Friday August 11 2017, Daily News Digest

small business credit risk

News Comments Today’s main news: Earnest has Barclays looking for a buyer. Kabbage raises $250M. KBRA assigns preliminary Kabbage Asset Securitization ratings for Series 2017-1 Additional Notes. Funding Circle revamps website. Today’s main analysis: Small Business Credit Survey. Today’s thought-provoking articles: How good is POS financing? How the People’s Bank of China is changing online payments. Goldman Sachs on China’s […]

small business credit risk

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United States

United Kingdom

China

European Union

International

Australia

Asia

News Summary

United States

Kabbage Raises $ 250 Million (NewsCenter), Rated: AAA

Fintech company Kabbage completed $250 million in financing from a subsidiary of SoftBank Group.

According to the company, this investment represents the largest equity raise in the online small business lending segment to date and brings Kabbage’s total equity raised to nearly $500 million.

KBRA Assigns Preliminary Ratings to Kabbage Asset Securitization LLC, Series 2017-1 Additional Notes (BusinessWire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of additional Series 2017-1 notes (the “Series 2017-1 Additional Notes”) issued by Kabbage Asset Securitization LLC.

Kabbage Asset Securitization LLC (the “Issuer”) issued $525 million of Series 2017-1 Class A, Class B, Class C and Class D Notes (collectively, the “Series 2017-1 Notes”) on March 20, 2017. The Series 2017-1 Additional Notes include $25 million of additional Series 2017-1 Class A, Class B, Class C, and Class D Notes (together with the Series 2017-1 Notes, the “Notes”). The ratings for the $525 million of original Series 2017-1 Notes will be confirmed in conjunction with the issuance of the Series 2017-1 Additional Notes. The Series 2017-1 Additional Notes will have the same terms as the corresponding classes of Series 2017-1 Notes, including same Note Rate, Advance Rate and Legal Final Payment Date. The proceeds of the sale of the Series 2017-1 Additional Notes will be used to provide extra funding capacity for Kabbage.

Source: BusinessWire
Source: BusinessWire

Affirm – A Leading Point of Sale Finance Provider (Nanalyze), Rated: AAA

Not surprisingly, there is a lot of easy money to be made in loans. If we look at the CB Insights list of unicorns, we see 211 of these mythical creatures grazing in a field of rainbow colored grass. If we break these unicorns into categories, here are the top-3:

  • eCommerce/Marketplace – 16%
  • Internet Software and Services – 13%
  • Fintech – 12%

When we drill into the fintech category, we see that just over half of the companies are based in the USA (13 fintech companies). Of these 13 fintechs, almost half are enabling people to spend money they don’t have:

  • Social Finance – $20 billion in loans funded (vs. just $1.45 billion in savings)
  • Credit Karma – Helps you see how much money you can borrow
  • Greensky – Instant credit decisions
  • Avant – Personal loans using artificial intelligence (AI) for credit scores
  • Prosper – Loan money to your neighbors so they can buy more isht
  • Kabbage – Loan money to small businesses at ridiculous rates

San Francisco startup Affirm has taken in a whopping $420 million in funding so far from high profile investors like Andreessen Horowitz, Khosla Ventures, Morgan Stanley, and Peter Thiel’s Founders Fund.

The ability for Affirm to be right there at the point of purchase is what puts them in front of everyone else who is trying to finance purchases. When you select Affirm, then you’re required to create an account after which your ability to pay is assessed.

This is not a revolving line of credit, but rather each transaction is evaluated on its own merits. The transactions are reported to Experian so that you can build up your credit to buy even more isht. For the privilege of instant credit at the point of purchase, you’ll pay between 10% and 30% APR simple interest.

San Francisco fintech is shopping for a buyer, as it scrambles to raise $ 50 million (Biz Journals), Rated: AAA

San Francisco fintech Earnest has hired Barclays (NYSE: BCS) to help it find a buyer and raise $50 million in equity, a “dual track” process that could see the company sold for around $200 million, The Information reports.

A sale of the online lender at that price would be lower than previous valuations, which have been pegged higher after the company raised $200 million in debt and $100 million in equity.

SMALL BUSINESS CREDIT SURVEY  (New York Fed), Rated: AAA

Startups are of particular interest since they account for 34% of all small employer firms and play an outsized role in U.S. innovation and productivity. Young firms are the drivers of job growth in the United States, accounting for nearly all net new job creation and almost 20% of gross job creation. Yet, even as their importance has become more widely recognized, the rate of startup creation has been decreasing for years. And, of those ventures that launch, failure rates are high. Approximately one-third of new establishments fail within their first two years, and half fail within five years.

While funding is the lifeblood of every company, capital is especially critical for startups. To reach scale, startups need to be able to secure expansion capital. The Report on Startup Firms offers detailed intelligence on startups’ financing needs and challenges, asking questions about capital requests, borrowing qualifications, applications and success levels.

This report addresses several important borrower-centric questions:

  • How strong is demand for financing among startups?
  • Are startup firms seeking financing and credit from traditional lenders, or are younger firms attracted to new capital sources?
  • How successful are new firms in obtaining financing, and how do they rate their experiences with lenders?
Source: Small Business Credit Survey

Read the full must-read report here.

PayPal Acquires Swift Financial, Expands Loan Capabilities (The Street), Rated: A

PayPal Holdings Inc. ( PYPL) has acquired online lending firm Swift Financial in an effort to expand the online payments company’s business that offers working capital to merchants, Reuters reports.

PayPal will now be able to offer term loans of up to $500,000 to its larger merchants while taking advantage of Swift’s data and capabilities.

Is regulation really keeping banks from lending? (American Banker), Rated: A

Policymakers pushing to scale back regulation have relied heavily on a core argument — bank lending is being held back by post-crisis capital rules and other restrictions.

Federal Reserve Board Chair Janet Yellen has repeatedly said that banks’ lending activities have not been appreciably affected by new rules. In a hearing last month, she pointed to a survey of members by the National Federation of Independent Business which suggested that only a small fraction of small businesses are unable to get the credit they desire.

But loan demand is a difficult thing to measure, in part because it’s hard to count loans that aren’t made. By some metrics, lending demand is down.

But the industry says there is a worrisome trend that those aggregate numbers fail to address, and that is the heightened challenges that banks — particularly larger institutions — face in lending money to borrowers with less than perfect credit scores.

Bill Nelson, chief economist and head of research at The Clearing House Association, said that the new capital and liquidity rules — and especially the Fed’s stress testing program — have made it especially hard for the largest banks to make loans that run a risk of default under economic stress.

Competition rewards student loan borrowers who do their homework (Credible), Rated: A

An analysis of rate requests submitted by students and their families through the Credible marketplace found that when borrowers prequalified with more than one lender:

  • The average difference between the high and low interest rate on 10-year, fixed-rate loans was 1.7 percentage points.
  • Borrowers choosing the loan with the lower interest rate could expect median savings of $2,769.
  • In addition, private student loans funded through the Credible marketplace so far this year carry rates that can be competitive with federal PLUS loans.

