- Today’s main news: SoFi completes $769M student loan securitization. Affirm is headed to unicorn status. Funding Circle SME fund to double. Funding Circle SME Income Fund NAV, profit to rise. Zopa investors can move repayments into IFISA automatically. Harmoney says Kiwi SMEs are tapping into P2P for cash flow more. TransUnion launches Mobile Score Card in Africa.
- Today’s main analysis: Lending Club’s investor day highlights.
- Today’s thought-provoking articles: Why it’s easier for small businesses to go global. How payday apps give workers fast access to cash. Why banks will share financial secrets. IMF: Chinese banks don’t have enough money. Crowdcredit Inc. in Japan.
- SoFi completes $769M student loan securitization. AT: “SoFi is the clear leader in student loan ABS.”
- LendingClub’s investor day highlights. AT: “This is a must-read.”
- Why it is easier for small businesses to go global. AT: “Much of this is intuitive. The internet has made the world a smaller place. Access to P2P funding it certainly helping, but internet-based businesses have had an easy go of going global even before the rise of P2P financing. The significance of P2P financing models for global business is that it is now possible for traditional businesses to leverage the capital necessary for expansion.”
- Affirm is headed to unicorn status. AT: “Congratulations. It couldn’t happen to a better company or a better entrepreneur.”
- How Max Levchin cofounded PayPal and pivoted. AT: “A great podcast interview.”
- Levchin talks about digital payments, bitcoin.
- How payday apps give workers fast access to wages. AT: “I think the most interesting of these are the ones where workers can access their wages before payday, essentially serving as payday loan apps. Another interesting idea is getting paid by the hour as you work.”
- An attractive way to profit from the student loan bubble.
- Lenders are exiting the auto niche. AT: “This should create a hole for other lenders to profit from. As supply diminishes, if demand does not also diminish, opportunities will rise for those still in the game.”
- Financial literacy curricula for non-prime consumers.
- Ken Rees of Elevate. AT: “Lend Academy podcast interview.”
- Winners and losers in Consumer Financial Protection Bureau (CFPB) leadership battle.
- Attorneys general call for CFPB independence.
- PNC to offer consumer loans through mobile devices.
- Kaplan Fox to investigate Qudian.
- How Ally Financial is using technology to reinvent itself. AT: “Smart move.”
- Notable real estate trends in 2018.
- 5 things to know about P2P lending.
- Wells Fargo fines will not be dropped.
- Funding Circle SME fund size to double.
- Funding Circle SME Income Fund NAV, profit go up.
- Zopa investors can move repayments into IFISA automatically.
- Why banks will share financial secrets. AT: “Some of the concerns are valid, but with the right precautions in place, open banking should be a net positive for consumers.”
- UK needs its own version of business development companies.
- Companies react to report on alternative finance.
- UK at the top of developed nations for new businesses.
- FCA to change definition of advice.
- Banks face capital shortfall.
- Top 50 fintechs, and LexinFintech to perform “extra due diligence” on IPO.
- New guidelines for banks to support P2P lending in Taiwan.
- Ning Tang on fintech innovation.
- India’s foreign direct investment good for China.
- Introducing Crowdcredit.
- New Union gets Capital Markets Service license in Singapore.
- Validus Capital can now deal in securities in Singapore.
- Banks in the market in Singapore.
- Equity crowdfunding and P2P lending. AT: “An introduction for newbie investors.”
- New legislation addresses reward-based crowdfunding.
- Fintech: The new oil in MENA.
- Banking changes coming as a result of technology.
