Thursday September 12 2019, Weekly News Digest

bank technology

News Comments Today’s main news: KBRA assigns preliminary ratings to SoFi Consumer Loan Program 2019-4 Trust. Stripe debuts corporate credit cards. College Ave completes $300M securitization of private student loans. Yirendai issues earnings results. Today’s main analysis: Deregulating Fannie and Freddie (A MUST-READ REPORT FROM THE U.S. TREASURY). Today’s thought-provoking articles: Average FICO scores hit […]

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United States

United Kingdom

China

International

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News Summary

United States

KBRA Assigns Preliminary Ratings to SoFi Consumer Loan Program 2019-4 Trust (Yahoo! Finance), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by SoFi Consumer Loan Program 2019-4 Trust (“SCLP 2019-4”). This is a $465 million consumer loan ABS transaction.

Preliminary Ratings Assigned: SoFi Consumer Loan Program 2019-4

Class

Preliminary Rating

Class Principal

A

AAA (sf)

$360,000,000

B

AA+ (sf)

$29,500,000

C

A+ (sf)

$47,500,000

D

BBB+ (sf)

$28,000,000

OnDeck CEO Noah Breslow to Deliver Keynote Address at 2019 LEND360 Conference (GuruFocus), Rated: A

OnDeck today announced that Chairman and CEO Noah Breslow will be a keynote speaker at the LEND360 Conference in Dallas, Texas on Thursday, September 26, 2019. Mr. Breslow will discuss industry trends in alternative data and how they are improving many aspects of online lending to small businesses.

Case activity for On Deck Capital, Inc. vs Beautyshea, LLC on Sept. 9 (Pennsylvania Record), Rated: B

‘Judgment Entered For $6,593.50 On 09-09-2019 236 Notice Of Judgment Sent 09-09-2019’

Payments giant Stripe debuts a credit card in its latest step into the financing fray (TechCrunch), Rated: AAA

Last week, when the popular payments startup Stripe made some waves with its first move into money lending through the launch of Stripe Capital, we reported that the company was also soon going to be launching a credit card. Now, that news is official. Today, the company is doubling down on financing with the launch of corporate cards for business customers.

College Ave Student Loans Completes $ 300 Million Securitization of Private Student Loans (Crowdfund Insider), Rated: AAA

Student loan marketplace, College Ave Student Loans, announced on Tuesday it has completed a $300 million securitization of private student loans, its third securitization and largest to date. According to College Ave, the transaction was oversubscribed attracting a broad and diverse group of repeat investors and new participants. Barclays and Goldman Sachs were joint lead underwriters on the transaction with Barclays serving as structuring agent and sole bookrunner.

The Deregulation of Fannie and Freddie; Rate Cuts; “Full Stack” Banks (PeerIQ), Rated: AAA

This week, the Trump administration released their long awaited housing finance plan that will privatize Fannie Mae and Freddie Mac.

The plan would require a significant recapitalization – up to $180 Bn.

Read the full report here.

Source: Federal Reserve, PeerIQ

Average FICO score hits all-time high (CNBC), Rated: AAA

For the first time, the average national credit score has reached 706, according to FICO, the developer of one of the most commonly used scores by lenders.

Source: CNBC

U.S. Consumer Debt Surges on Jump in Credit-Card Balances (Bloomberg), Rated: A

U.S. consumer borrowing swelled in July by the most since late 2017 as Americans carried larger credit-card balances to fund both everyday and online purchases.

Total credit rose by $23.3 billion from the prior month, exceeding all estimates in a Bloomberg survey of economists, Federal Reserve figures showed Monday. Revolving debt outstanding increased by $10 billion, also the most since November 2017, while the growth of non-revolving credit was little changed from a month earlier.

Kabbage Launches New Small Business Revenue Index (Crowdfund Insider), Rated: A

Global financial service platform Kabbage announced this week the launch of its new Small Business Revenue Index. According to Kabbage, the index has two million live data connections the platform maintains across its customer base of more than 200,000 small businesses.

The Current State of the Small Business Lending Sector (Lend Academy), Rated: AAA

The companies that I view as pioneers in this space are Kabbage and OnDeck.

Although Kabbage and OnDeck were early to small business lending there are many other names in this space with varying models and scale including Funding CircleStreetsharesFundboxBlueVineBiz2CreditFundation and Credibly to name a few. LendingClub also has a small business lending operation but they primarily work with partners Funding Circle and Opportunity Fund today to originate these loans.

The Challengers of Small Business Lending

Probably the most recognizable name is PayPal and the Working Capital product which, according to deBanked, has surpassed OnDeck in small business lending volume.

Patriot Financial leads $ 15 million round for Numerated (American Banker), Rated: A

Numerated, the loan technology company that incubated inside Eastern Bank and spun off on its own in May 2017, has raised $15 million from bank investment fund Patriot Financial Partners. Existing investors Venrock, Fintop Capital and Hyperplane also joined the round.

TBF Financial Buys $ 60 Million in Commercial Debt from Major Online Lender (PR Newswire), Rated: A

TBF Financial purchased nearly $60 million in non-performing loans from a major online small business lender in recent transactions, CEO Brett Boehm announced today.

TBF bought the pools of post-charge-off loans as the highest bidder in transactions arranged through multiple brokers. In most cases, the company purchases directly from alternative lenders, equipment leasing companies and banks.

LendingTree Ranks the 50 Most Expensive Towns in America (NewKerala), Rated: A

No. 1 Vineyard Haven, Mass.

Total population 17,321
Median individual income $39,045
Median home value $674,600
Affordable housing costs for a median income earner $911
Calculated mortgage payment for a median priced home $2,767
Median rent payment $1,441
Home affordability deficit -$1,856
Rent affordability deficit -$530

The DeFi trend is accelerating and gaining acceptance, with Coinbase joining the fray. The leading brokerage has created the Coinbase Bootstrap Fund, to boost DeFi projects. Coinbase will invest in two projects, the Compound crypto lending scheme, and the dy/dx crypto derivative exchange.

The 30-somethings guide to creating passive income (Ladders), Rated: A

You might not have $30,000 saved up to buy a rental property right now, but do you have $500? The beauty of REITs like DiversyFund is you can start investing for the amount of money you might drop on a new pair of shoes.

There are public and private REITS as well as funds classified as real estate crowdfunding. Compare your options and find the best one that works for you.

PeerStreet Named CRETech 2019 Real Estate Tech Award Winner (Crowdfund Insider), Rated: B

Real estate investment platform PeerStreet announced on Tuesday it won first place in CRETech’s 2019 Real Estate Tech Awards (RETAs for the Information & Intelligence – Crowdfunding category.

Zillow chooses Impac Mortgage COO Rian Furey to lead mortgage expansion (Housingwire), Rated: B

Zillow announced Monday that it is naming Rian Furey president of Zillow Home Loans.

Balboa Capital Continues Accelerated Growth, Adds 125 New Employees in First Half of 2019 (Yahoo! Finance), Raated: A

Balboa Capital, an online lender that specializes in equipment financing and small business loans, hired 125 new employees during the first six months of 2019 to accommodate the company’s rapid increase in new business and acquisition of several new strategic partners.

United Kingdom

Why crowdfunding may not be the great democratising force in investment after all (The Conversation), Rated: AAA

The digital revolution has had a huge impact on the way new and small companies are financed – and crowdfunding has been at the forefront.

Initially, crowdfunding brought great optimism that it would have a “democratising effect” on finance. On the one hand it would enable entrepreneurs excluded from traditional sources of finance to attract funding. And, on the other, it would provide new opportunities for people with even relatively modest amounts of money to invest. For example, private investors looking for higher returns than those available with high street banks have been attracted to various lending platforms – also known as peer-to-peer (P2P) platforms.

Sonovate raises £110m to drive invoice finance (Fintech Futures), Rated: A

Finance tech provider Sonovate is looking to expand internationally and deploy more working capital to SMEs and mid-market businesses after raising £110 million, reports Jane Connolly.

Spotcap find 77% of SME brokers are upbeat about Brexit (AltFi), Rated: A

Over three-quarters of commercial finance intermediaries in the UK expect the number of loans they broker to increase after Brexit, with more than half saying the number will rise “by a lot”.

In July Berlin-based online lender Spotcap asked 132 UK brokers, accountants and advisers about the future of SME finance in the UK, the results of which it published today as part of a report entitled The State of Commercial Finance in the UK.

FCA urges firms to prepare for no-deal Brexit and launches helpline (P2P Finance News), Rated: A

FIRMS should prepare for the possibility of a no-deal Brexit, says the Financial Conduct Authority (FCA), as it launches a dedicated helpline for businesses.

The City watchdog, which oversees the peer-to-peer lending market as well as the rest of the financial servcies sector, says firms who have not prepared appropriately for the UK leaving the EU without a deal may see an impact on their business.

Foreign firms eyeing P2P market entry (P2P Finance News), Rated: A

REGULATORY consultancy Bovill has reported a steady stream of interest from new entrants to the peer-to-peer lending market, particularly from overseas firms.

Brown attributed the slowdown to the fact that P2P is a more mature market, meaning there was “less of a gold rush” for new players.

H&M extends Klarna ‘buy now, pay later’ service to the UK (Fashion United), Rated: B

Swedish fast-fashion giant H&M has extended its partnership with payment provider Klarna to the UK market, offering Brit shoppers the option to ‘buy now, pay later’.

New SME services added to Starling Bank’s marketplace (AltFi), Rated: B

Digital Risks is an insurance provider for small and medium-sized digital businesses, including cover for specific threats like commercial legal protection, cyber security, management liability, employers liability, public liability and professional indemnity.

While CyberSmart is a platform for SMEs to identify digital weaknesses and achieve their Cyber Essentials Certification, the government-backed accreditation for companies looking to protect against cyber threats.

China

Yirendai (NYSE:YRD) Issues Earnings Results (Mayfield Recorder), Rated: AAA

Yirendai posted its earnings results on Tuesday, September 3rd. The technology company reported $0.24 earnings per share (EPS) for the quarter, missing the consensus estimate of $0.48 by ($0.24), Morningstar.com reports. Yirendai had a return on equity of 32.93% and a net margin of 15.30%. The firm had revenue of $322.89 million for the quarter.

LexinFintech Secures $ 300 Million Private Placement of Convertible Notes with PAG (Crowdfund Insider), Rated: A

Chinese consumer financing platform LexinFintech announced on Wednesday it has entered into a convertible note purchase agreement with PAG issue and sell convertible notes in an aggregate principal amount of $300 million through a private placement. 

IceKredit Raises $ 47M in Pre-Series C Funding (FINSMES), Rated: A

IceKredit, Inc., a Los Angeles, CA and China-based credit risk and credit management company, raised $47m in pre-Series C funding.

These Chinese Online Lenders Are Not For the Weak at Heart (GuruFocus), Rated: A

Beijing-based online lender Yirendai (NYSE:YRD) and Shanghai-based Paipaidai, or PPDAI Group (NYSE:PPDF), shares have been pummeled down to their lowest levels in the past year. Yet aside from receiving credit lines from large Chinese institutions amid China’s crackdown on fraud lending in their industry, both lenders appear to remain in a healthy state.

PPDAI — the older and bigger of the two lenders — came out strong in its recent quarter, beating earnings expectations. The $1.2 billion online lender reported it had 29% year-over-year growth in loan origination volume to $3 billion, compared to just 1.6% growth a year earlier.

Hexindai Announces Support For Regulators’ Decision to Include P2P Platforms in Central Bank’s Credit System (Crowdfund Insider), Rated: B

Chinese peer-to-peer lending platform Hexindai (NASDAQ: HX) announced on Tuesday its support for the decision by industry regulators to include the country’s P2P platforms in the central bank’s credit system. The online lender reported that it believes this as a positive move for the P2P industry.

Sequoia-Backed P2P Lender Huobank Collapses As Beijing Mops Up Online Finance Risks (China Money Network), Rated: A

European Union

Banks raise concerns ahead of ECB meeting (Irish Examiner), Rated: A

The president of Germany’s powerful savings banks association, community lenders that dominate the country’s shopping streets, joined Dutch bank ING yesterday in criticising the ECB’s loose monetary policy.

Its 50 million customers have increased their savings by almost 5% since last year to €965bn which is roughly the size of the Dutch economy. With lending amounting to about €860bn, the banks are left with a chunky unused surplus.

Fintech Europe Selects Eight Startups for its Fourth Batch (Yahoo! Finance), Rated: B

Fintech Europe, Plug and Play’s fintech-focused innovation platform based out of Frankfurt, Germany, announced today the eight startups selected for its fourth batch. The platform has grown its partner base to 11 Financial Institutions since its inception in May 2018. Together with Deutsche Bank, TechQuartier, BNP Paribas, Nets Group, UniCredit, Aareal Bank, Abanca, Danske Bank, DZ Bank, Elo, and Finablr, it runs two 12-week innovation programs a year.

CashDirector 

CashDirector SA is a technology company providing SMEs and banks with a Digital CFO integrated with on-line banking, helping with SMEs manage cash flow and accessing financing.

Credit Kudos

Credit Kudos is a credit bureau that uses financial behaviour to measure creditworthiness.

International

Technology Is Banks’ New Battleground (WSJ), Rated: AAA

European banks are spending vast sums on technology—but it may not be enough to defend against the incursions of bigger, richer American rivals.

U.S. lenders already dominate investment banking in Europe. The big risk for the continent’s banks is that slicker tech could give their American rivals a platform to make gains in lending to companies—the Europeans’ traditional stronghold.

