Introduction Online lenders are fast becoming the first port of call to avail loans and have been attracting strong funding interest from VCs and PEs. This demand for a digital lending experience has also forced traditional lenders like banks and credit unions to figure out the technology which will allow them to originate loans in […]
Online lenders are fast becoming the first port of call to avail loans and have been attracting strong funding interest from VCs and PEs. This demand for a digital lending experience has also forced traditional lenders like banks and credit unions to figure out the technology which will allow them to originate loans in a flexible yet scaleable way. They have two options: Buy or Build.
The build option can be extremely expensive and time consuming. But the buy option leads to a digital experience that is constrained, as you are dependent the features and functionalities of the vendor. Moreover, there is no way to really differentiate in the eyes of the digital customer. The solution is DigiFi: an open source tech platform which also allows you to customize along with a layer of additional services like hosting, support, platform implementation, etc.
DigiFi was founded by Joshua Jersey and Bradley Vanderstarren in 2014. It started its life as Promise Financial, an online lender, and raised $110 million in credit capital. It built up its own proprietary tech as there was no solution provider in 2014 offering an end-to-end loan origination platform that could automate the entire process. They sold off the tech to a large lending institution in 2017 and pivoted to DigiFi, one of the world’s first open source loan origination systems (LOS) which equips the lenders with flexible and modern tools to create unique platforms and digital experiences.
The company’s ideology is simple: That is to give other incumbent lenders, branches, credit unions, and startup digital lenders a platform where they do not struggle to build core lending capabilities from scratch. The company utilized the year 2017 and early 2018 to build up its platform, and started working with clients in late 2018. The company, with 10 people, has raised $4 million in equity to date and is based in New York.
The Market’s Pain Points and the DigiFi Solution
The ‘build or buy’ question creates a space for a platform that can bring together the qualities that fulfill the core origination requirements of the lending market and yet customize to give the client a competitive edge over other players. DigiFi empowers its clients to control the features and UI/UX so that it suits the specific needs of their unique client base. The existing tech vendors force the lenders into a rigid structure that limits flexibility to differentiate and provides the exact same experience for all sets of clients.
DigiFi gives the best of ‘buy vs. build’. Thus, DigiFi clients do not need to start from scratch and yet have the power to tailor the tech (buy and build, a win-win!). The company’s core platform is open source, and the source code can be accessed on Github. Revenue is generated from acting as a layer that provides hosting, support, platform implementation and customization services.
In crux, the platform of the company has features like complete lending CRM, decision engine for lending decisions, machine learning environment, and open-API architecture, and it can be configured for deployment across a range of lending verticals that include consumer, mortgage, small business, and commercial. DigiFi gives out the open source platform and its documentation for free.
The platform of the company is currently being leveraged by Sprout Mortgage, Mariner Finance, Constant Energy Capital, Greenwave, and Home Point Financial.
The Platform in Detail
The company provides its platform to the lenders for free and charges for additional services of configuration, setup, support, and running. Depending on the requirements of the client, DigiFi offers support plans for a monthly fee. The customization and platform implementation are charged on an hourly basis. The implementation time and cost varies. The implementation might take up to 4-8 weeks at a minimum and can take up to months if the lender needs to build out features from scratch. As compared to years and millions of dollars for building an in–house model, the DigiFi solution is usually in the 5-6 figure range.
As per the CEO of DigiFI, the incumbents are getting better with time as they have a lower cost of capital and existing customer base, positioning them to succeed. Getting the right tech partner on board is thus the critical piece to build a successful moat.
DigiFi offers a platform to lenders looking to tap the online lending market that not only equips them to get the best of the ‘buy vs. build’ system but also ensures full support and customization. It powers the lender with ready-made solutions, fast implementation, support and training, feature controls, unique customizations, flexible hosting options, and a contributor community. It provides the option to integrate all major data sources – Transunion, Equifax, Experian, MicroBilt, LexisNexis, etc. With over 45,000 development hours, DigiFi platform provides it clients a strong barrier to entry with complete configurability with other APIs, true scaleability with AWS, and integrated AI ML solutions.
News Comments Today’s main news: SoFi has raised $500M. Morningstar accelerates acquisition of DBRS. PayPal hits $10B in small business loans milestone. Lendy goes into administration. Klarna launches installment loan app for all retailers. New York overtakes London as financial hub of the world. Today’s main analysis: LendingClub’s advance shareholder meeting presentation (A MUST-READ). Today’s […]
Morningstar accelerates acquisition of DBRS. This is an interesting acquisition. Consolidation in the credit ratings business means fewer ways to analyze a potential investment. It will strengthen Morningstar’s reputation and analysis technology, but investors will lose in the long run since analysis information will come from fewer quarters.
Online lending startup Social Finance, better known as SoFi, took another tack this morning, quietly announcing in a press release that it has closed half a billion dollars in a single funding round led by Qatar Investment Authority, a Doha, Qatar-based private equity and sovereign wealth fund.
The company said it will use the capital to invest in growth and add some muscle to its $2.3 billion balance sheet. The company’s valuation will stay about the same as with the last funding round two years ago, which was led by Silver Lake.
Social Finance Inc., a financial technology startup, is close to signing a deal that would put its name on a new NFL stadium under construction in Inglewood, California, according to two people familiar with the matter.
The deal for the stadium, which would be home to the Los Angeles Rams and Chargers, hasn’t been signed so figures could change. But currently the agreement would have SoFi pay $20 million a year for 20 years, these people added.
Morningstar, Inc. today announced it has entered into a definitive agreement to acquire DBRS, the world’s fourth-largest credit ratings agency, for a purchase price of $669 million. The combination of DBRS with Morningstar Credit Ratings’ U.S. business will expand global asset class coverage and provide an enhanced platform for providing investors with leading fixed-income analysis and research.
The small business lending market is booming and it’s not the traditional banks that are benefiting. Fintechs are leading the way. Case in point: PayPal. It hit a milestone, announcing it has provided more than $10 billion in loans to more than 225,000 small businesses around the globe.
The $10 billion mark comes a little more than five years after PayPal made its first loan. Today it has issued more than 650,000 loans through financing programs in the U.S., UK, Australia, Germany, and Mexico.
First, a quick summary of headlines. The Fed agreed to keep interest rates on hold for longer according to the minutes of the April meeting. The decision is expected to help inflation pick up towards the Fed’s 2% target. The Fed’s latest ‘dot plot’, shown below, indicates Fed governors on the margin expect lower rates in the 2019 to 2021 timeframe suggesting lower growth expectations.
“…what we see is right now the fundamentals of the economy in the U.S. on a global basis and the fundamentals of consumers and unemployment being low as you mentioned, means that credit is in good shape and we just don’t see that changing a lot.”
Small business clients are increasingly looking to alternative lenders for financing. There are numerous draws for SMB clients: a fast and easy application process, quick funding, and a higher chance of being approved for a loan.
According to the Federal Reserve’s Small Business Credit Survey, the main reason clients applied for funding from an online lender was the speed of decision / funding (63 percent) followed by a better chance of being funded (61 percent).
The number of small business owners who turn to alternative lenders for funding has increased steadily since 2016.
RedWeek.com, the largest online community for timeshare rentals and resales, announced a new partnership with Affirm that will give travelers the flexibility to pay for their vacation rentals in simple, monthly installments.
Travelers can check eligibility for a loan online before booking their next trip and, after entering five simple pieces of information, receive a real-time decision without impacting their credit scores.
Once upon a time, if you wanted to borrow money for your business you had to make a trip down to your local bank branch or credit union to see if you could qualify for funding. However, a new generation of business lenders has since emerged to offer business owners an alternative way to secure capital.
2. Invoice Financing
Is your business structured in a way so that it gets paid after delivering services or goods to customers? If so, invoice financing is an alternative lending option that might work for you.
Microloans are issued through non-profit organizations aptly named microlenders. Although the maximum loan size is generally $50,000, the average microloan issued to a small business or startup is a much smaller $6,000.
CoreLogic today launched the new CoreLogic Teletrack platform, offering lenders and credit issuers superior access and greater insight into alternative credit data through one of the industry’s largest alternative credit databases. The new platform and solution combine upgraded services, data, products and an analytics engine to help users discover new market segments, make smarter risk decisions and grow their business throughout the credit lifecycle.
Intuitsaid Tuesday it had agreed to buy analytics company Origami Logic, effectively doubling down on the use of customer data to enhance its marketing.
The company can cross-sell its own products as well as products and services from third parties — like a Capital One Platinum Credit Card or a loan from Lending Club — based on what it knows about you.
US online banking platform Azlo and online small business lender announced the launch of Mission Street Capital, a new program that provides small businesses banking with Azlo access to loans through Kabbage up to $250,000.
Not many know this discount bulk retail giant also provides a loan marketplace to shop for the best mortgage rate. While open to all, Costco members can access discounts on lending services. Loan options include home equity, fixed and adjustable rate, FHA, VA, USDA, and jumbo. Note, this lender’s services are strictly digital so you will not be able to meet up with someone face-to-face.
Though P2P lendings are not low investment choices; with Fast invest, it is possible. You can start investing here with just 1 pound to accelerate cash flow. The website allows investors to deposit amounts and based on that suggests loans. After you choose the loan pack as an investor, the site assigns borrowers. Once the borrower takes the loan from you, the site starts increasing your invested amount with the applied interest rate of up to 14% till the payback period. It also comes with buyback guarantee if the borrower fails to return your loan in the payback period.
Real estate crowdfunding sites provide you the opportunity to invest in third-party properties. Fundrise is the best crowdfunding platform to go for that lets you start investing with only $500. With a year’s saving, you can start investing in this crowdfunding site and gain 8.7 to 12.4% annual returns based on your deposited amount.
BFS Capital today announced the appointment of Fred Kauber as Chief Technology Officer and Chief Product Officer. As a member of the management team reporting to CEO Mark Ruddock, Kauber will be responsible for leading a customer-focused product and technology organization whose mission is to help BFS re-imagine financial services for small businesses.
Damian Webb, Phillip Sykes and Mark Wilson of RSM Restructuring Advisory have been appointed as joint administrators of three companies within the Lendy Group: Lendy Limited, Saving Stream Security Holdings Limited and Lendy Provision Reserve Limited.
BondMason, an online savings and investments platform that sources investments from across the peer-to-peer (P2P) market for its clients, has reportedly announced it is officially shutting down its P2P lending business.
Peter Briffett, CEO of U.K. FinTech Wagestream, told PYMNTS in a recent interview that the cash flow constraints of having to wait for a single day to receive wages every month can be dangerous to the financial wellness of professionals. A single, expensive incident can force these professionals into debt via bank overdrafts or credit cards — or worse, Briffett said, into the payday loan cycle.
The company recently announced a $51 million funding round for its solution — led by Balderton Capital and Northzone, which provided equity, and Shawbrook, which provided debt.
And that is where microfinance is moving – to an era where individuals and businesses can get financial services from other individuals and business entities. Technology is providing tools for matching borrowers and lenders. And even more important – the tools for creating contracts that execute accordingly.
Announced Tuesday, the Klarna app presents the retailer’s site with a footer containing a Pay with Klarna button. When selecting that option, the shopper can pay for purchases in four equal installments with no interest or fees. The app is open to any merchant, not just those already affiliated with Klarna, the company says. These could include retailers without an alternative-payment option or that use a competitor’s program.
Stabelo’s model is to pool capital from institutional investors in exchange for fixed-income securities and uses the money raised to lend mortgages directly to homebuyers. The firm offers mortgages in conjunction with Avanza Bank, which is the biggest online lender in Sweden, and owns just under 20% of Stabelo.
A survey by consultancy and advisory firm Duff & Phelps, involving 180 executives in asset management, private equity, hedge funds, banking and brokerage, found that confidence in the UK capital has plummetted in the last year.
Just 36 percent ranked London as the foremost global financial hub— a year-on-year drop of 17 percent. With New York rising 10 percent, ranked by more than half (52 percent) as the world’s new financial powerhouse, the two cities have “switched places”.
Major crypto exchange Binance has partnered with decentralized crypto lending platform Cred to bring its services to the Binance ecosystem, according to a press release publishedon May 29.
As part of the agreement, Cred will migrate some of its ERC-20 LBA tokens to Binance’s mainnet, Binance Chain, and become the official lending and borrowing platform for the decentralized financial ecosystem.
