Wednesday May 30 2018, Daily News Digest

refinancing

News Comments Today’s main news: GreenSky sets shares at $23 each, sold 38M. Elevate Credit doubles floor space. Tandem hits 100K clients. Lidya raises $6.9M in Africa. Today’s main analysis: PeerIQ recounts TransUnion Summit 2018. Today’s thought-provoking articles: An orthodontist racks up over $1M in student loans. CompareCards releases credit card fee report. The worst is over for Chinese microlenders. […]

refinancing

News Comments

United States

United Kingdom

China

Other

News Summary

United States

Fintech GreenSky raises more than US$ 800mln in its IPO (Proactive Investors) Rated: AAA

The online lender priced its shares at US$23 each, raising a total of US$874mln in its first day of trading. The company sold 38 million shares, surpassing its expectation of 34 million shares.

Elevate Credit doubles space with ‘super floor’ in Addison office building (Dallas Business Journal) Rated: AAA

Elevate Credit Inc. will expand at Spectrum Center in Addison, doubling both the size of its footprint and the capacity for employees who can work in the office.

The fast-growing company is growing from 26,000 to 52,000 square feet in the 614,000-square-foot office complex.

VantageScore win, TransUnion Summit 2018 (PeerIQ), Rated: AAA

The House passed the Economic Growth, Regulatory Relief, and Consumer Protection Act which reforms the Dodd-Frank Act and provides significant oversight relief to small banks. Below are some of the main provisions of this bill:

  1. One of the most notable shifts lost in the headlines is that the legislation requires Fannie Mae and Freddie Mac to evaluate and consider alternative credit scores to FICO. The change introduces competition to the credit scoring market and is a big win for VantageScore.
  2. Regulatory Capital relief:
  3. The threshold for a Systematically Important Financial Institution has been raised to $250 Bn in assets from $50 Bn, which will exempt a number of regional banks. These banks will no longer be subject to onerous CCAR tests and reduce their compliance burdens. Banks with less than $10 Bn in assets are also exempt from the Volcker Rule – a win for Jeb Hensarling’s (R-TX) campaign to provide relief for community banks.
  4. Banks with less than $3 Bn in assets will have a lower frequency of regulatory exams, banks with less than $5 Bn in assets will have fewer reporting and compliance requirements, and all banks with less than $10 Bn in assets will have the same capital ratio.
  5. Lenders can now charge subprime borrowers higher rates for auto loans.

TransUnion Financial Services Summit 2018

Delinquencies in auto loans have picked up recently to 4.3%, with subprime auto doing worse. (The drop in auto performance can be attributed to longer auto loan terms, higher LTVs, lower used car re-sale prices, and the “Lyft effect”).

Source: TransUnion

If a loan is prepaid before the 12-months mark the originator loses money as the net interest margin is not enough to compensate for the origination and servicing expenses. Only 23% of prepaid loans are refinanced, and most consumers go for a longer tenor loan with a higher balance.

Source: TransUnion

Mike Meru Has $ 1 Million in Student Loans. How Did That Happen? (WSJ), Rated: AAA

Due to escalating tuition and easy credit, the U.S. has 101 people who owe at least $1 million in federal student loans, according to the Education Department. Five years ago, 14 people owed that much.

Silver Hill Funding’s Leslie Smith is Targeting the Underserved in the SBL Space (Commercial Observer) Rated: A

In March, Smith oversaw the formal launch of Commercial Direct, an online small-balance loan customization platform that’s a division of multibillion dollar real estate investment firm Silver Hill Funding, a subsidiary of Bayview Loan Servicing.

Commercial Direct’s lending strategy targets small business owners, entrepreneurs and investors who are relatively new to the commercial real estate arena or are looking to expand or diversify their portfolios. The platform finances commercial and residential condominiums, among many other asset classes, and closes loans in 30 days or fewer, according to Commercial Direct’s website.

With the backing of Silver Hill—which has funded more than 20,000 transactions since its founding—and Bayview Loan Servicing, the platform is off to a strong start.

Fintech adds another S.F. office (San Fransciso Business Journal) Rated: A

After snapping up a new headquarters last year, fintech company Affirm leased up 46,000 square feet in 550 Kearny St. in San Francisco with landlord Brickman.

The new space is around the corner from the company’s headquarters in 650 California St., where it leased 86,225 square feet.

Does Your Business Need More Space? A Lender Weighs In On Why And How To Expand (Forbes) Rated: A

In this post, I speak with Victoria Treyger of 

For Your Money, Which is Better: The Algorithm or the Adviser? (Kiplinger) Rated: A

The reality is, the rapid growth and early-stage adoption of financial technology (FinTech) indicates an industry disruption is underway. Algorithm-based, digital advisory technology has brought us the increasingly popular “robo-advisers,” which replace human advisers with software programmed to understand and advise on clients’ needs. Robo-adviser firms have witnessed triple-digit growth since 2013. Research firm Cerulli Associates reported they had about $60 billion in assets under management (AUM) at the end of 2016, and could amass an estimated $385 billion by 2021.

Are we in the Golden Age of Fintech? (Fintech TV), Rated: A

Dubbed the ‘Mayor of Fintech’, Ron Suber discusses the current fintech landscape, and what technology has him excited about the future.

Watch this video interview with Ron Suber.

Can your side gig fund retirement? (CU Insight) Rated: A

Almost 40% of respondents in a recent Betterment survey said they feel unprepared to save enough to maintain their lifestyle during retirement. As a result, they have become members of the growing gig economy by either supplementing their full-time job or relying solely on their independent work/temporary contracts.

According to “The Gig Economy and Future of Retirement” survey, 76% of those 55 and older were using earnings from a second job to save for retirement, as were 65% of people 35 to 54. In addition, 42% of gig workers under 35 say they’re moonlighting to help save for retirement.

Online lender Earnest gathered data from tens of thousands of loan applicants to learn just how much people are actually earning from their gig. They found 85% of people take home an average of $500 per month from their side hustles.

CompareCards Releases 2018 Credit Card Fee Report (PR Newswire) Rated: AAA

CompareCards by LendingTree today released the findings of its studyon credit card fees that compared the fees of a representative sample of 200 credit cards that are in Americans’ wallets.

Source: Lending Tree

Highlights from CompareCards 2018 Credit Card Fee Report:

  • Two cards — both no-frills credit cards from credit unions — had only a single fee. One card in the survey had as many as nine fees.
  • Credit union-issued credit cards have 2.73 fees per card, lower than 4.48 fees for cards issued by banks.
  • The most common fee levied by issuers is the late payment fee: 99.5 percent of cards impose this fee, averaging $36.02.
  • The average balance transfer fee, among cards that allow them, is 3.46 percent.
  • The average cash advance fee is 3.99 percent.
  • Foreign transaction fees, overall, average 1.48 percent, including cards that have no fee. But if cards assess the fee, most of the time the fee is 3 percent of the purchase price.
  • When compared with smaller credit card issuers, larger credit card issuers assess higher cash advance fees (4.11 percent, versus 3.86 percent) and balance transfers fees (3.49 percent versus 3.42 percent), on average.
  • However, average foreign transaction fees are lower at larger credit card issuers (1.22 percent, versus 1.76 percent at smaller issuers).

RBC Wealth Management – U.S. launches new digital alternative investments platform (PR Newswire) Rated: B

RBC Wealth Management-U.S., one of the nation’s largest full-service wealth management firms, is taking some of the mystery and difficulty out of alternative investing with a new digital alternative investment platform for high-net worth clients.

Developed in partnership with Artivest, an award-winning alternative investment management and technology solutions provider, RBC Wealth Management’s cloud-based investment platform gives financial advisors and their clients access to leading private equity and hedge funds across sectors, stages and styles.

Five Firms Hit by ‘Crypto-Sweep’ in Alabama as Regulators Step up Operation (Bitcoin News) Rated: B

Cease and desist letters have been sent to three Los Angeles based companies. The second firm form California, Leverage, has advertised itself as a crypto lending platform offering to investors a variable, daily interest. This case is again about an unlicensed security, the ASC said.

5 Ways to Get ‘Free’ Money From Your Employer Without a Raise (Student Loan Hero) Rated: B

2. Use your company’s 401(k) matching program

Saving for the long term can be a challenge: 69% of millennials surveyed are not saving for retirement, according to online lender Earnest. Although it can be hard to think about setting aside money when you have to manage student loan payments, it can help with future financial goals — especially if your employer offers a match on retirement plans.

United Kingdom

Tandem reaches 100,000 clients, signs for Form3 paytech (Banking Tech), Rated: AAA

SMEs: a neglected opportunity for UK big banks (SME Magazine) Rated: AAA

Big banks are neglecting the SME market opportunity due to a variety of factors. One of the main problems is the onboarding process, where in many cases the ownership structure can be unclear, leading to difficulties around initiating relationships with SME businesses.

Second, the nature of the SME growth model makes it difficult for banks to determine the value of the business opportunity. This poses problems when it comes to granting credit facilities to SMEs, as they are seen as higher risk for conducting business with.

Third, banks follow bigger sources of revenue and SME profitability is lower than larger organisations.

Finally, existing legacy software systems prevent large banks from servicing SME customer demands which go beyond traditional offerings. For example, the desire to integrate P2P lending, blockchain, mobile wallets, and accounting and legal functionality all as one end-to-end service.

Why scaleups still shy away from debt and equity growth funding (Real Business) Rated: A

Some £2.9 billion was claimed in R&D tax credits during 2015-16, according to HMRC, with the average amount of relief claimed via the SME scheme increasing from £56,223 to £61,514.

Despite a dip in deal numbers in 2016, the crowdfunding boom returned. Beauhurst data claimed £8.27 billion was invested in 2017 – more than double the previous year.

Department store numbers fall by quarter (Drapers) Rated: B

A report by peer-to-peer lending platform Lendy found that the number of large department stores fell from 240 in 2009 to 180 in 2016. The total number of shops fell from 407,000 to 403,000 during the same period.

Lendy said department stores had been more negatively affected than the rest of the high street by online shopping, as the heavy debt burdens carried by their owners had hampered their own investment in ecommerce and store refurbishment.

China

Worst Is Past for Microlenders — Analysts (Caixin Global) Rated: AAA

Effects of a late-year regulatory crackdown on Chinese online lenders has most likely run its course by now, analysts said, even as shares of U.S.-listed companies continue to feel some lingering fallout.

Shares of online lenders Qudian Inc. and LexinFintech Holdings Ltd. have tumbled by 24% and 17% respectively since the firms released their first-quarter results a week ago, wiping out over $1.4 billion in combined market value. Yirendai Ltd., the first Chinese peer-to-peer (P2P) lender to list in the U.S., saw its shares fall by 4% a day after releasing its earnings results after trading on Thursday.

To curb excess in the 1 trillion yuan ($156 billion) unsecured short-term loan industry, regulators issued rules in early December that capped annual interest rates on loans at 36%, barred lenders from offering loans to borrowers with no source of income, and tightened scrutiny over funding sources.

Australia

Credible Lab CEO Stephen Dash likens ASX to ‘junior Nasdaq’ (Australian Financial Review) Rated: A

Credible Labs Inc founder and chief executive Stephen Dash said he had chosen an ASX listing for the company, which allows users to sort through US student loans, because a large number of the company’s early investors were based in Australia and Asia.

India

How the Fintech Industry is Drawing Young Talent in the Country (Entrepreneur) Rated: AAA

The fintech industry is creating new and exciting opportunities for the country’s workforce in such areas as payments, retail baking, peer-to-peer debt financing, personal finance, asset management, institutional investments, remittances, and financial research. However, the primary enabler for all these segments is data. The volume of data that is being generated and leveraged by the digital banking and financial services industry is massive and unprecedented. As a result, the demand for technically trained data scientists is growing rapidly among fintech companies. With an increasing number of people in the country consuming fintech products, data scientists are required to manage large, complex sets of data and organise them to facilitate faster and enhanced delivery of various services to consumers.

Acko Gets $ 12 mn funding from Amazon, others (Elets Online) Rate: A

Online insurance startup Acko General Insurance Co. has raised $12 million (around Rs 80 crore) in a new round of funding led by e-commerce giant Amazon, an official statement revealed.

The latest funding infusion that saw participation from Ashish Dhawan, angel investor and founder of private equity fund ChrysCapital and existing investor Catamaran Ventures, the family office of Infosys co-founder NR Narayana Murthy, takes Acko’s total external funding to nearly $42 million.

In recent times the online lender that has joined hands with cab aggregator Ola to offer in-ride insurance to riders is said to be exploring venturing into travel insurance and healthcare space.

Asia

Singapore Has Fintech Dreams, But It’s Short on Tech Talent (Bloomberg) Rated: A

Singapore’s goal of becoming a high-tech financial hub is running into real-world problems of labor supply and demand.

Technology startups in many countries are fighting to attract skilled workers like software engineers. Yet in the tiny city-state of Singapore, with a population of 5.6 million, the dearth of talent is particularly acute. The nation’s universities and polytechnic schools churn out what the government estimates are 400 graduates a year with the right qualifications, well short of plans to add 1,000 financial tech jobs annually, according to the Singapore Fintech Association.

Africa

Lidya Scores $ 6.9 Million in Series A Investment (Finovate), Rated: AAA

Nigeria-based digital bank Lidya landed a fresh round of funding this week. The bank pulled in a Series A round totaling $6.9 million, an amount that marks the round as one of Nigeria’s largest tech investments. Combined with the $1.25 million Lidya received last March, today’s round brings the bank’s total funding to $8.2 million.

Authors:

George Popescu
Allen Taylor

Tuesday May 29 2018, Daily News Digest

alternative loans

News Comments Today’s main news: How SoFi, Robinhood trick investors into saving money. The highest paying green IFISAs. Ant Financial’s $10B fundraising is oversubscribed. HashChing gets $700K loan. Today’s main analysis: Alternative loan borrowers may be traditional prospects. Today’s thought-provoking articles: The challenges online lenders would face in a recession. Crowdfunding in Switzerland is at a record high. Only 4% […]

alternative loans

News Comments

United States

United Kingdom

China

European Union

International

India

Other

News Summary

United States

Designers at SoFi, Robinhood explain how they trick users into saving (and making) money (Business Insider) Rated: AAA

  • Personal finance apps have gained traction with customers — especially millennials — thanks to the ease with which they let users sock money away, save towards big goals, and make big purchases more possible.
  • From the loan refinancing company SoFi to the stock trading platform Robinhood, many of these companies are now worth billions of dollars thanks to enthusiastic investors.
  • At the heart of their success: A good product which combines smart design with financial psychology to convince users to meet the goals they set for themselves.
  • Here’s how the best companies in fintech design their apps to convince users to save and make money.

Alternative loan borrowers may be traditional prospects (Banking Exchange) Rated: AAA

The latest example of this comes from a new study by TransUnion that indicates that some borrowers who use “alternative loans” may actually be good candidates for traditional consumer credit products.

Alternative loans typically don’t appear in traditional credit bureau files. These services include short-term debt, such as “payday loans”; point-of-sale finance offered by retailers or third-party lenders; virtual “rent-to-own” finance; and auto-title loans.

Release coincides with OCC announcement

Elizabeth Pagel, vice-president, market strategy, consumer lending at TransUnion, notes that while many consumers in the FactorTrust database of alternative loan users skew subprime, nearly 40% are not subprime credits, and 12% are actually prime or above.

One example given by TransUnion demonstrating the general pattern concerns near-prime borrowers (those with VantageScore 3.0 credit scores of 601-660):

• About 14% of those borrowers with only one short-term loan went 90 days or more past due on a traditional account 12 months later.

• The delinquency level fell to less than 12% when a consumer possessed two alternative loans.

• The delinquency level fell to about 9% when a consumer had eight or more alternative loans over the course of seven years.

Source: Banking Exchange
Source: Banking Exchange

The Unique Challenges Online Lenders Would Face In A Recession (Forbes) Rated: AAA

Technology has reshaped the lending industry over the last decade. Companies like Lending Club, Prosper and SoFi built billion dollar business (even if valuations have come down from their respective peaks) by better connecting lenders to borrowers and streamlining what was previously a slow and bloated consumer lending process. Dozens more companies have launched in their wake and are contributing to this wave of change. In fact, TransUnion data shows that fintech lenders now account for over a third of personal loan origination by volume. That Goldman Sachs launched their own online lending business, Marcus, shows that much of this change is here to stay.

But these businesses have all come of age during an unprecedented period of economic expansion and low default rates. Low defaults have helped performance, while low yields in other asset classes have driven up investor demand for higher yielding personal loans.

If the market needed a warning sign, look no further than auto loans. Delinquencies in the subprime auto market have 

PeerStreet Review 2018 – Real Estate Crowdfunding Platform (Dough Roller) Rated: A

Some real estate investors come to the platform looking for financing, while others come looking for above average returns on their money.

The difference is that while other P2P platforms provide personal loans to individuals, PeerStreet supplies financing for real estate transactions. The purpose of the platform is to make these sophisticated investments in commercial real estate available to ordinary investors.

The loans are generally short-term, between six months and 24 months. They also have conservative loan-to-value (LTV) ratios, of not more than 75% of the value of the underlying property.

Types of loan investments include:

  • Single-family residential buy-to-rent properties
  • Single-family refinances
  • Single-family Value Add (This is a property that is purchased then renovated for sale, sometimes referred to as a fix-and-flip loan.)
  • Bridge loans

Kabbage Sees More Mobile Lending, Women and Minority Owned Businesses Seeking Funds (Small Business Trends) Rated: A

Online lending platform Kabbage says it sees more mobile lending, more women and minority owned businesses seeking loans and more businesses from rural and lower to middle income communities too.

Today 140,000 small businesses use Kabbage. Today, Kabbage has delivered over $4.5 billion in funding, moving the loan process from long lines at a physical bank to a  shorter wait on mobile or the web.

Expect More Bank Mergers After Dodd-Frank Rollback (Barrons) Rated: A

But the legislation known as the Crapo bill (named after Idaho Sen. Mike Crapo), which President Donald Trump signed into law on Thursday, could provide another boost to bank investors by unleashing mergers, dividend increases, and buybacks among regional and local banks.

By raising the threshold for stricter supervision under Dodd-Frank from $50 million in assets to $250 million, the new law effectively removes a disincentive for mergers and acquisitions.

Banks had been wary of doing deals that would put them over the $50 billion level, which required more capital and more stringent supervision. CIT Group’s (CIT) deal for OneWest was a rare case where an acquisition broke that barrier since Dodd-Frank was enacted in 2010.

Vermont Passes First-of-Its-Kind Law to Regulate Data Brokers (Gizmodo) Rated: A

Earlier this week, Vermont became the first state in the nation to enact a law that will regulate data brokers that buy and sell personal information in an attempt to add a new layer of accountability to the massive, data-trading companies that often operate without much oversight.

As TechCrunch noted, under the guidelines of the bill—which passed into law Tuesday without the signature of Republican Governor Phil Scott—data brokers will have to pay a $100 annual fee to register with the state, and will have to comply with new rules meant to protect Vermonters from suffering at the hands of another data breach like the one that befell Equifax last year and exposed the data of 145 million (and counting) Americans.

United Kingdom

The highest paying green IFISAs of 2018/19 (Peer2Peer Finance) Rated: AAA

Earlier this year, Assetz Capital closed its Green Energy Account due to a lack of deal flow, while Trillion Fund closed in 2015 after the government scaled back its green energy subsidies.

So in alphabetical order, here are the highest-paying P2P green IFISAs available right now…

Abundance

  • Target returns for IFISA: 3-15 per cent

Downing Crowd

  • Target returns for IFISA: 3-7.6 per cent

Goji and Prestige-Prime Group

  • Target returns for ISA: 6.5-8.3 per cent

Triodos Crowdfunding

  • Target returns for IFISA: 5-7 per cent

Ethical bank Triodos launched its own P2P platform earlier this year, named Triodos Crowdfunding. Within the first few months of the year it had already funded seven projects, four of which were IFISA eligible.

Could savers be given access to multiple IFISAs each tax year? (Peer2Peer Finace) Rated: A

The Office of Tax Simplification (OTS) – an independent adviser to the government on simplifying the tax system – has said ISA rules should be made more simple for investors to administer.

It suggests changing the rule where only one type of ISA can be opened at a time and instead letting savers hold multiple products, such as more than one Innovative Finance ISA from different peer-to-peer lenders or a variety of cash ISAs, as long as they remain within the annual allowance.

Rage against robo-advice machines (FT Adviser) Rated: A

Despite the FCA offering this assistance now the regulator has found several causes for concern in the robo-advice that is being given to clients.

The watchdog revealed some robo-advice firms were failing to properly disclose prices and services, and crucially, the regulator flagged risks clients were not receiving suitable advice.

As a result, the FCA has required many of the robo-advisers which took part in the study to make “significant changes” to their businesses.

Christian Faes of LendInvest (Lend Academy) Rated: A

In this podcast you will learn:

  • How the financial crisis formed the backdrop for the founding of LendInvest.
  • How their first foray into raising capital online transformed their business.
  • The kinds of loans that LendInvest offers today.
  • The typical borrower who uses LendInvest today.
  • How they have applied technology to the borrowing process.
  • How they attract these kinds of borrowers.
  • The four different channels for investors.
  • Details of their London Stock Exchange listed bond.
  • What is being done in the UK to address the housing shortage there.
  • How Brexit has affected their business over the past two years.
  • Who has provided equity capital for LendInvest.
  • Christian’s thoughts on international expansion for LendInvest.
  • How he feels about a potential LendInvest IPO.

Crowdfunding faces withholding tax clampdown (The Times) Rated: A

Revenue has tightened the rules on peer-to-peer lending by requiring businesses that raise money through crowdfunding to deduct a 20% withholding tax on the interest they pay.

The move will make it harder for individuals to avoid tax when they use crowdfunding to lend spare cash to small businesses rather than earning paltry returns by leaving it on deposit.

Can this lending buy-to-let startup help agents sell more homes? (The Negotiator) Rated: A

A buy-to-let finance start-up founded by the entrepreneur behind crowd-funding mortgage firm Landbay says it wants to help agents sell properties faster and in greater volumes.

Officially launched this week after being set-up in November last year, Dot offers agents and developers a one-click buy-to-let purchase button for their ‘properties for sale’ listings (see mock-up above) which, the company’s claims suggest, could offer an antidote to the current sluggish sales market.

After clicking the button, investors will be offered the opportunity to buy the property on the spot if they put down a 30% cash deposit via Dot.

FCA urged to extend cap on payday loan fees to other forms of credit (The Guardian) Rated: B

The City watchdog is facing mounting pressure to extend its cap on payday lending fees and interest to a broader range of high-cost financial products before a major review of lending practices this week.

Likely to result in a series of new rules for banks and finance companies, the review comes as hard-pressed Britons increase their personal borrowing to levels unseen since the financial crisis.

China

China: WeiyangX Fintech Review (Crowdfund Insider) Rated: AAA

Ant Financial’s $10-billion fund-raising faced oversubscription

The ongoing $10-billion fund-raising of Ant Financial Services has attracted the attention of multiple investors.

According to informed sources, investors expected to participate in this round of financing include private equity group Carlyle, General Atlantic, Silver Lake, Sequoia Capital China, Warburg Pincus, sovereign wealth fund Temasek, institutional funds Canada Pension Plan Investment Committee (CPPIB) and BlackRock; while many other investors were rejected.

According to a person involved in the funding, this round of financing will value Ant Financial at more than US$150 billion. 

Traditional banks can be the ‘trusted face’ of fintech and online finance firms (South China Morning Post) Rated: A

While banks see fintech as their biggest threat, they can use their trusted position among customers and regulators to collaborate in the shift to digital banking, software firm Temenos says

In a recent survey of 400 banking executives, Temenos said more than 53 per cent of respondents cited e-financial services like PayPal, Alipay, WeChat Pay and Apple Pay as their biggest non-traditional competition in the next two years.

