Thursday January 3 2019, Daily News Digest

china p2p lending

News Comments Today’s main news: RateSetter passes 500M GBP in secondary market lending. U.S. economy fuels boom in consumer debt. Seedrs tops 500M GBP in crowdfund securities. Today’s main analysis: China P2P lending crackdown could see 70% firms closed. Today’s thought-provoking articles: Peter Renton’s Q3 2018 MPL results. 2018 was a standout year for fintech funding. 9 big ideas […]

The post Thursday January 3 2019, Daily News Digest appeared first on Lending Times.

china p2p lending

News Comments

United States

United Kingdom

China

International

India

News Summary

United States

U.S. Economy Fuels Boom in Consumer Debt (WSJ), Rated: AAA

Consumer debt, including credit cards, auto and student loans and personal loans, is on pace to top $4 trillion in 2019.

Consumer spending has increased 2.7% on average in the four quarters through September compared with the same period a year earlier, as disposable income rose 2.7% on average, according to Moody’s Investors Service. Meanwhile, personal savings as a percentage of disposable income was 6.3% in the third quarter, above a 20-year average of 5.9%, according to Bureau of Economic Analysis data.

My Quarterly Marketplace Lending Results – Q3 2018 (Lend Academy), Rated: AAA

My trailing 12 month returns for the year ended September 30, 2018 across all my accounts was 4.77% up from 4.46% in my last update. My original six accounts, all with Lending Club and Prosper, also improved over last quarter but are still at a paltry 3.19%.

Source: Lend Academy

How Betterment Stayed on Top in 2018 (and How they Plan to Stay There in 2019) (Financial Advisor IQ), Rated: A

Robo advisor Betterment currently manages $15 billion in assets for its more than 400,000 customers, firm CEO Jon Stein tells FA-IQ. But at the start of 2016, Betterment’s AUM was just a little over $6 billion, Stein says. The firm has cemented its place on the 2018 Financial Times’ 300 Top RIAs list.

Q: How has Betterment’s client base evolved?

A: When Betterment was first launched, our customer base was mainly young folks in their twenties who were depositing $100-$500 to invest at a time. That client demographic has shifted dramatically over the years. Today, more than one-third of our business comes from customers who are at least 50 years old.

2018 – Volatile Equity and Credit Markets (PeerIQ), Rated: A

2018 was a volatile year for equity and credit markets, particularly in the fourth quarter. The S&P500 is down ~7.5% for the year, and cyclical stocks are down more. CDX IG spreads have widened ~40 bps and CDX HY spreads have widened ~150bps.

ABS markets enjoyed record issuance. However, spreads widened, and all-in yields were higher leading to rate increases for borrowers and tighter margins for lenders. 2019 is shaping up to be a pivotal year in this late economic cycle. Synchronized global growth could turn into a synchronized slowdown. The risk of policy error is heightened as the Fed navigates record low unemployment and a slowdown in growth. The US yield curve has partially inverted and the all-important 3-month – 10-year yield spread is at ~37 bps.

Kevin Tweddle of Independent Community Bankers of America (Lend Academy), Rated: A

Our next guest on the Lend Academy Podcast is Kevin Tweddle. His official title is the Group EVP for Innovation and Financial Technology at the Independent Community Bankers of America (ICBA), the leading trade organization representing community banks. He is completely focused on fintech and helping community banks use technology to thrive in the future.

Online Loan Marketplaces: Benefits, Challenges, and Enormous Growth (Small Biz Trends), Rated: A

Financial technology (Fintech) and the internet have enabled the creation of online loan marketplaces. Marketplace lending is made possible by technology platforms that use scoring algorithms to determine the borrowers’ ability to repay.

Fintech online loan platforms have started creating partnerships with banks and credit unions to reach small businesses who aren’t as comfortable dealing entirely online. Traditional lenders are eager to jump on the Fintech bandwagon to avoid being made obsolete.

As a small business owner, will you consider online lenders to finance your business? The convenience of banking online is attractive to many who want to bank from anywhere. Online lender Kabbage says 17% of their loans have been accessed through mobile.

Equifax Faces Scrutiny As Dems Take Over The House (PYMNTS), Rated: A

A report in the Wall Street Journal, citing analysts, reported that legislative response to the massive Equifax data breach of 2017 is at the top of the agenda for 2019. The Wall Street Journal noted that existing proposals, some bipartisan, provide a glimpse into how changes can be made to the industry. The paper noted the changes would pertain to how the firms handle consumer information and could include tougher cybersecurity standards and making it easier for consumers to fix mistakes on their credit reports.

White Oak Healthcare Finance Provides $ 161 Million to Support Allegiant Healthcare’s SNF Acquisition (AP News), Rated: B

White Oak Healthcare Finance, LLC (“White Oak”), today announced it acted as sole lender and administrative agent on the funding of a $161 million senior credit facility for Allegiant Healthcare (“Allegiant”) and Hillstone Healthcare, Inc. (“Hillstone”). The funds were used to acquire and provide working capital for a portfolio of 17 skilled nursing facilities in Ohio.

Five reasons Bitcoin could enter a more extreme death spiral (The Conversation), Rated: B

The one upside to all this is that, although cryptocurrencies may have entered a death spiral, the blockchain economy is here to stay. As well as allowing safe peer-to-peer lending and transactions, it is being used to build more efficient supply chains and in the evolution of the internet of things – to name just a few of its applications.

United Kingdom

RateSetter passes £500m in lending on secondary market (P2P Finance News), Rated: AAA

RATESETTER has passed £500m in lending on its secondary market, marking a major liquidity milestone for the platform.

At the end of December 2018, the peer-to-peer platform revealed that a cumulative total of £500m in liquidity had been provided to investors via its secondary market. According to the platform, in the majority of cases investors were able to access these funds within one working day.

Seedrs Tops £500 Million in Crowdfunded Securities (Crowdfund Insider), Rated: AAA

In a blog post, UK crowdfunding platform Seedrs shared that it has now topped £500 million in investment crowdfunding. The money has been raised for 720 deals that have been successfully funded since the platform launched.

P2P set for fundraising boom in 2019 (P2P Finance News), Rated: A

P2P lenders raised more than £10m through crowdfunding platforms last year to boost their technology and operations, while almost £2bn was ploughed into the wider fintech sector.

“39 fintech companies have used crowdfunding platforms to raise capital. This is a record level of crowdfunding investment into fintech companies and we expect to see more of this in 2019.”

Robo-advice app for self-employed launches (FT Adviser), Rated: A

A new robo-advice service designed especially for the self-employed and freelancers is expected to launch in the first quarter of 2019.

The start-up, which received £1.5m after a funding round in late 2017, is currently in the Financial Conduct Authority (FCA) Sandbox, and hoping to receive authorisation in the next couple of months.

iwoca adds Barclays and HSBC to Open Banking connections (Fintech Finance), Rated: B

iwoca,the UK’s fastest growing small business lender, today announces it has connected to Barclays and HSBC banks under Open Banking. This expands the number of Open Banking connections offered by iwoca to three, including Lloyds Bank, and will enable more than 60 percent of the lender’s customers to take advantage of the Open Banking service.

Arbuthnot Commercial ABL provides £6.5m facility to Fluorocarbon Group (Specialist Banking), Rated: B

Arbuthnot Commercial Asset Based Lending (ABL) has agreed to provide a £6.5m refinancing facility to fluoropolymer processor the Fluorocarbon Group.

China

China P2P Lending Crackdown May See 70% of Firms Close (Bloomberg), Rated: AAA

The number of Chinese peer-to-peer lenders may drop by 70 percent this year, a research firm that tracks the industry says, as the nation intensifies a crackdown on riskier forms of financing.

As few as 300 companies will remain by the end of the year, according to an estimate from Shanghai-based Yingcan Group. The number of operators dropped by more than 50 percent to 1,021 during 2018, it said, adding that there’s been no new entrants into the market since August.

Tighter Reg Shrinks China’s P2P Lending Mkt By 50 Pct In 2018 (PYMNTS), Rated: A

According to Yingcan Group, by the end of 2019, there will only be 300 P2P lenders remaining. During 2018, the market research firm said the number of P2P lenders declined by 50 percent to 1,021. What’s more, no new companies have entered the market since August.

Yidai shuts shop as China intensifies crackdown on P2P lenders (Banking & Finance), Rated: A

Yidai, an online peer-to-peer (P2P) lending intermediary, is the latest to exit the business as China reins in its US$176 billion experiment with this riskier form of financing.

The company set up a committee to start refunding its lenders after “months” of losses, Yidai said in statements over the extended holiday weekend. It has about 32,000 lenders with an outstanding principal balance of four billion yuan (S$795.4 million), and expects to repay them in three-to-five years.

International

2018 was a standout year for fintech funding (Business Insider), Rated: AAA

In the first half of 2018 alone, fintechs secured $57.9 billion, nearing the previous annual record of $62.5 billion set in 2015.

Fintechs including UK neobank Revolut, US insurtech Root, US fintech for gig economy workersEarnin, Hong Kong-based alt lender Oriente, and US crypto exchange operator Coinbase all raised funding rounds of over $100 million this year.