Cryptocurrency asset management company BlockFi announced that its interest-bearing accounts now support the gemini dollar (GUSD) in a post published on May 29.
Per the announcement, GUSD deposits will see a yearly yield of 6.2%, paid in the stablecoinin question. BlockFi notes that it also offers GUSD as a U.S. dollar funding option and as collateral from institutional cryptocurrency borrowers.
Brazil has more fintech start-ups than any other Latin American country, and most of them are consolidated in the country’s financial centre, São Paulo.
One country poised to see an explosion of opportunities after Brexit is Lithuania. In February of this year, the country saw around 100 British financial companies apply for a licence in the country.
Estonia has one of the highest rates of start-ups per capita in Europe. According to Startup Genome, 29 percent of all jobs created by these start-ups are within the country’s fintech industry.
Home to the European Central Bank and more than 200 banks – most of which are foreign – Frankfurt plays an important role in the EU’s financial system.
Bengaluru (previously Bangalore) is anticipated to become one of the next big tech hubs. One of Asia’s fastest growing start-up ecosystems, the city is home to 438 fintech start-ups and has been dubbed the ‘Silicon Valley of India’.
Apolitical, a peer-to-peer lending platform for governments, unveiled its list of the world’s 100 most influential individuals on gender equality on Wednesday. It recognized politicians, activists and academics, among others, who were shaping gender policy in 2019.
According to Adrienne Church, General Manager at small business lender Prospa, venturing into an unfamiliar type of lending may be worrying – but it is also necessary as the lending market expands, and the property market remains as unpredictable as it inevitably always is.
Agritech startup TaniGroup, which operates agriculture e-commerce TaniHub and peer-to-peer lending provider TaniFund, today announced it raised a US$10 million Series A round of financing led by Openspace Ventures with participation from Intudo Ventures, Golden Gate Ventures, and The DFS Lab.
In February of this year, the Indonesian Financial Services Authority (Otoritas Jasa Keuangan or “OJK”) issued an updated checklist for peer-to-peer lending (“P2P lending”) platform providers (“Checklist”) registering with the OJK or applying to the body for a business license or change of ownership. The new Checklist introduces several changes to the previous checklist issued in October 2018. We highlight the key material changes and new requirements introduced by the Checklist.
Qatar Investment Authority has led an investment of more than $500 million in SoFi, a mobile-first personal finance firm. The investment values the company at $4.3 billion on a pre-money basis, according to a release from the fund.
We all know that Kenya revolutionized mobile payments for the developing world and brands like M-Pesa continue to lead the market, but what about mobile lending? According to Creditinfo Kenya, 93 percent of all mobile loans originate from regulated financial institutions, and there are around five million borrowers and each has an average of 5.89 loans.
Home Capital is a specialty finance company that primarily deals in mortgages. The company typically deals with borrowers who don’t meet normal bank requirements. It offers traditional mortgages and consumer lending as well as securitizing insured mortgages and offering home equity lines of credit.
News Comments Today’s main news: SoFi to roll out crypto trading with Coinbase. Walmart now offers Affirm loans. Funding Circle fund ups the ante on buyback strategy. Orca launches IFISA. LendDenClub cross 1 million borrowers, lenders milestone. Today’s main analysis: 2019 securitization update. How marketplace lending is a growing and dynamic global market. (A MUST-READ) Today’s thought-provoking articles: The 2009 […]
SoFi to offer crypto trading through Coinbase partnership. This is the most interesting news story of the week. The largest cryptocurrency exchange partnering with one of the largest marketplace lenders to offer cryptocurrency trading will be a huge feather in the cap for both companies.
Walmart now offers Affirm loans. We saw this one coming. In fact, I wonder why it took so long. Affirm snagging Walmart as a customer will catapult it to PayPal status fast.
Why a small bank launched a separate digital-only branch. I think we’re going to see more of this. As more consumers demand digital banking, and Millennials are all over it, more brick-and-mortar banks will see the opportunity to launch digital-only branches as separate entities. It’s actually a smart move.
Fintech startup SoFi — known for its online lending services — is partnering with major United States-based crypto exchange Coinbase to roll out crypto trading support, according to a CNBC report Feb. 26.
The race to zero-fee exchange-traded funds has found an unlikely competitor: Online lending and personal finance platform SoFi, which has filed for two index ETFs that will waive management fees for the first year. In making the move to zero-fee ETFs, the online lender is crashing an ETF party dominated by Vanguard and BlackRock‘s iShares.
The new company founded by Mike Cagney, the former embattled chief executive of Social Finance, plans to announce a $65 million funding round on Wednesday, bolstering firm’s expansion into other financial services, including wealth management.
With the new venture, Cagney is using some of the strategies from his tenure at SoFi — like diversification into areas typically only occupied by traditional banks. However, the new company, Figure, is focusing on different customers, and it’s taking steps to avoid scandals similar to the ones that saw Cagney step down from the SoFi helm.
Walmart will offer its customers point-of-sale loans for the first time — both on its website and in nearly 4,000 U.S. stores — under a partnership with the Silicon Valley lender Affirm.
Under the deal, Walmart shoppers will be able to get Affirm loans of three, six or 12 months to finance purchases ranging from $150 to $2,000. The loans are already being offered in Walmart stores, and they will be available to Walmart’s online shoppers in the coming weeks.
The companies announced this morning that Affirm’s financing options would be made available in more than 4,000 Walmart Supercenters across the U.S., and will roll out to Walmart.com in the weeks ahead.
The offering will go live across Walmart Supercenters nationwide, except in Iowa, West Virginia and Puerto Rico, and will be soon available on Walmart.com.
In regulatory news, Square’s ILC charter application has received opposition from 37 community groups. The groups are concerned about Square’s CRA activities and have asked the FDIC to bolster Square’s CRA requirements. Before this letter from community advocates, nearly all of the 15 letters the FDIC received were in favor of Square’s bid. Square is the furthest along the path to getting an ILC charter and its experience will determine whether other FinTechs follow its lead.
Structured Credit Investor magazine explores the challenges facing the maturing marketplace lending sector. Issuers need to distinguish between the borrower experience that they provide and manage liquidity. The article also makes the point that the sector is ripe for consolidation, although we haven’t seen any M&A yet.
2019 Securitization Update
The first two months of 2019 saw 5 securitization deals totaling $1.7 Bn in new issuance. The issuance volume represents a 23% drop over that seen in the first two months of 2018, as the market recovers from the volatility in equity and credit markets seen at the end of 2018. Total securitization issuance now stands at $46.2 Bn, with 147 deals issued to date.
When the real estate bubble burst in late 2008, many Americans saw their home values fall drastically, but a lot has changed in the 10 years since — housing prices have rebounded from their lows during the Great Recession. And though prices are now starting to cool, in many cases, home values have even exceeded their 2006 highs.
On average, median home values have increased by nearly $50,000 across the 50 largest metros in the United States since 2009.
Metros where housing prices have recovered the most since 2009
San Jose, Calif.
Median home value 2009: $638,300
Median home value 2017: $957,700
Median home value change: $319,400
Median unemployment rate change: -6.4%
Median household income change: $32,991
Median home value 2009: $591,600
Median home value 2017: $849,500
Median home value change: $257,900
Median unemployment rate change: -5.4%
Median household income change: $27,889
Median home value 2009: $463,600
Median home value 2017: $617,100
Median home value change: $153,500
Median unemployment rate change: -5.0%
Median household income change: $11,467
According to the loan comparison website, the median balance of Gen Xers who have auto loans is $18,741 is higher than other age groups. It is 9% more than baby boomers’ $17,185 median balance. This is higher than millennials’ $16,200 and 37 percent more than the lowest median balance of $13,666 held by Gen Z.
Personal loan interest rates, whether you’re considering a loan from a bank, credit union or online lender, generally range from about 6% to 36%. The actual rate you receive depends on factors such as your credit score and history, annual income, existing debt and where you get the loan.
Online lenders offer the lowest starting interest rates on personal loans to borrowers with good to excellent credit.
LightStream and Marcus both require a minimum credit score of 660. LightStream accepts joint applications, and one applicant can have a credit score lower than its minimum. SoFi has a slightly higher credit score requirement and requires at least $45,000 in annual income.
Elevate Credit (NYSE:ELVT) announced its quarterly earnings results on Monday, February 11th. The company reported $0.09 earnings per share (EPS) for the quarter, meeting the Zacks’ consensus estimate of $0.09, Bloomberg Earnings reports. The business had revenue of $207.29 million for the quarter, compared to the consensus estimate of $212.42 million. Elevate Credit had a return on equity of 15.72% and a net margin of 1.59%. Elevate Credit updated its FY 2019 guidance to $0.55-0.65 EPS.
Hunt Real Estate Capital, which offers financing for all types of commercial real estate, will soon have a new underwriting system to help it originate those loans, as the company is buying a proprietary loan underwriting system from RealtyMogul.
Elevate Credit, Inc. (“Elevate”) today announced that Executive Vice President and Chief Information Officer Joan Kuehl has been named the Large Enterprise CIO of the Year by the Dallas ORBIE CIO of the Year Awards. The award honors chief information officers who have demonstrated excellence in technology leadership.
The world is bracing for a recession, with the latest data showing in the U.S. expect it to occur by the end of 2021
If those predictions prove true, it will be the first major economic downturn for some of the nation’s leading fintechs. Born out of the ruins of the recession, these startups have enjoyed nearly a decade of success buoyed by strong economic growth, a bull run in the stock market and low unemployment.
Kabbage has been named to the list for five consecutive years and this is its first year in the top five. The private financial technology company, founded in 2009, has 489 global employes and 367 at its U.S. headquarters in Atlanta. Flexibility at work and perks, such as a daily catered lunch and snacks, are among reasons employees appreciate working for Kabbage. Wellness benefits include fitness classes, health equipment onsite, biweekly meditation classes, CPR training, an annual flu shot clinic and sponsoring sports clubs. It also fully pays health benefits for individuals and provides annual bonuses and a 401(k) match. Through its sabbatical program, employees of five years can receive six weeks of paid time off and an additional $6,000. In 2018, Kabbage participated in the Atlanta PRIDE parade and also took a stand against gun violence after the mass shooting at Stoneman Douglas High School. Workers in 2019 will build a Habitat for Humanity home as part of its Kabbage Kares program, which also has supported PAWS Atlanta, Easter Seals and the Epilepsy Foundation.
CrowdStreet, an online marketplace for direct equity investment in commercial real estate (CRE), today launched a streamlined, investor-friendly approach to investing qualified retirement account funds into commercial real estate offerings. This new option makes it easier than ever for individuals to access CRE investments with their self-directed IRAs (SDIRA), thus reducing their investment exposure to a volatile stock market and achieving more independence in managing their investments.
Liquid P2P and Interest Radar are pleased to announce that they have entered into a strategic partnership. The two third-party investing services for online peer-lending giant Lending Club will combine strengths under a single platform to deliver a more comprehensive automated tool with a patent-pending liquidity solution.
Earlier this month Brendan Ross, the CEO of Direct Lending Investments, Inc., sent a letter to investors notifying them that they have suspended withdrawals and redemptions effective February 8, 2019. Lend Academy was able to obtain a copy of this investor letter, dated February 11, that provides some color into what happened. The reason given was the delinquency of a large holding, VOIP Guardian, a telecom receivables factoring company.
Add HSBC to the list of banks partnering with commercial online lenders.
The bank on Tuesday announced a partnership with Neptune Financial, a San Francisco online lender that focuses on businesses with $10 million to $100 million in assets. The bank estimates that, with the access it will get to Neptune customers, the deal represents a $1.5 trillion opportunity.
Venmo, the PayPal-owned peer-to-peer (P2P) giant, debuted a limited-edition rainbow-colored version of its physical card product. The card will function the same as regular Venmo cards, allowing customers to pay wherever Mastercard is accepted, split costs and tips, withdraw funds from select ATMs, and manage their Venmo balance, but it will only be available for as long as supplies last, according to Venmo.
The pace with which we are moving toward the internet of things is “very rapid” but we “can’t have the internet of everyone without the inclusion of everyone,” according to the vice chairman of payments giant Mastercard.
“You have to start focusing on how does the human get involved, and that’s going to be through having a digital identity,” Ann Cairns told CNBC’s Karen Tso on Monday at the Mobile World Congress in Barcelona.
