai is the first FinTech company in China to receive this prestigious reward.

Qudian Inc. (NYSE: QD) is a leading provider of online small consumer credit in China. The Company uses big data-enabled technologies, such as artificial intelligence and machine learning, to transform the consumer finance experience in China. The company recently emphasizes Its collection efforts and pricing policy. The Company’s collection efforts extend to every delinquent borrower. The Company’s collection process is divided into distinct stages based on the severity of delinquency, which dictates the level of collection steps taken. As part of the major upgrade of the Company’s risk management system in January 2017, the Company has developed a machine learning algorithm to better allocate collection resources based on more detailed grouping of larger delinquency risk. Higher risk groups are allocated with more collection resources as the likelihood of their outstanding balance becoming longer-term delinquent or even uncollectable is generally higher.

Australia

ANZ BBSW penalty too low: P2P lender (InvestorDaily), Rated: A

On Tuesday, ASIC announced that it had reached a confidential in-principle settlement with ANZ resolving the dispute over alleged BBSW misconduct. Commenting on the matter, RateSetter chief executive Daniel Foggo said the corporate regulator’s activity in this area of the market bodes well for a more transparent financial system.

India

Gratification Unleashed (OutlookMoney), Rated: A

There was a time when a loan mostly meant you were going to buy a house or a car. This is not the case any longer. With changing times, now there are loans against salary advance to fund even your honeymoon. Today, there are loans available practically for every need and dream.

Take the case of the ubiquitous car loan, the advent of luxury cars has turned several car companies to offer loans that are tailored to suit customer offerings. For instance, Volkswagen Finance (India), offers financing solutions to customers for both new and pre-owned Volkswagen group vehicles (namely Volkswagen, Skoda, Audi, Porsche, Lamborghini, MAN and Scania) through registered and authorised Volkswagen group dealer channels.

Yet, borrowing is not as smooth as one would expect it to be. Take for instance Mumbai-based Amit Shukla, he had to take a personal loan of Rs 5 lakh to fund his first commercial car, because a car loan did not work out the way he wanted it to work for him.

Asia

Finance: Ensuring a safe investment crowdfunding landscape (The Edge Markets), Rated: AAA

When equity and debt-based crowdfunding platforms were launched in the market, there were concerns that these vehicles could be used for money laundering. After all, investors could unknowingly fund a fraudulent company and the money could end up being misused by the issuers for their personal gain or, even worse, to fund criminal activities.

The Securities Commission Malaysia (SC) introduced a legal and regulatory framework for equity crowdfunding (ECF) in 2015 and peer-to-peer (P2P) financing last year to address these concerns. According to the SC’s deputy general manager Tengku Ahmad Ruzhuar Tengku Ali, the regulator views money-laundering activities to be of minimal risk on ECF and P2P platforms due to the safeguards built into their frameworks and the platform operators’ vetting process.

There have been several cases of fraud linked to investment crowdfunding. The first widely known case, involving US-based Ascenergy, came to light in 2015. The company had raised US$5 million from about 90 local and foreign investors by leveraging some of the better known crowdfunding platforms such as Fundable and EquityNet.

The SC’s approach

All six ECF operators registered in Malaysia are operational. According to Tengku Ahmad Ruzhuar, 31 issuers had successfully raised RM18.3 million on ECF platforms as at end-September, reaching 80% of their target amount.

Retail investors are allowed to invest up to RM5,000 per issuer and a total investment of RM50,000 within a 12-month period. Angel investors registered with the Malaysian Business Angel Network can invest up to RM500,000 while there are no restrictions for sophisticated investors.

Issuers are able to keep the funds raised if they reach a minimum of 80% of the target amount, but they are not allowed to raise multiple funds for the same purpose.

Canada

Canadian Small Business Lender Lendified Secures $ 60 Million Credit Facility From ClearFlow (Crowdfund Insider), Rated: AAA

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.

Facebook teams up with Clearbanc to offer cash advances to business (Financial Times), Rated: AAA

Small businesses advertising on Facebook can now get their hands on up to half a million dollars in growth capital, in the latest example of an online platform moving into territory historically dominated by bricks-and-mortar banks.

The social network has been trialling a scheme in partnership with Clearbanc, a Toronto-based firm, since February. Under the scheme, known as “Chrged,” customers connect their Facebook Ads account and their payment processor with Clearbanc, which then makes an offer.

Funds are not loans but merchant cash advances, giving Clearbanc the right to a certain portion of revenues flowing through the customer’s account until it gets its money back, plus a fee, typically of 5-10 per cent. The fee is set by analysing daily cash flows to determine the customer’s ability to repay.

About 1,000 small-business owners have so far taken up an offer.

MONEYTREE Q3 REPORT: STRONG AI AND FINTECH FUNDING PUSHING 2017 BACK ON TRACK (Betakit), Rated: A

According to CB Insights and PwC’s Canada’s latest MoneyTree report, 2017’s sluggish start may transform into a podium finish by year’s end.

The report, which tracks VC activity in Canada for Q3 2017, indicates that Canada could exceed $2.5 billion ($2 billion USD) across more than 300 deals for the year. The result would match or surpass activity from last year, when a total of $2.2 billion USD was invested, and 2016, which fell just below the $2 billion USD threshold.

Source: Betakit

Seed-stage deals accounted for 32 percent of deals in Q3 2017, a 19 percent drop from 51 percent of all deals in Q2 2017. However, early-stage and expansion-stage deals increased to 27 percent and 21 percent of deal share, respectively. Expansion-stage deals climbed to an eight-quarter high in Q3 — a strong contrast from past quarters where seed-stage deals were the most prominent, and perhaps a sign of a more robust investment ecosystem.

FinTech was another notably strong sector, as Canadian FinTech companies have received $252 million ($200 million USD) across 27 deals. This year is on pace to see $341 million ($270 million USD) invested across over 30 deals, on par with last year’s figure of $351 million ($278 million USD).

Source: Betakit

Authors:

George Popescu
Allen Taylor

Wednesday October 25 2017, Daily News Digest

chinese investors

News Comments Today’s main news: RateSetter partners with Experian. Australia publishes fintech regulation draft laws. Lending Loop hits $10M financing milestone. TD Ameritrade offers stock trading through Facebook Messenger. Abra secures $16M in Series B led by Chinese electronics manufacturer. Zero raises $8.5M for credit card that acts like a debit card. Nested raises 36M GBP. TransferWise changes its fee structure, but […]

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United States

TD Ameritrade Clients Can Now Trade Stocks on Facebook Messenger (Bloomberg), Rated: AAA

TD Ameritrade Holding Corp. customers are now able to trade equities and exchange-traded funds using Facebook Inc.’s Messenger services, according to a company statement Monday. Clients can also make deposits, access quarterly performance video statements and receive weekly alerts that rehash market moves.

Hon Hai invests in fintech start-up (Taipei Times), Rated: AAA

Hon Hai Precision Industry Co (鴻海精密), the world’s largest contract electronics manufacturer, participated in a US$16 million Series B fundraising program to invest in US-based digital wallet start-up Abra, the new firm said on Monday.

Barhydt said that Abra’s existing investors — Arbor Ventures, American Express Ventures, Jungle Ventures, Lehrer Hippeau and RRE — also participated in the fundraiser that closed on Monday.

The program helped Abra reach more than US$35 million in total capital, Barhydt said, but did not elaborate on potential uses of the additional US$16 million.

Zero raises $ 8.5 million for a credit card that functions like a debit card (TechCrunch), Rated: AAA

Just one-third of young adults have a credit card, according to a Bankrate survey.

A startup called Zero thinks it has a solution to this and it is gearing up to launch a credit card that functions like a debit card. The startup is also raising $8.5 million in a funding round led by ENIAC Ventures, including participation from NEA, Lightbank and others.

Biometrics is Going to Eat the Finance World (Lend Academy), Rated: AAA

In a recent survey it was revealed that 81% of people use the same password for multiple accounts with that number being even higher, at 92%, for millennials.

The introduction of Touch ID on the Apple iPhone in 2013 was a seminal moment in the history of biometrics. People could suddenly use their thumb or finger print as an identity verification tool and forgo using a password. Today, on my phone I can login to my bank account, buy music or apps, buy a plane ticket, even check my Lending Club account all with the press of my thumb.

While still primarily in the testing stage in banking, this past summer Bank of America announced the trialing of iris scanning technology from Samsung. In the UK, TSB is becoming the first European bank to start using this same technology, also with Samsung phones.

Behavioral biometrics can capture things like hand-eye coordination, pressure, hand tremors, keystroke dynamics, gait analysis, mouse use characteristics, navigation, scrolling and other finger movements.

USAA offers three variations of biometrics authentication already in their mobile app. Just this week Samsung announced a partnership with Biocatch to bring behavioral biometrics to its Nexsign biometric authentication platform.

‘We’re moving from the back end to the front end’: Cross River Bank CEO Gilles Gade (Tearsheet), Rated: A

Cross River banks some of the biggest names in fintech, including at least a dozen online lending companies like Affirm, Marlette and Rocket Loans. It has also developed payments solutions for faster, more secure and lower-cost transfers that have been integrated by TransferWise and the bitcoin wallet Coinbase, as well as Google Wallet and Stripe in the past.

It’s been almost a year since you announced your VC funding. How have you been using it?
We have absorbed the capital very quickly, managed to deploy it on the marketplace lending side. We like to retain loans from the origination platforms so instead of selling 100 percent of the origination we retain 10 percent. As our partners are growing nicely, naturally that 10 percent has kept increasing.

Can both banks and fintech vendors deliver banking-as-a-service?
We’re strong believers that BaaS has to be delivered by a bank. The fintech players need access to payment rails and they’re going to use a bank ultimately to do that. As a service, the bank could be either the facilitator of a transaction or the purchaser of the BaaS technology to provide it to consumers. There is a level playing field now — consumers can have the same functionalities in a small bank in Nebraska that they can have with a Chase or Wells Fargo.

Are banks prepared?
Most banks are not equipped or not API-driven, ubiquitous, priced properly — and the banks that are, the big banks, have been unwilling to do that because it would cannibalize some of their business or presents high risk — do they have the required compliance and adequate staff to be able to manage the operations?

