More people are signing up for financial services through digital channels than ever before. A third of digital transactions come from mobile devices. When a lender is approached via cell phone, how does that lender verify who is asking for a loan? The rise in security breaches is making it clear that collecting information like […]
More people are signing up for financial services through digital channels than ever before. A third of digital transactions come from mobile devices. When a lender is approached via cell phone, how does that lender verify who is asking for a loan? The rise in security breaches is making it clear that collecting information like name and Social Security Number isn’t going to be enough. Wouldn’t it be great to see a government-issued ID instead? But how would it work from a remote location?
Mitek, the company that brought mobile deposits into play by letting depositors take a picture of their check and deposit digitally, has processed over a billion transactions. They essentially invented the field of mobile capture through mobile deposit. The publicly traded company has used that experience as a stable foundation and funding for the next step — solving the need to perform secure digital ID checks with mobile imaging.
“You can use the camera on a smartphone to capture ID documents,” said Sara Clark, GM, Identity of Mitek, “We can extract data from a government-issued ID and evaluate the authenticity of the document. This assures the lender that the person on the other end of the device is holding ID that has passed a series of checks. An accompanying selfie can be added to check photo ID. The lender can be confident that this person is who they say they are.”
This is primarily a cloud product with some on-premise options. The pricing is subscription based on volume. The platform can also prefill forms with data from the ID, a real convenience for a smartphone user that adds to data integrity. It is also a real benefit for their typical customers.
“We work with regulated financial institutions,” Clark said. “For example, we’ve worked with banks on the on-boarding process through digital channels. Previously, lenders needed to meet with borrowers to check ID. In the US, that is normally done by asking for name, SSN, and other personal ID. But data breaches are rampant. Over 2 billion records have been hacked so it’s easy to acquire PII. The market is looking for a more secure solution that is user-friendly.”
Mitek has gone through different phases. In this latest development, they leverage mobile imaging experience harnessed by mobile deposit. They have a mature mobile imaging platform and assign enhanced technology to use deep learning and computer vision. Computer vision within the capture experience takes images and runs an algorithm on them.
“We use deep learning to differentiate between real IDs and potential forgeries,” Clark said. “There are 6-10 ID formats in each state and they are always changing. We look for forgery techniques, font inconsistency, photo integration issues, and other things. Our ability to bring this to the market has been supported by the parallel advances in deep learning that have emerged in the last 10 years.”
There is a lot of momentum in the rise of biometrics for authentication. The world will shift to electronic ID. Developing countries seem to be ahead here because they leapfrog past the old technology.
“We are continuing to head down the path of relying on data to know who you are. Biometrics is solving a similar problem, but it can’t be based off of data you already know, so it’s in the early stages,” Clark said.
Mitek plans to focus on the ID business, to be the global leader in new methods of global ID in financial services. That includes extending their footprint into biometrics. In fact, they are currently researching and developing with facial biometrics.
“We are leveraging bleeding edge tech,” Clark said, “and that kind of talent seems to be challenging to find. I wish I could find a lot more people with skills and experience in machine learning and deep learning. We work with universities to get new talent and invest heavily in the lab team.”
News Comments Today’s main news: Funding Circle US to bolster capital markets team. US investors in Yirendai try to preserve lawsuit. Fed wants a say in fintech rules. Ablrate gains ISA manager status. Mizuho commits to fintech partnerships. Today’s main analysis: AI fintech startups offer loans on new credit. Global fintech report from CB Insights. Today’s thought-provoking articles: Multi-seller ABS […]
Ten MPL options for accredited investors. AT: Virtually all MPL opportunities are for accredited investors. I think it would be more interesting to highlight the few that non-accredited investors can pursue.”
Shareholders in Chinese peer-to-peer lending company Yirendai Ltd. asked a California federal judge on Thursday to keep their securities fraud suit against the company and its executives alive, saying their request to dismiss the case rested on mischaracterizations and factual arguments the court couldn’t consider.
The investors sued Yirendai in 2016 after news that Chinese regulators were cracking down on the peer-to-peer lending business sent its stock tanking.
We’ve found more than a dozen AI fintech firms through our friends at CB Insights that claim their machine-learning algorithms can evaluate loan applications in milliseconds while minimizing defaults.
Many of these companies target so-called thin-file borrowers—people with little credit history—who are usually trying to consolidate debt from high-interest credit cards.