9 big ideas for 2019 (American Banker), Rated: AAA

JPMorgan Chase collected more than $1.8 billion in revenue from overdraft fees in 2017, according to an analysis of regulatory data by the Center for Responsible Lending. Bank of America and Wells Fargo both raked in more than $1.6 billion. Big banks typically charge around $35 per overdraft. Many other institutions also rely on such fees.

Give customers some control of their financial data

For decades, banks, credit card networks and credit bureaus have been sharing and selling consumers’ financial data without their knowledge or consent while data aggregators have screen-scraped that information without the full cooperation of financial services providers.

But there are signs that is beginning to change.

Fintech Predictions for 2019 (Crowdfund Insider), Rated: A

10. New Asset Class – New Asset Backed Lending for Crypto

The likes of Nexo, SALT, CoinLoans & Unchained Capital have emerged in the recent months unlocking the value of your cryptocurrency. There is a list of crypto lending sites here.

8. Banks will rule again

We have seen big banks leveraging Fintech platforms from OnDeck and Avant in 2018. More of it will come in 2019 as banks begins to decentralize banking again.

7. Everyone will be rich (unlocking home equity value)

I attend a talk by Mike Cagney of Figure at 2018’s Lendit China conference. He’s creating something completely different to unlock the potential of the entire “supply chain” process from home equity lines of credit to bundling and tracking this asset class utilizing smart contracts and blockchain. He wants to eliminate the hurdles and ambiguity for the secondary market.

As home equity value rises and interest rates increase, home equity products will need a ton of tech. It has become a forgotten art since the great depression. I am predicting that a lot more of Fintech companies will come to light in 2019 working with the banks to unlock consumers’ home equity value

India

Top 30 Fintech Influencers in India 2019 by Digital Fifth (Fintech News), Rated: AAA

Amrish Rau : CEO at PayU India

Amrish Rau is the CEO of PayU India, the country’s leading digital payment solution provider valued at around USD 2.5 billion. Previously, he had founded Citrus Pay, which was acquired by Naspers (PayU) in one of the largest startup acquisitions in India. PayU’s digital lending platform Lazypay has done extremely well with nearly 4.5 lakh customers already using it. He has also invested in multiple startups like Signzy, Elemential, Nuo and Open.

Harshil Mathur : CEO & Co-Founder at Razorpay

Harshil runs one of India’s most innovative Fintechs, Razorpay, which is morphing from a B2B Payment Gateway into a Financial Conglomerate. They have entered the lending business with Razorpay Capital, which has already reached an annual loan disbursal rate of USD 30 million.

Manish Khera : CEO at Happy

Manish is the founder of Happy Loans – one of the fastest growing MSME lending platform in the country.

Naveen Kukreja : Co-Founder & CEO at Paisabazaar.com; CMO at Policybazaar

Naveen is the co-founder and CEO of Paisabazaar.com. Under Naveen’s leadership, Paisabazaar.com has become one of the largest marketplace platforms for lending and banking products. Paisabazaar.com currently disburses annualized loans worth USD 1 billion to more than 1000 towns and cities across India.

Red tape grounds P2P startups as investors stay clear of space (India Times), Rated: A

The latest entrants into the digital lending sector, peer-to-peer lending platforms, are facing an uphill task attracting investors with regulatory restrictions limiting their growth potential.
OMLP2P is a Mumbai-based lending platform and disburses around Rs 20 lakh per month. Another Mumbai-based P2P lending startup Paisadukaan’s founder Rajiv Ranjan also said that VCs have been shying away from this sector because of the limitation imposed by the RBI.
Authors:
George Popescu
Allen Taylor

The post Thursday January 3 2019, Daily News Digest appeared first on Lending Times.

Thurday December 7 2018, Daily News Digest

equity sector analysis

News Comments Today’s main news: Google gets EU eMoney license. JD launches online P2P lending service in China. Hexindai partners with Kunming Aotous. Today’s main analysis: Equity sector analysis. Today’s thought-provoking articles: Internet finance in a state of flux in China. P2P lending looking for a fresh start. Wonga collapse clears way for US payday lenders in UK. United […]

The post Thurday December 7 2018, Daily News Digest appeared first on Lending Times.

equity sector analysis

United States

Fed Raises Rates; Sector Analysis; Loan Performance (PeerIQ), Rated: AAA

In regulatory news, Square will refile its Industrial Loan Charter application with the FDIC.

Credit card master trust data showed that net charge-offs dropped by 8 bps YoY, decreasing for the second month in a row.

Source: Bloomberg, PeerIQ

Affirm – Launch pitch at Phocuswright 2018 (PhocusWire), Rated: A

We have identified a $377 billion addressable U.S. online travel market. Millennials, the largest consumer group in the U.S., are shifting their spending from products to experiences.

We’ve also found that 55% of people are avoiding credit cards at checkout when paying for travel. 67% are looking for options to pay over time.

5 Business Trends That Will Continue to Rise in 2019 (Entrepreneur), Rated: A

1. Consumers will demand more control over their data.

2. Alternative lending will continue to grow.

Given that around 80 percent of small business loan applications are rejected, startup founders are increasingly looking to nontraditional financiers for capital.

Since 2006, P2P lending has skyrocketed by 110 percent per year.

United Kingdom

Wonga collapse clears decks for US payday loan firms in UK market (The Guardian), Rated: AAA

Chicago-based Enova, which also operates Pounds to Pocket and On Stride, saw UK revenue jump 20% to $36.6m (£29m). Texas-headquartered Elevate Credit operates in the UK under the Sunny loans brand, and saw its own UK revenue jump 23% to $32m, as new customer loans for Sunny rose 45% to $26,671.

Curo, which is behind WageDayAdvance, saw UK revenue jump 27.1% to $13.5m, while underlying earnings nearly halved from $8.1m to $4.2m. It was helped by a “high percentage of new customers”.

Collapse of ethical lenders stokes fears over access to credit (Financial Times), Rated: A

Ethical lenders that have been touted as alternatives to high-cost firms such as Wonga and BrightHouse are going out of business at the fastest rate in years, fuelling concerns that less well-off customers are in danger of losing access to credit.

The figures mark the worst year since at least 2010, as the sector battles against rising regulatory and technology costs.

Eight UK Credit Unions Went Out Of Business In 2018 (PYMNTS), Rated: A

Eight credit unions closed in 2018, and they affected an estimated 14,000 people with a collective £25 million in savings. Even some of the more successful CUs have had to curtail lending. Credit unions cap rates at 3 percent a month.

Despite initial reports of the feature’s disappearance, Hefeng Online Lending was still available until 4 p.m. on Wednesday. Previously, all products were labeled as being “sold out” after it was removed from the app’s main page. It has subsequently been completely removed.

China

JD launches P2P online lending products (en.ce.cn), Rated: AAA

E-commerce giant JD.com has become the first Chinese tech tycoon to launch peer-to-peer online lending products, CHNFUND.com reported on Sunday.

“Hefeng online lending” or literally “Hefeng Wangdai”, a platform providing information service on P2P online lending under JD.com, sold out all the products within seconds after it started operation on Sunday.

JD Finance removes second P2P lending feature from its app (Technode), Rated: A

JD Finance has removed its second peer-to-peer (P2P) lending feature from its app after it had been online for less than 10 days, highlighting difficulties in China’s P2P loans sector.

Chinese P2P Lender Hexindai Announces Funding Sources Partnership With Kunming Aotous (Crowdfund Insider), Rated: AAA

Chinese peer-to-peer lending platform Hexindai (NASDAQ: HX) announced on Wednesday it has formed a funding sources partnership with Kunming Aotou Economic Information Consulting Co., Ltd. (Kunming Aotou). 

Hexindai reported that through this agreement it will assess borrowers that are using its risk management and credit assessment capabilities before referring them to Kunming Aotou which will facilitate the loans through a trust fund. 

Internet finance in a state of flux with regulators stepping in to bring some stability and direction (Global Times), Rated: AAA

Recently, the Beijing-based Chang An Property Casualty Insurance Co was reported to have compensated nearly 2 billion yuan ($290 million) for its joint business with a number of domestic peer-to-peer (P2P) online lending platforms, according to a report of the Time Weekly.

The Lengjing reported that so far 220 P2P platforms had submitted their self-investigation reports to the government.

European Union

Google Gets EU eMoney License (PYMNTS), Rated: AAA

Google Payment Lithuania, a unit of Alphabet’s Google, was granted an electronic money institution license by The Board of the Bank of Lithuania.

The Lithuanian FinTech initiative now covers more than 100 licensed companies, with most of them involved in payments, electronic money and peer-to-peer lending and crowdfunding.

International

Peer-to-peer lending looks for fresh start as interest wanes (Financial Times), Rated: AAA

But even P2P Global Investments, the first investment fund dedicated to the sector when it launched in 2014, admits the initial “frenzy” of interest has died down.

It is considering changing its name because it no longer accurately reflects the fund’s interests.

Mike Bristow, chief executive of property lender CrowdProperty, suggested that some companies have tried to take advantage of the hype around peer-to-peer without making effective business plans.