What’s going on inside Almond?
Almond is our exploratory R&D lab for us to understand the aspirations of consumers. We’re trying to develop a front-end solution that could possibly be a killer app that we could white label and sell as one BaaS functionality — so that would be an online or mobile app for a bank account. We’re moving from the back end to the front end.

loanDepot Announces Agreement with Artificial Intelligence Real Estate Technology Company, OJO Labs (PR Newswire), Rated: A

Today loanDepot announced an agreement with OJO Labs, Inc. to act as the mortgage provider of its machine-powered assistant known as “OJO.” By matching OJO’s leading AI technology with loanDepot’s digital lending platform, melloTM, the combined offering will allow house hunters to access real estate and mortgage information, and get pre-qualified, through an entirely digital, mobile-first experience.

Large banks make terrible partners, fintechs say (American Banker), Rated: A

While large banks and fintechs are ostensibly working more closely together than ever, in private conversations and even publicly at a few conferences, fintech leaders have expressed increased frustration about working with bank partners.

Though they won’t name names, they claim tier-one U.S. banks string them along, fail to communicate, don’t pay anything and, worst of all, out-and-out steal intellectual property.

More seriously, fintechs claim large banks are bad at paying for new technology and services.

Parker Crockford, commercial director for the U.S. at identity verification software startup Onfido, said at the RegTech conference in early October that when he’s engaging with large financial institutions, “we get pulled into a lot of innovation conversations where they just want to pick our brains and look cool. I don’t have time for that any more. I’ll say, ‘I’m happy to give you a white paper or a 20-minute chat over the phone.’”

‘Buy The Block’ on its Way to Raising Millions of Dollars for Property Development in Black Communities (BlackNews.com), Rated: A

Entrepreneur Lynn P. Smith is the founder and CEO at Buy The Block – one of the only Black-owned platforms in the country that is dedicated to making investments in real estate as a group more accessible. The movement is presently on its way to recording massive success in funding for diverse development projects across Black communities in the US.

This enviable initiative offers every Black American an opportunity to invest as little as $100, and connect with other investors – with an added advantage of helping every member buy a piece of their first block.

Evolve Capital Partners Advises on CleanFund’s Financing Transaction (Accesswire), Rated: A

Evolve Capital Partners,Inc. is proud to announce that its client, CleanFund Commercial Capital, Inc., the leading direct provider of commercial Property Assessed Clean Energy (“C-PACE”) financing, recently announced its first closing of a $15 million equity financing round, led by Vulcan Capital affiliated entities. The financing will accelerate CleanFund’s growth across the U.S. and help the company continue to meet growing demand from commercial property owners.

Thrive Delivers Landmark Performance Gains for Horizon (Thrive), Rated: A

Thrive Inc. (Thrive) is excited to announce the compelling performance of its digital lending technology, ensuing from its multi-year technology licensing agreement with Horizon Community Bank (HCB), a leading Arizona-based FDIC insured bank and subsidiary of Horizon Bancorp, Inc.

Key Performance Highlights:

  • Application Time: Avg. of 5 minutes, as opposed to days
  • Automated Decisioning: 90% of applications are instantly decided; powered by Thrive’s configurable credit rules based algorithms
  • Time to Decision: <1 Day, as opposed to several weeks
  • Loan Booking Rate: 100%, as applicants prefer the quick digital application and decision process
  • Offer to Close: 1.5 Days, digital closing enables efficiency

Key Portfolio Highlights:

  • Portfolio Interest Yield: Above market interest rates drive loan profitability
  • Customer Acquisition Costs: <$200, driven by leveraging internal bank customers as well as new customers
  • Delinquent/Charge-Off: 0%, effective underwriting and real time loan monitoring is driving modern and powerful risk management while also compressing loan reviews
  • Monthly Origination Growth: 60%, driven by customer demand for a quick, efficient and friendly loan application experience

IBM and Zelle team up to advance P2P payments (Banking Technology), Rated: A

IBM says it has launched an “industry first” solution to support the full lifecycle of peer-to-peer (P2P) transactions, from the back office of financial institutions to the mobile device.

The project is a collaboration with Zelle, a P2P network in the US built on the clearXchange platform. Zelle now includes over 20 banks and credit unions, and is poised to reach an estimated 85 million US customers this year.

How FinTech Companies Are Closing The Banking Gap (Forbes), Rated: A

According to the World Bank, there are two billion people globally who currently have no access to banking services.There are many reasons for this: they may not have built up enough traditional credit history, they may have bad credit because of poor financial choices in the past, or they may live in an area where access to credit and other financial services are limited.

For instance, Jennifer Tescher, founder and president of The Center for Financial Services Innovation (CFSI), has helped launch financial inclusion initiatives by incubating startups addressing U.S. financial health through their Financial Solutions Lab. Some of these startups include Propel, which streamlines the food stamp process; Bee, a mobile alternative to potentially predatory financial services for low-income people; and popular startups that aim to assist with savings and debt repayment including Digit, EarnUp and LendStreet.

Founder and CEO Shivani Siroya, of California-based Tala, is trying to fix the challenge of low access to financial services by providing alternative credit scoring and instant credit delivery via mobile wallet.

Mexico, for instance, sees 38% mobile wallet use, compared to 17% overall in the US, even though 93% of Americanshave access to financial services.

3 Types Of Alternative Lenders You Need To Know About (Bisnow), Rated: A

1. Crowdfunding Platforms

Real estate crowdfunding hit $2.5B in 2015 and shows no sign of slowing down.

Platforms like RealtyShares and Fundrise offer several loan options and flexible payment terms, and cater to different asset classes. The latter prioritizes small-deal properties valued under $50M, and the former charges no fees for the first two years, or until an investment earns a 15% annualized return.

2. Nondirect Marketplace Lenders

Nondirect marketplace lending uses technology to connect lenders directly with borrowers, bypassing traditional banks, reducing barriers to transaction, and offering strong savings for borrowers and good returns for lenders. Popular for auto and student loans, financial institutions have increasingly stepped into the commercial lending role on these platforms, creating a marketplace in which loans are packaged and sent out to individuals, hedge funds, wealth advisers and banks.

3. Direct Lenders

Money360 is a direct lender with discretionary capital that ensures certainty of execution and timely closings. The lender offers loans between $1M and $20M on both bridge and permanent loans, with competitive terms and features similar to traditional lenders. Bridge loans are interest-only, and like banks, permanent loans use 25- to 30-year amortization schedules.

12 Tips to Get The Right Loan For Your Startup (Killer Startups), Rated: A

1. How much do you need for a small business loan for your startup?

Microloans work with the Small Business Association (SBA). They are for businesses that need to borrow between $35,000-$50,000 and have a limited credit history.

2. How quickly do you need access to loan funds?

If you’re positive that you need $100,000 right-off-the-bat, then an installment loan may be a better option. If you need $50,000 to start, but believe you’ll need additional capital down the road when you start to grow, you may want to look into revolving credit.

3. What is the loan going to be used for?

4. How long have you been in business?

If your business is still in the early stages, it may be difficult to secure a loan from traditional lenders like a bank since they require a positive credit history, collateral, business plan, projected financial statements, and cash flow projections.

In this situation, you may have to search for a small business loan from an alternative lender like an online lender like Lending Club.

5. Do you have collateral?

Do you have an property or inventory that you can put up as a collateral? If not, you may not qualify for a loan from a traditional lender. Instead, you may have to seek alternative funding options where you would offer accounts receivable, future sales, or a percentage of the company in exchange for the loan.

6. Eliminate your bad debt.

7. Research possible loan provider options.

Do your due diligence and seek lenders that are transparent with their rates, terms, and have positive reviews from customers.

8. Consider your niche.

9. Find a grant or contest.

10. Crowdfund Your idea.

11. Pay attention to APR, fees, and other costs.

12. Investor or capital?

Payday lender Speedy Cash files for IPO (Axios), Rated: A

The parent company of payday lender Speedy Cash has filed for a $100 million IPO. It plans to trade on the NYSE under ticker symbol CURO, with Credit Suisse listed as left lead underwriter. The Kansas-based company reports $33 million of net income of $442 million of revenue for the first half of 2017, and is owned by private equity firm FFL Partners.

Islands, Bodyguards, and Mansions – How would you spend $ 1 Billion? (NJ Online Casinos), Rated: B

Our new survey finds out the top 10 ways that people across America would spend their money if they won a $1 billion jackpot, including how many would buy a mansion, and how many wouldn’t give any to charity.

  • 89% would give some to their close family
  • 49% would pay off their debts as their first act
  • 37% would give some money to their friends
  • 28% would put $100 – $500 million into savings
  • 28% would buy a mansion

Arcadia launches new online payment options (Drapers Online), Rated: B

The owner of brands including Topshop, Topman, Miss Selfridge and Dorothy Perkins has joined forces with payment provider Klarna to offer online customers the option of paying for goods 30 days after delivery, without being charged interest.

20% of millennials said they would feel less guilty if they were offered deferred payment options, while one in five were more likely to complete a purchase if they knew they could spread the cost over time.

United Kingdom

RateSetter partners with Experian to boost business credit assessment (P2P Finance News), Rated: AAA

RATESETTER has teamed up with Experian to boost its credit decision-making process as it expands its commercial finance division.

Under the partnership, Experian is providing credit reference data and analytical services to RateSetter.

This has enabled the P2P lender to increase the number of business loan applications it processes each month from 150 to more than 600.

Nested Raises £36M in Third Round of Funding (Finsmes), Rated: AAA

Nested, a London, UK-based PropTech startup, raised £36m in its third round of funding.

The round was led by Global Founders Capital.

The company, which has raised almost £50m in total funding to date, intends to use the capital to expand its business reach, initially within London and in the near future expanding across the U.K.

TransferWise changes fees for GBP transfers, introduces complicated flat transaction fees (TechCrunch), Rated: AAA

Fintech startup TransferWise has built a solid reputation when it comes to transparency. The startup just announced new fees for transfers initiated from the U.K. And it’s quite hard to understand if transfers are going to be cheaper or not after the change.

TransferWise is switching from a simple variable fee to a flat transaction fee with a lower variable fee.

Let’s take an example. If you’re trying to transfer £1,000 from the U.K. to the Eurozone. With the old fee, you’d pay 0.5 percent (or the equivalent of £5) in fees. With the new fee, you now pay 0.35 percent + £0.80, which represents £4.30. You eventually get more euros.

For a £1,000, you now pay 14 percent less if you take into account all fees. But this percentage is going to change depending on your transfer.

Because of this tiny little flat transaction fee, you’ll now pay morethan before if you transfer less than £530.

This is even worse for GBP/USD transfers. If you transfer less than £800, you now pay more than before. But it’s now cheaper if you transfer more than £800.