- United States
- SoFi Announces Completion of $ 769 Million Student Loan Securitization, Bringing Total ABS Issuance in 2017 to $ 6.9 billion (PR Newswire), Rated: AAA
- LendingClub’s Investor Day Highlights (PeerIQ), Rated: AAA
- Why it is easier now for small businesses to go global (Born2Invest), Rated: AAA
- Max Levchin’s lending startup is heading for unicorn territory (Axios), Rated: AAA
- How Max Levchin cofounded and built PayPal into a payments monster after 6 pivots and a bitter rivalry with Elon Musk (Business Insider), Rated: A
- PayPal founder talks digital payments, bitcoin (The Seattle Times), Rated: A
- Can I get my pay instantly? New payday apps give workers fast access to wages — for a price (Mic), Rated: AAA
- There’s an attractive way to profit from the $ 1.3 trillion student-loan bubble (Business Insider), Rated: A
- Some lenders stand to gain as others leave auto niche (American Banker), Rated: A
- Financial Literacy Curricula for Non-Prime Consumers Should Focus on Relevant Topics, Attainable Goals (BusinessWire), Rated: A
- Ken Rees of Elevate (Lend Academy), Rated: A
- Winners and Losers in the CFPB Mess (Credit Union Times), Rated: A
- Attorneys general call for Consumer Financial Protection Bureau independence (Lake County News), Rated: B
- PNC to offer consumer loans through mobile devices (American Banker), Rated: A
- Kaplan Fox Announces Investigation of Qudian Inc. (Business Insider), Rated: A
- Meet Tim Russi, President of Auto Finance at Ally Financial (Vator.TV), Rated: A
- Notable Real Estate Trends To Watch For In 2018 (Forbes), Rated: A
- Peer-To-Peer Lending : Here Are 5 Things To Know (NDTV), Rated: B
- Trump says fines for Wells Fargo will not be dropped (Des Moines Register), Rated: B
- United Kingdom
- Funding Circle SME fund size to double following C share merger (P2P Finance News), Rated: AAA
- Funding Circle SME Income Fund Net Asset Value And Profit Both Rise (Morningstar), Rated: AAA
- Zopa investors can now automatically move repayments into their IFISA (P2P Finance News), Rated: AAA
- Why banks will share your financial secrets (BBC), Rated: AAA
- The UK needs its own version of business development companies (Financial Times), Rated: A
- Industry reacts to Cambridge report on alternative finance (AltFi), Rated: A
- The UK ranks top of all major developed economies for establishing new businesses (City A.M.), Rated: A
- FCA to change advice definition in January (FT Adviser), Rated: B
- Chinese Banks Face Potential Capital Shortfall, IMF Says (WSJ), Rated: AAA
- WeiyangX Fintech Review (Crowdfund Insider), Rated: A
- New guidelines for banks to support P2P lending (Taipei Times), Rated: A
- CreditEase’s CEO Ning Tang spoke about FinTech and innovation at Fortune Global Forum (Business Insider), Rate: A
- India’s FDI climate good for China investment (China Business Law Journal), Rated: A
- European Union
- Moody’s highlights improving performance for European SME ABS next year (FTSE Global Markets), Rated: AAA
- Billie Raises €10m Series A (LendIt), Rated: A
- Regulated Crypto Platform Plays By the Rules and Disrupts Trading Model (Coin Telegraph), Rated: A
- Australia/New Zealand
- Harmoney Reports Increase in Kiwi SMEs That Are Tapping into P2P Lending for Business Cashflow (Crowdfund Insider), Rated: AAA
- Sydney fintech Avoka raises $ 16m in Roger Allen-led round (Financial Review), Rated: A
- Crowdcredit, Inc from Japan (Makoto UJIKE Email), Rated: AAA
- Crowd-lending platform New Union awarded CMS license (The Edge Markets), Rated: A
- P2P lending platform Validus Capital gets licence to deal in securities in Singapore (Business Times), Rated: A
- Singapore banks can save over 10% from fintech (SBR.com.sg), Rated: A
- Equity crowdfunding and peer-to-peer lending (The Star), Rated: B
- New Amendment To Address Reward-Based Crowdfunding And What To Expect (Mondaq), Rated: AAA
- Fintech Is The New Oil In The Middle East And North Africa (Forbes), Rated: AAA
- Significant banking changes due to tech innovation (Gulf News), Rated: A
- TransUnion launches Mobile Score Card solution (IT Web Africa), Rated: AAA
SoFi Announces Completion of $ 769 Million Student Loan Securitization, Bringing Total ABS Issuance in 2017 to $ 6.9 billion (PR Newswire), Rated: AAA
SoFi announced today the closing of its $769 million offering of SoFi Private Student Loan notes (SoFi 2017-F).