When students and families request rates through the Credible marketplace and prequalify with more than one lender, the difference between their high rate and low rate averages 1.1 to 1.7 percentage points, depending on the loan term and type.

 

Vanguard posts unrivaled digital platform AUM (FinancialPlanning), Rated: A

The firm’s hybrid advice offering, Personal Advisor Services, is now at $83 billion in assets under management, according to the firm, putting it in position to be the first digital platform to cross $100 billion.

Since the first quarter of the year, the platform’s assets have experienced a 66% growth increase.

Even during its pilot phase with no paid advertising support, assets for Personal Adviser Services rose from $755 million in 2013 to $10.1 billion at the time of its launch in 2015.

FastPay and Tennenbaum Structure an Innovative $ 80MM Credit Facility for Videology (Newswire), Rated: A

FastPay, a prominent financial technology company that provides lending and payment solutions to digital businesses, along with Tennenbaum Capital Partners, LLC today announced the close of an $80 million international credit facility for Videology. Videology is a leading, global converged TV and video software provider with offices across the United States, Europe, Canada, Asia and Australia.

REAL ESTATE TOPS THE WILLIS ALTERNATIVE INVESTMENT LEAGUE TABLE (All About Alpha), Rated: A

The gist of its new report is that the alternatives asset industry has grown to nearly $6.5 trillion in assets under management.  The world’s largest 100 alternative asset managers make up more than 61% of the pie, with $4 trillion, which represents an increase of 10% in the latter AUM number over the course of 2016.

The survey divided those 100 managers into seven classes, and found that of the ten, the largest share of assets is that held by real estate managers. The full breakdown among the seven classes is as follows:

  1. Real estate – 35% of the whole, over $1.4 trillion;
  2. Private equity fund managers – 18%, and $695 billion;
  3. Hedge funds – 17%, and $675 billion;
  4. PE funds of funds – 12%, and $492 billion;
  5. Illiquid credit – 9% and $228 billion;
  6. Infrastructure – 4% and $161 billion;
  7. Commodities – 1% and $40 billion.

Criticism Heats up on Real Estate Crowdfunding Platform iFunding (Crowdfund Insider), Rated: A

iFunding, a real estate crowdfunding platform, is getting hammered on Bigger Pockets – a real estate investment forum. iFunding has had a choppy operational history at best. The platform has been peppered with high profile partnerships and then departures. Two unrelated lawsuits, in which the platform allegedly prevailed, certainly did not help. iFunding has not been originating any new deals since 2016 – as far as we know. Now there are allegations of deals gone back and the possibility of insolvency.

Largest FinTech Co. in World Accelerates, Invests in Chapel Hill’s WalletFi (Exitevent), Rated: A

Little Rock, Ark., home to the VC FinTech Accelerator, wasn’t quite as sexy a locale, but the 12-week program was sponsored by FIS, the largest FinTech company in the world. It offered funding as well as access to 30 executives from a variety of major banks and FinTech companies who’d signed on as mentors and advisors.

The decision has been a good one. WalletFi has signed on its first customer and two high profile advisors including the CEO of a publicly-traded bank.

Crop Pro Raises $ 8M in Series A (Coverager), Rated: A

Des Moines-based Crop Pro announced it has raised $8 million in a Series A round led by agriculture investors Finistere Ventures and Seed 2 Growth Ventures (S2G), with participation from specialty insurer GuideOne Insurance . Crop Pro will use the investment to expand its team and speed the development of products and services that bridge the gap between agricultural and financial technologies.

3 Possible Application of Machine Learning in finance (TechBullion), Rated: A

It is becoming extremely hard to correctly determine the eligibility of a loan borrower. Even after careful evaluation of all available parameters, some successful companies and individuals still default their bank loan.

Loan eligibility evaluation tasks will be taken over by the smart machine learning technology. To determine the credit score of a client, machine learning can apply regression algorithms which are accurate.

As the financial world transition to digital currencies and digital transactions, there is going to be no physical theft because the money is virtually held. For this reason, thieves are starting to change tact and are now switching to digital means of stealing money.

When put in place, machine learning begins by gathering and segmenting data into at least three segments to create models which eventually amounts to datasets. These datasets can be obtained from historical information. The machine learning models and datasets can then be used to predict the possibility of fraud occurring in financial transactions.

7 Reasons Why Investing in Real Estate Online is Efficient & Effective (Crowdfund Insider), Rated: A

Forbes reported earlier this year that real estate crowdfunding was a $3.5 billion industry in 2016, up from $1 billion in 2014.

  1. Real Estate Investing Is No Longer (as) Local. With online tools and search algorithms, you can put searching for properties ‘on automatic’ and find properties that match your criteria – locally, nationally or even anywhere in the world. 
  2. Transparency. Many online platforms, in addition to doing most of the due diligence before presenting their investment opportunities, have built-in tools that allow investors to analyze risk, assess property valuations, calculate internal rates of return and loan-to-value calculations, and do market research. 
  3. Availability of Information. This availability of information has spurred some investors to create their own investment groups where they pool (i.e. crowdsource) their collective knowledge to evaluate the investments presented, and often will use other resources and means to further evaluate an investment opportunity.
  4. Document Delivery Is More Efficient.
  5. Convenience. Investors in this century no longer have to drive to view properties because images and virtual tours online make it unnecessary. Technology has taken real estate from the ground to the cloud.
  6. Lower Barriers to Entry. Many real estate investing platforms facilitate investments for  $1,000, $5,000 or $10,000. Through online real estate platforms, investing can be done with just a few hundred dollars per month, as many investments are simply equity trades where investors are buying a stake in a project or stakes in multiple projects within a single portfolio. Even debt-based instruments can be entered into with a small fraction of the investment needed 10 or 20 years ago. A few up-and-coming real estate platforms allow non-accredited investors ways to invest for as low as $100 per month.
  7. Greater Diversification. With today’s online options, an investor can diversify into fix-and-flip projects, rental properties, and debt or equity across residential, multifamily and commercial more easily than even 5 years ago.

Want to Be a Real Estate Millionaire? Here’s How to Invest with a Single Click (Inc.), Rated: B

Fortunately for investors of all types, real estate became the perfect asset class for crowdfunding: stable, tangible, and relatively predictable in its growth and eventual returns.

If you’re looking to get started in real estate in a few hours or less, here are a few tips to get you started:

  1. Understand how crowdfunding portals work. There are two classes of investors: accredited and non-accredited.
  2. Ascertain what kind of investor you are. There are two classes of investors: accredited and non-accredited.
  3. Carefully weigh any investment, with the help of an expert. There are two classes of investors: accredited and non-accredited.