Is an IFISA-inspired boom coming to the P2P sector? (P2P Finance News), Rated: A

THE PEER-TO-PEER Finance Association (P2PFA) has reported yet another quarter of increased lending among members in the sector, and the figures show just how beneficial ISA manager status can be.

P2P platforms offering Innovative Finance ISAs (IFISA) have previously said that most inflows have been coming in this tax year, and the latest P2PFA data shows just how much of a boost the fully regulated firms are getting.

Lending Works and Landbay, which both received full Financial Conduct Authority (FCA) authorisation and launched IFISAs at the start of this year both recorded some of the biggest increases in loanbook sizes and lenders.

The property loan fund that won’t surprise you with a lock in (Citywire), Rated: A

For LendInvest Real Estate Opportunities, a small Luxembourg-based fund run by the former peer-to-peer lending platform LendInvest, post-referendum it has provided an opportunity.

Assets in the fund have more than doubled to £130 million since the Brexit vote as investors have viewed its investments in short-term loans to property developers as a different way to get exposure to bricks and mortar.

The fund can be held in a self-invested personal pension (Sipp) but is not an eligible investment for an individual savings account (ISA).

The real estate fund has become a key focus for LendInvest as it has moved away from peer-to-peer lending after the Financial Conduct Authority (FCA) made it clearer what it thought P2P actually meant.

The fund lends to professional investors, developers and landlords who use their property portfolio as a prime source of income, transact several times a year and operate as a business.

‘He then went into discussions with the bank because he wanted to keep the asset and let it out, so refinanced. It had a valuation of £10 million, so 100% return in 10 months. We charged 15% interest.’

With interest rates that high it is not surprising perhaps that the fund has so far achieved its annual target of an 8% net return.

Accounting and business banking fintech raises €750k in seed round (AltFi), Rated: A

UK startup Countingup has raised €750,000 led by Frontline Ventures along with private investors to support sole traders.

Uniting business banking and accounting into a single product, Countingup aims to use the funding to build an accounting bank to serve 1m entrepreneurs.

Invest in property development from just £500 (This is Money), Rated: A

A new crowdfunding platform is allowing retail investors the chance to back residential property developments by investing as little as £500.

The start-up, called Homegrown, is giving individuals the chance to invest in developments – such as a converted milk processing factory that’s being turned into flats and offices – and claims projected annual returns of around 12 per cent over roughly two years.

HOW DO I… ACCESS BUSINESS FINANCE? (BQ), Rated: A

While credit conditions have continued to improve over the last 12 months there is still an issue for smaller businesses when it comes to the best finance options available and information on how to access them. There has been rapid developments in the different types of funding available to businesses, including peer-to-peer lending, crowd funding and business angel finance, but small businesses don’t always have the time to navigate around all the types of finance available.

Businesses can discover the funding options available to them including The Start Up Loans Company by using the Business Finance Guide (published by the British Business Bank in partnership with the ICAEW, and a further 21 business and finance organisations).

Equity finance

Whether you’re starting out or experiencing a high-growth phase, equity can be an important resource to provide finance as well as broader expertise. There is a breadth of equity funding options available, including the Northern Powerhouse Investment Fund, which provides early or late stage equity finance ranging from £50,000 to £2m.

Debt finance

At any stage of its development your business is likely to need a mix of different forms of debt, all of which have their advantages for business growth. The Northern Powerhouse Investment Fund offers microfinance covering micro-finance ranging from £25,000 to £100,000 and debt finance covering larger business loans £100,000 to £750,000.

London – Still The #1 FinTech Hub (Let’s Talk Payments), Rated: A

In H1 2017, UK attracted $564 million of VC investment, up 37% on H1 2016. FinTech is worth $9.25 billion to the UK economy and now employs 60,000 people.

About 77% of UK businesses are aware of FinTech products and services and 65% have adopted at least one FinTech application, with a fifth (19%) taking on four. MarketInvoice, a London-based invoice financing firm found that these as result of using FinTech products and services, adopters reported saving (on average) over £5,500 a year.

London consistently attracts foreign direct investments (FDI) from around the world. Between 2006 and 2016, the capital has recorded investments from 67 different countries. The US, India, China, Japan and Spain together accounted for 56% of the investment. Of top source countries, the fastest-growing contributors to FDI into London are China, which has seen a tenfold increase over the last 10 years, Italy (+450%), and Canada (+400%).

Seven tips to help prepare to raise funds for your GP practice (Practice Business), Rated: B

1 Decide on equity or debt – or a combination

For example, if your business is already two-years old try Funding Circle.

Thirty per cent equity and 70% debt is a good ratio and can make the company easier to manage.

2 Test your financial model – it must be robust

3 Be realistic about your valuation

4 Decide on the appropriate people to approach

In the £1 to £5m area, try EIS/SEIS funds and VCT funds. This is where an expert adviser can be helpful in providing introductions and knowledge. For smaller amounts contact Angel Investors.

5 Make contact and ensure you follow-up

6 Prepare the right information for the right stage in the process

7 Take your team with you

Number of UK financial services trade marks surges due to fintech growth (Finance Feeds), Rated: B

According to data provided by professional services firm RPC, the number of trade marks registered by financial services firms has jumped 35% in five years – from 3,141 in 2011 to 4,228 in 2016.

Examples of fintech companies and challenger banks that have registered a number of trade marks recently include Atom Bank, Monzo, and Redwood Bank. Last year, the raft of fintech and financial services trade marks registered in the UK comprises names like “ Zentity” and “Numus Cash”.

China

A glimpse at how Qudian and China’s online micro lenders revolutionise financing (SCMP), Rated: AAA

One day in July, Carina Shi awoke to incessant phone calls by angry, loud men, seeking repayment on a 20,000 yuan loan taken out by a friend.

Unbeknown to Shi, the 20-year-old college student had been listed as the contact by a friend who defaulted on a loan borrowed from Qudian Inc, the Beijing-based online lender at the centre of the fourth-largest US initial public offering this year. Debt-collection calls only ceased after Shi called her friend’s mother in Inner Mongolia to resolve the debt.

Shi’s experience offers a glimpse into the inner workings of Qudian, a provider of micro loans that ballooned within three years into a sizeable lender offering a loans book of 38.2 billion yuan (US$5.6 billion) to 7 million active users during the first six months of 2017.

The annualised interest rate on 59.5 per cent of loans lent last year surpassed 36 per cent, according to the company. That compares with between 12 and 14 per cent among the country’s largest commercial banks.

That crackdown gave Qudian and other online lenders like Ppdai, Fenqile and Hexindai the niche to build a market, which expanded by 23 per cent in two years to 452.4 billion yuan at the end of last year.

Chinese overseas investors prefer tech stocks (Technode), Rated: AAA

China’s sizable middle class is on fire. A McKinsey & Company report projected that they would account for 76% of the country’s urban population by 2022.

When we say Chinese people are becoming increasingly tech-savvy, we don’t only refer to the fact they are the first adopters of cutting-edge technology software and voracious buyers of smart gadgets. We also have a knack and understanding for technologies to seek better investment returns. The report shows that tech stock is the most popular category for Chinese-speaking investors.

A dominating 56% interviewees said they have invested in Alibaba, which had a growth of nearly 80 percent since the start of this year. JD and Apple performed equally well to rank the second and third.

Source: Technode

As digital natives, the country’s younger generations are first-movers to the sector. The report points out that post-80s gen represents nearly half (47.2%) of the users with post-90s gen comes as a close second (36.2%).

Over 65% of Chinese traders prefer Chinese companies when investing in the US.

Over 55% of Chinese investors will hold a position for over three months, and 20.03% for longer than a year.

The Role of Punctuation in P2P Lending: Evidence from the People’s Republic of China (Asian Development Bank), Rated: AAA

Using data from Renrendai, one of the largest P2P lending platforms in the People’s Republic of China, we investigate how the amount of punctuation used in loan descriptions influences the funding probability, borrowing rate, and default. The empirical evidence shows that the amount of punctuation is negatively associated with the funding probability and borrowing rate. We propose that the use of punctuation affects the readability of a loan description and reflects borrowers’ self-control and cognitive ability.

Source: ADB.org

Download the full report here.

China’s Latest Fintech Offering Looks Overpriced (WSJ), Rated: A

Investors sent the stock of Chinese online microcredit company Qudian Inc. QD 7.00% —which literally translates as “Fun Shop”—up nearly 50% on its first day of trading on the New York Stock Exchange last week. But on Monday, following criticism of Qudian’s high lending charges in Chinese social media and newspapers, the stock tanked, dropping almost 20%.

The market does seem ripe for growth: Nonmortgage consumer loans are only around 20% of household deposits in China, according to Bernstein analysts.

Still trading at 6.6 times book value even after Monday’s share price tumble, Qudian is asking for a lot of faith compared with more-established lenders.

Source: The Wall Street Journal

Chinese P2P lenders face IPO scrutiny (International Financial Law Review), Rated: A

Online lending companies are facing a number of issues when planning an initial public offering in Greater China and the US, according to panelists at last week’s IFLR Fintech Asia conference in Hong Kong. Regulators’ attitudes towards business models,
accounting requirements and risk reserves are issues companies need to be mindful of.

Credit Industry Leader Joins China Rapid Finance Board of Directors (PR Newswire), Rated: B

China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE: XRF), one of China’s largest consumer lending marketplaces, today announced the appointment of Zhou Ji‘an, Executive Director and General Manager of China United SME Guarantee Corporation (“Sino Guarantee”), to its board as a non-executive independent director.

A seasoned chief executive in the financial industry, Mr. Zhou brings to the Company more than 18 years of experience in global organizations, financial institutions and government.

European Union

3 Advices For Peer-To-Peer Investors From ‘Inspeer’ Ceo (Coinidol), Rated: A

AltFi Data Analytics, published by investment bank Liberum, shows that the ratio of operating costs to the loan portfolio at the crowdlending platforms is lower by almost 40% comparing to banks.

  • Diversification is a key
  • Know your borrower
  • Pay attention to risks
International

Creation of Billion Dollar Startups Shifting Out of US (BW Disrupt), Rated: AAA

Today, there are 214 unicorn startups globally — private companies that have reached a hefty valuation of over $1 billion.

Of these, the United States has taken the largest share of the world’s most valuable private companies, with 127 US-based startups reaching unicorn status since 2013. China follows in second place, producing 59 unicorn companies over the same time period.

Since 2013, the share of new unicorns born each year in the United States has consistently dropped, from 75 percent of all unicorn births in 2013 to less than half (49 percent) by 2015. That number sunk even lower to hit just 43 percent last year.