The closing marked the company’s 12th ABS transaction this year, bringing its total issuance in 2017 to $6.9 billion, up from $4.2 billion in 2016. The 2017 total includes six Student Loan ReFi and six Consumer Loan transactions.
LendingClub’s Investor Day Highlights (PeerIQ), Rated: AAA
Rep. Patrick McHenry (R-NC) sent a letter to the Cleveland Fed accusing them of using their study on peer-to-peer lending to block bill “Protecting Consumers Access to Credit Act” (H.R. 3299). The bill proposes to overturn a decision in the Madden v. Midland Funding case against the “valid when made” clause which allows sales of legally made loans in one state to parties in other states, even if the loan exceeds the interest rate cap in the state of the borrower.
Positioning and Strategy
LendingClub doubled-down on the capital-light marketplace lending model, and emphasized the role of technology, data & analytics, and the “virtuous cycle of scale.” LendingClub also emphasized the new product innovation on the investor side of its business – notably the Exchange Traded Product (ETP) which we think may have been lost in the immediate reaction to revised guidance.
LC sees an addressable market opportunity of $300-350 Bn in the credit card refinance and debt consolidation spaces, and a $38 Tr pool of addressable capital on the investor side of its marketplace.
LC has a two-pronged strategy to attack these markets and meet EBITDA margin goals:
- 2018: Focus and Invest
- Accelerate personal loans growth while prudently managing credit
- Invest in auto and leverage secured capabilities for personal loans
- Strengthen Investor franchise by expanding securitization and growing new structures
- Address legacy issues
- 2019-2020: Expand and Deepen
- Expand lead in personal loans through further data, analytics, and product and testing efforts
- Expand role in the borrower journey through new products and services
- Expand investor universe to lower cost of funds, improve resiliency, capture more value
As seen in the chart below, LendingClub is positioning MPL loans as a new asset class that offers higher risk-adjusted returns as compared to other fixed incomealternatives, while offering lower interest rate risk. LC has delivered historical annualized loss-adjusted returns of 6.7% on its Prime loans portfolio, and 10.9% on its Near-Prime loans portfolio.
The top question on investors’ minds remains the expected performance of MPL loans thru a recessionary scenario in the chart below, LendingClub published estimates of expected annualized charge-offs on Prime loans in a baseline scenario of 5.5%, in a moderate recession scenario of 7.9%, and in a protracted slump scenario of 11.5%.
Why it is easier now for small businesses to go global (Born2Invest), Rated: AAA
It has become significantly easier today to run a multinational business compared to a few years ago. This is down to the increasing adaptation of technological advances to various business operations.
Markets are becoming decentralized and barriers to entry are minimal
The internet is central to the paradigm shift we have witnessed in the business environment over the last couple of decades. For instance, you do not have to live in the U.S. to sell your products or services to the Americans. Even where certain levels of certification are required, these can easily be done online thereby allowing a foreigner to obtain the required credentials for operating a business that targets American citizens. Therefore, market access is global, decentralized and without limits for anyone looking to expand exponentially.
Another thing that is influencing growth strategies among small businesses is the ease of access to financing.
Ideally, most businesses would opt for local lending. However, with the growing popularity of online-based peer-to-peer lending platforms like Lending Club, small businesses can now access financing regardless of whether they have security. But it is not as easy and straightforward as it sounds. According to National Business Capital, the process can be as tasking as trying to apply for a securitized loan with background checks and credit scores playing a crucial role.
Nonetheless, lending institutions are being pressured by the increasing number of peer-to-peer lending platforms. This has forced them to lighten up their lending requirements in a bid to increase their loan portfolios and subsequently interest incomes. In this case, we could say that technological advances and the emergence of alternative lending solutions have forced the hand of the credit market to create a more conducive environment for businesses to thrive.
Max Levchin’s lending startup is heading for unicorn territory (Axios), Rated: AAA
Affirm, the personal credit startup led by PayPal co-founder Max Levchin, has filed a stock authorization form in Delaware that would allow it to raise up to $210 million in new funding at around a $1.4 billion pre-money valuation.