Five Hot Atlanta Startups (NewsCenter), Rated: B

Kabbage processes data generated through ordinary business activity, such as accounting data, online sales, shipping and dozens of other sources, to understand performance and deliver fast, flexible funding in real time. Kabbage has raised nearly $500 million in funding, with a whopping $250 million Series F that closed just a few days ago. According to the company, Kabbage has provided in excess of $3 billion in loans to more than 100,000 small businesses across all 50 U.S. states.

According to the company, more than 13,000 customers around the world use PrimeRevenue to optimize their financial supply chain. PrimeRevenue has raised more than $115 million in funding from Battery Ventures, Brown Brothers Harriman, and RRE Ventures.

United Kingdom

Funding Circle Revamp: Online Lender Announces New Look & Feel to Platform (Crowdfund Insider), Rated: AAA

On Thursday, online lender Funding Circle announced it is revamping its platform by offering a new look and feel. The lending portal also announced its new motto, Made to Do More.

Investors Spend £7bn on Alternative Income Trusts (Morningstar), Rated: A

Over the past 12 months to August 2017 investment trusts have raised £9.6 billion from investors in these two ways – known as issuance. Of this, 74% has been within what could broadly be termed alternative income; those assets not directly comparable to equities or conventional bonds and which distribute a structured yield to shareholders.

Issuance in what could be termed conventional income, such as multi-asset or UK and global equity income trusts, totalled £668 million. Finsbury Growth & Income (FGT) led the way with £112 million of issuance. Conventional issuance amounted for around £950 million which was dominated by activity in the secondary market from Scottish Mortgage (SMT) £299 million. Alternative income accounted for the remaining £7.2 billion.

Morrow: stop pandering to banks on robo-advice (Citywire), Rated: A

The regulator should stop pandering towards banks when it develops rules for robo-advice, evestor chief executive Anthony Morrow has argued.

‘If [evestor co-founder] Duncan Cameron and I can build a business to provide financial advice to customers then banks should be able to.

‘The only reason is absolute greed. There is probably an argument to say if, and it is a massive if, interest rates went up three or four percent, would the banks even be bothered because at that sort of rate they would probably still be getting a 2% margin on current accounts which is more than they would make on these new robo-advice things, and with absolutely no risk there,’ he said.

FCA: Advice market reform is ‘on track’ (Money Marketing), Rated: B

In particular, it cited fee transparency and the removal of commissions as steps forward, and that the results of its recent suitability review, which showed that 93 per cent of advice cases were suitable, demonstrated positive results.

The FCA writes: “A market where advisers aren’t driven by commission and are better qualified will provide a better quality of advice for consumers.”

China

This PBoC circular is set to radically change online payments in China (The Asset), Rated: AAA

The new document requires all third-party platforms, such as WeChat Pay, Alipay and others, to connect with Wang’lian (网联), an independent clearing house jointly established by PBoC, other Chinese regulatory bodies and some payments companies.

The new model adopts a centralized clearing procedure where Wang’lian will act as the sole intermediary clearing entity to handle all transactions between payments companies and banks.

According to Chinese media, the document from PBoC requires that banks and payments companies be ready with the internal infrastructure changes required for the new model by October 15. From June 30 2018, all payments and transfers will be processed by Wang’lian.

Data from online transactions, for instance transactions through WeChat’s red packet function, will be monitored by PBoC.

Goldman Sachs: 2017 China ‘s financial technology rise (199IT), Rated: AAA

Click the image to read the report.

The latest monthly report of P2P industry in Chinese first-tier cities: Beijing overtook Shanghai (Xing Ping She), Rated: A

Recently, a third-party institution has launched the Monthly Report of P2P Lending Industry of Chinese First-tier Cities. According to the report, the total number of P2P lending platforms in Chinese first-tier Cities has reached to 1,100 by the end of July, among which 403 platforms are in Beijing, 279 in Shanghai, and 418 in Guangdong Province.

Meanwhile, the total Volume of P2P lending industry in the three areas has reached to $27.37bn, increased by $592m from the last month. The volume of Guangdong Province ranked No.1, which amounts to $9.53bn, with growth rate of 2.01 percent from the last month. The following was Beijing, where the volume amounted to $9.19bn, with the month-on-month growth of 6.69%. And Shanghai reached the p2p industry volume of $8.65bn, which was down 1.95% from the previous month.

China Rapid Finance Limited Sponsored ADR (XRF) to Release Quarterly Earnings on Thursday (Week Herald), Rated: A

China Rapid Finance Limited Sponsored ADR (NYSE:XRF) is scheduled to announce its earnings results before the market opens on Thursday, August 17th. Analysts expect the company to announce earnings of ($0.17) per share for the quarter.

China Rapid Finance Limited Sponsored ADR (NYSE:XRF) last posted its quarterly earnings data on Thursday, May 25th. The company reported ($1.01) earnings per share for the quarter.

European Union

Robo.Cash Update: Investments Jump 30% in July (Crowdfund Insider), Rated: AAA

Robo.Cash, an automated peer to peer lending platform with a buyback guarantee, reports that July was a solid month for the online lender as investments jumped 30%. In the first half of the year, Robo.Cash says that over 700 investors have signed up and 85,720 loans have been originated. In July, 187 investors joined the platform.

Source: Crowdfund Insider

One in five German companies faces charge on bank deposit (New York Daily News), Rated: A

Nearly one in five German companies has faced being charged for parking cash at its bank as a result of the European Central Bank’s negative rate policy, the Ifo economic institute said on Wednesday.

Only 8 percent of all companies eventually accept the charge, with most others escaping it through negotiations or by switching banks, Ifo’s survey of 4,000 companies showed.

International

How Financial Institutions and Fintechs Are Partnering for Inclusion (Center for Financial Inclusion), Rated: AAA

Major Findings

  • The best partnerships between financial institutions and fintechs are a win-win for both partners, as well as for financial inclusion. Mainstream financial institutions partner with fintechs to improve product offerings, increase efficiency, and lower costs – goals with special relevance to low-income customers. By partnering with mainstream financial institutions, fintechs get to scale their technology and can access capital to grow. As a result of these partnerships, low-income customers who are left out of – or poorly served by – the financial sector have greater access to higher quality, more convenient, and less expensive financial products and services.
  • To facilitate productive fintech partnerships, mainstream financial institutions are organizing internally for innovation, strategically integrating systems and staff, and developing contractual agreements to ensure stability and success. Fintech partnerships enable legacy institutions to engage with and learn from new technology in low-risk, low-cost ways. They are also key to allowing incumbents to compete in a world where alternative players, like Facebook and Amazon, are threatening the central role of financial institutions in the lives of customers. By offering better, less expensive, and more innovative products, financial institutions can assert their continued relevance as customer-facing institution.
  • One encouraging and somewhat unexpected finding is that the partnerships between financial institutions and fintechs represent a slow but pervasive financial industry shift toward customer-centricity. Better data management and use, new digital banking products, and greater customer engagement all enable better service for underserved customer segments.