Chinese unicorns rising

In 2017 YTD, 16 new unicorns have been born in China.

In the third quarter of 2014, Lu.com, a finance marketplace that deals largely with P2P lending, reached a $10 billion valuation after a VC round backed by Morgan Stanley and Ping An Insurance.

Looking at companies with the highest valuations upon their entrance into the unicorn club, 7 of the top 10 spots go to China-based companies, with the US claiming the remaining 3.

Wish Finance: Small Business Lending Blockchain Platform (BlockTribune), Rated: A

BLOCK TRIBUNE: Could you tell us a bit how Wish Finance got started?

EUGENE GREEN: A decade ago I was a small businessman. Several of my closest friends are small businessmen in Asia, Europe and the US. All of them had the same massive problem, which I had – an inability to get a loan. So I founded Wish Finance to solve this major pain point.

BLOCK TRIBUNE: Where do you see the value of Wish tokens in the medium to long-term and the ultimate benefit for token holders?

EUGENE GREEN: We are not selling digital candy wrappers, but a token convertible to real company equity. The token price will go up with the company valuation, and comparable FinTech lending companies showed a fiftyfold valuation growth in only a few years. So the token holders could stand to benefit in a big way.

Better structure could protect investors in P2P market – BoJ paper (Central Banking), Rated: A

A research paper published by the Bank of Japan on October 23 suggests using specific purpose companies and specific purpose trusts to strengthen investor protection in the field of P2P lending.

P2P lending matches borrowers and lenders online without making use of traditional financial intermediaries such as banks. In recent years, the amount of outstanding loans in the P2P sector has grown significantly in the UK, the US and China.

Australia

Australia publishes draft laws for relaxed fintech regulation (Reuters), Rated: AAA

The Australian government published draft laws on Tuesday that would let financial technology companies operate without a full licence, a measure it said would encourage innovation without compromising existing levels of consumer protection.

Financial technology companies would be able to test products involving non-cash payments, crowdfunding, consumer credit and provide financial advice on pension funds, life insurance and domestic and international securities.

Industry superannuation funds need to adopt digital advice into their offering to retain those members who eventually seek advice elsewhere and inevitably leave their industry fund.

Through digital advice, super funds should begin focusing on what Cheung terms as “incremental advice”.

Instead of providing just intra-fund and single-issue advice, super funds should provide members with the ability to deal with cashflow, debt management, or protection and insurance needs, as needed.

India

Fintech Valley Vizag and Knowledge Partner KPMG Announce Finackathon 2017 (BW Disrupt), Rated: AAA

HackerEarth, a leader in innovation and talent management software, has been selected by Fintech Valley Vizag – a Government of Andhra Pradesh initiative, to host Finackathon 2017.

The hackathon will be held in two stages. The idea phase which began on September 14th is currently underway with entries set to close on October 30th. The shortlisted teams will participate in the final round to be conducted in the first week of December in Visakhapatnam. The winning teams in each category (Banks, Insurance, Capital Markets, and NBFCs) will be awarded a sum of INR 3,00,000. The winners will also be given a chance to carry out Proof of Concept (PoC) with corporates and will need to be executed in Fintech Valley Vizag. Investor network of The Fintech Valley, Vizag will be invited for Hack Day, where they will go through the prototyped solution.

The hackathon is looking for solutions across the following 5 themes:

  1. Customer Experience
  2. Process Automation
  3. Financial Inclusion
  4. Risk Management
  5. Lending
MENA

Betterpaydayloansonline.com Now Allows Getting Quick Payday Loans (MENAFN), Rated: B

Betterpaydayloansonline.com is a web-based service, which makes it possible to get quick, safe and convenient payday loans with no hassle at all.

Canada

LENDING LOOP HITS MILESTONE OF PROVIDING $ 10 MILLION IN FINANCING (Betakit), Rated: AAA

Lending Loop, a Canadian P2P lending platform, has officially provided financing of more than $10 million across the country.

The company says it has supported the expansion of over 180 small businesses through a system that allows investors to reach out to small businesses on Lending Loop’s digital marketplace.

Lending Loop’s investment model moves away from institutional or accredited investors; Canadians can even invest $50 into a pool of larger loans.

A new service is helping employers reduce turnover by paying their employees by the day (The Washington Post), Rated: A

Restaurant News reports that hourly employees can use a smartphone app to access money for hours worked and have it deposited on a debit card. The amount is limited to 50 percent of what’s earned and–to discourage impulse buying–employees only have an hour after their shift to access the money. There’s no fee for the worker, but businesses pay Instant Financial $1 per active user per month.

Barha is aiming to put a dent into the burgeoning payday loan industry, which was used by approximately 12 million Americans in 2015. His service is also being looked at as a potential recruiting and motivation tool by employers, particularly in — but not limited to — the retail and restaurant industries.

According to a recent USA Today report, almost 150,000 employees at more than 50 companies like McDonalds, Outback Steakhouse and Dunkin’ Donuts as well as other restaurants and retailers, trucking companies and staffing firms have access to the service.

GDS Link Joins Canadian Lenders Association to Support Innovative Lending; Sponsoring Canadian Lenders Summit (PRWeb), Rated: B

GDS Link, a global provider of risk management solutions and consulting for multiple verticals within the financial services industry including marketplace lending, retail finance, alternative financial services, credit card, auto, and business lending and leasing, today announced that it has joined the Canadian Lenders Association (CLA) as an affiliate member and will be sponsoring the Canadian Lenders Summit.

GDS Link is sponsoring the Canadian Lenders Summit, which has partnered with the CLA. The inaugural event will take place on October 26, 2017 in Toronto, Canada. Representing GDS Link is Rich Alterman, EVP of Business Development.

Latin America

Brazilian fintech Nubank offers accounts for transfers, payments (Reuters), Rated: AAA

Brazilian startup Nubank said on Tuesday it would expand from credit cards into digital accounts allowing users to make transfers, pay bills and earn more interest than average savings account, beefing up its challenge to traditional banks.

Tech-savvy millennials have been the core demographic for Nubank’s credit card, but Velez said he hoped new accounts would serve some of the roughly 60 million Brazilians – around 30 percent of the population – who do not have a bank account.

Venture capital firms including Sequoia Capital, Kaszek Ventures, Tiger Global Management and DST Global have invested $179 million in Nubank since 2013, giving it a value of $500 million in early 2016 that made it the largest Brazilian fintech startup.

Authors:

George Popescu
Allen Taylor

Friday May 5 2017, Daily News Digest

Friday May 5 2017, Daily News Digest

News Comments Today’s main news: Lending Club’s Q1 2017 results: a little disappointing. SmartFinance to IPO in U.S. Prosper says system error overstated returns. Details on NAV’s raise of $38mil Series B. Next Insurance secures $29M during Series A. Metro Bank hits 1 million accounts. LendIt Europe to meet in London this year. Mexican fintech raises $4M in Series A. Today’s main […]

Friday May 5 2017, Daily News Digest

News Comments

United States

United Kingdom

  • Metro Bank hits one million accounts. GP:”This is a very large number of accounts. I am very impressed.”AT: “Great achievement. Congratulations.”
  • Sand. Meet Head. GP:”Certainly worth a read.”AT: “I love Anand’s sense of humor, but his insights are prescient, as well. I’m always amazed at the hubris of incumbents in any industry. Any time there is market disruption, the surest path to survival is humility, not boasting.”
  • LendIt Europe returns to London. GP:”I think there was no doubt it will be in London and stay in London. “
  • Robo-advisor to provide full retirement advice in two hours. GP:”I am not sure why it takes 2 hours to compute such a simple algortihmic solution. “AT: “This sounds like a joke, but I know it isn’t. I think most people will want the robot’s advice checked by a human until they are 100% comfortable with the technology.”
  • Octopus-backed Moola goes live.
  • What is fintech and why Google and Facebook will be the banks of the future. GP:”Google is already struggling to defent against monopole attacks and Facebook is avoiding carefully to be turned into a credit bureau. I doubt they will move in that direction. Also banks don’t have a good image with the public and aren’t that profitable so I see no reason for Google or Facebook to come even close to being banks.”AT: “The headline is misleading and somewhat overstated.”
  • Fintech: What will bring the most change? AT: “A poll indicates that blockchain may be the most disruptive fintech technology in fintech. I think it certainly has the potential to be, but we haven’t seen it yet.”
  • What does rising inflation mean for your money? AT: “A blog post at Funding Circle.”

China

European Union

India

Middle East

Central America

News Summary

United States

Lending Club Reports First Quarter 2017 Results (Crossroads Today), Rated: AAA

($ in millions)

March 31,
2017

December 31,
2016

March 31,
2016

Originations

$

1,958.7

$

1,987.3

$

2,750.0

Net Revenue

$

124.5

$

130.5

$

152.3

Net Income (Loss)

$

(29.8)

$

(32.3)

$

4.1

Adjusted EBITDA (1) (2)

$

0.2

$

(0.9)

$

26.3

Key accomplishments and developments in the first quarter across the Lending Club platform include:

Investors

  • Banks further increased their purchasing, funding 40% of total originations for the quarter, up from 31% in the fourth quarter, and retail investors expanded to 15%, up from 13% in the prior quarter
  • Developed a retail investor mobile application, now available in the App Store
  • Lending Club initiated activities to support the securitization of Lending Club loans with external partners

Borrowers

  • Achieved another nearly $2 billion originations, surpassing $26 billion in total loans since inception almost ten years ago
  • Continued the Company’s lead as the largest personal loan provider in the U.S. with a borrower base of almost 2 million individuals
  • Introduced an enhanced version of our Joint Application loan program, giving borrowers the ability to jointly apply for a personal loan

Adjusted EBITDA (3) Adjusted EBITDA was $0.2 million in the first quarter of 2017, improving $1.0 million from the fourth quarter of 2016, resulting from the decrease in revenue noted above, and a decrease of $10.3 million in other general and administrative expenses. The decrease in other general and administrative expenses was primarily driven by an insurance recovery of $9.6 million. Adjusted EBITDA also includes $10.6 million of expenses primarily associated with the Board Review that was disclosed in 2016.

Lending Club’s $ 30M quarterly loss is its smallest in the last year (American Banker), Rated: AAA

Lending Club, the online consumer lender whose fortunes were hurt by scandal last year, lost $29.8 million in the first quarter amid lower revenues and rising expenses.