CB Insights reported in its 2016 Global Fintech report that investments dropped from an all-time high of $14.6 billion in 2015 to $12.7 billion last year. Online loan companies, in particular, took something of a hit in 2016. The last quarter was particularly tough, with a 31 percent tumble in loan originations. (However, overall, the top online loan sharks companies tracked by S&P Global Market Intelligence improved their bottom-dollar on loan originations by 15 percent from year-to-year, mostly on the backs of small businesses and students.)
Avant offers direct unsecured personal loans ranging from $1,000-$35,000 with funding delivered as soon as the next business day. It has served more than 500,000 customers worldwide, though last year’s downturn for digital lenders also hit Avant. Its year-to-year loan originations were down 12 percent to about $1.7 billion.
Led by a bevy of former Google-ites, including former Google CIO and ZestFinance CEO and founder Douglass Merrill, ZestFinance has raised $62 million in equity financing, including an undisclosed amount last July. Total funding is $262 million thanks to a couple of additional rounds of debt financing. Peter Thiel’s name again appears on the long list of investors.
Upstart is an AI fintech version of Lending Club. Meaning it provides peer-to-peer lending. Like ZestFinance, it particularly markets to the skinny jeans crowd, offering loans of up to $50,000 to help consolidate debt, pay off student loans and build credit history for those living in hipster cities like Portland and Brooklyn. The machine learning bit involves taking less tangible variables like education, college major and astrological sign into account.
Federal Reserve wants a say on U.S. fintech rules -Brainard (NASDAQ), Rated: AAA
The Federal Reserve wants to give input on future rules governing how technology companies move into consumer lending markets, Fed Governor Lael Brainard said on Friday.
Policymakers will have to determine whether financial technology, or fintech, companies may tap the Fed for services that large, traditional banks enjoy.
“The OCC’s proposal raises interpretive and policy issues for the Federal Reserve regarding whether charter recipients would become Federal Reserve members or have access to Federal Reserve accounts and services,” Brainard told a conference at Northwestern University in Evanston, Illinois.
LendingHome launched in 2014 but quickly established themselves as the leader in the category. They are the only real estate crowdfunding platform to have reached $1 billion in total loans issued, a milestone they crossed in December, 2016 just two and half years after launching.
PeerStreet were founded just 18 months ago but they are already making a name for themselves. They are also focused on the fix & flip market providing loans ranging from 6-24 months in length. They target 6-12% returns and they maintain a conservative maximum LTV (loan-to-value) of 75%.
Sharestates has offered both debt and equity investments, although the vast majority of their deals are for debt. These deals are similar to other platforms with loan terms typically 6-24 months targeting 8-12% returns.
RealtyMogul is one of the most established players in the space having launched in 2013. They have done around $260 million in deals and today they focus primarily on commercial property.
Patch of Land is 100% focused on debt deals tied to mainly residential properties but with a small number of commercial properties as well.
RealtyShares is a “full stack” capital provider, meaning they offer both debt and equity deals on a single project for borrowers. They have done some large deals including this $5.9 million deal for a 132-unit apartment complex in Ohio.
The world leader in marketplace lending for small business loans offers US accredited investors a solid option. Loan terms range from 12 – 60 months and interest rates from 5.49% – 27.79%. Loans are rated from A+ for least risky down to D grade. They have a marketplace where you can browse the loans on offer or you can setup automated investing strategies based on loan grade. As I wrote this there were 12 loans available on their marketplace. Funding Circle provides financials and other details about each company although they don’t provide the company name.
Streetshares is a relatively new small business lender, they launched in 2014, and they are focused primarily on providing funding for military and veteran community businesses. Run by two veterans they provide three different products: term loans (3 – 36 months), lines of credit ($5,000 – $100,000) and government contract financing (for companies dealing with federal or state government contracts).
P2Binvestor, or P2Bi for short, is an asset backed lender providing revolving lines of credit typically backed by accounts receivables. These lines of credit range from $250,000 to as much as $10 million.
Upstart has been something of a quiet achiever when compared to some of their well-established competitors. Founded by ex-Googlers they have a very data-centric approach to their business. One of the things that makes Upstart unique is they were the first platform to look at a borrower’s education and factor that into the lending decision. Interest rates range from 6.37% – 29.99% APR, loan terms are three or five years and amounts range from $1,000 – $50,000.
In Wilmington, N.C., a high-tech company called Lapetus Solutions has developed a technology it calls Chronos that interprets facial characteristics such as baggy eyes, rosy cheeks and double chins to estimate a person’s life expectancy. One purported use of this futuristic-sounding software is to help insurance companies assess risk quickly and inexpensively. Customers could then purchase life insurance online in record time, perhaps circumventing the usual medical examination altogether.