This year, Europe’s banks plan to make technology investments worth in aggregate $77 billion, according to consulting firm Celent. That compares with $105 billion for their U.S. rivals. Faster, more seamless trading systems have long been a priority, but tech spending has shifted across business lines and from back office to front office. It can cover everything from maintaining decades-old systems to cutting-edge artificial intelligence.

Source: Celent

Wirecard Teams Up With Credibly to Digitalize Funding Disbursements (Crowdfund Insider), Rated: A

Germany-based global provider of digital payments and commerce solutions Wirecard announced on Wednesday it is partnering with U.S. business funding fintech Credibly to digitalize funding disbursement. Wirecard claims to be one of the largest issuers of payout cards in the U.S. and is now offering fully digitalize solutions.

PwC to AM industry: disrupt yourself or face extinction (City Wire Selector), Rated: A

The European financial services industry is facing an ‘Amazonisation’ moment, in which those offering consumer-first solutions underpinned by sustainable finance will survive and the others will cease to compete.

That is the headline finding of 52-page report co-authored by PwC Luxembourg and Luxembourg for Finance, which investigated underlying industry trends and indicated that the European market is losing ground on its US and Asian peers when it comes to innovation and assets.

State of the Chain: Five Winning Use Cases for Blockchain in 2019 (U.today), Rated: A

Predictably it was Binance that stole the limelight, with the surprise launch of its eponymous lending platform, which was unveiled on Monday, August 26, and then proceeded to fill its initial lending quota of 200,000 BNB and 10 million USDT in a matter of seconds two days later.

Dharma and Compound have announced new products, while Coinbase has hinted that this will be the next vertical it expands into.

Lenders can enjoy annualized interest of up to 15%, which is significantly better than the negative rates they are currently offered on fiat savings and on negatively yielding government bonds.

Australia

Hopes fintech inquiry will ‘validate’ bank competitors (The Sydney Morning Herald), Rated: A

On Wednesday New South Wales senator Andrew Bragg successfully moved to secure a senate committee inquiry into the fintech and regulatory technology spaces, paving the way for a year-long review into how competitive Australia is in these sectors.

Chief executive of small business lender Lumi, Yanir Yakutiel, said the inquiry should focus on expanding the regulatory sandbox program, which is designed to help early stage fintechs test their ideas.

India

Five Ways Artificial Intelligence Is Instigating Paradigm Shift In Online Lending Space (Via.news), Rated: AAA

Currently, digital lending accounts for around 15% to 20% of the total lending market and could surpass 50% in coming years.

Asia

Chinese P2P Lending Companies Ventures to Vietnam (LearnBonds), Rated: AAA

This business model boomed in China, but following a regulatory clampdown by authorities on risky financial practices, the number of fintech and peer-to-peer (P2P) lending platforms in the country dropped from about 1,900 a year ago to just 900 in May.

It now appears that some of these Chinese P2P lending companies have not necessarily disappeared. They simple ventured into new markets and in particular Vietnam.

According to the State Bank of Vietnam (SBV), there were 40 peer-to-peer lending companies operating in Vietnam as of March. Of these, 10 companies are from China.

MENA

The opportunity of peer-to-peer lending in Lebanon (Executive Magazine), Rated: AAA

Through conversations with Lebanese entrepreneurs, business owners, bankers, and politicians, I have had a number of eye-opening discussions into the challenges and opportunities faced by Lebanon’s SME ecosystem. Given the country’s long-standing tradition in financial services and its large banking sector, I believe fintech—with solutions such as peer-to-peer lending, machine learning to personalize insurance solutions, and the use of artificial intelligence for wealth management—stands as a serious contender to unlock the funding challenges faced by Lebanon’s SMEs.

Latin America

SoftBank in talks to invest in Latam venture capital funds (Reuters), Rated: AAA

Japan’s SoftBank Group Corp (9984.T) is in talks with venture capital firms in Latin America to invest hundreds of millions of dollars in their funds, a move likely to speed up spending of a $5 billion regional venture capital fund, three sources with knowledge of the matter said.

So far, SoftBank has only announced direct investments using the fund’s resources, injecting capital into Colombian delivery app Rappi, Brazilian lender Creditas, gym membership app Gympass and Mexican payments firm Clip, for instance.

Proptech Flat raises US$ 4.5 million pre-seed round led by ALLVP (Contxto), Rated: A

Contxto – Not only is the Mexican real estate industry huge but also outdated with many inefficient processes. Counteracting this, a new Mexican startup, Flat, recently raised US$4.5 million in one of Mexico’s largest pre-seed rounds ever.

Africa

Nigerian online-only bank startup Kuda raises $ 1.6M (TechCrunch), Rated: AAA

Nigerian fintech startup Kuda — a digital-only retail bank — has raised $1.6 million in pre-seed funding.

Canada

Peer to Peer Lender Lending Loop Tops $ 50 Million in Loans (Crowdfund Insider), Rated: AAA

Canada’s first peer to peer lending platform for SMEs, Lending Loop, has topped CDN $50 million in loans, according to a post by Brendon Vlaar, co-founder and CTO of the company. Lending Loop provides investment opportunities in debt-based securities to both accredited and non-accredited investors.

PayBright Raises $ 34M in Growth Equity Financing (FINSMES), Rated: A

PayBright, a Toronto, Canada-based fintech company, received a $34m equity investment from goeasy.

Authors:

George Popescu
Allen Taylor

The post Thursday September 12 2019, Weekly News Digest appeared first on Lending Times.

Thursday August 15 2019, Weekly News Digest

Germany yield curve

News Comments Today’s main news: Prosper reports Q2 results. Figure to raise $1B. Funding Circle shares rise. RateSetter to stress test provision fund. LendInvest raises 200M GBP. Two more Chinese P2P firms shut down. N26 eyes IPO. Today’s main analysis: Gen Z’s credit market activity. Today’s thought-provoking articles: Radius Bank’s rebranding to banking as a […]

The post Thursday August 15 2019, Weekly News Digest appeared first on Lending Times.

Germany yield curve

News Comments

United States

United Kingdom

China

European Union

International

Other

News Summary

United States

Prosper Reports Second Quarter 2019 Financial Results (Business Wire), Rated: AAA

Prosper, a peer-to-peer lending platform connecting borrowers and investors, today reported financial results for the second quarter of 2019. Personal loan originations increased 27% compared to the first quarter of 2019, and the company has now generated positive adjusted EBITDA in eight out of the last nine quarters.

Financial summary:

  • Total Net Revenue, which includes the non-cash impact related to warrants to purchase preferred stock, increased to $42.9 million in Q2 2019 compared to $31.7 million in Q2 2018.
  • Core Revenue(1), which excludes the non-cash impact related to warrants to purchase preferred stock, decreased to $50.7 million in Q2 2019 compared to $52.3 million in Q2 2018.
  • Net Loss decreased to ($0.6) million in Q2 2019 compared to a Net Loss of ($12.6) million in Q2 2018.
  • Adjusted EBITDA(1) decreased to $5.3 million in Q2 2019 compared to $8.8 million in Q2 2018.

Key Operating and Financial Metrics (Unaudited) (in thousands)

SoFi Co-Founder’s New Startup Aims to Raise Funds at $ 1 Billion (Bloomberg), Rated: AAA

Mike Cagney, the former embattled chief executive officer of Social Finance Inc., is raising more than $100 million for his new startup Figure Technologies Inc. at a $1 billion valuation just less than two years after its founding, according to people familiar with the matter.

San Francisco-based Figure uses blockchain technology to provide home equity loans online in just a few days, with approval happening in minutes. The company made its first loan in 2018, and is on pace to provide more than $80 million in loans this month alone, according to one of these people, who asked not to be named because the details are private.

As Gen Z Comes of Age, Credit Market Activity Shows Significant Growth (TransUnion), Rated: AAA

Gen Z, those individuals born in 1995 or after, increasingly took part in the consumer credit market during the first half of 2019. The newly released Q2 2019 Industry Insights Report from TransUnion (NYSE: TRU) found that growth is coming from the entire Gen Z demographic who are 18 years or older – not just those who became credit eligible for the first time.

Approximately 14 million Gen Z consumers (44% of this group) were carrying a balance as of Q2 2019, up from 11 million in Q2 2018, according to the report. The number of Gen Z consumers who were credit eligible (18 years or older) increased by 4.5 million in the last year, rising to 31.5 million in Q2 2019. Over the next three years, it is anticipated that another 13 million Gen Z consumers will become credit eligible.

Gen Z Consumers Carrying a Balance Rising at High Rates

Credit Product Q2 2019 Q2 2018 YOY Growth %
Auto 4,376,000 3,072,000 42%
Credit Card 7,746,000 5,483,000 41%
Mortgage 319,000 150,000 112%
Personal Loan 746,000 534,000 45%

Credit cards are the most popular product among Gen Z consumers, with 55% carrying a balance—though they still only constitute 5% of the U.S. population carrying card debt. Mortgages had the largest year-over-year growth rate spike with Gen Z consumers (112%), but from a low base. Mortgages are still the credit product Gen Z consumers are least likely to have, with only 0.5% of mortgages held by members of this generation.

The Percentage of Gen Z Consumers Carrying a Credit Balance is Growing (Data as of Q2 2019)

Credit Product Gen Z
(carrying a balance)
All Generations
(carrying a balance)
Gen Z
Percentage
Auto 4,376,000 86,064,000 5.1%
Credit Card 7,746,000 148,141,000 5.2%
Mortgage 319,000 68,368,000 0.5%
Personal Loan 746,000 19,556,000 3.8%

Q2 2019 Credit Card Trends

 Credit Card Lending Metric Q2 2019 Q2 2018 Q2 2017 Q2 2016
 Number of Credit Cards 437.1 million 420.0 million 409.8 million 391.0 million
Borrower-Level Delinquency Rate (90+ DPD) 1.71% 1.53% 1.46% 1.29%
Average Debt Per Borrower $5,645 $5,543 $5,422 $5,247
Prior Quarter Originations* 15.3 million 14.5 million 15.0 million 15.3 million
Average New Account Credit Lines* $5,773 $5,649 $5,817 $5,466

See TransUnions infographic here.

Atlanta-Based LendingPoint #17 on Inc. 500 List of Fastest Growing Private Companies in the USA (The Daily Times), Rated: A

Inc. Magazine today ranked commerce platform LendingPoint No. 17 on its 37th annual Inc. 5000, the most prestigious ranking of the nation’s fastest-growing private companies. LendingPoint joins companies such as Microsoft, Dell, Pandora, Timberland, LinkedIn, Yelp, Zillow, and many other well-known names who gained their first national exposure as honorees on the Inc. 5000. LendingPoint has hit successive funding records year-over-year and is on pace to reach $100 million per month in loan originations by the end of 2019.

Fintech Firm OppLoans Named to Inc. 500 for Fourth Consecutive Year (Globe Newswire), Rated: A

OppLoans has been named to Inc. magazine’s prestigious 2019 Inc. 500 list for the fourth year in a row. Only four companies on this year’s list, including OppLoans, have placed on the Inc. 500 at least four or more times. With a three-year annual revenue growth of 1,435%, OppLoans placed #321 on the annual ranking of the fastest-growing companies in the U.S., 19 spots higher than the firm placed in 2018. OppLoans has achieved rankings of #340 (2018), #219 (2017) and #445 (2016).

FINICITY TO POWER DIGITAL SOLUTIONS FOR EMPLOYER STUDENT LOAN CONTRIBUTIONS (Finicity), Rated: A

Finicity, a provider of real-time financial data access and insights, announced today the rollout of its Student Loan Account Verification product, which will simplify employer benefit repayment programs, where employers are looking to contribute to or help repay employee’s student loans.

Fannie, Freddie to Consider Alternatives to FICO Scores (WSJ), Rated: A

One firm’s dominance over the credit scores used to vet many U.S. mortgages is getting a shake-up.

Fannie Mae and Freddie Mac, two mortgage-finance firms that back nearly half of U.S. mortgages, will have to consider credit-score alternatives to Fair Isaac Corp.’s FICO score when determining a mortgage applicant’s creditworthiness, under a new rule issued on Tuesday by the mortgage-finance giants’ federal overseer.

Zoca Loans Review: Installment Loans for Bad Credit Borrowers (Moneycheck), Rated: A

By going through a simple online application process, you have the chance to obtain between $300 and $1,000 – all of which can be funded the very same day.

HSBC launched a digital lending platform for online personal loans (Business Insider), Rated: A

HSBC USA partnered with Amount, a tech provider for financial institutions, to launch a digital lending platform that streamlines online personal loan applications. Consumers can evaluate loan options, submit applications online, and receive a credit decision within minutes.

HSBC will initially lend up to $30,000 with terms ranging from two to five years and it says funds will be available as quickly as the next day. The bank will charge fixed monthly payments starting 50 days after customers receive the loan. Amount’s platform — which has cumulatively originated $6 billion in loans to 800,000 customers — has been customized to HSBC’s preferences, including its proprietary risk models.

Source: Business Insider Intelligence

Virtual Bank Aims to be Primary Account Engine Behind Fintech Brands (The Financial Brand), Rated: AAA

It’s Time For Regulators To Expand Opportunities For Smaller Investors (Forbes), Rated: A

In the past decade we’ve seen a new financial movement take shape: a focus on giving more investors a seat at the table. More and more people and organizations are realizing that investors of all income levels and backgrounds could (and should) have the opportunity to access more asset classes. In this technology-enabled age of access, data and transparency in investing, there is an opportunity to update our laws to ensure that smaller investors are not excluded from the opportunity to create wealth — opportunities that have emerged under the financial ethos of fintech: crowdfunding, peer-to-peer, financial literacy and inclusion.