How Max Levchin cofounded and built PayPal into a payments monster after 6 pivots and a bitter rivalry with Elon Musk (Business Insider), Rated: A
He now spends most of his time at Affirm, which offers small loans but doesn’t charge any penalties or fees.
PayPal founder talks digital payments, bitcoin (The Seattle Times), Rated: A
Q: Are digital payments progressing as quickly as you hoped since you started PayPal?
A: They are moving at a good pace, adjusted for just how large and complicated the market is. It’s highly regulated and there are a lot of things to be careful about. The elephant in the room for the last seven or eight years has been cryptocurrency.
Q: What are some of the most interesting areas of digital payments?
A: A good example is international remittances, where companies can pop up and do well. They’re the guys who figured out how to do it much cheaper and much more transparently with much lower friction to both the recipient and the sender.
Can I get my pay instantly? New payday apps give workers fast access to wages — for a price (Mic), Rated: AAA
And while many workers typically wait anywhere from once a week to once a month to get the money their company owes them, new apps from financial technology startups like DailyPay, FlexWage and PayActiv are giving workers everywhere — including at Goodwill, McDonald’s and Uber — faster access to wages, and sometimes even on the same day they clocked their hours.
Proponents like Shah say faster access to wages can motivate hourly workers to put in longer hours (since they’ll reap the rewards more quickly) and can reduce their reliance on abusive payday loans with sky-high interest rates that can leave borrowers in an unending debt cycle. Indeed, taking out a single $100 payday loan for two weeks could eat up more than $130 out of your next paycheck, once you factor in interest and fees. Repeat that every two weeks and you are down hundreds of dollars for the year — equivalent to a full month’s rent for many.
With DailyPay — which is used by hourly workers at DoorDash delivery service, the Maids residential cleaning service and Kellermeyer Bergensons Services facilities management firm — employees can access 100% of their accrued and unpaid net wages for a fee of $1 to $3 per transaction. The money can be deposited directly into their bank account or put on a prepaid card or payroll card on the same day.
Another app called Earnin lets workers withdraw up to $100 a day and $500 per pay period in advance of receiving their regular paycheck. While it charges no fees, it does give workers the option of “tipping.” The service then withdraws funds directly from your checking account after you’ve been paid.
FlexWage, for example, only lets workers tap up to 70% of their unpaid wages between regular paychecks (for a $3 to $5 fee per transaction). PayActiv gives them access to 50% of their net pay for every 30 hours worked for a $5 fee.
Instant Financial lets employees withdraw half their daily net pay every day at no cost at all: Instead they charge employers $1 per month per employee enrolled in the program.
There’s an attractive way to profit from the $ 1.3 trillion student-loan bubble (Business Insider), Rated: A
According to Goldman Sachs, the outstanding student loan balance has reached $1.3 trillion in face value, about the size of the high-yield corporate-bond market. This outstanding debt is not without problems, as it delays homeownership for some millennials and cuts their disposable income.
It’s the $190 billion of outstanding loans that are held within asset-backed securities (ABS) refinanced by private lenders such as SoFi.
“Recent marketplace student loan deals have featured borrower pools with average credit scores above 770 and average borrower incomes above $160k: a very different credit profile than the government guaranteed portfolios.”
Some lenders stand to gain as others leave auto niche (American Banker), Rated: A
The indirect auto business is in a state of transition.
TCF Financial in Wayzata, Minn., surprisingly walked away from the segment on Dec. 1, and others like Regions Financial and Fifth Third Bancorp have tapped the brakes for reasons ranging from competition and credit concerns to regulatory pressure and low yields.
Auto sales are also projected to fall by 7% this year, according to Autodata and the Bureau of Economic Analysis.
Financial Literacy Curricula for Non-Prime Consumers Should Focus on Relevant Topics, Attainable Goals (BusinessWire), Rated: A
America’s financial literacy programs may be failing the very people who need them most, according to newly released research from Elevate’s Center for the New Middle Class (CNMC). Non-prime consumers learn and retain financial education material differently than their prime peers, the research indicated.
To be most effective for a non-prime audience, financial literacy curricula should:
Be trans-media. Use different media types to deliver different messages.
