Thursday March 29 2018, Daily News Digest

Thursday March 29 2018, Daily News Digest

News Comments Today’s main news: SoFi changes wealth portfolios. Silver Lake buys $500M of Credit Karma stock. Half of Zopa deposits are into IFISA accounts. Landbay considers IPO, opens Seedrs campaign. Wonga South Africa enters personal lending. Today’s main analysis: 7 reasons to hate the long bond (A GREAT READ). Today’s thought-provoking articles: The benefits of additional data from […]

Thursday March 29 2018, Daily News Digest

News Comments

United States

United Kingdom

China

European Union

International

Asia

Africa

News Summary

United States

SoFi Announces Changes to Wealth Portfolios (Crowdfund Insider), Rated: AAA

On Tuesday, online lending platform SoFi announced it was making changes to wealth portfolios. SoFi made changes in all five risk strategies – Conservative, Moderately Conservative, Moderate, Moderately Aggressive, and Aggressive.

Conservative:

“Our lowest risk portfolio invests heavily in bonds, which may be appropriate for someone investing with a lower tolerance for risk or a shorter time horizon, like under three years. With bonds, there are three options: Short-term bonds are considered lower-risk/lower-reward, intermediate-term bonds are considered moderate-risk/moderate-reward, and long-term bonds are considered higher-risk/higher-reward.

Source Crowdfund Insider

Moderately Conservative

“The Moderately Conservative strategy is also weighted toward short-term bonds, so it’s a fairly cautious approach. Historically, we’ve selected both investment-grade bonds (lower risk, lower interest rate) and high-yield bonds (higher risk, higher interest rate). Now, we’re reducing some of that high-yield exposure and increasing the amount of investment-grade bonds to lower the overall risk of this portfolio. This strategy also invests a bit in the stock market. Our approach here (and in other strategies) is to balance our investments across the globe. We’re putting a little less in Emerging Markets, less in U.S. Markets, and more in Developed Markets outside the U.S. (like Japan, parts of Europe, and Canada). We believe that these new allocations will give this portfolio a relatively better chance to grow.”

Source Crowdfund Insider

Silver Lake Buys $ 500 Million Stake in Credit Karma (Fintech Collective), Rated: AAA

San Francisco based Credit Karma has received $500m in a secondary offering from Silver Lake, valuing the company at $4b.

Credit Karma isn’t receiving any proceeds or issuing any new shares as part of the transaction, Chief Executive Kenneth Lin said in an interview. Rather, Silver Lake is amassing common shares from earlier investors and employees in a so-called secondary sale that values the 11-year-old company at roughly $4 billion, according to a person familiar with the matter.

How You May Benefit from Additional Data When Reviewing Subprime Applicants (Lendit), Rated: AAA

Nearly 80 million adults have what is considered subprime credit, according to Experian data.

The takeaway: while Darrell has a higher biweekly income than Nancy, he is much less stable in his borrowing history. And, while Nancy has been late on a few payments, she has a proven track record of ultimately satisfying her debts.

These examples illustrate why lenders hoping to help consumers in the growing nonprime and subprime markets stand to benefit from alternative credit data.

Sophisticated Investors May Be Harming Fintech Lending Platforms (Harvard Business School), Rated: AAA

But lending platforms, also called peer-to-peer lending, must address a major design problem: Sophisticated investors have been gaming the system by applying specialized screening tools to scoop up the choicest loans with the lowest default rates, leaving less experienced investors with less attractive loans to choose from. After these lower-grade loans perform poorly—that is, the borrowers fall into arrears with payments or default altogether—these less savvy investors may flee the platform.

Can lending platforms make their systems more equitable for all investors?

In their new working paper Marketplace Lending: A New Banking Paradigm? Vallée and Yao Zeng, an assistant professor of finance at the University of Washington, address these issues from the perspective of what platforms can do to level the investing playing field.

The key variable to control, Vallée and Zeng found, is the amount of information available about loan applicants. When platforms share a lot of information about applicants with potential investors—data such as income, debt level, and credit history, and even whether the loan is financing a wedding, for instance—experienced investors can precisely pin down the safest loans to back.

