- Today’s main news: RateSetter receives full FCA approval. PayPal’s market value eclipses American Express’s. Lending Club files 8-K entry into material definitive agreement. Some of Zopa’s loans are up for sale by P2PGI. Hexindai sets terms for U.S. IPO. PolicyBazaar becomes most-funded insurance aggregator worldwide.
- Today’s main analysis: Big bank earnings, IMF global growth forecast. Betterment vs. Wealthfront.
- Today’s thought-provoking articles: Ron Suber declares this the Golden Age of Fintech. Busy quarter in fintech deals. Mortgage startups: Blurring the lines between old and new capital strategies. High income homes hit hardest by UK inflation.
- PayPal nearing market value of Goldman, Morgan Stanley. AT: “PayPal’s steady growth is paying off. This is a company that has stayed true to a long-term vision. Popular in the U.S. it could someday be the world’s favorite payment processor.”
- Ron Suber says we are in the golden age of fintech. AT: “If the fintech age began with PayPal in 1998 and the ‘golden age’ is the middle 10 years, that means the best is yet to come.”
- LendingClub files 8-K for material definitive agreement. AT: “This is a $250M credit facility.”
- Bank earnings of JP Morgan, Citigroup, Bank of America, and Wells Fargo. AT: “Despite fintech disruption, the top banks in the U.S. are doing well.”
- A busy quarter for fintech deals. AT: “This may be the first time I’ve seen P2P lending lumped in with banking.”
- Robo-advisor comparison: Betterment and Wealthfront. AT: “The interesting analysis is AUM vs. AUM. Betterment has a higher total while Wealthfront has a higher AUM per client. But there’s more–a lot more.”
- SoFi hasn’t completely bailed on its bank aspirations. AT: “They evidently believe their chances for getting a banking license will improve if they back up five and punt.”
- Barclays CEO says bank must protect payments business from Apple, Amazon.
- LendingHome to ramp up originations by raising $450M.
- Pefin uses AI for comprehensive financial advice.
- BlueVine rceives $130M in debt financing, business line of credit with monthly payments.
- Fintech moves beyond lending.
- Community banks take swing at fintech collaboration.
- Senate Dems claim Noreika serving as Office of the Comptroller of the Currency illegally.
- Why Trello didn’t fail to become a unicorn. AT: “A profit is a profit. In other words, don’t chase a status symbol; build a business.”
- Companies are owned less and creating more value. AT: “Interesting read. Although not specifically about alternative lending, there is a lesson here for alternative lenders. Digital assets are on the rise, so we’re all in the right place.”
- Congress should fix Madden v. Midland.
- Alt lending’s Achilles heel: reaching low-income consumers.
- Wall Street vet joins PeerStreet.
- Centana Growth Partners hires senior management.
- Kansas goes after student loan scammers.
- RateSetter receives FCA approval. AT: “We’ve been waiting for this for a long time. Congratulations.”
- Some of Zopa’s loans are up for sale.
- High income homes hit the hardest by inflation.
- Welendus receives full FCA approval.
- How Moneyfarm is changing wealth management.
- Collaboration benefits banks.
- Future of Fintech Awards shortlist.
- SMEs ignore credit scores.
- Wonga appoints Epiphany to assist with brand perception.
- PolicyBazaar raises $77M at $500M valuation.
- KrazyBee raises $8M to enter payday lending.
- P2P lending, borrowing limits.
- Markel International launches insurtech platform for Asian market.
- Baker McKenzie poaches partner from Gilber + Tobin. AT: “With experience in P2p lending, securitization, smart contracts, and the blockchain.”
- United States
- PayPal’s Market Value Eclipses AmEx, Nears Morgan Stanley, Goldman (WSJ), Rated: AAA
- Ron Suber: We are in the Golden Age of Fintech (Crowdfund Insider), Rated: AAA
- LendingClub Corporation (NYSE:LC) Files An 8-K Entry into a Material Definitive Agreement (Market Exclusive), Rated: AAA
- IMF Raises Global Growth Forecast, GS Enters Fix-and-Flip, Deep Dive on Big Bank Earnings (PeerIQ), Rated: AAA
- It Was a Busy Quarter for Deals in Fintech (Bloomberg), Rated: AAA
- Robo-Advisor Teardown: How Betterment And Wealthfront Stack Up (CB Insights), Rated: AAA
- Mortgage startups blur lines between old and new capital strategies (National Mortgage News), Rated: AAA
- SoFi Bails On Being A Bank (PYMNTS), Rated: A
- Barclays CEO Says Bank Must Protect Payments Business From Apple, Amazon (Bloomberg), Rated: A
- LendingHome adds $ 450 million to ramp up originations (National Mortgage News), Rated: A
- Pefin Leverages Artificial Intelligence To Provide A Comprehensive Set Of Financial Advisory Services (Superb Crew), Rated: A
- BlueVine Expands Reach With up to $ 130 Million in New Debt Financing, Business Credit Line With Monthly Payments (PR Newswire), Rated: A
- Fintech market moves beyond lending (Financial Times), Rated: A
- Community Banks Take A Swing At FinTech Collaboration (PYMNTS), Rated: A
- SENATE DEMOCRATS CLAIM A TOP BANKING REGULATOR IS SERVING ILLEGALLY IN HIS POSITION (The Intercept), Rated: A
- No, Trello Didn’t “Fail To Build A Billion Dollar Business” (Medium), Rated: A
- Companies Are Owning Less And Creating More Value (Forbes), Rated: A
- Congress Should Fix Fintech Lending Model (Competitive Enterprise Institute), Rated: A
- Fintech’s Achilles heel: Reaching low-income consumers (American Banker), Rated: A
- Wall Street Veteran Joins PeerStreet To Lead Capital Markets Team (BusinessWire), Rated: B
- Centana Growth Partners Expands Investment Team with Senior Hires (BusinessWire), Rated: B
- Kansas AG’s office targeting student loan scammers (WIBW News Now), Rated: B
- United Kingdom
- UK Peer-To-Peer Lender RateSetter Receives FCA Regulatory OK (The New York Times), Rated: AAA