European Union

Crowdfunding in Switzerland at Record High: CHF 375 Million (PR Newswire) Rated: AAA

The Swiss crowdfunding market has reached a record high volume of CHF 374.5 million in 2017, almost three times more than in the previous year. This has been revealed by the latest Crowdfunding Monitoring report issued by the Lucerne University of Applied Sciences and Arts. The financing of SMEs and investments in real estate are key drivers of the strong growth. The authors of the report are expecting a further marked increase to about CHF 1 billion this year. Compared to the more advanced markets in the United Kingdom and the United StatesSwitzerland is two to three years behind, but catching up rapidly.

Hungary ready to join the global blockchain market (Budapest Business Journal) Rated: B

Europe is starting to take blockchain-based solutions seriously, and Hungarian players seem ready to be part of the game. The largest international blockchain summit in the CEE region, Blockchaineum 2.0, gathered major stakeholders in Budapest to discuss the hottest issues on the global agenda.

Peer-to-peer lending is considered another blockchain target area. Ray Youssef, CEO of Paxful gave the example of Nigeria, the biggest economy in Africa, where high inflation and foreign currency restrictions push many people towards finding shelter in cryptocurrencies.

International

Mobile ventures to take on payments (Daily Sabah) Rated: A

Square, one of the most popular payment solutions Visa invested on, allows street vendors the opportunity to accept credit cards. It brings the convenience of payment for consumers, who can shop safely anywhere in the world.

Klarna is another venture that has received Visa investments. It is one of Europe’s leading payment providers, aiming to make the payment process simple, smooth and secure for customers and trading partners. Klarna offers payment solutions for over 60 million users in Europe and North America.

Cryptocurrency Cap Waiting to be Unlocked by Lenders (The Merkle) Rated: A

Today, cryptocurrency has an estimated market cap of $300 to $800 billion USD. Asset-backed tokens have been expected to reach $5 trillion USD by 2025.

Now, Depository Network (DEPO) has made it even easier for digital asset owners to cash in on their holdings while offering peace of mind to lenders.

DEPO is developing the world’s first decentralized, multi-platform collateral network. The depository will be a secure place for borrowers to deposit their coins or tokens as a collateral for loans while offering lenders full control over the details of the loan agreement.

Australia

Mortgage marketplace receives $ 700k loan (Australian Broker) Rated: AAA

An online home loan marketplace has received a $700,000 loan from Jobs for NSW, which is set to help the business create 46 jobs over the next five years.

HashChing reports it now has over $900million settled through their platform from more than 1,950 loans. It also says it has 586 mortgage brokers on the platform and is growing at 700% year-on-year.

India

Only 4% Indians get easy personal loans from banks and NBFCs (Sify Finance) Rated: AAA

27 public sector banks, 93 commercial banks, over 10,000 non banking financial and Gold companies and several micro-finance institutions, but ask any entrepreneur the ease of getting a loan. A mixed response is most likely, with majority opting for diplomatic correctness over factual accuracy.

Getting a loan is certainly a monumental feat in this era of digitisation. And this is the exact demand that peer-to-peer companies such as LenDen, i2i Funding, Faircent, Lendbox are keen to fulfill.

i2i Funding is India’s second largest p2p lending platform, with a size of 50,000 customers. The company aspires to cross Rs 2 crores in monthly disbursal by October 2018.

How do Investors Invest in Startups – From a Venture Capitalist’s Point of View (Entrepreneur India) Rated: A

In this regard, to decode what goes on in the minds of leading venture capitalists, Entrepreneur India interacted with Bhaskar Majumdar who is Managing Partner at Mumbai-based Unicorn India Ventures. At this point in time, Unicorn India has dedicated equity funds worth INR 100 crores under deployment, while another INR 600 crores worth debt fund has been launched.

He also states that with aspects such as credit scoring, data collection, and even lending to MSMEs having now received the digital touch, Fintech is exciting considering the fact that startups in the sector could effectively collaborate with banks to bring more people into the formal banking system.

Xiaomi Launches Mi Credit, A Lending Marketplace Exclusively for MIUI Users (BW Disrupt) Rated: B

Chinese smartphone manufacturer Xiaomi has introduced Mi Credit which aims to deliver instant loans exclusively to MIUI users.

Mi Credit provides a hassle-free approach to avail loans instantly.

MIUI users can apply for a loan anytime and from anywhere. The company is offering loans starting from Rs 1,000 up to Rs 1 Lakh.

According to a report published by ET, the loan will be extended at 3% interest per month and focuses on salaried professionals.

Africa

Kenya moves to regulate fintech-fuelled lending craze (Reuters) Rated: AAA

Kenya built a reputation as a pioneer of financial inclusion through its early adoption of a mobile money system that enables people to transfer cash and make payments on cellphones without a bank account.

Now, a proliferation of lenders are using the same technology to extend credit to the banked and unbanked alike, saddling borrowers with high interest rates and leaving regulators scrambling to keep up.

This week, the finance ministry published a draft bill on financial regulation which covers digital lenders for the first time. A key aim is to ensure that providers treat retail customers fairly, it said.

Eurasia

Russia Has Significant Opportunity to Advance Financial Tech Services – Analyst (Sputnik International) Rated: AAA

Bob Contri: I think that in financial services, which is where I work, digital is very important. I would say for our clients globally it’s probably the most important topic right now. I think it’s very important from a client perspective so how do they provide financial services to their clients in a very efficient way. And I think it’s also very important how they manage their business so how can they use their technologies to create more efficiency in the middle and back office. So it’s probably the biggest topic right now in our practice globally with working with our clients.

Sputnik: Do you think there’s big potential for new approaches in banking such as peer-to-peer lending, crowdfunding?

Bob Contri: Sure, I think that the face of financial services is changing pretty dramatically. I think that obviously automated money transfers and cross-border payments will change dramatically. I think peer-to-peer lending has a big opportunity to grow significantly. So I think the whole face of financial services is changing pretty dramatically. That’s not to say that the market leaders of today won’t be the market leaders of the future.

MENA

RentSher — a firm with a hire purpose (Gulf News) Rated: AAA

Founders Vaibhav and Purvashi Doshi and Harsh Dhand originally conceived of RentSher as a peer-to-peer lending platform, the Airbnb of stuff.

But after they launched the firm in Bengaluru in 2015 (Dubai followed in 2016), they noticed a problem.

“We figured out that peer-to-peer alone is not scalable enough,” said Vaibhav, the firm’s CEO, in an interview at his and Purvashi’s Dubai villa.
That forced a rethink, and a move towards a business-to-business (B2B) and business-to-consumer (B2C) model, a centralised one-stop rental platform for companies already offering rental services to connect with a pool of customers through an easy-to-use interface.

Reaping the fruits of hard work (Khaleej Times) Rated: B

It was while discussing a common problem that Marie-Christine Luijckx and three friends came up with a successful business model. Luijckx and her friends were doing long working hours in their corporate jobs with very few healthy food choices resulting in loss of productivity at the workplace. They thus decided to establish Fruitful Day, a business that delivers curated selections of fresh fruit to workplaces and homes across the UAE in 2015.

Luijckx says all partners believe passionately in the business and they funded it with their personal savings. “Our only external funding to date has been through Beehive, which is a debt crowdfunding platform,” she says.

Authors:

George Popescu
Allen Taylor

Friday May 25 2018, Daily News Digest

The likelihood that business would choose fintech over banks

News Comments Today’s main news: Prosper qualifies borrowers up to $40K. GreenSky completes largest fintech IPO of the year. RateSetter hits $2.5B in lending. Lebashe increases RainFin stakes to 75%. Today’s main analysis: Peter Renton’s quarterly MPL results. Today’s thought-provoking articles: Alternative loan customers may perform well on traditional credit products. Banks, credit unions, and alternative lenders. How Ashton Kutcher […]

The likelihood that business would choose fintech over banks

News Comments

United States

United Kingdom

China

International

Other

News Summary

United States

Prosper Introduces Loans Up To $ 40,000 For Borrowers (Prosper Blog) Rated: AAA

Today we’re pleased to announce that Prosper now offers qualified borrowers access to loans up to $40,000.

GreenSky Completes Largest Fintech IPO of the Year (Lend Academy) Rated: AAA

There is a lot that sets GreenSky apart from many of the fintech companies that exist today. The biggest differentiator is that the company is profitable and runs a high margin business. In fact, the company has been profitable for the last five years. They reported $139 million in net income on revenues of $326 million last year. They also have a highly differentiated, boots on the ground model to originating loans, empowering contractors to offer financing to homeowners at the point of sale. They also partner with other types of merchants to offer financing. GreenSky only holds a small portion of loans on their own balance sheet with most loans being funded through around 15 bank partners.

Segment of Population Using Alternative Loans May Perform Well on Traditional Credit Products (Globe Newswire) Rated: AAA

Two-thirds of consumers active in the alternative loan market fall in the subprime risk category, the riskiest of all credit tiers. Yet, a new TransUnion (NYSE:TRUstudy found that many of these consumers perform well when opening traditional credit products such as credit cards, auto and personal loans.

TransUnion studied over five million consumers who originated a traditional credit product between Q2 2015 and Q1 2016 and measured their performance 12 months after originating the loan. Of the over five million consumers, approximately 450,000 (or 8%) were present in TransUnion’s alternative lending database. TransUnion then compared the performance of the alternative loan population to those consumers who were not seeking or did not possess an alternative loan product.

The study corroborated that many alternative loan borrowers do present greater risks on traditional loans. However, there is a material subset of this population that would present reasonable risks on an auto loan or credit card, among other traditional products.

For instance, in the near prime risk tier (consumers with a VantageScore 3.0 credit score of 601-660):

  • Approximately 14% of those borrowers who possessed only one short-term loan went 90 or more days past due on a traditional account 12 months later.
  • The delinquency level declined to less than 12% when a consumer possessed two alternative loans.
  • The delinquency figure dropped even further to around 9% when a consumer had eight or more alternative loans over the course of seven years.

Near Prime Consumers with Strong Alternative Loan Payment History Perform Better on Traditional Loans

Number of
Satisfactory
Alternative
Loan
Accounts
0 1 2 3-4 5-6 7-8 9-10 11+
Ever 90+
Days Past
Due in 12
Months on
Traditional
Loans
18 % 11 % 11 % 11 % 10 % 9 % 8 % 8 %

Comparing Origination Activity of Alternative Loan Borrowers to the Rest of the Population

Approximately 26% of alternative loan borrowers who originated a traditional loan product in the study opened an auto loan and 50% took out either a personal loan or auto loan. This latter statistic compares favorably to the 37% origination rate for the rest of the population in the study.

From a supply perspective, traditional finance companies are providing by far the most loans to alternative lending consumers, with a market share of 59%. However, credit unions (9%) and FinTechs (3%) supply about 12% of such loans to this credit population.

Five Banks and Credit Unions Rocking The Small Business Market (The Financial Brand) Rated: AAA

FIS found that more than one-quarter (27%) of small businesses in the U.S. are using alternative lenders like these. Among Millennial business owners, that percentage is double (48%). And yet only 7% say they are using these platforms for lower interest rates; in most cases, banks and credit unions offer better rates. FIS also found that small businesses have been turning to non-bank financial apps to make B2B payments.

In research conducted by ath Power Consulting, two-thirds of small business owners said they would consider switching to a competing banking provider if it offered products and services to help them better manage and grow their business, and over half (54%) would consider switching to a non-bank alternative for the same reasons.

Source: The Financial Times

Digital Federal Credit Union and offers a service to small businesses to raise capital and give its members an opportunity to invest in community business. The credit union has partnered with GrowthFountain, a funding portal of crowdfunding solutions. Tennessee Valley Federal Credit Union has also done the same thing.

San Francisco startup Seed is a free mobile-only banking service for small businesses, who can get a checking account and a debit card through Seed’s partnership with The Bancorp and have access to bill payment, mobile check deposit and ACH and wire transfers. Seed is sort of like Mint and QuickBooks except that Seed directly partners with a FDIC-insured bank (like how Simple started out). There’s not a physical checkbook in sight.

My Quarterly Marketplace Lending Results – Q1 2018 (Lend Academy) Rated: AAA

My preliminary return of 4.70% is close to where it was last quarter but still down. I don’t expect my final Lend Academy P2P Fund return to increase this number so I am still stuck in the downward trend of returns.

My six original accounts at Lending Club and Prosper have all been open for at least six years so they are very mature accounts that have experienced several turns of capital as I have kept reinvesting over the years. The returns for the past year are still bad at 2.34% as I continue to pay for poor underwriting performance in 2015 and 2016 at both companies. When you see today that you can get 3% on a 10-year Treasury Note a sub 3% return is just not acceptable for an unsecured consumer loan.

Source: Lend Academy

SoFi finds new downtown San Francisco office a talent magnet as it expands services (San Francisco Business Times) Rated: A

San Francisco-based SoFi said a downtown San Francisco office it picked up this year through an acquisition is paying an unexpected dividend: greater interest from engineers that the fintech wants to hire.

SoFi has 44 engineers at the company’s downtown San Francisco office at 222 Sutter St, consisting of almost 15,000 square feet on one floor. Another 40 or so employees float between SoFi’s downtown office and Presidio headquarters.

How [and why] I invest in startups (TechCrunch) Rated: AAA

A lot of venture funds try to optimize for returns. They run complex ratio economic models to determine what their diluted value will be at the end of the life cycle of the optimal and non-optimal case of every given company.

What I look for in founders

I don’t have a magic formula, but there are four important factors that must all check out for me to invest in a founder.

  1. Domain Expertise
  2. Grit
  3. Purpose
  4. Charisma

Amazon’s Finance Ambitions Are Drawing Attention From the Fed (Bloomberg) Rated: A

Fed Vice Chairman Randal Quarles, the U.S.’s most influential banking watchdog, is monitoring the potential for disruption to the industry and has expressed concern about how tech companies could provide financial services outside of regulators’ oversight, according to people who’ve spoken with him privately. Quarles hasn’t yet made any moves to intervene and the Fed’s influence would be limited.
Should the Fed get involved in the debate, it could be welcome news for traditional banks, who view Amazon and other technology companies as potential threats that enjoy fewer regulatory constraints. The companies are increasingly encroaching on lenders’ business, as evidenced by Amazon’s recent interest in offering a product akin to checking accounts.

Autotrader and Kelley Blue Book Team with LendingTree to Empower Shoppers with Auto Lending Options (PR Newswire) Rated: A

Securing vehicle financing in advance can save car buyers both time and money on their car-shopping journey. With this in mind, Autotrader and Kelley Blue Book, both Cox Automotive companies, have teamed with LendingTree. LendingTree’s auto finance marketplace provides each site’s visitors simple and easy online financing that can be used for new and used cars and trucks, anywhere in the United States.

Plenty of payday loan customers have good credit: TransUnion (American Banker) Rated: A

When Liz Pagel and Matt Komos began analyzing a slew of alternative credit data gathered by FactorTrust, an alternative credit bureau TransUnion acquired last year, they sought to understand the behavior of consumers who use payday loans, pawnshop loans, auto title loans, rent-to-own arrangements and “buy here, pay here” credit.

But 12% turned out to be prime and super prime. Only 3% were unscored.

The researchers then looked at what other credit these short-term borrowers have and found 75% have traditional credit, too.

Developers could make bank from Dodd-Frank rollback (The Real Deal) Rated: B

New legislation passed by the House of Representatives would relax restrictions on thousands of smaller lenders, potentially opening up the spigot for developers seeking commercial loans. The bill, which is awaiting President Trump’s signature, would remove provisions of the 2010 Dodd-Frank Act that many community and regional banks had deemed too costly and unfairly burdensome.

14 Chicago tech companies made Inc.’s 2018 Best Workplaces list (Built In Chicago) Rated: B

OppLoans is an online lender that uses a data-driven credit-scoring algorithm to provide loans to consumers who can’t access credit from traditional institutions. OppLoans is one of the fastest-growing tech companies in Chicago and has been named to the Inc. 500 two years in a row.

 

 

Fundbox Named “Best Overall Business Lending Company” In 2018 FinTech Breakthrough Annual Awards Program (PR Newswire) Rated: B

 Today Fundbox,  a leader in credit and payments for small businesses serving other businesses (SMB2B), announced that it has been selected as winner of the “Best Overall Business Lending Company” award by FinTech Breakthrough, an independent organization that recognizes the top companies, technologies and products in the global FinTech market today.

“We are delighted to recognize Fundbox for one of our program’s marquee awards, the Best Overall Business Lending Company award, an uber-competitive award category for our program with many compelling companies nominated,” said James Johnson, Managing Director, FinTech Breakthrough. “Fundbox stood out from the competition with its artificial intelligence-based underwriting platform. By fully automating the underwriting process with a data-driven risk model, Fundbox promises to underwrite faster, more cost-effectively and with greater accuracy than many other lenders – opening up lending possibilities for more customers. Congratulations to the entire Fundbox team for their industry recognition with our 2018 FinTech Breakthrough Award distinction.”

United Kingdom

RateSetter hits £2.5bn of lending (Peer2Peer Finance) Rated: AAA

The peer-to-peer lender, which launched in 2010, said 65,000 people have RateSetter investment accounts, financing more than 460,000 borrowers.

Investors have lent more than £1.55bn to individuals and almost £950m to businesses and have earned an average annual return of 4.4 per cent.

ArchOver launches Innovative Finance ISA to UK investors (Global Banking & Finance) Rated: A

ArchOver, the peer-to-peer (P2P) business lending platform, is helping British investors make the most of their annual tax-free allowance with the launch of its Innovative Finance ISA (IFISA). ArchOver’s IFISA service offers investors premium credit control and security, proven by ArchOver’s no-loss rate. It allows investors to invest directly in successful businesses, earning tax-free interest of up to 10% p.a. – far more than the average return on a cash ISA.

OakNorth: Brexit creates opportunity to reform banking regulation (AltFi News) Rated: A

OakNorth has called on the Treasury to use Brexit as an opportunity for regulatory reform in banking.

Responding to the Treasury Select Committee’s inquiry on SME finance, the bank said that there should be more proportionality between challenger banks and incumbents.

Mayo-based Doherty Menswear successfully raises €45,000 in peer-to-peer loans (Mayo Advertiser) Rated: B

To date, €1,012,000 has been raised through Linked Finance’s online lending platform (www.linkedfinance.com ) to facilitate business growth in Mayo, for 29 businesses.

Two more hires for ThinCats amid company growth (Peer2Peer Finance) Rated: B

PEER-TO-PEER lending platform ThinCats has appointed two new sales and marketing executives, as its hiring spree continues.

The alternative finance specialist has named Tony Smedley (pictured) as head of sales operations, and Richard Wilson as head of marketing, as part of a new push to “ramp up the provision of vital funding for small- and medium-sized enterprises (SMEs).”

China

China Rapid Finance Announces Preliminary First Quarter 2018 Results (PR Newswire) Rated: AAA

China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE:XRF), operator of one of China’s largest consumer lending marketplaces, today disclosed preliminary financial results for the first quarter of 2018.

The Company expects to report a net loss in the range of $25 to $30 million, the majority of which consists of approximately $16 million of one-time expenses: 1) non-recurring expenses associated with preparing for registration; 2) write-offs related to receivables and amortizations; 3) non-cash accounting charges related to adoption of the new GAAP standard for revenue recognition (ASC 606); and 4) one-time costs associated with a pilot funding program that was discontinued due to regulatory changes.

Yirendai Reports First Quarter 2018 Financial Results (PR Newswire) Rated: AAA

In the first quarter of 2018, Yirendai facilitated RMB11,956.7 million (US$1,906.2 million) of loans to 174,128 qualified individual borrowers through its online marketplace, representing a year-over-year growth of 65%; 23.1% of loan volume were generated by repeat borrowers who have successfully borrowed on Yirendai’s platform before; 72.5% of the borrowers were acquired from online channels;  100% of the loan volume originated from online channels was facilitated through mobile.

In the first quarter of 2018, Yirendai facilitated 214,231 investors with total investment amount of RMB11,427.6 million(US$1,821.8 million), 100% of which was facilitated through its online platform and 95% of which was facilitated through its mobile application.

In the first quarter of 2018, total net revenue was RMB1,592.7 million (US$253.9 million), an increase of 56% from prior year; net income was RMB278.9 million (US$44.5 million), a decrease of 21% from prior year and adjusted net income in the first quarter of 2018 was RMB668.5 million (US$106.6 million), an increase of 91% from prior year.

The fuse that could light China’s debt bomb (Financial Review) Rated: A

A financial planning manager in a major Shanghai bank branch points to a flickering computer screen displaying a list of wealth management products for customers wanting a higher yield to normal deposits.

For a deposit of 100,000 yuan ($20,600), he recommends a “low risk” product with an interest rate of 4.25 per cent over one year. Alternatively, the customer can opt for a riskier 4.75 per cent yield but there is no guarantee they will get any of their money bank. The customer is advised to act fast as yields are falling rapidly following closer government scrutiny of China’s savings products since March.

European Union

New Robo.cash P2P Lending & Millennials Research & 4M€ Milestone (Crowdfund Insider) Rated: AAA

Robo.cash’s research shows that Millennials are steadily taking over the leading position from the older generation of investors. Six months ago, the average age of investors of the platform was 38 years, and the age groups were distributed as follows: Silent generation (73-90) — 0.8%; Baby boomers (54-72) — 9.5%; Generation X (38-53) — 38.6%; Millennials (22-37) — 50.3% and Generation Z (18-21) — 0.8%. Today, the typical investor has grown younger to 37 years old due to the increased share of Millennials — 53.9% and Generation Z — 1.8%.

Source: Crowdfund Insider

Dublin-founded Future Finance agrees £100m debt facility (Irish Times) Rated: A

Future Finance, a Dublin-founded student loan specialist that recently secured €40 million in funding, has signed a £100 million (€114 million) debt facility.

The deal with alternative asset management firm, Waterfall Asset Management, which includes an option to participate in a further £150 million (€171 million) extension, will enable the company to grow its student lending business further.

International

What the Blockchain Means for the Future of Small Business Funding (Business.com) Rated: AAA

Business financing has always been a thorny issue for many small and medium-sized businesses (SMBs), and is often cited as one of the reasons behind the morbid failure rates for new businesses. One report found that about 29 percent of failed businesses identified the lack of working capital as a major reason for failure, second only to the lack of market demand for their products or services.

Here are a few specific ways the blockchain can be used to bolster funding for SMBs.

1. P2P lending

The blossoming crypto market is also helping fan the flames of disruption for P2P business lending. Earlier this month, Ripple, the company behind the third-largest cryptocurrency, XRP, announced plans to push the use of XRP into other industry segments outside of P2P payments and banking, including the P2P lending industry.

2. Using blockchain and big data to improve existing systems

Wish Finance, a blockchain-based lending platform for SMBs, is using the blockchain to help improve traditional risk scoring systems while providing a simple platform for repayments.

3. ICOs and SMB funding

But as investors become wiser and as trust becomes a permanent feature of the blockchain, there’s a growing opportunity for SMBs with solid business models to cash in.

Africa

Budding SA bank buys peer-to-peer lending firm RainFin (Business Tech) Rated: AAA

Johannesburg-based Lebashe will boost its holdings in RainFin by 24% to 75% for an undisclosed sum, the company said in an emailed statement on Thursday. RainFin, the largest peer-to-peer lender in South Africa, bought back the 49% held by Barclays’s South African unit, with Lebashe acquiring its 51% stake in February last year.

Asia

Singapore’s GIC emerges as most active Asian PE investor in Q1 (Deal Street Asia) Rated: AAA

Singapore’s sovereign wealth fund GIC completed at least 11 private equity deals in the first quarter of this year, making the $344-billion fund the most active Asian PE investor during the period.

GIC joined other investors in sealing two of the biggest investments of the quarter, according to a PitchBook report. It participated in the $5.5-billion buyout of Denmark’s Nets A/S by partnering with private equity firm Hellman & Friedman, and in the $2.5-billion investment in FirstEnergy in January.

Canada

IOU Financial Inc. Releases Financial Results for the Three-Month Period Ended March 31, 2018 (Benzinga) Rated: AAA

IOU FINANCIAL INC. (“IOU” or “the Company”) (TSXV:IOU), a leading online lender to small businesses (IOUFinancial.com), announced today its results for the three-month period ended March 31, 2018.