In theory at least, insurance carriers want to provide coverage only to those less likely to need it. The better the carriers understand and predict risks, the better they can manage their liabilities. So if facial recognition technology identifies risks that were previously unknown or unknowable, it could render some consumers uninsurable, an advantage perhaps for the insurance company but not the consumer.
But Erin Ardleigh, president and founder of Dynama Insurance, an independent insurance brokerage based in New York City, isn’t so sure. “How would facial recognition technology help underwriters? I suppose if it could identify clients [who were] engaging in risky behavior, such as smoking or skydiving,” she says.
Rodgers, though, contends that the decision of whether to try this or any other new technology may ultimately come down to dollars and cents.
A leading House Republican on financial technology issues said April 25 he is working with a Senate Democrat on a revised “permanent beta test” bill to prod regulators to foster fintech innovation.
“You must have a default ‘yes’ to new innovation,” Rep. Patrick McHenry (R-N.C.) said in a speech at the American Action Forum in Washington.
McHenry said the 2017 version of the act would include “significant changes and revisions,” but he declined to discuss those. He also declined to identify the Democratic senator with whom he is working. He said he hopes to introduce the new bill in two months.
Global Debt Registry Wins FinTech Breakthrough Award (GDR Email), Rated: A
Global Debt Registry (GDR), the asset certainty company known for itsloan validation expertise, today announced it has won the FinTech Breakthrough Award for ‘Best Business Lending Product’. The
Karla Friede was first an executive with depth in sales and marketing and a passion for innovating. As the president and CEO of a company who had developed a new offering, a B2B payment technology, she was excited about getting to market.
Friede admits it wasn’t easy launching and scaling at that time. But, it taught them to be very smart with every penny. And, they had to prove their business case as they went along because investors weren’t throwing money at every shiny object.
Many B2B organizations don’t accept credit cards. And, managing ACH transfers require a lot of manual processes and the collection of sensitive financial data.
Friede says she was a little naïve in tackling the launch because the B2B payments space was so large. It’s one thing tackling Billion Dollar industries, it’s another thing dipping your toe into a market in the tens of Trillions.
Friede encourages founders to partner with people that think differently but complement your skills.
As Friede puts it, investors are looking for reasons not to invest in you…rather than reasons to invest in you. Don’t give them those reasons, give them a proven business model and secure set of customers.
Only 9% of VC-backed companies have woman CEOs so you won’t ‘look and feel like them.’ Instead, look and feel like someone who knows what they are doing and has proven it. That’s a shorthand all investors respond to.
If you are a female founder and you’re concerned about bias, she has this advice:
Target women-lead VCs or those with a woman partner.
Make it easy for the VC to relate to you.
Talk like the men around you.
She considers it a point of pride that they’ve raised $25M and it’s taken them to Series F to do it.
Real estate crowdfunding platform Small Change announced this week the launch of Pittsburgh’s Liberty Bank Building real estate offering. The funding portal noted that the project is seeking $300,000 to fund development of the building into co-working operator Beauty Shoppe’s flagship location.
Picker also noted that the next reincarnation of the Liberty Bank Building is having difficulty getting funds because it is considered to be the first full co-working building in Pittsburgh:
“Why is it so difficult to finance projects that bring innovation and new life to neighborhoods and cities? Must we rely on traditional financial institutions that are not very innovative at their core?”
Small Change added there is a 10% projected return on debt instrument. A full return of interest and capital is anticipated in 36 months. This is not an offer to sell securities.
As we reported last fall, New York Department of Financial Services Superintendent Maria T. Vullo stated that she was “ardently opposed” to the Office of the Comptroller of the Currency’s (OCC’s) intention to process applications for a new financial technology (fintech) company charter. We now see just how much her counterparts in other states share that view, as the state bank regulators recently came together under the Conference of State Bank Supervisors (CSBS) banner to ask the federal courts to stop the OCC’s fintech charter initiative.
In turn, we believe that the CSBS action will act as a further disincentive for at least some fintech companies to pursue a national bank charter at this time.
Rather than having a “real” human being as your financial adviser, you can now hire a robot, or robo-adviser. The automated adviser will then manage your investment funds through the use of mathematical rules called algorithms. There is almost no human interaction.
While there may be cost savings, it is important to understand their risks and limitations before using them. First, what level of human interaction is important to you? While limited human interaction may result in reduced fees, many people feel more comfortable having often complex investment decisions explained by a person they trust. Before you decide to create an account with a robo-adviser, it’s important that you understand how the system works. Robo-adviser systems are limited to the information provided, and do not seek out new information or research potential options in the same way that a human adviser would.