- P2PGI puts portion of Zopa loans up for sale (P2P Finance News), Rated: AAA
- Inflation hitting higher income households hardest (P2P Finance News), Rated: AAA
- Payday P2P lender Welendus receives full FCA approval (P2P Finance News), Rated: A
- Moneyfarm is changing the face of wealth management (City A.M.), Rated: A
- Collaboration brings benefits to business at every level, say bosses (The Yorkshire Post), Rated: A
- Future of Fintech Awards shortlist 2017 (Financial Times), Rated: A
- SMEs are ignoring their credit score (P2P Finance News), Rated: A
- Epiphany appointed by Wonga to help with brand perception (Prolific North), Rated: B
- Chinese peer-to-peer marketplace Hexindai sets terms for $ 58 million min-max US IPO (NASDAQ), Rated: AAA
- European Union
- Credimi: four asset management funds renovate and increase the commitment up to €72.5 million (Credimi Email), Rated: AAA
- Lenddo and EFL Team Up to Lead Financial Inclusion Revolution (Lenddo Email), Rated: A
- Australian banking doesn’t need Google to be competitive (Financial Review), Rated: A
- Online Lender Prospa Forms New Partnership With Retail Marketplace MyDeal (Crowdfund Insider), Rated: A
- PolicyBazaar Raises $ 77M at a $ 500M Valuation (Coverager), Rated: AAA
- Micro-lending startup KrazyBee raises $ 8M, plans to enter payday-loan segment (YourStory), Rated: A
- Lending and borrowing limits on peer-to-peer lending platforms (Livemint), Rated: B
- Markel International Launches Fintech Insurance for Asian Market (Insurance Journal), Rated: A
- Baker McKenzie snags top G+T partner (Australasian Lawyer), Rated: B
- SA’s Retailer Pick n Pay Reaches 200 000 Money Transfer Users (Tech Financials), Rated: AAA
PayPal’s Market Value Eclipses AmEx, Nears Morgan Stanley, Goldman (WSJ), Rated: AAA
PayPal Holdings Inc. PYPL +0.04% vaulted over American ExpressCo. AXP -0.20% in terms of market value this week, punctuating a rally that has pushed up the payments company’s shares by nearly 75% since the start of 2017.
Its market capitalization stands at about $83 billion, nearly double the $47 billion value it had when it spun off from eBay Inc. a little over two years ago.
PayPal, which reports earnings on Thursday, now trades at a multiple of about 32 times forward earnings, according to FactSet. So although its market value is about half that of Mastercard Inc. and about two-fifths that of Visa Inc., its earnings multiple is far dearer. Visa trades around 27 times forward earnings and Mastercard is around 29 times. AmEx, meanwhile, trades just shy of 15 times.
Ron Suber: We are in the Golden Age of Fintech (Crowdfund Insider), Rated: AAA
So what exactly is the “Golden Age of Fintech”?
Ron Suber: Innovation cycles take 50 years. PayPal started it in 1998, Lending Club and Prosper accelerated it in 2006 by giving people reasons to borrow and lend online … similar to how AOL and EBay gave people reasons to go on the World Wide Web in the early internet days. And now we are in the Golden Age of Fintech which is the middle 10 years of the 50 year innovation cycle.
How does this fit with the online lending space? Can early MPL/Online Lenders remain competitive? And what do they need to do to remain competitive?
Ron Suber: Yes, The keys (KPI’s = key performance indicators) continue to be:
A) Loan Performance
B) Equilibrium between capital and borrowers
C) Committed Long term, low cost of capital
D) Unique, diversified and low cost methods of acquiring borrowers
E) Increasing Life Time Value (LTV) with multiple loans and additional products
F) Platform efficiency, customer experience and profitability
G) Scale and Brand.
What is next for you? Was Lend360 really your final appearance as the “Godfather of Fintech”? Or is this the intermission before the next act?
Ron Suber: Lend360 was my last presentation in North America … I am heading back to Australia and Southeast Asia for the remainder of the year … then to Patagonia for a Q1 vacation and then onto Africa to do some teaching about lending and entrepreneurship with Opportunity International (OI). OI provides entrepreneurs around the world with access to loans, savings, insurance and training – tools that empower them to work their way out of poverty…..a hand up, not a handout.
[Editors Note: Ron has created his own “Rewirement” web site available here.
LendingClub Corporation (NYSE:LC) Files An 8-K Entry into a Material Definitive Agreement (Market Exclusive), Rated: AAA
On October 10, 2017, LendingClub Warehouse I LLC (“Warehouse”), a wholly-owned subsidiary of LendingClub Corporation (the “Company” or “Lending Club”), entered into a Warehouse Credit Agreement (the “Warehouse Agreement”) with certain lenders from time to time party thereto (the “Lenders”), a large commercial bank as administrative agent (the “Administrative Agent”), and a national banking association as the collateral trustee (in such capacity, the “Collateral Trustee”) and as paying agent. to the Warehouse Agreement, the Lenders agree to provide a $250 million secured revolving credit facility (the “Credit Facility”) to Warehouse, which Warehouse may draw upon from the Credit Facility closing date until the earlier of October 10, 2019 or another event that constitutes a “Commitment Terminate Date” under the Warehouse Agreement. Proceeds under the Credit Facility may only be used to purchase certain unsecured consumer loans from the Company and related rights and documents and pay fees and expenses related to the Credit Facility.
IMF Raises Global Growth Forecast, GS Enters Fix-and-Flip, Deep Dive on Big Bank Earnings (PeerIQ), Rated: AAA
During an unusual period of global synchronized growth, the IMF raised its Global Growth Forecast for 2017 and 2018 by 10 bps to 3.6% and 3.7%, respectively. The IMF also named nine banks that will struggle to achieve profitability.