BRIEF-Lending Club reports Q1 adjusted loss per share $ 0.02 (Reuters), Rated: AAA

  • LendingClub corp – qtrly originations $1,958.7 million versus $2,750.0 million
  • Q1 adjusted loss per share $0.02
  • Q1 loss per share $0.07
  • Q1 earnings per share view $-0.03 — Thomson Reuters I/B/E/S
  • Q1 revenue $124.5 million versus i/b/e/s view $122.8 million

Here is the Lending Club Q1 Earnings Deck (Crowdfund Insider), Rated: AAA

Below is the Lending Club Q1 earnings deck. The company is predicted Q2 growth of 6% to 10%. Full year sequential growth is expected to be 15% to 19%.

See the Lending Club Q1 2017 results in full here.

Lending Club slowly woos investors back after last year’s scandal (Financial Times), Rated: AAA

In the first quarter the San Francisco-based company originated $1.96bn of loans, it said on Thursday, down slightly from the $1.99bn of the fourth quarter. Banks bought 40 per cent of the loans, up from 31 per cent in the fourth quarter, indicating that many are now satisfied that the company has ironed out its problems.

But net revenues for the quarter were $125m, down 5 per cent from the fourth quarter. The quarterly net loss was $29.8m, slightly less than the previous period.

According to data from Orchard, a technology provider to the industry, total returns from an index of US consumer loans came to 3.95 per cent last year, down from 8.71 per cent in 2014.

Online Lender Prosper Says System Error Overstated Returns (Bloomberg), Rated: AAA

Prosper Marketplace Inc., one of the largest U.S. online-lending platforms, notified the majority of the investors that buy its loans that it had overstated their annual returns due to a system error, a spokeswoman said.

The error has been fixed, according to spokeswoman Sarah Cain. Some of the investors that were affected saw their annual returns fall in half, but in most cases returns fell less than 2 percentage points, Cain said. The issue has been going for “several quarters,” she said.

The glitch didn’t affect the cash that investors received, tax documents, expected future returns, or any other information the startup provided to loan buyers. In a small number of cases, returns were understated, Cain said.

Q1 2017 Shareholder Letter (Square), Rated: AAA

Our first-quarter results demonstrate our continued ability to grow the business at scale while balancing investment and margin expansion. Improvements in net loss and Adjusted EBITDA reflect strong top-line growth, coupled with ongoing operating leverage and improvements in transaction loss rates. Similar to previous quarters, we saw strong momentum across our products, with revenue growth driven by both transaction-based and subscription and services-based monetization.

We launched in the UK, our fourth international market, where small and medium businesses (SMBs) generated £1.8 trillion of revenue in 2016.

Square is a great fit for the UK market, which has 5.5 million SMBs2 and a thriving entrepreneurial scene. The annual revenue of SMBs in 2016 was £1.8 trillion, which is 47% of all private sector UK revenue. In the UK, the average adult now carries less than £25 in cash and 70% of shoppers prefer to pay by card, yet industry research estimates that half of UK small businesses still do not take card payments. Our contactless and chip reader aims to meet the needs of the UK market, where there are more than 100 million contactless cards.

See Square’s full Q1 2017 report.

FT Partners Advises NAV on Series B Financing (FT Partners), Rated: AAA

Read the full announcement here.

PeerStreet Hits New Milestone: $ 300 Million in Loans Funded (PeerStreet), Rated: A

Under a year ago, we announced PeerStreet had funded $75 Million, October we rounded $150 Million and now, thanks to the ongoing support from our investors and lenders, we’ve just surpassed $300 Million with zero losses to date.

The number of lenders PeerStreet works with has grown from 25 to 89. The loans we’ve recently made available for investment are more diverse than ever, with 11 new states added since this time last year, now totaling coverage across 28 states and Washington D.C. Currently, we are publishing triple the number of loans we did a year ago. To support this growth, our underwriting and portfolio management teams have doubled since last year.

Next Insurance Secures $ 29 Million During Series A Funding Round (Crowdfund Insider), Rated: A

Next Insurance, an insurtech company that specializes in small to medium businesses, announced on Wednesday it secured $29 million during its Series A funding round, which was led by Munich Re/HSB Ventures with participation from  Markel, Nationwide, and other existing investors.

The funding from the Series A funding round will go towards continuing to grow Next Insurance’s insurance products and expand the company’s offering to new business sectors. The announcement follows Next Insurance’s recent release of the first ever Facebook chatbot for small business insurance.

CAN ALTERNATIVE DATA SOLVE ONLINE LENDERS’ ‘ALGORACISM’ PROBLEM? (The Alternative Lending Report), Rated: A

A March 2017 letter written by Congressman Emanuel Cleaver, II (D-Mo.), to Consumer Financial Protection Bureau Director Richard Cordray raises fresh concerns about “algoracism” tainting the creditrisk-scoring models used by online lenders.

Cleaver’s letter highlighted five predatory practices cited by the HBS paper as pervasive in the “Wild West” of online lending and alleges that risk-scoring algorithms may be designed to discriminate against minorityowned, small business borrowers.

Minority-owned businesses comprise roughly 15% of the 28.8 million small businesses in the United States, according to a 2016 Small Business Administration report.

Biased algorithm design can occur if engineers code data correlation parameters with attributes that make inadvertently discriminatory assumptions, which could be violating the Equal Credit Opportunity Act. ECOA prohibits creditors from discriminating against borrowers on the basis of race, color, religion, national origin, sex, marital status, age or because they receive income from a public assistance program.

In fact, FastPay’s loan algorithm is over 80% weighted towards the credit risk of the brand counterparties, which typically average 90-days sales outstanding before they pay their creative and advertising technology vendors. Despite prolonged payment terms, Proctor & Gamble and other Fortune 500 brands pose extremely low credit-default risks to invoice financiers like FastPay.

Ultimately, Arora attributes flawed credit-risk modeling in fintech to the big banks that refuse to share data. But banks in the U.S., unlike in Singapore and the UK, where lenders are opensourcing their loan algorithms, see no incentive to make accountholder data available to third parties.

Regardless, Mills said Kabbage, which charges an annual percentage rate, ranging from 24% to 99%, is an interesting fintech small business lender because they factor variables like borrower credit card data and the company’s Facebook page into their risk scoring models.

Source: The Alternative Lending Report

See the full report at SmallBusinessLending.io.

How Lending Club Is Differentiating Itself From Other Online Lenders (Forbes), Rated: A

In less than a year, Sanborn cut and rehired 179 jobs and hired a new CFO, COO, general counsel and chief capital officer. In addition, the company launched a new auto refinance product and an investor mobile application, Lending Club Invest.

Sanborn: Nearly 75% of borrowers also say that their FICO score has increased by 19 points after consolidating debt or paying off credit cards, which can help put them on a better financial track.

Sanborn: Today we have more than 148,000 retail investors – more than any other online lender. Part of the evolution of our marketplace is growing and balancing the mix of investors – having the right mix of investors strengthens our marketplace and makes us more resilient, scalable, and better able to serve a wide range of borrowers of all credit profiles.

Sanborn: Our mission has been to transform the banking system to make credit more affordable and investing more rewarding. So, everything that we do comes from this goal and with the intention of delivering a great experience for everyone who comes to our marketplace. With 10 years of experience and incredibly powerful data and insight that informs us on our customers’ behaviors, choices and needs. We’re also able to calibrate this data into our models to price credit risk and better manage our marketplace and the success of both our borrowers and investors.

A traditional bank uses government-guaranteed deposits to lend to make a spread and can only give loans to a narrow spectrum of borrowers. Our credit marketplace attracts investors that span retail, asset managers, funds and banks, all with different risk appetites, to invest in loans across the credit spectrum so we can say yes to more borrowers. Our diverse investor base also means we’re not reliant on any one type of investor to fund our loans, so we have the agility to pivot funding channels to meet changing market conditions.

OCC fintech charter plans in jeopardy as Curry departs (Finextra), Rated: A

Proposals by the US Office of the Comptroller of the Currency to issue special purpose banking charters to fintech firms are up in the air following the departure of leading advocate Thomas Curry and his replacement as acting head of the Federal agency by Simpson Thacher & Bartlett partner Keith Noreika

Curry completed his five-year term as Comptroller last month but planned to stay on and push through his controversial fintech charter.
Noreika, a member of the Trump transition team, has extensive experience advising banks on regulatory issues, although his views on Curry’s fintech plans are not known.

Crowdfunding Real Estate Isn’t Just For Millionaires Anymore. (Yes Magazine), Rated: A

In up-and-coming neighborhoods, it’s not uncommon for developers to swoop in and alter historic buildings beyond recognition, or tear them down completely to make way for new projects. But when Eve Picker, president and founder of the real estate crowdfunding portal Small Change, came across a three-story property called the Buvinger Building in Pittsburgh’s Lawrenceville neighborhood, she saw a way to both preserve history and add much-needed housing units in a thriving area.

Luckily for Picker, the funding process is easier than it used to be. She posted a detailed project overview on Small Change’s website, which included information about the building’s history and aesthetics, the financial returns and risk factors, and a link to invest. Small Change met their investment goal of about $240,000 in just under three months, and construction on the project began in late Feb. 2017.

Though the internet paved the way for Title III crowdfunding, it solves a problem that existed long before the digital revolution. When securities regulations were put in place to protect non-wealthy investors after the stock market crash of 1929, one unintended consequence was that those very same investors were frozen out of a broader range of investment opportunities. It took years for the SEC to approve the Title III regulations in the JOBS Act, Roderick explains, because of the challenge inherent in striking a balance between protecting investors and making it easier for developers to raise money.

Small Change, however, is raising more than just capital. It’s a crowdfunding platform that backs real estate development projects only if they benefit underserved communities.

It also means that, in addition to financial returns, many Small Change investors are seeking investments that align with their values. It’s not something easy to quantify—and that’s where the Change Index comes in. The index is Small Change’s proprietary system for measuring a project’s viability in terms of transportation, the environment, and economic inclusiveness.

The Index also provides a metric for potential partners and investors to gauge their compatibility with a particular project.

Small Change plans to launch its first Reg CF offerings later this spring. It’s still one of only about 25 Title III electronic crowdfunding portals that the SEC has approved. While most Title III portals are focused on startup and small business financing, Small Change deals exclusively with real estate, which makes it even more of an outlier.

Major Credit Unions Will Unveil New Blockchain Tech Next Week (Coindesk), Rated: A

CULedger, a consortium project unveiled late last summer, is supported by more than 50 credit unions and four of the biggest credit union service organizations in the US. Spearheading the project are the Credit Union National Association and Mountain West Credit Union Association (MWCUA).