Top ten banking tech case studies in 2018 (Fintech Futures), Rated: A

Micro-lending: Mynt
Philippine fintech, Mynt, talks about the business case and technology behind its current micro-lending efforts and where it is planning to head with other financial services, leveraging the customers and data of its majority shareholder, the country’s largest Telco.

Robocash – fintech crossing the borders
In 2017, peer-to-peer (P2P) platform Robocash started its operations in the European Union (EU). Since then, it attracted more than €4 million

Live Oak Bank and Finxact – riding the second wave
The US, in particular, is in urgent need of new core offerings to support next generation digital banking.

Home Credit – to its credit
In an exclusive tour of Home Credit’s (HC) operations in Prague, we met seven staff members and learned about its retail challenger Air Bank, P2P lender Zonky and Home Credit Venture Capital (HCVC).

Mobile banking: RBC – farewell friction
Royal Bank of Canada (RBC) has been proactive with its digitisation strategy.

Australia

Mums and Dads turn to commercial real estate as resi slows in Australia (The Investor), Rated: A

They are also navigating their way around banks’ lending restrictions through peer-to-peer lending, further boosting their investment prospects.

India

Various fees charged by P2P platforms (India Times), Rated: A

Every loan involves a cost. From the time of signing up to delay in repaying the loan, here’s a list of charges a borrower needs to pay while taking a loan from a peer-to-peer (P2P) lending platform.

Asia

UMG Idealab has started its venture journey in Indonesia with 11 portfolios to date.

UMG Idealab  is looking for startups in IoT, Big Data, Voice Recognition (VR), and Artificial Intelligent (AI). He aims to invest in 20 startups next year.

Central bank warns of P2P lending (Vietnam News), Rated: B

The State Bank of Việt Nam (SBV) has warned local people and firms to consider carefully and be cautious before taking part in peer-to-peer (P2P) lending as there are many potential risks related to the service.

Authors:

George Popescu
Allen Taylor

The post Thurday December 7 2018, Daily News Digest appeared first on Lending Times.

India’s Largest Digital Lending Conclave 2018

alternative lending conference

This year’s digital lending conclave in India features top speakers addressing consumer lending and SME lending concerns. There will also be discussions in equity financing for alternative lenders and debt capital for alt lenders. Speakers include: Gaurav Chopra Alok Mittal Shilpa Mankar Ahluwalia Samir Bhatia And many more Location: DLAI, C/o Capital Float Zen Lefin […]

alternative lending conference

This year’s digital lending conclave in India features top speakers addressing consumer lending and SME lending concerns. There will also be discussions in equity financing for alternative lenders and debt capital for alt lenders. Speakers include:

  • Gaurav Chopra
  • Alok Mittal
  • Shilpa Mankar Ahluwalia
  • Samir Bhatia
  • And many more

Location:

DLAI,
C/o Capital Float
Zen Lefin Pvt. Ltd.
‘Gokaldas Chambers’,
#222/14, 3rd floor, 5th Main,
Bellary Road,Sadashivnagar,
Bangalore – 560 080

Date: May 3, 2018

Register here.

Monday March 5 2018, Daily News Digest

marketplace lending

News Comments Today’s main news: Kabbage says ‘no’ to lending for assault guns. Collateral enters administration. Orix invests $60M in Wecash. SMBs accept face-to-face payments via mobile devices. Today’s main analysis: The friction between new finance and old regulations (a must-read report). Today’s thought-provoking articles: 3 lessons from LendingClub’s earnings. The business schools that produce the highest salaries. Beware fintechs […]

marketplace lending

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Africa

News Summary

United States

Online lender Kabbage to restrict weapons lending (Reuters), Rated: AAA

Kabbage Inc, a U.S. online lender for small businesses, said it will cut ties with clients that make or sell assault-style rifles or that sell weapons or ammunition to people under 21 years old, one of the strongest steps by any financial firm after last month’s high school massacre in Florida.

3 Revelations From LendingClub’s Earnings Report (The Motley Fool), Rated: AAA

1. Lawsuit settlements

One piece of good news is that the company recently dealt with its largest liabilities from the 2016 scandal, settling both federal and state class action shareholder lawsuits. The bad news: LendingClub has to pay plaintiffs a total of $125 million, with $47.75 million covered by insurance, leaving LendingClub on the hook for the remaining $77.25 million. That amounts to roughly 12% of the company’s liquid assets and about 5% of the current market capitalization.

2. A challenging environment

In addition to these company-specific problems, the macroeconomic environment has become more challenging, though that is no fault of LendingClub. Increased awareness of personal loans delivered via the internet has spurred a large increase in applications, and LendingClub saw a 43% increase in applications in 2017 — much higher than the company’s 3.7% growth in originations.

3. Cost cuts in 2018

LendingClub believes it has stabilized both its credit model and its investor base in 2017 while introducing new investor products, and it will pivot in 2018 to focusing on controlling costs. Part of that will entail outsourcing its loan servicing to industry-standard third parties while reallocating internal engineers to the things that differentiate the company, like data-driven underwriting and product innovation.

For the full year 2018, the company forecasts 18% to 22% revenue growth while targeting cost growth of only 14% to 16%.

 

The top 20 business schools where graduates earn the most money, ranked from lowest to highest salary (Business Insider), Rated: AAA

With that in mind, online lender SoFi looked at the average salary graduates of American business schools earn and ranked the top 20.

SoFi’s approach is unique. It reviewed the self-reported income on over 60,000 student-loan refinancing forms from January 2014 to December 2017.

The average salary for graduates of all business schools SoFi reviewed was $109,992.

  • 20. University of Texas at Austin — $139,776
  • 3. Stanford University — $186,534
  • 2. Columbia University — $189,295
  • 1. University of Pennsylvania — $224,034

There is Friction Between New Finance & Old Regulation (Crowdfund Insider), Rated: AAA

The Milken Institute is out with a comprehensive report this week that drills down into existing legislative action by Congress that addresses the emerging Fintech industry. This is the first report of its kind and provides a solid perspective on what Congress has accomplished to date while recognizing the fact elected officials can do far more.

“Subjecting nonbank lenders to 50 different state usury laws is inconsistent with today’s increasingly interconnected and digital global economy.”

The research provides multiple policy recommendations. In brief, they are as follows:

  • Provide certainty on “true lender” and “valid when made” issues to maintain a vibrant, competitive marketplace for credit.
  • Harmonize inconsistent state-by-state regulations related to mobile banking to drive financial inclusion and access.
  • Update tax reporting guidelines regarding cryptocurrency transactions to protect against tax evasion and to promote a more transparent, responsible marketplace.
  • Enable the reporting of alternative data that can expand access to credit.
  • Develop common reporting standards among U.S. financial regulators to foster a more transparent marketplace.
  • Require the IRS to automate certain data collection and reporting processes that can help enhance the speed and efficacy of the underwriting process.

This report is a must read policy paper for Capitol Hill staffers and US Fintech industry participants.

Read the full report here.

Equity and Credit Market Volatility, Continuing Bank-FinTech Partnerships (PeerIQ), Rated: AAA

US equity markets had a bad week as the S&P500 closed 3.3% lower at 2,659. CDX IG spreads widened marginally by 0.6 bps to 55 bps and CDX HY spreads widened by 8.7 bps to 337 bps. We have seen significantly higher volatility this year, driven mainly by rising interest rates and inflation expectations. No new MPL deals have priced since the rise in volatility, although we expect the first $1 Bn MPL ABS transaction to announce soon.

We share a few anecdotes from our informal conversations which we share in generic fashion to protect the innocent:

  • A large issuer: “Our bonds are oversubscribed 2 to 3x. And when we share that with our investors they want more.”
  • A large ABS investor: “We need help monitoring losses in the personal loan ABS space. Is this an indutry issue?”
  • A large investment bank (Warehouse): “We ar doubling our exposure to warehouse lending. We have the mandate to grow the book.”
  • A large investment bank (Syndicate Desk): “MPL has gone mainstream now.”
  • A lender: “The 5% risk retention requirement is hurting our ability to issue loans to consumer and grow our business responsibly.”
  • An issuer: “We are a small emerging originator and we have 7 term sheets – from large banks and small – in the last few weeks. Competition in warehouse lending is growing.”

Also heard at the conference was that Citibank is planning a Marcus-like online lender to enter the consumer unsecured loans space, although the timeline was unclear. Our view is that the GS Marcus – and specifically the ROE and NIM opportunity – is inspiring competitive response from other banks including Citi.

Marketplace lenders develop new wrinkles to attract more funding (American Banker), Rated: A

Last year, marketplace lenders learned that maintaining diverse sources of funding is just as important as managing the credit risk in their loans.

LendingClub, Marlette Funding and others developed their own securitization platforms, rather than relying on whole-loan sales to large investors. They also invited some of these investors to contribute seasoned loans to collateral pools for these in-house deals.

Marketplace lending’s death has been over exaggerated (PaymentsSource), Rated: A

It’s clear that equity investors no longer see the value of marketplace lenders, such as companies that provide credit at the point of sale or online lending.