Today’s marketer on the hot seat is Dana Marineau, Credit Karma’s vice president of brand, creative and communications. People love Credit Karma for its free credit scores, but the company provides so many other free tools. Dana’s team is tasked with elevating the brand beyond just free credit scores, as a place to get help with financial decisions and achieve financial progress. She brings a 15 year experience at EA, working on many of the top sports games in the business.
When Midwest BankCentre, a community bank in St. Louis, launched the digital-first Rising Bank in February, it joined the ranks of other financial companies —generally large players such as JPMorgan Chase, Wells Fargo and MUFG Union Bank — that have created separate, digital-only brands. Unlike them, the $1.9 billion-asset Midwest hopes to keep a community bank feel at the internet-only unit.
Brex, a San Francisco credit card startup that reached a valuation of $1.1 billion late last year, 22 months after its founding, is launching its second product, a physical credit card for e-commerce companies. Its first card, targeted to venture-backed tech startups, has attracted more than 3,000 customers by providing higher spending limits and simplifying the application process.
YieldStreet — which provides a platform for making alternative investments in areas like real estate, marine/shipping, legal finance, commercial loans and other opportunities that in the past were only open to institutional investors — is today announcing that it has raised $62 million in a Series B round of funding.
For the seventh consecutive year, Guaranteed Rate has the most loan originators of any lender on Mortgage Executive Magazine’s annual list of the “Top 200 Mortgage Originators in America,” including the number one originator.
Guaranteed Rate led the way with 36 originators ranking within Mortgage Executive Magazine’s Top 200, including three of the top five. Shant Banosian of Boston, Mass., was named the nation’s 2018 Top Originator by funding $536 Million in total loan volume.
The U.S. Office of the Comptroller of the Currency has asked a Manhattan federal court to dismiss a lawsuit by a New York financial regulator over its plan to issue banking charters to fintech companies, saying the lawsuit is premature.
Blockchain’s usage is no longer limited to digital crypto currencies, as blockchain databases may be deployed in innumerable circumstances and scenarios, including, for instance, within the financial services and insurance sectors for money transfer, peer-to-peer lending and transfer of securities, as well as automatic execution of contracts.
LoanStreet positions for growth with new hires (LoanStreet Email), Rated: B
After the launch of LoanStreet’s commercial lending product and the announcement of their $6.5 million funding round, LoanStreet – the first fully-integrated platform that streamlines the process of sharing, managing, and originating loans – has appointed three credit union industry veterans to support LoanStreet’s aggressive growth.
These new hires include Mike Doherty, Managing Director and Head of Credit Union Sales; Tony Harter, Business Development Director; and Joe Parvin, Business Development Director.
White Oak Business Capital, Inc. (“WOBC”), an affiliate of White Oak Global Advisors, LLC, has announced that Carol Apicella has joined the firm as Senior Vice President and Senior Business Development Officer. Apicella will be responsible for expanding the firm’s markets in the Northeast and Mid-Atlantic.
The portfolio, an investment trust, of loans originated by Funding Circle lowered its dividend expectations amid lower projected returns last year prompting a discount to its net asset value.
Following a move to a more than 10 per cent discount last year it started share buybacks in a bid to narrow its discount. It has now made additional capital available from its free cash flow to be deployed into share buybacks, the fund said yesterday.
Orca Money is finally launching its long-anticipated Innovative Finance ISA (IFISA). Orca’s spin on the savings vehicle allows investors to spread their money across multiple peer-to-peer lenders (P2P) thus providing a heightened degree of diversification. Additionally, Orca Money conducts due diligence on behalf of IFISA investors.
Currently, the Orca IFISA allows access to 5 P2P platforms: Lending Works, Assetz Capital, Landbay, Octopus Choice and Lending Crowd.
Experian Plc, the world’s biggest credit data firm, said on Wednesday that it had agreed with rival ClearScore to abandon their proposed merger, after Britain’s competition watchdog indicated that it may block the deal.
It has been over a year since the Open Banking UK initiative under the Competition and Markets Authority order and Second Payment Services Directive (PSD2) was launched and has become one of the industry’s biggest technology and regulatory shake ups in recent years. It is no surprise that the initiative’s first year has seen a relatively low consumer uptake. This has been coupled with reports that consumers’ knowledge of the scheme appears to be markedly low.
In an attempt to bring crypto closer to the mainstream, the London-based fintech startup has announced the launch of Aave Pay.
The app will allow its users to pay their utility bills using digital coins by converting crypto into fiat in real-time using bank transfer facility. The company is claiming that the platform can be used to business expenses as well including employee salaries, income taxes, and other commercial or corporate expenses.
It may not feel like it, but some corners of banking are suffering as badly as they did during the depths of the financial crisis. Global volumes of initial public offerings and share placings in January and February have been nearly 60 percent lower than in the same period last year. The numbers are worse than the first two months of 2009. If activity doesn’t pick up soon, it would be worrying evidence of the fragility of investor sentiment.
The hope is that the lull is temporary, and technical. The government shutdown in Washington has gummed up U.S. IPOs. Uncertainty over the U.K.’s future relationship with Europe just drags on. And the December stock-market wobble probably killed off deals that were being planned for the window that traditionally opens between January and the start of the full-year earnings season in late February.
Marketplace Lending – A Growing and Dynamic Global Market (DBRS Email), Rated: AAA
I wanted to share with you a new joint report from our U.S. and European structured finance teams. The new report, attached to this email, analyzes the growth of the marketplace lending market around the globe.
The commentary includes the following topics:
— The evolution in finance, from traditional banking to FinTech.
— FinTech’s influence on marketplace lending around the globe.
— Growth hurdles.
— Securitization considerations.
That’s the case for a large part of the world’s population who can’t get access to a loan from a traditional credit provider — like a bank — creating a world in which the hardest working people don’t always get access to the credit they need. Enova, however, believes it has a solution. The fintech company draws on the power of machine learning and data to offer products that expand access to credit for consumers and small businesses.
Earn Bitcoins as the interest payments: If you have earned some Bitcoins already, you can put the Bitcoins to earn for you. Lend them out at particular interest rate. You can lend the Bitcoins directly to someone known at a greed interest rate and repayment period. You need to assess trustworthiness of borrower. Peer to peer Bitcoin lending is another way to let the earned Bitcoins earn for you. There are many peer-to-peer lending websites where the borrowers post the borrowing requests. Over these websites, you can act as a lender. It is also possible to fund the small portion of numbers of loans to reduce the risk.
One of the largest providers of peer-to-peer loans in the State has shut down a key part of its business aimed at smaller investors, blaming an absence of regulation in the crowdfunding space.
Grid Finance, which is backed by Enterprise Ireland, wrote to holders of its “Brick” accounts – that facilitate the investment of up to €100,000 – in recent days stating that it would withdraw the offering from the marketplace.
In recent years as China winds down its industrial and manufacturing powerhouse growth, it’s looking to other developed nations to determine which platforms it should invest in and pave the way to sustained economic growth. As most other major developed nations have done over the past century, financial services and engineering have been a very profitable platform and companies in China are quick to launch their own services to capitalize on the triple-digit growth in online financial services exhibited since 2003.
Similar to Hexindai (HX), which I’ve previously covered as a leading online lender which is capitalizing on the middle class appetite for debt to finance their lives and vacations, Dragon Victory International Limited (LYL) is taking on the crowdfunding segment in the People’s Republic of China. Similar to countless other platforms around the world, the company’s services are around financing new companies and capitalizing entrepreneurs through public funding and they already have over 4.5M users who use their services, a number nearly doubling each year.
More companies will die: As of February 17, only 60 percent of online lending institutions had disclosed their operational information for January 2019, including five problematic platforms.
However, the current asset quality of the online lending industry has improved significantly according the data from firms that did report.
As of the end of January 2019, the accumulated amount of the online P2P online loan industry was about 7.78 trillion yuan ($1.16 trillion). The total loan amount in January was 91.4 billion yuan ($13.61 billion), down 55.1 percent year-on-year and down 1.3 percent from the previous month.
Further consolidation of industry players is certain. Some experts quoted in media reports predict that the scale of future online loans will continue to shrink because of regulation.
Aoma Electric issued a letter of concern to the Shenzhen Stock Exchange on February 14, attributing the decision to the broader economic slowdown, and a high number of overdue loans.
Panda Gold Control in 2018 was also dragged down by its P2P business, and expects a net loss of 41.16 million ($6.13 million) to 57.63 million yuan ($8.58 million) in 2018. Faced with the uncertainty of the P2P sector, Panda Gold Control chose to divest.
Launched on Dec. 2, BHB claims to offer an ethereum-based solution for peer-to-peer lending, but by Jan. 18, local media reports were already accusing the project of operating an illegal pyramid scheme. Now, CoinDesk is able to reveal inconsistencies in the information provided about its founding team that further suggest something may be amiss at the China-based project.
However, the image of Bobby White used in BHB’s marketing materials is identical to that of an economics professor at China’s Tsinghua University named Alexander White. Meanwhile, the image of Gregory Moss is the same as one used by a philosophy professor at The Chinese University of Hong Kong, who is also named Gregory Moss.
Tencent-backed online brokerage firm Futu Securities has set the terms for its US initial public offering (IPO) to raise up to $130 million, which will value the company at more than $1 billion. The company previously set its target at as high as $300 million when it filed for the US listing in December.
Chinese tech behemoth, Tencent, owns over 38% of the company, has shown interest in purchasing up to 25% of the new shares issued.
LenDenClub, one of India’s fastest growing peer-to-peer (P2P) lending platforms, recently crossed an important landmark with more than 1,00,000 borrowers and lenders on its platform. The breakdown of borrowers to lenders is 83,300 and 16700, respectively. The company crossed this milestone by keeping up with latest market trends, and saw an increase in the use of its product InstaMoney, which was launched in June 2018.
Today, thanks to the ongoing digitization, borrowing has become as easy as it can get in India. For contrast, all it takes now is the touch of a few buttons, answers to a few verification-related questions, and anyone can receive a loan in a matter of hours or days, if not minutes. And all of this is without any collateral and while enjoying the comfort of your home. Now, compare this with taking a day off to go to the bank, doing extensive paperwork, visiting frequently to check the progress of your loan application, and ultimately, getting your application rejected because of the loan officer’s misjudgement. All while wasting two months of time in the constant to and fro and taking multiple days off from your office.
It is beyond doubt that the advent of fintech startups has altered the game of lending in India. It has become both simpler and convenient to borrow using their revolutionary approaches driven by state-of-the-art technologies. Currently, more than 1,500 fintech startups (of all shapes and sizes) are catering to the Indian market, and more than half of these startups have been launched over the last 3 years. This gives us a clear picture of how lucrative the sector is becoming for our startup ecosystem. But what is essentially fuelling this trend? Let’s find out.
The latest ordinance of the Banning of Unregulated Deposits (UDS) 2019, was passed by the government to provide a comprehensive mechanism to ban UDS as well as to protect the interest of depositors. This is in line with the Reserve Bank of India’s guidelines on the NBFC-P2P sector, issued in October 2017 to regulate the unorganized lending business in the country.
US$102.2m of the total funds raised went to lending fintech companies such as the homegrown Funding Societies.
Fintech investments in Singapore more than doubled to US$365m in 2018 from US$180m in 2017, putting the country amongst the top five fintech markets by funds raised last year in Asia Pacific, behind China, India, Australia and Japan, according to Accenture’s analysis of CB Insights data. The number of deals in the country rose to 71 from 61 in 2017, making it the third busiest market in the region, behind only China and India.
Online payment giant PayPal launched its Working Capital initiative in 2013 as an alternative method for business to access working capital much faster than through traditional means. Many small and medium-sized business (SMB) clients embraced the program and since then the company has advanced more than $6 billion in loans to over 170,000 businesses in the UK, US, Germany and Australia.
PayPal also recently revealed that it has partnered with Konfio, a Mexican online lender that utilizes unconventional data sources to facilitate fast credit assessments, in a deal that will allow PayPal to extend its Business loan and working capital programs to Mexican businesses.
ID Finance, the fintech company operating in Europe and Latin America, saw revenue of $49m in 2018. This represents growth of 236% for the business, which was formally separated from its operations in Russia and CIS region last year.
The company is enjoying particularly strong growth in Latam, one of the world’s fastest growing markets for fintech adoption thanks to high mobile penetration and a sizeable underbanked population – according to the World Bank 61% of Mexico’s population is excluded from the traditional banking system, while 40% of Brazil’s 207m population are blacklisted. The company now has 141 employees in Latam and saw revenue growth of 403% in the region last year.