In securitization news, Marlette Funding Trust 2017-3 is expected to close at the end of October with $298 Mn in loans. MFT 2017-3 is the fifth ABS from this platform and the fourth on the MFT shelf (the first was on Citi’s CHAI shelf).
In this week’s newsletter, PeerIQ dives into the earnings and loan loss provisions for the major money center banks.
The big money center banks released earnings this week to a mixed reception although YTD stock performance is strong. FICC trading revenues were down year-over-year across the board. ROE levels for the big banks remain mired in the low double-digit area or lower.
- JP Morgan is currently the largest US Bank ranked by total US Deposits, which has grown 9% year over year.
- JP Morgan credit card costs were up about $200 Mn year-on-year driven by the successful Sapphire launch, and higher net charge-offs.
- Q3 2017 provision for credit losses was $1.5 Bn, up from $1.3 Bn in the prior year. Currently at 3.3%, credit card allowance to total loans rose every quarter this year.
- Citi built approximately $500 Mn in card loan loss reserves this quarter:
- $150 Mn from regular seasoning and volume growth.
- $50 Mn from hurricanes and other natural disasters.
- $300 Mn attributable to forward-looking NCL expectations.
- Citi expects NCL rate on branded cards to increase 10 bps in 2018 to 295 bps.
- Citi shifted away from rewards oriented products and more towards value products due to heavy competition in rewards products (see Chase Sapphire Reserve). These cards typically have non-yielding promotional balances in the near term.
Bank of America
- Quarterly profit rose 13% year over year.
- Provision for loan losses increased by nearly 15% quarter over quarter while allowance for loan losses decreased 1.7% over the same period.
- Allowance for loan losses as a percentage of total loans decreased to 1.15% from 1.19% last quarter and from 1.29% last year.
- Wells Fargo was the only reporting bank that had decreasing negative returns YTD and a ROE decline YOY.
- Revenue fell 2% year over year, and Wells is the only reporting bank to have falling revenues.
It Was a Busy Quarter for Deals in Fintech (Bloomberg), Rated: AAA
Traditional Wall Street firms are keeping financial technology humming as they set their sights on developing technologies of their own. The third-quarter saw the second highest financing deal count ever, with 412 total transactions, according to a report from investment bank FT Partners.
Still, some areas are hotter than others. Banking — which includes peer-to-peer lending — and payments reported the most deals in the period. The largest was Softbank Group Corp.’s $250 million investment in online lending startup Kabbage Inc. Payments startups Toast Inc. and Raise Marketplace Inc. were also in the top 10 deals with $101 million and $60 million investments, respectively.
Robo-Advisor Teardown: How Betterment And Wealthfront Stack Up (CB Insights), Rated: AAA
In the battle for assets under management (AUM), incumbent wealth management firms have faced significant pressure from insurgent robo-advisors, as investors have poured over $1.6B into robo-advisors across 151 investments since 2013.
The two largest of these robo-advisors, Betterment and Wealthfront, have collectively raised $405M in aggregate funding to date and have both voiced the long-term goal of going public. Nearly a decade after launch, Betterment and Wealthfront together manage approximately $15.9B of assets for over 495K client accounts.
Some of the key takeaways from our analysis include:
- Betterment continues to outpace Wealthfront in client accounts. As of Q1’17, Betterment managed approximately 330K accounts, nearly 2X as many accounts as Wealthfront (at 165K accounts).
- Wealthfront has a higher growth rate than Betterment. As of their respective filings in Q1’17 and Q2’17, Wealthfront had added 65K accounts, representing 65% growth, while Betterment added 52K accounts and grew 19%.
- Betterment has raised more than 2X the amount of funding as Wealthfront. Betterment has raised $275M total as of its latest investment (a $70M Series E – II round in Q3’17), while Wealthfront has raised $129.5M as of its last funding (a $64M Series D in Q3’14).
- Betterment has taken the lead over Wealthfront for total AUM since 2015.
- Wealthfront has consistently had a higher AUM per client. Wealthfront clients average $40.9K per account, compared to Betterment’s account average of $27.4K.
CLIENT ACCOUNTS: WEALTHFRONT COULD SURPASS BETTERMENT IN 3 YEARS
An analysis of the data shows that while Betterment leads Wealthfront in number of client accounts today, Wealthfront’s higher growth rate suggests that Wealthfront could surpass Betterment within 3 years. Wealthfront added 65K accounts in H1’17, representing 65% growth, while Betterment added 52K accounts and grew only 19% over the same period.
Comparing average AUM per client, Wealthfront has consistently had a higher AUM per client ($40.9K invested per account, vs. Betterment’s average of $27.4K), and as it continues to add additional services like PATH and the portfolio line of credit, that average could grow over time.
ASSETS UNDER MANAGEMENT (AUM): BETTERMENT GROWTH SLOWS
Betterment grew AUM by approximately 13% since their last filing, their slowest quarter for growth. Again, this comes on the heels of the backlash against changes in Betterment’s fee structure in Q1’17. In contrast, Wealthfront set a new record for AUM growth in Q2’17, adding approximately $1.76B in AUM since the previous quarter. This was Wealthfront’s largest quarterly dollar increase in AUM.
Mortgage startups blur lines between old and new capital strategies (National Mortgage News), Rated: AAA
Marketplace lending is, in many respects, an evolution of the privately funded mortgage market, which has co-existed with mainstream lenders without posing much threat for years.
Technology used by marketplace lenders offers deeper insights and transparency into transactions, while more easily connecting investors and borrowers in disparate locations.
LendingHome has raised $110 million in venture capital since it was founded in 2013 and is looking for more. It’s done six bridge-loan securitizations totaling $183 million and has a marketplace lending vehicle where accredited investors can purchase fractional interests in loans.
This suggests that the legacy of fintech and marketplace lenders will not be defined by drawing lines between this new breed of lenders and mainstream incumbents, but rather by how those lines are blurred.