Source: PaymentSource

A typical lender leverages equity into debt at a fixed ratio. If they want to grow their portfolio they have to raise equity and lever it into more debt. An off-balance sheet marketplace eliminates the equity-debt leverage ratio allowing a lender to double and triple their portfolio as quickly as they can grow their marketplace.

The SEC Goes Hot with ICO Subpoenas but are Regulators “on Shaky Legal Ground?” (Crowdfund Insider), Rated: A

The fact the Securities and Exchange Commission has been issuing subpoenas to initial coin offering (ICOs) issuers has been rumored for quite some time. Recently, multiple publications, including Crowdfund Insider, revealed this fact. The SEC has been warning of this sort of activity for many months and, while not surprising to most, it is an unpleasant moment for an issuer when that subpoena shows up.

Mulvaney says the CFPB will depend heavily on state Attorneys General for enforcement of consumer protection laws (Lexology), Rated: B

For example, the acting director noted that the agency will devote greater resources to consumer education, instead of relying heavily on enforcement actions to ensure consumers make the correct choices, reaffirming previous remarks in a Wall Street Journal opinion piece (previously covered by InfoBytes here).

Mulvaney stated that he does not anticipate devoting any further resources to mandatory arbitration clauses, citing Congress overturning its arbitration rule through the Congressional Review Act as evidence the Bureau does not have the authority to do so.

3rd Circuit holds payday lender’s arbitration clause unenforceable (Lexology), Rated: B

On February 27, the U.S. Court of Appeals for the 3rd Circuit held that an arbitration clause is unenforceable if the corresponding forum selection provision designates a forum that does not actually exist.

The benefits of fintech for the credit invisible (microbilt), Rated: A

 

Rethinking The Reputation Of The Merchant Cash Advance (PYMNTS), Rated: A

The rise of alternative lending and familiarity of growing names like OnDeck is beginning to shift public perception of the merchant cash advance, however.

There are scenarios, too, in which a merchant cash advance may actually be the best financial option for a business in need of working capital.

“We see a lot of clients who already have a long-term equipment loan, or an SBA loan, or a loan from a traditional bank or a factoring line, and they’re looking to unlock short-term liquidity from their business,” he said. “When you take out an SBA loan or equipment loan, you have to have some type of collateral to pledge, and that money can dry up quickly. We come in un-collateralized.”

One driver behind the shifting reputation of merchant cash advances is the industry’s participation in technology adoption and innovation.

At Best Egg, talk is a best practice (American Banker), Rated: B

So, every quarter, he and the company’s management team host an all-hands meeting and outline to the company’s 100-plus employees what the most important goal for the next 90 days will be.

So the word went out to employees that for the time being, efforts to grow the business would have to take a back seat to making certain that the existing business was profitable. According to Meiler, it was employees’ focus on the task that helped Best Egg rack up $11 million in GAAP profits last year, even as competitors were still posting operating losses in the tens of millions of dollars. And, he adds, the company still grew its business by 60% anyhow.

Best Fintechs to Work For (American Banker), Rated: A

Office exercise happens beyond a standing desk at many of the companies. NvoicePay not only provides stretching areas and lockers to employees, it offers monthly classes with a certified trainer and kinesiologist. Marlette Funding’s Best Egg unit offers employees self-defense classes on site, along with yoga.

And if you like the beach, check out nCino, where employees regularly go for early morning paddleboat sessions at nearby Wrightsville Beach in Wilmington, N.C., and SmartbizLoans, which hosts “Disco Yoga” at San Francisco’s Baker Beach.

Addressing an employee’s well-being and comfort comes in different forms, whether it is Cross River Bank’s policy of providing 100% of the premium for various insurance benefits covering employees and their families, Nav’s unlimited paid time off option for employees, or Ensenta’s tradition of celebrating workforce diversity with multiple holidays, including Kwanzaa, Diwali, and the Day of the Dead.

To keep burnout in check, PeerStreet mixes play with hard work (American Banker), Rated: A

To that end, they’ve established a company that regularly celebrates its successes and milestones with parties, and encourages employees to get together and have fun in nonwork environments. A prime example of the latter is the PeerStreet Olympics, an annual event in which the company is divided for a day into teams of friendly athletic competition, some of which takes place on the beach near its Southern California offices.

United Kingdom

Peer-to-peer lender Collateral enters administration (Financial Times), Rated: AAA

Collateral (UK), a small P2P company offering pawnbroker-style and property-backed loans with 15 per cent returns, went into administration on Wednesday after it emerged that it was not authorised by the Financial Conduct Authority.

BondMason offers to step in on Collateral loans (P2P Finance News), Rated: A

PEER-TO-PEER investor BondMason has offered to step in and manage the loanbook of the troubled Collateral platform.

BondMason, which invests in loans across more than 30 P2P platforms on behalf of investors, revealed it has invested 2.48 per cent of its portfolio through Collateral, which has fallen into administration.

P2P platforms reassure investors after Collateral closure (P2P Finance News), Rated: A

PEER-TO-PEER lending firms have been reassuring their investors about the safety of their platforms in the aftermath of Collateral going into administration.

Business lenders Ablrate and MoneyThing have both sent messages to their customers detailing their stability, performance and regulatory requirements that mean they have to hold client money separately and have a ‘living will’ that puts a plan in place should a business fail.

Growth in the number of Zombie businesses in the South East says report (Daily Echo), Rated: A

The proportion of south east companies which are only paying the interest on their debts – one of the signs of a so-called ‘zombie’ business – has risen to four per cent in December from one per cent in April 2017, according to indicative research by R3, the insolvency and restructuring trade body.

This represents around 12,000 businesses in the region.

Beware Fintech Firms Bearing Bitcoin (Bloomberg), Rated: AAA

Rather than try and undercut banks, or chase millennial savers’ pennies at a loss, fintech firms are now leaping at the chance to make serious cash through a technology that most banks won’t even touch. What’s more, Bitcoin has the power to take over people’s lives. One trader says it’s worse than gambling; Korea calls victims “zombies.”

Here’s a roll call of recent converts: Mobile-payments firm Square Inc. has rolled out Bitcoin trading; social-payments app Circle splashed $400 million on Poloniex, only about 15 months after it had stopped offering bitcoin trading; and money-transfer company Revolut has started offering crypto trading facilities.

Trading platform Coinbase booked more than $1 billion in revenue last year, according to Recode, which, if true, is more than peer-to-peer marketplace Lending Club and more than Square. On top of the money to be made from trading fees and asset-price gains, Bitcoin could also act as a lure, helping startups cross-sell their other products to a bigger audience.

 

London Fintech Humaniq Launches New Version of Mobile App (Crowfund Insider), Rated: A

On Friday, London-based FinTech firm Humaniq revealed it is marking the milestone of its mobile app reaching its first 50,000 downloads by unveiling a new, improved version.

Some of the new features include:

  • New referral program: The new 2.0 referral program will build on this by displaying community progress with referrals and thereby make the referral process more transparent and intuitive for all users.
  • Transaction options extension: Transactions can now be made through the messaging chat system.
  • New registration process: Allows users to start interacting with a Humaniq assistant bot, which becomes smarter and is learning to execute more useful commands, even without the registration.

Peer-to-peer lender Linked Finance helps firms to add 2,400 jobs (The Times), Rated: A

The country’s largest peer-to-peer lending platform said that it had supported the creation of more than 2,400 jobs since it began its Irish operations almost five years ago.

Linked Finance, which connects local businesses in need of loans with an online lending community of individuals, institutions and other investors, said firms that had borrowed money through its platform had raised staffing levels by 24 per cent on average.

City Moves for 5 March 2018 – who’s switching jobs at ArchOver? (City A.M.), Rated: B

ArchOver, the peer-to-peer (P2P) business lending platform, has announced Bill Johnston will join its board of directors as a non-executive director (NED). In his role, Bill will support ArchOver in formularising its training and development programme, to ensure it has the right talent in place as it continues to scale.

China

Orix invests $ 60m in Chinese fintech startup (Asian Review), Rated: AAA

Japanese financial services group Orix bought a 6.4 billion yen ($59.8 million) stake in Wecash, a Chinese startup that uses big data and artificial intelligence to rate consumer credit.

Wecash can calculate a consumer’s creditworthiness in 10 seconds or less using phone records and other personal information, and has partnered with dozens of financial institutions so far. It also suggests potential lenders to consumers looking to take out a loan.

Only about 30% of the Chinese population is believed to borrow money from banks.

Hong Kong gives fintech measures the thumbs up (Asia Asset Management), Rated: B

Hong Kong will allocate HK$500 million (US$64.1 million) to financial services, including fintech, over the next five years, Mr. Chan said in the budget speech.

European Union

We talked to Nordic fintech queen Lena Apler – and her message to legacy banks is reboot or die (Business Insider), Rated: A

Big banks are particularly exposed when it comes to ETF funds. The fast-growing $5 trillion-dollar industry is being challenged by a crop of robo advisors, such as Apler’s portfolio company Sigmastocks, an algorithm-powered tool that tailors portfolios for customers, or BetterWealth, a roboadvisor app.

Although the region’s leading banks, such as Danske, Nordea and Swedbank are doing some good things and building new digital banking products and roboadvisory capabilities, Apler says, it won’t be enough.