With the potential for rapid growth and job creation, FinTech firms in Africa have caught the attention of global investors. According to the London Stock Exchange Group’s 2019 “Companies to Inspire Africa” report, which highlights these firms, the FinTech sector has the second highest growth rate representation of technology and telecoms as well as financial services. As it stands, companies in this space represent more than a quarter of 360 featured firms from 32 different countries. Pan-African payments firm Cellulant is among the companies that appeared in the first and second editions of the report.
News Comments Today’s main news: FDIC opens comments on Special Purpose National Bank charters. Plaid raises $250M. P2PFA member lending exceeds 10B GBP. ThinCats raise 200M GBP. Bondora originates almost 8M euro in loans in November. Klarna joins Shopify Plus Partner Program. Nubank launches debit card. Today’s main analysis: Trends in credit card debt. Today’s thought-provoking articles: Consumer credit market poised […]
FDIC seeks comments on fintech bank charters. The Trump Administration may have just opened the door wide for OCC bank charters. They want to encourage more bank startups, which is good if they are the right bank startups. More of the same won’t cut it.
Formation of new banks post-crisis is historically low. More banks have failed since 2009 than have new banks opened.This trend could leave some communities severely underbanked.
The FDIC wants to encourage new banks to startup and wants innovative FinTech firms to be part of that process. The agency wants to streamline its application process and is seeking comments on how that can be done.
The company is today announcing a $250 million Series C investment led by famed venture capitalist and the author of the Internet Trends reportMary Meeker, who will join its board of directors as part of the deal. The funds were raised at a valuation of $2.65 billion, according to sources close to the company. Capital from Meeker’s investment came from Kleiner Perkins’ growth fund — where Meeker has been a partner since 2010 — not from the reported billion-dollar-plus solo fund she’s in the process of raising.
New investors Andreessen Horowitz, Index Ventures, Norwest Venture Partners and Coatue Management also participated, as did existing investors Goldman Sachs, NEA and Spark Capital.
Low unemployment rates and continued positive growth in both GDP and real disposable income are among the key drivers that will propel the U.S. consumer credit market in 2019. Partly due to the strong performance of these economic indicators, TransUnion’s (NYSE: TRU) 2019 consumer credit forecast found that originations and consumer balances are expected to increase for most credit products, while serious delinquency rates will likely decline or remain steady.
A few outliers in the forecast come by way of serious credit card delinquency rates and originations as well as mortgage originations. Credit card delinquency rates are expected to rise from 1.94% in Q4 2018 to 2.04% in Q4 2019 as a shift toward more non-prime consumers with access to credit cards will likely negatively impact originations and consequently the serious delinquency rate.
TransUnion Forecast: Top Consumer Credit Trends for ‘19
Trend #1: There’s Room for Growth in Personal Loans
Personal loans continue to display signs of strength, and total balances are expected to climb 20% to an all-time high of 156.3 billion by the end of 2019.
Trend #2: Affordability May Impact the Auto Industry
It’s also worth noting that the number of auto loan originations is expected to end 2018 at 28.5 million and grow to 29.4 million in 2019. This is a significant increase from recent years (27.5 million in 2017, 28.3 million in 2016, 28.0 million in 2015). This growth is expected to be driven from both ends of the risk spectrum. Yet as the growth continues, the serious delinquency rate is anticipated to remain muted, ticking up to 1.44% in Q4 2019, an increase from the expected 1.43% in Q4 2018 and the 1.43% mark observed in Q4 2017.
Trend #3: Homes Becoming More Expensive, but Home Equity Increases Could Be a Boon to Consumers
Mortgage originations have declined the past several quarters, a trend that is expected to continue into 2019. Rising interest rates, increasing home prices, and supply constraints are driving lower origination numbers. Average balances will continue to trend upward in 2019, growing from an anticipated $208,831 at the end of Q4 of this year to $218,490 by the end of Q4 2019, a 4.6% increase.
Trend #4: More Near Prime Consumers will Carry a Credit Card
Near prime consumers are expected to increase their origination share to 19.1% in 2019, up from 18.3% in 2018.
Americans repaid $40.8 billion in credit card debt during Q1 2018 – the second-largest quarterly payoff ever. But we added almost $38 billion back to our tab in Q3 and Q2 2018. We also began the year owing more than $1 trillion in credit card debt for the first time ever, after adding $87.3 billion to our tab in 2017.
Single women own considerably more homes than single men do. On average, single women own around 22% of homes, while single men own less than 13% of homes.
Oklahoma City was the metropolitan area where single men own the largest share of owner-occupied homes, at 16%. Even though single men own a greater proportion of homes in Oklahoma City than they do elsewhere in the country, they still own fewer homes than single women, who own 24% of residential properties in the area.
New Orleans was the metropolitan area where single women own the largest share of owner-occupied homes. In this area, single women own nearly twice as many homes than single men do: 27% compared with 15%.
The OCC’s quarterly metrics report, released Tuesday, showed continued improvements in credit quality of mortgage loans at banks. But it also noted that the report is based on $3.26 trillion in principal balances, representing 32% of all mortgages in the U.S. Ten years ago, that figure was $6.1 trillion in mortgage balances, representing 60% of all outstanding mortgages.
Subprime personal loan balances have been climbing since 2014 and are forecast to increase 20% next year, to a record $156.3 billion, according to credit-scoring firm TransUnion. The last three months of this year will be the biggest quarter ever for origination, accounting for some 5 million loans.
San Francisco-based Affirm, founded by PayPal co-founder Max Levchin, is one of the leaders in point-of-sale loans and is available at more than 1,200 US retailers. The company says its lending process allows it to approve far more applicants across the credit spectrum than traditional lenders.
Payday lending has also increased. These days, this type of high-interest, short-term debt often takes place online through installment loans. San Francisco-based LendUp is an example of the new breed of payday lenders, charging annual percentage rates that can range from 30% to more than 1,300% depending on the type of loan, according to a report by NerdWallet.
Digital banking platform Good Money just raised $30 million in a Series A funding round to continue developing its app.
Led by Michael Novogratz’s Galaxy Digital (via its Galaxy EOS VC Fund), participants in the funding round included Breyer Capital, Blocktower Capital, Boost VC, Ken Howery, BlockChange Ventures, Cross Culture Capital, Troy Carter, Mitch Kapor, Peter Diamandis Blake Mycoskie and Justin Rosenstein, among others.
Personal safety is a real concern Americans have about the sharing economy, according to a new survey commissioned by insurance company Lloyd’s.
The sharing economy includes companies that use data and develop platforms to connect people, including ride-sharing services like Uber and Lyft, apartment and home lending sites like Airbnb and VRBO, as well as peer-to-peer lending, reselling, co-working, and freelancing sites, per Forbes.
The analysis showed that 60 percent of American consumers believe they are putting their personal safety at risk by using sharing services because it means interacting with strangers, and 58 percent think that the risks outweigh the benefits.
Admiral Realty Capital’s new private placement, Fund V, is engaged in providing financing to Puainako Heights Land Investment, the master-developer of a subdivision on the Big Island with over 330 single-family homesites. The offering is featured on the Boston-based crowdfunding platform Investors’ Harbour.
Different than most existing crowdfunding platforms, Investors’ Harbour does not feature an avalanche of small “fix-and-flip” projects handled by real estate enthusiasts. With a very low acceptance rate, Harbour only hosts larger-scale construction programs, conducted by commercial development firms with admirable track record.
Bloqboard – a non-custodial digital asset lending platform for collateralized loans originated, settled, serviced, and managed on the Ethereum network and powered by Dharma and Compound – has today announced the release of a new feature they call ‘Offers to Lend’. This provides lenders with the ability to offer prospective borrowers their cryptoassets for peer-to-peer loans issued on the Dharma protocol.
Blockchain enabled payments company Wyre today announced a partnership with bZx, the protocol that powers decentralized margin lending. bZx will incorporate Wyre’s KYC/AML solution for DEXs to offer compliant trading.
Digital business bank Tide has reached 56,000 SME customers, accounting for one per cent the UK’s 5.6m SMEs. The bank has more than doubled the number of customers using its services in the last 12 months.
OakNorth – the bank for entrepreneurs, by entrepreneurs – has today announced that it will be expanding its lending operations to Manchester to deal with increasing demand for its loans across the North of England.
Founded in 2015 with £1m in funding, Onedox helps people manage household bills and expenses by allowing them to connect their different accounts including gas, electric, internet, mobile, and insurance. The service – which is free of charge – allows users to stay on top of their bills while receiving personalized recommendations for saving money by switching to new providers.
China Lending Corporation has announced the launch of its new supply chain financing services, which include a business factoring program.
In addition, China Lending has acquired 98.04 percent equity interest in Hangzhou Zeshi Investment Partners, which will enable China Lending to launch its new supply chain financing services in the near future, including financing products design, related corporate financing solutions, investments and asset management, and more.
China’s financial technology, or fintech, sector, has suffered this year due to a slowing economy and stricter financial regulation. In the peer to peer lending sector, hundreds of firms have shut down due to inability to comply with regulations or insolvency. So, what can we expect from this industry in the near future?
The company offers the highest loan-to-value ratio in the entire industry – up to 80%. And, unlike its competitors, it accepts five of the top cryptocurrencies as collateral, including Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and Ripple. Short-term loans are available at a low interest rate of just 2.5%.
THE ability for small businesses in Northern Ireland to access alternative forms of finance has become a vital factor in their successful growth, the head of a Belfast accountancy firm insists.
Since the financial crash and credit crunch, the funding void left by traditional lenders has been filled by boutique funders and alternative finance, which can allow SMEs to access finance for a variety of different needs, from long term investment through to funding for short term working capital.
Klarna announced today that they are among the first payment service providers to join the Shopify Plus Technology Partner Program, focusing on high-growth and high-volume merchants. This integration will allow merchants in Germany, the UK and the US to easily implement Klarna’s smoooth payment suite and offer a superior customer experience and thereby unlock additional growth potential.
In a press release on Tuesday (Dec. 11), Cred revealed the rollout of its developer platform CredX (not to be confused with the new credit card accounts payable solution recently launched by Finexio). The Crypto-Lending-as-a-Service (CLaaS) solution enables other crypto companies — including exchanges, crypto wallets or mining services — to integrate Cred’s lending functionality into their own solutions. Its set of application program interfaces (APIs) enable businesses to use crypto as collateral to access corporate financing products.
Communication and Informatics (Kominfo) Minister Rudiantara said the ministry had shut down 400 financial technologies (fintech), consisted of sites and applications, related to fraud cases on online loan services that are recently rampant in Indonesia.
The Indonesian Fintech Joint Funding Association (AFPI) asked the Jakarta Legal Aid Institute (LBH) to open the identities of 25 peer to peer (P2P) lending organizers or registered online loan services that are said to have made violation.
South Korean fintech Toss has raised an $80 million funding round led by US-based firms Kleiner Perkins and Ribbit Capital, with participation from Altos Ventures, Bessemer Venture Partners, PayPal, and Qualcomm Ventures, among others. This brings Toss’ valuation to $1.2 billion, making it the latest fintech unicorn globally, and Korea’s first.
Toss started out offering peer-to-peer (P2P) payments, but has since added other services —including insurance, investments, savings accounts, credit score management, and a financial dashboard that allows users to see all of their finances in one place — by partnering with third parties. Toss already has 10 million registered users, meaning it reaches around 20% of Korea’s population with its services.
“A lot of the traditional models are not applicable to onboard those people into financial systems,” says Sarah Zhang, co-founder of Singapore-based Points.
That’s where Points – also called PTS – picks up the slack. Founded last year, the blockchain-powered startup uses AI and big data to assess factors like an individual’s occupation, bill payments, and shopping activities to calculate a credit score.
Brazilian fintech Nubank has launched a debit function for its card offering as well as the ability to withdraw cash from ATMs, in a move that aims to extend its reach to as many as 120 million customers.
The startup created in 2013 and valued at over $4 billion
According to Javelin Strategy & Research, account takeover fraud increased by two million new fraud victims from 2015 to 2016. That represents a 16 percent jump in new fraud cases of that kind in just one year. The problem isn’t getting better. As the alternative lending landscape grows with increased technological advancements, and the number […]
According to Javelin Strategy & Research, account takeover fraud increased by two million new fraud victims from 2015 to 2016. That represents a 16 percent jump in new fraud cases of that kind in just one year. The problem isn’t getting better.