Income&, while reaching out directly to investors, is working to serve retirees potentially more interested in accessing the mainstream mortgage market’s lower-risk cash-flows than taking on more risk in order to reach for yield the way marketplace lenders’ investor bases tend to.
The company structures the investments through a twist on traditional securitization.
SoFi Bails On Being A Bank (PYMNTS), Rated: A
“With SoFi’s leadership in transition, we’re withdrawing our application with the FDIC for now,” SoFi spokesman Jim Prosser said in a statement to Reuters. “A bank charter remains an attractive option when the time is right. This decision does not change our plans to make deposit accounts available through partner banks in the near future.”
Barclays CEO Says Bank Must Protect Payments Business From Apple, Amazon (Bloomberg), Rated: A
Barclays Plc will need to defend its advantages in the payments business from encroachment by technology companies including Amazon.com Inc. and Apple Inc., according to Chief Executive Officer Jes Staley.
LendingHome adds $ 450 million to ramp up originations (National Mortgage News), Rated: A
A fund LendingHome began setting up earlier this year raised $100 million in commitments and established a $300 million credit facility that brings its total potential assets to $400 million.
LendingHome Opportunity Fund II is committed to buying more than $1 billion in high-yield bridge loans over a two-year period, but the company also will continue to sell loans to other investors through other existing channels.
Pefin Leverages Artificial Intelligence To Provide A Comprehensive Set Of Financial Advisory Services (Superb Crew), Rated: A
Q: Catherine, what is Pefin?
A: Pefin understands a user’s complete financial situation, including their current spending patterns, their debt and investments and their goals. An interactive chat experience helps users plan for life events that matter to them- like buying a home, having kids, sending them to college, and retiring in comfort. Pefin then incorporates the economy, markets, social security rules, federal and state taxes and much more to craft a thorough financial plan tailored to each user, showing the affordability of their plans. It provides ongoing advice on how they can save to achieve their plans, when they should repay debt, and whether investing is appropriate. If it is, Pefin also offers investment advice and portfolio management services through its SEC regulated subsidiary, Pefin Advisors. Pefin does not require that users invest through its platform, but if they choose to do so, it tailors each portfolio to help users achieve their plans.
Q: Who are the primary users of Pefin and what are some of the key challenges you are helping them solve?
The typical human advisor charges between $2,000 – $,5000 for a one-time financial plan and being static, it is obsolete moments after it is created. Robo-Advisors, while affordable, are unable to offer a comprehensive financial plan, instead focusing on recommending a generic portfolio (one of 10 or so static investment portfolios), primarily based on a risk level the user picks. Pefin’s AI stays on top of 2-5 million data points per user and updates plans real-time, ensuring the advice users receive is current and anything but generic. And Pefin does all this, for $10 a month. As for investments, Pefin requires no minimum investment size, and fees are 0.25% of assets under management, with the first $5,000 managed for free.
Q: Can you give us more insights into your Artificial Intelligence powered solution?
The neural network understands these financial rules and relationships, and propagates them forward in time, up to 80 years depending on the age of the client. The network starts with a user’s current finances and projects how they change over time with market conditions, inflation, taxes, government rules, and their plans. For any given user, the network evaluates anywhere from 2-5 million data points, depending on the complexity of their financial situation and financial plans are available 24/7.
BlueVine Expands Reach With up to $ 130 Million in New Debt Financing, Business Credit Line With Monthly Payments (PR Newswire), Rated: A
BlueVine is expanding its reach in online business lending with new debt financing of up to $130 million and a new additional line of credit product that allows business owners to make monthly, instead of weekly, payments, over 12 months.
BlueVine secured major funding as the company rolls out a 12-month business line of credit based on monthly payments, a new offering that would make it easier for business owners to meet their everyday funding needs.
BlueVine introduced the new product in response to client requests for a longer-term business line of credit with monthly payment plans. The new financing underscores the fintech pioneer’s commitment to innovation based on customer needs.
The new product gives business owners 12 months to repay each withdrawal in full, meaning lower payments each month.
Fintech market moves beyond lending (Financial Times), Rated: A
Goldman Sachs, arguably the world’s leading investment bank, has not been the greatest success story of recent times. After all the challenges of the 2008 financial crisis and the post-crisis regulatory glut, its profitability has declined sharply.
Today its stock market valuation, though far stronger than most banks, puts it on a so-called price-to-book valuation of 1.1 times. That is to say, its shares are worth 10 per cent more than the value of its net assets.
Compare that with the market’s view of Lending Club, the upstart peer-to-peer lender. Despite a scandal last year founded in slipshod controls, and a fall in the group’s share price from a 2015 high of more than $25 to barely a fifth of that today, it is relatively far more valuable than the Wall Street titan, with a price-to-book multiple of 2.6 times.
All that has yet to follow is a re-rating of Goldman stock — from bank to fintech. Though with barely $1bn of Goldman’s near $1tn balance sheet so far devoted to online lending, it may have a while to wait.
In a sign that the fintech business is maturing into more sophisticated areas, “regtech” is among the fastest-growing areas, accounting for a chunk of applications to the Future of Fintech awards.
Community Banks Take A Swing At FinTech Collaboration (PYMNTS), Rated: A
Community banks are typically a better bet for small businesses in search of a loan, with approval rates higher than those at larger financial institutions. But the latest data on SMB lending in the U.S. suggests a shift is ahead.
Earlier this month, Biz2Credit released its monthly Small Business Lending Index and found that approval rates at large banks increased more than they did at smaller community banks. And while community banks’ SMB loan approval rates are still higher than those at large banks (49.1 percent compared to 24.8 percent, respectively), separate analysis from the Federal Reserve, also published earlier this month, concluded that community banks are beginning to reexamine how small businesses fit into their broader loan portfolios.
The Fed found that small business lending at community banks actually declined in 2016, while SMB lending at big banks increased over the same period.