Apler’s online bank Collector, which received its full banking license in 2015, has expanded to comprise cards, saving accounts and quick loans to both consumers and businesses. Collector doesn’t face the same issues as legacy banks in a digital world, Apler explains.

International

SMBs Turn To Mobile Devices To Accept Payments In Face-To-Face Environments (PYMNTS), Rated: AAA

The retail point-of-sale (POS) terminal market is no stagnant business. While it is currently a $15 billion industry, Global Market Insights is expecting it to reach $45 billion by the year 2024.

Only 13 percent of small- and medium-sized businesses (SMBs) are considering adding new payment types to face-to-face and remote environments, according to The PYMNTS SMB Technology Adoption Index.

Here are five ways SMBs are accepting payments from their customers.

  1. About a quarter – or 26 percent – of SMBs use hardware and software integrated POS to accept payments in a face-to-face environment.
  2. Almost two in 10 – or 19 percent of SMBs – use check scanning to accept payments in a face-to-face environment.
  3. And just about the same amount – 18 percent – of SMBs use NFC-enabled terminals to accept payments in a face-to-face environment.
  4. Fourteen percent of SMBs use mobile phones to accept payments in a face-to-face environment.
  5. Just under one in 10 – or 8 percent – of SMBs use mobile tablets. 

AltFin Shines As Investor Interest In B2B FinTech Continues (PYMNTS), Rated: A

Total venture capital across the global FinTech market between 2010 and 2017 hit a combined $97.7 billion, growing at a compound annual growth rate (CAGR) of 47 percent.

Accenture highlighted Kabbage, the U.S. alternative small business lending firm, that secured $900 million in 2017, while other alternative finance players, like LendingPoint and SoFi, landed significant investment rounds.

This week, alternative lender C2FO showed that the alternative finance funding gears are still turning, landing $100 million from Allianz X and Mubadala Investment Company. Existing backers Temasek, Union Square Ventures and Mithril Capital also participated, an announcement said.

This week’s blockchain investment comes from Square Peg Capital, which provided $5.5 million in Series A funding to AgriDigital, an Australian company hoping to use the funds to expand into North America.

Reports in The Australian Financial Review this week said the company uses blockchain to facilitate supply chain finance to the agriculture business, offering supply chain management features also powered by distributed ledger technology.

Why More MBA Students Are Gunning For Careers In Fintech (Business Because), Rated: A

According to CB Insights, $4.7 trillion of revenue generated by financial services firms is at risk of being displaced by fintech startups.

Prominent business school alumni have founded successful fintech startups, such as Giles Andrews, who setup peer-to-peer lender Zopa after getting an MBA at INSEAD. Jeff Lynn and Carlos Silva developed crowdfunding platform Seedrs during their MBA at Oxford’s Saïd Business School. According to PwC’s Global Fintech Report 2017, funding of fintech startups has increased at an annual growth rate of 41% over the past four years, with $40 billion in cumulative investment made.

Niels Turfboer is UK managing director at Spotcap, the Berlin-based online lender.

Lending and profit on the blockchain – Bitstrades targets new markets (The Merkle), Rated: B

Bitstrades is clearly aiming to position itself as a complete platform that both links users together and also leverages economies of scale to make both lending and investing possible. The Bitstrades ICO raised millions in funding and now the BSS token is available for trading.

TigerWit Raises $ 5M in Funding (Finsmes), Rated: B

TigerWit, a global fintech company, secured $5m in funding.

Australia/New Zealand

Financial planners not needed in credit space (TheAdviser), Rated: A

Bringing financial planners into the credit space would be unnecessary, according to a Commonwealth Bank executive, as there are more than enough brokers to service the mortgage needs of Australians.

The CBA executive said: “With 16,000 brokers out in the marketplace, we’re certainly not in a position where we need more people to serve Australians well in meeting their mortgage needs. For me, it’s certainly not a quantity issue.

The PC has also alleged that brokers working for lender-owned aggregators could feel compelled to provide customers with home loan products offered by the bank with an ownership share of the business.

Commissioner Stephen King referenced CBA’s ownership of Aussie Home Loans and cited figures published in the PC’s report, which said that 37 per cent of loans written by Aussie brokers were for CBA products.

We launch a new calculator that figures out the true “cost of credit” of a loan contract (Interest.co.nz), Rated: B

This one will be very helpful for readers who know just three things: how much they are borrowing, the amount of their repayments, and the number of those repayments.

It will be very useful indeed for anyone contemplating taking out a personal loan, a car loan, or even a payday loan.

With just these three items, you can work out the effective cost of credit of the debt obligation, expressed as a % per annum.

India

FY 19 – Beginning of a New Era for P2P Lending in FinTech Sector (India Info Online), Rated: AAA

India is poised to be a USD 4-trillion economy by 2022, of which USD 1-trillion would be digital economy.

Digital economy was a focal point for this budget ’18 as government’s support with regard to lending MSME’s allocated 3794 crore in the form of capital support and interest subsidy by 2022 which will help develop the MSME sector. Micro, Small and Medium Enterprises (MSMEs) contribute about a third of India’s manufacturing output and provide employment to over 10 crore people. Despite this, the share of institutional lending in the total borrowings of MSMEs is less than 10%.

The prudential guidelines include maximum leverage ratio that can be maintained (2 times), minimum net owned funds (Rs2 crore), cap on aggregate exposure of lender to all borrowers (Rs.10 lakh), borrowers across all P2P (Rs10 lakh), exposure of single lender to borrower (Rs50,000) and maturity of loans (not exceed 36 months).

Signzy is helping banks solve customer authentication, onboarding problems with blockchain-based solution (YourStory), Rated: B

Signzy developed blockchain and AI-based solutions to digitally identify, verify, and authenticate customers. Its onboarding solution, Real KYC, has now been deployed by more than 45 large clients, including leading banks, NBFCs, mutual funds, P2P lending platforms, payment wallets, and so on.

Africa

Nigerian banks are using Facebook Messenger to onboard small businesses (Tearsheet), Rated: AAA

Mastercard is working with Facebook Messenger to bring a digital payments and banking experience to small businesses in Nigeria, in an effort to incentivize Nigerian merchants to close the mobile payments adoption gap and bring them onto the formal financial grid.

The payments giant, which has said it’s in the business of killing cash, is bringing this initiative to a country where 98 percent of the $301 billion in consumer-to-business payments is transacted using cash.

Authors:

George Popescu
Allen Taylor

Thursday January 25 2018, Daily News Digest

blockchain equity rounds

News Comments Today’s main news: SoFi to roll out checking accounts. Zopa re-opens to new customers. Roostify integrates with LendingTree. China regulator says credit market should adopt blockchain. ETHLend hits 1M GBP in P2P crypto loans. Borrowell launches free Equifax credit report monitoring. Brazilian payments company sets post-Snap IPO record. Today’s main analysis: Blockchain equity funding vs. ICOs. Today’s thought-provoking articles: […]

blockchain equity rounds

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Asia

Egypt

Canada

South America

News Summary

United States

SoFi will roll out checking accounts this spring (Tearsheet), Rated: AAA

SoFi is rolling out checking accounts without a banking license, demonstrating the new reality that a company doesn’t have to be a bank in order to bank customers.

By partnering with the Wilmington, Delaware-based WSFS Financial, SoFi will roll out a fee-free checking account and debit card this spring in a bundle it’s calling SoFi Money, designed to address the pain points customers have with day-to-day banking products, like high fees and clunky digital interfaces, executives said at a media gathering in New York Tuesday morning. SoFi Money will include peer-to-peer transfers between SoFi customers, mobile check deposit and high yield interest rates on deposits (0.75 to 0.85 percent). It will be available first to current SoFi members before the broader rollout.

Five challenges facing SoFi’s new CEO (American Banker), Rated: A

Reforming SoFi’s culture.

Determining when to go public. SoFi has a number of key shareholders who might like to access wealth that is tied up in the company’s shares. That list includes the Japanese conglomerate SoftBank, which led a $1 billion equity financing round in 2015, and the venture capital firm Silver Lake Partners, which led last year’s $500 million round. That round reportedly valued the privately held company at more than $4 billion.

Deciding how to grow. But while student loan refinancing proved to be an excellent way to find new customers during a period of low interest rates, that opportunity is now shrinking, as rising interest rates reduce the spread between what borrowers pay the federal government and what SoFi can offer.

Yes or no on a bank charter? 

Proving that he has the right background. Noto does not appear to have any experience in consumer financial services, which could be viewed as a weakness.

Roostify Announces Integration With LendingTree (BusinessWire), Rated: AAA

Roostify, a provider of automated mortgage transaction technology, today announced that it has integrated its online mortgage platform with LendingTree (NASDAQ: TREE), the online loan marketplace. The new integration makes it easier than ever for consumers to locate and apply with the right lender.

Lenders can utilize the new integration to create a seamless path for consumers to search, select, apply for, and close a loan online. Consumers selecting an offer on LendingTree from a lender using Roostify will be able to authenticate into the lender’s Roostify-powered online experience, with all information securely pre-populated. The consumer can move from shopping around to getting their loan in just a few clicks, streamlining the experience and improving lead quality for lenders.

