Monday November 28 2016, Daily News Digest

orchard quarterly originations report

News Comments Today’s main news: Orchard’s quarterly consumer lending report. Today’s main analysis : Why Lending Club should become a bank sooner rather than later. Are there any good reasons to invest in FinTech? Today’s thought-provoking articles: China recovers $ 1.5 billion in online lending fraud case. Why some SMEs are not happy in Hong Kong. United States […]

orchard quarterly originations report

News Comments

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  • Why invest in Fintech? AT: “This is an interesting analysis and shows that P2P lending is the top sector within FinTech. While still swaying toward pessimism, it brings out some of the positives in the industry. There is still growth in the sector despite some of the recent fallbacks. FinTech operators should not lose hope because of one bad year.”

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United States

Consumer Unsecured Q32016 (Orchard Platform Email), Rated: AAA

Key Insights

  • Origination volumes continued to fall in Q3, down approximately 21% from Q2 origination volume and down just over 50% from peak originations in Q4 2015. Following years of consistent quarter-over-quarter increases in originations, we hav eseen 3 consecutive quarters of declines in 2016. The Q3 change represents a smaller drop than the one experienced in Q2, and may indicate that these declines are beginning to taper off. We’re not ruling out an uptick in originations next quarter as confidence and capital returns to the origination platforms.
  • 2014 vintage charge offs have increased more steeply than in recent years, aligning closely with rates we saw in 2011 and 2012. While some of this trend can be attributed to deteriorating loan performance, most of it is due to the continued growth of subprime loan origination platforms. These platforms charge off at higher rates but offer investors increased interest rates as compensation for this additional risk. Early indications show 2015 vintage performance on the same track as the 2014 vintage.
  • After increasing 96 bps in Q2, borrower rates fell 79 bps in Q3, primarily driven by decreases in origination volumes for subprime originators in this period.

Lending Club should become a bank as fast as it can (FT Alphaville), Rated: AAA

The fragility of “true” marketplace lenders like Lending Club was displayed for all to see earlier this year when market conditions suddenly shifted, originations plummeted and a scandalinvolving Lending Club’s CEO hit the papers. Marketplace lenders (sometimes referred to as P2P or online lenders) transfer loan revenue and credit risk to loan investors at origination, so they earn nothing from loans held on balance sheet.

The takeaway? Lending Club should become a bank as fast as it can in order to reap the economic benefits of its loans and secure a more stable funding base. And, in the meantime, there are changes it can and should be making to increase resiliency and create the foundation for a sustainable and profitable business.

According to my simplified view, Lending Club would need an annualised net income run rate of $329m (at a 7x P/E) by Q3 2018 to justify its current $2.3bn valuation.

If Lending Club were able to quadruple originations to $8bn a quarter by Q3 2016, with the same aggressive assumptions, quarterly net income would be $93m. That would translate into a market cap of $2.6bn at a 7x P/E, which is around 13 per cent above the company’s current market cap, although the difference amounts to nothing for shareholders absent dividends in the interim.

If Lending Club were able to quadruple originations to $8bn a quarter by Q3 2016, with the same aggressive assumptions, quarterly net income would be $93m. That would translate into a market cap of $2.6bn at a 7x P/E, which is around 13 per cent above the company’s current market cap, although the difference amounts to nothing for shareholders absent dividends in the interim.

Online lending platforms yet to prove their worth (Financial Times), Rated: A

It has not quite turned out like that. After years of rapid growth, the industry in the US has gone into reverse, as concerns over the quality of the assets pumped out by the likes of Lending Club, Prosper and Avant have spread a chill across the sector.

New data from Orchard, a technology and data provider based in New York, shows that volumes across US consumer-loan platforms slipped for a third successive quarter between July and September, dropping 21 per cent to $1.86bn. That was less than half of the peak in the fourth quarter last year.

Through measures such as these, Lending Club says it has lured back almost all of the banks and hedge funds that were active earlier in the year.

But buyers, rather than sellers, still have the whip hand, says Matt Burton, chief executive of Orchard. He notes that platforms have been offering discounts for volume, and sometimes sweetening deals with warrants and preferential servicing fees.

Lending Robot Files to Form Pooled Investment Fund (Crowdfund Insider), Rated: A

Lending Robot, the robo-advisor geared towards marketplace lending assets, has filed a Form D 506cwith the SEC indicating its intent to create a pooled investment fund. According to the filing, the minimum investment accepted will be $100,000.00 with no targeted max size of the fund.