The researchers looked at all transactions executed by LendingRobot users for a three-year period between January 2014 and February 2017, including more than $120 million invested on the two major lending platforms, LendingClub and Prosper. They found that using the LendingRobot screening model paid off by reducing the average loan default rate by more than 20 percent compared to the average level on the platforms.

Bond Investors Should Double Down On Due Diligence As Yields Rise (Seeking Alpha), Rated: AAA

Appealing to this new financial demographic is the idea behind such companies as Upstart and Social Finance Inc. (commonly known as SoFi). Since 2013, SoFi has securitized about $9.5 billion in loans, while Upstart last year packaged $338 million of personal loans into two deals.

SoFi targets top college graduates – Harvard lawyers, Yale doctors, Wharton bankers – people whose outstanding student-loan balances match their outstanding career potential. For SoFi, this cohort is a good bet to provide lower-cost loans that allow the buyers to de-lever faster and hopefully return for car loans, mortgages and wealth management services such as college and retirement savings plans. Upstart took the idea a stage further by widening the customer base beyond the Ivy League.

Kabbage Data Shows Mobile is the Future for Small Business Lending (Lend Academy), Rated: A

Mobile devices have changed consumer expectations. People now expect that you can have access to anything you might need right from your mobile device. While this has historically been the case for consumer financial apps, Kabbage released data today on small businesses which shows they too are leveraging mobile to better manage their business.

They analyzed behavior of almost 150,000 small business and found that between April 2014 and February 2018 loans accessed through mobile increased by more than 360 percent. Dollars accessed through mobile increased over 1,220 percent.

Petal, WebBank to launch card for ‘credit invisibles’ (American Banker), Rated: A

The fintech startup Petal announced a partnership Wednesday with WebBank to officially launch a credit card for the estimated 65 million people who have insufficient credit history to qualify for a traditional credit card.

The CFPB has identified 45 million people who have no credit score,” Gross said. “Experian and others have indicated that there are 50 million more people that are thin file people and have a have a credit score that’s not accurate because of limited data at the credit bureau. Andreessen Horwitz has estimated 90 million people are misscored — that’s a third of the U.S. population.

Property Coin ICO: A Securities Token for a Real Estate Portfolio (Crowdfund Insider), Rated: A

Aperture is a new platform that is focusing on the real estate marketplace putting a new spin on property crowdfunding. While not the first blockchain based real estate startup, Property Coin (PCX) is in the midst of a security token offering that is claiming first when it comes to crypto denominated securitization / structured real estate portfolio using distributed ledger technology.

Operating in the fix and flip space, Aperture says they have delivered over “50% un-levered IRRs so far – a claim that is pretty impressive.

In aggregate, their team claims they have been involved in the closing of over $150 billion of real estate financing transactions and have originated over $10 billion in mortgage loans, having worked for some of the largest investment banks in the world.

A mortgage in 30 minutes? Fintech says it’s coming (American Banker), Rated: A

Lenda claims to make the fastest mortgages out there — currently two weeks start to finish, with an eventual goal of 30 minutes in a nearly all-digital process.

Launched in 2014, Lenda has made $200 million worth of mortgages, is licensed in 12 states and plans to expand to 12 more later this year. Jason van den Brand, its co-founder and CEO, said that despite other big players, the mortgage arena is ripe for further disruption.

How Lenda works

Lenda lets the consumer log in to their bank account from its portal to retrieve the necessary three months of bank statements. (They could also download the statements from their Dropbox, Box or Google Drive account and then upload them to Lenda.)

Income verification and employment verification are automated where possible. To be sure, some employers don’t share employment data with databases used by lenders. In such cases employment verification needs to be manual.

Consumers ready for a digital mortgage

Consumers, meanwhile, seem to be increasingly ready for digital mortgages. According to a Harris poll commissioned by Fiserv, 69% of consumers already research loan options online and 68% said they review loan documents online. Among millennials, 48% said they would be comfortable researching loan options on their smartphone.