Former Coinbase CTO Balaji Srinivasan Joins DeFi Blockchain Project Findora (Yahoo! Finance), Rated: B

Balaji Srinivasan, the former CTO of Coinbase, has just joined decentralized finance blockchain project Findora.

Tricolor Launches New, Affordable Auto Insurance for Low Income, Credit Invisible Consumers (Globe Newswire), Rated: B

Tricolor, the used vehicle retailer focusing on the sale and financing of vehicles to the Hispanic consumer, today unveiled a groundbreaking new affordable auto insurance option for low-income and credit invisible customers through its affiliate company Tricolor Insurance. After testing the product earlier this year, Tricolor will begin rolling out the new insurance offering throughout all of its markets in Texas and California.

Artivest Achieves Critical Platform Momentum, Announces Executive Leadership Appointment (Yahoo! Finance), Rated: B

To date in 2019, Artivest, a multi-billion-dollar alternative investment platform, has achieved exponential organic growth across nearly every aspect of the business, greater than any previous full calendar year in the company’s history. The firm has attracted more new investors, allocations, investment managers, and—most importantly, in regard to how the wealth management industry gauges the success of digital platforms—has surpassed $1 billion in new investments transacted online by high-net-worth investors into private funds, at low minimums.

Netflix alum Steve Swasey to lead communications at Healthline Media (MMM-Online), Rated: B

Healthline Media has hired Steve Swasey as VP of communications, a newly created role at the health-focused publishing company.

In the first half of 2016, he worked at online lending marketplace Lending Club as SVP of corporate communications.

United Kingdom

Funding Circle Shares Rise on Positive Report (Crowdfund Insider), Rated: AAA

Last week, online lender Funding Circle (LSE:FCH) released its 6-month report and the shares have responded positively to the numbers. Six-month Revenue was reported at £81.4 million versus H1 2018 at £63.0 million – up 29%. Loans under management rose 37% to £3.54 billion and originations jumped 14% to £1.19 billion.

Funding Circle went public in 2018 priced at 440 pence per share. Funding Circle raised a gross amount of £300 million garnering a market cap of around £1.5 billion.

RateSetter to introduce stress testing to provision fund (P2P Finance News), Rated: AAA

RATESETTER is planning to introduce stress testing to its provision fund over the next financial year.

The ‘big three’ peer-to-peer lender’s provision fund is a buffer that protects investors against losses should any of its loans default. Borrowers pay cash into the provision fund in accordance with RateSetter’s assessment of their creditworthiness.

LendInvest Secures £200 Million Investment from the National Australia Bank to Expand Reach in Buy-to-Let Market (The Fintech Times), Rated: AAA

LendInvest has now raised over £1.8 billion of debt and equity from investors, making LendInvest one of the largest non-bank mortgage lenders in the country.

This new funding expands LendInvest’s capacity to lend in the UK Buy-to-Let market. LendInvest launched its first Buy-to-Let mortgage product in late 2017 after agreeing a substantial funding line with Citigroup. LendInvest has already lent more than £370 million in Buy-to-Let loans and is taking market share in the bank dominated market. In June this year, LendInvest also become the UK’s first Fintech business to securitise its own portfolio of assets worth £259 million, which received a AAA rating from Moody’s and Fitch.

SME online fashion retailers face barriers to innovation, Klarna (Retail Tech Innovation Hub), Rated: A

Small online fashion retailers in the UK are open to embracing innovative technologies, but various challenges are preventing widespread adoption, according to research by Klarna.

In terms of challenges, 53% said the cost of introducing flexible payment options was the biggest barrier to adoption.

Source: Klarna

SME online retailers look to overcome barriers to realise innovation ambitions (Retail Times), Rated: A

The research  conducted across 100 UK SME decision makers at online retailers in 2019 — shows the UK’s SMEs understand the need to embrace flexibility and innovation. Over the next 12 months they plan to prioritise investing in flexible payment options (49%) and e-commerce capabilities (48%) to meet consumer demand for a frictionless shopping experience.

Tandem Bank leverages Open Banking to offer competitive mortgages (Finextra), Rated: A

Ex-RateSetter business finance head launches new P2P platform (P2P Finance News), Rated: A

RATESETTER alumni Brian Cartwright has launched new alternative property lender Nexa Finance, with a focus on the East Midlands.

Cartwright (pictured), managing director at Nexa, previously worked as head of business finance at ‘big three’ peer-to-peer lender RateSetter.

His new venture, which bills itself as a regionally-focused business lender, aims to connect East Midlands-based small- and medium-sized enterprise (SME) property developers and house builders with funders.

Personal Finance Society publishes P2P guide following uptick in queries (P2P Finance News), Rated: A

MEMBERS of the Personal Finance Society (PFS) have been showing an increased interest in peer-to-peer lending, leading the PFS to produce its own ‘good practice’ guide to P2P.

The financial planning trade body has partnered with Octopus Investments to create the guide, which tells advisers that recommending P2P products could help them to increase their own assets under management, adding that “for suitable clients, it could prove a useful vehicle for excess cash holdings which may currently fall outside of the adviser’s view.”

Atom Bank, iwoca, Modulr Finance, & Currencycloud, All Benefit from BCR Grant (Crowdfund Insider), Rated: A

The BCR has awarded £10 million each to the following platforms:

I Never Got Paid From Winning Wonga Fantasy League in 2010 (TechRound), Rated: A

I worked for Wonga.com in 2010, back when you couldn’t even go to the bathroom without hearing their jingle on the radio. Like most offices today, everyone put in £10 to play in the office fantasy league and with Van Persie and Rooney in their prime, this was my year.

After doing some calculations, my £160 owed to me in 2010 would now be worth £2,752. (based on £24 per month for 9 years)

Without the price cap, you have 4 of those years at £30 per month. Making the total figure £3,040.

But again, I am being kind. This does not include default charges of £25 per month for every missed payment.

China

Shanghai-based Zendai closes two P2P units worth US$ 1.4 billion as Beijing intensifies crackdown (SCMP), Rated: AAA

Zendai Group, a closely held private investment company in Shanghai, abruptly shut down two peer-to-peer lending units valued at 10 billion yuan (US$1.4 billion), as Chinese financial regulators ratchet up measures to clean an industry fraught with frauds and defaults.

Another Peer-to-Peer Lending Platform Stumbles (Caixin Global), Rated: A

Laocaibao, a peer-to-peer (P2P) lending platform ultimately owned by private conglomerate Zendai Group, is the latest casualty of the troubles that have engulfed the scandal-hit industry over the past three years.

Laocaibao has stopped providing loans and Zendai’s investment and consulting arm, which directed clients to the platform, has fired employees, according to statements from the companies and investigations by Caixin.

Peer to Peer Lender Fincera Targeted by Local Chinese Government in Demand to Cease Lending Operations (Crowdfund Insider), Rated: A

Fincera Inc. (OTCQB: YUANF), a China-based peer to peer lending platform providing access to capital for SMEs, has become the target of a local government attempt to shut down P2P lenders.

According to a note from Fincera, the Hebei provincial government, where Fincera is based, has requested that Fincera “cease P2P business operations.”

Fincera Announces Intention to Sell Kaiyuan Finance Center (Benzinga), Rated: A

To protect the interests of all its stakeholders-investors, borrowers, brokers, and employees, Fincera has announced its intent to sell the Kaiyuan Finance Center, which has an estimated valued of over RMB4.0 billion.

Fincera is the largest Hebei-based company operating in the peer-to-peer lending industry, comprising over 90% of the province’s market with approximately RMB9.0 billion in unpaid principal balance.

Fincera Inc. (“Fincera” or the “Company”) (OTCQB:YUANF), a provider of internet-based financing and ecommerce services for small and medium-sized businesses (“SMBs”) and individuals in China, today announced that businesses operating within the P2P (peer-to-peer) lending industry in Hebei province, including the Company, have received requests by the Hebei provincial government to cease P2P business operations. The Company vehemently disagrees with the request and is taking steps to protect its many stakeholders, including initiating the process of moving its business registration to Beijing where local regulators are supportive of the P2P industry.

Senmiao Technology Announces Unaudited Financial Results for First Quarter of Fiscal Year 2020 (Yahoo! Finance), Rated: A

Senmiao Technology Limited  (AIHS) (“Senmiao”), a provider of automobile transaction and related services and an operator of an online lending marketplace connecting Chinese investors with individual and small-to-medium-sized enterprise borrowers in China, today announced its unaudited financial results for the quarter ended June 30, 2019.

First Quarter of Fiscal 2020 Highlights

  • Total revenues increased by 3,975% year-over-year to $5,094,440 from $125,026
  • Gross profit increased by 758% year-over-year to $1,072,128 from $125,026
  • Loss per share decreased by 50% year-over -year to $0.02 from $0.04
European Union

German mobile bank N26 eyes eventual IPO, CEO tells newspaper (Reuters), Rated: AAA

Berlin-based digital bank N26 is planning an eventual stock exchange listing, its chief executive has told a German newspaper.

Google exec joins N26 as chief banking officer (Finextra), Rated: B

N26 today announced the appointment of Thomas Grosse as Chief Banking Officer. The newly introduced role is yet another step towards realizing N26’s ambition to become the first truly global and fully digital retail bank. As Chief Banking Officer, Thomas will oversee the set-up of regulated N26 banks and bank partnerships within the N26 Group, thus ensuring the highest standards in product, processes and customer experience across all markets.

Thomas will begin his new role at N26 this October, reporting directly to N26’s co-founder and CFO, Maximilian Tayenthal.

European Fintechs Escape Troubles Afflicting Established Banks (Bloomberg), Rated: AAA

Its latest fundraising gave Klarna, which facilitates online installment payments, a $5.5 billion valuation. European fintech companies raised $3.3 billion in venture capital in the first half of 2019, up from $1.9 billion in the same period last year, according to data compiled by CB Insights. In contrast, an index of European Union banks has dropped 39% the past 18 months.

FlixMobility and Klarna raise a lot of money (Tech.eu), Rated: A

Tech.eu Podcast hosted by Natalie Novick and Andrii Degeler is a show in which we discuss some of the most interesting stories from the European technology scene and interview leading entrepreneurs and investors from across the region.

EstateGuru Seeks to Carve Out €5 Billion of European Real Estate Financing Market (Crowdfund Insider), Rated: A

EstateGuru, a crowdfunding platform based in Estonia, is out with a release predicting it will claim €3-5 billion of the European real estate financing by 2025

EstateGuru adds that approximately 70% of SMEs lack access to credit and this is a major constraint to their growth. The company claims that 12% of all loans are set to be financed by alternative providers, including crowdfunding platforms, by 2025 as it appears to be interested in expanding into other financing verticals.

Barclays releases £100,000 for unsecured SME lending through app and online banking (Finextra), Rated: A

New research released by Barclays has revealed that over half of the UK’s small and medium enterprises (SMEs) have woken up at night with a new business idea (57 per cent), while the most popular time for an idea to be dreamt up is between 2-3 am (28 per cent).

Analysis revealed that almost half (48 per cent) of SMEs said that they are more creative at night, with over two fifths saying they are more productive outside of 9 – 5 working hours and keep a note pad and pen by their bed so they can jot down ideas. Half attributed this to having extra time to think away from daytime pressures.

In a High Street banking first, Barclays has launched £100,000 unsecured lending for SMEs on its award winning app and online banking platform, with thousands of SMEs set to benefit from access to faster finance.

German Fintech Finleap Announces New Business Unit “Finleap Connect” (Crowdfund Insider), Rated: B

FinLeap, the fintech start-up platform behind Germany’s SolarisBank, announced on Wednesday the launch of its new business unit, FinLeap Connect. According to FinLeap, the fintech platforms finreach solutions and infinitec solutions will become part of this business unit.

International

Global Yields Crash, GSKY for sale, LC earnings (PeerIQ), Rated: AAA

Today, more than $15 Tn in sovereign debt trades at a negative yield. In Germany, for instance, bond investors have moved from charging 75 bps last year to a willingness to pay for the privilege of providing < 0% money for 10 years.

Source: PeerIQ

GreenSky shares sank ~37% after a strong earnings report was paired with news that the marketplace was exploring a potential sale or merger.

Alternative Data: The Great Equalizer To Lending Inequalities? (Forbes), Rated: AAA

Alternative data has come into the spotlight in financial services, and it presages a significant shift in credit availability for unbanked and underbanked consumers. There are about 

Celsius Network Announces Increased Accessibility To Crypto-Backed Loans with Updated Terms for Borrowers (Business Wire), Rated: A

Celsius Network (work/), the industry-leading cryptocurrency platform, announces updated terms for borrowers aiming to provide millions of users with increased accessibility to low-interest crypto-backed loans. In addition, Celsius has reduced its minimum requirement for loan requests to $1,500. Recently Celsius announced it will expand its lending operations throughout Europe.

The latest updates to Celsius Networks lending service include:

  • Lowered minimum requirement for loan requests from $3,000 to $1,500
  • Up to 30% discount for CEL token holders paying loan interest in CEL with yearly rates as low as 3.47%
  • Borrowers can request a loan in USD or supported stablecoins
  • Loans are issued the same day
  • Members can apply through the Celsius mobile app or on the Celsius Network website

ONTOLOGY BLOCKCHAIN HIGH FIVES WITH DEFI (ICO Examiner), Rated: B

Ontology (ONT), a project offering linking and bridging solutions for multiple blockchains, has announced five new partnerships with companies operating in various geographical locations within the decentralised finance (DeFi) arena.