SENATE DEMOCRATS CLAIM A TOP BANKING REGULATOR IS SERVING ILLEGALLY IN HIS POSITION (The Intercept), Rated: A
SIX SENATE DEMOCRATS have asked the Treasury Department’s inspector general to investigate whether Keith Noreika, head of the Office of the Comptroller of the Currency, is illegally serving in office.
Noreika planned to serve temporarily until Joseph Otting, former CEO of OneWest Bank and Trump’s nominee for the OCC, was confirmed. But that hasn’t happened yet; Otting’s nomination has sat on the Senate calendar for over a month.
Special government employees are limited to 130 days of service over a 365-day period. The OCC contends that the number only refers to business days, meaning weekends can be taken off and Noreika still has until November to go. But “business days” appears nowhere in the statute.
No, Trello Didn’t “Fail To Build A Billion Dollar Business” (Medium), Rated: A
I’ve seen a lot of folks passing around that article about how Trello failed to build a billion dollar business. It’s stunningly obtuse.
The premise is that the software that was sold for a $400m acquisition was a failure because it wasn’t worth $1b.
When Fog Creek spun Trello off as its own entity, the amount of money they raised was $10m. That was the only money they ever raised, and it was all they needed to raise.
For almost anyone with a sincere connection to reality, a $400,000,000 exit is an amazing win.
The “Trello Failed” take is not only wrong…
Really, what is the issue with an exit that large, after a fundraise that small? I believe there’s a level of unicorn fetishism at play here that’s more than a little depressing. To think that on any level a company either reaches a billion dollars or has “failed” is to denigrate the work of entrepreneurs building amazing products and achieving amazing things.
I have no real interest in billion dollar companies. I’m interested in companies that serve their customers, build amazing products and make money. If they happen to reach a billion, that’s great. But getting to a billion is not a goal that keeps me up at night.
Companies Are Owning Less And Creating More Value (Forbes), Rated: A
Although our society and culture are slow to realize it, the assets of yesterday are quickly becoming the liabilities of today. This is true in business and in our individual lives as well.
Digital technology and digital assets, rather than physical things, are giving us options that are newer, faster, cheaper, and more convenient. It appears that today, the less you own, the more have.
By owning less and relying on a network to share the load, they operate more profitably and scale rapidly and inexpensively, trouncing big, established, asset-heavy players.
So, what are we doing in a world where less (stuff) is becoming more (valuable) and access is trumping ownership?
- First, we are lightening our balance sheets, both personal and corporate. People are carefully considering which assets they actually need to own, and what stuff actually creates more value than its cost of ownership.
- Second, we are using our intangible assets, like skills, ideas, technology, and particularly relationships, to serve us in ways never before possible.
- Third, we are identifying our own professional skills and differentiators for the gig economy.
Congress Should Fix Fintech Lending Model (Competitive Enterprise Institute), Rated: A
Originally announced for markup, the Protecting Consumers’ Access to Credit Act of 2017 never made it to a vote. Yet, this is one of the most important bills Congress can pass this session, as it provides a legislative fix to a damaging U.S. Court of Appeals ruling, Madden v. Midland Funding.
Nonbank Fintech lenders are not currently chartered at the federal level. Instead, each Fintech lender is required to charter in each the state in which it originates loans. Each state sets its own regulations with regards to interest rates. Such a patchwork of different regulations means that Fintech lenders often cannot lend to customers in other states at the same interest rates that they lend to their in-state clients. This puts Fintech lenders at a competitive disadvantage, as solely state-chartered firms cannot offer consistent products nationwide that can provide benefits from economies of scale.
Fintech’s Achilles heel: Reaching low-income consumers (American Banker), Rated: A
Over the last decade, fintech companies have launched robo-advisers, digitized lending, improved fraud detection and created virtual currencies. In short, fintech firms have helped change our understanding of what is possible in financial services.
However, the fintech revolution has largely ignored the financial needs of the bottom third of the U.S. population. For instance, fintech companies have so far failed to successfully create an alternative to credit scores for the 51% of people with subprime scores. Secondly, fintech firms have yet to help move our national savings rate in a positive direction. Thirdly, the amount of money that lower-income households have left over every month after paying their expenses is still declining despite fintech apps’ promise to help people budget. According to data from the Pew Charitable Trusts, the typical low-income household had $1,500 of income left over after expenses in 2004. In 2014, they were $2,300 in the red after expenses.
One explanation: Consumer spending dictates the preponderance of innovation and investment, and spending by 5% of households with the highest income now directs one-fifth of gross domestic product.
AI can help people save more of their paycheck
Close to half of Americans have expenses that equal or exceed their income, making every month a financial balancing act.
A fintech company could use artificial intelligence to identify patterns in someone’s past family financial behavior — both successful and unsuccessful — to recommend an easy-to-follow budget, send reminders or prompts, and eventually, say, help someone consistently lower expenditures and increase savings. Digit, for instance, is one example of a fintech company paving the way to do just that. The digital service mines someone’s checking account data to determine what he or she can afford to save and then Digit automatically transfers that amount into someone’s savings account.
Improve government-issued benefit cards
Each month, 52.2 million Americans receive government benefits — and most of them receive the benefits on a payment card. Most of these payment cards lack associated mobile apps that could make it easier for someone to check balances, track spending or fund savings. The cards also fail to let someone pay utility or phone bills directly.
Peer-to-peer platforms that enable lending between friends and family
Pro-consumer auto and mortgage loan calculators
In 2014, auto loans (29%) and mortgages (28%) were the second and third largest debt categories in America. In a world where visiting two additional mortgage brokers (or getting two more quotes) could save someone over $24,000 over the lifetime of their loan, the lack of clarity and understanding when people are signing their loan documents is reprehensible.
Wall Street Veteran Joins PeerStreet To Lead Capital Markets Team (BusinessWire), Rated: B
PeerStreet, an award-winning platform for investing in real estate backed loans, is excited to announce the appointment of Louis Nees as Head of Capital Markets. He will be based in the firm’s headquarters in Los Angeles, California.