As the alternative lending landscape grows with increased technological advancements, and the number of lenders using alternative credit data and alternative lending practices increases, so too do the number of attempted frauds. Experian’s Clarity Services is an alternative credit data provider with solutions designed to decrease default rates and flag potential fraud before it happens.
Three Distinct Types of Lending Fraud
Online lending fraud can take on any number of different characteristics, many of them quite sophisticated. But there are three general categories of lending fraud that online lenders should concern themselves with.
First-party fraud is when borrowers use some sort of deception to trick a lender into believing they are a good credit risk and get away with money they do not intend to pay back.
Second-party fraud is a type of lending fraud in which the fraudster is a friend or trusted acquaintance of the party whose name is on the application.
Third-party fraud, often called “identity theft” or “identity fraud” is when someone submits a fraudulent loan application in someone else’s name pretending to be that person. However, unlike second-party fraud, the perpetrator is unknown to the victim and probably acquired the victim’s identity illegally or in underhanded ways.
Each type of fraud presents its particular challenges and should be fought in different ways. This article will focus on first- and third-party fraud.
The Threat of First-Party Lending Fraud
First-party fraudsters are difficult to detect because they apply for loans under their own names. In many cases, the clues that they do not intend to pay back a loan are very subtle and easy to miss.
One popular type of first-party fraud is loan stacking. This is when the applicant submits multiple credit applications at different lenders on the same day hoping to be approved for several unsecured loans. They then accept the various loan offers available to them, take the cash, and never intend to pay it back. For online lenders, where credit standards are often lower than at banks and loans are approved much more quickly, it has become a real problem. Javelin Strategy & Research claims it costs lenders $340 million in annual losses.
The good news about first-party fraud is that it can be detected using powerful predictive tools, which allow online lenders easy and quick alerts to inconsistencies, fabrications, and misrepresentations in loan applications.
The Varieties of Third-Party Lending Fraud
Third-party fraud is a little more subtle. In this case, another party is applying for a loan pretending to be someone else. They’re actually using real-life facts about the victim in order to deceive the lender into giving them money. It is really difficult to detect when fraud rings get their hands on stolen identity information that allows them to apply for multiple lines of credit at several lending institutions. Again, alternative finance lenders are often easy targets.
Here are six types of third-party lending scams often perpetrated against alternative lenders:
Identity theft – Identity theft takes place when personal financial information is obtained illegally for the purpose of assuming that person’s identity. Information can be acquired in a number of ways including dumpster diving and sifting through trash bins looking for credit card bills and other account documents, hacking into databases or mobile phone apps where personal identity information is stored, or buying it on the black market.
Account takeover fraud – An individual or fraud ring gains access to digital data, usually by hacking or phishing. Then they use credit information such as credit card numbers, bank accounts, etc. to access the victim’s money in those accounts.
Information fabrication – This type of fraud relies on falsifying information about a party in such a way that it is believable. For instance, falsified pay stubs for a fictional job are often used to prove current employment.
Synthetic identity fraud – This type of identity fraud now accounts for 85 percent of all identity fraud in the U.S. Fraudsters combine real identity information with falsified information about a supposed credit applicant in order to defraud the lender.
Credit piggybacking – This sophisticated scheme involves a fraudster being added as an authorized user on a credit account in good standing in order to instantly increase the fraudster’s credit score and thus, the likelihood of a loan approval.
Loan stacking – As mentioned previously, loan stacking occurs when an individual applies for multiple loans from different lenders. Third parties can wreak havoc on a victim’s credit file and get away with a lot of cash using this fraudulent scheme.
Fraud can be quite sophisticated, targeting alternative lenders and, in many cases, the most unlikely victims. For instance, a loan stacking ring could obtain the credit information of subprime individuals, use credit piggybacking to boost their credit scores, and add some synthetic identity elements to bamboozle a small lender into approving someone who otherwise would never be approved for credit. Often, they get away with such schemes due to lack of detection and fraud prediction tools.
How to Catch a Fraudster
Experian’s Clarity Services has designed solutions specifically to detect fraud before it happens using predictive variables to look at over 250 fraud-specific attributes. Clear Fraud Insight is designed to lower alternative lender default rates and detect potential fraud before a loan is approved. Some preliminary results have shown a 60 percent increase in acceptances while defaults remained constant, and alternatively, an 11 percent reduction in defaults as acceptance rate remained unchanged.
Different lenders should expect different results. Nevertheless, isn’t it time to upgrade your risk assessment tools?
According to data from Experian’s Clarity Services, online consumer lending has grown over 350 percent from 2013 to 2017. Funded single-pay volume rose 72 percent while installment loan volume went up nearly 500 percent. The single-pay loan volume actually shot up 106 percent through 2016 but fell slightly the following year. Still, these numbers indicate […]
According to data from Experian’s Clarity Services, online consumer lending has grown over 350 percent from 2013 to 2017. Funded single-pay volume rose 72 percent while installment loan volume went up nearly 500 percent. The single-pay loan volume actually shot up 106 percent through 2016 but fell slightly the following year. Still, these numbers indicate a growth in online alternative finance lending, and with governments around the world cracking down on traditional payday lending, this spells a huge opportunity for further growth in the years to come.
In 2013, the average online installment loan amount was just below $800. In 2017, it was just over $1,400. And the average loan term rose from six months in 2013 to almost 10 months in 2017.
This growth may have something to do with how online installment loan providers are marketing their services. The number of lenders using direct marketing in 2015 was indexed to 100, but in 2018 (through July), that number was 275, representing growth on pace to reach 550 percent by year end. The number of pre-screened mailed names went up from an indexed amount of 100 in 2015 to 988 through July of this year.
Marketing isn’t the only factor affecting growth in this segment of online lending. There is also a growing number of lenders tapping into the market, and the fact that the Consumer Financial Protection Bureau (CFPB), several U.S. states, the United Kingdom, and other government entities are beginning to target traditional brick-and-mortar payday lenders is contributing to the growth of the online installment loan segment.
The growth of this segment highlights the importance of credit risk evaluation. The need for effective credit risk solutions that identify potential defaulters and is capable of separating the good borrowers from the bad is also growing.
The Importance of Predicting Defaults Before Issuing Online Loans
One of the most important tasks for any lender is predicting the likelihood of default. A higher than expected default rate can lead to huge losses. On the other hand, mitigating delinquencies can lead to greater profits and allow the lender to issue more loans. It is particularly important to predict whether a borrower will default on the first payment of an installment loan. After all, defaulting on the first installment means the lender will not recoup any of its investment, and defaulting on the first payment is a clear sign that the borrower should have been flagged as a high credit risk and will likely default on subsequent payments.
Alternative finance lending is inherently risky. Lenders must fight a higher default rate than banks (20 percent vs. 3 percent) right off the bat. That alone makes predictive credit risk modeling a necessity in today’s installment loan market.
In recent years, online lending leaders have seen greater than expected default rates, which means these online providers must be extra diligent about predicting delinquencies in order to watch their bottom lines. For this reason, the tools that lenders use to make such predictions must be carefully chosen so that default rates decline and profits increase over time.
3 Ways to Identify Good Credit Risks Before Issuing a Loan
Some defaults are to be expected. Profitable lenders understand that the interest on the good loans will pay for the losses on the bad loans. Nevertheless, mitigating those losses is paramount to maintaining solvency and being able to service future borrowers. An online installment loan lender can use credit risk scoring to decrease default rates and increase profits simply by identifying the good and bad credit risks. Here are three ways a lender can ensure they are focusing on the good credit risks:
Prescreen your potential borrowers – Credit risk evaluation should begin before you make initial contact with potential borrowers. If you are involved in direct marketing, prescreen potential borrowers before sending them your marketing collateral. Not only can this lower your default rate, but it will also lower your marketing expenses.
Use an effective credit risk scoring solution – Today’s lenders do not just rely on FICO scores and payment histories. They collect alternative data that identifies how potential borrowers spend their money and handle their debts. Much of this data is out of sight from traditional credit scoring agencies, but it is essential to getting a complete picture of the borrower.
Make your offer based on the borrower’s credit risk profile – First, build a credit risk profile on the borrower and use the predictive score to make your loan offer. It is best when lenders are able to structure a loan based on a consumer’s risk level. For example, a higher risk customer might warrant a smaller loan amount to control the lender’s risk.
Assessing Credit Risk: The Perfect Solution for Online Installment Loan Providers
The most important factors in underwriting the subprime consumer involve credit risk assessment and fraud detection. New solutions that combine the largest visibility into the industry’s alternative credit data and traditional bureau data ensure lenders are fully equipped to assess and mitigate risks. These solutions are offered by Experian’s Clarity Services and Experian, and include:
Clear Credit Risk
Clear Advanced Attributes
These solutions are designed to assess a borrower’s creditworthiness or to determine credit eligibility. Lenders receive an actionable score with adverse action codes to help them determine whether a potential borrower is a solid credit risk and to help determine a reasonable loan structure.
Clear Credit Risk is Clarity’s trademarked credit risk product designed to predict the likelihood of a borrower’s default on the first payment. It includes an effective score and is built on data that has proven most predictive for subprime consumers.
Experian’s Clarity Services is a credit reporting agency founded in 2008 and acquired by Experian in 2017. As the leading alternative credit data provider, the company services a wide variety of alternative finance lenders such as auto finance companies, check cashing services, prepaid credit card issuers, short-term installment lenders, small-dollar credit lenders, telecommunications providers, and more.
Its a good thing that everything that happens in Vegas doesn’t stay in Vegas, which is where the Seventh Annual Money20/20 Conference took place on October 19-21, 2018. With the goal to “fearlessly take on the mission of creating a simpler, fairer, faster and more inclusive financial system for individuals, businesses, and society as a whole,” the three-and-a-half […]
Its a good thing that everything that happens in Vegas doesn’t stay in Vegas, which is where the Seventh Annual Money20/20 Conference took place on October 19-21, 2018. With the goal to “fearlessly take on the mission of creating a simpler, fairer, faster and more inclusive financial system for individuals, businesses, and society as a whole,” the three-and-a-half day event included more than 500 speakers and 15 agenda themes.
Themes included :
Payments and Platforms
Banking and Personal Finance
AI and Deep Learning
Cybersecurity and Fraud
Alt Lending and Credit
Blockchain and Crypto
Digital Identity and Biometrics
And much more
While this is going to serve as a brief overview of the Conference, some of the notables who spoke, and bigger announcements, there will be special interest on Alternative lending and credit. We’ll also look at the all-important payments race.
A lot of the coverage is available on YouTube where Money20/20 has its own channel, so, if you missed the conference, you still have free access to some of the information.
Apple Co-founder Steve Wozniak is always a good bet to help you get a financial conference rolling. The business legend’s assurances that the claims that artificial intelligence (AI) and robotics, along with other forms of technology, are going to cut into human productivity are unwarranted helped to establish an ongoing theme that tech is necessary for the broader inclusiveness of our collective financial future.
Jennifer Bailey, VP Internet Services for Apple Pay, detailed some of the expansions of the new iPhone X, which include face ID security.
Other notable speakers from the first day of the conference included John Collison of Stripe, Michael Mebach, CPO of Mastercard (who spoke on how to build a seven-trillion-dollar middle class), Anand Sanwal of CB Insights, and Bill Ready of PayPal.
Day Two’s lineup of speakers was headed by none other than Virgin’s own Richard Branson, who told a remarkable story about how he created Virgin by renting a plane and selling seats to the other passengers scheduled to be on the American Airlines flight that was delayed. Sallie Krawcheck, Ellevest’s CEO and co-founder, had some valuable remarks on diversity, and Vanessa Colella, head of Citi Ventures and CIO of CitiGroup, shared some keen insights on partnerships.
Possibly the speaker from the conferences second day who made the biggest impression was Nikolay Storonsky, CEO of Revolut. The way money is moved is changing rapidly, but if Storonsky is correct in his predictions, it may change even faster. He predicts that in 10 years, two or three large fintech players will take 95 percent of banks’ business marking an industry overhaul akin to how Amazon bypassed the retail industry and Uber took on taxis.
Patrick Gauthier, VP of Amazon Pay, spoke to Tracey Davies’s central theme when he talked about the use of technology to make things simpler and more natural between the merchant and the consumer. Harley Finkelstein, CEO of Shopify, pointed out that middlemen will not be totally going away in the financial realm of the future, but they will have to “provide a disproportionate amount of value for their profit margin in the future.”