The latest handful of businesses to be attracted to Ontology’s framework of compatibility are Hong Kong registered Babel Finance, USA-focused crypto loan specialists SALT Lending, cryptocurrency services provider LendChain, Hong Kong-based Fountain Financial, and Chinese trading platform HOX.

Australia

CBA FY19 results a mixed bag, digital metrics positive and Klarna will be a hit (Verdict), Rated: AAA

CBA FY19 underlying net profit for the year to end June falls by 5% to A$8.49bn ($5.75bn). The bank’s overall results do not quite match analyst forecasts.  But there is a strong argument that in all the circumstances the results represent a resilient full fiscal.

Release of the CBA FY19 earnings also serve to highlight the bank’s success in upping its digital strategy.

Operating income is 2% lower on margin pressure.

Net interest income is down by 1.2% on lower retail mortgages margins and higher funding costs.

Business lending increases by 4% while retail mortgage growth is also strong delivering 4% volume growth for the year.

India

Faircent raises fresh funding from investors led by Das Capital & Gunosy Capital (India Times), Rated: AAA

Faircent.com, a P2P lending company, has recently raised capital in a funding round. The latest funding, led by Singapore-based Das Capital and Gunosy Capital, also saw participation by existing investors Starharbor Asia Pte Ltd, and M&S Partners Pte Ltd (Sin Growth Partner Pte Ltd).

Keep retail indulgence in check (livemint), Rated: A

Overspending is a big problem for many. “They buy things they don’t need with money they don’t have to impress people they don’t like. Not passing a judgement here, but money does buy some kind of happiness for many,” said Rachit Chawla, chief executive officer, Finway, a registered non-banking financial company (NBFC). 

Payday loans, digital lending platforms, and P2P lending have evolved, so has the penetration of credit card, personal loans, and the like. At a behavioural level, de-linking debt with shame has also made it easy for people to borrow.

Asia

Hexindai-backed Musketeer Completes Registration for Its P2P Platform in Indonesia (Yahoo! Finance), Rated: AAA

Hexindai Inc. (HX) (“Hexindai” or the “Company”), a fast-growing consumer lending marketplace in China, today announced that its invested Indonesian online lending platform, Musketeer Group Inc. (“Musketeer”), has completed registration for its peer-to-peer (P2P) lending platform with the Indonesian Financial Services Authority (OJK).

Musketeer’s P2P platform, PT Technology Indonesia Sentosa, is among the early batch of lending companies in Indonesia that have registered with OJK.

Philippines to Relaunch OF Bank to Create Digital-only Bank (Regulation Asia), Rated: A

The Overseas Filipino Bank was launched in January to cater to overseas Filipino workers, who will more easily be able to access digital-only services.

Latin America

Fintech Debt Investors Follow Equity Dollars Into Latin America (Forbes), Rated: AAA

Venture capital investments in LatAm startups quadrupled to a record $2 billion in 2018 from $500 million in 2016, according to an annual review by the 

Financial report for the second quarter and six months period 2019 (Yahoo! Finance), Rated: B

  • VEF made a follow-on investment in FinanZero, a Brazilian online consumer loan marketplace, who closed a Series B investment round of SEK 100 mln (USD 10.5 mln).

Authors:

George Popescu
Allen Taylor

The post Thursday August 15 2019, Weekly News Digest appeared first on Lending Times.

How Digital Lending is Changing With New Technologies

How Digital Lending is Changing With New Technologies

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 […]

How Digital Lending is Changing With New Technologies

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.

Author:
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.

Thursday May 3 2018, Daily News Digest

10 best states for small business lending

News Comments Today’s main news: Microloans for SMBs are becoming big business. RateSetter offers IFISA transfers. Funding Circle opens IFISA to transfers. Funding Circle SME Income Fund issues more shares. BNP Paribas Asset Management launches SME lending fund. Today’s main analysis: Lendio’s top 10 best states for small business lending. Today’s thought-provoking articles: The missing benefit in employee financial […]

10 best states for small business lending

News Comments

United States

United Kingdom

International

European Union

Other

News Summary

United States

Microloans a glimmer of hope for small businesses in need (USA Today) Rated: AAA

The microloan market has evolved in the last five years, says Antara Dutta, a social entrepreneur and mentor with the Delaware chapter of SCORE, a volunteer network of small business advisers. Many nonprofit organizations, foundations and peer-to-peer lending networks have also entered the microloan market.

One such company is Funding Circle, a San Francisco-based lending platform that connects investors with small business owners.  “Banks have really pulled back from doing small business loans over the past decade,” says Sarina Siddhanti, Funding Circle’s U.S. Head of Commercial. “We fill that gap.”

While Funding Circle awards business loans up to $500,000, they also offer microloans to entrepreneurs who need less.

Lendio Announces Annual List of Top 10 Best States for Small Business Lending (Lendio) Rated: AAA

In honor of National Small Business Week, Lendio, the nation’s leading marketplace for small business loans, today announced its third annual list of top 10 states for small business lending, based on lending data from the Lendio platform, which matches businesses with more than 75 lenders.

Source Lendio; sba.gov

CommonBond’s Latest Study Reveals the Missing Benefit in Employee Financial Wellness (Crowdfund Insider) Rated: AAA

On Tuesday, CommonBond, an online lending platform servicing the student loan market, released the results of one of the most comprehensive employee financial wellness benefits studies to date. According to the lender, the research revealed the extent to which student debt affects employees’ financial wellness, as well as how companies are meeting, or not meeting,  the financial wellness needs of their employees.

Key findings of the study included:
  • Student debt cuts across all age groups, including parents who are taking out loans for their children: Nearly 75% of all workers have taken out loans to fund their own education, while 21 percent of workers expect to take out a loan for a child or other family member’s education in the next five years. 
  • Human resources executives prioritize benefits for employees without student debt: For employees with student debt, student loan repayment is the most-requested financial wellness benefit; however, human resources teams rank student loan repayment as their third priority. 
  • Employees do not think their benefits are as innovative as human resources executives believe: 71% of human resources executives see their benefits offering as innovative, compared with 50 percent of employees. 
  • Student loan benefits attract talent, retain employees, and improve work performance: 78% of employees with current or future student loan debt want their employer to offer this benefit, and 65% of employees over age 55 in these categories want the same.

RealtyMogul Brings Fintech Solutions To Commercial Real Estate Investment (Benzinga) Rated: A

What does your company do? What unique problem does it solve?

RealtyMogul is a unique commercial real estate private markets investing platform that provides discerning investors exclusive access to thoroughly vetted opportunities, rigorous underwriting, and high-touch customer service through licensed investment professionals. We strive to build wealth through sound principles and data insights, serving real people who want a smart alternative investing strategy.

Fannie and Freddie approve thousands of loans with no formal appraisals (The Washington Post) Rated: A

For homeowners and buyers, it’s been a windfall: relief from having to pay for a traditional mortgage appraisal that usually costs between $400 and $600. The savings nationwide to consumers in just the past year alone may total tens of millions of dollars.

Last year, the two largest sources of American mortgage financing — federally backed Fannie Mae and Freddie Mac — began accepting home-purchase loans that carried no formal property appraisal.

Ryan Lundquist, an appraiser in Sacramento, noted that computer programs “cannot smell 20 cats living at the property.”

Pat Turner, a Richmond appraiser, says that, worse yet, the “savings” from Fannie and Freddie may not always flow to buyers. He cited a recent case in his area where a major online lender allegedly charged a buyer $600 on a loan with an appraisal-fee waiver.

 

After ceding a key competitive advantage to fintech companies in recent years, several mass market and regional banks are testing alternative data for use in marketing, pre-screening, and underwriting consumer loan products like credit cards and personal loans, and exploring emerging use cases in fraud prevention and other areas.

While most lender decisions still use traditional sources, such as credit file data managed by the consumer reporting agencies, the potential for alternative data to transform lending is clear. Rent and utility payments, employment information, and behavioral data paint a clearer picture of a consumer’s creditworthiness and could allow lenders to reach underserved populations. In fact, alternative data has allowed Lending Club, a marketplace lender, to extend lower-priced credit to borrowers that would otherwise be classified as subprime, according to the Federal Reserve.

Inside Bank of America’s big plans for small businesses (TearSheet) Rated: A

What about branch transformation on the small business side? How is B of A marrying its physical and digital strategies?
We know in certain pockets of towns and cities you’ll have more business owners coming in and out than in others; in those centers with high traffic of business owners we add more capabilities so we’re there for them and have more people who understand small business.

What’s an example of technology you’re investing in?
Three weeks ago we launched our relationship rewards program, which is our version of the Preferred Rewards, where when you bring more to us — more deposits or lending — you get more benefits. It’s a very straightforward way to bank with us that encompasses lending, merchants and operating accounts. That’s a technology investment in itself because we have to on the back-end tie everything together and understand the full picture of the relationship; it comes from updating our products and solutions in the backend to streamlining the underwriting and fulfillment processes.

 

 

First RealFund Raises $ 500,000 of Preferred Equity for Brooklyn Property Renovation (Citizen Tribune) Rated: B

First RealFund (“FRF”) has raised $500,000 of preferred equity financing for the renovation of a 4-story brownstone in Brooklyn’s Bedford Stuyvesant neighborhood.

Morgan Stanley kicks new tech strategy into gear (American Banker) Rated: B

Morgan Stanley CEO James Gorman has asked Rob Rooney, the investment bank’s technology chief and leader of its international unit, to return to New York to focus solely on the tech part of his job.

“We have enormous, staggering amounts of data for risk management, [anti-money-laundering], regulatory and other purposes,” Rooney said. “The use cases here are enormous. The job in our technology organization is to make sure we build a strategy we can leverage across the firm, otherwise it’s not efficient.”

The bank is increasing its investments in innovation and cybersecurity, he said.

United Kingdom

RateSetter opens IFISA to transfers (Peer2Peer Finace) Rated: AAA

RATESETTER has opened its Innovative Finance ISA (IFISA) to transfers from other providers.

RateSetter will accept full and partial transfers and there is no limit on the number of existing ISAs that can be transferred.

RateSetter introduces bonus scheme (Bridging & Commercial) Rated: B

Investors will receive a £50 bonus if they recommend the platform to a family member or friend who then invests £1,000.

The referred person can also receive a £100 bonus if they keep the £1,000 invested in RateSetter for a year.

Funding Circle opens IFISA to transfers (Peer2Peer Finance) Rated: AAA

FUNDING Circle has opened its Innovative Finance ISA (IFISA) to transfers, meaning that all of the ‘big three’ peer-to-peer lenders now offer this capability.

“Since last November more than £90m has been lent directly to businesses through the Funding Circle ISA, and we’re pleased to see so many of you taking advantage of the opportunity to earn attractive, stable returns tax-free,” the company said on a blog post on its website.

 

6%-yielding Funding Circle fund issues more shares (Citywire) Rated: AAA

The 6% yielding lender to small businesses, plans to sell up to 24.9 million shares it holds in treasury having bought them back when they briefly traded at a discount two years ago.

The shares are being offered to ‘qualified’ experienced investors at  102.2p, which is 2.2% less than the share price at Monday’s close and a 2%-3% premium to their net asset value.

Starling Bank partners with Samsung for mobile payments (AltFiNews) Rated: A

Announced today, digital bank Starling has partnered with Samsung to offer mobile payments method Samsung Pay to all Starling customers, creating the bank’s fourth partnership for making purchases via a mobile phone.

Starling users will now be able to make contactless payments at the point of sale using nothing but their Samsung phone, using iris, fingerprint or PIN recognition to prove their identity.

Nucleus targets start-ups with new type of loan (Peer2Peer Finance) Rated: A

The alternative business finance provider announced the launch of Start-up Finance on Wednesday, which is tailored to help start-ups get their business off the ground.

Young companies can borrow between £25,000 and £20m, with a secured interest-only loan, over a period of up to five years.

High-cost lending provides “a socially valuable function”, says regulator boss Bailey (City A.M.) Rated: A

The boss of the UK’s top financial regulator believes access to controversial high-cost loans is an “important feature” for many Britons to fund everyday living.

Andrew Bailey, the chief executive of the Financial Conduct Authority, today indicated a clampdown on the sector would not be forthcoming.

How to become an IFISA millionaire in 25 years (Peer2Peer Finance) Rated: B

Figures from P2P analyst 4th Way suggest if a lender invests £10,000 each year across several platforms and aims for nine per cent interest after bad debts, they could be a millionaire within two-and-a-half decades.

Rip-off debts soar as rent-to-own, catalogue credit and doorstep lending surge after payday loan crackdown (The Telegraph) Rated: B

Debts from catalogue credit, doorstep lending and rent-to-own have all more than doubled in recent years even as regulators cracked down on payday loans.

Lenders now face a crackdown as the City watchdog wants to make sure high-cost loans are only used by borrowers who can afford the debt and are helped by it.

 

China

Niwodai Seeks Partners for Fintech-driven Expansion into Southeast Asia (PR Newswire) Rated: AAA

Niwodai, one of the largest Chinese P2P lending companies, is said to be seeking a path into Southeast Asia, according to sources. The company is in frequent contact with potential partners, looking to map out a proper route to advancing their business, of which financial technology is the most powerful tool. Considering the challenges that most Chinese fintech companies have faced, proper cooperation with a local partner should be a win-win situation.