  • Net earnings on an IFRS basis and adjusted net earnings amounted to $0.8 million in Q1 2018, the second consecutive quarter with positive earnings for the Company.
  • Loan originations increased 11.2% to $24.5 million compared to the same period in 2017.
  • Provision for loan losses decreased 50.6% to $0.9 million in Q1 2018 driven by measures taken to reduce defaults.
  • Opex decreased 23.1% to $1.9 million for the first quarter of 2018

Authors:

George Popescu
Allen Taylor

Tuesday February 20 2018, Daily News Digest

Loan Charge Rates

News Comments Today’s main news: Cross River Bank, PeerIQ partner on loan data.Coinbase to offer crypto payments service to compete with PayPal.Better Mortgage hits $1B in mortgage loan funding.LendingClub updates Truth in Lending Statement.Zopa to launch a credit card.Funding Circle plans IPO at $2.1B valuation.Prospa ranked #1 among high-growth firms in APAC. Today’s main analysis: […]

Loan Charge Rates

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

APAC

Other

News Summary

United States

Fintech-friendly Cross River Bank partners with PeerIQ on loan data (American Banker), Rated: AAA

Cross River Bank in Fort Lee, N.J., has entered into a partnership with PeerIQ, a provider of consumer loan data analytics, in an effort to streamline capital sourcing between online lenders and institutional loan buyers such as small banks.

Coinbase Now Powering Payments in Digital Currency (Crowdfund Insider), Rated: AAA

Coinbase, one of the largest cryptocurrency exchanges in the world, has launched Coinbbase Commerce, a payments platform that allows merchants to accept digital currency anywhere, anytime.

Millennials SME Owners Prefer Online Alternative Lenders to Tradtional Ones (Bank Innovation), Rated: AAA

According to Mercator’s report, Business Banking Services: Keeping Up with Millennial Owners, 27% of total U.S. SMEs have used online alternative lenders (P2P lenders or marketplace lending platforms) in 2017.

Of this number, 48% of millennial owners (aged 18–34), currently have a loan from an alternative lender compared to 25% of SMEs run by owners over 35 years of age. Further, these millennial owners said they are twice as likely to use alternative lenders than their older counterparts.

Source: Bank Innovation

P2P lending soars but SMEs generally wary of finance (P2P Finance News), Rated: A

The 2018 Small Business Finance Markets report, released on Tuesday, found that P2P business lending rose by 51 per cent in 2017. In contrast, bank lending to UK small- and medium-sized enterprises (SMEs) fell to £700m in 2017 from £3bn the previous year.

Despite increased demand for alternative finance, the report found that 70 per cent of smaller businesses would rather forego growth than borrow. The BBB’s analysis found that only 1.7 per cent of small firms sought new loans over the last 10 quarters – a record low since its index began in 2011.

Less than half (43 per cent) of businesses surveyed were confident they would get a loan if they applied, even though most new loan applications (72 per cent) are approved.

Better Mortgage Hits $ 1 Billion Dollars in Mortgage Loans Funded after Launch in January 2016 (BusinessWire), Rated: AAA

Better Mortgage, a digital mortgage company focused on improving access to home financing for a new generation of homeowners, announced that it has funded over $1 billion dollars in mortgage loans to date. Better launched in January 2016, making it the third fastest online lender to reach this $1B milestone — per research published by Lend Academy in July 2017.

The Case for M&A (Why Banks Should Buy Online Lenders) (PeerIQ), Rated: AAA

Tech firms have already demonstrated they can open these markets. The largest money market fund in the world, Ant Financial’s four-year-old Yu’e Bao, was built on a sweep from the AliPay payments product. Intuit can utilize proprietary accounting and tax data to underwrite (and acquire) borrowers in novel ways. Amazon can underwrite small businesses using inventory turnover and reams of customer data.

“Big Tech” firms also have proprietary platforms and channels – in-home (think ‘Alexa’), apps, in-car, and mobile to name a few.  However, in the US – at least for now – Big Tech firms lack a regulatory “swimlane” to compete with banks in lending and payments on a national scale. Their non-bank and commercial status confines their activities to narrow forms of lending, affinity partnerships, and lead generation. Until that impediment is dissolved, “Big Tech” firms need to partner with national banks with unsecured lending capabilities to fully unlock these markets.

Our argument is that banks without an unsecured lending capability risk losing long-term customer relevance. Banks that do not have an unsecured lending business do not have a seat at the table.

Source: PeerIQ

Which Banks are the logical buyers?

Banks that have the following characteristics would make a short-list of likely acquirers:

  • Are active in lending, but have a gap in unsecured consumer loans
  • Banks with asset management or structured products arms that can package loans into new products (e.g., ABS offerings, investment vehicles, etc.). Also, banks that have aspirations to develop a robo-advisor
  • Banks that have a demonstrated history of partnering with FinTechs
Source: PeerIQ, SEC filings, bank corporate websites

We assume underwriting and loan terms similar to those today (e.g. ~700 credit score, 15% coupon, $15k principal, 3 to 5 year term). We assume annual charge-off rates of 5%. We assume a 1.5% deposit funding charge and a leverage ratio of 15%.

We find that a bank can generate 10% NIM, 2 to 3.5% ROA, 15 to 20% marginal-ROE during good times.

Update to Truth in Lending Disclosure Statement (Lending Club), Rated: AAA

As of Friday, February 23, 2018, recent updates made to the Truth in Lending disclosure statement for unsecured consumer loans will take effect. The forthcoming Truth in Lending disclosure statement is available here.

Will LendingClub Turn a Corner in 2018? (Guru Focus), Rated: A

LendingClub has a market cap of about $1.6 billion, which makes it one of the biggest players in the peer-to-peer lending market.

The company’s stock price has plunged nearly 40% over the last four months and this could continue unless the upcoming earnings call changes investor sentiment. LendingClub was valued at about $9 billion in late 2014 but it has dropped to about $1.6 billion.

Source: Guru Focus

Pricey personal loans would be outlawed by bill that would reshape state lending industry (Los Angeles Times), Rated: AAA

A bill introduced Thursday by Assemblyman Ash Kalra (D-San Jose) could dramatically reshape California’s lending industry by capping interest rates at roughly 20% for consumer loans between $2,500 and $10,000. Since rate caps were removed by the Legislature in the 1980s, there’s been no limit to the amount of interest lenders can charge on those loans.

That has led to startling growth in the market. In 2016, more than half of the loans between $2,500 and $5,000 and about 21% of larger loans charged interest rates of 100% or higher. In all, Californians in 2016 — the most recent year for which state data are available — borrowed $1.1 billion at triple-digit interest rates.

But Kalra’s bill would do much more than ban lenders’ priciest offerings. The bill would extend an existing set of rate caps that now apply to loans of less than $2,500 to all loans of up to $10,000. That would cap interest rates at roughly 19% for loans up to $10,000.

Had the caps been in effect in 2016, 98% of loans between $2,500 and $5,000 and 95% of loans up to $10,000 would have been outlawed. Only about $91 million of the $2.7 billion in loans made in those sizes in 2016 had rates below 20%.

BFS Capital Announces New 5 Million Credit Line (BFS Capital Email), Rated: A

BFS Capital, a leading small business financing platform, today announced it is has received a new $175 million revolving credit line provided by funds managed by Ares Management, L.P. BFS Capital will use the new facility to accelerate the growth of its lending business, following a record year where the company generated more than $300 million in originations, a new annual high.

Braviant Holdings Announces $ 7 Million Equity Raise (Braviant Email), Rated: A

Braviant Holdings, a leading fintech startup that uses advanced analytics and proprietary technology to make smarter lending decisions, has raised $5 million common equity from Loom Capital, LLC. Alongside the equity investment, Braviant has entered into an exclusive partnership with a subsidiary of Trend Capital, a tech-enabled digital marketing platform affiliated with Loom.

VPC’s portfolio sales drag on performance (P2P Finance News), Rated: A

VPC Specialty Lending Investments has reported a total net asset value (NAV) return of 3.07 per cent for 2017 – below its target return levels.

PeerStreet Review (Benzinga), Rated: A

In addition, “accredited investors” need only apply. Investors must have a net worth greater than $1 million in liquid assets (meaning the equity in your home doesn’t count) or you need to earn more than $200,000 per year or make $300,000 jointly.

PeerStreet’s minimum investment is $1,000 and account fees range from 0.25% to a 1% setup fee. The investment length ranges from six to 24 months.

Marla Blow of FS Card (Lend Academy), Rated: A

In this podcast you will learn:

  • How Marla’s time at the CFPB indirectly led to the founding of FS Card.
  • Why creating a new credit card company is so complicated and challenging.
  • What their Build card is and who is their target market.
  • How they are able to offer an secured credit card to people that banks reject.
  • The types of data they use to find stable customers in the subprime segment.
  • The typical size of the credit line they provide to these customers.
  • The profile of their target customer and how they are using the credit card.
  • How they are providing financial education to these people.
  • How FS Card is acquiring these credit card customers.
  • The percentage of their customers who have qualified for credit line increases.
  • Why improving credit scores of their customers is a key metric.
  • How they are able to issue these cards through their partner bank.
  • How FS Card makes money.
  • What regulators could be doing to help subprime consumers get more access to responsible credit.
  • What more should fintech companies be doing to help these underserved people.
  • The biggest challenges that FS Card has to overcome to become a large and successful credit card company.

How does real estate investing benefit from technology (Realty Biz), Rated: A

Buying and selling property has already become much more accessible due to technology, and this trend is only going to speed up. While historically, real estate professionals, investors, and landlords have been reluctant to pay for technology, and the data available has been spotty, the tide is turning as more wake up to the opportunities. Investment values are shooting up in many places due in a large part to technological advances, including the ability to market real estate to audiences beyond the immediate community and to close deals securely, quickly, and remotely with investors.

BBVA taps digital start-up Azlo to target US freelance market (Fintech Futures), Rated: A

BBVA has partnered with digital business account provider Azlo to target the freelance market in the US.

According to BBVA, by 2020 in the US alone, 43% of workers will be employed in freelance capacities – a trend that is expected to continue to grow.

Goldman Sachs and rivals home in on risky consumer banking (Financial Times), Rated: A

Lloyd Blankfein was a breezy opening act at a big industry event this week in Key Biscayne, Florida. On stage at the Ritz-Carlton the chairman and chief executive of Goldman Sachs was talking about Marcus, the bank’s new online savings and lending platform, which is targeting borrowers with scores as low as 660 on the 300-850 Fico scale. Goldman calls such people “creditworthy”; others call them subprime.

Banks Urged to Take On Payday Lenders With Small, Lower-Cost Loans (WRAL), Rated: A

Those who find themselves pinched for cash often turn to high-cost payday lenders. But traditional banks and credit unions could serve that role for borrowers and do it at much lower rates, according to a new proposal from the Pew Charitable Trusts.

B of A’s Moynihan: Big banks are ‘fine’ with Dodd-Frank (American Banker), Rated: A

While small and regional banks are pushing for a rollback of the Dodd-Frank Act, big banks are largely supportive of the 2010 financial reform law, Bank of America CEO Brian Moynihan said Thursday.

African-American Entrepreneur Launches Innovative Mobile Tax Refund Loan App to Revolutionize the Tax Industry (Black News), Rated: B

Good news for Americans struggling with income tax returns given the recent changes in the tax laws with the enactment of The PATH ACT. A visionary African-American entrepreneur, Marshawn Govan, has come up with an innovative mobile tax refund loan app that is all set to revolutionize the tax industry and make tax returns simpler for Americans.

Titled as MKG Tax Refund, the state of the art program is a patent pending mobile tax refund Collateral Driven Interest & Investment (SaaS) Software-as-a-Service (FOF) Fund-Of-Fund multi-manager investment application.

Add Another Bank to Fintech Roostify’s Roster of Investors (Bank Innovation), Rated: B

If there’s any question that digital mortgage firms are gaining attention from larger fintech players and investors, then look no further than venture capital firm Santander InnoVentures‘ investment in Roostify, a startup that digitalizes the mortgage application process.

French asset manager signs record deal in the Meatpacking District (The Real Deal), Rated: B

Tikehau Capital, a Paris-based firm with $15.6 billion in assets under management, signed a lease for the top two floors at Rockpoint Group’s new development at 412 West 15th Street, sources told The Real Deal.

The 11-year lease covers nearly 10,000 square feet on the top two floors of the 18-story building, which offer sweeping views of the Hudson River.

Lawmakers highlighted that H.R. 3299 — the Protecting Consumers’ Access to Credit Act of 2017 — clarifies current law to ensure innovative marketplace lending remains in-tact while simultaneously providing safe consumer protections.

H.R. 3299 passed through the House by a vote of 245-171 and went on over to the Senate, which received it, read the measure twice and referred to the Committee on Banking, Housing and Urban Affairs.

United Kingdom

Zopa on hiring drive to support credit card launch in 2018 (P2P Finance News), Rated: AAA

ZOPA is recruiting staff to develop its new credit card, which it plans to launch later this year as a feature of its digital bank.

Temasek-backed Funding Circle plans IPO at .1b valuation (Deal Street Asia), Rated: AAA

Funding Circle, the largest peer-to-peer (P2P) lender in the UK, is planning to list on the London Stock Exchange (LSE) that will see it float at an estimated valuation of £1.5 billion ($2.1 billion), according to a report by Britain’s Sky News.

Funding Circle set to hire Morgan Stanley to lead London flotation (P2P Finance News), Rated: A

FUNDING Circle is reportedly poised to hire Morgan Stanley to lead a flotation on the London Stock Exchange in the second half of this year.

The largest P2P platform by loan book size in the UK is expected to hire the US bank in the coming weeks, according to Sky News.

Lendy reports 224% turnover increase (Bridging&Commercial), Rated: AAA

Lendy has revealed a 224% turnover increase in 2016 (to £29.2m), compared with the previous year (2015: £9m).

The P2P lending platform has published its audited accounts for 2016, which also showed that profits before tax increased to £3.3m, compared with the £53,000 reported in 2015.

Lending Works chooses Credit Kudos to power new Open Banking initiative (Finextra), Rated: A

Credit Kudos, a challenger credit bureau, and Lending Works, a fast-growing peer-to-peer (P2P)  lending platform, are partnering to enable customers to benefit from the UK’s Open Banking  initiative, a secure way for banking customers to take control of their financial data. Credit Kudos  and Lending Works’ partnership is one of the first initiatives to use Open Banking to improve  customer experience in the finance industry.

Currently, approximately 60% of Lending Works’ borrowers are provided with  instant and automated credit decisions, whereas the remaining 40% require some manual  processes. Within the new world of Open Banking, Lending Works expects to increase that figure  to up to 90% of credit decisions being fully automated.

Small businesses look to specialist lenders for loans (Financial Times), Rated: A

British small businesses are diversifying their sources of funding away from big banks, as a growing number turn to specialist asset-backed lenders, peer-to-peer finance sites, private equity and venture capital investors.

Fewer small businesses are applying for loans than in the past five years and more of them fear that if they did they would be rejected, according to the latest report into small business finance by the British Business Bank, a government-backed development bank.

Out of the UK’s total of 5.7m small businesses, only 1.7 per cent applied for a loan or overdraft last year, the fifth consecutive year of decline since 2012.

There’s never been a better time to seek alternative finance (Belfast Telegraph), Rated: A

There are also several privately funded lenders (with a local presence in the province through brokerages) such as Atom Bank, Relendex, Thin Cats and Dunluce Capital which have all completed a number of deals in Northern Ireland from cash flow loans to property development finance.

The Access to Finance initiative supported by Invest Northern Ireland offers a variety of support including start-up funding, loans and equity investment.

WhiteRock Capital Partners manages the £50m NI Growth Loan Fund (Access to Finance) which offers loans from £50k to £1.25m to local SMEs. With an extensive network of funding partners, we work hard to deliver the most appropriate support for local businesses.

ArchOver readies for IFISA launch (P2P Finance News), Rated: A

ARCHOVER is planning to launch its Innovative Finance ISA (IFISA) in the next few weeks.

Crowdfunding Comes of Age (moneyexpert), Rated: A

Crowdfunding is gaining serious traction in the UK market, with the sector pushing past the £10 billion milestone in 2016. While, most people will probably still associate the idea of ‘crowdfunding’ with websites like Kickstarter or early stage equity investments, the reality is that 97% of the market is debt-based – either P2P lending or Crowd Bonds.

Both P2P lending and Crowd Bonds are also making big strides into the mainstream thanks to their inclusion in the new(ish) Innovative Finance ISA (IFISA), which allows investors to earn interest tax free on their investments.

It’s time to get clear on the Innovative Finance ISA (moneyexpert), Rated: A

With the birth of the Lifetime ISA (LISA) for 18-39 year olds on 6 April 2017, the Innovative Finance ISA (IFISA) is no longer the baby of the ISA family. But it is perhaps still the least well understood.

The peer-to-peer lending industry celebrates its 13th birthday this year. Has it finally grown up? (Verdict), Rated: B

Whether that’s Paypal in the US or the start of the peer-to-peer lending industry (P2P) in the UK, financial services were changing long before the global recession hit.

The P2P industry is celebrating its 13thbirthday this year. With big changes afoot in its major players such as Zopa, as well as Funding Circle, what is next for P2P lending?

China

China Gets Pushback on New Rules to Curb Lending Practices (WSJ), Rated: AAA

Chinese regulators and commercial banks are butting heads over new rules Beijing is rolling out to tackle off-the-books lending that’s compounding China’s debt woes.

Particularly targeted are practices banks use to move loans off their books by repackaging them as investments. Banks transfer the loans—mostly corporate and local government borrowings—to brokerages and other types of shadow lenders, which then peddle the rebundled investments to investors. Such maneuvers accounted for $3.5 trillion in off-balance lending as of last year.

European Union

Online Lending Market Growth Continues With Spanish Purchase (Prague Post), Rated: AAA

Wonga’s latest acquisition is Spanish company Credito Pocket, who was a lending company based in Barcelona. This is aimed to boost the visibility of their Wonga.es domain.

BinckBank and Raisin double up for Dutch savings market (Fintech Futures), Rated: A

BinckBank says it will be the first in the Dutch banking sector to offer its clients access to European savings products via its cooperation with Raisin.

Augmentum Fintech to raise £100mln to cash in on Europe’s financial disruption (Proactive Investor), Rated: A

A new trust aimed at Europe’s fast-growing fintech sector is looking to raise £100mln ahead of a float in London.

Augmentum Fintech PLC said the financial services sector is ‘ripe for disruption and disintermediation’ but, unlike other sectors such as retail and travel, this has yet to happen.

ING Diba Buys Lendico (P2P Banking), Rated: A

Bank ING Diba acquires p2p lending marketplace Lendico. According to Finanz-Szene.de the transaction was reported to the German Federal Cartel Authority last week. The bank has confirmed the acquisition.

International

Digital Identity Pioneer IdentityMind Global Lands $ 10M (Coverager), Rated: AAA

IdentityMind Global, the leader in Digital Identities You Can Trust, today announced that it has closed a $10M Series C round of financing. In addition to all existing investors, the round was co-led by Benhamou Global Ventures and Eastern Link Capital and included Hanna Ventures, Overstock.com, and Zanadu Capital Partners.

Coin-backed P2P platforms shrug off crypto volatility (P2P Finance News), Rated: A

Digital currencies such as Bitcoin and Ethereum suffered from price falls in January but many firms are still seeing the benefits of creating their own cryptocurrency to use for P2P lending. One provider, SOFIN, is currently looking to raise up to $1m (£720,000) to create a token that can be used as a tool to bypass high exchange rates so loans can be funded internationally.

FintruX’s whitelist closes in 11 days (AMBCrypto), Rated: B

The global P2P lending ecosystem, FintruX backed by Ethereum and No-Code development has reopened the Token Sale, FTX which is used to power the FintruX network and is set-up as a mean to reward or get rewarded for participating in the marketplace. The token’s minimum per transaction at present is 0.1 ETH.

Harnessing the Full Potential of the $ 600 Billion Crypto Network (NewsBTC), Rated: B

Gluwa and Aella Credit are the two fintech companies that have come together to create a blockchain based protocol that will allow investors to lend in any crypto.

These two companies plan to launch Creditcoin, which will operate across blockchains in the P2P lending market.

The Gluwa platform, to be powered by Creditcoin, will address the issues of accessibility of the crypto market by those in the fiat world by seamlessly connecting them with cryptocurrencies.

GISC LoanCoin Network (NewsBTC), Rated: B

GISC LoanCoin Network is a utility token based lending and borrowing platform that allows users to leverage their blockchain assets to secure cash loans. The network is optimal for P2P and B2B credit financing on a global scale.

iP2PGlobal Announces Its Pre-ICO Crowdsales For Its TWQ Token On Feb 19 (CoinTelegraph), Rated: B

The TWQ (Tawarruq) is an ERC20 token that confer the right to the token holder to submit an application for a personal financing based on a Commodity Tawarruq Trading program, through the iP2PGlobal platform and have it listed in the platform for prospective lenders to view and choose to finance.

10TWQs are needed to apply for a personal financing of up to 5ETH.

Australia

Australian Online Lender Prospa Ranks #1 in List of High Growth Firms in Asia Pacific (Crowdfund Insider), Rated: AAA

Prospa, a Sydney based online lender servicing the SME market, has received a nice recognition as it took the top spot for a high growth firm in Asia Pacific. According to a recent ranking of the top 1000 firms in Asia-Pacific by the FT, Prospa ranked number one having experienced revenue growth of 1600% during the time period of 2103 to 2016.

Payday lender Nimble Money up for sale, bids due this week (Financial Review), Rated: A

Privately owned personal loans company Nimble Money is on the block, with its two founders believed to be seeking an exit.

Street Talk can reveal Melbourne-based Baillieu Holst has been hired to find a buyer for the business and has been marketing the short term loans provider to financial services industry players and private equity firms in recent weeks.

Interested parties have been told Nimble Money is on track to make about $15 million in earnings this year, following significant growth in its loan book over the past 12-months.

It’s expected to be worth about $100 million.

Loans.com.au slashes variable rates for home buyers (Canstar), Rated: B

Online lender loans.com.au has cut interest rates on its variable rate home loan to just 3.52% (3.56%* comparison rate).

Comparatively, the next lowest variable home loan for owner-occpupiers at the time of writing sits at 3.54% (3.55%* comparison rate).

Over $ 11.5 million lent by payday loan alternative (finder), Rated: B

BaptistCare has approved 16 loans per week to some of Australia’s most financially vulnerable people.

The No Interest Loan Scheme (NILs), a microfinance program aimed at providing small no- and low-interest loans to financially vulnerable people, has this week announced it has surpassed $11.5 million lent in NSW. The loans are designed to help people on lower incomes purchase essential goods and services.

The loans are provided through BaptistCare with the scheme run under Good Shepherd Microfinance in partnership with NAB and the NSW Office of Fair Trading.

India

Financial services execs invest in fin-tech startup Fincash (VC Circle), Rated: AAA

Mumbai-based personal finance startup Fincash.com has raised Rs 1 crore ($150,000) in a fresh funding round from a group of angel investors from the financial services sector, a company statement said.

The startup will use this money to build its team, expand its product line, acquire customers and make its services available across more cities and towns, the statement added.

Fintech startup Aye Finance raises Rs 25 cr from Vivriti Capital (Economic Times), Rated: B

Fintech company focussed on the MSME sector Aye Finance has raised Rs 25 crore through a securitisation deal facilitated by Vivriti Capital.

APAC

Lendit’s accumulated volume of loan tops W100b (The Korea Herald), Rated: AAA

Lendit, a peer-to-peer lending platform operator in South Korea, has extended a combined 101.8 billion won ($95.4 million) in nearly 7,300 consumer loans as of Monday to midrange borrowers seeking lower interest rates, according to the fintech startup Monday.

How VC Firm Magma Partners is Tapping Into the Untapped Chilean Fintech Market (Bank Innovation), Rated: A

With government-backed initiatives and a finite business of copper export, Nathan Lustig, co-founder and managing partner at Magma Partners, saw huge potential in the Chilean fintech market.