Address the unique challenges of non-prime Americans. A financial wellness program will be more effective for non-prime Americans if it directly addresses their unique challenges – things like income volatility and a lack of available resources. It also needs to identify outcomes that are relevant, attainable, and meaningful to them.
Highlight the next immediate steps.
Focus on building their credit. Non-prime Americans understand that their credit scores affect every part of their financial lives and they are hyper-focused on what they can do to improve them. Anchoring a financial wellness program on credit score management can actually lead non-prime consumers to understand broader financial management principles.
Ken Rees of Elevate (Lend Academy), Rated: A
In this podcast you will learn:
- The evolution of Ken’s career that led to the founding of Elevate.
- The different products that Elevate offers today.
- A profile of the typical Elevate customer.
- How Elevate’s products help their customers’ financial situation.
- Their typical loan terms.
- Ken’s view of the new CFPB rules on small dollar loans.
- How Elevate’s underwriting process works.
- The total originations for Elevate in the US and UK.
- The importance of data analytics in their business.
- The percentage of customers coming to them through a mobile device.
- How they can underwrite 95% of their loan applications in an automated way.
- How their charge-off rates have been trending.
- The different funding sources they use to fund these loans.
- What their Center for the New Middle Class does.
- How their IPO process went and what it is like being a public company.
Winners and Losers in the CFPB Mess (Credit Union Times), Rated: A
Payday Lenders – Like them or not, the payday lending industry was in for a huge takedown under the CFPB’s final rules that will restrict the way they do business.
Still, the industry now has a friend rather than a foe in the director’s office. And that can’t hurt for an industry that just weeks ago appeared to be headed for a major takedown.
Attorneys general call for Consumer Financial Protection Bureau independence (Lake County News), Rated: B
California Attorney General Xavier Becerra on Friday joined attorneys general from 17 other states in calling on the Trump Administration to respect the independence of the Consumer Financial Protection Bureau.
PNC to offer consumer loans through mobile devices (American Banker), Rated: A
PNC Financial Services Group plans to introduce a consumer lending product that it will market through both its mobile wallet and in new branches.
The $375 billion-asset Pittsburgh company intends for the new loan product to be available on a national scale, Chairman and CEO William Demchak said this week.
Kaplan Fox Announces Investigation of Qudian Inc. (Business Insider), Rated: A
Kaplan Fox & Kilsheimer LLP (www.kaplanfox.com) is investigating Qudian Inc. (“Qudian” or the “Company”) (NYSE:QD) on behalf of investors who purchased Qudian American Depository Shares.
On October 17, 2017, Qudian issued 37.5 million American Depository Shares at $24 per share under a Registration Statement and Prospectus filed with the U.S. Securities and Exchange Commission, for gross proceeds of $900 million.
On November 21, 2017, Chinese media sources began to reveal that the personal information of millions of Qudian customers were allegedly available for sale on the black market. On November 23, 2017, Bloomberg reported that “Chinese regulators and police are investigating a potential leak of data from online lender Qudian Inc., according to people with knowledge of the matter.
Meet Tim Russi, President of Auto Finance at Ally Financial (Vator.TV), Rated: A
VatorNews: How is technology influencing and impacting Ally’s auto business? Why is this technology integral to the company’s future in this arena?
Tim Russi: We’re a company that’s 100 years old, and you don’t become a 100 year old company in today’s world if you don’t have the ability to reinvent yourself.
Ally operates in what we in the lending world refer to as an ‘indirect model,’ so dealers originate the loans and leases and then we purchase them from the dealers. The speed and access of the indirect model has changed significantly in the last 15 years. The industry was very disruptive in creating online portals for dealers to be able to submit applications to lenders, so the lender didn’t have to be on site to do the loans.
VN: How have you seen technology in the auto space evolve in that short amount of time? How quickly is the space changing?
TR: You look at a lot of the lending models today and they’re going direct to consumers, and we’ve even got a direct model, because as you look at digital and the consumers doing shopping online, and wanting to buy, there’s no reason they shouldn’t be able to select and purchase the vehicle and obtain financing right at the ‘point of sale.’ If the sale’s going to be online, not in the dealership, we want to make sure we’re there and then fulfillment can occur at the dealership.