New small businesses have a tough time in these 10 cities, report says (Fast Company), Rated: A

Specifically, it looked at businesses that earn an annual revenue of less than $7,500,000, have been in business for at least six months and no longer than 60 months, and submitted a loan query to LendingTree between Jan. 1, 2016, and Jan. 23, 2018. The self-reported data was then limited to the 50 most populous metropolitan areas, and with that, a list was born.

Here are the 10 worst cities, per LendingTree:

  1. Cincinnati
  2. Rochester, N.Y.
  3. Philadelphia
  4. Louisville, Ky.
  5. Birmingham, Ala.
  6. Detroit
  7. Harrisburg, Pa.
  8. New Orleans
  9. Virginia Beach, Va.
  10. Chicago

Here are the 10 best cities, per LendingTree:

  1. Sacramento, Calif.
  2. Grand Rapids, Mich.
  3. Portland, Ore.
  4. Knoxville, Tenn.
  5. Denver
  6. Seattle
  7. Tulsa, Okla.
  8. Albuquerque, N.M.
  9. Fresno, Calif.
  10. Los Angeles

With No Movement On Lending Reforms, Catholic Group Starts Microloan Program (WOSU), Rated: A

Faced with watching some parishioners struggle to pay back high-interest loans, the Society of St. Vincent de Paul Diocese of Columbus launched its own microloan program in Licking County in late 2016. Since then, it’s expanded to four other counties.

The non-profit organization has partnered with a local credit union to offer loans of up to $500. Borrowers then make monthly payments for 12 to 15 months to pay off loans that carry an interest rate of 3 percent.

That’s a fraction of the rate for loans from payday lending businesses, where interest can exceed 600 percent.

The Catholic microloan program is open to people of all faiths, and Zabloudil says about 75 percent of loan recipients have made good on their payments. Part of the reason for that, Zabloudil says, is they work to ensure borrowers don’t get in over their head.

The program currently offers loan to people from Franklin, Delaware, Fairfield, Knox, Licking and Ross Counties. Zabloudil hopes to eventually take the program to the 17 other counties served by the Roman Catholic Diocese of Columbus.

 

 

LENNAR TO INTRODUCE ONLINE, MOBILE MORTGAGE APPS (Builder), Rated: B

Lennar Corp. plans to start using mortgage-application technology from San Francisco, Calif.-based startup Blend in an effort to attract younger buyers. By applying for a mortgage online or on a phone, consumers can shave 10 days off the process, executives say. The Wall Street Journal’s Laura Kusisto reports:

Making it easier for those buyers to get mortgages could help Lennar with attracting millennials, a critical group of home buyers that have been put off from buying new homes by the high prices and long commute times to many communities. An additional obstacle on the margins for younger home buyers is the complicated process of applying for a mortgage.

GoKapital Launches Its Nationwide Business Loans Affiliate Program (PR News), Rated: B

GoKapital, an online lender from Miami Florida, has launched an affiliate program that will allow bloggers, webmasters, and digital marketers to earn commissions when they refer new customers to one of their business loan programs.

GoKapital’s Affiliate program highlights:

  • Business loans ranging from $10,000 to $1,000,000 for every industry. Servicing businesses in all 50 states, Canada, and Puerto Rico
  • 24-hour funding with 95% approval rate
  • Dedicated support and integration manager

Marshall Lux Joins Marlette Funding as an Advisor (Business Wire), Rated: B

Marlette Funding, LLC, owner of the Best Egg personal loan platform, today announced the addition of Marshall Lux as an Advisor to the Board and Company.

Marshall Lux has been a Financial Services consultant and practitioner for 30 years. He began his career at McKinsey where he served all manner of financial service firms across a variety of subsectors and functional areas. Marshall led McKinsey’s and BCG’s private equity practice. He has extensive relationships across PE Firms.

Seven banks in seven months select Jack Henry’s Core Director platform (Fintech Futures), Rated: B

Jack Henry & Associates’ banking division is in seventh heaven with the revelation that seven US community banks within the last seven months have selected to implement its Core Director processing platform.

The platform can be installed in-house or implemented through JHA OutLink Processing Services, Jack Henry Banking’s outsourced offering.

The firm names two of the banks – California International Bank and the State Bank of Bottineau, located in North Dakota. FinTech Futures has contacted Jack Henry for the other five names but they won’t be revealed yet.