Lustig points out that only 30% of Chileans have credit cards, while only 50% have bank accounts, “and that’s the more advanced population,” he said. Additionally, consumer experience is “pretty horrible for about 80% of this population,” he said.

One area within the fintech space that Magma has been particularly interested in is invoice-based lending, also known as factoring. In its portfolio is Portal Finance, a startup that provides SaaS for the factoring industry.

Portal Finance earns between 0.5% to 1% for every deal the bank accepts.

Talad platform offers SME loans based on invoice collateral (The Nation), Rated: B

Talad Invoice, a lending platform initiated by a fintech startup, is expected to grow at an exponential rate this year, following two years of peer-to-peer lending using invoices as loans collateral, said Watewiboon Pumipue, chief executive officer of D90 Capital Co, which operates the financial platform.

Finda envisions online financial marketplace (The Korea Herald), Rated: B

Finda operates an eponymous web portal that provides information about over 7,000 financial products — ranging from personal and mortgage loans, investment instruments, credit cards to insurance products — standardized in Finda‘s own format. Users can be offered easy-to-understand and up-to-date information about products online, she said.

Finda gathers information primarily from an open API by the Financial Supervisory Service, but since the FSS’ database provides data, including interest rates, of the previous months, Finda reflects updates directly from sellers — banks, insurers, credit card firms and peer-to-peer lending platforms.

Africa

Global Startups Boot Camp Coming To Rwanda (KTPress), Rated: A

Rwanda will next month host a continental Startup boot camp (SBC) that will source innovative and top startup talents in the country and across the globe.

SBC is a global family of industry-focused accelerators, which last year launched its first-ever Africa-based programme.

Canada

KiWi’s marketplace loans set for imminent Canadian debut (Financial Post), Rated: A

The next stage in the development of Canada’s first credit fund that invests in marketplace loans — unsecured consumer and small business loans provided by online lending companies — is set to play out over the next month.

The gang behind KiWi Private Credit Fund — formed last summer with $30 million of contributions from institutional and high-net-worth investors — is planning to meet the Canadian platforms.

Russia

Microfinancers warn Central Bank of return to 90s (Realnoe Vremya), Rated: A

The regulator has been fighting against expensive and very risky loans for several years already. Last July it tightened reserve requirements for MFO again: they must add 100% interest for payday loans with a delay of more than 90 days.

Firstly, the regulator is going to restrict the size of payday loans to 10,000 rubles, secondly, to reduce the biggest term of such loans to 15 days, thirdly, to reduce interest rates to 1,5% in 2018, to 1% in July 2019 a day. Now the largest payday loan is 45,000 rubles. The maximum term is 2 months, while extra payment on such loans is limited to a threefold size of a loan.

Payday loans account for 57,6% of all loans that MFOs granted in the second quarter of the last year.

Authors:

George Popescu
Allen Taylor

Thursday January 18 2018, Daily News Digest

mobile banking user growth

News Comments Today’s main news: Marcus passes the $2B loan origination mark. Varo Money secures $45M in Round B. Funding Circle’s fund announces Citibank deal. Qudian enters budget auto financing. PeerStreet intros 30-day notes. Today’s main analysis: Investing in Mintos’ secondary market. Today’s thought-provoking articles: Mobile banking is more important than ever. Credit score changes would force banks to help […]

mobile banking user growth

News Comments

United States

United Kingdom

China

International

India

APAC

News Summary

United States

Goldman Sachs’ Online Lending Platform Marcus Has Originated Over $ 2 Billion in Loans, Deposits Rise to Over $ 5 Billion (Crowdfund Insider), Rated: AAA

Meeting a prediction from this past June set by Goldman Sachs CEO Lloyd Blankfein, online lending platform Marcus topped $2 billion in loan originations. Additionally, Marcus reported online deposits of over $5 billion. Deposits and consumer lending have now been combined under a single brand, thus, in reality, creating a challenger bank for the future.

Overall, Goldman Sachs (NYSE:GS) reported net revenues of $32.07 billion and net earnings of $4.29 billion for the year ended December 31, 2017.

Diluted earnings per common share were $9.01 compared with $16.29 for the year ended December 31, 2016. Goldman reported a Q4 loss of $5.51 per share. The results were impacted by a tax related expense of $4.4 billion. Without this expense, Goldman said earnings per share would have been $5.68.

Varo Money Closes $ 45M Series B Financing Round (Varo Money Email), Rated: AAA

Mobile banking is more important than ever (Business Insider), Rated: AAA

As we’ve seen for the past few quarters, mobile banking is continuing to rise, but the rate of growth is decelerating as offerings mature.

  • JPMorgan Chase 

    How a 23-year-old Max Levchin got Peter Thiel to invest in PayPal in under 24 hours (Business Insider), Rated: A

    Levchin told Shontell, “I saw [Thiel’s] name on the pinboard, wandered into a class that was taught by him, which turned out to be more like seminar with six people in the room. So it was a very small group of people. One: I couldn’t sleep because it would be obvious, but two, he was actually pretty interesting. So I stayed awake and chatted him up afterwards.”

    That turned out to be a good move. Here’s Levchin:

    “In the inimitable Peter Thiel fashion, we basically spend about 20 minutes talking after his lecture, and he said, ‘Well, what are you doing in Silicon Valley?’ I said, ‘I just got here two weeks ago. Probably gonna start a company.’ He said, ‘Oh, great. We should meet for breakfast.’

    “We met the next day. He said, ‘All right, so what companies are you thinking of starting?’ I had two ideas that I was concurrently thinking about. I described No. 1., No. 2. He said, ‘No. 1 is better; you should do that.’ ‘OK.’ ‘I’d like to invest.’ It was less than 24 hours later. Peter was a committed investor in my new project.”

    Credit score changes would saddle banks with risk to help nonbanks (American Banker), Rated: AAA

    Recently, the Federal Housing Finance Agency has been evaluating whether to allow originators that sell loans to Fannie Mae and Freddie Mac to use something other than the currently mandated FICO model. Specifically, the FHFA is evaluating whether originators can also use the VantageScore model offered by a company owned by the three credit bureaus — Equifax, Experian and TransUnion.

    VantageScore contends that its model will provide credit scores on more than 30 million additional consumers and make 7.6 million of these scores eligible for a loan sold to Fannie or Freddie because of the model’s supposed ability to more accurately assess blemished and dormant credit histories and accommodate thin credit files that most often effect younger consumers. VantageScore also argues that, since the model consolidates data from all three credit bureaus, it eliminates scoring differences caused by data discrepancies. The result, the company maintains, will be expanded home ownership, a more vibrant housing market, more consistent underwriting and faster economic growth.

    The major proponents of the alternative credit scoring model are large nonbank originators and credit reporting firms — companies that make their living from the quantity of loans they originate, not the quality. Their business models shield them from ongoing credit risk and require ever-increasing volumes to achieve scale economies. In short, nonbank originators generally don’t eat their own cooking — either in the form of loans or in the form of securities backed by the loans they originate. Therefore, they have everything to gain from this FHFA change, and very little to lose.

    PeerStreet Announces New Investment Product “30-Day Notes” (Crowdfund Insider), Rated: AAA

    On Wednesday, PeerStreet announced the launch of its new investment product, 30-Day Note, to provide increased liquidity for accredited investors at 30-day terms. According to the online lender, the 30-Day Notes product was launched quietly in October as a pilot program, is now offered monthly.

    Axial Members Surpass $ 25 Billion in Closed Middle Market Deals (Axial Email), Rated: A

    Axial, the deal network for the middle market, today announced its members have closed more than $25 billion in deals on 2,000-plus M&A and growth capital transactions since Axial’s launch in 2010. To facilitate these closed transactions, Axial arranged more than 2.1 million private member-to-member deal connections. Nearly one-third (650) of the total transactions closed in 2017.

    In 2017, the revenues of businesses that privately transacted using the Axial deal network ranged from $2.9 million to $610 million, with EBITDA ranging from negative $19 million to $223 million. Top sectors of deal flow activity include Business Services, SaaS, Healthcare IT, Distribution & Logistics, and Manufacturing. Notably, 24% of all growth capital transactions attempted in 2017 were in the Technology sector, more than doubling year-over-year from 10% in 2016.

    Worthy Peer Capital Receives SEC Qualification for 5% Money Market Alternative (Worthy Financial Email), Rated: A

    Worthy Financial, Inc., a modern personal finance company that delivers alternative investment products and digital savings solutions to a wide-range of retail investors, is pleased to announce that its subsidiary Worthy Peer Capital, Inc. has been qualified by the U.S. Securities and Exchange Commission (SEC), under Regulation A+, to bring a new liquid peer-debt product to the entire investing ecosystem.

    The new Worthy Bond offers all investors – including non-accredited investors – a 5% fixed return. Although the bonds have a 36 month term, they can be cashed in at any time for those with imminent liquidity needs, thereby serving more as an alternative to traditional money market products. Bonds may be purchased at .

    Democrats Add Momentum to G.O.P. Push to Loosen Banking Rules (The New York Times), Rated: A

    But unlike the $1.5 trillion tax overhaul, which passed along party lines, the effort to loosen the post-crisis rules is somewhat bipartisan. A group of Senate Democrats has joined Republicans to support legislation that would mark the first major revision of the 2010 Dodd-Frank Act, a signature accomplishment of President Barack Obama that has been deemed “a disaster” by President Trump.

    The bill would allow hundreds of smaller banks to avoid certain elements of federal oversight, including stress tests, which measure a bank’s ability to withstand a severe economic downturn. Under current law, banks with assets of $50 billion or more are considered “systemically important financial institutions” and therefore governed by stricter rules. The bill would raise that threshold to institutions with assets of $250 billion or more, leaving fewer than 10 big banks in the United States subject to the stricter oversight.

    Banks with assets of $50 billion to $100 billion would be immediately freed from those requirements. Financial institutions with $100 billion to $250 billion in assets, such as BB&T and American Express, would no longer be subject to tougher rules after 18 months, although the Federal Reserve would retain the authority to periodically conduct stress tests on those firms.

     

    The One Big Reason It’s So Hard to Refinance Your Student Loans (Money), Rated: A

    More than half of borrowers who applied for refinancing in 2017 were turned down, according on a report released Wednesday by LendEDU, a student loan marketplace that tracked 32,000 applications to eight refinance companies.

    Using data from users of the LendEDU marketplace, the report found that 58% of 2017 refinance applicants were ultimately rejected. And those who passed muster had very high FICO credit scores—the average approved applicant had a score of 764. Nationally, the average credit scoreis 700 out of 850; anything above 720 qualifies as excellent.

    Refinancing companies are currently advertising fixed interest rates that start at about 3.5%. Yet the average on refinanced loans in 2017 was 5.56%, LendEDU found.

    Source: Money

    Bill Gates made these 15 predictions in 1999 — and it’s scary how accurate he was (Business Insider), Rated: A

    Gates’ prediction: “People will carry around small devices that allow them to constantly stay in touch and do electronic business from wherever they are. They will be able to check the news, see flights they have booked, get information from financial markets, and do just about anything else on these devices.”

    No. 3: Instant payments and financing online 

    Gates’ prediction: “Automated price comparison services will be developed, allowing people to see prices across multiple websites, making it effortless to find the cheapest product for all industries.”

    The Top Ten Fintech Predictions for 2018 (Crowdfund Insider), Rated: A

    10. Resurgence of Peer to Peer Lending and the Emergence of A New Asset Class

    We’ve seen coin-backed lending such as Salt Lending. There will be many more platforms that will attempt to solve solvency and liquidity issues with lending in fiat currency backed by coins.

    9. Alternative Internet

    The cost of a simple PayPal transaction might go up dramatically because it was routed through Comcast’s fiber. You may have to pay an additional $3.99 a month for an “Online Banking” package if you want to do online banking…

    8. Banks will rule again

    Most of the online platforms (payments or lending) plus secondary markets are at the mercy of banks. Without a bank charter, you are simply limited on growth.

    6. Baby Boomer Financial, Inc.

    The youngest baby boomers are approaching retirement age. The baby boomer generation is about 75 million people (on par with Millennials) in the US and represents a vast amount of wealth in this country. They want to transact, invest, bank and most importantly transfer their wealth in a responsible way. I predict that there will be Fintech startups specifically addressing the needs of this generation of folks.

    4. Mass Adoption of Zero Latency Payment Clearance/Credit.

    Over the past few decades, we went from a cash society and in-person / in-branch interviews to “same-day” ACH (direct deposit) and next day loan funding. I predict that in 2018, we will see instant credit approval and funding.

    3.  Social Networks Venture Into Credit.

    I am making another prediction that Facebook or Snapchat will venture into extending credit.

    2. Vertical Integration.

    WeWork will get into the Working Capital lending business. And dare I say Indeed, Monster, and LinkedIn, will start lending money based on your resume and activities within your professional connections?!

    BlackRock makes impact a necessity for companies (ImpactAlpha), Rated: A

    Larry Fink flips social impact from a luxury to a necessity for every company. The chief executive of BlackRock, the world’s largest asset manager with $6 trillion under management, served notice on corporate CEOs their companies “must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.” Fink made his point as clearly as possible: “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

    Would a bank payday loan be any safer? (Daily Journal of Commerce), Rated: A

    Thanks to a recent regulatory change, it now may be possible for banks to offer small, short-term loans that could be a lot less dangerous for borrowers. Whether banks will actually do so remains to be seen.

    Standard Chartered creates fintech investment unit (Fintech Futures), Rated: B

    Standard Chartered has established a new business unit, SC Ventures, to invest in fintechs and other start-ups.

    Christopher Blake Joins Cross River Bank Loan Team (Long Island Press), Rated: B

    Veteran loan officer Christopher Blake joined Cross River Bank, where he’ll serve clients in Long Island, Queens and Brooklyn in the lender’s Commercial and Multi-Family Real Estate division, the company announced Tuesday.

    Freefly has teamed up with three fantastic financing partners (Freefly), Rated: B

    AFFIRM FINANCING

    Ideal for individuals looking to finance their Freefly purchases.

    SCL EQUIPMENT FINANCE

    A flexible lender designed for U.S. business, sole proprietors, and independent contractors.

    GLOBAL FINANCE

    A creative lender with options for businesses in the U.S. and many countries across the globe.

    United Kingdom

    Funding Circle’s fund unveils Citibank deal (P2P Finance News), Rated: AAA

    FUNDING Circle’s listed fund has inked a deal with Citibank, whereby the financial institution indirectly channels £50m to small businesses through the peer-to-peer lending platform.

    The transaction was announced by the Funding Circle SME Income Fund (FCIF) on Wednesday.

    Under a rather complicated structured finance deal, Citibank’s London branch will advance a senior, floating rate loan of £50m through two Irish special purpose vehicles. The facility matures in December 2026.

    Funding Circle SME Income Fund Limited (London South East), Rated: A

    The Board is pleased to announce that the Company has entered into a formal agreement with Citibank, N.A. London Branch (“Citibank London”) to establish a funding transaction to make loans to ?UK small businesses through the Funding Circle platform?. The transaction will serve to support the Company’s target dividend yield of 6-7% per annum.

    Under the terms of the agreement Citibank London will provide �50 million of funding into the transaction, by entering into a senior, floating rate loan. The Company will contribute a portfolio of existing UK small business loans at par, and in return shall receive ?approximately �50 million of cash to be deployed in accordance with its investment policy, and junior notes.

    Fintech firms struggling to get a foothold with established lenders (The Irish Times), Rated: A

    Banks and other financial institutions remain extremely wary of working with fintech firms, particularly in Ireland where few are willing to give start-ups the endorsement they need to help secure business elsewhere.

    Andrew Patrick White, founder and chief executive of FundApps, a regtech firm that provides compliance and regulation monitoring services to asset managers and hedge funds, said many financial institutions were afraid of fintech solutions because of a fear that they would be used to replace staff.

    “Your grandmother probably has more sophisticated apps on her iPad than many banks have inhouse,” Mr White added.

    Your morning briefing (PaymentsSource), Rated: A

    ‘All-in-one’ cards get another shotCurve has debuted a card in the U.K. that allows consumers to switch a card used to fund a payment after they have left the store. Through the card’s “back in time” feature, card preferences can be changed for up to two weeks, a system the company is selling as a financial management tool. Curve, which is being offered for free with a $60 premium option with more rewards, works like a regular card and is usable anyplace that accepts Mastercard. While all-in-one cards have struggled to gain traction over the years, more than 100,000 people signed up during the card’s testing phase and spent more than $120 million, according to a release.

    OnePlus’ fraud hit: Electronic equipment company OnePlus became the latest to get hit with card fraud, with consumers reporting unauthorized transactions and the company disabling credit card payments but still allowing PayPal transactions. The company is doing a complete audit of its systems and is looking for alternative payment options.

    When we asked, which, if any, Isas have you used over the 2017/18 tax year, nearly a third (32%) said they’d only used a Stocks and Shares Isa.

    This was followed by nearly a quarter (24%) who’ve only used a Cash Isa, and 17% who use a mixture of different Isas.

    This decline in Cash Isa savings is likely to be attributed to poor cash savings rates and the introduction of the personal savings allowance in April 2017.

    Interestingly, Innovative Finance Isas – used for peer-to-peer lending – don’t appear to have taken off, with just 3% of those who voted in our poll only using this savings vehicle.

    Source: Moneywise

    Name Change for Funding Knight as GLI Finance Updates to Sancus Funding (Crowdfund Insider), Rated: B

    As part of an ongoing strategic update, GLI Finance has renamed peer to peer lending platform FundingKnight to Sancus Funding Limited with immediate effect. GLI Finance, an AIM listed company, has also transferred ownership to Sancus BMS Group Limited.

    China

    Qudian is Moving into Budget Auto Financing (CapitalWatch), Rated: AAA

    The newly listed peer-to-peer lending company in China, Qudian (NYSE: QD), has moved into auto-purchase financing, a new business initiative called “Dabai Auto,” according to the company.

    Launched in late November 2017, Dabai Auto is currently targeting Qudian’s existing high quality users, who have been approved with credit lines, but have not actively transacted in small cash installments. The company also announced that it plans to spend around RMB 100 million ($15.5 million) to promote Dabai Auto through online and offline channels. The offline channels would include Qudian user engagement and delivery centers that are located in the shopping districts of over 100 cities across China.

    HNA-owned P2P lending platform doing business normally, executive says (Global Times), Rated: A

    Payments of investment products on jbh.com, an online peer-to-peer (P2P) platform owned by HNA Group, remain normal and there have not been any capital losses since the platform was set up three years ago, an executive of the company said on Wednesday.

    Payments for all maturing investment products on jbh.com are being made as normal, sina.com.cn reported Wednesday, citing Xia Aobi, president of jbh.com.

    International

    Funding Circle and Lufax: Two High Profile IPOs for 2018 (Lend Academy), Rated: AAA

    Neither IPO is a surprise as both companies have indicated their intentions before. But we now have a clearer indication on the timing. First off the rank will likely be Lufax. The South China Morning Post reported that Lufax is planning to do their IPO in Hong Kong in April at a possible valuation of US$60 billion. This would be more than three times the valuation of their previous funding round in 2016.

    The Funding Circle news actually broke just before the New Year with this article from Sky News. They reported that the company was preparing to hire advisors in the first steps towards an IPO. They are supposedly going to interview investment bankers this quarter with a possible listing in London in late fall which would put us in the latter part of the third quarter.

    A successful Funding Circle IPO, one where the valuation rises after it goes public will be very good for the marketplace lending industry in both the UK and the US. We have had little good news here in the last couple of years when it comes to the public markets and I would very much like to see a success story here.

    Investing on the Mintos Secondary Market – Hint One (P2P-Banking), Rated: AAA

    On the Mintos p2p lending marketplace the majority of investors invest on the primary market into loans, either manually or via autoinvest. But for the 29% of investors that do invest on the secondary market picking loans presents them with a huge choice of about 125,000 offers (no typo, really 125K loan parts on offer!).

    Source: P2P-Banking

    For the shown loans there is a very high probability that they will miss the payment and therefore run an additional 60 days until they are repaid under the buyback guarantee. If that happens the remaining actual loan duration would be 62 or 63 days and the impact of the 0.1% discount on the YTM would be much smaller. The resulting YTM would be somewhere around 11 to 13%. So they would not be a good buy and there are much better offers on the secondary market.

    Source: P2P-Banking

    With two weeks remaining the effective YTM for a buyer is not 36% but rather around 12%. Again there are offers with better YTMs on the secondary market.

    Chinese tech groups undermine banks’ dominance of finance (Financial Times), Rated: AAA

    The recent refusal by US regulators to sign off on Ant Financial’s $1.2bn acquisition of Dallas-based money transfer firm MoneyGram International does not signal the end of the Alibaba-affiliated payments group’s US financial ambitions.

    On one level, the scuppered deal suggests that Chinese companies, whether state-owned or otherwise, will have an ever harder time winning approval for US acquisitions. The move also confirms that the Americans now believe that the definition of national security — their basis for scrutinising overseas deals — embraces anything related to information and data.

    But Ant Financial’s attempted US play also shows how much technology is undermining the dominance of traditional global titans, especially in the financial sphere. It is especially noteworthy that many of the upstart challengers to banks and other legacy companies increasingly either have a Chinese face or Chinese capital behind them. That, in turn, underscores how some Chinese players have leapfrogged into prominence across the world.

    Blockchain is revolutionizing the loan industry – a look at Valorem… (Global Crypto Press), Rated: A

    Smart contracts are providing the solution to the trust issues that are usually the main concerns in the micro loan industry.  Whether it be student loans, cars, or any other kind of micro lending – blockchain technology provides what’s needed to move away from the banks, and towards a peer to peer lending model.

    Volerem Foundation is building the infrastructure to facilitate exactly this.

    India

    Govt should think of new ways to boost sectors like P2P lending: LenDenClub (India Info Online), Rated: A

    Additionally, we also expect the government should think of new ways to boost sectors like P2P lending. Eg.- Enable tax exemption for the lenders on P2P lending platforms, under section 80C. This will result in raising the trust bar and credibility, leading to more and more people investing in such platforms. It will also bring in a good enough capital infusion in the P2P lending space.

    Introducing Syndicates for India (Angel.co), Rated: A

    Today, we are announcing Syndicates for India, a new way for investors in India to invest alongside experienced angels and VC funds that invest in India’s vibrant tech ecosystem.

    To date, over 1,800 startups have raised more than $700M through Syndicates on the AngelList platform, receiving more than $6B in follow-on funding.

    APAC

    Gov’t urged to increase ceiling for individual investment in P2P lenders (Yonhap News Agency), Rated: AAA

    A business lobby of peer to peer (P2P) finance firms said Thursday it has asked financial regulators to raise the annual ceiling on individual investment in P2P lenders.

    The Korea P2P Finance Association has asked the Financial Services Commission (FSC) to increase the limit to 100 million won (US$93,632) per year from the current 10 million won, an association official said.

    ZorroSign Among Top 25 FinTech Companies (PR Newswire), Rated: B

    ZorroSign, Inc., today announced the company has been recognized among the top 25 FinTech companies in Asia-Pacific (APAC) by CIO Outlook. The honor spotlights organizations that are fundamentally disrupting the way companies in the global finance sector do business. ZorroSign offers unique secure eSignature, end-to-end Digital Transaction Management, and post-execution fraud protection solution. With security being on top of mind for financial services providers, ZorroSign Document 4n6 (Forensics) Token technology offers a major advantage to its customers.

    Authors:

    George Popescu
    Allen Taylor

Is a Ban on Arbitration Clauses in Consumer Financial Services Contracts Beneficial to Consumers?

CFPB arbitration rule

On September 29, 2017, some Texas business groups sued the Consumer Financial Protection Bureau (CFPB) and CFPB Director Richard Cordray in the Northern District of Texas U.S. District Court. Alan Kaplinsky, chairman of the Consumer Financial Services Group of Ballard Spahr helps Lending-Times unpack this lawsuit and shed some light on how it might impact […]

CFPB arbitration rule

On September 29, 2017, some Texas business groups sued the Consumer Financial Protection Bureau (CFPB) and CFPB Director Richard Cordray in the Northern District of Texas U.S. District Court. Alan Kaplinsky, chairman of the Consumer Financial Services Group of Ballard Spahr helps Lending-Times unpack this lawsuit and shed some light on how it might impact the alternative lending industry.