United Kingdom

17 firms authorised to manage Innovative Finance Isas (Bridging&Commercial), Rated: AAA

A total of 17 firms have been authorised to manage Innovative Finance Isas (IFIsa) by HM Revenue and Customs as of 26th October 2016.

     Company name                                                                        Types of business

  • Abundance Investmnt Ltd                                                       Peer-to-peer
  • British Pearl Ltd                                                                        Property crowdfunding platform
  • Crowd2Fund                                                                              Crowdfunding platform
  • Crowdcube Capital Ltd.                                                           Crowdfunding platform
  • Crowd for Angels UK                                                                Crowdfunding platform
  • Crowdstacker Limited                                                              Peer-to-peer
  • London House Exchange (Property Partner)                       Property crowdfunder

Crowd2Fund was one of the first firms to offer the IFIsa and revealed that it had seen a growth of investors in the past six months.

(NOTE: This list represents only crowdfunding and P2P firms on the list. For the complete list, click the link.)

UK Government Commits To Invest £500,000 A Year In FinTech (PYMNTS), Rated: A

The U.K. is already a hotbed of FinTech startups, but the government is getting behind it in a bigger way, committing to invest £500,000 a year into financial technology companies.

According to a report, the U.K. government is also gearing up to launch a network of regional FinTech envoys as an effort to enhance the country’s status as a leader in FinTech. The funds, noted the report, will come out of the Department of International Trade.

European Union

ECrowd! raises more than €300K in second round of funding (Finextra), Rated: A

The debt crowdfunding – also known as crowdlending- platform ECrowd!, specializing in sustainable investments, has closed an investment round of € 307,900 through the online investment platform Crowdcube (equity crowdfunding).

This is the second round of funding which ECrowd! has closed in just over a year. In all, 135 private investors have participated in the round in exchange for 10.24% of the capital of the company. The largest investment was € 76,000, coming from a private professional investor.

Australia

LONGREAD: Why would you invest in fintech? (Bluenotes), Rated: AAA

As it stands today, fintech to date is not innovative or transformative enough and investment dollars are not sufficient to build a world-leading financial-services breakthrough.So let’s analyse the decimators. The World Economic Forum’s Cluster of Innovation Model provides one view of fintech and breaks the market into 11 major sectors and 33 market segments as shown below.

Total Fintech investment from 2009 to 2015 totalled $US43.9 Billion, including Venture Capital(VCs) and other investors such as private equity and crowd funding.

So let’s analyse the decimators. The World Economic Forum’s Cluster of Innovation Model provides one view of fintech and breaks the market into 11 major sectors and 33 market segments as shown below.

The key question is whether this level of investment is sufficient for major disruption. Uber, for example, has raised $US11.45 billion in funding and debt in 14 funding rounds since March 2009 and has had some success in some taxi markets – markets much smaller than financial services.

Total fintech investment by VCs from 2009 to 2015 is $US31.3 billion while total VC investments over same period is $US476.4 billion. Therefore, fintech is only 7 per cent of all VC investments – it is not a dominant category.

The major fintech angel-investing and start-up categories are:

Peer to Peer Lending: Lending to consumers using online, mobile and social media that matches lenders directly with borrowers.

SME and business lending: Mobile, online and social media lending services targeted at small-to-medium businesses.

Student loans: Direct lending to students using mobile, online and social-media channels.

Point of sale/online payments: Tech services targeting online payments, point of sale payments and related services .

Crypto currencies: Cyber or digital asset designed to work as a currency or a value exchange.

Digital banking: Retail banking using social media, mobile and web based services often supported by tools and rewards e.g. budget tools.

Local and international remittances: Remittances services for local person-to-person payments and international transfers using social media, mobile and the web

Wealth/investment and related tech: Investment and pension products using mobile, social media and the web.

Insurances and tech: Insurance and tech services using web, mobile and social media.

The leading segment is P2P Lending with $US5.2 billion followed by three segments – SME lending, POS/online payments and digital banking.

It is significant these nine segments total 67 per cent of fintech investment. It is likely therefore any major disruptor will emerge from these segments.

Fintech’s first decade is high on hype and spin but very low on delivering its ‘vision’ of a total disruption of financial services.

The modest level of investment to date – $US43.9 billion – is not enough to create the next financial service giant.The P2P example is salient. Launched when money was cheap, the sector has realised it is not quite easy to build a billion-dollar business.

China

China recovers over $ 1.5 billion of assets in online lending fraud case (Reuters), Rated: AAA

China has recovered more than 10 billion yuan ($1.5 billion) of illegal assets since launching a fraud investigation into an online lending platform, the official Xinhua news agency quoted the Beijing public security bureau as saying on Wednesday.