The integration will enter general availability in Q1 2018 for all joint clients of Roostify and LendingTree.

2018’s Best Online Checking Accounts (WalletHub), Rated: AAA

More than 6 in 10 people don’t realize that online-only banks offer better rates and lower fees than their counterparts with branch access, according to WalletHub’s 2018 Banking Survey. But it’s true. What online-only accounts lack in terms of face-to-face interaction, they make up for with superior terms. For example, the average online checking account costs 47% less than its branch-based counterpart, according to WalletHub’s latest Banking Landscape Report. And the average online savings account pays 457% more interest than the branch alternative.

Best Online Checking Accounts – Editors’ Picks

Best For… Online Checking Account Best Feature
Overall Aspiration Summit Account APY up to 1.00%
Highest APY Consumers Credit Union Free Rewards Checking APY up to 4.59%
Debit-Card Rewards Bank5 Connect High-Interest Checking Account 1 point per $2 spent
No Monthly Fee BofI X Checking


Capital One 360 Checking Account

No ATM fees


No ATM fees

International Travel Charles Schwab High Yield Investor Checking No foreign fee
Money Management Tools PNC Bank Virtual Wallet Spending analysis

RealtyMogul Boosts REIT Cred with Hire of Industry Veteran Aaron Halfacre as President (Crowdfund Insider), Rated: A

RealtyMogul, a leading real estate crowdfunding platform offering Reg D (accredited) and Reg A+ (both accreds and non-accreds) investment opportunities in commercial and residential property, has hired a new President to help lead the firm. Aaron Halfacre, a 20 year real estate executive, has joined RealtyMogul bringing in institutional expertise including in the hot REIT sector.

Aaron Halfacre Becomes RealtyMogul’s First President (Bisnow), Rated: A

A former Campus Crest president and chief investment officer, Halfacre took a year and a half break after the publicly traded student housing REIT was acquired by Harrison Street Real Estate Capital in a $1.9B deal.

As president of RealtyMogul, Halfacre will be responsible for creating a strategy, growing assets and augmenting business growth. He will serve as a voting member of the firm’s investment committee, which has invested in more than $1.4B of real estate since 2013, the company reports.

Juvo Receives Investment from Samsung to Boost Smartphone Usage Among Underbanked (Finovate), Rated: A

Mobile identity company Juvo has received an investment from Samsung NEXT, an off-shoot of Samsung that launched in 2013 to create new software and foster a startup culture at Samsung. The amount of the investment was undisclosed and adds to the San Francisco-based company’s $54 million in equity funding.

The bigger story here is that the investment is a strategic one. Samsung will bring Juvo access to billions of underbanked prepaid users across the globe. This will help Juvo enable MNOs to increase smartphone adoption among prepaid mobile subscribers.

The challenger bank Chime says it has 750,000 millennial customers (American Banker), Rated: A

Chime, a mobile-only neobank for millennials, said Tuesday that it has opened 750,000 accounts to date and is signing up users at a brisk pace this month.

The growth is extraordinary. While there are many other mobile-only challenger banks in the U.S. — including Qapital, Digit and, more recently, Varo and Douugh — few have racked up large numbers yet. Chime touts a low-fee checking and savings account with a debit card and an app that provides automated savings and real-time notifications; there are no monthly or overdraft fees nor minimum-balance requirements. The Bancorp Bank holds the federally-insured accounts.

The reason why most people get rejected for a personal loan (Yahoo! Finance), Rated: A

LendEDU, a marketplace for loans and financial products, just released data showing that 76% of people who apply for a personal loan are declined. One of the main reasons for rejection? A low credit score. The average American has a credit score of 687. Meanwhile, the average FICO credit score of an approved applicant was 741.

Of those who do get approved, LendEDU predicts that just 35% went on to accept the personal loan.

Currently, 16 million consumers have an unsecured personal loan. According to a TransUnion, personal lending balances grew a steady 10.8% in the second quarter of 2017, totaling $108 billion.

Back in 2010, fintech only made up 3% of personal loan lenders. In 2015, Transunion says that number jumped to 30%.

Why fintech is still a way off disrupting lending (Financial News), Rated: A

But of the many things that banks do, lending to small and medium sized companies (‘SME’ lending) is one of the more complex areas to emulate. It is also politically charged. As such, there is some evidence that the disruption attempted in the area of lending is itself being disrupted by the practicalities of a complex area of finance.

Citi’s mobile app is lagging behind its peers (Tearsheet), Rated: A

The fourth-largest bank by assets grew its total active mobile users 21 percent year over year to nine million, the bank reported last week in its fourth-quarter earnings.

By contrast, Chase reported 30.1 million users, Bank of America 24.2 million and Wells Fargo 21.2 million.

Citi’s growth rate for 2017 was stronger though, at 21 percent year over year, than its peers’. Chase reported 13 percent growth, Bank of America 12 percent and Wells Fargo 8 percent.

Mulvaney outlines new CFPB governing philosophy (The National Law Review), Rated: A

In a memorandum to CFPB staff and a Wall Street Journal article, Mr. Mulvaney described his governing philosophy for the CFPB’s exercise of its authority.

  • While observing that there will be times when “dramatic action” is needed to protect consumers and that, at such times, he expected the CFPB “to be vigorous in [its] enforcement of the law,” Mr. Mulvaney stated that “bringing the full weight of the federal government down on the necks of the people we serve should be something that we do only reluctantly, and only when all other attempts at resolution have failed.”
  • In using its enforcement authority, the CFPB will focus on “quantifiable and unavoidable harm to the consumer” and when such harm does not exist, the CFPB “won’t go looking for excuses to bring lawsuits.”  In addition, there will be “more formal rule making and less regulation by enforcement”  because “the people we regulate should have the right to know what the rules are before being charged with breaking them.”
  • CFPB priorities should be guided by data such as 2016 complaint data which showed that “almost a third of the complaints” received by the CFPB related to debt collection and “[o]nly 0.9% related to prepaid cards and 2% to payday lending.”
  • In light of the Dodd-Frank Act requirement for the CFPB to “consider the potential costs and benefits to consumers and covered persons,” CFPB decisions should be driven by quantitative analysis.  Although qualitative analysis can play a role, it should not be to the exclusion of measurable “costs and benefits.”

Read the memo for yourself here.

What you thought you knew about millennials is wrong (American Banker), Rated: A

Sixty-three percent say they are saving money. This is very close to the rate of Gen Xers (64%) and baby boomers (75%).

Fifty-four percent of millennials say they are on a budget, the same level as Gen X and only slightly below the rate of boomers (57%).

They are diligent about savings and budgeting: 67% of millennials who have a savings goal stick to it. And 73% of millennials on a budget adhere to it regularly.

And 59% say they feel financially secure, compared with 54% of Gen Xers and 63% of baby boomers.

Making it in GR: Lessons in crowdfunding (Rapid Growth), Rated: A

Last month’s “Making it in Grand Rapids” article focused on the ever-expanding alternative financing options for entrepreneurs, such as: impact investment funds, peer-to-peer lending solutions and crowdfunding platforms. Grand Rapids entrepreneur Don Rhoads is Owner/Inventor of At Last Industries (At Last), which created the BedBud Alarm. He is also Head of Development at Cut Through Creative. Rhoads shares his progression from having an idea through the development and launch of his Kickstarter campaign—and the insights he learned along the way.

RG: A recent Small Business Credit Survey reported that “70 percent of startup applicants are in need of funding to support [their growth]” and that “52 percent of startups [have] applied for financing.” Did you pursue any avenues before deciding on crowdfunding?

DR: Yes. I actually applied for and presented at a 5×5 Night. Unfortunately, I didn’t win that one, but as much as I was disheartened, I was still [determined to] fulfill the product. Also, through traditional bank loans, I applied through my current bank. It was a little bit difficult. In a startup, it is difficult to put a value on a business. [Banks] want capital behind it because most startups fail anyway, so they want some substance behind you so they can get their money back. I was told I would need to be a little bit further down the line to get additional funding.

Technology and the Future of Financial Advice (Janus Henderson), Rated: A

Technology arrives in waves and is embraced over an adoption curve. These waves are growing stronger – in large part because technology is becoming ever more powerful. Over time, we have seen these waves play out in financial planning, too.

It is worth looking at two of the challenges faced by the industry now. The first is demographics. Clients have grown older and wealthier, but they are not being replaced within the market for traditional advice services. This is creating an advice gap for firms who need to replenish their client bases.

The second big issue is that consumer engagement is challenging. Long-term thinking hurts. As Daniel Kahneman articulated in Thinking, Fast and Slow, human beings do not easily think about the future in an analytical way and there remains room for improvement in financial literacy among the public. Add to that the low levels of customer trust for the industry and many consumers are not switched on to the benefits of financial advice.

Source: National Financial Literacy Test Results.
United Kingdom

P2P platform Zopa re-opens to new customers (Financial Times), Rated: AAA

Zopa, the UK’s first peer-to-peer lender, has reopened its platform to new customers after having to close to new money last year amid high demand for its new Innovative finance Isa (Ifisa) product and a long-running imbalance between lenders and borrowers.