Summary of the Complaint

Plaintiffs in this case include the U.S. Chamber of Commerce, American Bankers Association, American Financial Services Association, Consumer Bankers Association, Financial Services Roundtable, Texas Association of Business, Texas Bankers Association, and chambers of commerce for the city of Grand Prairie, Irving-Las Colinas, Grapevine, Lubbock, Bay City, New Braunfels, Longview, McAllen, North San Antonio, Paris-Lamar, and Port Arthur, all within the state of Texas.

The CFPB issued a mandatory ban on arbitration clauses in July 2017. The ban is designed to allow consumers to join class action lawsuits against financial services companies instead of being forced to use arbitration that financial services companies put into their contracts.

“The outcome is extremely important because if it goes into effect, it’s going to cost the financial services industry billions of dollars in the first five years alone,” Kaplinsky said. All types of financial service companies, including online lenders, will likely have to defend new class action lawsuits filed against them by consumers. Some of that cost will get passed on to consumers, he said.

According to the complaint filed in federal district court, plaintiffs are suing the CFPB for ban arbitration clauses for four specific reasons:

  1. Plaintiffs claim the CFPB itself is structured unconstitutionally, therefore the ban cannot stand;
  2. and further claim the “arbitration rule,” as it is called, violates the Administrative Procedure Act because the CFPB “failed to observe procedures required by law when it adopted the conclusions of a deeply flawed study that improperly limited public participation, applied defective methodologies, misapprehended the relevant data, and failed to address key considerations;
  3. plaintiffs further claim the rule violates the APA because it runs counter to the record set prior to the CFPB’s formation and doesn’t take into account important aspects of the problem the agency is trying to solve;
  4. and, finally, they claim it violates the Dodd-Frank Act for failing to advance public interest and consumer welfare.

Who Are Ballard Spahr and Alan Kaplinsky?

Kaplinsky heads the group at law firm Ballard Spahr that specializes in consumer finance issues. The Ballard Spahr Consumer Financial Services Group employs 100 lawyers that specialize in various types of consumer services from banking services to online lending. He has been practicing law since 1970 and has spent his entire career focused on consumer financial services and involved in disputes regarding a variety of asset classes including auto loans, payday loans, credit cards, mortgages, and more.

Arbitration is a special interest of his because he is known for pioneering the arbitration provision in consumer contracts.

“When the CFPB got involved in rule making pertaining to arbitration, it was natural that I would be heavily involved in that,” he said.

Kaplinsky, along with several other lawyers, authors the Consumer Finance Monitor, a blog that keeps its eye on CFPB activities and comments on them. He is not representing the plaintiffs in this case, but he has a strong interest in it due to the nature of his practice and where it intersects with the legal ramifications of the final outcome.

Is the CFPB Unconstitutional?

Regarding the first complaint, that the CFPB’s structure is unconstitutional, Kaplinsky said, “I think they have a very good argument.” He cited the PHH case in the DC Circuit Court of Appeals that came to the same conclusion with a 2-1 vote.

The argument is based on the separation of powers clause in the U.S. Constitution that federal agencies cannot be structured in such a way to assess too much power in the hands of one individual. The CFPB is currently structured so that the director of the agency can not be removed by the president without just cause as opposed to directors of other federal agencies that allow for a sitting president to remove and replace them for any reason at his discretion. Kaplinsky also said the bureau is not subject to Congressional appropriations. Rather, it is funded from the Federal Reserve system “with very few limitations.”

The Administrative Procedure Act

The Administrative Procedures Act (APA) is a law that applies to all rules issued by the federal government.

According to the Act, any rule that is arbitrary, capricious, or contrary to other laws is invalid. Kaplinsky said it’s relevant in this case because the entire process used by the CFPB was “tainted and flawed.”

Reasons cited for the flawed procedures include not using comments received from members of the public throughout its proceedings and ignoring data gathered from its own study regarding the effectiveness of class action lawsuits and arbitration.

“They conducted a study,” he said, “then drew conclusions to propose the rule that is contrary to what the study in fact showed. The study demonstrated unequivocally that arbitration was a good process for consumers and very effective, speedy, and fair. And it’s a much better process for consumers than having to go to court.”

Kaplinsky also said the CFPB’s study showed that class action lawsuits were not beneficial to consumers. Of 562 class action suits looked at, only 12.3 percent produced any settlement benefit to the class action participants, he said. While attorneys litigating class action lawsuits received more than $400 million in attorneys fees, class action plaintiffs received an average of $32 in settlements.

“That’s a paltry amount by anybody’s standards,” Kaplinsky said, and he went on to note that class action settlements typically require consumers to fill out paperwork to receive a claim but only 4 percent of them bother to do so.

The CFPB also didn’t consider whether consumers who go through the arbitration process were pleased with the experience. and ignored other studies, as well, he said.

Does the Arbitration Rule Solve the Problem it Seeks to Solve?

When it comes to getting vindication, do consumers have a choice? The CFPB says arbitration clauses take their choice away. Kaplinsky disagrees.

“If the CFPB thinks wrongdoing was involved, the consumer can get relief,” he said. “There are actually very few arbitrations, so the CFPB concludes erroneously that arbitration isn’t working.” Kaplinsky said the reason there are few arbitrations is because companies often choose instead to settle with consumers. “Companies don’t want arbitration. It costs them money.”

In fact, it costs $3,000 just to initiate the arbitration process. And, according to Kaplinsky, the CFPB didn’t even consider how many companies opt to settle with consumers without going through the arbitration process.

“Companies don’t win all the time,” Kaplinsky said. “They can lose in arbitration. But they try to resolve the matter even if they have to pay out more.”

One reason for this is because lawsuits and settlements can be a public relations negative for a company. If they can settle a dispute in arbitration, the result of which is typically private, then it saves them in the long run on public image.

The Dodd-Frank Act

In 2010, Congress passed and President Obama signed the Dodd-Frank Act, a sweeping piece of legislation that created the CFPB and other financial services regulatory agencies. One of the provisions of the Act is purportedly to advance public interest and protect consumer welfare. Plaintiffs suing the CFPB say the arbitration rule does neither, and Kaplinsky agreed.

“Arbitration is working well,” he said. “The CFPB is saying they don’t care if companies get rid of the process. They want to preserve class action lawsuits, which aren’t working well for consumers.”

Citing Section 1028 of the Dodd-Frank Act, Kaplinsky said any rule passed by the CFPB must be consistent with the results of its own study. Since the CFPB’s study shows that arbitration is working well and class action lawsuits aren’t, and the CFPB came to the opposite conclusion, the arbitration rule is therefore in violation of the Dodd-Frank Act.

The Impact to Alternative Lenders

If Congress doesn’t override the arbitration rule and it is allowed to stand, Kaplinsky predicted that every alternative lender will have to conduct a cost-benefit analysis to determine if they should abandon arbitration clauses altogether and stick to individual disputes or run the risk of class action litigation.

“Most will come to the conclusion that to get rid of the clause altogether and change of their forms will be the best course of action,” he said. “They’ll have to prepare for an onslaught of class action lawsuits.”

Of course, many alternative lenders are pre-funded startups. Some never see venture capital funding even in early seed rounds. One class action lawsuit could put them out of business even if the company isn’t found to be guilty of violating consumer rights because of the high cost of litigation. This is one case everyone in the industry should keep an eye on.

Author:

Allen Taylor

Monday June 12 2017, Daily News Digest

Philippine banking

News Comments Today’s main news: Zopa’s  6.1% return IFISA to launch June 15. CFPB’s Corday extends small biz lending RFI comment period. Zopa looking for 40 tech whizzes.  WeChat Pay available globally through Paymentwall. Today’s main analysis: Lending Club and the rise of securtization club deals. Today’s thought-provoking articles: China urges banks to devolve loan approval responsibility. How Thailand could […]

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United States

Weekly Industry Update: Lending Club and The Rise of Club Deals (PeerIQ Email), Rated: AAA

A club deal program enables Lending Club to drive standardization – in offering docs, covenants, structure, servicing, collateral consistency, and offering cadence. As a sponsor, Lending Club is able control its brand in the public ABS markets and manage competing interests amongst issuers, placement agents, and investors. (See this week’s

Corday announces extension of comment period for small business lending RFI (Ballard Spahr), Rated: AAA

Last month, in conjunction with a field hearing, the CFPB issued the RFI, together with a white paper on small business lending.  In his remarks, Director Cordray revealed that, in response to requests for additional time to respond to the RFI (which currently has a July 14, 2017 comment deadline), the CFPB is extending the comment period by 60 days.

With regard to the CFPB’s debt collection rulemaking, Director Cordray discussed thedebt collection proposals under consideration by the CFPB which it released last July in anticipation of convening a SBREFA panel.

Elevate Launches Elevate Labs (News Channel 10), Rated: AAA

Elevate Credit, Inc., a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, today announced the launch of Elevate Labs at its new San Diego-based Advanced Analytics center. The center of excellence underscores the company’s commitment to innovation in the non-prime credit market.

Elevate’s industry-leading technology and proprietary risk analytics are optimized to help non-prime consumers meet their immediate financial needs while improving their financial futures. The company annually invests $40 million in its technology and analytics capabilities, including substantial investments in its proprietary IQ and DORA risk technology and analytics platforms, to support rapid scaling and innovation, robust regulatory compliance and ongoing improvements in underwriting.

DORA, Elevate’s proprietary risk analytics platform, utilizes a terabyte-scale Hadoop database composed of thousands of elements, 1.5 million customer records and other wide-ranging data inputs including credit bureau data, web behavioral and performance data, bank account data and other non-traditional data, to accurately assign risk to customers.

Elevate’s cutting edge technology and analytics team, worldwide, consists of the most advanced thinkers in risk analytics with more than 35 data scientists in our Risk Management department including over 25 staff members with advanced degrees and eight with PhDs. While the San Diego location is the company’s most concentrated and fastest growing analytics center, the team is spread across offices in Texas and the United Kingdom.

Here Are All The Financial Reforms That Will Disappear With Dodd-Frank (Forbes), Rated: A

The U.S. House of Representatives on Thursday passed the Financial CHOICE Act.

The Act has seven principals:

1. Taxpayer bailouts of financial institutions must end and no company can remain too big to fail.

2. Both Wall St. & Washington must be accountable

3. Simplicity must replace complexity

4. Economic growth must be revitalized

5. Every American must be able to achieve financial independence

6. Consumers must be protected

7. Systemic risk must be managed via profit & loss

The Act proposes to restructure the Consumer Financial Protection Bureau, an agency that monitors financial products from loans to high-fee investment products.

Stress tests for America’s big banks, another Dodd Frank invention, are also contentious. The CHOICE Act proposes major changes.

In mortgages, the CHOICE Act will aim to allow smaller banks to increase lending by minimizing a rule about qualified mortgages. The rule increases costs of lending to higher risk borrowers and often precludes banks from holding mortgages on their books. Modifying the rules may allow local banks to increase lending.

The Death of Basis Points? (ETF Trends), Rated: A

The Financial Services industry is in the middle innings of a multi-phased and disruptive process that began in 1993 with the first ETF, and jump-started in 2008 with the first “robo advisor.” These two disruptive events continue to put enormous downward pressure on the fees charged by mutual fund companies and individual Advisors.

I do not believe financial services is racing toward a flat-fee model. However, the pace of fee compression will accelerate as clients have more low-priced options from which to choose. The end-result is enormous pressure on traditional Advisors to justify their higher prices and deliver an asset management solution more sophisticated than buy-hold-rebalance.

There are six key steps to becoming a Quant Advisor:

1. Develop a small but powerful set of investment models that are both unique and compelling. As an example, we only work with a small number of Advisors in an area to create and keep a competitive edge.

2. Have discretion on client accounts. The real value of using models is the ability to affect many client accounts at the same time to create efficiency and scalability. Building scale is the only sustainable way to overcome fee compression.

3. Communicate. Most clients simply don’t need or want to meet with their Advisor four times a year, but they want regular access to bite-sized information about what their Advisor thinks. Creating valuable, but short-and-sweet communications keep a client happy and informed. Generic newsletters do not count (because no one reads them).

4. Create multiple channels for a client to engage. Most traditional Advisors have a simple fee grid based on assets. A Quant Advisor will have a service menu that provides options from super low-cost investment-only relationships all the way to complex financial planning solutions. Due to scale and efficiency, any of these service levels can be highly profitable. Maybe one of the options is aflat fee only service level?

5. Sell more than advice. A Quant Advisor sells financial advice/planning and asset management services. Traditional Advisors only sell advice/planning and pay someone else to provide asset management (such as managed accounts, SMA’s, mutual funds, etc.). By having a unique and compelling asset management capability in-house, Quant Advisors do not have to pay someone to do it for them. That creates a new revenue source and the ability to capture a higher percentage of the total fees paid by the client. As fee compression continues to eat away at advice/planning prices, having multiple services to sell a client creates a more stable revenue stream.

6. Be hyper-transparent. Clients are more afraid of what they do not know than what they do. By proactively talking about and disclosing fees (including the hidden ones), risk and performance the relationship can blossom based on a new level of trust and understanding.

Industry Power Players Join RealtyShares (RealtyShares Email), Rated: A

We recently had the honor of welcoming

U.S. business schools embrace ‘fintech’ as students clamor for courses (Reuters), Rated: A

Stanford University and Georgetown University business schools are planning to offer “fintech” courses for business school students for the first time this fall. New York University is planning a new course for undergraduates after launching a fintech specialization in its business school last year.

They join the University of Pennsylvania’s Wharton School, Columbia University’s business school and the Massachusetts Institute of Technology’s (MIT) Sloan School of Management, which all launched similar programs in recent years.

A number of prominent startups have exploded onto the fintech scene in recent years, fostering interest in mobile payment apps like Venmo, digital loan platforms like SoFi and robotic wealth managers like Betterment.

Lending Club Shareholders Approve Election of Directors (Crowdfund Insider), Rated: A

Present at the Annual Meeting in person or by proxy were holders of 313,460,225 shares of common stock, representing 77.7% of the shares of common stock outstanding.

The vote tallies were as follows:

Nominees
 
For
 
Withheld
 
Broker Non-Votes
Scott Sanborn
231,733,112
2,464,510
79,262,603
Lawrence Summers
189,603,973
44,593,649
79,262,603
Simon Williams
192,466,148
41,731,474
79,262,603

Approach alternative investments with care (Business-Standard.com), Rated: A

Unlike the wealthy, retail (individual) investors have limited options to invest in high-risk, high-return alternative instruments. The ticket size of such products — private equity, exclusive wines and paintings — are too high for small investors. But, in recent times, more avenues have opened that allow retail investors to make risky bets in assets other than stocks. For example, bitcoins is one such asset that younger investors are looking at. The price of this virtual currency has gone up from $579.13 a year back to $2,825.03 — a return of 488 per cent.

Marketplace Lending News Roundup – June 10 (Lend Academy), Rated: A

Fintech’s ultimate value: Making sense of the data explosion from American Banker – Interesting piece what the true role of fintech should be: making sense of the masses of data.

U.S. business schools embrace ‘fintech’ as students clamor for courses from Reuters – Today fintech is one of the hottest courses at MBA schools, driven by student demand.

Peer-to-peer lender calls hung parliament “the worst of all outcomes” from AltFi – Commentary on yesterday’s UK election from an online lending perspective.

Marketplace Lending: The Next 10 Years from deBanked – Interesting thoughts on where marketplace lending may be heading.

LendingTree, Inc. to Present at RBC Financial Technology Investor Day (PR Newswire), Rated: B

LendingTree, Inc. (NASDAQ: TREE), operator of LendingTree.com, the nation’s leading online loan marketplace, today announced that it will participate in RBC Financial Technology Investor Day at The Westin New York Grand Central in New York, NY.

Doug Lebda, LendingTree Founder and CEO, is scheduled to present on Wednesday, June 14 at 8:55am ET. The presentation will be webcast live and archived at

Additionally, the company’s latest investor presentation will be available on its investor relations site at investors.lendingtree.com.

The week in real estate industry deals: June 5-9, 2017 (Inman), Rated: B

RealtyeVest lowered its required minimum investment amount to $5,000 for all offerings on their real estate crowdfunding platform for accredited investors. Previous minimum investment amounts ranged from $15,000 to $50,000, depending on the real estate project. The new $5,000 threshold is intended to draw first-time investors to experience RealtyeVest’s high-caliber performance with a nominal financial commitment. “We are seeing significant activity on our platform, however we feel there is a corner of the market we are not appealing to,” said Daniel Summers, RealtyeVest CEO, in a statement. “So we are offering investors a taste of our service with a new lowered investment amount for all projects. Once they see the quick return on their investments, they will no doubt want to increase their contribution amounts.”

United Kingdom

Zopa hunts for 40 tech whizzes as it narrows focus on bank launch (The Telegraph), Rated: AAA

Britain’s largest peer-to-peer lender has heightened its focus on building a bank, firing the starting gun on a recruitment push that will see it hire at least 40 developers for the project.

However its tune changed late last year, when it emerged that the technology firm wanted to challenge high-street lenders by offering deposit accounts and overdrafts.

Having raised £32m from investors eager to support the project earlier this month, the group is now looking to bulk out its workforce by at least 16pc – bringing in tech experts able to build a digital bank from scratch.

The hires will come from London and Barcelona, where Zopa opened a technology hub last week.

Zopa clarifies coverage ratios ahead of Core account launch (P2P Finance News), Rated: AAA

ZOPA has clarified the expected implications of phasing out of its provision fund as it prepares to launch Zopa Core on Thursday, a new account which will not be backed by the fund.

On 15 June, the peer-to-peer platform’s target date for unveiling its Innovative Finance ISA, the new account will formally take over from the firms’ existing Access and Classic products, whose safeguard fund will be phased out by December this year.

Existing safeguarded loans and new loans purchased before that deadline will continue to be covered by the fund until they reach maturity.

Zopa’s innovative finance Isa, paying projected 6.1%, to launch on 15 June (Which), Rated: AAA

Zopa’s long-awaited innovative finance Isa (Ifisa) will be made available to existing customers on Thursday 15 June, but it won’t be protected by the company’s Safeguard scheme.

The Isa, offering projected returns of up to 6.1%, will initially be made available to existing Zopa customers wanting to invest new money. It will then be possible to move existing Zopa loans into an Isa wrapper from 1 July, and transfer funds from third-party Isas from 17 August.

It is expected that new customers will have to wait two months or longer before being invited to open a Zopa Ifisa, due to expected high demand.

Zopa’s Safeguard scheme is a central compensation fund that aims to pay out to lenders whenever a borrower defaults on a loan. This fund is limited, so it could run out if lots of borrowers fail to repay, but it has covered 100% of eligible loans to date.

However, this scheme won’t be offered to Isa customers, nor will it be available to any new investors after December 2017.

It will offer two savings products in an Isa wrapper.

  • Zopa Core, in which your money will only be lent to lower-risk borrowers, offers expected returns of 3.9%.
  • Zopa Plus lends your money to a wider range of borrowers, offering expected returns of 6.1%.

LandlordInvest reports high demand for secondary market loans (P2P Finance News), Rated: AAA

ACTIVITY on LandlordInvest’s newly-launched secondary market has been better than expected, with investors shrugging off political uncertainty to snap up loan parts in record time.

The peer-to-peer lender, which specialises in buy-to-let finance, launched its secondary market in the middle of May.

Filip Karadaghi, the firm’s co-founder and chief executive, told Peer2Peer Finance News that uptake had been higher than expected, with no signs of a slowdown ahead of Thursday’s UK General Election.

Peer-to-peer comes of age as alternative asset class for investors (Financial Times), Rated: A

More than a decade after the first peer-to-peer sites launched in the UK, the sector that allows investors to lend directly to individuals and small businesses is coming of age. Two of the largest sites in the UK — Zopa and Funding Circle — were last month authorised by the City watchdog, marking a seal of approval for the lenders and providing a boost to the broader sector.

Institutional investors are already piling in. High-profile fund managers including Neil Woodford and Artemis invested more equity capital into RateSetter in recent weeks, valuing the company at more than £200m. Zopa completed a £32m funding round, led by Wadhawan Global Capital, an Indian financial services company.

The rise of peer-to-peer sites means that lending, which as an asset class has been a monopoly for the banks, is opening up to ordinary investors.

Othera and Credit Crowd strike a blockchain partnership (AltFi), Rated: A

Credit Crowd gets on Othera’s blockchain, citing transparency as the key issue.

Blockchain provider Othera has linked up with Australian fintech lender Credit Crowd, allowing the Sydney fintech to digitise its loans on blockchain.

The partnership will allow Credit Crowd’s loans to be tokenised and traded on digital asset token exchanges—in effect, a kind of securitisation.

Credit Crowd is a P2P marketplace that specialises in short-term loans, secured by first mortgage properties. The company claims to have facilitated more than A$100 million worth of loans since its founding in 2012 and managed over A$50 million in their retail fund.

P2P lenders stay away from apps (P2P Finance News), Rated: A

APPS may be seen by some as a vital tool for any fintech business but peer-to-peer lenders have largely avoided this area so far.

Of the biggest UK P2P players, only Funding Circle has an app for investors, while Zopa has one in development.

Instead, others such as RateSetter, MarketInvoice and Landbay have focused on the overall web, desktop and mobile user experience.

Julian Cork, chief operating officer at buy-to-let lender Landbay, said the platform had considered making an app but decided against it.

Will robo-advice mean checkmate for human financial advisers? (Lexology), Rated: A

To date, robo-advice offerings have tended to focus more on the less complex end of the financial advice spectrum. The FCA’s enthusiasm for robo-advisers stemmed largely from concerns about an ‘advice gap’, situations where consumers (particularly those with limited assets) are unable to get advice and guidance on a need they have at a price they are willing to pay. The FCA has therefore seen robo-advisers as a way of providing quick and inexpensive advice primarily in relation to lower value or less complex scenarios. Robo-advice is still in its infancy and is generally not yet at the stage where it can provide sophisticated advice in relation to complex circumstances. Certain external factors are also slowing the spread of robo-advice. For example, recent research sponsored by ING suggests that the majority of the public remains uncomfortable with the idea of automated advice and this attitude will take time to change. In addition, PI Insurers may feel, by necessity, that they need to take a relatively cautious view in relation to new and untested technology. Firms implementing robo-advice solutions may therefore face increased insurance premiums, which is a further potential brake on innovation.

For the foreseeable future then, it appears that human advisers have no need to be concerned. Robo-advice is in the process of automating only one part of the wider industry and even then at a relatively restricted pace. But what about the longer term? If we make the reasonable assumption that advances in robo-adviser technology are inevitable does that mean that robo-advisers will one day become so sophisticated and accepted as to render human input redundant?

Meet the next generation of fintech startups set to revolutionise the world of finance (Wired), Rated: A

Winner of the startup stage Curve, started out in 2015 to cut out the noise and disconnection in the banking landscape. The digital wallet platform is designed to connect all of a person’s financial services into a single go-to place online, which is accessed with a Mastercard.

Finimize has grown an online community of 100,000 people. Each day, members receive a newsletter that digests the biggest finance stories of the day and why they should matter to them.

AgentCASH is an enterprise grade omnichannel platform that enables SMEs to sell and manage their products on multiple channels in real time.

Crowdsurfer brings big-data engineering expertise to crowd and peer finance to help the world understand where funds are flowing to.

Reposit was developed by its CEO Curran McKay as a faster, more affordable alternative to the £3.5 billion tenancy deposit system.

Lendr uses artificial intelligence to act as a reverse auction platform for mortgages.

Co-founder of Capitalise Paul Surtees has built technology that enables SMEs and their advisors to find, compare and select the best lenders available to them – allowing them to access the funding available. The platform matches SMEs with lenders, who are ranked based on their past successes.

London-based Paybase rolls an end-to-end solution for payments, compliance and risk into one unified API. The platform is designed for marketplaces such as the sharing economy or crowdfunding sites, as well as fintech apps and products that have complex payment processes.