China’s police have seized nearly 300 million yuan in cash, 187,000 grams of gold, as well as real estate, jewelry, stock equities, luxury cars, and helicopters from online peer-to-peer (P2P) platform Ezubao, Xinhua said.

Why many SMEs are unhappy in Hong Kong (The Asset), Rated: AAA

One-in-five small and medium-sized businesses (SMEs) in Hong Kong are dissatisfied with the availability of finance and 57% of SMEs rate highly the importance of their main financial services provider in understanding how theirbusiness works.

Overall, only 20% of SMEs are using external financing sources such as bank loans, leasing, private equity and crowd funding. The bulk of funding for most Hong Kong SMEs are from the companies’ retained profits, which account for 53%, followed by savings (10%) and bank loans (8%). Bibby Financial analysts say that the most common avenue for SMEs to get bank loans is to pledge property or cash deposits as collateral. This explains why only a small proportion of SMEs get financed by banks or externally, as most of them lack excess assets for collateral purposes. Moreover,the research found thatreceivables financing accounts for just 2% of funding in Hong Kong, compared with 13% in the US. Bibby Financial analysts believe the significant gap may stem from Hong Kong SMEs’ lower awareness of factoring and similar trade financing tools, which are not yet common in the market where there is considerable room for growth.

WeiyangX Fintech Review (Crowdfund Insider), Rated: A

On November 15th, JD.COM announced it would transfer/sell all the shares it held in JD Finance.

On November 17th, Yonyou Network Co., Ltd announced it was jointly launching Zhongguancun Bank, which is the first private and digital-centered bank in Beijing, with ten other companies.

However, Gregory D. Gibb, co-chairman of Lufax said in a recent interview that robo-advisors in Chinese financial service market had yet matured.

The year of 2015 is regarded as a milestone of China’s equity crowdfunding industry—Internet giant Alibaba, JD.COM and 360 were all targeting this emerging market. In spite of the thriving prospect, the industry is still faced up with a number of problems:

  1. No special laws for industry regulation;
  2. Constrained by only two main profit models: commission fees and service fees;
  3. Filled with fund-raisers with high project risk;
  4. Non-professional or non-accredited investors with high possibility of blind investment;
  5. No general standard for funding project valuation;
  6. High level of information asymmetry;
  7. Difficulties in equity exits;
  8. Not sufficient attention attached on fund custody.

The P2P lending industry has experienced tremendous growth in the past years, yet only a few managed to be profitable. This is the same situation with China, which is now the largest P2P lending market in the world. Xue Hongyan, senior analyst at Suning Institute of Finance, said:

”According to public information, only 1% of the 2154 Chinese P2P lending platforms have managed to be profitable.”

Making P2P firm globally respected (China Daily), Rated: A

At the time of this interview, Tang Ning, founder and CEO of CreditEase Corp, one of China’s leading peer-to-peer or P2P lending and wealth management firms, was busy with his preparations to attend the Asia-Pacific Economic Cooperation or APEC Economic Leaders’ Meeting in Lima, Peru, this month.

He became the pioneer of P2P lending in China when he founded CreditEast in 2006. Under his stewardship, CreditEase has grown rapidly and has 100 billion yuan ($14.7 billion) in assets under management now.

Ten years on, CreditEase has four branches in the United States, Israel, Singapore and China’s Hong Kong. Tang visits the US up to three times a year to teach at Harvard University and Stanford University as well as interact with financial services industry leaders and venture capital institutions.

CreditEase Corp has set up the Fintech Investment Fund totaling $1 billion, half of which will be invested abroad.

QuantGroup closes $ 73m Series C led by Sunshine Insurance (Deal Street Asia), Rated: A

Fintech startup QuantGroup has closed a RMB500 million $73 million) Series C financing round led by Sunshine Insurance Group Corporation, Fosun Capital, Guosen Hongsheng Investment Co., Ltd., and other undisclosed investors.

QuantGroup, which operates via QuantGroup.cn, provides online financial services including credit-based consumption and IOUs. It previously raised an undisclosed series A funding round from Fosun Kinzon Capital, Banyan Capital and China Grow Capital and a series B round from Zhixin Capital, Star VC, Oriental Fortune Capital and others.

Canada

First Digital Lending Platform To Be Granted Exempt Market Dealer Licence By OSC (Mondaq), Rated: AAA

On September 28, 2016, Vault Circle Inc. (Vault Circle) announced that it had received approval by the Ontario Securities Commission (OSC) to operate as an exempt market dealer in Ontario.