Fintechs impatient as British banks seek extra time to open up (NASDAQ), Rated: A

Financial technology firms were supposed to start breaking into mainstream banking this month when new rules forced Britain’s nine big banks to loosen their grip on the industry.

But many fintech companies are still waiting with frustration on the sidelines after the banks delayed making the changes.

Financial technology firms were supposed to start breaking into mainstream banking this month when new rules forced Britain’s nine big banks to loosen their grip on the industry.

But six of the nine banks have asked Britain’s regulator for an extension to the January 13 deadline for putting in place the ‘open banking’ regulation, which overlaps with a new European Union directive known as PSD2.

UK fintech takes the lead in the Forbes 30 under 30 (AltFi), Rated: A

The gender balance has been particularly notable in the finance sector this year, as Forbes named Starling Bank’s Chief Platform Officer, Megan Caywood, and Lendable co-founder Victoria van Lennep alongside her business partner Martin Kissinger, as ones to watch.

In the technology category, Monzo co-founder Jonas Huckestein and the co-founders of digital receipts startup Flux all found themselves highlighted by Forbes.

China

China’s Banking Regulator Pushes Blockchain Adoption for Credit Market (CoinDesk), Rated: AAA

Blockchain technology should be adopted as part of a plan to boost development of China’s secondary loan market, according to a paper by the China Banking Regulatory Commission (CBRC).

Published on Jan. 19, the paper, drafted by a special committee, covers a variety of topics around developing and regulating financial technologies. In a section on the future development of China’s credit market, it suggests the country should double down its adoption of blockchain technology.

Download and read the report yourself here (in Chinese).

Ant Financial and the Greening of Fintech (The Diplomat), Rated: A

Ant Financial, an affiliate of Alibaba, is one clear example of a company using fintech to encourage a greener world.

Ant Forest is the world’s first largescale, bottom-up pilot in greening citizens’ consumption behavior through the use digital technology and social media. It is an app that Ant users can voluntarily engage with to reduce their carbon footprint and encourage their social networks to do the same. Users that perform carbon-reducing activities, such as paying bills online or walking to work, relative to a predetermined benchmark, are rewarded “green energy” points. As users accumulate enough points virtually, a real tree is planted. To date, Ant Forest has planted saxauls, willows, and Scots pine trees in Inner Mongolia and Gansu.

Ponzi scheme sparks protests (The Standard), Rated: B

Chinese authorities are struggling to quell protests after the collapse of an investment scheme that took about 30 billion yuan (HK$36.7 billion) from millions of depositors.

Hundreds of people marched on Monday in Nanjing, where Qianbao started in 2012, shouting for officials to act. But a video shows police grabbing investors as others yelled about being beaten up.

European Union

Ten User’s Pain Points Digital Banking and FinTech Should Care Of (Finextra), Rated: AAA

Studies have shown that users tend to quickly switch products and services. This also concerns banks as the competition and the number of Open Banking services increase due to the implementation of the European Directive PSD2.

1. Onboarding

Onboarding becomes particularly important in digital era. It can be a productive introduction to a new service or a challenging obstacle that deters customers. The banks of the future should provide a full digital onboarding.

2. Authentication

Log in difficulties or problems shouldn’t create obstacles for the customer. After all, no one would go to a restaurant with a locked door.

5. Transactions

Users should be able to fully control their banking. It is crucial for them to find a certain transaction and download a payment slip. View transaction history is among the TOP 3 customer scenarios. This function should be simple and understandable. Users want to filter their transactions to find specific items, view detailed information, report a violation, check payment status, export and save them, etc.

6. Payments

We are pleased to see that bank payment interfaces are becoming simpler each year. Digital technologies allow us to move complex banking procedures to the background. Challenger Banks ar a good example here.

The purpose of payment limits is to ensure the user’s security. The user should have online access to a flexible configuration of any financial transaction.

8. Notifications

There shouldn’t be too many notifications, only relevant ones.

Conclusion

Being in the users’ shoes and finding pain points in products and services will be a crucial competitive advantage. Companies recognising this issue will take a leading position in the future financial market.

International

ETHLend hits £1m crypto-P2P loans milestone (P2P Finance News), Rated: AAA

CRYPTO-BACKED peer-to-peer lending platform ETHLend has funded $2m (£1.4m) of loans in just over a month since launching.

The platform, which lets investors back business and personal loans worldwide n the Ethereum (ETH) digital currency, only went live in December but says it has already facilitated 438 loans.

Its biggest loan so far was for 83ETH, equivalent to £58,681.

Blockchain Startups Absorbed 5X More Capital Via ICOs Than Equity Financings In 2017 (CB Insights), Rated: AAA

In Q1’17, 19 ICOs closed for about $21M. Three quarters later, in Q4’17, over 500 ICOs closed for almost $3B. According to CB Insights, 2017 saw over 5x more capital deployed in ICOs than in equity financings to blockchain startups. Q4’17 alone saw that number jump to 7x.

In total, ICOs raised over $5B across nearly 800 deals in 2017. To put those numbers into context, equity investors deployed $1B in 215 deals to the sector.

GDS Link Acquires Fraudscreen, the UK’s Leading Provider of Analytics to Predict Payment Intent (GDS Link Email), Rated: A

GDS Link, a global provider of risk management solutions and consulting for multiple verticals within the financial services industry including marketplace lending, retail finance, alternative financial services, credit card, auto, and business lending and leasing, today announced that it has finalized the acquisition of 

Finastra sees accelerating FusionFabric.cloud adoption (Finastra Email), Rated: A

At its regional flagship thought leadership event, Finastra Universe Paris,Finastra today welcomed new companies to the FusionFabric.cloud open architecture. Among the early adopter Fintechs, consultants, banks and academics using the platform to develop and deploy innovative apps are Efficiency MC, Conpend and BankBI. In addition, Thomson Reuters joins Finastra’s innovation ecosystem as a data provider.

Thomson Reuters is currently embedding its instrument reference data into FusionFabric.cloud.

Paris-based system integrator, Efficiency MC, is using the platform to develop an interest rate derivatives pricing model app.

European Fintech, Conpend, is using FusionFabric.cloud to develop apps for corporate banking.

Cloud focused Fintech, BankBI, has a Performance Management and Analytics application for FusionFabric.cloud to complement the Finastra retail banking solutions, including C-suite dashboards.

Australia

The everyday Aussie is increasingly choosing a peer to peer personal loan – here’s why (mozo), Rated: AAA

ASIC’s second marketplace lending survey revealed that $300 million worth of personal and business loans were written by peer to peer lenders during the last financial year – almost double the amount commissioned during the 2015/2016 financial year.

The snowballing popularity of these types of loans is measured by the fact that, as of June 2017, the industry had 7,768 investors and a further 18,746 borrowers – numbers that had doubled over the preceding 12 months and are only set to grow in the new year.
Comparatively, at the lowest peer to peer rate in the Mozo database of 6.99% (on offer from Harmoney), the average Aussie borrower would pay just $5,634 in interest on the same loan – saving more than $4,000 in the process.

Stuart Stoyan is FinTech Australia’s new chair (Business Insider), Rated: B

Stuart Stoyan, the founder and CEO of Melbourne-based fintech MoneyPlace, which in 2015 became Australia’s second fully licensed marketplace lending platform, has become FinTech Australia’s new chair.

India

RBI Directions On Peer To Peer Lending Platforms: Frequenly Asked Questions (Mondaq), Rated: AAA

2.2  Electronic platforms connecting banks and NBFCs to borrowers

The RBI has clarified that electronic platforms that assist only banks, non-banking financial  companies (“NBFCs”) and other regulated All India Financial Institutions (“AIFls”) to identify  borrowers will not be considered peer to peer lending platforms  (“P2P Lending  Platforms”).   However, in cases where,  apart from banks, NBFCs and AIFls, or other retail lenders use the  electronic platform for lending, the platform will have to register separately as a non-banking  financial platform –  peer to peer lending platform (an “NBFC-P2P”).

2.3  Leverage ratio and investible funds for an NBFC-P2P

The RBI has clarified that for an NBFC-P2P, customers’ funds lent or borrowed by using the platform  is not reckoned as an outside liability of the NBFC-P2P, for the purpose of determining the  leverage ratio of the NBFC-P2P.

(a)  Do the P2P Lending Platforms have to fulfil the 50-50 test issued by the RBI to fall  within the purview of the P2P Directions?

The RBI, with its clarification that an existing NBFC cannot operate as an NBFC-P2P, has clarified  that the 50-50 test set out by the RBI to qualify as a non-banking financial company is not  applicable to an NBFC-P2P.

VC Firm 3one4 Capital Announces Second Fund With An Initial Corpus Of $ 39 Mn (Inc42), Rated: A

With closed commitments for $39 Mn, the 3one4 Capital team will look to enhance its deep involvement model across its investment domains. The fund will invest early stage startups with ticket sizes of $250K to $2 Mn.