European Union

BNP Paribas Asset Management launches SME lending fund (AltFiNews) Rated: AAA

BNP Paribas Asset Management has launched a new SME lending fund for institutional investors.

The BNP Paribas Novo 2018 business loan fund follows on from its Novo 1 fund, launched in 2013. The new fund has the backing of the FF and the CDC and aims to provide new sources of financing to help French medium-sized companies expand.

BNP Paribas Novo 2018 could invest €264m over the next three years, the firm said in a statement.

German Varengold Bank Provides Credit Line to Estateguru (P2P Banking) Rated: B

Estonian property p2p lending marketplace Estateguru announced that it has secured its first institutional investor.

In March 2018, Estateguru signed the firm’s first institutional credit line to be invested in loans originated in the Baltic market with Germany based Varengold Bank AG.

International

New FIS Study Finds Larger U.S. and U.K. Banks Are Vulnerable to Losing Critical Small-Midsized Business Customers (Fintech Finance) Rated: AAA

The study found that more than 80% of surveyed SMB customers in the U.S., and 70% of SMB customers in the U.K., are satisfied with their primary banking providers. However:

  • In the U.S., SMBs report higher satisfaction with services from community banks over larger banks.
  • In the U.K., nearly one in four SMBs – most of which use larger banking providers – are planning to switch banking providers in the next 12 months
  • Common reasons cited by SMBs in both countries for switching banks are uncompetitive fees, dissatisfaction with services/products provided, outdated bank processes, or being declined for a business loan/line of credit.
  • SMBs in both countries report difficulty in obtaining reliable and accurate information from their banks, especially larger institutions, without visiting a physical bank branch.

Growing Adoption of Digital Tools

  • About 60% of SMBs in both countries have increased the number of transactions done digitally over the past year.
  • More than 40% of financial transactions were completed digitally by SMBs in both countries.
  • Acceptance of online, mobile app and person-to-person payments increased 38% over the last year for U.S. SMBs.

 

Banks are treating customers like product developers (TearSheet) Rated: A

Banks’ race to meet the customers “where they are” has taken on a new twist: customers are now product developers — not just end users.

Digital-only challenger banks like Monzo are emphasizing customer involvement to build a human connection with customers — a move others like Tandem, Revolut and Chime are also emulating. Chime, for instance, recently launched a chat feature within its mobile app that lets customers provide real-time feedback, a tool that’s used by around 50,000 users every month, according head of product Zachary Smith.

Three-year-old Monzo, which has 650,000 customers, has been active on various fronts in seeking feedback from customers on products while they’re in development — both through in-person “Testing Tuesdays” at Monzo offices and an exchange of views and polls on its online forums.

Rad Card Great HODL Survey Reveals Average Crypto User 25-34, Male (Bitcoin Exchange Guide) Rated: A

The team at Rad Card, found online at RadLending.com, just completed something called “The Great HODL Survey”.

  • The average cryptocurrency user is a male between the ages of 25 and 34
  • That person holds a bachelor’s degree
  • The average cryptocurrency users “hodls” between $1,000 and $10,000 worth of tokens, but has never used cryptocurrency for payment of goods and services
  • Crypto investors, overall, “prefer not to use their assets in real life as much as business owners”, according to the study, as well as freelancers or service providers that accept cryptocurrencies in exchange for their work, products, or services

Core features of the RAD platform include a P2P lending platform, crypto-secured lending, and a digital credit score. The company will offer its services to miners, small crypto businesses, post-ICO companies, exchanges and traders, and traditional fiat investors, all of whom can benefit from crypto-backed loans.

Fintech and the Sharing Economy (TLE) Rated: B

One of the phenomena this has supported is a surge in partnerships forged online, to provide peer to peer services.

The prediction is that the sharing economy will be worth over $335 billion by 2025. Fintech is pivotal in this, as it’s responsible for developing the accessible and efficient systems to carry out these digital “barter and buy” opportunities.

Peer to peer lending using Fintech also requires less cost to facilitate and therefore provides greater equality of opportunity.

ZPER Embeds Trustonic in New Mobile Wallet for Optimized Security (Blockchain News) Rated: B

Decentralized peer-to-peer (P2P) Lending Platform ZPER is using features from digital security semiconductor group Trustonic in its new mobile cryptocurrency wallet, claiming that it will be the most secure available.

The wallet will also be able to store and exchange multiple cryptocurrencies, thus enabling P2P cross-border value exchanges.

 

Australia/New Zealand

Online lender continues huge loan growth (Australian Broker) Rated: AAA

Neo-lender Wisr Limited saw a 42% growth in its origination of personal loans in the latest financial quarter.

This was the company’s largest quarter in loan originations since Wisr, formerly known as DirectMoney, began in 2014.

Loan originations have continued to grow over the financial year, growing by 20% in the first quarter and by 79% in the second quarter.

The FMA Makes A Guidance Note For Peer – To – Peer Lending Services & Crowdfunding Services (Mondaq) Rated: A

The Financial Markets Authority (FMA), New Zealand’s regulator for financial services, has released a guidance note to licensed peer-to-peer (P2P) lending services, licensed crowdfunding services for fair dealing in advertising and communicating offers of financial products or services.

Who is this guidance for?

  • The FMA addressed the guidance note to P2P lending services and crowdfunding services, but it is useful for anyone who is promoting or advising others about these services (i.e marketing teams, investment bankers, lawyers).
  • The fair dealing expectations stretch beyond New Zealand’s borders, so they apply to people overseas. Anyone who acts in relation to, or makes an offer of financial products or services in New Zealand should take note.
  • The guidance note is applicable to any media channel that businesses use to communicate and advertise their financial products and services (be it snail-mail or social media).

 

 

Bank names new group executive (Mortgage Business) Rated: B

Online lender ME has appointed Craig Ralston as group executive of customer banking, effective as of 1 May. He will be responsible for ME’s product and service delivery, with a focus on improving the design, simplicity and fairness of the bank’s offerings.

Mr Ralston joined ME in February 2015 as head of strategy to enhance the bank’s strategic and business planning cycle.

India

Fintech Startup OpenTap Raises ₹3 Crore from HNIs (IndianWeb2) Rated: AAA

Chennai-based OpenTap, a fintech startup focusing on the alternate lending segment, has raised about ₹3 crore funding from HNIs (high networth individuals). The capital raised will be used by the startup to strengthen its technology infrastructure and widen the reach of its financial services network across the country. The startup had earlier raised undisclosed amount in seed funding, in May 2015.

India Dealbook: MyLoanCare raise funding (Deal Steet Asia) Rated: B

Fintech startup MyLoanCare raises $975k in Series A round Online loans marketplace MyLoanCare, operated by My Finance Care Advisors Pvt. Ltd, has raised Rs 6.5 crore ($975,000) from Ncubate Capital Partners, the venture capital arm of Gurugram-based SAR Group.

Asia

Startup bags funds from Singapore ex-minister to get ultra-wealthy into crowdlending (Tech in Asia) Rated: AAA

Singapore-based Helicap is a new fintech platform that aims to bring a fund management angle in the peer-to-peer (P2P) lending space. To make this happen, it has raised US$1.5 million in seed funding.

The round was led by Teo Ser Luck, the former Minister of State for Manpower who last year decided to trade politics for the startup sector. Fintech company Nufin Data, where Teo serves as chairman, also invested.

Latin America

Neon Raises $ 22M in Series A Funding (Finsmes) Rated: AAA

Neon, a São Paulo, Brazil-based fully-digital Brazilian bank, raised $22m in Series A funding.

Propel Venture Partners, Monashees, Quona Capital, Omidyar Network, Tera, and Yellow Ventures participated in the funding round. As part of the investment agreement, Neon Pagamentos SA transferred its controlling interest to a holding company in the United Kingdom. In addition, as part of the new round, Jay Reinemann of Propel Venture Partners, and Marcelo Lima of Monashees, are joining Neon’s board of directors.

The company intends to use the funds for product expansion, investment in technology and innovation on customer experience.

Canada

On Wednesday, Lending Loop, a peer-to-peer online lending platform for small-business loans, announced a pilot project in partnership with Ontario that will provide $3-million of loans over the next two years. The government will boost Lending Loop’s loans by 10 per cent, which will help fund more than $30-million of loans to businesses across Ontario. The government will receive a full re-payment of the loan plus interest at the end of the loan terms.

Authors:

George Popescu
Allen Taylor

Taking Mortgage Lending, Jumbo Loans Where They’ve Never Gone Before

mortgage lending jumbo loans

Alternative lending has created a new benchmark in borrower experience, especially in the consumer lending space. The fintech lending industry seems to be lagging behind in the mortgage industry, and especially jumbo loans (mortgage loan with strong credit quality where the amount exceeds conventional conforming loan limits), due to their nonconformity with set income and […]

mortgage lending jumbo loans

Alternative lending has created a new benchmark in borrower experience, especially in the consumer lending space. The fintech lending industry seems to be lagging behind in the mortgage industry, and especially jumbo loans (mortgage loan with strong credit quality where the amount exceeds conventional conforming loan limits), due to their nonconformity with set income and credit patterns. Neat Capital is a Boulder, Colorado-based alternative mortgage lender that understands the massive market opportunity the above issues represent. It is focused on creating a digital lending platform for mortgages that is fast, reliable, paperless, and value-accretive for borrowers.

Streamlining Mortgage Lending Underwriting

Founded in 2015 by Luke Johnson, Chad Lewkowski, Christin Price, Ryan Brennan, and Steve Herschleb, the company wanted to deliver a modern approach to mortgage lending centered on making it simple, unique, and transparent.

Underwriting and loan documentation is considered a back office process in traditional banking. Neat Capital is trying to bring this core activity online and looking to capture the loan documentation, underwriting, and loan selection process in one single online session for the client. This facilitates a hassle-free experience for the client and better conversion rate for the startup. It has been able to bring down the entire cycle to 13 days as compared to the 30-60 day norm in the jumbo loan industry.

The company has raised a total of $4.2 million in two funding rounds. Its angel round saw an investment of $2 million. But the company had to face a major crisis in December 2016 and was on the brink of shutdown before it could recover. At the same time, Luke Johnson, CEO and founder, faced a personal tragedy with his wife battling brain cancer. But the employees, investors and other stakeholders stuck together and fought hard to become the fastest lender in the U.S. for jumbo loans.

How Neat Capital is Different From Most Mortgage Lenders

The traditional mortgage lending process is recursive in nature. It involves sending information and documents to underwriting, following up with clients for clarifications, and if the underwriter does not like it, it results in rejection or a change in terms. The whole process is susceptible to getting bogged down on a regular basis, which leads to delays and surprises. So the secret sauce for Neat Capital is to break down this unproductive cycle and provide certainty at the outset in a single online session. The company is unique because it can evaluate a loan in real-time according to a very detailed underwriting guideline and with a high degree of accuracy due to its proprietary artificial intelligence algorithms.

Another USP is its ability to handle borrowers with complicated income streams, net worth, and credit who can’t be analyzed on normal mortgage parameters. The company funds from its balance sheet, but it resells loan into the market almost immediately to free its balance sheet for expansion.

Neat Capital is focused on high quality credit with a weighted average FICO (Fair Isaac Credit Organization) score of 766 and weighted average LTV (Loan To Value Ratio) of 72%.

Neat Competitors and Customers

Alternative lending has seen traction with players like Better Mortgage and SoFi targeting the same clientele. But Neat Capital believes there is a huge addressable market, and it is incumbents like Wells Fargo that are its biggest competitors.

Its typical customer usually has an owner-occupied unit in San Francisco. It also has clients looking to buy second homes or investors looking to buy houses as a real estate play. But it is not restricted to any particular category and covers all conventional mortgage options, as well.

The Future of Mortgage Lending

The mortgage industry has gone online and the application process has moved entirely onto digital platforms. The winner of the market will be the player who can execute the entire loan application process in one single session versus the current scenario of requiring multiple sessions for loan application closure. Also, the industry needs to be ready for a smartphone future where the first and only point of contact between the platform and the borrower would be a smartphone. The application engine needs to be smartphone-powered so that the platform is not losing clients to other smartphone-ready peers.

The company’s future plans are to cover the entire spectrum of conventional Fannie Mae loans to jumbo loans. Instead of focusing on yield expansion or going down the credit quality ladder, the company will aim to concentrate its bets in niches where it believes that other lenders have mis-priced the risk.

Neat Capital also needs to grow while educating clients and referral partners, wealth managers, real estate agents, and employers about why they are different and what is their unique selling proposition. Currently, the company operates in nine states, but it is planning to double that number in 2018.

Conclusion

Neat Capital has focused on a market gap in mortgage lending that has been overlooked by the alternative lending industry. The challenges due to non-conforming loans and income streams & net worth not falling under typical lending patterns made it difficult for players to successfully compete with traditional banks. Neat Capital seems to have solved this problem. A 13-day turnaround for an industry that usually sees transactions taking months to close will definitely revolutionize the market.

Author:

Written by Heena Dhir.