Other notable speakers included Asiff Hijri, president and COO of Coinbase, who framed the crypto world well when he spoke of the two base use cases of the space, the store of value of bitcoin and the ability to build apps on top of Ethereum, while noting that we’re still looking for that breakthrough app. His quote “Fintech before crypto, and the promise of a stablecoin…is like mobile before the iPhone came along” might be one of those “remember when” moments.
NBA legend Shaquille O’Neal also spoke on the third day of the conference. Now an advisor and advocate of Steady, the platform which helps Americans find work, says his partnership with these efforts is driven by recollections of a past where the only investments that paid off were those he embarked on in order to help others.
Much of what happened on Day Four is listed below, including the Uber/Barclays and the Grab/Mastercard partnerships, but the day also had some other mentionable happenings.
Marisol Menendez, head of open innovation for BBVA, introduced the overall winner of the 10th annual BBVA Open Talent competition, the reward going to Sedicii; founder Rob Leslie accepted the award. Sedicii provides a service that identifies data between two organizations without exposing the underlying data.
Also, adding some hope for the financial sector in general, Ripple’s Co-Founder and Executive Chairman Chris Larson stated that he thinks digital assets can help guard against another financial crisis by solving some of the key problems of global liquidity. He also predicts that a fluid digital asset (he thinks it will be XRP, of course) will make more fluid the trillions of dollars that are tied up due to the “clunkiness” of current systems.
Focus on Alternative Lending and Credit Cards
As instant payments and expanded remittance options gain more prominence in the world of payments and commerce, an app designed to speed up the remittance process, designed via Visa APIs, took top honors at the conference.
American Express and Amazon announced a partnership, which will produce a no-annual-fee business card. Cardholders (Amazon Prime members) will get to choose if they want to receive five percent rewards on any Amazon purchase (Whole Foods included) or 90-day payment terms, a reward that might benefit small businesses with cash flow issues.
Goldman Sachs’s Marcus Platform announced a new wealth management offering designed to make the financial market more inclusive for average Americans. The offering will focus on online savings accounts and personal lending, the end game being to educate customers on some of the ins and outs of the financial sector.
Grab Financial and M and A Mastercard announced a partnership that will make prepaid cards available to underbanked and underserved customers in Southeast Asia in order to bring them into the financial realm and allow them to conduct business globally.
Gregory Wright, CPO and SVP of Experian, touched on a common theme from the conference, that of businesses going forward by putting consumers first. He reinforced the platform’s focus on putting the consumer at the center of the lending decision by giving the consumer more control over his or her data to allow them to make a more informed lending decision. The goal is for lenders to make better decisions at lower risk while giving more consumers access to credit.
David Richter, global head of business and corporate development for Uber, joined with Curt Hess, CEO of BarclayCard US, to announce the unveiling of the Uber Visa card. A native app specifically designed for the Uber platform, the app will make it more engaging and enjoyable for Uber riders and Uber eaters to experience the platform. The card will also offer real-time notifications of rewards and balances, rather than customers having to wait a month for a statement as credit cards traditionally do.
Other Noteworthy Announcements
ViSync took the grand prize in the conference’s hackathon challenge. According to a Visa spokesperson, their entry, an app designed to help send remittance payments overseas, should make it easier for migrant workers to send money back to their home countries.
FICO announced an “Ultra” FICO rating. The new device will consider how people manage their checking accounts and will incorporate things like overdraft history to determine credit scores. The goal is to help younger people and others with little or no credit and people who are rebuilding their credit after a couple of setbacks.
Tracey Davies, president of Money20/20, also announced the Rise Up! program, the pilot of which took place at this event. Rise Up! seeks to increase inclusion into the financial sector on all levels. This pilot program, which will expand to other demographics in the future, focused on gender (women make up 50 percent of the population, but only 20 percent of leadership roles in the financial sector.). Of the 300 women who applied to the program, only 35 were selected. Those who were selected were privy to special seminars and one-on-one access to various leaders from the financial space.
The Payments Race
Knowing how we build points of sale, I wonder if the organizers of the original event knew just how apropos the payments race would be to the overall message of the Money20/20 events. Whether they did or not, the event serves to draw a good picture of how we use and interact with different forms of currency in our daily lives.
Closely resembling the scavenger hunt of the television series The Amazing Race, five participants were given six days to make it to Las Vegas for the opening day of the convention. They drew to see which host city will host most of their scavenging, and then they all have to make it to their city and then to Vegas. Along the way, they got points for things like the number of states they visited and the different modes of transportation they use.
The catch is this: Each participant was only allowed to use one form of payment; the options were
Team Credit Cards
Team Devices (Apple Pay and such)
The episodes—all of which can be seen on YouTube—show the obstacles in trying to perform these tasks with only the given form of payment.
As you can imagine, Team Checks had a hard time of it, and they had to rely on the goodness of many others to navigate their journey. Team Cash didn’t face as many obstacles, but travel required some finagling as they got deeper into the trip. Team Crypto had some transportation issues early on, but also relied on the kindness of others to make the necessary accommodations.
Team Credit seemed to have the most ease traveling—they just rented an RV and drove—and the representative from Team Devices said after it was all over that using only devices proved to be easier than she thought it was going to be; she did have to go to some pretty significant lengths to rent a car.
In all, the little series of videos showed the importance of various forms of payment and that we still haven’t gotten to the point where we can survive conveniently on one single form of payment; still, everything from the conference seems to speak to the reality that we’ll get there.
And how did the race turn out? Well, I haven’t seen an actual crowning, but Team Crypto was the first to get to the Las Vegas sign, which was basically the finish line—I haven’t seen anything that mentioned how each fared at the number of states visited or modes of transportation used. If Team Crypto did prove the winner, it was their second straight title.
The event will return to Vegas next year, the dates being October 27-30, 2019.
News Comments Today’s main news: Preview of OnDeck’s Q3 earnings. Credit Karma acquires Noddle from TransUnion, expands into UK. Lufax to move P2P lending to the blockchain. WeBank hits $21B valuation. Linked Finance loans up 63%. Nubank now worth $4B. Today’s main analysis: The unbanked approaches banking like everyone else. Today’s thought-provoking articles: HSBC, Barclays bucking the trend. International P2P lending […]
QED Investors has raised its largest fund to-date. QED raised $175 Mn in its fifth fund which is focused on early-stage FinTech. QED also released their first quarterly newsletter. (Subscribe here) Matt Burton, the founder and CEO of the Orchard platform, joined as a partner and will lead QED Belay, the newly formalized founding stage investment platform.
SoFi and Marlette are issuing their fourth Consumer Unsecured deals of 2018. SCLP 2018-4 is a $549 Mn securitization. KBRA has rated the tranches A to D AAA, AA+, A+ and BBB respectively. SCLP 2018-4 is the first consumer unsecured deal to receive a AAA rating. MFT 2018-4 is a $266 Mn securitization. KBRA has rated the tranches A to C AA, A, and BBB- respectively.
HSBC and Barclays Leaning In, Marcus and Discover Pulling Back
HSBC and Barclays are launching new unsecured personal loan products. These products will complement the banks’ existing US credit card offerings while competing head-on with Marcus on its home turf. HSBC and Barclays are looking to capture a piece of the $140 Bn personal loan market, that is growing at an annualized rate of eighteen percent.
Discover and Marcus are cautious about the growth in personal loans and the potential for higher losses. GS will temper Marcus’s origination growth and not “chase volume targets”. We note that GS is the only bank whose provision for loan losses increased in Q3 – GS provisions rose by 172% YoY to $174 Mn, while loans grew by 72% – far outpacing loan growth (and what might be expected from loan seasoning).
When community advocates ask banks to provide accounts for the estimated 63 million people in the U.S. who are unbanked, bankers typically raised two concerns.
Both arguments appear to be shot down by a new trove of data collected from four of the largest banks: Bank of America, JPMorgan Chase, U.S. Bank and Wells Fargo.
Seventy-four percent of the 3 million previously unbanked people who opened accounts at the four banks in the past year are digitally active. In fact, they are heavy users of online and mobile banking. They are statistically no more likely to call or walk into a branch than existing bank customers.
Financial technology startup Credit Karma said on Tuesday it is expanding into insurance through a new service that makes it easier for users to find cheaper auto insurance policies.
The tool generates suggestions by analyzing government information on drivers and vehicles together with data from credit bureaus and public insurance rate filings, bypassing the need for users to manually input information into long forms, the company said.
ForwardLine, a nationwide direct lender providing affordable loans to small businesses, has announced strong results for third quarter 2018, achieving a 350% increase in loan originations over third quarter 2017. The company attributes its growth trajectory to strategic investments in technology, enhanced analytics, and an improved overall customer experience.
Online mortgage lending has been a very large part of NBKC Bank’s business model, and remains so.
Now, people in all 50 states can apply online for a mortgage from NBKC. Its originations run between $2.5 and 3 billion annually, and the bank is one of eight mortgage lenders on Costco’s nationwide platform.
AGORA Data, Inc., a secondary loan marketplace based in Arlington, Texas, announced today, the release of the first-ever Loan Validation Report for seasoned loans. AGORA’s proprietary technology enables car dealers and finance companies to avoid compliance issues with the Truth in Lending Act (Regulation Z), by assessing in real-time any issues with the terms of a loan, either at the portfolio or individual loan level. This includes assessment of the loan APR, Finance Charges, Principal Balance, Total of Payments, Unearned Interest and Gross Balance. Violation of Regulation Z can lead to significant penalties and other legal issues.
Roostify, a leading digital lending platform provider, announced today that Courtney Keating Chakarun has joined the company as Chief Marketing Officer. Chakarun comes to Roostify from CoreLogic, where she served as Senior Vice President, Marketing & Innovation.
PeerIQ, the leading provider of risk analytics for consumer credit, today announced that Liberty Lending, a leading online platform that provides innovative borrowing solutions to deserving consumers, has entered into an agreement to license two PeerIQ products: Consumer Credit Suite and Analytics Platform.
Credit Karma, the US startup with 85 million users that offers credit reports and a platform to browse and buy other financial services, has made an acquisition to help it kick-start its first overseas expansion beyond the US and Canada: it has acquired Noddle, a UK-based credit reporting service with 4 million users, from TransUnion.
Financial terms of the deal are not being disclosed, but Valerie Wagoner, Credit Karma’s VP of International (who had previously been at Twitter), said that it will be a full acquisition of tech and employees — 35 in all — and TransUnion is not taking any stake in Credit Karma as part of this deal, although the two will continue to work together with TransUnion providing data to Credit Karma, as it had done before.
As a point of reference — and a sign of the consolidation and competition in the market — earlier this year Experian acquired another credit scoring service in the UK, ClearScore, for the equivalent of $385 million. That service has 6 million users compared to Noddle’s 4 million. Competition authorities are still investigating that deal, and Credit Karma’s will also have to get the pass from regulators before closing.
Experian is launching a new range of services to help lenders evolve their approach to making consumer credit decisions, so businesses can make more informed decisions and deliver fairer, more affordable outcomes for their customers. It’s now possible to take a multi-dimensional view of a borrower’s financial health with Experian Credit 3D.
Knowing a consumer’s credit information at a single point in time only offers a snapshot of their financial behaviour. However, by using innovative trended and alternative data sources via ExperianCredit 3D, businesses can access an unparalleled set of insights, enabling faster decisions based on a more rounded picture of affordability.
UK based flight search site Alternative Airlines, has put the cat amongst the pigeons with an announcement of a new deal with Affirm to roll out what the American company describes as its “fair and honest alternatives” to traditional payment options.
The new partnership will see customers pay for their flights in instalments, instead of one single tranche. Giving them the opportunity to plan ahead and even open up a travellers horizons by giving them a chance to experience more wide-ranging trips, with the US customers able to divide fees over three, six and 12 months instalments.
Tencent-backed online lender WeBank Co. Ltd. has reached a sky-high valuation of 147 billion yuan ($21 billion) after less than four years in operation, becoming one of the world’s largest “unicorn” companies.
The new valuation is based on a legal document attached to an auction notice on Taobao.com, which described the upcoming auction of a minor stake in WeBank.
WeBank’s latest valuation makes it the fifth most valuable privately-held company in the world, based on the CB Insights list.