Those involved in the initiative say they want to utilize the tech in a bid to improve how credit unions function – while also making them more competitive in an increasingly tough environment for financial institutions. The idea is to create a blockchain-powered utility through which credit unions could send money or exchange other types of information.

FinTech and Digital Wallets are the Core of Financial Inclusion (Due), Rated: B

In a FDIC survey released in 2016, the Federal organization found the roughly 7% of American households are unbanked. That is 9 million households with no checking account or savings account. No direct deposit. No credit cards. These families utilize virtually no mainstream financial services. In some parts of the country, as much as 40% of the population is unbanked!

With no bank relationship, these individuals have little if any credit history and poor credit scores. There is a lack of trust and understanding of how banks and mainstream financial services work. This is a serious problem the entire financial industry needs to overcome.

Instead, less savory businesses are often chomping at the bit for this demographic’s financial business. Payday loans, title loans, and other expensive, low-quality financial products are all these people have had access to.

In many ways, digital wallets work like a bank account. You can store funds, make payments, and transfer to other financial accounts. In the case of Bluebird, you can even write checks!

Digital wallets look a lot like a regular checking account to outsiders, but there are some important technical differences between bank accounts and digital wallet accounts.

Financial technology startups are not encumbered by those sentiments. While the rules of the game are the same, startups can quickly adapt to new market trends, customer feedback, and more.

Unlike a giant bank where you have to navigate a series of annoying phone menus to reach a live human, startups are right on the pulse of what their customers are saying and doing. That is a major advantage.

United Kingdom

Challenger bank hits one million accounts (AltFi), Rated: AAA

Metro Bank surpasses one million customer accounts less than seven years removed from launch.

Metro Bank, which became the first new high street bank in the UK for over one hundred years in 2010, now has more than a million customer accounts. The milestone was reached, fittingly, on the bank holiday Monday, when the majority of incumbent banks are closed.

Some stats from the last seven years include: being open 75 per cent longer than the average bank, saving customers over 4 million days by printing over 1 million cards instantly in-store, and preventing over 20,000 cards from being cancelled unnecessarily.

Sand. Meet head. (CB Insights), Rated: AAA

Source: CB Insights
Source: CB Insights

It goes by many names.

Hubris.
Arrogance.
Cluelessness.

It’s also worth understanding that there is no upside to saying stuff like this.

Cuz more often than not, you’ll find yourself on the wrong side of history like so many of these CEOs.

And then we’ll make slides to immortalize your cluelessness.

Europe’s largest lending and fintech event, LendIt Europe, returns to London this autumn (LendIt Email), Rated: AAA

LendIt Europe 2017 launched last night with a cocktail reception for 75 of London’s fintech elite at the Dion in St. Paul’s. The 2017 event is set to be Europe’s largest lending and fintech event, with over 1,000 participants from the UK and Continental Europe as well as North America and Asia. Taking place at the Intercontinental O2 Hotel on October 9-10, this year’s conference is expanding with the industry to cover the hottest topics in fintech including blockchain, insurtech, digital banking, and much more.

Early confirmed keynote speakers are Jaidev Janardana, CEO of Zopa, Francesco Brenna, Partner at IBM Global Business Services, and Shane Williams, co-founder of UBS Smartwealth. With six tracks of content including Digital Banking, Credit & Underwriting, Policy & Regulation, The Cutting Edge in Fintech, Innovations in Lending, and Investor Insights, this year’s LendIt Europe agenda will be the most comprehensive yet, with more details being released on www.lendit.com/europe in the coming months.

A featured component to this year’s conference, and back for its second year running, is the PitchIt startup competition. PitchIt allows innovative fintech startups from across EMEA to present their solution in front of the LendIt audience of international investors and industry leaders. The PitchIt programme has been an exciting part of the LendIt series of events, with past winners and finalists going on to secure significant investment and publicity.

Robo-adviser to provide full retirement advice in 2 hours (FT Adviser), Rated: A

Robo-adviser Wealth Wizards has launched a new automated paraplanner tool to help firms provide retirement advice in less than two hours.

Wealth Wizards said the tool generates a “regulated advice solution” made up of an annuity, drawdown or a blend of the two.

The report could then be edited by an adviser to make sure it suited the client’s needs.

Octopus-backed robo advisor Moola goes live (AltFi), Rated: A

Investors have a new robo advisor to choose from following the soft launch of Moola.

The firm, which is backed by private equity specialist asset manager Octopus, announced back in December that it had received full regulatory approval from the Financial Conduct Authority (FCA) as well that it had arranged a tie-up with Blackrock-owned ETF provider iShares.

The passive only portfolios are risk targeted and cost just 0.75 per cent per year.

What is FinTech and why Google and Facebook could be the banks of the future (Manchester Evening News), Rated: A

In total, the sector generated almost £7bn revenue last year and now employs more than 60,000 people.

Not only that, but the big players are wising up to this need for disruption with Barclays opening a flagship FinTech accelerator in May, offering 500 workspaces for start-up innovators.

HSBC and Tradeshift have also confirmed that their new ‘procure-to-pay’ product will go live in summer allowing businesses to manage their entire supply chain and working capital requirements in one place, from any device.

The innovation specialist at SoftwareONE said: “Back in the 80s, when ATMs came into play, people thought it would be the end of bank branches and jobs, but instead it freed up clerks to perform other tasks, like mortgage advice, which actually added value to the customer.

“Moving on to the current day and bank branches have now become mobile phones – or apps – people can access their accounts and information at a touch of the screen.”

AccessPay, which moved from London to Manchester, is flying after a recent £2m funding boost.

Based in City Tower, the fast-growing firm is looking to recruit 60 new staff and expand into the US after securing funds from Clydesdale and Yorkshire Banks’ Growth Finance team.

The specialist in cloud-based payments and cash products has been driving innovation in the sector since it was founded in 2012.

Fintech: What Will Bring the Most Change? (City A.M.), Rated: A

Finance professionals have two basic questions about fintech and what it means for them:

  • How will fintech positively affect their careers?
  • How will fintech negatively affect their careers? For example, will peer-to-peer (P2P) lenders replace banks as the preferred platform or intermediary for borrowing and lending? If the answer is yes, then bank loan officers and credit risk analysts should start looking for alternative careers. The particular areas of fintech that evoke this sort of existential concern include blockchain, mobile payment, P2P lending, and robo-advisers.

 

The responses of our 333 poll participants suggest that interest in blockchain technology has risen to an all-time high, with four out of 10 readers opting for that choice. Another 22% are believers in robo-advisers.

Read between the lines: What does rising inflation mean for your money? (Funding Circle), Rated: B

Inflation is rising – and is set to climb even higher by the end of the year. Official figures revealed a surprise jump in the headline rate of inflation to 2.3% in March, its highest rate for four years. And it is estimated to climb to 2.8% by the end of the year.

But there’s one area where inflation is hitting hard right now – our savings. If you can’t get a savings return higher than inflation, you’re losing money. The cash in your nest egg will be worth less and less as inflation outstrips the returns you get. And right now, no-one can get an inflation-beating rate from traditional banks and building societies with even the much-heralded new Government-backed savings bond paying less than inflation at 2.2%.

China

Chinese online lender SmartFinance targets IPO in US (Deal Street Asia), Rated: AAA

SmartFinance, a Chinese internet loans business that judges borrowers on factors including how often they charge their phones, has consulted banks about a possible U.S. listing that could happen as soon as this year.

The rapidly expanding company, which anticipates it will reach a $1 billion valuation by the end of 2017, has hired former Cheetah Mobile Chief Financial Officer Andy Yeung to help better manage investor relations and smooth the path to an eventual listing.

Jiao, who is known to colleagues by his English name UBee, told Bloomberg the company’s next step is an initial public offering, probably in the U.S. By the end of 2017, he expects to have more than 2,000 staff and facilitate as many as 4 million loans a month.

SmartFinance is more commonly known as Yongqianbao, which translates as “need money pal,” and taps into as many as 1,200 data points collected by its smartphone app to assign credit ratings for would-be customers. Making calls that go unanswered or failing to frequently charge your phone are all potential signs of a problematic borrower.

China’s Ping An to launch first overseas fintech and healthcare fund of $ 1 bln (Reuters), Rated: A

Ping An Insurance Group Co of China Ltd, the country’s largest insurer by market value, is launching its first overseas fund to primarily invest in financial and healthcare technology worldwide, underscoring its push beyond its home market.

The initial size of the so-called Ping An Global Voyager Fund will be $1 billion, the insurer said in a statement on Thursday. It will be managed from Hong Kong and led by Jonathan Larsen, an 18-year stalwart of Citigroup who joined Ping An as its chief innovation officer.

P2P Industry News (Xing Ping She Email), Rated: A

IPO boom of P2P Lending platforms is coming!
China Rapid Finance (CRF) has gone public in the US and it is also the second P2P Lender listed successfully in America, which may bring an IPO boom of Internet finance industry.

It was revealed that Qudian, a P2P lender focusing on providing consumer finance products for young people, has already submitted their IPO prospectus to the SEC, expecting to finish IPO process by the second quarter of this year. Fintech companies such as PPDAI, Lego Group Inc. Are also actively preparing for US IPO. Several giants are among the long waiting list of IPO candidates, including Ant Financial, Lufax, Zhongan Insurance and Jingdong Finance etc. In fact, the assessment value of Ant Financial has already reached to $60 billion, and once the IPO could be successful, the director Jack Ma may become the China’s richest person again with holding at least 5% shares.

Ant Financial planning to buy MoneyGram with $3.5 billion Loan
Recently, an insider revealed that Ant Financial is going to sign a loan contract valued $3.5 billion for the acquisition of an American company MoneyGram International.

The loan application has attracted 14 providers, including ANZ, Barclays, Citi, Credit Suisse, DBS, Goldman Sachs, HSBC, ING, J.P. Morgan, Mizuho Bank and Morgan Stanley. With Deutsche Bank and Societe Generale participated as leading banks, and BNP Paribas SA is the sponsor. Ant Financial has got the Green Light for the acquisition by raising the biding price by 1/3 and surpassed its rivals.

European Union

Altisource Launches Enhanced Vendor Oversight Platform to the Market (Yahoo! Finance), Rated: AAA

Altisource Portfolio Solutions S.A. (“Altisource”) (ASPS), a leading provider of real estate, mortgage and technology services, today announced the expansion of the Vendorly™ platform, an innovative vendor oversight platform for financial institutions. The platform launched last year exclusively for members of the Lenders One® Cooperative, a national alliance of independent mortgage bankers, and is now available to the broader mortgage and community bankers market outside of the Lenders One network. The Vendorly platform is designed to help streamline vendor due diligence, document maintenance, monitoring and audits.