Demystifying Securitization

growth of securitization

Mortgage Backed Securities (“MBS”), Collateralized Debt Obligations (“CDOs), Collateralized Loan Obligations (“CLO’s), Asset-backed Commercial Paper (“ABSCP”) and other types of securitized products are largely responsible for the Subprime Crises in 2008. These financial instruments created massive financial losses and large-scale damage to the economy overall. A great deal of negative press followed demonizing certain industry […]

growth of securitization

Mortgage Backed Securities (“MBS”), Collateralized Debt Obligations (“CDOs), Collateralized Loan Obligations (“CLO’s), Asset-backed Commercial Paper (“ABSCP”) and other types of securitized products are largely responsible for the Subprime Crises in 2008. These financial instruments created massive financial losses and large-scale damage to the economy overall. A great deal of negative press followed demonizing certain industry participants and the use of financial engineering. Best-selling books like Too Big to Fail and The Big Short along with countless congressional testimonies drew even more attention to the subject.

With all the media attention came a fair amount of misinformation. For decades now, securitizations funded large consumer purchases including automobiles and homes. It also fueled the credit card industry and the expansion of consumer credit. Securitizations fund the small to large businesses and countless other aspects of the United States and world economy. Yet, for many it is a relatively new phenomenon that they may not completely understand, or even mistrust.

More recently, internet lenders brought an entirely new buzz to the securitization market. Their more customer-centric model to lending resulted in explosive growth. So much so, the original peer-to-peer funding model was largely replaced by the efficiency of the securitization market. According to Bloomberg/Peer IQ, total securitization of marketplace loans is now close to $90 billion, up from less than $50 million at the end of 2013.

What is Securitization?

Securitizations, or, more specifically, asset-backed securities (“ABS”), are pools of loans such as residential and commercial mortgages, auto loans, consumer loans, leases, trade receivables, or other assets packaged in security form. The loan pools often separate into different securities with varying levels of risk and return.  Lower risk, lower interest tranches receive the loan payments first, with the holders of the higher-risk securities receiving payments thereafter. The securities sell as new issues and subsequently may trade in the secondary securities market. Public offerings of ABS require registration with the SEC.

Securitization is like secured lending in many ways. Secured lenders require borrowers to pledge specific assets as collateral for a loan. Cash flows from the borrower and the assets pledged as collateral back the loan in the case of default. In a similar way, the loan pool in the securitization trust acts as collateral for a security. In a securitization of secured loans, assets that collateralize the loans in the pool also flow through the trust in case of a loan loss and subsequent liquidation. The holder of the security has a rightful claim to the cash flows of the loan pool including principal and interest payments, loan sales and recoveries from any defaults.

Essentially, securitization is the process of taking a group of homogeneous assets and transforming them into a security. The assets are pooled together and repackaged into a single security, which is then sold to investors. The security entitles them to the incoming cash flows and other economic benefits generated by the asset pool.

A Simplified Overview of the Securitization Process

From FDIC.gov website

How did Securitization Begin?

The modern history of securitization began in 1970s when Government Sponsored Enterprises (“GSE’s) including the Government National Mortgage Association (“Ginnie Mae”), the Federal National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Corporation (“Freddie Mac”) issued the first residential mortgage-backed securities. These first issuers pooled residential mortgage loans and used them as collateral for securities. The market was significantly expanded by the Emergency Home Finance Act of 1970, which authorized Fannie Mae and Freddie Mac to buy and sell mortgages insured or guaranteed by the federal government. Along with credit enhancement of the government guarantee came an entire industry of creating newly issued bonds and trading securities in the secondary market. By 1977, Bank of America issued the first non-government sponsored security in the form of a private label (non-government backed) residential mortgage pass-through bond.

Securitization evolved over the decades, as different methods and products developed from the process. A critical component was the Tax Reform Act of 1986. The Tax Reform Act eliminated the double taxation of income earned at the corporate level by issuers and dividends paid to securities holders. It also allows for Real Estate Mortgage Investment Conduits (“REMICs” or “Conduits”). A REMIC is an important distinction for balance sheet lenders as they were now permitted to structure a security offering as a sale of assets. The ability to package assets off-balance sheet offered regulatory capital relief for lenders and greatly increased capital available to fund growing consumer loan demand. Mortgage securitizations then led to new types of asset securitization including auto loans, credit card receivables and others. As the United States paved the way other advanced countries soon followed with their own ABS.

By the 1990s the securitization market exploded. New rules in the United States by the SEC along with REMIC legislation made the process more efficient. Global consumer culture clamoring for access to credit paired with the expansive growth of institutional managed money seeking new investment opportunities was the perfect combination. Consumer credit was now available to purchase everything from houses and cars to consumer electronics and higher education.

The need for business credit also expanded during this time. The 1990s saw the introduction of commercial mortgages backed securities (“CMBS”), collateralized loan obligations (“CLOs”), Franchise ABS, Equipment Leasing Securitizations and other structures designed to finance business.

Growth of Securitization (1970–2008)

Source: *Securitization and Fractional Reserve Banking Nov 12, 2009 Nikolay Gertchev

What are the Benefits of Securitization?

For the Issuer, Securitization is Cost Efficient. It allows a company to issue low cost senior debt independent of the company’s rating and fund itself less expensively than it could on an unsecured basis. The strategic use of securitization enables a company to grow its business and earnings without additional equity capital and/or enhance return on equity. These benefits derive primarily from the capital efficiency of securitization. Depending on the structure, securitized assets can be supported with less equity capital than on balance sheet assets primarily due to the transfer of asset-related risks to investors.

Securitization Transfers Asset-Related Risks. Firms that specialize in originating new loans and have difficulty funding existing loans may use securitization to access more liquid capital markets for funding loan production. In doing so, the originator or finance company also transfers risk. These risks generally include interest rate risk, basis risk, liquidity risk, prepayment risk and credit risk. While in some transactions the issuer may retain most of the economic credit risk associated with securitized assets, the credit risk of certain asset types may be small compared with these other risks. In addition, securitization can create opportunities for more efficient management of the asset ability duration mismatch generally associated with the funding of long-term loans, for example, with shorter term bank deposits.

Diversification for Investors. Investors seek diversification of investments for the benefit of their overall portfolio. Securitizations offer unique investment opportunities and attractive risk-return profiles compared to other asset classes such as government and corporate bonds. Securitization also allows the structuring of securities with differing maturity and credit risk profiles from a single pool of assets that appeal to a broad range of investors.

Risk Sharing and Liquidity. Securitized products allow institutional investors opportunities to participate in consumer and corporate assets that cannot be found elsewhere. With securitization, investors may invest in various consumer and business loans without having to develop in-house origination and servicing capabilities required to procure loans, collect payments and managed defaults and liquidations. In this way, investors benefit from the sourcing and servicing expertise of originators freeing money for more efficient capital deployment. Finally, the conversion of basically illiquid banking assets into tradeable capital market instruments often gives investors the opportunity to sell securities in the secondary market and obtain liquidity.

Securitization Provides Market Driven Pricing Discipline. Securitization can provide a market driven pricing discipline by highlighting the market price for risks transferred to investors and, thereby, providing pricing benchmarks to judge the profitability of a business.

How do the Regulators Look at Securitization Post-Crises?

Despite a major setback in 2008, securitization continues to be the primary alternative to bank financing. Securitizations transfers trillions of investment dollars into the economy. The regulatory authorities in the United States recognize the systematic importance of the capital markets to the real economy. In a report to Congress in 2010 by the Federal Reserve (“The Fed”), the Fed states, “the securitization markets are an important link in the chain of entities providing credit to U.S. households and businesses, and state and local governments. When properly structured, securitization provides economic benefits that can lower the cost of credit.” That exact phrase was reiterated in 2014 in a joint agency report by the US Treasury, SEC, OCC, HUD, The Fed, FHFA and FDIC regarding risk retention for securitizations.

Comments like this from the regulatory bodies lead most people to believe that securitization is here to stay. Transforming illiquid typical bank assets into tradable securities, is an important way to channel cash to borrowers and fund economic growth. While new regulation calls for increased scrutiny of deals it recognizes the importance securitization plays to the overall economy. New measures such as better documentation and risk retention are now in place. The rules call for issuers to retain and economic interest or so-called “skin-in-the-game” on deals they bring to market. This makes for a better alignment of interest, stronger transactions and increased transparency. In that way we are better than ever before.

Author:

Written by Phil Toth, managing director at Oberon Securities  

Mortgage Data Asset Verification

mortgage data asset verification

Modernizing banking infrastructure is no easy task, but one company has found an easy way to make it happen using the latest development techniques and tools. Borrowers expect easy-to-use solutions in this era of digitalization, but to deliver inclusive lending solutions for a broader set of borrowers, it’s very important to use data that is […]

mortgage data asset verification

Modernizing banking infrastructure is no easy task, but one company has found an easy way to make it happen using the latest development techniques and tools. Borrowers expect easy-to-use solutions in this era of digitalization, but to deliver inclusive lending solutions for a broader set of borrowers, it’s very important to use data that is reliable and timely. That’s where a technologically-based solution optimized for user experience comes in. Plaid gives traditional top-notch institutions a competitive advantage by giving them access to the latest technological advancements.

About Plaid

Plaid was co-founded by Zachary Perret and William Hockey, ambitious innovators who felt that something had to be done to make financial transactions simpler and quicker, in 2012. They developed Plaid into a platform whose suite of APIs can absorb huge volumes of unstructured data and transform it into something usable.

Based in San Francisco, Plaid acts as a bridge between users’ bank accounts, banks, and third-party applications. Initially, Plaid aimed at helping borrowers access necessary information that would help them determine the right lending institution based on their qualifications and the lending institution’s requirements. The platform made borrowing easy and fast since all information was processed in real time. However, with time, Plaid started getting attention from other financial industry players, including mortgage providers, that needed real-time data verification.

To date, Plaid has raised $60 million. The latest funding round, a Series B, pulled in $44 million led by Goldman Sachs. That was in the spring 2016.

Partnership with Fannie Mae

Recently, Plaid partnered with Fannie Mae to help automate asset verification, which has been a time-consuming and tedious step in the mortgage lending process. In collaboration with Fannie Mae’s validation service, Plaid will offer a quick, simple, and more reliable way for mortgage providers to vouch and verify borrowers’ assets.

This partnership will allow Fannie Mae’s lenders access to borrowers’ financial information directly and in real time through the Plaid platform. The integration will eliminate the manual document collection and review steps from the mortgage lending process. The collaboration will also alleviate risk through Fannie Mae’s Day1 Certainty program.

According to Kate Adamson, the head of the mortgage department at Plaid, the introduction of automated asset verification in the mortgage process is a huge step from what was traditionally handled through enormous paperwork. She said Plaid are excited to have finally simplified and streamlined the mortgage application process. “Working with Fannie Mae to smooth the mortgage application process is a great example of Plaid’s mission in innovating and simplifying how consumers experience financial services,’’ she said.

Mortgage processing is one of the major components of fintech but has not yet been fully exploited. The founders of Plaid have a broader mission whereby they want to change how consumers experience financial services by using new technology to shift focus from compliance optimization to consumer operations and user experience optimization.

The Plaid platform differs from other platforms in that it focuses on helping lenders from relying on banks solely to gather and verify information. Foundations such as Freddie Mac and Fannie Mae always have to verify assets in the process of buying mortgages. Normally, the verification process involves the submission of bank statements for every account a borrower has, and in cases where there are more than one party involved, all parties must submit bank statements. The process takes from hours to a couple of days, but Plaid has reduced it to mere seconds.

To eliminate the process of uploading and downloading statements, Plaid has synced all necessary information by building relationships with over 10,000 financial institutions thus helping borrowers verify their information within seconds.

Advantages of using APIs for data verification

  • Standardized data: The relationship with over 10,000 institutions helps lenders to get standardized data that is complete and accurate. Data retrieved through APIs is also authentic and reduced the rate of fraud.
  • Automation: Since all data is synched with the platform, the process of retrieving and verifying data is automated reducing processing time. Automation also helps to reduce paperwork, which is costly in both effort and time.
  • High document integrity: Data retrieved through APIs is acquired from the source and can thereforebe trusted. Every institution wants to make decisions using updated and accurate data, which has been made possible through APIs in real-time.
  • Conversion: Initially, mortgage processing took days and was also a tiring factor that made many potential customers abandon the process in the middle. Now, the application process requires minimal effort, which leads to an increase in conversion rate.

Plaid’s key differentiators

  • An all-purpose enterprise: Most companies are dedicated to mortgage asset verification only, but Plaid is different since it offers cross-industry asset verification to ensure optimal consumer experience and satisfaction.
  • The unique drop-in module: The Plaid Link feature has boosted customer experience in many ways including ease of use, a factor that has led to the attraction of a huge number of consumers to the platform and increased conversion rate.
  • Ease of integration: Plaid is designed for developers, which makes it user-friendly. Developers can easily get started and integrate their applications without any trouble.
  • Quality integration: Having built relationships with over 10,000 banks, the quality of data processed through the platform can be deemed high quality regarding completeness and accuracy as it is updated real time.

The Future of Plaid

The company has started seeing overwhelming results with an increase in conversion rate for mortgage applications, more banks integrating with the platform, and other financial institutions planning to launch with them soon. The enterprise is also improving the technology front end and back end to facilitate efficiency from an operational point of view. Plaid is streamlining and tokenizing data as well as increasing resources, to include human resources, to sustain growth, improve efficiency, and meet market demand. The main aim of the platform is to improve customer experience by making all operations as simple and fast as possible.

Authors:

Written with Ibrahim Kihugu.