Of the 29 virtual bank licence applications before the HKMA, submissions have been made by WeLab, HKT, Standard Chartered Bank, as well as an alliance between Australia’s Airwallex, Bank of East Asia (BEA), and mainland firm Sequoia Capital China.
There are 21.43 bank branches and 50.09 ATMs for every 100,000 residents in Hong Kong, higher than the global city average of 12.6 and 47.55 respectively in 2016, according to World Bank data.
LendUp’s mission is to provide anyone with a path to better financial health. Through its proprietary software, it designs safe, transparent products that expand access, lower costs, and provide credit building opportunities for the population of Americans who currently have limited options within the traditional banking system because of low credit scores and income volatility.
More than 500 fintech aficionados hit the swanky Peninsula event space in Melbourne’s Docklands last week for the third annual Intersekt festival.
The three-day shindig, organised by FinTech Australia, debated topics such as how start-ups can capitalise on the loss of trust in incumbent institutions (exacerbated by the banking royal commission); and the extraordinary rise of “neobanks” around the world.
Anthony Eisen, co-founder of local payments star Afterpay, and Chad West, the marketing head of globally focused neobank Revolut, explained how they have lured customers by reinventing traditional fee models.
LARGE unexpected expenses are hitting the household budgets of two-thirds of Australians, and many are resorting to dangerously expensive credit cards to get themselves out of a financial jam.
Cars are the biggest cause of unpleasant financial surprises, according to new research by marketplace lender SocietyOne, followed by travel costs and medical bills.
The lender’s When ‘It’ Happens report reveals that 40 per cent of people would cover unexpected costs by borrowing money from family and friends, almost 20 per cent would add the expense to their mortgage, 31 per cent would sell stuff, and 28 per cent would take on extra credit card debt.
Iwan Kurniawan, 28, Indonesia; Reynold Wijaya, 29, Indonesia Co-Founder, Modalku
Together with Kelvin Teo, Iwan Kurniawan and Reynold Wijaya founded Indonesia-based Modalku, called Funding Societies in its sister operations in Singapore and Malaysia, a peer-to-peer (P2P) digital lending platform that connects cash-strapped SMEs with lenders. The startup is backed by Sequoia, Softbank Ventures Korea, and Alpha JWC Ventures, and recently passed the US$110 million mark through more 3,000 loans to businesses in the region.
Rachel De Villa, 25, Philippines Founder and CTO, Cropital
Rachel De Villa is the co-founder and CTO of Cropital, a crowdfunding platform that helps finance local Filipino farmers. Established in 2015, Cropital aims to improve the income and productivity of farmers through crowdfunding, providing scalable and sustainable financing. Through Cropital’s online platform, investors choose a farm or farms to invest in. Cropital manages the fund for the farmer making sure it goes to the right resources, assuring as well that investors will get a return on investment.
Abraham Viktor, 25, Indonesia Co-Founder and CEO, Taralite
Abraham Viktor is the co-founder and CEO of Taralite, a P2P lending platform. Taralite’s loans are issued by financial institutions other than banks, also known as multi-financers, which allows it to reduce the interest rate up to 2% and extend the loan period of up to three years. The platform accepts houses, cars or motorcycles as collateral. Founded in January 2015 as Wedlite, Taralite graduated from startup incubator program Global Entrepreneurship Programme Indonesia (GEPI) in November 2015. Previously, Viktor was an investment banking analyst, first with Boston Consulting Group and later at Nomura investment banking.
Mohamed Abbas, 27, Singapore Co-Founder, Rely
Mohamed Abbas is a tech entrepreneur and the co-founder of Rely, a startup that enables online shoppers to shop and pay for their purchases by splitting their cost into manageable monthly payments, interest-free. Abbas is also the co-founder of Onelyst, an online marketplace that helps users from lower-income brackets compare loan rates across different licensed moneylenders. The website allows users to find loans for different purposes, such as medical or rental expenses, and produces a list of personalized options in minutes.
The federal government announced during the tabling of Budget 2019 on Friday (2 November) that it will introduce a “property crowdfunding” platform by Q1 2019 to help Malaysians buying their first homes, reported Bernama.
On Sunday (4 November), Prime Minister Tun Dr Mahathir Mohamad said the scheme is the first of its kind in the world, and will enable people to buy a home as long as they can a pay the 20 percent down payment, which can be financed via savings, debts or withdrawals from their Employee Provident Fund (EPF) account. The remaining 80 percent will be funded by investors via peer-to-peer lending supervised by the Securities Commission.
Dubbed as FundMyHome.com, the property crowdfunding platform is expected to help the Pakatan Harapan administration fulfil its election promise of one million low-cost housing within 10 years.
CIMB and Maybank are the participating institutions that will contribute towards the externally funded 80-percent portion of the house price, with more expected to sign up in the future.
The site – developed by finance and real estate media platform The Edge – will list about 1,000 homes costing less than US$120,000 during the first phase of its rollout. All properties listed will be completed or near completion, and buyers looking for rental income will be allowed to “buy to rent” through the portal.
One student explains her student loan turmoil. AT: “This article highlights how student loans can draw unsuspecting students into high debt before they realize the implications of that debt. A variable interest rate on a student loan?”
Our case here involves Wealthfront, an automated investing service founded by all-star venture capitalist Andy Rachleff. Boasting over $10.5bn under management, the platform offers a wide-range of thoughtful strategies to the casual investor, including indexes optimised to harvest tax-losses and a smart-beta product, overseen by Random Walk proselytiser Burton Malkiel.
Back to Wealthfront’s risk parity offering. In an attempt to lure investors, it backtested its new strategy versus its competitors at AQR and Bridgewater. Here are the results:
The loan, ironically called a “Smart Option” loan, has a variable interest rate that fluctuates based on changes in the financial market — which may have been explained to me at the time (I truly don’t remember), but I know I didn’t fully grasp what that meant.
Now, eight years later, that loan — one of nine that left me $95,000 in debt upon graduation (because, yes, interest does accrue while you’re in school) — very clearly marks the exact moment when I lost control of my own financial destiny.
Cloudvirga, an Irvine, Calif.-based provider of digital mortgage point-of-sale (POS) software provider, closed a $50m Series C funding round.
The round was led by Riverwood Capital with participation from Upfront Ventures. In conjunction with the funding, Riverwood executives Scott Ransenberg and Jay Schneider will join Cloudvirga’s board of directors.
One is Fair Square Financial, which last week snagged a $100 million investment from Vikram Pandit, the former CEO of Citigroup.
It’s an infusion of cash that the online credit card company says will allow it to expand beyond its downtown co-working space this year while doubling its workforce to 100 employees during the next two years.
The expansion decision is the result of surprisingly strong customer demand for its online-serviced, low-fee Ollo cards, Fair Square CEO Rob Habgood said. The credit cards carry a variable interest rate that currently sits at a lofty 24.99 percent.
Much of the hype around fintech focuses on what traditional banks do wrong: they’re slow to adopt new technology; they don’t center the customer; they’re too big to respond nimbly to change. This narrative is part of why fintech continues to attract massive investment, with $31 billion total flowing into the sector last year, according to KPMG.
The truth is that there’s actually a lot that banks do right — things that fintech startups can struggle to replicate. I mean, there’s a reason why they’ve been successful.
Here are the three areas where I feel fintech’s needs and banks’ expertise overlap.
The rate of credit card delinquencies jumped 52 basis points (BPS) in the first quarter (Q1) of 2018, and will likely continue to increase over the next 12 months as consumers take on more debt. That’s according to an analysis from Moody’s on Friday (May 18) after the release of the New York Federal Reserve Bank’s Household Debt and Credit Report.
The rate of new delinquencies on credit cards stood at 6.42 percent in Q1, up from 5.9 percent for the same period last year. According to Moody’s, the delinquency trend for the next year is for an “increase.” The Q1 credit card delinquency rate trails the 7.3 percent rate for auto loans but is higher than the 3.4 percent rate for residential mortgages.
Meanwhile, the rate of total new household debt delinquencies was about 4.5 percent in Q1 of 2018, “down slightly from a year ago,” Moody’s said. “Over the next year, we believe delinquencies will rise a bit as lenders modestly loosen underwriting standards.”
Dream Live Prosper (DLP), an award-winning family company led by Don Wenner (Founder and CEO), is excited to announce the appointment of Greg E Schecher as Director of Originations and Capital Markets.
Based out of the company’s Southeast headquarters in St. Augustine, Florida, Greg will lead the firm’s CRE bridge loan lending and marketplace lending platform.
HSBC UK has created the “first live” use case of open banking for credit applications using the InterConnect cloud platform from Equifax.
According to Equifax, the solution will help quick affordability assessments by allowing individuals to submit their bank transaction information electronically, in less than five minutes, during an application for credit.
Each submission is presented directly to HSBC UK’s underwriting team in real-time, providing the bank with view of a customer’s affordability and offering faster lending decisions.
About 150,000 Britons have lent nearly £10bn in this way over the past decade, earning around 4.5% interest on average. By contrast, the average interest rate on an easy access savings account is just 0.51%.
The bigger platforms, such as Zopa, Funding Circle and RateSetter, are therefore attractive alternatives for would-be savers.
The market was boosted by the launch in 2016 of innovative finance Isas, which allow people to invest £20,000 a year tax-free in P2P platforms and equity-based crowdfunding, where they buy stakes in companies.
The fintech industry is one of the fastest growing areas of the British economy and is generating more than £20 billion annually. The sector continues to grow, it currently employs over 60,000 people and has produced more billion pound-valued start-ups than any other British economic sector.
A BAN on cryptocurrency adverts will do more harm than good, a crypto-backed peer-to-peer lender has warned.
Lendingblock, which lets individuals lend in a range of digital currencies such as Bitcoin, Ethereum and Ripple, said rather than Google, Facebook and Twitter pursuing a current ban on cryptocurrency adverts to help clamp down on scams, they should help promote education and awareness.
Lendingblock warned a complete blackout on information may be “the easiest option” but warned that cryptocurrencies aren’t going anywhere so it would be better to partner with the industry and ensure consumers understand the market.
The Manufacturer has partnered up with the alternative finance specialist ThinCats to make £100 million of funding available to UK manufacturers, as more and more investors are becoming increasingly keen to help fund SMEs.
The main issue for some SMEs is that they do not have the largest amounts of assets against which the banks are more willing to lend. As a result, many of them can’t invest in their growth, or delay investment until they reach the point they can fund it themselves. The wider knock-on effect of this problem is that the UK’s productivity and growth is being held back.
What separates Bitmillex from other crypto exchanges is that the platform was developed out of the long-standing demand of a credible cryptocurrency exchange which will prioritize fund security and also will be able to extend a much wider range of investing and trading options than what is offered by current regular exchanges.
Speaking further, Mr. Briton highlighted the other state of the art features of Bitmillex which keeps it ahead of other crypto exchanges-
Most advanced security and hosting protection through cloud hosted servers that are connected to custom hardware security modules and multiple protective layers to withstand any attack and hack attempts. In addition, 98% of all balances are to be stored in secure offline cold storage.
Multiple social trade offerings through Auto-Trade, Peer-to-Peer BTC market and Peer to Peer Lending & Borrowing opportunity. (use the term copy trading)
Bitmillex has introduced MTG trading software to ensure a ground-breaking multi-terminal and multi-platform trading experience(MT4)
Traders have the flexibility to hold funds in fiat and trade major forex pairs when the crypto market is bearish
Bitmillex is offering its revolutionary Debit Card to users that will be linked to their wallets and will provide them immediate access to their balance at ATMs or POS in fiat currency worldwide
Current regulations and policies on peer-to-peer lending do not directly restrict or prohibit foreign investment in P2P lending intermediaries.
Relying on a network, a P2P lending intermediary will generally charge a certain consulting fee, service fee, etc., once a lender and borrower that have been brought together establish a lending relationship.
Local financial service office recordal/registration. Article 5 of the measures specifies that, within 10 working days after collecting its business licence, a P2P lending intermediary, or one of its branches, that proposes to launch P2P lending information intermediary services is required to carry out, on the strength of relevant materials, recordal/registration with the local financial regulator of the place where it has its business registration. Once it has completed recordal/registration with the local regulator, the P2P lending intermediary is required to apply for the appropriate telecoms service operating permit in accordance with relevant regulations of the competent telecoms authority before it can launch its services.