Read the full report.

Crypto vs VISA – Can Denarius Compete When it Comes to Transactions Per Second? (The Merkle), Rated: A

VISA handles on average around 2,000 transactions per second (tps) and peaks around 4,000 tps during high shopping periods. This is just a fraction of their capacity, which is said to be around 56,000 transactions per second.

Paypal, in contrast, handled around 10 millions transactions per day or 115 transactions per second according to data from late 2014.

Today, the Bitcoin network is restricted to a sustain rate of around 7 transactions per second or a little over 600,000 transactions per day.

REAL Launches ICO to Disrupt Global Real Estate Investment Markets (Cryptocoins News), Rated: A

REAL will disrupt global real estate investing by moving it on to the Ethereum blockchain and enabling the average investor to build a real estate portfolio.

Property owners and developers will apply to have their assets tokenized and listed on the REAL crowdfunding website. The REAL team – which is composed of successful entrepreneurs, venture capitalists, and developers who have already invested $350,000 of their own funds in the project – will carefully analyze the properties to select the ones that will provide investors with the greatest long-term value, with targeted annual returns of 12-20%.

The REAL token sale will begin on August 31, but investors contributing greater than 100 ETH will have the opportunity to participate in a 24-hour pre-sale on August 24. During the ICO, investors will be able to acquire tokens at the rate of 220 REAL per 1 ETH until the investment cap has been reached.

Australia

DirectMoney closes funding deal (LendIt), Rated: AAA

The Board of DirectMoney Limited (ASX: DM1), (“DirectMoney”, or the “Company”) are delighted to announce the completion of a wholesale funding agreement with 255 Finance.

The agreement is structured around the purchase of $50 million in DirectMoney originated loan assets, with the intent to increase this in the future. 255 Finance will also receive equity in DirectMoney and options that vest based upon specific hurdles being met. Significant growth in both lending volumes and the operational performance of DirectMoney is anticipated as a result of the facility.

Asia

What’s slowing the adoption of straight through processing for payments? (The Asset), Rated: A

One technical difficulty is the need for compatible payments systems across different entities. The ISO 20022 XML format is a standardized and popular format for payments among financial institutions. However, payments under the XML standard still need to be reformatted if the transaction goes through the United States’ Automated Clearing House network.

Regulatory requirements, which can include know-your-client checks and anti-money laundering, as well as risk and control, can mandate that a part of the process is completed manually.

Authors:

George Popescu
Allen Taylor

Monday April 24 2017, Daily News Digest

credit card delinquency rates

News Comments Today’s main news: Credit Card ABS vs installment loans ABS comparison. Assetz Capital hits 240M GBP in four years. Octopus Choice close to 50M GBP in first year. Lendix expands to Italy. Today’s main analysis: 90+ wealthtech companies. Today’s thought-provoking articles: 88% of global banks sweat losing revenue to fintechs. 17 fintechs that may become unicorns. China SME […]

credit card delinquency rates

News Comments

United States

  • Credit Card ABS vs installment loans ABS comparison. GP:” People often try to use credit cards data, which there is plenty of, and goes back very far, to predict installment loans behavior. However, Americans have a priority in defaults which is proportional to the pain point if the product stops working. We believe unsecured personal loans are very low on the totem pole of default priorities. PeerIQ here analyzed the difference quantitatively and concluded very interestingly: ‘Peak delinquencies in credit card ABS are ~8% in a stress scenario. By contrast, three-year unsecured personal loans (such as loans in the seminal CHAI shelf) are typically associated with a ~12% cumulative loss estimate (under a benign base case).’ “
  • 90+ companies transforming investment, wealth management. GP:” We saw Wealthfron enter lending last week. Perhaps we should look at a few other companies for partnerships.” AT: “WealthTech as a sub-niche seems to have come out of nowhere. Yet, many of these companies are important to the overall fintech ecosystem, and I see WealthTech growing by leaps and bounds worldwide in the foreseeable future.”
  • Why having a trust strategy is key to fintech’s future. AT: “Building trust is the single most important thing for any financial services company.”
  • Allianz invests in Lemonade. GP:”Insuretech is coming? Is Lemonade the Lending Club of insurance?”
  • NASDAQ announces venture investment program for fintechs. AT: “This is interesting. I like reading the NASDAQ analyses on the industry on NASDAQ’s blog. I’d be interested in seeing how their investments perform, and how they choose which companies to invest in.”
  • North American Financial Institutions go social. GP:” Our readers are already aware of this trend I believe. Nothing really new.”
  • Fintech puts payday lending in old wine in new bottles. GP:” It is very hard to point exactly when innovation happens. Before 1990 there was no online payday lending, because there was no internet. Today it exists. Something did change. Everything we build is built on top of online lending. Perhaps lending was invented when the first money was invented and searching who invented something, for the glory, is not very useful in this case. We are losing time with the history of lending or with the exact meaning of certain words. I would rather look who is making the money, Elevate Credit or brick and mortar stores? Who’s revenue is growing?”
  • Fintech lures MBAs away from banking and consulting. GP:”Fintechs even lures executives and CEOs of Wall Street banks, no wonder MBAs are also following. “AT: “We’re also starting to see banks and traditional financial institutions poach talent from the fintech companies.”
  • Biz2Credit to expand to Puerto Rico. GP:” Puerto Rico doesn’t often make the lending news. I wonder if it is underserved.”
  • Inside Online gives off good vibes with digital branded magazine. AT: “I applaud Elevate Credit starting an online brand magazine. This is one of the most underrated and most effective online marketing strategies to implement, and I’m glad to see at least two companies in this space pursuing this channel.”
  • Elevate appoints Tony Leopold as GM.
  • BMO Harris Bank launches fintech partnership program with 1871.

United Kingdom

European Union

International

Australia

China

India

Asia

  • Indonesia’s fintech landscape. GP:” The Indonesian market is particularly closed to international ownership, investment, etc. However, they are the 4th most populous country in the world and their financial sector is far from being mature. Which leaves a lot of opportunity if people are willing to approach the Indonesian market properly, perhaps in partnership with local entrepreneurs and by structuring firms through local law firms .”
  • ASIC signs agreement with Indonesia.

Africa

News Summary

United States

Credit Trend Through Delinquency Rates (PeerIQ), Rated: AAA

Banks earnings season continued this week following strong Q1 results from JP Morgan and Citi last week. Morgan Stanley beat expectations on each line of business increasing year-over-year profits by 82%. The investment bank also generated 122% YOY revenue growth in the fixed income currency and commodities business. Bank of America exceeded expectations and benefitted from the greater net interest income due to a rise in long-term rates.

For the first time since 2015, GS surprised analysts by missing expectations on top and bottom line performance. Fixed income revenues were flat year-over-year trailing double-digit business unit gains across peers including JPM, C, MS, and BAC.