United Kingdom

Accounts promising rates up to 15% are drawing in savers – with 12,000 at Zopa alone (This Is Money), Rated: AAA

Half of all customer deposits at peer-to-peer lender Zopa since the start of the year have come via its Innovative Finance Isa, despite only launching the tax-free accounts in June 2017, This is Money can reveal.

Zopa, which was the first to offer the new style Isa product, said 12,000 customers have opened one of its two Isas, which offer up to 4.6 per cent interest.

For savers with a cash Isa, the FSCS offers protection of up to £85,000 per banking licence. This means that if something goes wrong with the bank or building society where you have deposited your money, you will never lose the first £85,000.

Meanwhile for those with a stocks and shares Isa, the first £50,000 is protected, as long as the provider belongs to the scheme.

Landbay opens Seedrs round to new investors as chief eyes IPO (Peer2Peer Finance), Rated: AAA

LANDBAY has announced that it is opening its latest equity funding round to new investors on Seedrs, as its chief executive unveils the company’s flotation ambitions.

The peer-to-peer lender, which specialises in buy-to-let mortgages, has already raised its target of £1.25m from this funding round but it has been opened up again to new investors.

Landbay recently hit the £100m cumulative lending milestone, with over 25 per cent of that amount having been originated in the last three months.

LendingCrowd raises $ 2.8 mln (PE Hub), Rated: A

LendingCrowd said March 28 that it secured another 2 million pounds ($2.8 million) in funding led by Equity Gap. Also participating were a number of private investors from Scotland’s entrepreneurial and finance scene and the Scottish Investment Bank. LendingCrowd, of Edinburgh, Scotland provides a peer to peer lending platform.

Credit unions and the tech revolution: Lessons from the Abcul conference (Coop News), Rated: A

But technology also presents opportunities to reach new markets – making it vital that credit unions keep up with new developments, delegates at this year’s conference of the Association of British Credit Unions (Abcul) were told.

Pitching his fintech to the conference, he said it could offer new possibilities to the sector, such as partnering with the Post Office to offer branch facilities where members can deposit and withdraw money.

“Mobile use is continuing to shoot up. 78% of the UK population is using a smartphone two-four hours a day – and fastest growth is the over -55s. In the South Manchester Credit Union 65% of traffic comes from mobile devices. It’s something we’ve got to accept.”

Colchester is top area for buy-to-let (Mortgage Introducer), Rated: A

Colchester in Essex is the top area to invest in buy-to-let based on capital growth, transaction volumes, rental yield and rental price growth, LendInvest research shows.

In Colchester prices are rising by 9.98% per year, rental growth is increasing by 3.41%, transaction volumes are rising by 2.79% and yields stand at 3.71%.

Despite topping LendInvest’s list Colchester is far from the best in terms of yield, with Manchester offering returns of 5.42%.

The worst area to invest is in East Central London, where capital gains are falling by 3.76%, rental price growth is sliding by 1.1% and transaction volume growth is down 1.73% year-on-year. Despite all of these factors landlords in that area still make a yield of 2.9%.

Scott Wright: Will RBS fund lead to better deal for SMEs? (Herald Scotland), Rated: A

In a growing economy there is a balance to be struck between ensuring banks are well-capitalised and providing the credit private companies need to expand. That much is recognised by leading business figures such as Mike Welch and Jim McColl, with the latter planning to launch his own bank to help address the funding issues.

In that context, the £425 million Royal Bank of Scotland has set aside to boost competition in the banking sector for SMEs is to be welcomed.

And it is encouraging that Nationwide said it would direct that funding to the UK’s 5.7 million smaller and micro businesses rather than the big corporates, given that is arguably firms of this size which have suffered most from the tightening of bank lending. It is also SMEs, broadly speaking, which have been caught up in the shocking mistreatment scandals that have to occurred at certain banks since the financial crisis.

Cryptocurrencies yet to convince the savvy investor – Assetz Capital (Finextra), Rated: B

Investors in the Assetz Capital platform are yet to be convinced by cryptocurrencies, with just 16% seeing them as worthwhile investments.