Therefore, remember that even if you are not dealing with a human, you still need to verify the license of the service and the registration of the product or offering with the proper authorities.
PayJoy is a FinTech company based in San Francisco, CA. PayJoy is bringing consumer finance to people who otherwise could not afford modern electronics such as smartphones. Today, PayJoy’s unique locking technology enables us to offer monthly installment payment plans to millions who otherwise would be unable to afford a quality smartphone. PayJoy’s ambition is to deliver affordable consumer finance to 1B+ people worldwide to obtain a smartphone and join the modern digital, mobile economy.
Unfortunately, Poloniex Lending Bot cannot do much about issuing loans at very low rates when the market spikes. Additionally, the bot negates any opportunity to benefit from high long-term rates. Moreover, there is a 10% fee for using the bot, which can negate some of the profits earned rather quickly. It is a convenient lending bot, granted, but it should not necessarily replace manual, lending activities for anyone who knows what they are doing.
This also means one needs to buy small amounts of said coin to effectively issue the loan. If the coin suddenly plummets in value, that can cause losses in a cryptocurrency portfolio. Then again, a lending bot would not be able to protect users from falling currency values either by any means.
David Bradley-Ward, CEO at Ablrate, said: “Following our successful application for full authorisation from the FCA we now have the necessary approvals from HMRC to offer an Innovative Finance ISA. We hope to be able announce the launch of our IFISA soon after integrating the necessary technology.”
However, the asset backed lender is taking a cautious attitude towards the new product.
Marketplace loan ABS involving a multi-seller approach is expected to become more commonplace, due to the extra control that online lending platforms can exert over the securitisation process. Investors and loan sellers also benefit from a consistent securitisation programme, but a degree of expertise is required to handle the greater complexity involved in executing such transactions effectively.
VPC Specialty Lending Investments PLC on Friday said its net asset value increased significantly over the course of 2016 but said its NAV per share declined after its share capital swelled, while it reported negative total return in the period.
VPC said its net asset value at the end of 2016 stood at GBP363.1 million versus GBP201.8 million at the close of 2015, but the NAV per share fell to 95.26 pence from 100.90 pence after 182.6 million new shares were issued throughout the year.
Total shareholder return in the period was -17% versus the total return in 2015 of -5.5%. Revenue return was 6.0% versus 4.3% the year before.
FUNDING Circle is closing its community forum on Tuesday, as it says that some investors are “asking questions about a narrow range of technical topics” that would be better dealt with through its investor support team.
A thread on short-term property loans has now attracted 1,300 replies and more than 59,000 views. Lenders on the platform expressed their concerns around a tranche of London-based property loans that are going into default.
The platform suggested that its investors share their views on another website called the P2P Independent Forum instead.
For a start, you are probably wondering what future jobs will be available in fintech, as banking as we know it transforms into an online entity and long-standing financial institutions are shapeshifting for a new era.
If you want to work in this sector, you’ll need to brush up on the latest goings-on in the industry, and what better way to do that than to follow the experts online? To save you some trouble, we’ve provided you with a list of 10 people to follow on Twitter if you want to work in the fintech sector.
Note: the deal was done in CHF which is about parity with USD, so you can read that as $100m.
A $100m Fintech raise in Switzerland in 2014 would have been inconceivable. In 2017 it is noteworthy as another sign of a rapidly maturing Fintech community in Switzerland.
I could only find the Tradeplus24 news on German language sites, so if that is an issue for you, here are the key facts:
– they raised CHF100m debt
– The debt is for lending to Swiss SME (note: they refer to KMU which translates to SME). This makes them a balance sheet lender, like Avant, not a marketplace lender like Lending Club. This means they have assured capital to offer rather than simply matching on a best efforts basis (our take is the latter is the better model long term but that you need balance sheet based lending to get a market going).
The Tradeplus24 approach is different. It brings Insurance into the mix. AsOceanoOne put it “An insurance or equal protection of investment grade quality against credit loss and fraud is in place for all pre-financed receivables. The purchase of the receivables occurs only when a credit insurance or an equal protection is in place and confirmed by the relevant protection provider.”
Twenty-six executives of a Chinese online peer-to-peer lender stood trial in Beijing on Wednesday and Thursday after allegedly cheating the public out of a huge amount of money.