Bloomberg reports that, Navient, the largest servicer of student loans, reached an agreement to purchase JPMorgan’s approximately $6.9 Bn FFELP education loan portfolio.

In the ABS space, Yirendai reported its progress in funding consumer loan products via ABS. Another Chinese online lender, China Rapid Finance, announced that it plans to list on the NYSE, making it the second Chinese online lender to go public in the US.

We are often asked by investors whether credit card receivables are a proxy for installment loan performance. This week, we dig into credit performance of credit card securitizations representing over $100 Bn+ in consumer credit ABS deals. We include the following issuers in our analysis: American Express, Bank of America, Discover, Capital One, JP Morgan Chase, and Citi.

We compare delinquency and loss levels of credit card ABS to installment loans and conclude that credit card ABS performance is a poor proxy for installment loans, and that installment loan delinquencies are arguably a leading indicator of credit risk.

Credit Card ABS – A Strong History of Credit Performance

The credit card ABS market has historically been the benchmark sector in consumer ABS due to its liquidity, transparency, and strong performance including through the Great Recession.

The Credit Card ABS market is not an originate to distribute risk-transfer market, but rather a critical channel for funding and liquidity. Issuer incentives are strongly aligned with investors due to their dependence on debt capital markets for funding.  Credit Card ABS provides over 50% of funding for card issuers (followed by deposits). New Credit Card ABS issuance is expected to grow in the wake of higher rates and funding costs from deposits.

Post-2008, new ABS issuance contracted significantly, including in the credit card markets. Consumers entered a de-leveraging phase reducing demand for loans. Large banks, in response to the new capital and liquidity regime, shifted to borrowers with higher credit scores and focused on existing relationships. Wider spreads and higher capital charges also reduced available sources of funding for consumer credit.

Post-crisis, non-bank lenders emerged to fill the lending gap by offering installment loan products to expand access to credit. Since installment loans sometime re-finance higher rate credit card debt, some investors have drawn analogies between credit card performance to installment loan debt.

Credit Card ABS Delinquencies are Near Multi-Decade Lows

In our March 2016 newsletter, we discussed credit card master trust performance, noting that delinquencies from 2011 through 2015 followed a downward trend for major credit card issuers.

We continue our analysis below, observing delinquencies continuing the downward trend in 2016, reaching historic lows in early 2016.

While the Composite index shows this trend, there is variability among the individual trusts. Discover and Capital One, with a mass-market tilt in customer base, experienced larger rises in delinquencies, compared to Amex and Chase which have a mass affluent footprint.

Source: Federal Reserve

Installment Loans Lead Credit Card Losses

There are limitations in comparing delinquency rates on credit card ABS to installment loans. For instance, unlike MPL ABS deals which consist of static pools, credit card trusts are revolving securitizations that re-invest principal and interest over time. Also, we do not have access to the credit score distributions for credit card issuers to compare risk on an apples-to-apples basis.

Nevertheless, when comparing credit card ABS performance to the PeerIQ loan performance monitor we can draw some conclusions:

Delinquencies on credit cards reached multi-decade all-time lows in early 2016.

Credit card delinquencies are in early stages of reverting to historical levels, whereas the Loan Performance Monitor indicates that the unsecured personal installment loans have started a pattern of higher losses in successive vintages starting in 2015.

Through-the-cycle losses on credit card products are lower than losses on installment lending products.

Peak delinquencies in credit card ABS are ~8% in a stress scenario. By contrast, three-year unsecured personal loans (such as loans in the seminal CHAI shelf) are typically associated with a ~12% cumulative loss estimate (under a benign base case).

Note: We should expect higher losses on installment loans as non-banks offer access to credit to borrower segments outside of a traditional bank’s higher credit score underwriting box.

Historical credit card performance data is a poor proxy for measuring installment loan performance.

We can also offer the following tentative hypotheses which we look forward to testing with our TransUnion partnership:

Installment loans are lower in the consumer payment priority stack.

Installment loan losses lead performance in other asset classes such as credit card.

Credit card account management strategies (e.g., re-pricing of delinquent loans, credit line decrease tactics, etc.) are powerful levers for managing risk as compared to installment loans where issuers can only set terms at time of approval.

Deeper borrower relationship engagement (as measured by breadth of product penetration) reduces borrower’s credit risk all things being equal.

90+ Companies Transforming Investment And Wealth Management (CB Insights), Rated: AAA

Wealth tech investments reached a record of 74 deals in 2016.

We identified over 90 companies in the wealth tech space and organized them into 7 main categories based on the services and software they offer, then sub-categorized them by the client group they serve, whether business-to-consumer (B2C), business-to-business (B2B) or both.

Wealthfront has raised approximately $129.5M from investors, including Social Capital, Spark Capital, Greylock Partners, and Index Ventures.

This includes AdvisorEngine which raised a $20M Series A investment from WisdomTree Investments.

Stash, for example, is a goal-based digital investment platform that lets investors contribute as little as $5. Another company, Acorns, rounds up credit and debit card purchases to the nearest dollar then automatically collects and invests that spare change.

This category is exclusively B2B focused and includes Plaid Technologies, a software intermediary that securely connects financial application users with their respective bank accounts.

Click here to see a full list of WealthTech startups.

Why Having A Trust Strategy Is Key To The Future Of FinTech (Forbes), Rated: A

FinTech continues to see massive investment across the board and according to the annual FinTech Report, global cumulative investment will exceed $150 billion in 2017 alone. At least 80% of financial institutions PwC recently surveyed believe that they are at risk to innovators whether that be mobile banks like Monzo and N26 or more hardcore technological innovations like Lemonade and Algodynamix who want to change FinTech from the inside out with AI and other technologies like Blockchain. Trust is central to all of these emerging propositions whether it is from an emotional perspective because of previous traditional banking issues or a technological one like Blockchain.

Tom Blomfield, CEO, Monzo wants the youth market to come through word of mouth; “We’re focused on people who live their lives on their smartphones. Generally (but certainly not exclusively), these people tend to be younger and more willing to try out new products and services. For these customers, ‘trust’ is earned by making a product or service that demonstrably works well. It’s less about expensive advertising campaigns or branches on the high street… For us, it’s centred around transparency and community. We have a very active community forum.”

Ajay Bhalla, President, Global Enterprise and Security, Mastercard wants to increase trust by removing friction from the tedium of security.

Allianz Invests in Lemonade (PR Newswire), Rated: A

Lemonade, the insurance company powered by artificial intelligence and behavioral economics, today announced a strategic investment by Allianz, the world’s largest insurance company.

Nasdaq Announces Venture Investment Program For Fintech Companies (Crowdfund Insider), Rated: A

U.S. stock exchange group Nasdaq (Nasdaq: NDAQ), announced on Wednesday the launch of its venture investment program, Nasdaq Ventures, which is dedicated to discovering, investing in and partnering with unique fintech companies worldwide. According to the group, this program’s main objective is to identify and collaborate on new technologies and groundbreaking services and solutions which align with its clients’ needs an d the company’s long-term objectives in the global capital markets.