VN: How has SmartAuction changed the way dealers sell and buy vehicles? What kind of ROI have you seen?
TR: SmartAuction, we actually developed in 1999 and we’ve done over 5 million transactions. We have 20,000 vehicles that are available for sale or purchase in the marketplace. It’s a wholesale marketplace so dealers can post and buy.
Notable Real Estate Trends To Watch For In 2018 (Forbes), Rated: A
3. Fractional Investing
As peer-to-peer lending and crowdfunding catch mainstream attention, folks looking for greater diversification and passive investment opportunities will engage in factional investing. The last few years have seen some extremely credible startups innovate in this space, and next year could lead to individuals moving away from sole ownership to fractional ownership via crowdfunding. – Sohin Shah, InstaLend
7. On-Demand Access For Renters
We often hear from renters that they are too busy to sweat the small stuff. They want immediate tour confirmations, like booking a restaurant on OpenTable, and near-immediate confirmation that they have leased, like booking a hotel. This real-time service expectation from a new generation of renters is exactly what we plan to cater to in 2018. – Anthemos Georgiades, Zumper
Peer-To-Peer Lending : Here Are 5 Things To Know (NDTV), Rated: B
- P2P lending is a form of financial innovation but the concept that works behind it is the same as in the case of the banking system.
- Any lay investor or lender can lend money to any borrower who is registered with the P2P platform.
- Borrowers and lenders enter into a contract according to which they agree to the amount disbursed and the rate of interest.
- A borrower can raise loan at the rate of interest, which is inversely proportional to his credit score.
- Each P2P lending platform charges a fee for the transactions that are fructified at their platforms.
Trump says fines for Wells Fargo will not be dropped (Des Moines Register), Rated: B
President Donald Trump weighed in on an investigation into scandal-plagued Wells Fargo, tweeting Friday that fines and penalties against the bank would not be dropped, and may actually be “substantially increased.”
Trump’s statement comes a day after Reuters reported that Mick Mulvaney, the president’s budget director and now acting director of the Consumer Financial Protection Bureau, was weighing whether the bank should have to pay tens of millions in fines already levied against it for mortgage lending abuses.
Funding Circle SME fund size to double following C share merger (P2P Finance News), Rated: AAA
THE FUNDING Circle SME Income Fund (FCIF) is set to double the value of its assets after announcing plans to convert its conversion shares into the ordinary portfolio on 20 December.
The investment trust, which invests in loans on the Funding Circle platform, revealed in its half-year report that the move will increase the fund’s size to around £310m.
Currently the ordinary shares are worth £165.3m and the C shares, launched in April, are worth £142.3m.
Funding Circle SME Income Fund Net Asset Value And Profit Both Rise (Morningstar), Rated: AAA
Net asset value per ordinary share was 100.55 pence per share, representing an increase in the total NAV to GBP167.0 million from GBP165.0 million at the start of the half, which ended September 30. Net asset value total return was 12%.
For the C shares, net asset value was 99.82p, having only been issued in April. These shares are due to convert to ordinary shares on December 20.
Zopa investors can now automatically move repayments into their IFISA (P2P Finance News), Rated: AAA
ZOPA investors can now automatically re-direct their repayments into their Innovative Finance ISA (IFISA).
The peer-to-peer consumer lender confirmed this week that customers can gradually move their Zopa money into the tax wrapper without having to sell loans or pay extra fees.
Moving money into the IFISA will contribute to the investor’s annual tax-free allowance, Zopa said. However, once money is in the IFISA and has been lent out, those repayments will not contribute to the IFISA allowance.
Why banks will share your financial secrets (BBC), Rated: AAA
Customers of nine of the biggest UK banks have received letters and emails in recent weeks informing them that their information can be shared, securely, with other firms. All they need to do is give their permission.
The UK’s competition watchdog says this so-called Open Banking regime will revolutionise many people’s financial lives, helping them get better deals.
Most people stay loyal to their bank. The Competition and Markets Authority (CMA) found that only 3% of personal customers move their accounts each year.The UK’s competition watchdog says this so-called Open Banking regime will revolutionise many people’s financial lives, helping them get better deals.