The proceeds raised by Vault Circle from accredited investors will be used by Lendified Inc. (Lendified), an affiliate of Vault Circle, to provide alternative financing options to small and medium sized businesses (SMEs) in Canada.

The OSC initially set out its expectations for businesses planning to operate “peer-to-peer” lending websites on June 19, 2015, by highlighting the concern that such online platforms and their related activities may trigger the application of dealer registration and prospectus requirements under the relevant provisions of the Securities Act (Ontario).

MENA

2016/17 TRN Report: Top Exit Strategies of Real Estate Crowdfunding Platforms (MENAFN.com), Rated: A

Real estate crowdfunding (RECF) landscape has transformed rapidly over the past four years. It is much easier to become a real estate investor or developer today, than it was a few years ago. Also, the industry is now open to everyone wherever they are. The developments are making the industry more accessible, transparent, attractive and rewarding.

Most crowdfunding legislations passed and enacted so far have diminished the requirements for real estate investing.

Exit strategies make it easier for investors to leave a deal without necessarily having to pull out their money. One exit strategy is allowing investors to sell their property shares to willing buyers on a secondary market. These strategies made it easier for RECF investors to liquidate their investments.

Authors:

George Popescu
Allen Taylor

July 21st 2016, Daily News Digest

News Comments A lot of news today, and today we have an especially good international section. Please do pay attention to the Australian, Singapore and China sections in particular. (And Lending Times technical team reports that yes, Mailchimp has not answered any of the multiple requests for support from a paying client in 17 hours. […]

News Comments

  • A lot of news today, and today we have an especially good international section. Please do pay attention to the Australian, Singapore and China sections in particular.
  • (And Lending Times technical team reports that yes, Mailchimp has not answered any of the multiple requests for support from a paying client in 17 hours. We will send today’s newsletter by hand again using the older design template.)

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News Summary

 

United States

The marketplace lending market has received an influx of positive news recently, (Peer IQ), Rated: AAA

The WSJ reports that Moody’s removed Class C mezzanine bonds issued by CHAI 2015-PM1, 2015-PM2, and 2015-PM3 from downgrade review and confirmed Ba3 rating.

At the time of downgrade review in February, Moody’s cited a faster build-up of delinquencies and charge-offs than expected. Moody’s also increased the expected cumulative lifetime net loss from 8% to 12% (bringing revised estimates in-line with platform and market expectations).
As of the June 15, 2016 distribution date, losses on the CHAI 2015-PM1, 2015-PM2 and 2015-PM3 pools have reached 3.6%, 1.5% and 0.5%, respectively.
Improvement in Credit Spread on MPL ABS bonds
The ratings action was presaged by the ABS market which showed spread tightening from 1000 to 400 bps. Readers may seek to review the May month-end newsletter to see the analysis cited in the WSJ report:
PeerIQ credit spread on MPL ABS bonds
Leading up to the CHAI 2016 PM-1 offering in April, the culmination of ratings actions, regulatory chatter, delinquency fears, and volatile credit markets created an inhospitable environment for new deals. The auction resulted in limited participation and wide initial pricing–10.26% coupon priced to 12.5% yield on the CHAI 2016 PMI-1 C tranche.
Investors that bought the CHAI C tranche at new issuance without any leverage would have seen about 15% price appreciation in 3 months. Investors that performed the up-front credit work and applied analytics to separate the signal from headlines were able to earn outsized returns.
Dislocation creates opportunity
Ironically, the dislocation in recent months has created substantial investor interest in MPL ABS and whole loans. The CHAI 2016-1 PM1 offering prompted investors that were historically dismissive of marketplace lending to do a double-take
Repeat ABS investors are now looking upstream to capture additional whole loan economics.
Large asset managers with double-digit return objectives in a negative to low rate world are looking to strike bargains with platforms. There is still much more to be done. Nevertheless, the climate for establishing relationships with platforms may be as good as ever.

Little Change in LendingClub Loans Since Madden Decision, (BNA), Rated: A

So far, LendingClub loans haven’t changed in average interest rate or risk, either in the 2nd Circuit or nationwide.

Both the total number and value of loans and the amounts arranged through the company have only grown, not diminished, while average FICO scores measuring a borrower’s credit rating remain consistent, and internal loan grades have remained the same. One exception is that the average value of borrowers’ previously requested FICO score did increase steadily since the decision, even though FICO scores at the time of loan issuance did not.

LendingClub has also continued to arrange loans to borrowers in the 2nd Circuit that surpass the interest rate caps in those states. The Madden decision does not prevent national banks from providing loans above a state’s interest rate cap. Instead, it applies to debt collection agencies that purchase those loans.