The scrutiny of vendor oversight practices continues to be a focus of regulators. It’s important for mortgage and community bankers to have a multifaceted vendor oversight program. Through the Vendorly platform, and its vendor oversight offerings, Vendorly can help strengthen its customers’ compliance management framework and increase their operational efficiencies. Vendorly offers managed vendor oversight services, including due diligence, document management, annual assessments, information security assessments, financial condition reviews and on-site audits.

Vendorly is announcing collaboration with Secure Insight, an innovator in the mortgage industry in providing settlement agent risk evaluation, rating, monitoring and database reporting on fully vetted mortgage closing professionals. Currently servicing close to 100 clients nationwide, Secure Insight will deliver real-time risk ratings and related settlement agent data to clients through the Vendorly platform. Together, Secure Insight and Vendorly intend to develop a platform that produces a transaction-based tool with risk data on each transaction prior to a closing (and just before the proceeds are wired). It is expected that this process will provide data in a more efficient, streamlined manner and give lenders greater comfort in the protection of their money, documents and consumer data at each closing.

India

i-lend plans to venture out with funds from 50K  (India Times), Rated: A

Peer-to-peer lending startup i-lend has raised an undisclosed amount in a pre-series A round from early-stage venture capital firm, 50K Ventures. It plans to spend the money on marketing, scaling up and expanding its core team.

The Hyderabad-based company recently started operations in Bengaluru and plans to expand to a few more cities in the coming months. It is also looking to raise Series-A funds later this year.

The company has disbursed more than 600 loans since its inception in Ventures is thinking 2013 and 50K Ventures is thinking about expanding i-lend to other verticals.

Why Nomura, Google, IBM and Amazon are Investing in Indian Fintech (Edgy Labs), Rated: A

In a press release, Nomura Holdings, Inc. unveiled its initiative, called the “Voyager-Nomura FinTech Partnership in India.” Through the Voyager Program, the company invites startups and entrepreneurs with innovative Fintech solutions for the financial industry, especially capital markets and investment banking.

To further consolidate the Voyager Program, Nomura Holdings has recruited the expertise of many authoritative partners, including Google, Amazon, IBM, PwC and Internet Services Pvt. Ltd.

Middle East

Responsible finance summit focus on Islamic fintech (Middle East Association), Rated: AAA

With the retail share of responsible investment doubling to 26 per cent in 2016, ethical, responsible and Islamic fintech can support further growth to deliver the financial products, experts said at a summit in Zurich, Switzerland.

The Responsible Finance & Investment (RFI) Summit opened yesterday (May 3) with leaders from across the responsible investment, impact investment and Islamic finance sectors gathering to discuss how to promote greater awareness of and engagement within responsible finance.

The first day’s sessions focused on ethical, responsible and Islamic fintech and the power they harness which can disrupt financial services and in doing so address the inequities in society and support equitable, inclusive and sustainable economic growth.

Central America

Sr. Pago raises 4 million dollars in its Series A investment round (Crossroads Today), Rated: AAA

Sr. Pago, the first 100% Mexican financial integrator for acceptance of credit and debit cards provided for the country’s non-banking population, through the placement of its Series A has successfully raised four million dollars in capital, thus ensuring the acceleration of its operations and underpinning its long-term vision.

This raising of capital is taking place thanks to the confidence of three recognized investment funds: IGNIA and EB Capital, with headquarters in Mexico City, and an international fund with its headquarters in Miami, FL, which through this capitalization have become strategic partners of Sr. Pago, supporting the business model of this Mexican Fintech company as the only one that has the country’s non-banking economically active population as its primary market and main consumer.

Authors:

George Popescu
Allen Taylor

Friday March 17 2017, Daily News Digest

orchard originations

News Comments Today’s main news: CreditEase Fintech Investment Fund announces new global investments. Money360 loan portfolio exceeds $200M. Funding Circle launches C shares offer for the fund. Today’s main analysis: Signs of a turnaround in volumes? Today’s thought-provoking articles: Groundfloor launches tax-deferred real estate investing. China’s yield-strapped investors spark P2P explosion. United States CreditEase Fintech Investment Fund announces new investments […]

orchard originations

News Comments

United States

United Kingdom

China

India

Asia

Africa

News Summary

 

United States

CreditEase Fintech Investment Fund Announces New Investments in Global Growth-Stage Fintech Companies (PR Newswire), Rated: AAA

CreditEase Fintech Investment Fund (“CEFIF”), a venture fund investing in growth-stage fintech companies in China and globally, announced at the 2017 LendIt USA Conference in New York that it recently participated in investment transactions in three new fintech companies. LendIt annual conferences are recognized as one of the largest global fintech industry events dedicated to connecting the global fintech and lending communities.

The three investment transactions include Series C financing round in Trumid, an electronic trading platform for the bond market, Series B financing round in WeConvene, an online corporate access management ERP provider for capital markets, and Seed Round financing round in WorldCover, an innovative peer-to-peer insurance network.

Money360 Doubles Loan Portfolio, Exceeds $ 200 Million Mark (Yahoo! Finance), Rated: AAA

Money360 has doubled its portfolio in record time, having surpassed the $200 million mark this month in closed commercial real estate loans, the company announced today.

It took Money360 more than a year and a half to hit the $100 million mark, but less than six months to increase to $200 million, and by year-end, it expects to exceed $500 million in transactions.

The $200 million milestone came on the heels of four recent loan closings totaling nearly $38 million. All of these loans represent a loan-to-value ratio of not more than 75 percent and include:

  • A $16.2 million bridge loan for a single-tenant, 71,132-square-foot office property constructed in 2006 located in Rosemont, Illinois.
  • A $12.3 million bridge loan for a single-tenant suburban office property in Auburn Hills, Michigan.
  • A $7.5 million bridge loan for two industrial buildings in Irvine, California.
  • A $1.9 million permanent loan for an unanchored, 100-percent-leased retail property in Smyrna, Georgia.

Signs of a Turnaround? A Closer Look at Orchard’s 2016 Q4 Report (Orchard Platform), Rated: AAA

Origination numbers fell consistently over the course of 2016, and we have been waiting to see whether that was going to continue or whether we would eventually see an uptick. In Q4, we finally saw an uptick.

Not a huge one. It’s about a 10% increase over Q3 numbers. And that’s still down significantly from the peak last year, about 46% from what we recorded in Q4, 2015.

Charge-off Rate Vintage Curves

Back in 2010, the size of the industry and the volume of loans originated were pretty small. There were also fewer lenders focused on subprime lending. Additionally, a larger percentage of 2010 loans had a term of 36-months. 60-month loans have grown more in later years. 36-month loans have shown a tendency to charge-off at slightly lower rates.

This introduction of new loan products for lower credit quality borrowers in later vintages—i.e. lower lending standards and longer duration loans—means that the 2010 vintage includes not only fewer loans, but the loans tended to be of a higher credit quality. Given those factors, charge-offs are bound to be lower in the 2010 vintage.

More recent years all stack together pretty tightly, within 1-2% of each other in cumulative charge-offs. However, 2014 and 2015 vintages seem to be charging off at a slightly faster rate, at least, as of this latest report.

Borrower Interest Rates

Since Q2 of 2016 we’ve seen borrower rates fall in both Q3, and Q4 by around 1.2%.

Subprime rates are significantly higher. They’re in the 25-40% range. Whereas the prime lenders are going to be in the 8% to maybe 15-20% range. We end up with a weighted average of ~16%.

GROUNDFLOOR Launches Tax Deferred Real-Estate Investing (Press Release Rocket), Rated: AAA

GROUNDFLOOR, the first and only U. S. real estate lending platform open to non-accredited investors and IRA Services Trust Company, the leading innovator of hi-tech Self-Directed Individual Retirement Account (SDIRA) solutions, today announced an initiative to maximize the benefits of tax-deferred investing for retail investors. As a result of the collaborative effort, GROUNDFLOOR will immediately begin inviting investors on their platform to fund their accounts directly through their 401(k)s and IRAs.

GROUNDFLOOR offers real estate investments with different grades that have a range of risk/reward profiles, offering returns ranging from 5% to over 20% so investors can build a diversified portfolio. In 2016 GROUNDFLOOR delivered loans with an average annualized return of 14.16%.* Compared to 2015, in 2016 loan origination volume in dollars grew by 621%, and the dollar value of principal repaid grew by 588%. Only one of the 108 loans repaid to date has returned less than 100% of the principal due back to GROUNDFLOOR’S investors.

At a time when private markets continue to deliver superior returns compared to public markets, most Americans currently saving for retirement can no longer rely solely on traditional stocks, bonds, and mutual funds for growth and yield. At the same time, many investors have been hesitant to participate in SDIRAs because of the expense, burden, and paperwork traditionally associated with the self-directed investment of tax-deferred funds.

GROUNDFLOOR and IRA Services are working together to address these issues head on: IRA Services’ real-time, cloud-based, API-driven retirement investment solution for the P2P industry – the first of its kind – streamlines the once difficult process of investing tax-deferred funds in P2P marketplaces. Meanwhile, GROUNDFLOOR is the only P2P marketplace where both accredited and non-accredited investors can directly invest in private real estate projects on terms they control, rather than turning their money over to a fund.

How Whitepages Turned Their Data into an Identity Verification Tool for Online Lenders (deBanked), Rated: A

Whitepages might be a 20-year old company but the data they’ve amassed over time can add significant value to online lenders, the company claims. Whitepages Pro, which offers identify verification, allows lenders to gauge if an individual is real.

A simple query of an individual’s name, phone number, email, address or business name will return results not easily accessible elsewhere, like how long that person’s email address has been in their system or the likelihood that the email address was generated by a bot, not a real person. A match is good, no match might not be good, they say. Their system can also do things like identify the carrier the phone number belongs to and whether or not that carrier, if it’s VOIP or something, might have a higher propensity for fraud.

Machine Learning is the Future of Marketplace Lending (Due), Rated: A

At LendIt USA, CEO Scott Sanborn shared that his team at Lending Club uses a manual process to dynamically price loans. Unsurprisingly, some loans are more sought after than others, but matching the pricing with demand is a labor-intensive process. With AI and machine learning, Lending Club and other online lenders may be able to rapidly update loan pricing automatically to maximize investor yield and industry profits while ensuring virtually every loan gets funded.