In this role, Nees is responsible for leading PeerStreet’s Capital Markets team, which plays a crucial part in interfacing with the growing number of investors seeking to invest in loans on PeerStreet. The company recently surpassed half a billion in cumulative loans funded, all with zero losses to investors, and monthly origination volumes now reach above $50 million.
With his deep Wall Street background, Nees will provide key guidance on multiple and varied capital sources for PeerStreet.
Centana Growth Partners Expands Investment Team with Senior Hires (BusinessWire), Rated: B
Centana Growth Partners (Centana), a unique growth equity firm focused on the future of financial services, today announced an expansion of its investment team with the hiring of Tom Davis, Principal, and Matthew Alfieri, Vice President. Mr. Davis and Mr. Alfieri join the firm after the successful close of its $250 million fund earlier this year.
Mr. Alfieri joins Centana from Goldman Sachs where he spent nine years, most recently as a Vice President with the Principal Strategic Investments team, where he invested in financial technology and enterprise technology companies.
Kansas AG’s office targeting student loan scammers (WIBW News Now), Rated: B
Kansas Attorney General Derek Schmidt is joining the Federal Trade Commission and ten of his colleagues from other states in a coordinated crackdown against student loan scammers.
“The student loan market is the second largest debt market after mortgages,” said Schmidt. “There’s more than $1.4 trillion in outstanding student loan balances around the country.”
Around 42 million Americans have student loan debt.
UK Peer-To-Peer Lender RateSetter Receives FCA Regulatory OK (The New York Times), Rated: AAA
British peer-to-peer lending platform RateSetter on Tuesday said it had received full regulatory authorisation from the country’s Financial Conduct Authority watchdog.
P2PGI puts portion of Zopa loans up for sale (P2P Finance News), Rated: AAA
PEER-TO-PEER investment trust P2P Global Investments (P2PGI) has appointed Deutsche Bank to sell off 31,153 Zopa loans in its portfolio in the latest securitisation activity in the sector.
The bank is offering the loans in three tranches worth £208.9m overall.
The average value is £7,488 with an average interest rate of 7.2 per cent and remaining term of 45.7 months, Deutsche Bank said.
Inflation hitting higher income households hardest (P2P Finance News), Rated: AAA
NEW analysis by investment and financial planning group Tilney has revealed that the wealthiest households have experienced a much higher rate of inflation over the last two decades than everyone else.
In its household inflation index report, Tilney calculated that the top 10 per cent of households – those with incomes above £78,500 a year – have seen overall inflation of 64 per cent since 1997. That’s compared to 50.7 per cent for typical households (those with incomes of £26,900 to £30,000 a year) and 53.8 per cent for the lowest income families (less than £10,400).
Inflation has grown sharply in recent months, hitting a higher-than-expected 2.9 per cent in August, making it ever more difficult to savers to find an inflation-beating return from conventional savings accounts, adding to the allure of the peer-to-peer lending market.
Payday P2P lender Welendus receives full FCA approval (P2P Finance News), Rated: A
WELENDUS, the peer-to-peer payday lender, has received full authorisation from the Financial Conduct Authority (FCA.)
The milestone comes a year after the company was formed.
The platform, which wants to shake-up the payday lending market by offering more reasonable interest rates than its competitors, launched a crowdfunding campaign on Seedrs in January to raise £300,000, but closed that campaign two weeks ago and instead started a new one to raise £100,000.
Moneyfarm is changing the face of wealth management (City A.M.), Rated: A
Moneyfarm is one of the new kids on the block. Founders Giovanni Dapra and Paolo Galvani left behind their City careers to set it up in 2011. It’s an app-based digital wealth management platform, which expanded into the UK from Italy last year. Dapra, the firm’s chief executive, is on a mission.
Since moving to London, the business has doubled its user base, now managing £260m in assets across the UK and Italy.
As well as a partnership with Allianz Global Investors, and launching separate partnerships with Uberand Revolut, Moneyfarm is in the process of launching a pension product.
Fewer people are saving into a private pension plan than at any point for the past 60 years. Auto-enrolment has gone some of the way to curing this ill, yet still there is a reluctance to think ahead.
Collaboration brings benefits to business at every level, say bosses (The Yorkshire Post), Rated: A
One banking leader said that the rise of fintech and challenger banks had forced his and other large scale banks to collaborate more widely while all assembled agreed that universities and business leaders should work together more closely for the benefit of students as well as their respective organisations.
Pete Sumners, director of corporate structure finance at Clydesdale Yorkshire Bank, said that recent innovations in disruptive lending technology has meant that the banking sector at large had had to admit it did not have the technology to offer certain services and as such was forced to work with fintech companies: “In terms of banking, not just CYBG, collaboration has been forced on us by competition.
Simon Pilling, partner at Bond Dickinson, agreed that the rise of artificial intelligence had meant professional services had needed to change their business model but that there was still a need for skilled lawyers in all ends of the process.
Future of Fintech Awards shortlist 2017 (Financial Times), Rated: A
There are two categories; the Impact Award is for larger and more established fintech companies, which are starting to have an effect on the financial services industry, while the Innovation Award is for newer fintech companies that are bringing out novel solutions.
Funding Circle, a direct lending platform that connects investors to borrowers, is shortlisted for the second year running for our Impact Award. With valuation of more than $1bn it is one of the UK’s “unicorns” and the largest British online “peer-to-peer” company by cumulative amount lent. More than £3bn has now been lent through the platform, with £1.1bn of that in 2016.
THE JUDGES SAID:
“The company is big enough to be making an impact in small business lending now.”
Ant Financial Services, founded in 2014, is an affiliate of Alibaba, the Chinese e-commerce company.
THE JUDGES SAID:
“This is clearly one of the most innovative and impactful fintech companies of the moment, changing the landscape completely.”