Lending club changes after Madden vs Midland

As a result of the court’s decision, LendingClub in February renegotiated terms with WebBank—the Utah bank that originates all of the loans through the online service (40 BBD, 3/1/16)

Under the new arrangement, WebBank maintains ongoing accounts for the borrowers and receives regular payments from LendingClub—called “loan-trailing fees”—rather than a single lump sum fee on every loan it originates. The loan trailing fee is based on the total amount serviced by the bank and a “loan fee factor.” A LendingClub representative told Bloomberg BNA that the company does not publicly disclose the amount of the loan fee agreement with WebBank.

Different picture for Prosper

Prosper loan volumes

Representative for Prosper attributed any changes in lending to general market fluctuations but would not comment further for this story.

A 2009 paper from the Federal Reserve Bank of Atlanta said that loans sold into the secondary market through originate-to-distribute underperformed other loans by 9 percent. A 2010 academic paper funded by the FDIC’s Center for Financial Research also implicated the originate-to-distribute model in the subprime crisis.

Author and University of Michigan Finance Professor Amiyatosh Purnanandam told Bloomberg BNA that part of the problem with the originate-to-distribute model is that once the debt is sold, the originating bank has nothing at risk and the debt buyers don’t always have the skill in evaluating good borrowers as national banks do.

Jefferies revives stalled Lending Club bond: sources, (Reuters), Rated: AAA

Comment: We covered these news last week as well. At that time it was more of rumor. It seems it’s real news now.

Jefferies has revived its stalled Lending Club loan securitization in a club-style deal it has begun to pre-market to only a few select investors, two buyside sources with knowledge of the trade told IFR.

The bank is now looking to sell a two-tranche trade that could offer yields in the 4.25%-7% range, one of the investors said.

The top class of notes of slightly less than one-year were about 60% subscribed, while a longer 2-year tranche was already fully covered, the investor said.

The near-prime loan securitization was shelved after Lending Club said it had repurchased a US$22m pool of loans sold to Jefferies under Laplanche’s watch that included falsified documentation.

Goldman Sachs also hit pause on its potential bond sale of prime Lending Club loans.

But bankers told IFR that Goldman could now look to revive its bond deal, if the Jefferies trade finds favor with investors.

Goldman Sachs Sets Its Eyes on Retail Banking (GS), (Investopedia), Rated: AAA

Fast Start
According to the Wall Street Journal, more than 20,000 new customers have opened internet bank accounts with the Goldman unit since it launched three months ago. Unlike other Internet-only retail banks that tend to offer a wide range of services, Goldman’s products are geared towards long-term savings, and it solely offers its customers the option to open traditional savings and certificate of deposit (CD) accounts. As of July 20, 2016, the bank’s interest rate on online savings accounts was 1.05% while its interest rate on a 5-year CD was 1.85%. In many cases, these rates are a lot higher than what traditional banks pay their customers. For example, Wells Fargo (WFC), Citibank (C), Bank of America (BAC) and Chase (JPM) all pay less than 0.03% APY on regular savings accounts. GS Bank can offer above-average interest rates to its depositors because they do not have the overhead expenses of a typical brick and mortar bank. (See also, The Pros And Cons Of Internet Banks.)

Retail Diversification
For Goldman Sachs, savings accounts may not be as exciting as the main investment banking business. Yet, the company still benefits from expanding into retail banking, enabling Goldman Sachs to diversify its customer base and tap into a segment of the market, retail investors, that they have been unable to serve in the past. GS Bank will also help boost Goldman’s overall liquidity, and keep the company compliant with new regulations calling for more liquidity from financial institutions. Around the same time GS Bank was launched, the Federal Deposit Insurance Corporation (FDIC) proposed new rules that would require banks to own sufficient ‘‘easy-to-sell’’ assets that would be able to cover any and all liabilities coming due within a one year period. (See also: The History Of The FDIC.)

The Realities Of Alt-Lending Regulation Begin To Set In, (Pymnts), Rated: A

Comment: we covered this yesterday as head news. However it is so important that we would like to remind our readers just in case.

“I suspect more regulation will come to the space, and I think that will suit us well,” said PayPal VP and General Manager of Small Business Lending Darrell Esch in an interview with Forbes last year.

When asked by PYMNTS whether he was concerned about incoming regulation on the space, OnDeck Vice President of External Affairs and Associate General Counsel Daniel Gorfine simply stated, “No, not concerned.”

Reports from Bloomberg BNA this week, however, could signal a shift in how alternative lending players are reacting to the incoming threat of regulation.