Asia

Tryb Group raises $ 30M to develop fintech platforms for Southeast Asia (TechCrunch), Rated: A

Tryb Group, a Singapore-based organization focused on fintech services in Southeast Asia, has landed a $30 million investmentfrom Makara Capital.

For a Western comparison, Tryb aspires to be like LendingClub with a focus on digitizing the predominantly analog systems of financial services and banking in Southeast Asia, a region of over 600 million consumers.

“There’s strong demand to start buying ASEAN credit, with Japanese, Chinese, American and other investors looking to buy up $50-100 million worth. But they don’t know where to start since it’s all on paper,” he said.

Currently, the Tryb business doesn’t make direct revenue. It holds stakes in a number of businesses — including MC Payment which is in the process of going public in Singapore — but Gnirck said it has two acquisitions that he expects to finalize in the coming months.

Genie ICO Adds Cryptocurrency Heavyweight David Drake and Other Experts to Its Advisory Board (CoinTelegraph), Rated: B

Joining the Crowd Genie advisory board is David Drake, Founder and Chairman of LDJ Capital, who is also a global pioneer in the cryptocurrency industry and has written for more than 100 publications on innovative investing. Also joining the board is serial entrepreneur Petter Sehlin, who is a Founding Partner of global angel fund True Global Ventures and founder of the Polarchain blockchain. The founders of one of the world’s most comprehensive online cryptocurrency databases and information resources, AllCoinWiki, Anders Larsson and Joakim Holmer have also joined the board.

MENA

Egypt’s fintech startups are growing in number, value, and specialization (wamda), Rated: AAA

Financial inclusion is critical in reducing poverty and achieving shared economic growth, as mentioned The Global Findex Database 2014: Measuring Financial Inclusion around the World’: When people can participate in the financial system, they are better able to start and expand businesses, invest in their children’s education, and absorb financial shocks.

According to figures shared with Wamda by the World Bank Global Findex database, only 14 percent of adults in Egypt have an account as of 2014, and eight percent use an account to make digital financial payments. The Findex said that about 86 percent of adults in the country do not have an account and are therefore considered unbanked.

The model of Fawry, has demonstrated the validity of such business models, and has driven several concepts to launch.” Fawry, which was launched in 2008, provides payment solutions through ATM machines, mobile wallets, and retail points.

Egypt-based fintech startup Moneyfellows raised $600,000 from a group of investors led by Dubai Angel Investors and 500 Startups. This web and mobile-based platform founded in December 2014, allows users to create, manage, and track money circles (group money lending) online with members of their social networks. The startup makes money by charging users a small fee when they withdraw their payout from their money circle. So far, the startup has around 2,600 paying users and about 240 active circles.

Vapulus, which launched in December 2017, partners so far with 400 retail and F&B merchants in the country, and aims to reach 16,000 within one year of operation. The startup is a mobile app and mobile POS service for both individuals and sellers.

Canada

Borrowell launches free Equifax credit report monitoring, a Canadian first (GlobeNewswire), Rated: AAA

Borrowell today announced that it is providing Canadians with free access to their Equifax credit reports. For the first time, Canadians will be able to monitor important information in their Equifax credit report on a monthly basis, including credit utilization, inquiries and credit account history, for free online.

To date, Borrowell has provided credit information to nearly half a million Canadians.

Canada Venture Capital 2017 (CB Insights), Rated: A

Annual funding to Canada hits high in 2017

  • Total annual funding reached $2.7B, distributed across 333 deals in full-year 2017.
  • Total funding increased 7%, while deal activity decreased by 12%.
Source: CB Insights
South America

NYSE’s Biggest IPO Since Snap Is $ 2.3 Billion for Brazil Fintech (Bloomberg), Rated: AAA

PagSeguro Digital LTD, a payments company owned by Brazilian media group Universo Online SA, raised about $2.27 billion in an initial public offering on the New York Stock Exchange, according to Bloomberg data.

The company, which has a similar model to Jack Dorsey’s Square, sold shares at $21.50 each, above the top of the price range of $17.50 to $20.50 in the offering prospectus, with demand higher than underwriters expected. The equity offering is the largest on the New York Stock Exchange since Snap Inc in March 2017. Investors warmed to the stock, which rose as much as 36 percent to $29.25 in early trading.

Authors:

George Popescu
Allen Taylor

Buy or sell shares in a single-family house

Buy or sell shares in a single-family house

Point Digital Finance allows individuals to sell portions of equity in their house as if it was a company. Point buys a fraction of the house and pays lump sum ranging from $40,000- $250,000 in return. This arrangement even gives the buyer an option to buy back the share. This unique product of Point is carving its […]

Buy or sell shares in a single-family house

Point Digital Finance allows individuals to sell portions of equity in their house as if it was a company. Point buys a fraction of the house and pays lump sum ranging from $40,000- $250,000 in return. This arrangement even gives the buyer an option to buy back the share. This unique product of Point is carving its own niche in the lending industry. Through this, it has created a new asset class in which owner gets to live in the residential property without having to worry about monthly payments and enabling the investors to earn a sizeable return in one of the most lucrative asset classes. The deal can be structured for as long as a decade.

Most importantly, no monthly payments have to be made.

The story

Two years back, when Eddie wanted a loan for his new venture, the bank refused his application because he did not have a steady flow of income. This helped him appreciate the pain point of homeowners and hence Point was born.   This means that the home owner needs to either sell the house or pay back the investor within 10 years. Real estate is the largest asset class in the world and worth $14 trillion in the US.

Point was founded in the beginning of 2015 and is headquartered in Palo Alto, California. Point boasts of a high-profile list of investors which includes Andreessen Horowitz, Ribbit Capital, Bloomberg Capital, Vikram Pandit (Former CEO of Citigroup). PDF is the brainchild of Eddie Lim, Eoin Mathews, and Alex Rampell. Eddie Lim (co-founder) is a Harvard alumnus and has many successful start-ups to his name like TXN, Yub Inc, and Trial pay. Eoin Mathews (co-founder) was a board member at VietHope Inc and also the founder of Popt.com. Alex Rampell (co-founder) has experience in starting and building profitable products and companies.

HELOC vs Point

Before the real estate crash happened, individuals bought houses via easy funding which in reality they couldn’t afford and borrowed further against their equity as property prices rose. The collapse in home values ripped through banks and financial institutions that bought mortgage securities, which triggered the U.S. recession. Funding to house owners has only recently loosened up after an average 30% increase in property values across the nation since 2012. Ever since the real estate crisis of 2012, banks have reduced the amount of cash one can take out after refinancing their home and tightened credit standards for home-equity lines of credit, HELOCs, requiring higher FICO scores and proper documentation. The question is whether debt is the only product available on a home? Why not take the risk out for the “borrower” by having no monthly installments. Point Digital Finance (PDF) was established to fill this void by providing equity to homeowners with an option to buy a small fraction of their homes.

Traction

Point started their business in a few counties in California at the end of last year and after tasting success and rave reviews from both the homeowners and investors, it is ready to expand its wings by adding accredited investors and institutional partners. Expanding geographically is also in its plans, in order to make Point available to millions of homeowners across the country. HELOC’s, companies providing home equity loans and mortgage refinancing provide tough competition to Point. It is able to fend off the competition because of the uniqueness of its product where both parties (investors and homeowners) want the property to appreciate so that they both can make money, very few companies operate in a similar space. Depending upon the size of the loan, cost of acquisition can range from $800 to $2500. Unlike HELOC and home equity who only provide loans to people with good credit score and a steady flow of income, Point targets people who are in need of cash and don’t have a good credit score or steady income flow. In its constant effort to make the product more affordable for the masses, Point is working on a different combination to protect its exposure to risk, so that it can provide money at 8% APR rather than 18% which is available right now in the market.

Business model

Point business model is simple; it works on 3:1 ratio. For buying 10% of the home, it takes on an average 30% of the appreciation in the house and it also shares the losses, if the property value depreciates. To protect the investors from this downside, Point appraises the house at 90% of the market value. In case, homeowners exit the contract early and to ensure a win-win, it has capped an effective interest rate of 16%-18% compounded per year. The funding is usually covered within 4 years of the contract and 30% of the homeowners’ buy back the equity in the first year of the contract itself. Point charges 3% processing and escrow fees for the services it provides to its clients.

Customer profile

Homeowners use Point to sell their houses for various reasons like to settle a large debt, to improve their finances or renovation. Now, whether it is a financial constraint or investment opportunity, they can always arrange the cash flow by utilizing their biggest asset. After getting an overwhelming response from the public for its products, it did 20 deals in last quarter and plans on making it to 50 in the next few weeks. On average $1 million- $2 million worth loans are done by Point every month, in its endeavor to grow, it wants to find institutional investors and originate loans worth $10 million per month. It is focussing on MBS buyers, real estate exposure funds, and investors who want to invest for the long term and are comfortable in holding an illiquid asset in anticipation of a superior return. Point is now in the process of expanding and growing. It will start its operations in 5 more states by the end of 2016 and also brought Ryan Randall onboard as the head of its Capital Market. Ryan was previously CFO of Upstart. All this activity, a pedigreed investor base, and a seasoned team suggests Point will be very busy in the next few years.

Author: Heena Dhir and

George Popescu