California based Ripple, founded in 2012, has grown to be one of the world’s biggest blockchain networks. It allows businesses to transfer money globally at low cost using its own cryptocurrency XRP.
THE JUDGES SAID:
“This is no longer a prototype. Ripple is actually sending blockchain payments through. Many of these are still test payments but it is further than a lot of others.”
EFL Global provides alternative credit scoring for people who have previously been outside the banking system.
THE JUDGES SAID:
“There were many credit scoring entries and we liked what many of these were doing in terms of giving more people access to finance. However, we particularly liked the way EFL went beyond traditional credit score information.”
Digital Reasoning uses cognitive computing techniques to detect rogue traders at financial services companies.
THE JUDGES SAID:
“We thought this idea was cool. Cutting rogue trader activity and fraud at banks is a serious issue with consequences beyond just the banks themselves.”
Micro finance lending platform QCash Financial was founded by the Washington State Employee Credit Union as an alternative to expensive payday loans.
THE JUDGES SAID:
“We liked this because it was an alternative to payday lending and an instance of an established financial institution doing something innovative.”
Token is creating an open banking platform aimed at making it easier for people, businesses and financial institutions to move money around. Using digital identity and smart tokens it offers a way for people to give third parties access to their account details in a secure and simple way.
THE JUDGES SAID:
“This is solving the problem that PSD2 brings, where banks need to provide APIs to authorised third parties. Token simplifies the many APIs and is already integrating 10 banks into the system.
RSRCHXchange was founded in 2014 as a one-stop-shop for asset management firms to purchase research services from banks, brokers and boutique providers. It will be particularly useful in helping banks comply with the EU’s new Mifid II rules, which come into force at the start of 2018.
THE JUDGES SAID:
This is solving a problem that comes with Mifid II. A more sophisticated solution than others in the market.
Bricklane.com is an online property ISA allowing anyone to participate in the housing market with an initial investment of as little as £100.
THE JUDGES SAID:
“We liked this because it is creating a new product. The founders say the main competitor is cash, with most of their funds coming from people transferring their ISAs.”
Castlight Financial is aiming to prevent another credit crunch by providing a more accurate way to assess what a consumer can afford to borrow. It collects data in real time from customers’ banks accounts, including income and expenditure, and uses these to build a clear picture of a their monthly disposable income. People who may have previously been refused loans because banks had too little data about them may become eligible for credit. Castlight says it can also speed up the mortgage decision process from six weeks to 10 minutes.
THE JUDGES SAID:
“The idea of better credit scoring is attractive and it is significant that the company has made a profit from the first year and has not had to take any financing.”
SMEs are ignoring their credit score (P2P Finance News), Rated: A
ALMOST half (44 per cent) of small- and medium-sized enterprises (SMEs) have never checked their credit score, new research from RateSetter Business Finance shows.
The study, released on Monday, found that a further six per cent have opted against checking their score in the last year, while less than one in five (18 per cent) have checked the score in the last six months.
The peer-to-peer lender pointed out that credit scores are an integral part of establishing whether a business has a decent record of repaying debt, and have a significant impact on their chances of getting further finance.
Epiphany appointed by Wonga to help with brand perception (Prolific North), Rated: B
Leeds search specialist Epiphany has been appointed to help improve the brand perception of payday loan company Wonga.
Epiphany will work in partnership with Wonga’s content agency, Cedar, on brand perception and delivering a customer-first multi-channel content strategy. The agency will also be responsible for driving traffic and enquiries from organic search.
Chinese peer-to-peer marketplace Hexindai sets terms for $ 58 million min-max US IPO (NASDAQ), Rated: AAA
Hexindai, a Chinese marketplace for peer-to-peer lending, announced terms for its min-max US IPO on Monday. The offering is being made on a best-efforts, min-max basis and therefore will not be included in our IPO stats.
The Beijing, China-based company plans to raise at least $30,000,000 by offering a minimum of 2.7 million ADSs and a maximum of 8.9 million ADSs at a price range of $9 to $11. At the midpoint of the proposed range, Hexindai would command a fully diluted market value of $487 million.
Credimi: four asset management funds renovate and increase the commitment up to €72.5 million (Credimi Email), Rated: AAA
Barely a year after the launch, Credimi – the digital financing platform for SMEs that makes liquid the working capital in short time at low costs – has renewed the agreement with the four primary investment funds. They committed up to 72,5M€ to purchase the entire portfolio of commercial credits originated by the fintech platform.
Credimi is a fintech company officially authorized by the Bank of Italy to the public financing activity according to the dispositions contained in the new art.106 of the Banking Consolidated Law. The company will be able to provide funding to SMEs up to €300 million in the next months .
The four partners previously involved, Anima Sgr, Anthilia Capital Partner Sgr, BG Fund Management Luxembourg S.A. and Tikehau Capital, have decided to renew the agreement. Credimi is therefore reinforcing the attractiveness of its notes, which are the among the most profitable and diversified asset class among investments with a comparable risk profile. In fact, the notes combine an average life of the underlying invoices of less than 3 months with a spread around 450 base points and credit losses of 0.3%. Credimi finances hundreds of SMEs with average ticket of 20,000€, creating a low risk, diversified portfolio.
The portfolio subscribed by the four noteholders is untranched and pays a quarterly coupon. Additionally, Credimi continues to keep a stake of around 5% (as fifth noteholder alongside with the other four) to have ‘skin in the game’. This is not requested by law as the note is untranched and is ensured by Credimi to the noteholders on a voluntary basis.
Since launch on the market, Credimi has achieved outstanding results, exceeding initial expectations: €40million of loans have been delivered to Italian SMEs and more than 2.000 invoices have been financed. The same strong results have been obtained with the Supply Chain financing: by signing deals with corporations – such as Ariston Thermo, Jab group (Jimmy Choo and Bally), Pittarosso and few others – Credimi helps large enterprises to finance their suppliers at competitive prices and with an unmatched flexibility.