Innovation spotlight: North American FIs going social (Banking Tech), Rated: B

As banking continues to go digital, online innovators and niche players in North America are getting personal by adding social activities to their customer services.

SoFi, short for Social Financial, combines better rates on student loan refinancing with parties for its members (aka borrowers), around the country. It even offers career and financial counselling.

CommonBond offers an online student loan evaluation tool to help prospects determine the best ways to manage their debt. It estimates that members save an average of $14,581 as they repay their student loans, and even more for people like doctors and dentists with advanced degrees and higher debts.

Fintech Puts Payday Lending Old Wine in New Bottles (Naked Capitalism), Rated: A

And before you conclude that I am being a reflexive skeptic, Georgetown law professor Adam Levitin weighed in via e-mail:

First, Fintech is a meaningless term. The consumer-facing stuff is mainly (1) gussied up payday lenders (see, e.g., Think Financial and their tribal lending alliances), (2) money transmitters, and (3) BitCoin Bros. The money transmitters are probably harmless enough, but the first group are just trying to escape state usury laws and rollover restrictions, while the third group are grab bag of fools and con artists who think they are much more clever than they actually are. People on the Hill go ga-ga for Fintech without having any real knowledge of what they are and assuming that a digital platform represents a material (and better) transformation of a product.

The Lyric Financial website is remarkably content-free, particularly for specific product features and details of terms and conditions. Apart from the cloying trendiness which it is far too early in the morning to stomach, it’s very hard to find out what the deal really is.

You’re subjected to mandatory binding arbitration, which for a sophisticated product aimed at financially unsophisticated customers is a very bad sign.

It gets worse. In the bowels of their T’s and C’s I found this:

Governing Law

These Terms & Conditions, as well as any claims arising from or related thereto, whether in tort, contract or otherwise, are governed by, and are to be interpreted and enforced in accordance with, the laws of the State of Tennessee, without regard to New York’s conflicts of laws principles.

Which sounds suspect  – my take is that they are under Tennessee’s statutes (don’t know if that signifies anything noteworthy, either good or bad) but they don’t want to be liable under an aspect of NY law (which I’m guessing is much better settled and consumer-friendly than TN’s).

Fintech lures MBAs away from banking and consulting (Financial Times), Rated: A

Many fintech founders went to business school. Insead’s MBA alumni include Giles Andrews, British founder of peer-to-peer lending platform Zopa, and Taavet Hinrikus, the Estonian-born chief executive of online foreign exchange marketplace TransferWise. Jeff Lynn and Carlos Silva jointly developed the business plan for equity crowdfunding business Seedrs as part of their MBA course at Oxford’s Saïd Business School.

Now, as fintech founders grow their businesses, they are heading back to business schools to find well-qualified staff. About a fifth of hires from the international MBA class at Madrid’s IE Business School last year were made by financial services companies. Fintechs made 5 per cent of those hires, up from none last year.

Eight of Nutmeg’s 78 staff are MBA graduates, including two product managers, its chief marketing officer, chief architect and head engineer.

MBA graduates are unlikely to join fintech companies in the expectation of high salaries. Many,particularly those who have worked in private equity, understand start-ups operate differently, Nutmeg’s Mr Hungerford says.

Biz2Credit to Expand Online Access for Small Business Financing in Puerto Rico (Crowdfund Insider), Rated: A

Biz2Credit announce on Thursday it has formed a partnership with Puerto Rico’s Oriental Bank to help develop a digital lending platform for the bank’s commercial clients. According to the Biz2Credit, Oriental Bank will be considered the first bank in Puerto Rico to engage commercial clients through a digital platform that supports applications for business credit cards, as well as lines of credit, term loans, real estate loans, equipment purchase, and SBA loans.

Inside Online gives off Good Vibes with “digital branded magazine” (Prolific North), Rated: A

Inside Online has launched an online magazine as part of a digital marketing campaign for an online lending company.

Good Vibes aims to build a greater owned audience for Elevate Credit brand, Sunny.

Good Vibes will include in-house editorial, an external newsroom and illustrated graphics.

Elevate Appoints Tony Leopold as General Manager, Rise (BusinessWire), Rated: B

Elevate Credit, Inc. (“Elevate”), a leading provider of innovative online credit solutions for nonprime consumers, today announced the appointment of Tony Leopold as the General Manager of its Rise product, effective immediately.

BMO Harris Bank Launches FinTech Partnership Program with 1871 (Yahoo! Finance), Rated: B

BMO Harris Bank today announced a partnership with 1871 – a leading technology and entrepreneurship ecosystem which is currently home to nearly 500 high-growth digital startups in the Merchandise Mart – that will provide a select group of FinTech startups the opportunity to participate in a three-month mentorship program.

United Kingdom

Assetz Capital hits £240m of lending in four years (P2P Finance News), Rated: AAA

ASSETZ Capital hit its fourth anniversary with £240m lent to date and a plan to double that figure over the next 12 months.

The peer-to-peer lending platform, which channels funds to small- and medium-sized enterprises (SMEs) and small property developers, confirmed on Friday that it has returned over £20m of interest to investors since inception, yielding rates ranging between 3.75 and 18 per cent to investors.

Thanks to a recent surge in borrower demand, it also launched a temporary rate hike offer on its 30-day account last week to 4.75 per cent for a 90-day window.

Octopus Choice close to £50m loan target ahead of first anniversary (P2P Finance News), Rated: AAA

OCTOPUS Choice is set to have raised £50m within its first year of operation.

The lender offers average returns of 4.2 per cent based on conservative loans-to-value of up to 70 per cent and currently has 20 loans open for investment.

It pre-funds the loans, which a spokesman said has been given the green light by the Financial Conduct Authority (FCA) – despite several other P2P lenders having to stop the practice in order to gain approval from the City watchdog.

The platform’s loan book shows it has funded loans of as little as £95,000 to more than £5m, secured on properties valued between £175,000 and £8m.

What Brexit Means for London’s First FinTech Unicorn TransferWise (Coin Telegraph), Rated: A

According to a report published by GP Bullhound, TransferWise is one of Europe’s fastest growing unicorns. Also, according to the same report, the UK has the largest number of fastest growing unicorns, which are fast-growth, profitable businesses at 18 with a cumulative value of $39.6 bln.

Despite the clouds of Brexit looming, British tech deals hit a high in 2016 according to GP Bullhound. Whether the growth in the tech sector can be maintained post-Brexit is an interesting question.

Moneysupermarket pioneer sets up new financial advice business eVestor (The Telegraph), Rated: A

Duncan Cameron’s jointly-owned eVestor service aims to cut the cost of full-service financial advice by 80pc. He says it will deliver sophisticated advice to investors “whether they have £1 or £1m”.