China

China urges banks to devolve loan approval responsibility to boost lending (BusinessLine), Rated: AAA

China’s banking regulator has urged lenders to devolve responsibility for loan approvals to boost credit to small and micro businesses, but also emphasised that risks need to be kept under control.

Guo’s comments were made at a forum on Friday, according to a statement on the website of China Banking Regulatory Commission.

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

Internet Investment Fund has been Subscribed in Down Payment of ¥30bn

The Chinese Internet Investment Fund was founded jointly by the Cyberspace Administration of China and the Ministry of Finance. The total size of the fund is around $14.9billion. The initial subscription (almost $4.4 billion) has been finished with $300million was acquired by central government as guiding fund, and the rest was raised from strategic investors. Thus, the driven coefficient of the government funds reached to 1:14.

After a new round of share price increasing, Alibaba’s market value has reached to $360bn.

On 9th June, shares of Alibaba jumped by 13.29% and closed at $142.34 per share, the companies’ total market value reached to $362.3 billion. Exceeding Tencent for the second time and become Aisa’s most valuable company.

Previously, Alibaba issued its annual report of 2017 fiscal year, showing that Alibaba has surpassed Tencent on core metrics such as revenue, net earnings and cash flow.

According a report released by Deutsche Bank, Alibaba's estimated revenue for 2018 fiscal year will be far higher than expected, and the disclosed information will drive its stock price up further.

Ping An Launches Fintech Fund (Crowdfund Insider), Rated: A

Sepaking at the recent WSJ D.Live Asia event in Hong Kong, Ping An CIO Jonathan Larsen said Ping An is launching a new fund to invest in early stage Fintech ranging from $10 million to $30 million, according to a report from Dow Jones (here).

NYSE-listed P2P firm confident on its business model (ShanghaiDaily), Rated: A

CHINA Rapid Finance will follow the strategy of “low and grow” to realize a stable and sustainable growth after its debut on the New York Stock Exchange on April 28,  Wang Zhengyu, founder and CEO of the Shanghai-based peer-to-peer lender, said in Shanghai yesterday.

CreditEase’s CEO Tang Shares Insights on FinTech in China at The Asian Banker Summit (PR Newswire), Rated: A

CreditEase’s founder and CEO Ning Tang was invited to deliver a keynote speech today at The Asian Banker’s 18th flagship Summit “The Future of Finance” in Singapore. The Summit gathered leading industry, government and academic speakers such as Barney Frank, former US Congressman and a leading co-sponsor of the 2010 Dodd–Frank Act, David Shrier, Managing Director, MIT Connection Science and Engineering, and representatives from: ANZ, Bank of the Philippine Islands, DBS Bank, the Federal Reserve Bank of Chicago, Prosper Marketplace, Prudential, and Uber.

Future Life, Future Finance

The theme of this year’s Summit shares the same vision as CreditEase at its 11th anniversary – “Future Life, Future Finance”.

In his keynote speech, Tang shared his insights as a pioneer and thought leader in the FinTech industry, giving an overview of the current landscape, and anticipating where opportunities will be against the backdrop of potential or inevitable changes.

Going Global

After 10 years of successful domestic growth, at its 11th anniversary, CreditEase is ready to accelerate its global expansion. The opening of the new Singapore office and Tang’s delivery of the keynote speech at one of world’s renowned financial summits is just part of the global voyage.  In addition to Singapore, CreditEase Wealth Management operates overseas offices and affiliate offices in Hong Kong, New York, and Tel Aviv and its domestic mainland China network covers over 40 cities. Its resources are also spread across the US west coast, Germany, UK, and Australia.

China: WeiyangX Fintech Review (Crowdfund Insider), Rated: A

On June 3, 2017 Tsinghua PBCSF Global Finance Forum, which was hosted by Tsinghua University, and organized jointly by the Tsinghua University PBC School of Finance (PBCSF) and Tsinghua University National Institute of Financial Research (NIFR), convened in Beijing.

The highlights of the forum include:

Digital Financial Inclusion: LI Dongrong, President of National Internet Finance Association of China, pointed out in his speech that China and the world had the potential to drive the growth of inclusive economies by promoting digital financial services. While tremendous gains in financial inclusion have already been achieved, digital financial services, together with effective supervision, are essential to close the remaining gaps in financial inclusion.

InsurTech Innovation: JIANG Bo, Director-General of the International Department of China Insurance Regulatory Commission and Member of the strategic Council of PBCSF, said that Insurance technology (InsurTech) is a burgeoning phenomenon that has the potential to help the insurance industry reconnect with its customers following a period of increasing alienation and disengagement.

Three Chinese Fintech Companies Join Slate of Overseas Listing in 2017

  • Zhong An Online Property and Casualty Insurance, China’s first online-only insurer, has resumed a plan to raise $1 billion or more in a Hong Kong initial public offering (IPO) in the second half of this year.
  • Rong360, an online platform for financial product search, comparison and recommendation, has announced to raise at least $400 million in an initial public offering in the U.S. as soon as 2017.
  • With its rapid expansion, Chinese online lending platform Neo Capital has revealed its IPO plan in the U.S. last year.

On June 5, Chinese company Xiaomi, perhaps best known for its smartphones, announced that its affiliate Xiaomi Loan would partner with CITIC Securities to list CNY600 million asset backed securities (ABS) under a shelf registration on Shanghai Stock Exchange.

The ABS product was split into three tranches: AAA, AA and the subprime:

Rating level

Volume

Interest rate

AAA

CNY426 million

5.7%

AA

CNY78 million

6.3%

The subprime

CNY96 million

8%

International

WeChat Pay is now available globally via Paymentwall (Payment Wall), Rated: AAA

Paymentwall has partnered with Tencent to bring WeChat Pay (Weixin Pay) to every online and retail store. The partnership allows every business owner around the world to get instant access to 600 million Chinese shoppers in China and abroad.

With over 600 million active users, WeChat Pay is now one of the most popular payment methods in the world. WeChat Pay processed over $1.5 trillion in Chinese digital payments, representing over 30% of all online transactions made in 2016.

Human-robo combo has greatest chance of success (International-Adviser.com), Rated: A

A combination of human and robo could be the answer for underserved Asian investors seeking low-cost technology-driven financial advice, a market that pure robo-advice providers have found hard to crack.

Inexpensive, automated robo-advisors could be a solution, but unlike in the large markets of US and Europe, in Asia they face difficulties stemming from regulatory fragmentation, lack of scale and investors’ preference for human contact.

The hybrid approach uses automated financial advice systems, but provides a layer of personal contact when dealing with the institution. Some call this approach “cyborg-advisor”, others “bionic advisor”.

Due to low profit margins of robo-advisory services and the necessity to achieve scale in order to be profitable, independent robo-advisors are not likely to succeed in the region under current regulations, according to Aldcroft.

Australia

NAB Ventures provides seed funding to Australian start-up Basiq (Banking Business Review), Rated: A

NAB Ventures, a venture capital arm of National Australia Bank, along with Reinventure have provided seed funding to Basiq, an Australian-based start-up that offers open banking API platform.

India

Lending startup Loanmeet raises seed funding (VC Circle), Rated: AAA

Online peer-to-peer lending platform LoanMeet, which is run by Strivers Solutions Pvt. Ltd, has raised an undisclosed amount of seed funding from a clutch of investors.

Chinese entrepreneur-turned-investors Cao Yibin and Huang Wei, along with KrazyBee.com co-founder and CEO Madhusudan E, participated in this round.

LoanMeet provides short-term working capital loans to retailers for inventory financing. The company claims to be growing at 50% month-on-month.

Flipkart to Add Online Loans to its Marketplace (Crowdfund Insider), Rated: A

Flipkart, one of the largest e-commerce platforms in India sales topping $2 billion each year, is getting into Fintech. Flipkart states that with the creation of a new focused team for financial services and products, Flipkart will be providing the public the option of obtaining loans from e-lending firms.

Flipkart is also expected to start offering other financial services such as access to funds.

Lendingkart gets Rs 50 crore loan from Yes Bank (Medianama), Rated: A

Lendingkart, an online platform for lending to small businesses and entrepreneurs, has raised debt funding worth Rs 50 crore from Yes Bank Ltd. The company said that this is the first step towards eventually shifting from non-banking financial companies (NBFCs), who provide loans at a higher rate, to banks.

In June last year, Lendingkart had raised Rs 205 crore ($32 million) in a series B round of funding led by Bertelsmann India Investments (BII) and Darrin Capital Management, with participation from existing investors Mayfield India, Saama Capital and India Quotient. Of this, $20 million was raised through equity sale and remaining $12 million  through debt financing.

How the rise of P2P lending presents several opportunities to banks (India Times), Rated: A

Peer to peer lending is hardly new. But it has risen to commercial prominence in the past few years, thanks to technology. The emergence of marketplace lending platforms connecting individual borrowers and lenders is disrupting the business of lending.

Peer to peer lending is hardly new. But it has risen to commercial prominence in the past few years, thanks to technology. The emergence of marketplace lending platforms connecting individual borrowers and lenders is disrupting the business of lending.

A 2015 survey shows that 25% of U.S. millennials have used a P2P lending platform. According to recent research, the cumulative amount of loans that originated via marketplace lending platforms in China was over $150 billion in 2015. In US and UK, it was close to $30 billion and $10 billion respectively.

While the Indian P2P market is much smaller, the scene is heating up. Last year alone, 20 lending firms cropped up to take the total to about 30. What does this imply for our banking industry?

Asia

How Thailand Could Become Southeast Asia’s Next Fintech Hub (Forbes), Rated: AAA

Omise, a payment management platform founded by Jun Hasegawa and Ezra Don Harinsut, is Thai fintech’s greatest success story to date. In 2016, it raised a $17.5 million Series B round and currently operates in Thailand, Japan, Indonesia and Singapore.

The Thai Fintech Association formed in 2016 as a networking club that would facilitate connections among fintech startups, big banks and investors, according to Disyadej. But the organization filed as an association with the Ministry of the Interior this year so it could take a more hands-on role in the industry’s development.

Although TechGrind operates in six countries in the region, it has relocated several of its startups to Bangkok so they can make use of TechGrind’s network and resources there. But TechGrind approaches opportunities in fintech — and in all startup sectors — from a cross-border perspective.

One such company is Pymlo, which creates accounting software for small businesses in Thailand and the broader region.

Hong Kong, Singapore rivalry hobbling Asia in $ 100 billion fintech race (Reuters), Rated: A

Governments across Asia – most notably Hong Kong and Singapore – have launched a raft of initiatives to grab a slice of the $100 billion invested in financial technology globally but the regulatory hotchpotch is making it tough for firms to scale up, the Asia Securities Industry and Financial Markets Association (ASIFMA) said in a report on Friday.

Investors poured $19 billion worldwide into fintech – including P2P lenders, distributed ledger technology and crowdfunding platforms – in 2016 alone and thousands of fintech start-ups continue to proliferate, according to a February report by global regulatory body the International Organization of Securities Commissions (IOSCO).

Hong Kong, Singapore, Australia, Japan, South Korea and Malaysia have launched a range of special programs to attract and foster fintech ventures, from incubators and grants, to temporary license waiver schemes, with competition fiercest between Hong Kong and Singapore.

Philippines

Consolidated credit database likely to improve lending in the Philippines in 2018 (ASEAN Today), Rated: A

The Philippines will launch a credit consumer database in 2018 in a bid to bolster retail lending.

Bulk of lending in the Philippines have been corporate loan, forming more than 80% of loan books. Consumer lending business have been secondary to corporate lending – analysts explained that the lack of consumer level data can explain this.

The gap between corporate and retail lending is the lack of a credible database.

The government’s Credit Information Corporate collects data from banks in the Philippines. This will be extended to rural financial institutions to build a credible database by 2018.

Authors:

George Popescu
Allen Taylor

Monday April 17 2017, Daily News Digest

Monday April 17 2017, Daily News Digest

News Comments Today’s main news: Republicans propose drastic overhaul of CFPB.  BOE chief sees no need for tougher FinTech regulation. CBRC assistant chair reported ‘out of contact’. Today’s main analysis: Transparency remains a sticking point for online lenders. The India FinTech Market Map. Today’s thought-provoking articles: How this FinTech CEO plans to prosper. Interview with Scott Sanborn. International regtechs […]

Monday April 17 2017, Daily News Digest

News Comments

United States

  • Republicans propose drastic overhaul of CFPB, Dodd-Frank. GP:” This is just a proposal and it will likely change a lot by the time, if and when, it gets adopted into law. In all cases, the theme here seems to be more control and less power for the agencies.”  AT: “We saw this one coming. I didn’t expect a name change, but I think that’s interesting, especially the use of the word ‘opportunity,’ which puzzles me. Why would a regulatory agency include that word in its name? Another thing I find interesting is the deputy director holding the job at the will of the president, which I expected. However, it makes the agency serve at the whim of the winds of the political climate, like all other executive agencies. What makes that interesting is it goes against the initial conception of the agency, which was intended to be independent of the chief executive. I’m not saying it’s right or wrong, good or bad either way, but we can expect the Democrats to fight this hard.”
  • How this FinTech CEO plans to prosper in 2017. GP:”The key is customer satisfaction, which itself relies on a good product, fair pricing, ease of use whom themselves depend on the cost of financing, employee satisfaction, technology quality and an infinite list of other items.”
  • Transparency remains a sticking point for online lenders. GP:”This is very interesting data. If the online lenders build a reputation of being expensive, regardless if it’s true or not, it will hurt their customer acquisition costs significantly. This has to be fought and this perception is very dangerous. In general consumers, especially opinion leaders, are not stupid. I think a good way to fight for transparency and to fight the high rate and unfavorable terms opinion is by actually releasing actual verifiable data that offers more transparency and demonstrates the rate and term points. ” AT: “It’s important that online lenders not simply claim to be transparent. Most consumers, millennials, in particular, are well aware that technology is not inherently transparent. It can be used to set up walls of opaqueness as easily as see-through curtains, or blinds. If you’re going to call yourself ‘transparent’, you’ve got to be transparent.”
  • Chatting P2P marketplaces with LendingClub’s CEO. GP:” Lending Club is really turning into a large company, run as a large company, on values and brand and letting every department alone to do what they can with controls in place. I am curious how it will defer from a large bank in two or three years.” AT: “Scott Sandborn shares some interesting insights into marketplace lending in general and LendingClub in particular.”

United Kingdom

  • BOE chief sees no need for tougher FinTech regulation. GP:”I am pleasantly surprised, and once again I understand how the UK, despite being a small market, continues to be the point of reference in finance in the entire world and has been for hundreds of years. I am yet to see a single US regulator who says even once: there is no need for more regulation.” AT: “This is a sign of maturity. In the U.S., when legacy institutions sense up-and-coming competitors, the first thing they want to do is use regulation as a protectionist scheme. Competition is good–for the goose and the gander.”
  • Researcher showcases unauthorized NFC payments with cloned Android device. AT: “This is interesting. We must all understand there’s no such thing as fail-safe security in the cyber world. Every device is a potential entry point for bad actors. In fact, every app on every device is a potential entryway for hackers and other bad actors. The key goal for security experts is to stay ahead of them. This hole needs to be plugged quickly.”

European Union

International

China

India

Asia

MENA

Africa

News Summary

United States

Republicans propose drastic overhaul of Dodd-Frank and CFPB (Housingwire), Rated: AAA

According to the summary of bill changes, the original CHOICE Act would restructure the FHFA and OCC as bipartisan commissions. The FDIC would be reorganized as a bipartisan commission with all five commissioners appointed by the president, and both the Comptroller of the Currency and the CFPB director would be removed from the FDIC board. Also, NCUA board of directors would be increased from three members to five.

The new CHOICE Act 2.0 cuts a lot of those proposed changes, and instead, the FHFA director would be removable at will by the president, with no changes to the current law regarding OCC and NCUA. The FDIC structure would stay the same as proposed in CHOICE 1.0.

The original CHOICE Act replaced the director of the CFPB with a Consumer Financial Opportunity Commission, a bipartisan independent Commission serving staggered terms.

Instead, in the newest version, the Consumer Financial Protection Bureau would be changed to the Consumer Financial Opportunity Agency, an executive agency with a sole director removable at will. The deputy director would also be appointed and removed by the president.

While the original CHOICE Act established a CFPB Credit Union Advisory Council, the updated one removed it because the bill eliminates mandatory CFPB advisory committees.

How This FinTech CEO Plans To Prosper In 2017 (Forbes), Rated: AAA

Along with FinTech industry guru Ron Suber, Prosper’s president, Kimball is intent on growing loan volumes, offering lower average rates compared to traditional lenders, delivering higher returns to investors and returning Prosper to profitability.

Prosper, which is the original online peer-to-peer marketplace, has originated over $9 billion in consumer loans over the past decade.

Since being appointed CEO of Prosper Marketplace late last year, Kimball has stepped outside his former financial role as Prosper’s CFO to take on a more operational-driven strategy.

David Kimball: Ultimately, the long-term success of platforms will be dependent on their ability to deliver a great product and a consistent experience. The success of the partnerships will depend on the ability for the two companies to communicate and understand each other (language, transparency, and culture), and it will depend on how well objectives remain compatible.

David Kimball: Last year, the industry did a lot to lay the foundation for a successful 2017, and we’re seeing that work pay off. The [recently announced loan purchase deal] gives us the funding stability we need to continue to grow, while at the same time giving us some great long-term partners that are invested in our business and its success.

David Kimball: A successful CFO is one who partners with the business instead of playing the finance sheriff. That requires a willingness to understand the business, to think holistically, to work with peers who jointly own the results. The CFO is the finance subject matter expert, but should be able to consider other disciplines, just as a CTO should be able to understand the financial implications of engineering decisions.

As CEO, I continue to think holistically and I now have an opportunity to flex into other areas of the business.

Transparency remains a sticking point for online lenders (Tearsheet), Rated: AAA

A small business credit survey by the Federal Reserve Bank of New York found 46 percent customer satisfaction at online lenders like Lending Club and OnDeck Capital with a 19 percent rate of dissatisfied customers – compared with large banks’ 61 percent of customers who indicated they were satisfied with their small business loan process and 15 percent of whom expressed dissatisfaction. Almost half of all customers specified that their dissatisfaction came from a “lack of transparency.”

Online lending customers are also dissatisfied with higher interest rates and unfavorable repayment terms, two common issues for the growing industry, which continues to have a higher cost of capital and for customer acquisitions.

Chatting P2P marketplaces with LendingClub CEO, Scott Sanborn (Simple Innovative Change), Rated: AAA

CL: The LendingClub story is a fascinating one and one that I’ve followed from the early days. So how does it feel to sit here and realize that so much of what is here today and the proliferation of all these different lending platforms is really because of this company and this team and what you have been able to build?

SB: I think it is exciting. It’s very gratifying to see how the initial idea has gained traction and how that has spawned new players who are bringing new energy and new ideas to different segments of the market. I think the clearest benefit is looking at how much value we’ve driven to consumers and investors.

For example, the personal loan market was actually shrinking when we first started. It shrank like 57% from 2007 to 2010, and yet we were still able to giveCL: There’s this great photo from the day of the IPO back in 2014 in which you can see just how elated you were. At the time you were the CMO and it was a very happy day, but when you stepped into the CEO role recently it wasn’t necessarily under the happiest of conditions. So, how have you handled the ups and downs of being a part of the Lending Club team, and how are do you lead the team through these challenging periods?

CL: That’s the answer you want to hear, by all means. Since becoming CEO at LendingClub, what have you learned about your own management style and how are you navigating the transition to this role?

SB: So much is swirling and changing in real-time, which means you need to keep everyone in the loop. In those early days after I stepped into the CEO role, I can’t tell you how many times we pulled all 1,500 employees together and marched them across the street to a hotel, to fit them into one room and explain, “Here’s what’s happening. Here’s what we know. Here’s what comes next.” That was certainly critical.

Lastly, we have focused tirelessly on assembling the right team. When a business is growing 80% to 100% a year for so many years it’s hard for the organization to keep up, and this was an opportunity to say, “Okay, new reality. Let’s look at what the right foundation is for the next decade of Lending Club.”

CL: One of the other reasons that I wanted to speak with you is because I often speak with seed and series A Fintech startups that’ll eventually face the challenges of being a larger organization if successful. So, what do you think are the challenges associated with trying to be an innovator while also being a larger organization?

SB: Literally, I left that conversation, and sat down with several team members in a room and said, “Okay, what are our values?” It was remarkably easy, actually, to identify what our values were. We put those down on paper and we revisit them, probably annually, maybe every 18 months or so and say, “Do they still resonate? Are they still right for this stage of the company?” Essentially all of our initial values have remained intact and we’ve added one or two as we’ve grown to reflect the new stage of the company.

Since then we have remained crisp on what our values are, and we have made sure we’re hiring to those values, and that our performance reviews reflect those values as well. That’s how you keep the essence of a company and that integrity of the company as you grow. The reality is, as you get bigger and layers get introduced and processes get introduced maintaining that value system will help the company stay, essentially, intact and stay functioning well.

CL: As we look to the vision of the future loan markets, do you think that startups will increasingly become the sourcing mechanisms of loans with financial institutions acting more as the wholesale banking providers?

SB: I think we’re not done seeing the different types of models that could emerge and how they could participate, and I think that’s part of what’s exciting. Not all of them will be great ideas, and not all of them will work, but some will.

If you look at our model, banks provide between a quarter and 30% of our funding and they have a very low cost of capital. When you combine their low cost of capital with our low operating cost it allows us to give, especially that super-prime customer, an incredible value that they couldn’t get at these institutions directly.

United Kingdom

Bank of England Chief Sees No Need for Tougher Fintech Regulation (Corporate Counsel), Rated: AAA

Fintech could pose a threat to traditional banks in the United Kingdom, according to Bank of England Governor Mark Carney. But that doesn’t mean he thinks they should be subject to tougher regulation.

The Bank of England created a New Bank Start-up Unit last year, which advises companies trying to become new banks. Carney said in his speech that four mobile banks have been authorized as a result of the new division.

Some of the questions that he said need to be answered, moving forward are: “Which fintech activities constitute traditional banking activities by another name and should be regulated as such? How could developments change the safety and soundness of existing regulated firms? How could developments change potential macroeconomic and macrofinancial dynamics including disruptions to systemically important markets? And what could be the implications for the level of cyber and operational risks faced by regulated firms and the financial system as a whole?”

Researcher Showcases Unauthorized NFC Payments With Cloned Android Device (The Merkle), Rated: A

While this concept sounds ridiculous to most people, they should not underestimate the power of root malware on Android devices. By using this type of malicious software, it is possible to abuse the host card emulation protocol. Google introduced this feature in Android 4,4, as it allows for NFC payments by keeping the Android device next to a payment terminal. Unfortunately, it appears this protocol can also be used to make fraudulent purchases.

Thankfully, this exploit has been discovered by a security researcher who notified both Google and all of the applications he successfully “abused” about this vulnerability.

European Union

Aegon Leaves Legacy Behind With Ohpen’s Cloud Finserv Platform (Forbes), Rated: A

Ohpen, a banking technology company based in Amsterdam,has announced that it will partner with Aegon to develop a new platform for Aegon’s Dutch services, from banking to investments. It will also support multiple labels including Aegon’s Knab (bank spelled backwards) an entirely digital bank.

Aegon, a global financial conglomerate whose American holdings include Pimco, will replace multiple individual systems for pensions, savings, current accounts and wealth management with a single Ohpen platform running in the cloud on Amazon Web Services (AWS). Aegon will plug into Ohpen’s platform through a flexible, 100% API-based interface.

Multiple companies under one corporate umbrella do many of the same things and have their own infrastructure and staff. Ohpen lets them merge all those activities onto a single cloud-based back end and then put an API on top so any application or Web site can get to it.

International

Keeping the banks honest: meet the regtech rule-obeyers (Wired UK), Rated: AAA

Under mounting pressure to become more transparent and accountable, banks and financial institutions are turning to regtech: technology that automates regulatory compliance.

London-based FundApps alerts financial institutions when regulations change, and gives them software to help compliance. Launched in 2010, it covers 88 jurisdictions.