Lending Club, the dominant player in the peer-to-peer lending industry, grades loans from A to G, corresponding to interest rates from 5.32% to 30.99%. While this model is widely accepted and similar systems are used for virtually all bank and private lending, there are flaws in the model.

Airlines use complex algorithms to determine seat prices, but machine learning, commonly called artificial intelligence or AI, to better understand how people are interacting and purchasing. Rather than just increasing prices as the flight date gets closer, a computer could look for purchase trends and dynamically adjust prices on its own rather than leaning on a pre-determined schedule based on a series of inputs.

If this same logic were applied to a lending marketplace like Lending Club, it could look at trends, loan availability across multiple platforms, risk factors, and current interest rates across multiple lending marketplaces to best price loans. This ensures the best results for lenders and borrowers, as every loan would be funded and yields would be optimally set.

Small Biz Lending Approval Rates Surge at Big Banks, Institutional Investors: Biz2Credit Small Business Lending Index (Biz2Credit), Rated: A

Loan approval rates at big banks ($10 billion+ in assets) improved to new post-recession highs in February 2017, according to the latest Biz2Credit Small Business Lending IndexTM, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com.

Small business loan approval rates at big banks improved to 24.1% in February 2017, marking the seventh consecutive month of increases and the 11th time in a calendar year that approval percentages have increased. Further, loan approval rates at big banks in a year-to-year comparison are up more than one full percentage point, as they slowly creep towards the one-quarter mark.

For the first time in the last six months, loan approval rates at small banks dropped by one-tenth of a percent to 48.8% in February 2017 from 48.9% in January.

Institutional lenders’ loan approval rates improved to 63.5%, reaching a new Index high.

Loan approval rates dropped at alternative lenders in February, as they approved 58.4% of the loan requests they received, down one-tenth of a percent from 58.5% in January.

CFTC Chief Pick Says Commission Should Embrace Fintech (WSJ), Rated: A

J. Christopher Giancarlo, who Mr. Trump tapped Tuesday as the permanent head of the Commodity Futures Trading Commission, said in a speech here Wednesday he has instructed staff to examine the role the agency can play in promoting fintech in the multi-trillion-dollar derivatives markets it oversees.

Mr. Giancarlo has long argued the CFTC should do more to embrace financial technology, which he says has the potential to transform finance, in part by significantly boosting the quality of swaps data that regulators collect from the industry. He has tapped a top CFTC staffer, Jeffrey Bandman, to head the agency’s fintech efforts, according to people familiar with the matter.

‘Sick and tired of no one innovating’: Confessions of a financial tech entrepreneur (Tradestreaming), Rated: A

For the latest in our Confessions series, we spoke to a startup entrepreneur with considerable experience in the banking sector.

So banks are making more money off of high-income customers, and are pushing the startups to take the lower income ones they don’t want?
They would much rather get their tax breaks and give to charity and say they’re doing good for the country than get their hands dirty with a bunch of very subprime demographics. The fintech guys have to go to high risk. If you’re a bank, you can cherry-pick all the rich people and not have as many defaults in a downturn.

What about accelerators and incubator programs where the banks mentor startups. Doesn’t that show their goodwill?
They just steal your ideas. They’re not doing it for the good of their soul. They’re doing it to take a chunk and or steal the idea as you build it and do it themselves.

If it’s so hard to get your product to market, what’s the objective of a startup entrepreneur? Is it just to cash in when you’re acquired by a bank?
If you’re looking to make a little bit of money quick, it’s probably not a bad play, but if you’re actually looking for any kind of change in the world, and you believe in that, it’s not a good move. That’s the reason why people go into this, and I believe I’m one of them. I am bored and sick and tired of no one innovating in the space.

FinTech: Some Limits on Smart Contracts (The National Law Review), Rated: B

Milos Dunjic argues that the Capabilities of Smart Contracts are Overblown because most people misunderstand the fundamental properties of smart contracts and propose ideas that are not implementable on a practical level.

As for scalability, smart contract code must produce the identical outcome in every node that executes it. Dunjic questions whether a large number of distributed nodes all hitting a “funds transfer” API at the same time might look like a self-inflicted DDOS attack on the API. Would each call to the API receive exactly the same response from the API? Reliability must be absolute in a smart contract.

Fintech And Digital Wallets: Innovative Approach vs. Security Concerns (ValueWalk), Rated: B

In CES 2017, Samsung has declared that its Gear 2 will be outfitted with Samsung Pay, the digital wallet application of the organization. In the coming era, we can see more gadget producers integrate advanced wallet services.

Mobile payment procedures including bank transfers and cards are more secure now with the assurance of biometric validation. The unique mark scanner or face identification programming on a few handsets and platforms permit the users to enlist his biometric data with the gadget and from that point utilize them for any transaction when it needs confirmation. On account of biometric validation security vulnerabilities with mobile payment could be limited as it were. In future, we can expect the expansion of such computerized transactions with biometric confirmation constraining the security dangers and ruptures to a base.

Impact Investing Growing Among Alternative Managers (Private Wealth), Rated: B

Impact investing is growing in importance among the alternative investing community, according to a new survey by the Chartered Alternative Investment Analyst (CAIA) Association.

Assets under management in impact investments have grown 18 percent year-over-year for the past three years, according to the Global Impact Investing Network (GIIN). Total industry assets under management in traditional private equity impact investments are estimated to be around $80 billion.

United Kingdom

Funding Circle SME Income Fund launches C shares offer (AltFi), Rated: AAA

THE FUNDING Circle SME Income Fund has launched its first conversion (C) share fundraising as part of plans to raise additional capital over the next 12 months.

The placing is open until 6 April at a price of 100p per C share and the new class will list on the London Stock Exchange on 11 April.

The London-listed investment trust, which invests in loans on the Funding Circle platform, issued a new prospectus in February as it looks to issue up to 500 million new shares over the next 12 months.

China

Yirendai Appoints Chief Credit Officer (PR Newswire), Rated: AAA

Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading online consumer finance marketplace in China, today announced the appointment of Dr. Yichuan Pei as its Chief Credit Officer.

Dr. Pei will be responsible for the overall management of Yirendai’s Credit Department to ensure that the credit risk of loan portfolio on the Company’s platform is within the Company’s guidelines. He will also work closely with the Company’s Chief Risk Officer, Ms. Yiting Pan, to manage the Risk Management Department. Ms. Yiting Pan is expected to transit from her current position as Yirendai’s Chief Risk Officer into a new role with CreditEase and relocate to the U.S. in the middle of 2017 due to personal reasons. Dr. Pei will take over the full responsibilities of risk management and assume the Chief Risk Officer position at end of the transition period.

China’s yield-strapped investors spark peer-to-peer explosion (Nikkei Asian Review), Rated: AAA

Peer-to-peer lending is surging in China as conventional financial products lose their appeal — creating new opportunities and substantial risks for yield-hungry retail investors.

Outstanding peer-to-peer loans — funds lent by one individual to another through the internet — stood at 885.7 billion yuan ($128 billion) in China at the end of February. That is eight times the level of barely two years ago.

Companies are getting into the game, borrowing hundreds of thousands of yuan in operating capital. Lending services are now offering to choose investments for customers. For funding riskier borrowers, lenders can expect yields on the order of 8-12%. These loans turn over quickly in many cases, often in less than a year.

China’s peer-to-peer lending balance stood at just 103.6 billion yuan at the end of 2014, according Yingcanzixun.com, a site tracking the peer-to-peer industry run by Shanghai Ying Can Investment Management Consulting. Within a year, that surged to 406.1 billion yuan. Lending could top 1.3 trillion yuan by the end of 2017, an executive with Yingcanzixun predicted.

India

V Balakrishnan’s startup Billionloans looking to raise mn shortly (India Times), Rated: AAA

Billionloans, the online lending platform founded by former Infosys CFO V Balakrishnan, is looking at raising $1 million in funding within the next few weeks as it focuses on building a Rs 1000-crore loan book in two-three years.

Because the Billionloans platform functions as a marketplace, it does not take the risk of loan defaults itself. The lending is also done by institutional lenders who have the ability to make collections in case of defaults.

Balakrishnan’s platform will use a potential borrower’s social media behaviour, device information, banking transaction history and the results of a psychometric test to determine intention to repay to issue a score to gauge credit worthiness. The platform uses Micrograam’s underlying technology to issue the score, Balakrishnan said.

 

Asia

Singapore P2P Lender Silver Bullion Hits 1000 Loan Milestone, Over SM Lent (Crowdfund Insider), Rated: AAA

Launched only 19 months ago, Silver Bullion Pte Ltd‘s bullion has secured P2P loan platform has matched 1000 loans. While it took roughly 13 months to match its first500 loans, it took only another 6 months for Silver Bullion to reach 1000 loans.

Silver Bullion’s bullion secured P2P loan platform has now matched more than S$27M in loans. In Q1 2017, the U.S dollar denominated 12-month loans were matched with an average interest rate of 4.0% p.a while the Singapore dollar denominated 12-month loans had an average interest rate of 4.2% p.a.

Africa

Crowdfunding the solution for SMEs? (Moneyweb), Rated: A

Traditional financial institutions are generally reluctant to serve SMEs due to the high costs associated when assessing these businesses, their volatile balance sheets and the inherent high risks involved with start-up companies. This lack of financing for SMEs has exposed a gap in the South African lending and borrowing market, and has encouraged development in the sphere of social lending, also known as crowdfunding.

Online marketplace lending in South Africa is becoming an increasingly popular alternative to traditional financial institutions, which for years dominated the lending and borrowing market with high interest rates, rigorous red tape, excessive bank charges and inflexible attitudes. Social lending is revolutionising the manner in which SMEs and conventional corporate citizens access funding and it is disrupting traditional understanding of how money is lent and borrowed. Crowdfunding eliminates the need for traditional financial institutions in the context of SMEs and provides consumers with a convenient and flexible online funding platform that offers competitive interest rates, low fees and charges, and advantageous terms and conditions.

Launched in 2012 as the first online marketplace lending platform in South Africa, Rainfin Proprietary Limited (RainFin) has experienced rapid growth and popularity due to its ability to match borrowers directly with lenders.

However, despite the popularity and growth of these crowdfunding platforms in South Africa, they are not free of burdens and restrictions. The National Credit Act 34 of 2005 (NCA) previously allowed an individual to lend up to R500 000 to another individual without being registered as a credit provider.

Authors:

George Popescu
Allen Taylor