He says eVestor will use complex digital “decision trees” to replicate the role of human advisers at a fraction of the cost and “provide more consistent outcomes”.

My Moneything Investment Experience after 13 Months (P2P-Banking), Rated: A

Last year I started investing on British p2p lending marketplace Moneything. Read my past article about opening a Moneything account. Moneything mostly offers property backed loans, with a few different asset-backed deals in between. I used Transferwise and Currencyfair to deposit money from my Euro account. Recently I also used the Revolut App to transfer money from another UK p2p lending marketplace to Moneything.

I am invested in 31 loans right now, mostly at 12% interest rate with small amounts also at 10.5%, 11% and 13% invested. I have had no defaults and there are no fees for investors.

Why choose a robo-adviser? (IG.com), Rated: B

Anyone can use robo-advice to manage their finances, whether that involves a £500 initial investment in a Stocks and Shares ISA, or a £100,000 Self Invested Personal Pension (SIPP).

Just last year, the Financial Conduct Authority (FCA) warned that 16 million UK consumers could be trapped in a ‘financial advice gap’ where they need professional investment advice but simply can’t afford it.

There is a £310 billion shortfall in the UK’s pension savings, according to Aviva’s calculations, while Zurich Insurance recently found that 41% of women and 30% of men aged 25 to 39 have nothing saved in their pension fund.

According to a MetLife survey, 45% of retirement savers are so concerned about their dwindling returns that they feel forced to take on more risk – a decision which could have disastrous consequences in the absence of professional financial guidance.

Fintech Startup Prime Trust Appoints Former Hambrecht Partner Whitney White As New CTO & COO (Crowdfund Insider), Rated: B

Nevada-based Fintech startup Prime Trust announced on Friday it has appointed former Hambrecht Partner and CTO, Whitney White as its new COO and CTO. 

European Union

Lendix Now Offering Loans to Italian SMEs (Crowdfund Insider), Rated: AAA

European marketplace lending platform Lendix has opened its platform to Italian SMEs. As of today, Italian businesses may borrow from €30,000 to €2 million directly financed by international investors. Lendix called the operation “a new step towards a true European credit market.”

International

88% of Global Banks Sweat over Losing Revenue to FinTech Firms (Cryptocoins News), Rated: AAA

The report, Global Fintech Report 2017 [PDF], found that 88 percent of global banks are increasingly concerned that they will lose revenue to fintech businesses. The areas major banks feel they will lose out on include payments, fund transfers and personal finance sectors. In response, 82 percent claim that they intend to increase partnerships with financial technology services over the next three to five years.

The survey found that difference in management and culture in addition to regulatory uncertainty and legacy technology limitations, are identified as being significant challenges for financial technology companies and banks. Not only that, but banks are restricted to a system of checks and balances that can hinder the innovation process while fintechs are able to adapt easily due to a lack of bureaucracy.

The technology is moving from hype to reality and as it does so funding in the sector increased 79 percent year-over-year in 2016 to $450 million.

17 fintech businesses that could one day be worth over billion (Business Insider), Rated: AAA

GP Bullhound, a boutique investment bank focused on tech, on Thursday published an in-depth report looking at the global fintech industry.

The report found 39 fintech companies around the world already valued at $1 billion or over, and found that global venture capital investment into the sector has risen almost fivefold in the past three years to reach $13.6 billion in 2016.

GP Bullhound identified promising businesses in the alternative lending space, data analytics, digital banking, insurance, and asset management. Here are the 17 businesses that made the cut and, in GP Bullhound’s view, could be the next fintech unicorns:

  • LendInvest — Online mortgage platform
  • Prodigy Finance — Peer-to-peer university loans for overseas students
  • ID Finance — Online lending in Russia
  • Ebury — Financing for small businesses trading overseas
  • iZettle — Mobile phone linked card readers
  • WorldRemit — International money transfer on your smartphone
  • Cardlytics — Analytics of card spending
  • Kreditech — Digital credit scoring and lending
  • Taulia — Supply chain finance
  • PolicyBazaar — Indian insurance marketplace
  • Collective Health — Tools for employers to manage company health insurance
  • Atom — Digital-only challenger bank
  • OakNorth — Digital challenger bank pitched at entrepreneurs
  • N26 — App-only bank that is hugely popular across Europe
  • Betterment — Online investment advisor
  • Wealthfront — Online investment manager targeting millennials
  • Nutmeg — Online investment managet

SME Lending Activity: China Spikes, US Banks Reboot (PYMNTS.com), Rated: AAA

Small business lending activity across the globe is in flux. China saw a whopping 17 percent increase in small business lending in Q1, while U.S. banks are rebooting their efforts to capture SMEs from their alternative rivals. The U.K. and Canada, meanwhile, see their small businesses struggling to find financing.

$3.2 trillion worth of outstanding SME loans in China means lending activity to small businesses in the community has inched up in Q1 2017. New data from the People’s Bank of China released the statistic, which signals a 17 percent increase from a year ago, reports said.

Three out of five London SMEs have been turned away from lenders, according to data released by SME finance LDF. Its research revealed that more than half of London’s SMEs say the jargon associated with financing has turned them off from accessing a loan, and 57.6 percent said they have been turned down from a loan outright.

Fewer than 15 percent of Canada’s small businesses are run by entrepreneurs aged 25 to 39, said CIBC Capital Markets in a new report.

Three minutes could be all it takes for a small business to get financed from NatWest. The bank said last week that it has rolled out a new platform for its SME customers that have been pre-assessed for financing.

A dip of 1.1 in the PayNet Small Business Lending Index may appear to be bad news — signaling a slight decline in Canadian small business lending in February compared to January. But according to PayNet data, medium-sized business lending increased nearly two points in the index, marking the highest level since January 2016 and reflecting separate data from CIBC Capital Markets that signals strong growth among Canada’s SME community.

Australia

The fake offset accounts that could make your savings vanish (The Sydney Morning Herald), Rated: A

You recently answered a question regarding the safety of a home loan with an online lender (the debt would be on-sold to another provider and the loan would continue). My question relates to the security of money in an associated offset account. How secure would the money in the offset account be? If the lender goes bust would they be able to take all of our savings in the offset account and then on-sell the full value of the loan?

There was a time when a compelling reason not to go with a cheaper online lender was that, not being authorised deposit-taking institutions, they could not offer offset accounts. Some have since begun splitting out certain repayments in a quasi offset – on occasion, simply like a displayed redraw facility.

But there is a downside: offset accounts set up in this way are not subject to the Financial Claims Scheme or the scheme protecting deposits of up to $250,000 in the event the provider goes bust … only truly separate deposit accounts of locally incorporated authorised deposit-taking institutions (ADIs) are, whether they are offset or not.

Note APRA regulates ADIs (mainly banks, building societies and credit unions); online and other non-bank lenders are subject to the Consumer Credit Code and can be ruled on by the Credit and Investments Ombudsman.