Legislation in Europe requires companies to “know your customer” to make sure they’re not money laundering. That’s what Trulioo does.

Qumram records, retains and allows on-demand replays of digital activity across web, social and mobile.

US accounting rules require banks to store historical loan data to predict future repayment. “This is what we help them do,” says Vivek Subramanyam, CEO of Fintellix. Launched in 2006, it recently launched a website targeting US community banks and credit unions that are grappling with accounting regulations.

KYC3 (“Know Your Customer, Counterparty and Competition”) automates due diligence, so companies can screen potential clients.

How the World’s Richest Companies Can Help Its Poorest Citizens (Time), Rated: AAA

From Kenya and Tanzania, to Jordan and Peru, digital technology and simple mobile phones are opening up opportunities for millions of people by helping them to safely save and manage their money.

From Kenya and Tanzania, to Jordan and Peru, digital technology and simple mobile phones are opening up opportunities for millions of people by helping them to safely save and manage their money.

Four of the world’s largest telco system manufacturers — Sweden’s Ericsson, China’s Huawei, Canada’s Telepin and India’s Mahindra Comviva — have put aside their fierce competition and agreed to collaborate, not out of altruism but in order to better compete. Announced at the Innovate Finance Global Summit in partnership with the Bill & Melinda Gates Foundation, who works to bring competitors together to meaningfully address financial inclusion for the poor, these companies are developing a set of “application programming interfaces,” or in plain English, ways of making computers talk to each other. These APIs will create open-source standards for the development of digital financial services that are automatically compatible with each other, lowering costs for providers and increasing the utility of digital financial services for customers overall.

By governing how different digital accounts send and receive money, the APIs can be the basis for a new “internet of payments,” across which individuals, banks, merchants, employers, and governments seamlessly transact. The APIs are still under development, but when they’re complete they will be released as a global public good, available to anyone who wants to invent.

AI In Fintech: 100+ Companies Using AI Algorithms To Improve The Fin Services Industry (CB Insights), Rated: B

Funding to AI startups reached record highs in 2016 and applications for artificial intelligence technologies exist across nearly the entire spectrum of business. Highlighted here are the top 100 AI startups selected by CB Insights operating across numerous industry verticals.

China

Assistant chairman of China Banking Regulatory Commission, Yang Jiacai, reported to be ‘out of contact’ (SCMP), Rated: AAA

Fifty-six-year-old Yang Jiacai, assistant chairman of the China Banking Regulatory Commission (CBRC) was reported to be “out of contact” since Tuesday, April 11, by Chinese media Caixin and Caijing.

Caixin reported Yang had transferred all his responsibilities to his colleague, the commission’s vice-chairman Cao Yu.

Yang made his last public appearance a week ago during a press conference for the CBRC, during which he introduced some heavy-handed regulatory moves planned by the commission.

Podcast 97: Yihan Fang of Yirendai (Lend Academy), Rated: AAA

In this podcast you will learn:

  • The origins of Yirendai and how it was incubated inside CreditEase.
  • When and why Yirendai was spun-off from CreditEase.
  • Some background on all the divisions inside CreditEase.
  • The typical borrower who comes to Yirendai for a loan.
  • How Yirendai has broken new ground in China.
  • The different channels they use to obtain borrowers.
  • The typical size, rate and term of their consumer loans.
  • How these borrowers use their loan proceeds.
  • How Yirendai differentiates themselves from their competitors.
  • Who the typical investors are who participate on their platform.
  • The average amount each of their 200,000 investors deploy on their platform.
  • How their investor product works and details of their risk protection fund.
  • How their business model works as far as revenue.
  • A breakdown of their institutional investor interest.
  • Why they decided to do an IPO in New York rather than Shanghai or Hong Kong.
  • The impact of the new marketplace lending regulations in China.
  • Yihan’s perspective on the fraud that has happened in China.
  • Details of their new Yirendai Enabling Platform that they launched at LendIt.
  • What areas Yirendai will focus on in the coming years.

China is Cracking Down on Unscrupulous Financial Services (Crowdfund Insider), Rated: A

In a series of reports, ChinaNews is pointing to the increasing scrutiny of the Chinese government regarding financial fraud and over-all malpractice.

Now the China Banking Regulatory Commission has published measures to address risks in the financial and banking sectors. According to ChinaNews, CBRC highlighted 10 areas for improving risk control in both traditional and internet finance – which includes peer to peer lending.

All of this is taking place with the back-drop of Xian Junbo, Chairman of China Insurance Regulatory Commission (CIRC), being placed under investigation for “disciplinary violations.” He will be the most senior government financial regulator to be investigated in several years.

WeiyangX Fintech Review (Crowdfund Insider), Rated: A

Big Data Company Wecash raised $ 80 million in series C funding led by China Merchants Capital, Fore Bright Capital and SIG. Two new investors – Dongfang Hongdao Asset Management and Lingfeng Capital joined the existing investors in this round.

On April 10, China Banking Regulatory Commission released “Guidelines on risk prevention and control in banking industry” to make the P2P online lending market standard by perfecting the in-out mechanisms, paying more attention to the supervision and perfecting the governance of online lending companies.

According to the PwC Global FinTech Survey China Summary 2017 released on April 6, the three main areas to be disrupted by FinTech in China over the next five years will be consumer banking, investment & wealth management, and fund transfers & payments. E-retailers, large technology companies and financial institutions will be the biggest sources of disruption.

Compared with developed countries, the market-penetration level of auto finance in China is much lower. However, it also indicates that China has a tremendous room to develop and grow.

US

Australia

China

Market-penetration

80% – 85%

70%

Less than 30%

On April 6, second-hand car online trading platform Souche closed on $180 million in Series D Funding led by Warburg Pincus. Other participants in the round included VMS Investment Group, ClearVue Partners, Haitong International, CreditEase and Morningside Capital. Notably, Souche just finished Series C Funding led by Ant Financial in the last November. In the past five months, Souche has raised a total of $280 million.

 

India

The India Fintech Market Map: 72 Startups Working Across Lending, Payments, Insurance & Banking (CB Insights), Rated: AAA

Looking at Indian fintech specifically, funding to private companies in the sector boomed from about $175M in 2014 to a high of $2B in 2015 (buoyed by mega-rounds to Paytm) and then slid to $530M in 2016. Still, 2016′s total funding was more than 200% higher than total funding in 2014. A host of global corporations and their venture arms have entered the fray, eager to reach India’s mostly unbanked population and profit from the country’s tech-friendly regulatory environment.

‘Free’ credit reports from fintech portals (livemint), Rated: A

Apart from bureaus, online financial marketplaces are also offering free credit scores and reports. These reports are not counted against the free reports you can get from credit bureaus directly.

On the four fintech platforms we went to, it took no more than a few minutes to log on, authorise the fintech to access our credit report, and get it on the screen or in email. And it was also simpler to get a report here than from a bureau’s website.

On Bankbazaar, we got the report on its website and in email. Paisabazaar displays the report on its website. Both sites provided reports from Experian Credit Information Co. of India Pvt. Ltd.

FinTech: To Regulate Or Not To Regulate? Former RBI Deputy Governor R Gandhi Explains (Bloomberg Quint), Rated: A

In lending, peer-to-peer lenders and online SME (small and medium enterprises) lenders are targeting clients considered too risky by banks. They claim to use technologies that can assess credit worthiness in smarter ways than the traditional income statements used by banks. In payments, wallet companies have taken the lead in retail payments forcing banks to up their game.

One gripe that banks have is that these fintech firms are getting away unregulated, which gives them a lot more flexibility in how they do business.

That’s true for now, said R Gandhi, former deputy governor of the Reserve Bank of India (RBI) who retired after a 37-year stint at the central bank earlier this month. The dilemma for the regulator is to decide when to regulate and how to regulate so as to ensure that innovative business models get a fair chance, Gandhi explained in an interview with BloombergQuint on Tuesday.

Is India ready for Peer-to-Peer lending industry? (Faircent), Rated: A

What we are trying to do is to create a P2P (Peer to peer) lending industry. Fundamentally we are providing an alternative to banking and other financial institutions.

Karun: Investors whom we call lenders can get returns up to 18% to 20% per annum which is much better than other options today. As a borrower you can avail unsecured loans at much cheaper interest rates. What we feel is that the banks make huge margins in terms of the rates that they offering customers on their savings and the rates they are lending it out to people at, in the form of loans. By reducing the margin, with Faircent as the match maker, we are able to pass value to both sides of the table, to borrowers as well as lenders.

Karun: We are purely a digital entity.   We are trying to use technology so that there is minimal offline intervention.

We’ve done a lot of marketing technology interventions, like we have a CRM which is built on top of our platform, which is a custom made CRM. We have integrated it with our lead gen channels. We have an email marketing platform using which we nurture our customers and also do promotional activities with potential customers. We have done a lot of work in trying to become Omni-channel. Three main channels which we use are email, SMS and Voice.

Karun: We are using a lot of the off- the- shelf products. But the challenge for us is really how do we integrate them with our platform. So hence we have to be much more careful about which option we choose. We are using Octane and Amazon for email. Octane is basically a mix of email and SMS which we are predominantly using for marketing.

Karun: Yes, we have a mobile app which is available on the Android and iOS platform. Right now, our focus has been more to enable our customers to access our platform on the mobile device. So for example if there is an investor who wants to invest in loans on the fly he can do it using our app. At present we’re not really focused on the app to acquire more borrowers or acquire more investors and lenders.

Razorpay plans overseas foray (The Hindu Business Line), Rated: B

Razorpay, a payment gateway solution provider focused on online merchants, plans to go international. It is looking to enter South East Asia and West Asia markets in 2018-19, Harshil Mathur, co-founder, has said.

The fintech startup, which started its journey in mid-2014, is in talks with local and global (banking) players in these markets, Mathur said.

Razorpay, which had raised Series A funding of $11.5 million, is not worried about funding for the next two years, according to Mathur.

Asia

ORIX Launches New Online Lending Business for Japanese Small Businesses (Orix), Rated: AAA

ORIX Corporation (“ORIX”) and Yayoi Co., Ltd. (“Yayoi”), an ORIX Group company, announced today that they are launching a new online lending business, a new FinTech service utilizing accounting big data and proprietary Artificial Intelligence (AI) based credit model.

The business will provide Internet-based lending to small businesses in Japan. A new credit model is under development, utilizing ORIX’s credit expertise, Yayoi’s accounting big data, and cutting edge AI technology by ORIX’s partner company, d.a.t. Inc. Most existing credit models in the market to date relied solely on static data such as financial reports; by utilizing dynamic data, such as day-to-day journal data and other transactional data, the new credit model is expected to offer much better predictive power than before.

ALT plans to start offering lending services on a trial basis to the approximately 600,000 companies, who are existing users of Yayoi’s online services1 in October 2017. Customers will be able to apply online, during which process they grant permission to access their accounting data.

According to a survey of 7,609 Yayoi customers, 85.0% of small corporations have a need for short-term financing, but 36.5% of those have been shying away from obtaining traditional loans, due in part to the excessive amount of time and efforts required for approval of short-term financing. With respect to sole proprietors, just 16.4% of them have obtained short-term traditional loans. Utilizing online lending can reduce complex administrative procedures, including the need to submit financial reports and other paperwork and to visit financial institutions in person, and can also shorten the time needed to obtain much needed cash, making simpler, more flexible financing possible.

AN INDONESIAN peer to peer (P2P) lending startup, KoinWorks is supporting small and medium enterprises (SME) and education by launching an art exhibition, ARTificial Intelligence which will run from April 13 to April 30 at Pacific Place, Jakarta.

Benedicto also says that KoinWorks mainly focuses on SMEs that conduct their sales and marketing activities online. He also believes that by connecting SMEs to lenders, it will bring benefits to both sides.

Benefits for lenders are through net gained interest from their investment which can be up to 19.8% annually depending on the risk level. The service also fulfils social needs by helping businesses to grow.

Users may invest in KoinWorks with a minimum deposit of US$7.50 (100,000 rupiah). The funding will be deposited in real-time at a virtual bank account. Users only need to scan and upload information from their identity card, fill in the form, and deposit the money.

LendIt China Event, Lang Di Fintech, Updates on PitchIt Competition (Crowdfund Insider), Rated: A

LendIt, the global lending and Fintech conference, has announced the official launch of the Asian edition of their Fintech startup competition, PitchIt, in association with JadeValue, a Shanghai-based Fintech incubator. The competition is for all early stage Fintech startups in Asia-Pacific.

PitchIt will take place at the Lang Di Fintech conference, China’s largest global Fintech conference in Shanghai in July.

The 8 Finalists Will Receive:

  • Opportunity to secure investment and partners by meeting investors
  • Have your pitch heard by the international fintech community in front of an audience of international and local attendees across APAC.
  • Gain valuable exposure through global PR
  • Up to $1,000 for travel to Lang Di Fintech
  • Year-round exposure through press and brand visibility and the chance to gain mentorship from Global VCs on pitching and product positioning prior to the event.

The Winner Will Receive:

  • Mentorship, co-working space for 6 months and guaranteed investment of $150,000 from JadeValue
  • 2 free passes to LendIt USA 2018, roundtrip airfare and accommodations
  • Curated meetings for investment purposes in the US during LendIt USA 2018 (April, 2018, San Francisco)
  • Complimentary sponsorship at LendIt USA 2018
MENA

The future of digital money (Gulf News), Rated: A

At a time when the consumer relationship with cash is more virtualiser and abstract, and where use of physical cash continues to decline in many markets, the next phase of digital money offers undiscovered potential for a new period of expansive growth in transactions, beyond the limits of national borders.

The region’s e-commerce marketplace is thriving too, but it depends more on cash on delivery than on electronic payments. At the same time, a relatively low share of adults have bank accounts, while mobile money accounts have had limited success. That could be about to change. New Fintech entrants are playing their part in helping drive payment digitisation.

Furthermore, developments in payments technology are making it easier for us all to transact. Egypt’s Payfort recently has successfully helped smaller merchants accept electronic payments, and offers instalment payment options to help merchants improve sales. We’re also seeing global providers such as Apple Pay, Google Pay becoming more active in the region after a slow start and more global players are coming, for example Samsung, with Samsung Pay about to deploy payment services that are promising to be easier, faster and more secure using your Samsung smart phone.

Africa

VoguePay Wins Best Fintech Startup Award (This Day Live), Rated: B

VoguePay.com, a secure payment gateway has won the “Best Fintech Startup” at the 6th edition of the Cashless Africa Awards 2017, organised by Mobile Money Africa in Lagos recently.

Authors:

George Popescu
Allen Taylor

Thursday February 9 2017, Daily News Digest

south korea p2p

News Comments Today’s main news: Huge spike in deposits after Lending Works launches IFISA. Public-private partnership forms Online Lending Policy Institute. Today’s main analysis: How private debt/alternative credit boosts income, risk-adjusted returns. Today’s thought-provoking articles: What roll-back of Dodd-Frank means for MPL. An end to P2P wholesale lending. BondMason calls for end to provision funds. United States Private-public […]

south korea p2p

News Comments

United States

  • Private-public partnership forms OLPI. AT: “This is an interesting approach to dialogue concerning MPL innovation, regulation, and growth. Where the Marketplace Lending Association exists primarily for the benefit of lenders, the OLPI seems to have its focus on consumers. Both attempt to influence public policy, but they different paths.”
  • What rollback of Dodd-Frank means for MPL. AT: “I completely agree that regulation legitimizes the industry, but I am concerned that over-regulation can kill innovation. On the other hand, there is a real danger that protectionist policies can lead to banks reverting back to risky lending practices, hurting consumers, and making it difficult for marketplace lenders to compete. I hope we can strike a fine balance that encourages innovation, fosters competition, and provides more options for consumers.”
  • Zoot Enterprises XOR Data Exchange partner on risk mitigation.

United Kingdom

European Union

China

Asia

News Summary

United States

Unique Public and Private Partnership Forms Online Lending Policy Institute (Yahoo! Finance), Rated: AAA

The Online Lending Policy Institute (OLPI) today announced its formation and the appointment of its first Executive Director, Professor Cornelius Hurley. OLPI will provide a one-stop resource for those interested in Fintech generally and marketplace lending specifically. The OLPI will provide research and education to ensure informed policy and best practices.

The OLPI provides policy analysis, in-depth research, broad educational initiatives (like the successful MPL Policy Summit), and relevant and engaged thought leadership to foster responsible growth of online lending (providing a strong bridge between established financial services and technology knowledge). To that end, the OLPI convenes various stakeholders, facilitates industry consensus, and encourages the development of a regulatory framework that protects borrowers while promoting innovation.

Key activities of the OLPI will include:

  • Substantive research that affects the online lending industry
  • Publishing white papers, studies, and reports
  • Engaging policy makers and industry stakeholders in the creation of forward-thinking public policy
  • Commissioning studies to ensure policymakers and those studying the industry have accurate data to rely on
  • Hosting the annual MPL Policy Summit to share, educate, and exchange ideas
  • Acting as the one-stop solution for all who seek to understand legal and regulatory landscape of online lending
  • Providing the tools necessary to ensure responsible innovation in Fintech– OLPI will be a valuable research resource for the various associations that have already formed to advocate for Fintech

To reach its goals, the OLPI knew it was important to be led by an expert in financial services thought leadership that has built a reputation of integrity and innovation with the banking community at large. The OLPI is pleased to announce the appointment of Professor Cornelius Hurley as the first Executive Director of the Institute. Professor Hurley brings more than 35 years of diversified legal, entrepreneurial, and academic experience in the financial sector.

OLPI’s growing roster of members includes founding members Cross River Bank, Boston University’s Center for Finance, Law & Policy, and RocketLoans, among others. OLPI will announce its broader membership, including many leading industry players at LendIt 2017, where OLPI will host a day of legal and regulatory panels.

What Trump’s Rollback of Dodd-Frank Means for Marketplace Lending (Forbes), Rated: AAA

For marketplace lenders, the industry has matured despite a relative lack of federal regulation and uniformity. While it has thrived due to reduced oversight from lending authorities, a wave of deregulation in Washington could be a curse rather than a blessing as it can further erode the legitimacy fintech pioneers have started to garner since the great recession.

While reactionary regulations can hinder economic recovery, Dodd-Frank was structured in a way that made enacting new rules a heavily vetted process.

Bank lending has increased at a rate of 6 percent a year since 2013, reaching a record high of $9.1 trillion in commercial loans in 2016 and JPMorgan increased core loans more than 10 percent across all categories. If the banking sector has struggled under Dodd-Frank, it hasn’t curtailed profits.

Dodd-Frank has made it much more difficult for consumers to gain access to mortgages and other loan products and raised some costs, in turn affecting profitability, particularly among smaller community banks.

Regulation For Marketplace Lenders Creates Legitimacy

Without smart regulation, fintech companies will continue to be at a disadvantage when compared to brick and mortar counterparts, making it more difficult for a still-developing industry to establish itself as a legitimate entity.

Disruptive innovation can often flourish in this vacuum, but there’s a cost. Without the legitimacy that regulation offers, marketplace lending could struggle to be taken seriously as a direct competitor of the established banking system.

The danger lies in overregulation, but we are a long way from that.

Zoot Enterprises, XOR Data Exchange Partner For Risk Mitigation (PR Newswire), Rated: A

Zoot Enterprises has announced that it has formalized an agreement with XOR Data Exchange to provide Zoot clients access to multi-industry data predictive of identity theft and fraud risk. With the rise in online fraud, clients rely on Zoot to identify new ways to support their business strategy and quickly react to new fraud trends.

The partnership will bring a wider variety of predictive data sets and analytics to institutions that rely on Zoot for their platform needs across a wide variety of industries including financial services, merchant services, telecom, insurance, and healthcare. By sharing data through XOR, businesses are reducing credit and fraud losses, while providing additional insight into fraud rings that may target several different industries and establishing the creditworthiness of businesses that may not be identified using traditional providers.

United Kingdom

Huge Spike in Deposits Reported After Lending Works IFISA Launched (P2P-Banking), Rated: AAA

Lending Works CEO Matthew Powells reported an influx of more than 500K GBP deposits within 3 hours after launching the Lending Works Innovative Finance ISA (IFISA). Lending Works’ IFISA product offers 4% (up to 3 years) or 4.7% (up to 5 years term) tax-free for investments on the p2p lending marketplace.

A recent survey of Lending Works’ existing investors found that 88% plan to open an IFISA, with around a third expecting to invest between 10,000 GBP and the maximum threshold of 15,240 GBP of their annual ISA allowance into the IFISA before the end of the tax year in April.

First major peer-to-peer Isa becomes available, offering up to 4.7pc tax-free (The Telegraph), Rated: AAA

Lending Works has become the first large peer-to-peer company to offer an “innovative finance Isa”, beating several better-known rival lenders to the launch.

The new Isas will offer the same rates and terms as Lending Works’ existing accounts. Investors can lend over a three or five-year period. Three-year loans attract interest of 4pc and five-year loans earn 4.7pc. 

Of these only three have launched an Isa. The companies, Abundance, CrowdStacker and Crowd2Fund have lent out less than £100m between them in total.

An end to the nascent P2P wholesale lending market (Financial Times), Rated: AAA

Last weekend, the Mail on Sunday reported that lending money to businesses that in turn lend that money on — aka wholesale lending — is something the regulator reckons doesn’t count as P2P lending. According to the Mail, the FCA thinks P2P lenders doing this “would mimic banking – but without the same protection for individuals or regulations for the firms involved”.

Good news for fans of clarity. Less good news for fans of Ratesetter, a leading P2P lender with a boundary blurring business model and a wholesale lending operation that has historically made up around 15 per cent of its loan originations, as we showed in March last year.

The FCA’s views on wholesale lending in the P2P sector are not entirely clear. One advisor to P2P lenders said “different platforms have been getting different messages”, but suggested the practice might raise the question of whether deposit taking was going on. As they explained it, a lending business borrowing from a P2P lender would, in effect, be borrowing money from ordinary people for the purposes of lending it on, which is not a million miles away from what a bank does. In short, the P2P lender might be viewed as a channel for attracting deposits.

P2P investing firm calls for end to provision funds (P2P Finance News), Rated: AAA

PEER-TO-PEER lenders should not use provision funds, a P2P investment manager has argued in a new report.

BondMason claims the funds, used by platforms such as Zopa and RateSetter, are just a tool to attract lenders.

The investment firm, which aims to get clients a seven per cent return by selecting P2P loans across approved platforms on their behalf, argues that provision funds “do little (nothing) to improve returns for well-diversified investors.”

Looking at the wider market, the BondMason report found lending in the P2P market grew by 39 per cent in 2016 to £3.2bn but warned that this was down from the annual growth of 91 per cent between 2014 and 2015.

19 laptops containing customer information have been stolen from fintech company GoCardless (Business Insider), Rated: A

Fintech business GoCardless is offering some customers free credit monitoring for a year after admitting 19 laptops containing personal information were stolen from its offices.

The stolen laptops contained personal data on an unspecified number of customers, such as email addresses, passport numbers, dates of birth, and names, according to The Register, which first reported the theft. Importantly, no financial data was held on the laptops.

LendInvest unveils refurbishment product (Mortgage Introducer), Rated: A

LendInvest has launched a refurbishment product with interest between 0.92% and 1.1% per month which is rolled up and paid at the end of the term.

The loan is based on gross development value, not loan-to-value – and is available up to 70% GDV.

Customers can take out loans between £100,000 and £2m for terms up to 18 months.

Peer to Peer Lending on “Right Path” as Wealth Managers Seek Quality Investments (Crowdfund Insider), Rate: A

BondMason has published its Market Report 2017 reviewing the trends in the UK peer to peer lending market.  BondMason is a platform that provides investors a method to diversify their investments across many P2P lending platforms.

According to BondMason’s research, P2P lending is beginning to see a flight to quality as the industry matures and weaker platforms exit the market. BondMason’s numbers indicate that the UK direct lending market totaled £3.2 billion of lending in 2016. This is an increase of 39% versus 2015 but a drop in growth as the industry grew by 91% from 2014 to 2015.

BondMason believes there is significant room for growth of the online lending sector. While P2P lending accounted for £3.2 billion during 2016, the total addressable market is between £100 to £120 billion in the UK.