How will it work?
In practice and in time, customers will probably see a dashboard on their bank’s mobile phone app.
This will show them how much money they have in their different accounts, with different banks, and eventually how much they owe on credit cards and store cards too.
A set of computer programming rules in the UK, called Application Programming Interfaces (APIs), will ensure all these new services and banks to talk to each other.
Applications for mortgages could be dealt with more quickly, as providers and brokers could access spending history, rather than ask for printed copies of the last three months of bank statements.
Anne Boden, of mobile-only Starling Bank, says customers will be able to see exactly what they bought for lunch each day, an app could analyse the calorie levels, and then cross-check it with how much exercise that person is doing.
Customers could be bombarded with invitations to try out a new service, and could quickly lose control of their financial data, according to Mick McAteer, of the UK’s Financial Inclusion Centre.
He describes Open Banking as “a daft idea”, which will lead to more financial exclusion for those already on low incomes.
Unscrupulous individuals would be keen to access this data and use it alongside information revealed on social media to build up a complete set of personal information.
The UK needs its own version of business development companies (Financial Times), Rated: A
The great scramble for yield has seen asset managers hunt down ever more alternative sources of income. Many are starting to move into the world of shadow banking, alternative forms of lending in areas where banks are not competing for business as much as they used to.
But evidence from the US suggests that the biggest opportunity probably lies in what is called direct lending, preferably through a structure that might mimic US business development companies. These BDCs are a large and diverse universe of tax efficient, listed, closed-end funds resident in the US. Collectively they are worth at least $100bn, according to Keefe, Bruyette & Woods, the investment bank, nearly all of which has been lent to mid-market private businesses in the US — capital that has arguably helped to improve the nation’s corporate productivity and profitability. Income-hungry investors have also snapped up these funds, with average yields well over 9 per cent per year.
Direct lending companies will service the mid-market secured lending space for loans above £50m but they, in turn, lack an outlet into the public markets typically afforded by BDCs in the US.
Industry reacts to Cambridge report on alternative finance (AltFi), Rated: A
The Cambridge Centre for Alternative Finance’s report, entitled Entrenching Innovation, found the UK online alternative finance market grew 43 per cent in 2016 to £4.6bn.
“Abundance was particularly pleased to see our category (debt securities) confirmed as the fastest growing of all at 1,147 per cent year on year, with an accompanying 40 per cent increase in average deal size to £1.4m. It was also good to see hard evidence of investors in debt securities conducting their own due diligence and being comfortable with the risk/reward offers they found,” he said.
Anil Stocker, CEO and co-founder of fintech business finance firm MarketInvoice, says as awareness increases, which will be propelled by PSD2, so too will the use of alternative finance platforms.
The UK ranks top of all major developed economies for establishing new businesses (City A.M.), Rated: A
The UK outranked all other major developed economies in terms of the number of businesses established last year, according to figures from accounting group UHY Hacker Young.
It became home to 218,000 more businesses in 2016, a rise of six per cent over year-on-year. Meanwhile, other major developed economies including France, Germany, Italy, Japan and the US saw an average two per cent rise in number of businesses over the year.
FCA to change advice definition in January (FT Adviser), Rated: B
The Financial Conduct Authority has said it will introduce its new definition of advice from Wednesday 3 January.
As part of this it has amended its handbook to change the definition of financial advice, meaning only advice which offers a personal recommendation will be considered regulated.
Chinese Banks Face Potential Capital Shortfall, IMF Says (WSJ), Rated: AAA
Chinese banks may have insufficient capital to weather potential losses from the nation’s rapidly mounting credit risks, the International Monetary Fund said, in a broad review of China’s financial system.
With Chinese banking-sector assets, at $34.7 trillion, soaring to three times the size of China’s economic output, at $11.2 trillion, the IMF said that “holding more capital would strengthen the banking system and bolster financial stability,” according to a report on Thursday.
The IMF said China should consider boosting risk-weighted assets at its banks by 0.5% to 1% over the coming 12 months.
WeiyangX Fintech Review (Crowdfund Insider), Rated: A
LexinFintech, China’s online provider of installment-based loans has decided to conduct extra due-diligence investigation for its IPO in the US.