Allen Taylor

Thursday October 6 2017, Daily News Digest

China mortgage loans

News Comments Today’s main news: SoFi surpasses $25B in originations. JPMorgan Chase rolls out mobile banking app. ID Analytics has 85% visibility into online consumer lending. Zopa prices new securitization. Fannie Mae expands digital mortgage platform. SEC investigated Bank of Internet. China’s cash loan market hits 1 trillion RMB. Lendified secures $60M credit facility. Facebook, Clearbanc partner on merchant cash advance. Today’s main […]

China mortgage loans

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United States

United Kingdom

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International

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Asia

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News Summary

United States

A new milestone: we’ve surpassed $ 25b in loan originations! (@SoFi on Twitter), Rated: AAA

Thank you to our community of over 390,000 people for growing with us.

Will JPM’s millennial-app experiment grant access to new markets? (American Banker), Rated: AAA

JPMorgan Chase spent more than a year researching what millennials (and clients wanting to bank like them) desire in a financial relationship. The result is a new mobile-only app that lets people sign up for a bank account within minutes and also helps manage their spending.

The megabank made a splash on Monday debuting Finn by Chase, an app that includes a checking and savings account and a physical debit card.

ID Analytics Now Has 85% Visibility Into Online Consumer Lending (deBanked), Rated: AAA

At Money2020, deBanked caught up with Kevin King, Director of Product Marketing and Ken Meiser, VP of Identity Solutions for ID Analytics. The last time I crossed paths with the company was six months ago at the LendIt Conference in New York City. Since then, the company has increased its visibility into the online consumer lending market to 85%.

Fannie Mae goes all-out on fintech collaborations (Business Insider), Rated: AAA

Fannie Mae, a US government agency that funds mortgages for lenders, rolled out 

92.3% of acceptance partners said Behalf increased their sales 10-20% (Behalf), Rated: AAA

Behalf’s merchant acceptance partners have found a way to apply Amazon’s small business strategies to their own business models. By adding the Behalf instant credit approval tool to their ecommerce experience, they also unlock the power of flexible terms on every sale. Customers of our partners can get instant access to up to $50,000 in buying power with their choice of flexible payment terms. With this boost in working capital, small businesses are able to invest in their growth, which increases their business purchasing velocity. Case in point: 92.3% of the Behalf acceptance partners surveyed reported that adding Behalf to their checkout experience drove a 10-20% sales lift.

Source: Behalf

Download and read the full whitepaper here.

Bank of Internet was under 16-month SEC investigation (New York Post), Rated: AAA

Online lender Bank of Internet was the subject of a formal 16-month Securities and Exchange Commission investigation, according to a report.

The company, led by Chief Executive Greg Garrabrants, was the subject of scrutiny until June — when it ceased without the SEC taking any action.

The probe was focused on alleged conflicts of interests, auditing practices, and loans made to two entities, according to subpoenas and government documents obtained by Probes Reporter, a publisher of investment research.

Wealthier Depositors Pressure Banks to Pay Up (WSJ), Rated: AAA

Large U.S. banks are starting to pay up to keep depositors from moving their money, saying customers are becoming increasingly demanding as the stronger economy nudges interest rates higher.

The average interest rate paid by the biggest U.S. banks on interest-bearing deposits jumped to 0.40% in the third quarter, the highest level since 2012 and the biggest quarterly increase this year, from 0.34% in the second quarter, according to Autonomous Research.

Bank executives said that the newest pressure for higher rates is coming primarily from wealth-management customers, typically well-to-do individuals and families who deposit cash as part of their investment accounts.

Fifth Third executives said they were raising deposit rates for some of those customers, particularly those who had other relationships with the bank.

Source: The Wall Street Journal

FT Partners Advises Credit Sesame on its ,000,000 Growth Financing (FT Partners), Rated: A

  • On October 25, 2017, Credit Sesame announced it has raised over $42 million in equity and venture debt
    • The funding comes from existing and new investors including Menlo Ventures, Inventus Capital, Globespan Capital, IA Capital, SF Capital, among others, along with a strategic investor
  • The $42 million in funding is comprised of $26.6 million in equity and $15.5 million in venture debt, bringing the Company’s total funding to over $77 million
  • Headquartered in Mountain View, CA, Credit Sesame was founded in 2011 and has provided credit and loan management tools to over 12 million members
    • The mobile and web solution provides consumers with tools to build a path to achieve financial wellness, including free access to their credit profile complete with their credit score, credit report grades, credit monitoring, interactive step-by-step tools and recommendations for better lending options
Source: FT Partners

 

The 13 Chinese Companies That Listed On US Stock Exchanges In 2017 (Frontera), Rated: A

With about $2.4 billion raised in IPOs on US exchanges by Chinese companies so far this year, other China-based firms are increasingly vying for US investors and exchanges.

Qudian Inc (QD)

On October 18, Chinese online micro-credit provider Qudian Inc listed on the NYSE, raising $900 million in an IPO that was priced at $24, in the biggest ever US listing by a Chinese fintech firm. The financial sector firm’s stock, trading under the symbol QD, closed at $33 as of October 23. The stock commands a market capitalization of $8.8 billion in the US stock market.

Year-end Forward P/E for the depository receipt is estimated at 21.47. Estimated earnings-per-share stand at $8.21.

China Internet Nationwide Financial Services (CIFS)

This Beijing-based financial sector firm, trades under the ticker CIFS on the NASDAQ GM stock exchange, is engaged in providing financial advisory services in China. The company’s stock listed on the US stock market on August 8 at an initial offer price of $10 a share, raising $20.2 million for the company. The stock, trading at $31.5 (as of October 23rd), commands a market capitalization of $693 million in the US stock market.

China Rapid Finance Ltd (XRF)

Listed since April 28th on the NYSE stock market, China Rapid Finance Limited operates one of China’s largest online consumer lending marketplaces.  The company caters well to China’s 500 million EMMAs (Emerging Middle-class Mobile Active consumers), and has facilitated over 20 million loans to more than 2.7 million borrowers. Back in April, the company raised $69 million in an IPO, marking its listing on the US stock exchange under the ticker XRF. The shares initially offered at $6 a share, and now trade at $9.06 (as of October 23) with a market capitalization of $586.2 million.

Source: Frontera

Leading Banks are Embracing Digital Strategies More Than Ever (Lend Academy), Rated: A

JPMorgan was the first major US bank to partner with a fintech company when they launched their small business lending partnership with OnDeck in early 2016. That partnership was renewed earlier this year and has helped the bank to offer a seamless small business lending experience and reach customers it might not have otherwise. In recent months they have struck a new partnership with Mosaic Smart Data to help the slumping fixed income trading revenues and they have also completed an acquisition of WePay, a Silicon Valley company that offers payment capabilities to business platforms using APIs. Finally, just this week they launched Finn by Chase, an app aimed at millennials that allows people to use a phone to open a bank account, make deposits, issue checks, track spending and set up savings plans.

Bank of America saw more than 1 million users added to their digital channels and active digital banking users go from 32.8 million to 34.5 million in the last year. The main driver of this growth was through their mobile app. Customers are using the mobile deposit feature more than any other, mobile deposits now account for 21 percent of total bank deposits.

Wells Fargo’s digital growth, which includes web based and mobile users, saw a 2 percent increase from 2016. Branch and ATM interactions were down 6 percent while digital sessions through the web and mobile app increased 6 percent.

Citi is the first global bank to integrate banking, money movement and wealth management on mobile.

How Tech is Changing Multifamily Lending (Multi-Housing News), Rated: A

“Technology has helped us bring efficiency, speed and first-rate customer service to the small-loan space for all of our stakeholders, borrowers and brokers alike,” said Bonnie Habyan, executive vice president, marketing, at Arbor. Small-balance owners and operators need to work long hours to be successful, and the time and paperwork dedicated to obtaining financing is an inefficient use of time. Online multifamily financing platforms such as Arbor LoanExpress, or ALEX, address this by providing the ability to e-sign and upload documents.

“Crowdfunding was originally created to give average investors access to investments they normally wouldn’t have access to, and to give sponsors or borrowers easier access to capital,”said Bill Lanting, vice president, Commercial Debt at RealtyShares. “We were formed specifically with that idea in mind, to make borrowing easier and less cumbersome, and also to make investments in assets more available to everybody.”

AutoGravity Announces Partnership With Global Lending Services (PR Newswire), Rated: A

AutoGravity, a FinTech pioneer on a mission to transform car financing by harnessing the power of the smartphone, announced a partnership with Global Lending Services LLC, a South Carolina-based auto finance company, to provide access to finance offers through the innovative AutoGravity digital platform. Qualified car buyers gain access to an even broader set of car finance options through the AutoGravity iOS, Android and Web Apps.

Can employers help solve the student debt problem? (HRDive), Rated: A

The good news about student loans is that they allow millions of people to earn college degrees who otherwise wouldn’t be able to afford them. The bad news is that college graduates enter the workforce deeply mired in debt that deflates their net worth and keeps them cash-strapped for years, if not decades. The current wave of college graduates is facing debt in amounts far above previous generations.

Oliver Wyman, a global management consulting firm, sets the median figure for an undergraduate degree at more than $25,000. That figure rises with each advanced degree. Graduates with MBAs enter the workforce with a median debt of $45,000. Medical school graduates can expect to be $200,000 in debt.

Debt repayments for the typical college graduate will amount to $265 a month and for medical school graduates, $1,600 a month.

Target.com Introduces GiftNow (PYMNTS), Rated: B

Target announced that, starting this November, the retailer will integrate a wallet function in its Target mobile app. The purpose, says the retailer, is to allow customers to pay for purchases and redeem promotions through the use of a smartphone.

Legendary Investor Jim Rogers Believes FinTech Will Replace Banks and Cash (Cryptocoins News), Rated: B

Veteran investor Jim Rogers believes that banks must invest in the financial technology (fintech) space or they face being replaced.

According to the report, he has invested in Hong Kong-based ITF Corporation, the world’s first financial technology bank founded by Hui Jie Lim. Rogers has also invested in Tiger Broker, a Chinese online brokerage.

He also believes that digital currencies could change how we see money in the next 10 to 20 years. Even though he hasn’t invested in the crypto market Rogers is of the opinion that governments could issue their own cryptocurrencies in the future.

United Kingdom

New Zopa securitisation priced, highlights market confidence (AltFi), Rated: AAA

A securitisation of loans originated by peer-to-peer lending firm Zopa has received a warm reception in the market. The deal, which is the second securitisation of Zopa loans, has been priced significantly tighter than last year’s transaction.

The securitisation was led by P2P Global Investments PLC, the first UK listed investment trust to dedicate itself to investing in marketplace loans, and was arranged by Deutsche Bank. The most senior class of notes was priced at 70bps over one month Libor, compared to 145bps last year.

The senior tranche of the £209m securitisation, which represents 80 per cent of the portfolio, was rated AA by Moody’s.

Using the secondary market for above average returns on investment (P2P Banking), Rated: AAA

One central piece to understanding why trading (or flipping) strategies can be highly attractive is the effect of even small premiums pocketed on the portfolio yield. Take an investor that invests into a 100 (whatever currency) loan part and sells that part for 100.40 after holding it for 5 days. That is only a 0.4% premium, but the annualized yield is 33.8%.

Two main strategy approaches

Investors can
A) Invest on the primary market and then sell the loan later on the secondary market
or
B) Buy loan parts on the secondary market which they deem underpriced and then sell at a higher price. Be it buying at discount and selling at a lower discount, or already buying at premium and selling at an even higher premium.

One important point, is that market conditions change, usually good opportunities will stop working after a few months or weeks either because too many investors try to use them, or more general  the demand/supply ratio changes or the marketplace itself changes the rules how the market functions.

  1. First an investor will want to look how loan information is presented on the primary and secondary market.
  2. Understand the allocation mechanism on the primary market. How does the autoinvest feature work exactly?
  3. When is interest paid? Does it accrue for each of the day held, or does the investor holding the loan at the date of the interest payment gets full interest credited. This is important, because if in the example at the start of the article the investor not only makes a 0.40 capital gain but also collects interest for the 5 days he held the part, it will have a huge impact on yield
  4. Usually for this strategy longer duration loans are more attractive.
  5. Usually smaller loans are more attractive.
  6. Usually the time span a trading investor wants to hold on to a loan part, will be as short as possible (days). However there might be patterns observed where it could be desirable to hold for longer time spans.
  7. Strategies that allow to hold parts only at a time when the status of a loan cannot change can be attractive.

Monzo and Starling take bigger steps towards payment integration (AltFi), Rated: A

Monzo has announced today, after a week of dropping hints on various Twitter accounts, that it plans to integrate Android Pay into its user interface for current account users.

A few hours earlier, Starling Bank confirmed this morning that it will be the first bank in the UK to connect with Fitbit Pay.

Case study: the technology behind P2P (Banking Technology), Rated: A

The UK peer-to-peer (P2P) lending market has flourished in the last decade. Lending volumes among the major platforms are increasing rapidly, pushing the cumulative total above £7 billion for the first time, as the understanding of the investment model continues to grow.

New technology architectures, as well as the ability to quickly run up minimal viable products, mean that emerging P2P companies can turn ideas into reality much faster than their larger counterparts (“fail fast” or as I like to call it, “test quickly”).

This prioritisation of speed and efficiency, coupled with the ability to focus, means that P2P lenders can zero in on specific problems and provide what customers want and are increasingly expecting. At Landbay we can bring a new micro service up from scratch in 20 minutes, with the lag for code from committing to going live being about six to eight minutes whilst still maintaining the up time required.

Brokers should consider the P2P option (Mortgage Introducer), Rated: A

As the alternative finance market has become saturated with different funding options, it can be difficult for brokers to determine the best solution to suit their clients’ needs.