Lenddo and EFL Team Up to Lead Financial Inclusion Revolution (Lenddo Email), Rated: A
United by the common vision of providing financial inclusion for more than one billion new and underserved individuals across the globe, Lenddo and EFL will together provide a suite of credit scoring and identity verification products to more than 20 emerging markets.
Lenddo and EFL have individually facilitated over 5 million credit assessments since inception, allowing more than 50 financial institutions to disburse over $2 billion USD in credit to people with limited information. The combined company will work directly with banks, telcos, retailers, microfinance institutions and insurers to serve individuals and small businesses.
The first joint product offering goes live in Asia and Latin America today, with additional products and features scheduled for release in the coming months.
Australian banking doesn’t need Google to be competitive (Financial Review), Rated: A
A leading member of Australia’s fintech community has backed the view of veteran bankers that technology giants will be dissuaded from setting up shop in Australia and taking on the big four. But the disrupters see different reasons for Google’s absence.
SocietyOne CEO Jason Yetton said for the tech companies with the resources it wasn’t a question of whether they could disrupt the incumbents but whether they should do so.
In Australia there is a raft of smaller companies looking to carve out their own share of the financial services market including personal loans company Ratesetter, layby purchases Afterpay and online lender Zipmoney.
Tyro is a payments and technology company that also lends to small businesses. It also has Australia’s newest banking licence and is therefore subject to the same oversight as other authorised deposit taking institutions (ADIs).
Online Lender Prospa Forms New Partnership With Retail Marketplace MyDeal (Crowdfund Insider), Rated: A
Prospa, an Australian online lender for small businesses, has formed a partnership with Gandel-backed retail marketplace MyDeal, which will allow retailers on its platform to apply for loans of up to $250,000.
Senvirtne and his MyDeal team will be receiving a 1-2% small commission for every loan that comes through the marketplace.
PolicyBazaar Raises $ 77M at a $ 500M Valuation (Coverager), Rated: AAA
Gurgaon-based PolicyBazaar announced it has raised $77M in a Series E round led by Wellington Management , with participation from IDG Ventures India and True North; to name two. The online insurance aggregator has raised a total of $146.6M since its inception in 2008 and is currently valued at $500M.
According to VCCiRCLE, the company plans to go public by the end of 2018 after breaking even in November 2016.
Micro-lending startup KrazyBee raises $ 8M, plans to enter payday-loan segment (YourStory), Rated: A
On Monday, Bengaluru-based micro-lending startup KrazyBee said it had raised $8 million in a Series A round led by Xiaomi Technologies and Chinese venture capital fund Shunwei Capital. The funding raised was a combination of equity and debt, with participation from Essel Group’s E-City Ventures and RK Group.
The funding announcement comes within a year of the firm raising $3 million pre-Series A round in January from Plum Ventures. Prior to this, KrazyBee had raised a seed round of $2 million in May 2016.
Until July this year, the company claimed they had disbursed 80,000 loans and processed close to 170,000 loan applications. As of October 2017, the company had disbursed close to 150,000 loans and processed above 200,000 loan applications. The founder claims that of this number, 75,000 loans have already matured with steady settlement.
The average size of loans by KrazyBee is around Rs 15,000 with the maximum tenure being 12 months.
Lending and borrowing limits on peer-to-peer lending platforms (Livemint), Rated: B
Many lenders find P2P platforms attractive because of their potential for giving higher returns, compared to fixed and savings bank deposits. In fact, these platforms also market their services by comparing the returns from P2P lending with returns from mutual funds. It is important to note here that these platforms cannot guarantee any return.
Thus, the RBI imposed limits on how much can be lent and how much can be borrowed by individuals from these platforms—to limit the risk exposure of individuals.
If such a person was to take a personal loan from a bank, it would come at 16-17%. Through P2P lending they can get that loan at around 14%. Those with low credit scores typically go to other NBFCs, and get loans at 22-23%.
No borrower can have loans of more than Rs10 lakh, from all the P2P platforms combined; and no more than Rs50,000 from one lender. All loans through P2P platforms come with a payback period that cannot be more than 36 months.
Markel International Launches Fintech Insurance for Asian Market (Insurance Journal), Rated: A
Markel International, the specialist insurer, has unveiled a fintech policy offering comprehensive protection for businesses in the financial technology sector in Asia, having successfully launched it in the UK early last year.
Coverage also extends to the costs involved when sensitive documents or data are lost.
On top of the professional indemnity core cover, the policy offers protection for three additional perils to protect clients against their key exposures:
- Directors’ and officers’ liability cover protects against claims of mismanagement, which could be brought by shareholders, employees, creditors or regulators.
- Theft option covers the insured against the stealing of money or other financial instruments, through both electronic and non-electronic means, including through extortion. It will also cover the cost of rectifying computer systems following a theft.
- Cyber liability and loss cover provides protection if the insured suffers a network security incident, such as a hack, denial of service attack, or a computer virus, and will also cover business interruption losses arising from such an incident. This section includes cover for the cost of rectifying computer systems following a network security incident.
Baker McKenzie snags top G+T partner (Australasian Lawyer), Rated: B
Baker McKenzie has snagged a top partner from Gilbert + Tobin.
In addition to his knowledge in DCM matters, McGrath brings to Baker McKenzie a practice that covers a wide range of areas, including securitisation, leveraged and general finance, peer-to-peer lending, insolvency and restructuring, blockchain, and smart contracts.
SA’s Retailer Pick n Pay Reaches 200 000 Money Transfer Users (Tech Financials), Rated: AAA
South Africa’s Pick n Pay announced on Tuesday that it has 200 000 registered money transfer customers as of 27 August 2017.
The largest online grocery business in Africa is in partnership with digital bank TymeDigital, a subsidiary of Commonwealth Bank, to deliver money transfer.
In line with its plans to launch a digital bank, TymeDigital was recently awarded a banking licence by the South African Reserve Bank, a first in 18 years.