This week, KPMG China announced the 50 leading Fintech companies operating in China and published a related insight report.
(Note: Companies are arranged in alphabetical order based on the first letter of their Chinese name in pinyin.)
- Baidu Finance
- ICE KREDIT
- PING ++
- JD Finance
- QUARK FINANCE
- LENGJING INFO
- Ant Financial
- Suanhua Credit
- Beagle Data
- Tong Dun
- Wei Zhong Shui Yin
- Zhongan Insurance
New guidelines for banks to support P2P lending (Taipei Times), Rated: A
The Financial Supervisory Commission on Thursday gave its nod to guidelines on collaborations between peer-to-peer (P2P) lending platforms and commercial banks, in a move to support the development of emerging financial services.
Under the guidelines, banks may provide custodian and trust account services to P2P platforms, as well as transaction processing to meet rules against collection of deposits by non-bank entities, the commission said.
However, banks are barred from making recommendations on decisions about loan approval, interest rates and principal amounts.
The guidelines also regulate the so-called peer-to-bank (P2B) model, where banks participate as lenders on P2P platforms.
CreditEase’s CEO Ning Tang spoke about FinTech and innovation at Fortune Global Forum (Business Insider), Rate: A
Ning Tang, Founder and CEO of CreditEase, attended the 2017 Fortune Global Forum on December 6-8 in Guangzhou. With the theme of “Openness & Innovation: Shaping the Global Economy,” the Global Forum convened world leaders, senior executives and prestigious scholars to discuss the dynamic frontiers of international commerce.
Tang stated that the Chinese FinTech industry still sees great potential in the coming decade represented by development in applications such as microloans for SMEs, crowdfunding, robo-advisory, insurance technology, and blockchain products and services.
India’s FDI climate good for China investment (China Business Law Journal), Rated: A
Mumbai-based fintech start-up Kissht recently raised US$10 million in funding primarily from Fosun International, a Chinese investment consortium. The Krishnamurthy & Co team acted for and represented Kissht and its owner OnEMI Technology Solutions, led by Mumbai-based partner Sanket Sethia and associate Vwastav Ghosh.
Moody’s highlights improving performance for European SME ABS next year (FTSE Global Markets), Rated: AAA
The performance of small and medium-sized enterprise (SME) asset-backed securities (ABS) will remain stable across all major markets in Europe and issuance volumes will likely increase slightly, according to the 2018 outlook for European SME ABS from Moody’s. However, emerging political risks have created some uncertainty in affected markets, with a limited effect on securitised deals in the United Kingdom (UK), and potentially negative effects in Spain.
Billie Raises €10m Series A (LendIt), Rated: A
Billie is an invoice finance platform that launched earlier this year; the round was led by Creandum with participation from existing investors Speedinvest and Global Founders Capital; the company focuses on complete automation with no human interaction; It was co-founded by Matthias Knecht and Christian Grobe; Billie also secured a refinancing facility from a major German bank.
Regulated Crypto Platform Plays By the Rules and Disrupts Trading Model (Coin Telegraph), Rated: A
Trade.io’s solution is to develop an exchange platform for the sharing economy where traders can not only exchange tokens, crypto and fiat currencies and other assets but also share in the risk and revenue of the liquidity pool. To participate in the liquidity pool, members buy 2,500 Trade Tokens secured by financial assets in their trade.io wallets. Crypto and fiat currencies are accepted as collateral.
Trade Token owners share in 50 percent of the gains or losses of the liquidity pool, which are distributed to the wallets of pool participants. Besides trading fees and commissions, revenue is earned from investment banking and P2P lending fees.
Harmoney Reports Increase in Kiwi SMEs That Are Tapping into P2P Lending for Business Cashflow (Crowdfund Insider), Rated: AAA
Earlier this week, Harmoney announced there has been an increase in Kiwi SMEs that are tapping into peer-to-peer (P2P) lending for business cashflow.
The New Zealand online lender stated it estimates $100 million will be loaned to business accounts through its lending platform within the next six to twelve months. Currently, the average loan amount for business cashflow on its platform is $25,000.