“Strong evidence indicates that small business loans under $100,000 share common characteristics with consumer loans yet do not enjoy the same consumer protections,” the Treasury stated in its May report. “Treasury is willing to work with members of Congress to consider legislation that addresses both oversight and borrower protections.”

“I would have to do everything differently,” said CAN Capital Chief Legal Officer Parris Sanz in an interview with the publication. “I can’t give you a rundown of all the various moving parts that would be affected, but I can tell you for sure that it would be significant.”

In a separate interview with Bloomberg BNA, Richard Eckman, a partner at Delaware-based Pepper Hamilton LLP, said alternative lenders are probably wise to pay attention to this possibility.

REFILE-Marlette gets second ever online loan ABS over the line, (Reuters), Rated: AAA

Marlette Funding got its second-ever bond backed by personal loans easily over the line on Wednesday, but investors said the primary market was still wary of deals from the online lending industry.

Marlette’s deal narrowed its pricing from guidance, but investors said global low rates had turned all types of US consumer debt-related assets with yield into a hot commodity.

And similar deals from a year ago were pricing far tighter.

Marlette priced its top US$149m of 1-year Single A (rated by Kroll) notes at 225bp over EDSF, tighter than a 235bp-250bp area guidance, two investors said.

Last July, Citigroup cleared its top class of A3 (rated by Moody’s) bonds – one notch lower – of Prosper Marketplace loans at 140bp over EDSF, according to IFR data.

Riskier Ba3 notes from Citigroup priced at 385bp over interpolated swaps, whereas Marlette’s BBs Wednesday printed at a whopping 825bp over swaps.

By another measure, the BBs were about 75bp more than a deep subprime auto ABS sold this week by lender Consumer Portfolio Services, according to IFR data.

“Marlette’s business model ensures an alignment of interests among the company, the originating bank and institutional loan buyers,” Kroll Bond Ratings wrote in its presale report.

The hunt for yield, meanwhile, has prompted two banks with exposure to online loans to revive postponed deals in the primary market, buyside sources said.

Non-bank Jefferies has rekindled a roughly US$140m bond deal of near-prime Lending Club loans, which was shelved for two months after Laplanche stepped down from Lending Club.

Bankers said that Goldman Sachs could also look to bring out its paused prime-quality Lending Club deal after Jefferies.

United Kingdom

Oxford economist John Kay: Where the opportunities are for fintech, (Alt Fi Credit), Rated: A

Large scale financial services firms are still ripe for disruption, according to the economist John Kay, who believes the City of London and other major financial centres have taken a wrong turn.

Kay explains that he sees four main ways that fintech can be successful and help the real economy by disrupting financial services.

These are firstly; the payments system This is the system that enables the payment of wages and salaries as well as bills. Secondly; capital allocation. This how peoples’ savings become invested in the physical assets and infrastructure of a country. Risk management is third, i.e mitigating the risks of everyday life such as insurance. Lastly is wealth management in a broader sense.

Technology will take over a lot this spectrum and he argues wealth management “is an area of major disruption”, encompassing P2P lending/investing, robo-advice and other discretionary investment services. However, he says payments is the one that will most clearly disrupt things and change our lives. He thinks cash will “seem crazy” in 20 years’ time.

Kay has a sizeable investment in online investment management firm Nutmeg, however, which is one of the dominant players seeking to disrupt the fund management and wealth management industries although they have yet to announce a P2P/market place lending function.

City regulator warns on peer-to-peer lending, (Financial Times), Rated: A

Chris Philp, a Conservative MP on the Treasury committee, said many consumers do not understand the dangers they are exposed to through P2P.

He said the way P2P sites are paid fees without taking on the risk of loans on a balance sheet is akin to the securitisation of subprime loans before the financial crisis.

Mr Bailey said in response, “I agree with you on the risks”.

Mr Bailey noted that although some platforms have so-called reserve funds to pay out to investors in the event that borrowers default, there is “no guarantee in that fund”.

European Union

Renowned investor Peter Thiel increases investment in leading European fintech, Deposit Solutions, (Press Release), Rated: AAA

Prominent venture capital firms today announce they have invested €15 million in European fintech company Deposit Solutions GmbH, a fast growing fintech innovator operating in the €9 trillion market for retail deposits in Europe.

The key highlights include:  PayPal co-founder and Facebook’s first outside investor, Peter Thiel, and German leading fintech investor FinLab jointly increase their share in the company  US investor Greycroft Partners, the global growth fund of e.ventures as well as Valar Ventures come on board as three new partners  The funding round increases the valuation of Deposit Solutions to €110 million.  This is the second successful investment round for Deposit Solutions within a year, following last year´s investment into the Company of €6.5 million. Since then the valuation of the company more than quadrupled.  The funds raised will be used to further develop the proprietary technology platform and continue Deposit Solutions´ international expansion, having already recently expanded to the UK and Switzerland.  Deposit Solutions will increase the number of employees at its UK HQ in the City of London and is expected to launch its retail platform in the UK in 2017.