NatWest to offer online investment fund service and ‘robo-advice’ (Financial Times), Rated: B

NatWest is unveiling a service for customers to access investment funds online through the bank for the first time, ahead of plans to launch a “robo-advice” service later this year.

The service, called NatWest Invest launches later this month and will allow bank customers who do not wish to pay for financial advice to choose their own funds and invest with a minimum of £500.

Other banks in the UK are planning to follow suit by offering robo-advice. Santander is among the lenders in the process of developing an automated advice service and has invested in robo-adviser provider SigFig.

FinTech Monthly (Tech City News), Rated: B

Monese, an online banking app, raised a $10m Series A round. The app enables non-native citizens to open a UK bank account.

Seedcamp sold part of its stake in money transfer startup TransferWise. This news came shortly after it was reported that US giant Andreessen Horowitz increased its investment in the London-based startup.

And finally, Mastercard has launched a mobile marketplace for East Africa’s agricultural sector. The digital platform, called 2KUZE, meaning ‘let’s grow together’ in Swahili, will enable farmers to buy, sell and receive payments for agricultural goods via their phones.

European Union

How Private Debt/Alternative Credit Boosts Income and Risk-Adjusted Returns (LinkedIn), Rated: AAA

Quantitative easing has caused a significant distortion of asset prices and market dynamics. It has had an enormous impact on the price of most publicly-traded liquid assets, causing yields to drop below a level any return can historically justify. In this context, investors are looking for alternative solutions and private markets offer significant investment opportunities and value enhancement.

Alternative Investments and Alternative Credit have asset solutions that are very different from each other with very dissimilar drivers. Understanding these asset classes requires specialization and expertise. For example, in banks, sub-asset classes such as shipping, trade and commodity finance, infrastructure finance, leverage loans, and leasing are executed by specialized departments and treated as asset classes on their own merits.

Firstly, the active asset managers and institutional investors are providing the alternative sources of credit either directly or through their clients. This began the growth of a credit market along with the traditional bank lending in some sectors. The shrinking balance sheets of banks presented a tremendous opportunity for investors who were jolted by traditional fixed-income securities and needed options for diversification and higher yields.

Secondly, many new so-called Fintech companies in Alternative Lending have entered the market and established business models which are challenging the traditional status quo. They are still small in size in comparison with incumbent players; however, their business model is addressing many current challenges in the financial sector (inefficiency, information asymmetry, maturity transformation).

The increasing participation of the institutional investor market and new platforms are likely to bring more transparency regarding the actual return contribution of different asset classes in the future.

How Does Alternative Credit Enhance Risk-Adjusted Return and Income?

Currently, most liquid fully “institutionalized” asset classes do not offer the appropriate balance between risk and return. Monetary interventions themselves over the past few years have caused a positive return  on the most liquid public assets solely as a result of artificial demand pressure.

Contrary to public traditional fixed-income markets, Alternative Credit offers a private pricing differential (PPD) of 0.5% to 5% over the fixed income market, which is an attractive level.

In these uncertain times, Alternative Credit offers a plausible answer: “Going for the safest part in the capital structure and going for shorter tenors.”

  • Credit investments currently the highest safety in capital structure.
  • Alternative Credit can enable exposure for shorter tenors to self-liquidating assets (trade finance, factoring, supply chain finance).
  • Alternative Credit offers a floating rate exposure.

The best feature of Alternative Credit is its due diligence.

Alternative Credit offers portfolio construction opportunities to diversify other asset classes traditionally owned by banks (not mark to market) and segments that are not yet on the public market’s radar.

As equities became too volatile after the financial crisis of 2008, Private Debt became a surrogate for high-yield bonds. In addition, there was a contraction of more than 70% in the AAA-rated bonds and many of them lost their triple-A status (Preqin, 2014). This provided the cornerstone for the development of Alternative Credit, which enhanced the return of the portfolios by offering a combination of higher rates of return and lower risk.

Alternative Credit has already become the cornerstone of investments in many institutional portfolios and has become a regular source of income. It can be concluded that Alternative Credit is the new form of asset class that is expanding quite rapidly, in part due to the shortage of credit created by the credit crisis.

What drives the success of crowdfunding campaigns? (Invesdor), Rated: A

The first article, titled “Success drivers of online equity crowdfunding campaigns” addresses the research question that Andrea so aptly formulated. The question is highly relevant, as a large part of crowdfunding campaigns – both on Invesdor and on other platforms – have not reached their funding targets. Could something be done to increase the probability of a campaign succeeding?

Based on sixty campaigns that had been conducted via Invesdor, we found the following:

1.  Campaign characteristics that are pre-determined by the target company – with assistance from Invesdor – are relevant in determining the campaign’s success:

  • The lower the minimum investment requirement, the more investors and funds a campaign can be expected to attract.
  • Campaign duration is negatively associated with the number of investors.
  • Higher funding targets seem to attract larger numbers of investors.
  • The availability of financials in the pitch is positively associated with the number of investors.

2. The use of the entrepreneur’s (and Invesdor’s) networks is important for campaign success.

  • The more money the target company can raise through its and Invesdor’s private networks during the hidden phase, the more investors and more funds it is likely to attract in total.
  • Posting the campaign on social media is a strong predictor of success.

3. The understandability of the target company’s products may play a role in success

  • The results indicate that companies that offer consumer products, rather than products targeted to other businesses, may be more likely to conduct successful campaigns.

The results presented here are based on an aggregate assessment of campaigns and investments.

Fellow Finance Group 1 January – 31 December 2016 (Fellow Finance), Rated: B

2016 was a year of rapid growth for Fellow Finance. The number of platform users grew 220% and the total amount of intermediated consumer and business loans in Finland and Poland was above 50 million euros. This growth resulted in the overall loan volume exceeding 90 million euros which strengthened Fellow Finance’s position as the leader of the crowdfunding platforms in the Nordic countries and with 4,3% market share in continental Europe (source: Liberum Altfi Index). In Finland, Fellow Finance’s market share was over 30% of the whole crowdfunding market (source: Ministry of Finance of Finland). The average of annual yield for investors was 11%.

China

Hong Kong government dismisses report ranking city 5th for fintech (South China Morning Post), Rated: AAA

The government has dismissed a research report ranking Hong Kong only fifth last year among leading fintech hubs, saying the study did not directly compare financial technology development but rather financial and business environments as a whole.

During a Legislative Council meeting on Wednesday, finance sector legislator Chan Chun-ying asked the government why Hong Kong ranked three spots behind rival Singapore – which ranked second – in the report by global accounting firm Deloitte.

Banks should embrace fintech boom (The Straits Times), Rated: A

Fintech complements rather than threatens banking institutions. In my experience, banking has always been about technology, so today’s fintech innovation boom represents evolution rather than revolution for traditional banking. It is supplementing and diversifying the existing financial system – not replacing or disrupting it.

If we look closely, fintech is currently only focusing on a mere fraction of the financial services spectrum. To date, much of the focus of fintech has been on retail banking services – lending and financing along with payments-related products and services, where mobile and e-commerce has led to real demand from consumers.

Similarly, peer-to-peer lenders appear to be more focused on small businesses and higher-credit-risk borrowers than on mainstream banked clients.

Asia

Korean government to tighten watch over P2P lending (Pulse), Rated: AAA

From the second quarter, the government plans to toughen watch and scrutiny on peer-to-peer (P2P) lending service in burgeoning demand in South Korea.

Currently, moneylenders with assets worth at least 12 billion won ($10 million) fall under the broad state regulation. Smaller lenders can run money business upon registering with local governments.

Under a new act that would go into effect in the second quarter, small lenders also would have to comply with state regulation and watch.

Kelvin Teo erases borders with an online lending platform (Asian Review), Rated: A

In January last year, Riza Fansuri was in a quandary. The 37-year-old, who runs a small food supplier in a Jakarta suburb, wanted to develop new products, but that would take money. He tried applying for loans at banks, but they all turned him down because he could not provide sufficient collateral.

Desperate for help, he turned to a website for peer-to-peer lending, a method of debt financing that allows individuals to lend and borrow money directly from each other online instead of borrowing from banks. Half in doubt, he applied for a loan, and a week later, he managed to secure the 100 million rupiah ($7,485) needed to carry out his plan. His company successfully created two new products — instant ice cream and pudding mixes — that now account for 40% of its sales.

The website Fansuri used is run by Funding Societies, a fintech startup that operates in Indonesia, Singapore and soon in Malaysia. The company was founded by Kelvin Teo, a graduate from Harvard Business School, and Reynold Wijaya, an Indonesian classmate from the school. In less than two years, the company has arranged more than 360 loans worth a total of $19 million.

Authors:

George Popescu
Allen Taylor

Monday February 6 2017, Daily News Digest

Germany crowdinvesting

News Comments Today’s main news: Fundrise IPO is over-subscribed. P2P lenders prevented from offering wholesale finance. Today’s main analysis: Online lending student loans favor the rich. Today’s thought-provoking articles: Dodd-Frank Retention Rule. Orchard’s online lending snapshot. Lend Academy interview with SoFi’s Mike Cagney. Seniors’ income boosted by sharing economy. United States Fundrise IPO over-subscribed. GP:” […]

Germany crowdinvesting

News Comments

United States

United Kingdom

European Union

Australia

China

United States

Fundrise IPO Over-Subscribed, Increases Max Share Offer Under Reg A+ (Crowdfund Insider), Rated: A

In a solid indication of confidence of the young real estate crowdfunding platform, Fundrise has received solid investor interest in its self-crowdfunding IPO under Reg A+. Demand was sufficient to compel management to increase the maximum funding round from 2 million shares to 3 million shares of Class B Common Stock. At a price per share of $5.00, this means Fundrise may now raise up to $15 million.

The offer was only made available to individuals that had previously invested via the Fundrise platform. As of today, the platform indicates  the “offering is paused due to high demand.”

Even Good-Guy Student Loan Startups Still Favor the Rich (BuzzFeed), Rated: AAA

Last February, the online lending company SoFi paid $5 million for a 30-second ad during the Super Bowl.

That wasn’t where it always landed. The original version of the ad included three more words: “You’re probably not.” But at the last minute, SoFi cut them. The message, a spokesperson told Adweek, wasn’t “authentic” to the company’s image.

The line may have sounded too crude for national TV, but it was actually a perfect encapsulation of SoFi’s brand. Most people aren’t in great financial shape, and SoFi was built around identifying the best and rejecting the rest.

The problem these startups purport to solve is, inarguably, a huge one. Forty-four million Americans currently owe more than $1.4 trillion in student debt. That’s $1.4 trillion dollars hanging over 44 million heads, and, for those who can’t repay their loans, it’s a lifetime of ruined credit scores and dodging collections agencies.

But although the marketing has changed, the demographics have not. Ratings reports from the past four months show that the average Earnest borrower is a 32-year-old with an annual income of $143,447 and monthly free cash flow after expenses of $4,524. CommonBond’s average borrower is 33 years old with an annual income of $159,028 and $5,996 in monthly free cash flow. SoFi’s average borrower, in the new bond with the AAA rating from S&P, is 34 years old, with an annual income of $170,260 and free cash flow of $7,088. (Most graduates saddled with student loan debt don’t fit that description, which is why applicants for private refinancing often need their creditworthyparents to cosign, a caveat that doesn’t get mentioned in the ads.)

Kevin Reed, chief operating officer at Peer IQ, a risk analysis firm focused on online lending, said the emphasis on new metrics is aimed at venture capital investors, not institutional investors. “When you’re pitching Silicon Valley, you need an angle, some competitive differentiation,” he said.

In fact, one of the strongest signals that these online lenders are focusing on elite borrowers is the fact that banks like Citizens, which jumped in to compete in the refinancing ring, have a similar customer base but don’t use cutting-edge technology to find them.

In marketing documents obtained by the Financial Times, the company told investors that refinancing is “how they find the best and brightest and prevent them from attaching to a bank or broker.” In the same documents, SoFi also stressed it has the regulatory freedom to zero in on niche markets such as “the ‘next five percent.’” (That’s a term for the wealth bracket just a couple of rungs below the “1%.”) The company has already become a “one-stop shop for high earners,” focused on offering HENRYs more products, like mortgages, and personal loans.

High ratings have driven the refinancing boom. But Jon Riber, senior vice president at the ratings agency DBRS, told BuzzFeed News that the new metrics are unproven and haven’t been through a full credit cycle, so DBRS determines ratings looking at traditional data like FICO scores: “When it comes to free cash flow and income, we consider that but it doesn’t go into our model for forecasting defaults,” he said.

When you drill down into the ratings reports, there are some signs that the type of borrower is changing. For example, although 65% of the borrowers in Earnest’s latest securitization are making more than $100,000, the largest category is $50,000 to $99,000, which represents 32% of the securitization.

Dan Macklin, the SoFi co-founder, also said he didn’t think it was fair to describe SoFi clients as rich. Although SoFi borrowers earn salaries above the national average, many of them live in expensive cities, so they are not as well off as they seem.

DeGisi from CommonBond acknowledged that the average new borrower looks similar to the average old one, but claimed that CommonBond has been able to substantially broaden its customer base.

Dodd-Frank Risk Retention (RR) Rule Effective Now (PeerIQ), Rated: AAA

President Trump signed a memorandum to review Dodd-Frank Act on Friday. Loosening bank regulation, as noted by WSJ, would return

  • a 5% interest in each class of the securitization (an “eligible vertical interest,” or “EVI”);
  • a 5% of the fair value of the securitization in a first loss, subordinate tranche (an “eligible horizontal residual interest,” or “EHRI”);
  • any combination of an EVI and an EHRI such that the sum of the fair value of the EHRI and the percentage of the EVI are equal to at least 5 percent of the securitization (a “L-shaped” retention interest).
  • The transfer and hedging restrictions for RMBS are different from those of non-RMBS securitization. For RMBS, they expire on or after the date that is (1) the latest of (a) five years after the date of the closing of the securitization or (b) the date on which the total unpaid principal balance (UPB) of the securitized assets is reduced to 25 percent of the original UPB of the transaction, but (2) in any event no later than seven years after the date of the closing of the securitization.

    For all ABS deals other than RMBS, the transfer and hedging restrictions expire on or after the date that is the latest of (1) the date on which the total UPB of the securitized assets that collateralize the securitization is reduced to 33 percent of the original UPB at deal close, (2) the date on which the total UPB under the ABS interests issued in the securitization is reduced to 33 percent of the original UPB at deal closing, or (3) two years after the date of the closing of the securitization transaction.

    The risk retention rule also contains an exemption for securitizations that consist solely of qualifying high-quality loans that satisfied specific underwriting criteria.

    We highlight two important benefits from issuer’s perspective for QM designation. Issuers are 1) insulated from claims and defenses by borrowers due to safe harbor, and 2) are not required to retain 5% of capital structure per the credit risk retention rule. For example, all loans in Majority owned affiliate (MOA) – CLO managers raise equity capital from 3rd party investors through the creation of MOA to finance the purchase of risk retention securities. MOA holds the retention interest, but the securitizers control the major economic decisions of the MOA in relation to the retention interest and any other assets owned by the MOA. Control is measured by ownership of 50% or more of the equity of an entity or ownership of any other controlling financial interest under GAAP.

    Capitalized Majority owned affiliate (C-MOV) – The C-MOA can function as an originator and comply with both US and European retention requirements. The C-MOA has an option to act as the asset manager. As the asset manager, it can originate a small proportion of the assets owned by the CLO and still earn a management fee. The first CLO of the year, Venture XXVI, employs C-MOA.

    Capitalized Manager Vehicle (CMV) – In this solution, instead of CLO Managers serving as asset managers, the CMV is the primary asset manager. The CMV then hires CLO Managers as sub‐advisors. The CMV receives management fees on retained interest. The key accounting consideration is ensuring the CMV is not consolidated by the CLO Manager. 

     

    Weekly Online Lending Snapshot – February 03, 2017 (Orchard), Rated: AAA

    Interest in the space has been accelerating since the first of the year. Late last week it was reported that the American Banker’s Association is looking for an online lending platform to help its members expand their digital lending offerings, and it was reported that Citigroup Inc., has launched its own online lending offering which will make loans of up to $1 million available to small businesses. Also, in small business lending news, Credibility Capital announced this week that it successfully sold a pool of whole loans using Orchard’s software to share and affirm the data of a seasoned loan portfolio with its regional bank client.

     

    Podcast 89: Mike Cagney of SoFi (Lend Academy), Rated: AAA

    In many ways SoFi has become the leading company in all of fintech at least in this country. They raised $1 billion in Q3 of 2015, the largest equity round ever in our industry by a considerable margin. Since then they have continued to add new products, break records and execute flawlessly.

    • How Mike explains what SoFi does today.
    • The part of the business that Mike is most excited about.
    • Where they are at in their student loan business today.
    • Why their unsecured consumer loan product is very different to others in the market.
    • The killer product they have in the real estate market.
    • How SoFi views their wealth management product.
    • Why they decided to move into life insurance.
    • How Mike feels about the Superbowl ad they did in 2016.
    • How they have been raising money recently.
    • What is it about SoFi that makes their securitizations so successful.
    • How they would handle a shutdown in the securitization market.
    • Where SoFi is focusing their resources when it comes to tech.
    • What SoFi customers have in common.
    • The international plans for SoFi and their expansion to Australia.
    • The future vision for SoFi and their place in financial services.

    OnDeck Capital COO James Hobson to step down (Reuters), Rated: A

    James Hobson, the chief operating officer of marketplace lender OnDeck Capital Inc, will resign from his role on March 15 to become chief executive of online insurance startup Attune, according to an OnDeck statement.

    Jason Altieri, Former GC at Lending Club, Lands at Roofstock (Crowdfund Insider), Rated: A

    Roofstock, an online marketplace that facilitates direct purchases of rental property, has announced the appointment of Jason Altieri as Chief Legal and Compliance Officer. Altieri was previously General Counsel at publicly traded marketplace lending platform Lending Club (NYSE:LC).

    Altieri left Lending Club last October where, according to his LinkedIn profile, he remains an advisor.

    Orchard Platform Predicts Super Bowl Outcome (Crowdfund Insider), Rated: B

    The population of New England, at approximately 14.7 million is 1.45 times the population of Georgia, approximately 10.1 million.  New total loan volume in the New England region has been proportionally somewhat higher since 2010; In 2016 through September, New England had 1.58 times the loan volume that Georgia does.

    Winner: Patriots

    Parteger says that during 2016 borrowers from New England had higher incomes and FICO scores, with lower debt-to-income ratios. Borrowers in Georgia had one percent lower revolving credit utilization.

    A larger percentage of borrowers in New England rent their home, a lower percentage have mortgages.

    Winner: Patriots

    During 2016, both regions experienced similar sized loans. Interest rates were slightly higher in Georgia. Loans in New England were graded slightly higher but loans in Georgia had lower risk grades.

    Winner: Tie

    Using 2014 vintage loans, Pargeter says the Georgia has a slightly higher charge-off rate and a big higher average interest rate so overall returns are a bit better in Georgia.  Falcons get the edge on this one.

    Winner: Falcons

    Orchard says the Falcons will win!

    United Kingdom

    Peer-to-peer lenders prevented from offering wholesale finance (This is Money), Rated: AAA

    Peer-to-peer lenders are to be prevented from offering wholesale finance because it is considered too risky for private individuals.

    But the City watchdog, the Financial Conduct Authority, is thought to fear this would mimic banking – but without the same protection for individuals or regulations for the firms involved.

    LendInvest Responds to the UK Government’s Modern Industrial Strategy (Crowdfund Insider), Rated: A

    Last week, UK Prime Minister Theresa May unveiled a modern Industrial Strategy proposal to help build on the country’s strengths and take on its weaknesses.

    LendInvest’s team noted they plan to get behind four pillars to help kickstart the country’s productivity:

    • Technology and innovation: LendInvest noted that the strategy makes a significant investment in research and development for nascent UK sectors, which includes an Industrial Strategy Challenge Fund.
    • Infrastructure: The online lender shared that there were some commitments, including investments towards road, rail and digital infrastructure to enhance mobility and connectivity for citizens and businesses across the country. 
    • Developing skills: LendInvest stated it encouraged the government to invest in skills initiatives for small and medium enterprises (SMEs) property professionals to ensure that would-be property entrepreneurs are equipped with the tools to get projects off the ground.
    • Supporting businesses to start and grow: The website that while the government has already established the Patient Capital Review, it also welcomes further funding from the British Business Bank and a commitment to helping the BBB in providing finance businesses outside of London and the South East. It also encourages the government to use the review into entrepreneur to better understand how to support property developers to grow their businesses.
    European Union

    Germany: Investment Crowdfunding Grew by 39% in 2016 (Crowdfund Insider), Rated: AAA

    In a publication created by Crowdfunding.de, the report, entitled “Marktreport 2016: Crowdinvesting in Deutschland,” states that investment crowdfunding grew by 39% during 2016 reaching €63.8 million.

    The sector was largely powered by a sharp increase in real estate crowdfunding that captured €40.3 million growing by 92.5% during the year. Platforms like Exporo, Zinsland, Zinsbuastein, Bergfürst and IFunded closed 48 real estate crowdfunding rounds in 2016. Exporo led the group with €21.4 million in funding.

    Funding for SMEs and start-ups hit €18.8 million which is approximately at the same level of 2015.  Companisto led this sector with just over 50% of funding or €9.4 million in total.

    Wonga strikes £60m deal to sell European unit to Swedish suitor (Sky News), Rated: A

    Sky News has learnt that Wonga will confirm that it has decided to offload BillPay, one of its most valuable units, to Klarna, a Swedish provider of e-commerce solutions.

    Talks between Wonga and Klarna have been taking place for several months, although they had appeared to falter several weeks ago owing to a number of domestic issues faced by the Swedish purchaser.

    The sale of BillPay will be the most significant international disposal undertaken by Wonga, which is striving to rebuild its business in the wake of a string of scandals and a regulatory crackdown in the UK.

    Wonga’s losses have totalled nearly £120m in the last two years following a string of scandals and costs associated with cutting hundreds of jobs.

    Australia

    Seniors enjoy significant income boost from the sharing economy (News.com.au), Rated: AAA

    New research by peer-to-peer lender RateSetter has found that 44 per cent of over-55s earn money through sharing economy services such as online marketplaces, ride sharing, renting out rooms to travellers and lending money via online platforms.

    RateSetter’s research found that over-65s are the fastest growing group of spenders in the sharing economy, paying an average $82 a month, but younger generations aged below 44 remain the biggest spenders at more than $110 a month.

    Online marketplaces such as eBay and Gumtree remain the most popular part of the sharing economy, with 54 per cent of people using them.

    China

    Company Slammed by Short Seller Over Deals Says More Coming (Bloomberg Markets), Rated: AAA

    Credit China FinTech Holdings Ltd. is planning more investments as it aggressively expands beyond its original loans and lease-financing businesses into online payments and peer-to-peer lending.

    The company, part of a consortium that offered to buy a stake in Ping An Securities Group Holdings Ltd. last month, is currently in talks with “multiple” financial-services companies based in Asia outside China, Chief Executive Officer Phang Yew Kiat said in an interview in Hong Kong on Wednesday.

    The firm’s acquisition strategy — which is now focused outside China — has been driven by HK$4.3 billion ($554 million) of funds that it raised over the past three years, Phang said.

    The acquisitions put Credit China onto the radar of short seller Anonymous Analytics, which expressed doubts over some of the investments in December, as it rated the company a “strong sell.” In a report, Anonymous alleged Credit China had engaged in “a number of questionable” investments, including the purchase of a stake in payment provider Shanghai Jifu, which the short seller said was linked to a “key individual” within Credit China.

    About 480,000 investors involved with problematic P2P lenders by Jan (Global Times), Rated: A

    Over the last three years, a growing number of investors have got involved with problematic P2P lending platforms, according to the report. The figure reached 478,000 by the end of January, accounting for 4.5 percent of P2P investors in China.

    About 64 platforms reported problems or suspended their business in January, including three lenders whose managers disappeared, the report said.

    Authors:

    George Popescu
    Allen Taylor