The local procuratorate charged that the defendants had used two online P2P platforms, Ezubao and Sesame Financial, to illegally raise funds and then spent lavishly on luxury gifts and salaries between June 2014 and December 2015.
While fintech covers a diverse array of companies, business models, and technologies, companies generally fall into several key verticals, including:
Lending tech: Lending companies on the list include primarily peer-to-peer lending platforms as well as underwriter and lending platforms using machine learning technologies and algorithms to assess creditworthiness.
Payments/billing tech: Payments and billing tech companies span from solutions to facilitate payments processing to payment card developers to subscription billing software tools.
Personal finance/wealth management: Tech companies that help individuals manage their personal bills, accounts and/or credit, as well as manage their personal assets and investments.
Money transfer/remittance: Money transfer companies include primarily peer-to-peer platforms to transfer money between individuals across countries.
Blockchain/bitcoin: Companies here span key software or technology firms in the distributed ledger space, ranging from bitcoin wallets to security providers to sidechains.
Institutional/capital markets tech: Companies either providing tools to financial institutions such as banks, hedge funds, mutual funds, or other institutional investors. These range from alternative trading systems to financial modeling and analysis software.
Equity crowdfunding: Platforms that allow a collection of individuals to provide monetary contributions for projects or companies provisioned in the form of equity.
Insurance tech: Companies creating new underwriting, claims, distribution and brokerage platforms, enhanced customer experience offerings, and software-as-a-service to help insurers deal with legacy IT issues.
ASIC targets $ 200m in fee for no service (Money Management), Rated: AAA
The Australian Securities and Investments Commission (ASIC) anticipates getting over $200 million returned to consumers out of its so-called “fee for no service” remediation projects plus $30 million out of quality-of-advice work with the large institutions.
It said that in the financial advice space in the last 12 months it had extracted six enforceable undertakings; banned 41 individuals from providing financial advice; had four infringement notices and had undertaken seven criminal actions.
“In our fee-for-no-service remediations, we have got up to just over $60 million, and we anticipate getting over $200 million returned to consumers out of that project. We will have about $30 million in the backward-looking quality-of-advice work that we have done with the large institutions,” Bird said.
As the programme director for New Zealand’s first fintech-focused business accelerator programme, the pressure is on in the countdown to demo day. That’s when the teams will pitch their business plans and – they hope – attract the crucial dollars that will enable them to forge ahead.
The 39-year-old expat Canadian moved to Wellington six years ago with her husband and two pre-school children after falling in love with the country when the couple honeymooned here.
One of the largest banks in Japan, Mizuho Financial Group, has been in the news recently for several partnerships involving fintech. According to Nikkei Asian Review, the bank is in talks to co-develop a fintech incubator that will be focused on virtual currencies, like bitcoin, and AI-based loan screening ventures. The discussions are with World Innovation Labs (WiL), a firm based out of Silicon Valley that helps US and Japanese startups raise capital, to co-found the incubator by as early as June of this year.
The creation of an incubator is not Mizuho’s first foray into fintech. Just last week, it was reported that Mizuho partnered with Cognizant (one of the world’s leading professional services companies, a member of the Nasdaq-100, and Fortune 500 company) to develop a distributed ledger solution for more efficient and secure trade financing.
Just two days after the partnership with Cognizant was reported, it was announced that Mizuho had also partnered with IBM to create a blockchain-based trading platform.
Both agreements must be drawn up in an electronic form. Providers are restricted by the following rules:
Providers must be established as a legal entity in the form of a limited-liability company as meant by Law No. 40 of 2007, or in the form of a cooperative as meant by Law No. 25 of 1992.
The maximum direct or indirect foreign share ownership in Providers in the form of a limited-liability company which are established and owned by foreign citizens and/or legal entities is 85% of the total issued capital.
Providers are required to have IDR 1 billion in capital (i.e. paid-up capital for a limited-liability company and self-capital for a cooperative) at the time they apply for registration and IDR 2.5 billion at the time they apply for the license. Limited-liability companies or cooperatives intending to engage in the P2P Lending Services business are required to register with and subsequently apply for a license to the OJK.
Providers are prohibited from conducting other businesses outside the P2P Lending Services, such as acting as lender or borrower, providing security or guarantee for other parties’ debt and issuing bonds.
An exclusive pan-African post-acceleration programme, XL Africa has been launched by the World Bank Group for African digital startups.
XL Africa aims at supporting enterprises in any sector that are making smart use of digital solutions and connect these businesses with angel investors and venture capital firms in a bid to raise growth capital estimated at US$1.5 million.