Gerard Brody, chief executive of Consumer Action, says: “Non-bank lenders that offer these products should be warning customers clearly that if they go under, the money in the account won’t be protected by the government guarantee.”

China

WeiyangX Fintech Review (Crowdfund Insider), Rated: A

On April 11, Xiaomi Corp., China’s leading mobile phone maker, launched the mobile application Xiaomi Lending in Android market, signaling a strong ambition to expand in the country’s booming Internet Finance sector.

On March 20, Dianrong.com announced to enter into a strategic partnership with Quark Finance, with an aim to launch a new online microcredit platform.

On April 12, Chinese online peer-to-peer lending service Renrendai.com announced that its P2P business would be operated as an independent platform.

National Internet Finance Association of China has announced the first major report to its members regarding the legal and regulatory status of consumer finance. The document, which is echoing to the P2P Finance Association established by the organization in March, is the first to officially classify consumer finance in the eyes of the Chinese government.

On April 8, the first Committee of Internet Finance Law was established in Beijing. The committee held symposiums about the technology innovation and legal protection in Fintech industry, which attracted several representatives of governmental organizations and university professors.

India

P2P lending can play a pivotal role in financial inclusion (India Times), Rated: AAA

However, what is noteworthy is that P2P as a product does have the ability to make a real difference in the financial inclusion space.

According to “Accenture’s Digital Disruption: The Growth Multiplier” report, digital tech could power $2 trillion of global economic output by 2020. The survey states that the US is leading the race with digital revenue making up a third (33%) of output. In terms of industry sector, Financial Services is the largest contributor in terms of their digital contribution to national and global GDP. In fact the same is true for every country across the world.

P2P lending and borrowing ticks all the boxes in terms of being simple, rates that appeal to both borrowers and lenders and is available to individuals often neglected by banks. As a result, it is finding traction regardless of social strata, age or education.

Our lenders are young with 51% belonging to the age bracket of 30-39 years. About 36 % of the lenders are over 40 and 13 % are below the age of 30.

It is well known in India that it is very difficult to get a loan from a bank if you are an SME. When we talk of financial inclusion, it should not be merely limited to an individual, but also ensuring access to finance for companies of all sizes. P2P has done a great job in lending to SMEs and this is largely possible because of wide range of data sets used to arrive at a lending decision.

Financial institutions feeling fintech heat, says PwC study (India Times), Rated: AAA

Financial institutions are increasingly at risk of losing business to fintech innovators, with 67 per cent already feeling the heat, says a PwC study.

According to PwC’s Global FinTech Report, 67 per cent believe their business is at risk from financial technology (fintech) firms and as many as 95 per cent of incumbents seek to explore fintech partnerships to boost innovations.

In India, 67 per cent financial institutions acknowledge that non-traditional fintech poses a threat to their businesses, lower than the global average of 80 per cent, indicating that the market in India is not yet as matured as it is globally.

Can e-KYC Service Providers Like Finahub Ride The Aadhaar Wave? (Bloomberg Quint), Rated: A

Finahub Technology Solutions, a Kerala-based software technology solutions company, is riding a building wave in financial services–the increasing use of Aadhaar-enabled e-KYC (know your customer) by banks and non-banking financial services (NBFC).

The bank or the financial institution is a KYC User Agency, and must first register with the UIDAI. The intermediary, called a KYC Service Agency, transfers the confidential Aadhaar information in an encoded form from the user to the UIDAI, and then back to the bank’s server.

The software solutions provider, in this case Finahub, provides software that connects all the points in the chain.

The software solutions provider, in this case Finahub, provides software that connects all the points in the chain.

The company also offers an Aadhaar e-sign facility as an add-on service. If this option is chosen, once the e-KYC process is complete, the bank’s representative asks the customer to scan his fingerprint a second time.

Asia

Understanding Indonesia’s Burgeoning Fintech Landscape (Global Indonesian Voices), Rated: A

From 2008 until 2013, the investment value in fintech had increased threefold.

As reported by Tech In Asia, in Indonesia fintech is the business sector with the second largest investment in 2016, after e-commerce. According to Bank Indonesia, there are around 142 local fintech companies in Indonesia. They are categorized into four types: Market Provisioning, which includes CekAja and Cermati; Deposit, Lending, and Capital Raising, which includes UangTeman and Investree; Investment and Risk Management, which includes Bareksa and Stockbit; and Payment, Clearing, and Settlement, which includes Midtrans and Doku. This last category is the one with the most players, comprising around 80 companies.

There are at least 11 fintech startups that received funding from investors during 2016.

ASIC signs fintech agreement with Indonesia (InvestorDaily), Rated: A

The agreement, signed on Friday, provides a framework for the two regulators to share information on market trends and regulatory issues that develop from innovation within their respective markets.

The regulator said increased co-operation between the two regulators will support them to promote innovative practice, and described the agreement as “positive confirmation” of the relationship between ASIC and the OJK.

Africa

How Africa’s FinTech Industry Is Impacting Its Growth And Development (The Marketing Mogul), Rated: AAA

The emergence of Africa’s FinTech industry, through its software and platforms, has made financial products and services more accessible to consumers in developing countries with low standards of living. It has also made these products and services more affordable by reducing the cost of doing business for financial institutions and other intermediaries.

Africa’s largest economy, Nigeria has experienced 27% growth in mobile money usage between the years of 2011 and 2016. The country’s FinTech industry currently comprises of over 50 companies with investments exceeding $200m in the last two years. Nigeria, according to Irrational Innovations, has developed effective payment and lending platforms, with 37% of FinTech start-ups focused on offering payment and remittances services (such as Paga and Remitta) while 32% offer lending and financing services (like Renmoney and Onefi). The remaining 31% are divided amongst insurance, banking, trading, data, bitcoin and business solutions.

Kenya has also exhibited very promising potential and growth in the mobile money lending operations. In March 2015, financial times reported that $150m worth of loans had been issued to borrowers, following the collaboration between Kenya Commercial Bank and M-Pesa (a mobile money platform). The vast majority of these borrowers are low income earners previously regarded as un-bankable due to their lack of credit history and access to financial services (financial exclusion).

Ghana has also been on the rise in regards to Africa’s FinTech space. As of 2009, about 70% of Ghana’s population were un-banked, and the country had a GDP growth rate of 4%. But between 2011 and 2015, largely due to the utilisation of mobile money, the country recorded a 41% increase in the population’s access to formal financial services, as well as a compounded GDP growth rate of 7.7% between the same periods.

The use of mobile money in Sub-Saharan Africa has increased over the years, with approximately 70% of adults in Kenya, for example, utilising mobile phones for money transactions. African small- to medium-sized businesses (SMEs) account for over 45% and 33% of the continent’s employment and GDP rates respectively.

Authors:

George Popescu
Allen Taylor