Mojang founder Markus “Notch” Persson, Skype’s Niklas Zennström and Spotify’s founding duo Daniel Ek and Martin Lorentzon are Sweden’s richest people in tech today – all worth $1 billion or more.
Following Paypal’s announcement that it would buy the Swedish payments company iZettle for $2,2 billion (19 billion SEK), Jacob de Geer and Magnus Nilsson – founders of iZettle – have joined the few dozen Swedish entrepreneurs worth 1 billion krona or more.
In a review of documents produced for 1,450 digital coin offerings, The Wall Street Journal has found 271 with red flags that include plagiarized investor documents, promises of guaranteed returns and missing or fake executive teams.
“An autonomous car will need 40 times more bandwidth than the cars we use today,” says East. “The demand for data centers is growing 30% per year in the U.S. and 70% in China, but there are only six public companies in the supplier’s market.” They are: Equinix (EQIX), CoreSite Realty (COR), CyrusOne(CONE), Digital Realty Trust (DLR), QTS Realty Trust (QTS), and Switch (SWCH).
Data centers aren’t easy markets to enter. It’s not hard to purchase a piece of land to build the property, but the facility needs to be outfitted in fiber, equipped with interconnected networks, and wired for massive electric power and top-tier security devices. It takes about $1,000 to build one square foot of data center, said East, compared with the average cost of $300 for conventional real estate.
Capgemini and Efma today announced the launch of FinTechVisor, an innovative platform designed to bring FinTechs and financial institutions together to collaborate. The FinTechVisor portal offers a world-wide networking and collaborative community for FinTechs and financial institutions to become game-changers by co-creating the future of the financial services industry.
Launched today at the CCX Forum in London, the portal, which connects financial institutions and FinTechs, will have a feature that allows bankers and insurers to rate FinTechs and comment on their solutions, as well as a “matchmaker-like” personalized function for financial institutions to find a FinTech partner who complements their needs and interests.
InnerScope and Klarna have teamed up to offer a frictionless one-click checkout solution which gives customers a choice of 2 simple no-hassle payment options, Pay Now, or Slice It options.
The Pay Now option is for customers who want to pay in full at checkout can do it quickly and securely with a credit/debit card.
The Slice it option with its instant financing and a quick and simple credit application process allowing the customers to spread the cost of their purchases over a 6 to 24-month period at 0% annual percent rate (“APR”), depending on transaction value, giving them flexibility and increased purchasing power.
Online lender Prospa has launched a $146 million initial public offering, offering shares at $3.64.
Prospa, which lends to small businesses, says the majority of funds raised in the IPO, which includes institutional, retail and employee offers, will be used to grow its existing business, add new products and expand into New Zealand.
The High Court has sided with the Commerce Commission on how to interpret peer-to-peer lender Harmoney’s platform fees, deeming them to be credit fees and falling under the regulator’s purview.
The commission, which oversees the Credit Contracts and Consumer Finance Act 2003, claimed Harmoney’s platform fees were an unreasonable credit fee and sought a declaration from the court backing up its interpretation.
Justice Patricia Courtney today backed the commission’s interpretation, saying Harmoney’s documents amounted to a credit contract and that the way the peer-to-peer lender was structured went “beyond mere matchmaking”, providing a nominal creditor to hold loans as a bare trustee for investors and undertaking the full administration of the transactions.
Zip Co Ltd (ASX: Z1P) provides online credit for consumers and businesses at point-of-sale through brands zipMoney and zipPay.
Afterpay Touch Group Ltd(ASX: APT) provides a platform that allows retail merchants to offer consumers to ‘buy now, receive now, pay later’ without having to enter into a traditional loan agreement.
Money3 Corporation Limited(ASX: MNY) started out as a a payday lender, which it plans to exit in the next financial year. The company is predominantly involved in providing secured auto loans, which make up around 80% of its loan book.
Australia’s Westpac Banking Corp admitted on Monday to signing up a legally blind pensioner as loan guarantor for her daughter’s business without warning her of the risks, then threatened to evict her when the business failed.
The testimony, given to a powerful inquiry into the country’s financial sector, came as Australia’s “big four” lenders all admitted to misconduct in their submissions to a third round of public hearings that focuses on loans to small businesses.
Other transgressions included fraudulent loans and double-charging interest, the inquiry heard, a further hit to the sector’s reputation after previous rounds of hearings uncovered widespread abuses in Australia’s financial planning industry.
People earning more than Rs. 20,000 per month can utilise this app to borrow anywhere between Rs.3,000 to Rs.500,000. Offering flexible payback options, MoneyTap allows borrowers to select their own EMI plans.
Endeavoring to fill the gaps in SME unsecured loan segment, CoinTribe as a loan marketplace makes it easier for banks to confidently enter the uncharted domains.
Peer-to-peer or P2P lending has emerged as an alternative option for investors who wish to earn higher rates of return than what traditional fixed-income instruments can offer. However, lending on these platforms also entails higher risk, which investors need to be aware of before venturing into this relatively new investment avenue.
Peer-to-peer (P2P) lending is a relatively recent option and is a form of crowd-funding used to raise loans which are paid back with interest by bringing together people who need to borrow, from those who want to invest. For the funds that you invest, the interest rate may be set by the P2P platform or mutual agreement between the borrower and lender.
Risks: Since this is an unsecured loan where there is no face-to-face interaction, a P2P lender, i.e., the investor needs to be aware of the risks involved such as default on the part of the borrowers.
Small and medium enterprises (SMEs) can no longer avoid going digital if they want to stay relevant. And RHB Bank Bhd, which has a new five-year strategy, is looking to help them do just that.
Jeffrey Ng, the bank’s head of group business and transaction banking, says the digital economy is the biggest trend impacting SMEs, and many of them will require assistance to adopt the technology. Ng was previously head of RHB’s SME division.
For RHB, this means onboarding SMEs into its electronic financial supply chain platforms. Suppliers and buyers can perform payments for goods entirely on the bank’s platforms and receive payments instantly. SMEs that want to offer cashless payments can also do so with RHB’s solutions.
The evolving landscape of digital lending is turning traditional bank loans and credit analysis into a distant memory. The rise of big data and technological progress have led to alternatives or augmentations to Fair Isaac Corp.’s proprietary FICO score, the dominant credit score used to vet consumers’ creditworthiness. Now, a bill is making its way […]
The evolving landscape of digital lending is turning traditional bank loans and credit analysis into a distant memory. The rise of big data and technological progress have led to alternatives or augmentations to Fair Isaac Corp.’s proprietary FICO score, the dominant credit score used to vet consumers’ creditworthiness. Now, a bill is making its way through the U.S. legislative process that would require Ginnie Mae and Fannie Mae to consider credit scores beyond FICO. Although these proposals are focused on mortgages, one can infer that alternatives to FICO are welcome across the board, including consumer loans. And we now have the technical means to deliver.
When it comes to consumer lending, lenders have traditionally relied upon a loan applicant’s FICO credit score obtained through a credit bureau such as Experian or Equifax to help determine an applicant’s creditworthiness. These three-digit scores are derived using a proprietary formula that uses data like payment history, credit history length, and credit line amounts. The lower the score, the less likely an applicant is to secure a loan. The exact formula is a trade secret, known only to Fair Isaac Corp. Hence, we are already relying on a proprietary “black box” to make a credit decision. We’ll get back to that point later when we discuss machine learning algorithms. Enter digital lending.
Digital Lending Creates a New Way to Vet Applicants
New credit models are based on the proposition that the old ways of approving applicants based on FICO credit score alone do not paint a complete picture of an applicant’s creditworthiness. The proliferation of new data points about consumers provides a wealth of raw data ready for analysis.
With the use of machine learning algorithms, and more broadly artificial intelligence, new models are looking at hundreds, and thousands of other data points, and not all are related to traditional financial risk. Enhanced use of personal information may include educational history, employment history, and even seemingly non-financial information such as bedtime, website browsing patterns, spelling on loan applications, social media data, and even messaging patterns.
While using big data could muddy the waters by creating more confusion than clarity, artificial intelligence could have a big impact on how alternative lenders perform.
Artificial Intelligence Streamlines Sales and Strategy
Savvy digital lending startups are testing the waters with machine learning to make underwriting decisions and enhance their loans. Machine learning algorithms can help to determine if applicants are telling the truth about income by looking at past employment history and comparing it to similar applicants. However, this technology can also favor the applicant by finding hidden patterns.
This data collection is advantageous for people with insufficient credit history, low incomes, and young borrowers who are typically charged with higher interest rates if they obtain credit at all. These methods may also appeal to mortgage companies looking to automate less risky applicants through a similar process.
Yet several challenges exist with these new credit models:
First is what we’ll call a slow rinse and repeat the cycle. Machine learning algorithms, like humans, learn by doing and repeating while making correctional adjustments along the way. Economic credit cycles can last 5-7 years. Even if we back test a model using historical data, how do we know it will work in the future? A cliche in finance is that “past performance is not indicative of future returns.” It may take a long time to prove that a model is right or wrong because the model itself, like an inexperienced loan officer, hasn’t seen enough credit cycles.
Second, models need to explain their black box to gain trust. FICO gets away with being a “black box,” but artificial intelligence cannot. Even if a model works, humans need to have some kind of explanation to feel comfortable with the output.
Bank regulators need to know what’s going on. Fair credit regulators require that lenders keep records for the reason that credit was denied. The applicant has a right to inquire about why they were rejected. Disclosing the reason for a rejection is easy to do with an old-fashioned credit scorecard, based on a transparent point system. But what would regulators or auditors do with machine learning model outputs? For now, the practical answer is to run a traditional model as a backup whenever a machine learning model rejects an applicant, and hope that they both give the same answer! If so, record the traditional model’s output as the reason for credit denial.
For now, the most beneficial result of machine learning is the ability to detect consumer fraud by analyzing customer behavior with baseline data of ordinary customers and singling out outliers, such as how much time people spend considering application questions, reading contracts, or looking at pricing options. This filter alone leads to more accurate underwriting decisions, which, in turn, reduces defaults for lenders and lowers interest rates for consumers.
Blockchain Changes the Future of Funding
Peer-to-peer lending platforms originated out of one simplistic idea, one peer borrower asks for a loan, and another peer lender will decide to fund the loan. Both parties benefited by “cutting out the middleman” – the borrow paid a rate lower than that of a traditional loan, and the lender received a rate higher than that of a traditional savings account. But the peer-to-peer, or “people helping people” model, changed as large lending companies and institutional investors entered the space to become lenders, and, in institutional parlance, “buy loans” in bulk. Moreover, peers lack the expertise or ability to perform proper credit risk on other peers. Peer-to-peer became institutional-to-peer.
However, what if blockchain or distributed ledger technology could return us to the original concept of peer-to-peer lending? Blockchain-based solutions are currently developing identity and reputation models. With blockchain, an entire loan process can live online. Many parties share a record of transactions and supporting documents eliminating the need for intermediaries and third parties. Once I transfer the ownership to you, it’s done. I no longer have it. Currently, we can transfer ownership, but we need someone to record the transfer.
Eliminating the Need for Third-Party Risk Managers
With distributed ledgers, you can create a smart contract on a public utility blockchain without the need for a third party to execute the contract. This allows you to build a low-cost, high-trust platform that didn’t exist before. A handful of startups are designing platforms offering secured loans on a blockchain for those that are holding digital assets for the long term. Cryptocurrency investors will be able to earn interest on their holdings while the digital lender uses them as collateral for consumer loans.
Others are testing mechanisms for collateralized lending based on the value being stored in a smart contract on a blockchain. Collateral could be a security, a bond, a property, a title, data, or gold. The asset must have been digitized and recorded on a blockchain. For instance, the Perth Mint, Australia’s official bullion mint, announced plans to issue cryptocurrency backed by gold.
Mehul Agarwal is a Customer Success, Business Development and Marketing expert working with both users and creators of technologies to achieve their Engineering & Technology goals.
Mehul has worked with several startups, mid-size and large companies from the Valley and outside especially in the FinTech, Medical Devices, Connected Devices amongst others. He has generated over $45 Mil in revenue in the last couple years building one of the largest customer accounts for one of the companies he has worked with.
He mentors startups from around the world around Sales, Strategy, Growth & Marketing both as part of accelerator programs and independent companies.
On the education front, he has a bachelor’s and master’s degree in Economics from Pune University and also a Master’s in Customer Relationship Management from Symbiosis University.