The peer-to-peer lending platform canvassed the views of its investors in the Q1 Assetz Capital Investor Barometer. 43% believe the entire market is on the brink of collapse, while 40% feel cryptocurrencies are still too immature at present with significant risks attached. 14% feel it is a worthwhile investment but only in moderation, with just 2% thinking it is the future of investments.

The doors are open to MBAs in finance, including fintech, wealth management and venture capital (Find MBA), Rated: B

One route into the fintech sector is the Spotcap Fellowship, which provides up to £8,000 towards the cost of an MBA and a path to working at the Berlin-based online lender.

Niels Turfboer, UK managing director of Spotcap and an IE Business School MBA graduate, says he created the scholarship to address a talent shortage. A survey by recruitment website Indeed found that 20 percent of top fintech job vacancies were left unfilled after 60 days.

 

 

China

CreditEase FinTech Investment Fund Invests in Branch International (PR Newswire), Rated: AAA

CreditEase, a Beijing-based leading FinTech conglomerate in China, announced that its venture fund, CreditEase FinTech Investment Fund (“CEFIF”), recently joined a group of prestigious investors to participate in the Series B investment round of $70 million in Branch International. Other strategic investors in this round of financing include International Finance Corporation (IFC), Andreessen Horowitz, Trinity Ventures and Victory Park.

According to the report recently published by CreditEase, jointly with IFC and Stanford Business School, there are over two billion adults globally in the emerging markets who do not have access to basic financial services (click here to download the Financial Inclusion Report). On a daily basis, Branch processes tens of thousands of loans, in amounts ranging from $2.50 to $500, and expects its total loan origination to exceed $250 million in 2018. Recently entered into the Nigerian market, Branch is currently growing 50 percent month-over-month within that country and 20% month-over-month overall.

European Union

How Fintech is Fixing Broken Credit (Lend Academy), Rated: AAA

For millions of people, a lack of access to credit is just another part of life. Yet, without this access, it can be incredibly difficult for businesses and customers to connect with each other. In fact, according to The World Bank, despite a 20% increase between 2011 and 2014 in the number of adults with access to formal financial services worldwide, an expected 2 billion adults worldwide are unbanked. In addition, some 200 million businesses are excluded from the formal financial system.

The problem is particularly prolific in high growth markets; with a 2015 PwC report putting India’s unbanked population at 233 million (that’s nearly every 1 in 6 people). In South East Asia, a further 264 million people are without access to credit (including a staggering 80% of Cambodians). And even beyond the individuals affected, some 200 million businesses are excluded from the formal financial system.

A key way that we are achieving this at PayU is through our €110 million investment in German fintech company Kreditech, a leading technology group for digital consumer credit using machine-learning based underwriting. With traditional credit models simply not catering to large sections of the population, collaborative partnership can be instrumental in finding new ways to offer innovative solutions to the huge problem at hand.

International

Seven reasons to hate the long bond (INTL FCStone Email), Rated: AAA

The price of long-term treasuries will fall because:
1 – The global savings glut is turning into a global savings squeeze
2 – Just look at a chart of Treasury yields
3 – Speculative traders have a massive one-way bet on curve-flattening
4 – China could (should?) sell long-term Treasuries to teach Trump a lesson
5 – The Federal Reserve is reducing the size and duration of its holdings: it still has $526 bn of long bonds to sell!
6 – U.S. public debt is abnormally short: deficit-driven issuance will hit the long end disproportionately
7 – Forward guidance artificially compressed term premia: economic uncertainty will make them rise again

Source: INTL FCStone
Source: INTL FCStone

Chinese savings are unlikely to support anymore U.S. bonds for at least five reasons:
• The disappearance of China’s trade surpluses: China’s trade surplus has fallen from 10% of GDP in 2007 to 1% last year. China may become a deficit country next year.
• The Belt and Road initiative: China has found much better uses for its savings than financing the U.S. military and boomers’ Social Security claims. Going forward, China’s mountains of savings will build the infrastructure of Central Asia, the horn of Africa, Russia, Iran, Southeast Asia, and Eastern Europe, rather than flood the U.S. Treasury market.
• American protectionism: In the unlikely event that Trump’s bid to reduce the U.S.-China trade deficit by $100 billion next year is successful, China will have $100 billion less to invest in the U.S. Treasury market.
• China’s retaliation against American protectionism: Despite Trump’s claim that “trade wars are easy to win”, other countries have national interests too. China also has industries to protect, jobs to defend, and face to maintain. China is sitting on $3.1 trillion in currency reserves: according to the U.S. Treasury, China holds about $1.2 trillion in U.S. national debt (that just includes official accounts).