“We are seeing substantial demand from banks looking to offer their clients attractive deposit products under the existing account relationship. As a result we have gained access to millions of clients and billions of deposit appetite in a very short amount of time. This in turn is very attractive to banks wanting to raise deposits through our platform.”

Max von Bismarck, Chief Business Officer and Managing Director of Deposit Solutions, said: “We address an important structural problem in European banking today for banks and retail customers: Many banks are unable to offer attractive interest rates to their clients. At the same time other banks find it difficult and costly to gain access to retail deposit funding. Our platform provides a solution for both while savers find it easier to get access to better rates.”

ECrowd! Spanish Crowdlending Platform Receives License by the CNMV, (Crowdfunding Insider), Rated: A

Debt-based crowdfunding platform ECrowd! is one of the first Spanish sites to receive a formal operating license from the Comision del Mercado de Valores (CNMV), the securities regulatory agency in Spain. ECrowd!, based in Barcelona, has joined Crowdcube Spain, Lendix and MyTripleA in receiving official approval as a Collaborative Finance Platform under regulations enacted in 2015.

They were on track to achieve 100% growth during 2016. [Comment: Some authors have issues with important verb tenses, it is unclear if the author meant they are or they were.]

Switzerland

The era of Crowlending opens new market for startups, (Startup Ticker), Rated: AAA

In Switzerland significant growth in Crowdlending was achieved in the previous year. The Crowdfunding monitoring report 2016 published by theUniversity of Applied Sciences Luzern early this year reported a significant increase in the total amount of money raised through Crowdlending in the year 2015. A total sum of CHF 7.9 Million was collected through crowdlending with a growth rate of +126%. 266 campaigns were financed. Crowdlending has continued to become more popular not only among start-ups but also among investors.

The crowdlending market in Switzerland is booming and has opened new opportunities for entrepreneurs. New startups operating crowdlending platforms are been established and many projects have been successfully financed. Today, there are 7 crowdlending platforms: the pioneer Cashare for both SMEs and private ventures, CreditGate24 for private and institutional investors, creditworld for both private and on SME loan, Lend, splendid that is specifically focusing on education loans,swisspeers for SMEs and Wecan.fund for SMEs. Other platforms – such as Miteinander-Erfolgreich and Raizers – also operate alongside other models as crowdlending platforms.

India

India’s Mywish Marketplaces raises $ 15 M to expand to new financial products, (Tech Crunch), Rated: AAA

This isn’t a huge round compared to what other companies have closed, but it is entirely strategic. The capital was proved by Franklin Templeton, the U.S. banking giant with more than $700 billion in assets under management. Puru Vashishtha, who is board director at Mywish Marketplaces, told me in an interview that the company didn’t need to raise the funds and it wasn’t short of interest, but it did so for growth opportunities and was very deliberate with the capital that it did close.

“We were chased by a lot of venture capitalists and investors globally,” Vashishtha said. “Because we were profitable, we did not need to raise a lot and didn’t want to dilute too much too soon — that’s one of the reasons we chose Franklin Templeton. Also, Franklin Templeton has built a very big emerging market business, we want to leverage the experience and leadership of their team.”

To backtrack a little, Mywish Marketplaces operates Deal4Loans, a price comparison and loan aggregation website in India. Its products include credit cards, home loans, business loans and personal loans.

Like Credit Karma in the U.S. and countless others worldwide, it works with banks, credit card companies and other financial institutes to help drive customers, while for its users, it tries to provide a holistic look at financing option and which one suits best for each case. The Deal4Loans site claims to have served more than 6.3 million “satisfied” customers, while the company says it has dispersed a total of $2 billion loans in the last six years at a current rate of $400-$450 million per year.

So why is this profitable company — profitable from day one, it claims — raising money?

I hinted at it earlier, but Mywish Marketplaces wants to expand into more verticals with new financing products for Indian consumers.

P2P lender Faircent makes strategic C-suite appointments, (Economic Times), Rated: B

India’s largest peer- to- peer (P2P) lending marketplace, Faircent.com, on Wednesday announced the appointment of Shivam Gupta, who was a part of the global risk management team of Standard Chartered Bank based in Singapore, as chief risk officer and Karun Thareja, who was a part of the leadership at an analytics startup called WyzMindz, as head of marketing.