Source: INTL FCStone

 

Fintech and Property: What You Need to Know (The Urban Developer), Rated: A

Fintech is disrupting the global finance industry, to the benefit of both businesses and consumers.

Advancements in communication and information technology has enabled the rapid growth of technology platforms that provide transactional services. Online payment systems, debt platforms and online exchanges allow companies to better manage their clients and use the data collected to provide the best possible service.

What Fintech products will the property industry gain the most benefit from?

Data Analytics: Using information and data from Fintech platforms will help advisors and agents to make informed decisions for their clients. They will be able to get a better understanding of the client’s overall position, while also increasing the level of personalisation for the client.

 

Raising Capital: There are a number of avenues available for raising capital and the digitalisation of fundraising will open up new opportunities. Using Fintech products will not only speed up the process, but it will also open the door for reaching new investors through a number of online platforms.

India

Nuo Bank, India’s First Decentralized Cryptocurrency Bank, Raises $ 250,000 from Directors of PayU India (Crypto News), Rated: AAA

Despite government’s discouraging stance towards cryptocurrencies India’s crypto startups are getting their deserved thumbs-up from the industry and investors. One such promising startup known as Nuo Bank just raised about Rs. 1.6 crore ($250,000) from the CEO and MD of PayU India within a week of its launch, which shows the kind of trust that both PayU directors have in its growth potential.

Next, like other major cryptocurrency companies Nuo bank will also have its own coin. It’s going to issue 200 million Nuo tokens to customers, which represent 20% of its 1 billion token supply. The value of these tokens will be determined from smart contracts, and the smart contracts stipulate that 25% of Nuo Bank’s revenue should be kept reserved for these tokens.

P2Ps are in a race to build 1st blockchain platform here (The Economic Times), Rated: A

From established players like Faircent to early stage companies like India Money Mart, Paisadukaan and OML P2P, all are trying to develop the industry’s first blockchain platform and also share data about lending transactions between them in order to mitigate frauds.

All these companies have applied and are waiting for the NBFC P2P licence from the Reserve Bank of India.

Faircent, the country’s largest P2P platform has committed upwards of $1 million for this kind of a solution which they feel will help them reap huge benefits when traction on these platforms gains.

 

Asia

Fintech startup takes receivables platform to blockchain (Global Trade Review), Rated: A

The Singapore-based firm forecasts a US$2tn market opportunity in its use of blockchain to provide a secure invoice factoring solution using its customised cryptocurrency. With its token pre-sale set to end on April 8, the group’s initial coin offering will launch on April 9.

Acudeen Technologies brands its platform as “an inclusive environment for small businesses who are having a hard time getting financing using traditional means”.

Africa

Wonga South Africa Enters the Personal Loans Market (The African Exponent), Rated: AAA

Fintech craze changing face of lending (Business Daily), Rated: A

The numbers are in and the jury is out. The world over the fintech craze that underpins lending outside the traditional banking ecosystem continues unabated.

Whether the channel of consumption is online, mobile or the services packaged differently such as payday lending and layaway financing, investments continue to pour in chasing opportunities in a vertical that is quickly getting overcrowded with little to no service differentiation and a continued insistence on insight wizardry riding off copious amounts of personal data ingested.

Will technology save independent financial advice? (Money Web), Rated: B

Essentially technology can do two things for the advisor. It can significantly reduce the costs of administration and record keeping, while also making these processes simpler and more efficient.

“The whole market place is talking about digital – the rewiring of the investor and the investment advisor,” Wilson says.

Authors:

George Popescu
Allen Taylor