Thareja, on the other hand has extensive experience in Marketing, Sales and Business Management spanning more than 20 years. His domain expertise includes Analytics, Enterprise Systems, Contact Center Management and Process Management. In his prior roles he has led multi-fold growth in business units at companies like IBM, Microsoft, Oracle, Dassault Systems and NIIT.

Singapore

Online lending platform to offer investor insurance, (Straits Business), Rated: AAA

Online peer-to-peer funding platform Validus Capital has partnered home-grown insurance provider EQ Insurance to offer investor protection on some of the financing it provides to small and medium-sized enterprises (SMEs).

It will be the first platform in Singapore to provide investor insurance on its invoice financing services, the company said.

The platform, which was founded last year, has had a zero-per-cent default rate to date thanks to its “rigorous due diligence”, the company said. In the last few months, the company has had 27 SMEs approved for invoice financing services, each with an average revenue of $5 million.

Mr Prakash Somosundram, co-founder of Pealo – an aggregated marketplace for SMEs to access working capital – said the firm is looking into investor protection products. “This will definitely help us to attract more investors, and more people will see this form of investing as an asset class,” he added.

Pealo’s platform was launched in January – 300 SMEs have signed up and there are 46 live campaigns under way.

Mr Brian Teng, chief executive of InvoiceInterchange – which allows SMEs to put up their unpaid invoices for auction – also said the platform hopes to eventually make insurance available to investors.

Mr Teng declined to reveal how many SMEs have used the platform, but said there is significant room for invoice financing to grow as a source of funds for SMEs here.

“The penetration rate of invoice financing in Singapore is still low when compared with nations like Britain and the United States,” he noted. The company has funded $4 million of invoices since its launch in 2015.

Mr Roger Crook, chief executive of Capital Springboard – which runs a crowdfunding platform for invoice financing – said more than 100 SMEs have used the service.

The platform has funded over $85 million worth of invoices over the past year, with over 50 accredited and institutional investors taking part.

Australia

Online home loan marketplace exceeds billion in loans, (Broker News), Rated: AAA

HashChing, an online home loan marketplace, has surpassed $1 billion of home loans as momentum builds for the Sydney fintech company. The platform officially launched in August 2015 with just a few brokers on board across Australia. Now, more than a billion dollars’ worth of loans have been received and more than 1,200 mortgage brokers across the country have signed up. The platform works as an online marketplace connecting consumers to mortgage brokers.

“Customers aren’t just looking to save time. The key to our success is that our offer extends far beyond convenience. We’re able to offer pre-negotiated home loan deals from different lenders with equal features, the same products, but with an even better rate,” Sodhi, co-founder and CEO said.

Narang, co-founder and CIO added: “Our broker registration process has been automated to make it really easy and quick by allowing them to digitally sign the contract which instantly activates their account and saves the paper clutter at both ends.”

As the platform continues to build momentum, Sodhi and Narang have welcomed Claire Wivell Plater of The Fold Legal to their advisory board. Wivell Plater is a long standing member of the Business Advisory Committee to ASIC’s Licensing Division and was recently appointed to the Treasurer’s Fintech Advisory Group.

Narang explains HashChing 2.0 will involve more intelligent use of analytics for a better consumer experience.

China

How Chinese Search Giant Baidu Is Getting Deeper Into Banking, (Fortune), Rated: AAA

Chinese search giant Baidu is investing more deeply in financial technology startups as it seeks to expand its own lending efforts.

On Monday, Baidu announced an investment in ZestFinance, a startup taking on the credit scoring industry by using machine learning and a wide variety of data about borrowers to rate their ability to repay loans.

While the amount of the backing was not disclosed, Baidu also invested Bitcoin payments startup Circle Internet Financial last month, the Nikkei Asian Review reported on Wednesday.

Both investments followed Baidu’s decision last year to form an online bank in partnership with Citic Group’s banking unit. The new bank would be the first in China that “truly understands both the Internet and financial services,” Baidu CEO Robin Li said at the time.

Baidu had also made several notable hires from the finance sector, the Nikkei paper reported, including executives with experience from American Express , online financial marketplace Lufax, and Everbright Bank in China.

While online lending sites like Lending Club LC -0.22% have faltered in the United States, the market is strong in China. The peer-to-peer lending market reached almost $67 billion last year, the largest in the world, Nikkei reported citing data from Citigroup.

Baidu will use ZestFinance’s credit rating technology to assess the creditworthiness of its own users. Unlike the U.S., China lacks centralized credit bureaus, and only a small portion of the population has a credit card.

Author:

George Popescu
George Popescu