Loans can also be tailored to fit the specific needs of customers, with fixed rates available to allow customers to budget effectively for the full term of the loan. The flexibility of loans means borrowers can cover unexpected costs or finance planned purchases at more affordable rates, meaning P2P finance is a great option when situations happen to change at a company.

Whilst 25% of borrowers that apply to banks have their loan application rejected, according to British Business Bank, other forms of lending have paved the way for businesses to obtain cash, with P2P lending becoming one of the most prominent solutions in the current market.

Open letter to Andrew Bailey, chief executive of FCA (Specialist Banking), Rated: A

Dear Andrew, your comments on the BBC on Monday 16th October reflect the concerns that many share with the FCA about the effect of the high cost of credit impacting society widely and, in particular, the young.You cited concerns about certain aspects of credit card and payday lending practices, but you did not pass comment on the retail banks and their provision of overdraft credit at rates that may well exceed the rates of payday and credit card loans.It should be noted that at 1p per day for every £7 of overdraft, the fees for an overdraft of, for example, £2,000 pa, are in excess of 50% interest, uncompounded. This is certainly higher than many credit cards.Alex Letts
Founder and chief unbanking officer, U
China

Chinese Cash loan market grown to 1 trillion RMB in one year (Xing Ping She), Rated: AAA

Cash loan originated from the payday loan in America, and accelerated in China. In less than one year, the total volume increased from 600 billion RMB to 1 trillion RMB. As a branch of consumer finance, cash loan developed rapidly as much as P2P lending industry.

Early in this April, the regulator issued the first order to clean up the “cash loans”,while after six months the trend of compliance in the field is still unclear. Recently, with several relative businesses coming to the U.S. for IPO, the critical voice on the profiteering of cash loan becomes louder.

However, owing to the annual lending rate much more than the rate legal limited (36%), taking the consumer finance vents, cash loan still grow wildly under strict regulation.

Xi’s Neighborhood Watch (Bloomberg), Rated: AAA

Houses are for living in, not for speculation, Chinese President Xi Jinping said last week. The trouble is, fueling this speculation has been a surge in consumer lending, not only by banks but also by fintech firms such as recently listedQudian Inc.

Thanks to improved earnings and corporate debt that’s souring at a slower rate, Chinese bank shares have rallied this year.

Source: Bloomberg

What investors may be ignoring at their peril, however, is the spike in household advances. Consisting of mortgages, credit-card debt and auto loans, consumer lending as a share of the total is relatively low. Only 400 million Chinese had personal loans in 2016, or about 29 percent of the population. The ratio in the U.S. is about 82 percent, according to Bloomberg Intelligence. But it’s been growing fast and even People’s Bank of China Governor Zhou Xiaochuan is worried. China’s household debt-to-GDP ratio reached 47 percent in the first half, according to a recent Citigroup Inc. report.

Source: Bloomberg

Ali Microcredit Ltd. made 2.6 billion RMB in first half, exceeding 14 public banks (Xing Ping She), Rated: A

In the first half year of 2017, Chongqing Ali Microcredit Ltd. has made the revenue of 3.97 billion RMB, which increased 100 million RMB compared to the 3.86 billion RMB of 2016. The company’s net profit was 2.644 billion RMB, in a growth of about 700 million RMB from the end of 2016.

As one of the Ant Financial eco-system, Ali Microcredit takes the business of credit loan (Ant Jiebei). Therefore, Ali Microcredit is already the industry leader in the consumer finance field. Even compared to the listed banks, Ali Microcredit’s profit data can defeat many of them. Take the first half year for example, the company profit exceeded 14 of all the 38 listed banks in stock exchange of Shanghai, Hong Kong and Shenzhen, including Guangzhou Rural Commercial Bank (01551.HK, profit of 2.639 billion RMB), Bank of Tianjin(01578.HK,profit of 2.62 billion RMB), Bank of Hangzhou(600926.SH, profit of 2.53 billion RMB),etc.

Cash loan controversy (Global Times), Rated: A

Chinese people are becoming more and more willing to spend. But if they don’t have money, they borrow. This ever-growing phenomenon has recently thrown cash loans, also known as fast loans, right under the public spotlight.

Han, a 26-year-old white-collar worker in Shanghai, who preferred only to give her surname, borrowed a 6-month loan of 10,000 yuan ($1505.53) from Mayi Jiebei, the online cash loan service provided by e-commerce giant Alibaba’s subsidiary Ant Financial, at the end of September.

When borrowing the money, Han was informed by Mayi Jiebei that she will need to pay a monthly interest rate of slightly more than 100 yuan. In total, Han will need to pay an interest rate of 637 yuan to the provider.

Currently, the entire cash loan market is worth between 600 billion yuan and 1 trillion yuan, the wdzj.com report showed.

LendingClub of China: World’s no.2 economy is a fintech haven (MSN), Rated: A

China provides the infrastructure for financial technology to succeed, such as clearly-defined laws and good internet penetration, says Soul Htite, Dianrong CEO.
Watch the video interview here.

China Rapid Finance names Zhou Ji’an a non-executive independent director (Bankless Times), Rated: B

China Rapid Finance has named Zhou Ji’an a non-executive independent director. He becomes the seventh member of a board that includes former executives of Hewlett Packard, McKinsey & Company, Morgan Stanley, and UBS.

Mr. Zhou is the executive director and general manager of China United SME Guarantee Corporation aka Sino Guarantee. He previously served in senior roles with China Export & Credit Insurance Corporation, and China Life Insurance Co . and is a senior scholar of the Eisenhower Fellowships, an international nonprofit leadership corporation.

European Union

ECN Convention Debates Technology & Cross-border Future in EU Alternative Finance & Crowdfunding (Crowdfund Insider), Rated: AAA

Two main topics of the 6th Annual Convention of the European Crowdfunding Network (ECN) on October 19th and 20th were technology innovation and cross-border finance.

To retain their lead in innovation over banks and traditional finance’s Fintech, startups must keep delivering greater customer orientation and execution efficiency. The success of Initial Coin Offerings (ICOs) is a clear signal, and a red flag, that there exist gaps in technology and cross-border funding that finance has not filled.

Cross-border alternative finance is still hampered by the fragmentation of the European Union (EU) regulation at many levels: Not only do crowdfunding and crowdlending regulation differ from one country to the next, but so do investor taxation and corporate law.

Ingi Sigurdsson, CEO, Karolina Engine, claimed that artificial intelligence enables the platform to predict the success of crowdfunding campaigns with 80% accuracy. Mads Dalsgaar CMO, Funderbeam, explained how Funderbeam uses Bitcoin’s blockchain to register, clear and settle the trading of private companies’ shares. For Rein Ojavere, CFO of Bondora, technology enables his lending platform to “cut through the layers of fat” of multiple investment intermediaries. In the same vein, Lasse Mäkelä, CEO of Invesdor, called his company a “digital investment bank.”

Umberto Piattelli of law firm Osborne Clarke summarized the conclusion of ECN’s updated complete review of national crowdfunding and crowdlending regulations in 29 countries. He stressed the strong correlation between the growth of alternative finance and effective crowdfunding regulation. Only 11 out of the 28 EU markets researched have published specific regulations for crowdfunding and crowdlending. These markets have taken off rapidly after the issuing of such regulations.

Tink secures investment and bank partners as it plans European expansion (Banking Technology), Rated: A

Swedish fintech company Tink has signed with Nordic banks NordeaKlarna and Nordnet. Integrating in 2018, the banks will use Tink’s payment technology and personal finance management (PFM) platform within their existing customer channels.

In addition to the partnership agreements, SEB, Nordea, Nordnet, ABN Amro, Creades and Sunstone has invested €14 million in Tink.

International

DTCC: HOW TO THINK ABOUT FINTECH (All About Alpha), Rated: A

The Depository Trust and Clearing Corporation (DTCC), a provider of clearance, settlement, and a wide range of other services to the financial markets, has issued a new white paper on technological innovations and the disruptions fintech may generate.

By “core banking functions,” (1) the authors of the white paper have in mind credit, liquidity, and maturity transformation. The banks have more institutional experience handling these functions than upstart fintech firms and, to the extent the latter take over the core functions of the former, there may be reason to worry. Likewise, the fragmentation (2) of “the creation and delivery of financial services across additional providers and platforms” could cause errors and inefficiencies. And (3) if certain players could become too good at delivering these services in this way, they could pose systemic risks.

Source: DTCC

Read the full report here.

The Importance of Fintech Spreads Across the Financial Industry (PR Newswire), Rated: A

A research report by Transparency Market Research, predicts that the global peer-to-peer (P2P) market lending valuation will reach US$897.85 billion by 2024, as it expands at a significant CAGR of 48.2% from 2016 to 2024.

Dragon Victory International Limited (NASDAQ:  LYL) announced today that, the Company has entered into a Strategic Cooperation Agreement (the “Agreement”) with Shenzhen 708090 Investment and Development Co., Ltd (“708090”), a leading provider of shared workspace, community, and services for entrepreneurs, freelancers, startups and small businesses, to promote incubation services.

On October 24th, Fiserv announced that Regions Bank will expand their digital money movement capabilities with the addition of person-to-person payment and account-to-account transfer solutions from Fiserv.

On June 15th, Yirendai announced that it was awarded the Best P2P Lending Platform in ChinaAward at The Future of Finance Summit (the “Summit”) held in Singapore. Yirendai is the first FinTech company in China to receive this prestigious reward.

Qudian Inc. (NYSE: QD) is a leading provider of online small consumer credit in China. The Company uses big data-enabled technologies, such as artificial intelligence and machine learning, to transform the consumer finance experience in China. The company recently emphasizes Its collection efforts and pricing policy. The Company’s collection efforts extend to every delinquent borrower. The Company’s collection process is divided into distinct stages based on the severity of delinquency, which dictates the level of collection steps taken. As part of the major upgrade of the Company’s risk management system in January 2017, the Company has developed a machine learning algorithm to better allocate collection resources based on more detailed grouping of larger delinquency risk. Higher risk groups are allocated with more collection resources as the likelihood of their outstanding balance becoming longer-term delinquent or even uncollectable is generally higher.

Australia

ANZ BBSW penalty too low: P2P lender (InvestorDaily), Rated: A

On Tuesday, ASIC announced that it had reached a confidential in-principle settlement with ANZ resolving the dispute over alleged BBSW misconduct. Commenting on the matter, RateSetter chief executive Daniel Foggo said the corporate regulator’s activity in this area of the market bodes well for a more transparent financial system.

India

Gratification Unleashed (OutlookMoney), Rated: A

There was a time when a loan mostly meant you were going to buy a house or a car. This is not the case any longer. With changing times, now there are loans against salary advance to fund even your honeymoon. Today, there are loans available practically for every need and dream.

Take the case of the ubiquitous car loan, the advent of luxury cars has turned several car companies to offer loans that are tailored to suit customer offerings. For instance, Volkswagen Finance (India), offers financing solutions to customers for both new and pre-owned Volkswagen group vehicles (namely Volkswagen, Skoda, Audi, Porsche, Lamborghini, MAN and Scania) through registered and authorised Volkswagen group dealer channels.

Yet, borrowing is not as smooth as one would expect it to be. Take for instance Mumbai-based Amit Shukla, he had to take a personal loan of Rs 5 lakh to fund his first commercial car, because a car loan did not work out the way he wanted it to work for him.

Asia

Finance: Ensuring a safe investment crowdfunding landscape (The Edge Markets), Rated: AAA

When equity and debt-based crowdfunding platforms were launched in the market, there were concerns that these vehicles could be used for money laundering. After all, investors could unknowingly fund a fraudulent company and the money could end up being misused by the issuers for their personal gain or, even worse, to fund criminal activities.

The Securities Commission Malaysia (SC) introduced a legal and regulatory framework for equity crowdfunding (ECF) in 2015 and peer-to-peer (P2P) financing last year to address these concerns. According to the SC’s deputy general manager Tengku Ahmad Ruzhuar Tengku Ali, the regulator views money-laundering activities to be of minimal risk on ECF and P2P platforms due to the safeguards built into their frameworks and the platform operators’ vetting process.

There have been several cases of fraud linked to investment crowdfunding. The first widely known case, involving US-based Ascenergy, came to light in 2015. The company had raised US$5 million from about 90 local and foreign investors by leveraging some of the better known crowdfunding platforms such as Fundable and EquityNet.

The SC’s approach

All six ECF operators registered in Malaysia are operational. According to Tengku Ahmad Ruzhuar, 31 issuers had successfully raised RM18.3 million on ECF platforms as at end-September, reaching 80% of their target amount.

Retail investors are allowed to invest up to RM5,000 per issuer and a total investment of RM50,000 within a 12-month period. Angel investors registered with the Malaysian Business Angel Network can invest up to RM500,000 while there are no restrictions for sophisticated investors.

Issuers are able to keep the funds raised if they reach a minimum of 80% of the target amount, but they are not allowed to raise multiple funds for the same purpose.

Canada

Canadian Small Business Lender Lendified Secures $ 60 Million Credit Facility From ClearFlow (Crowdfund Insider), Rated: AAA

Lendified, a Canada-based lender who provides small business loans online has entered into an agreement with ClearFlow Commercial Finance to increase its lending capacity. According to the lending platform, through the agreement, ClearFlow is providing it with a $60 million credit facility to fund loans delivered through its website.

Facebook teams up with Clearbanc to offer cash advances to business (Financial Times), Rated: AAA

Small businesses advertising on Facebook can now get their hands on up to half a million dollars in growth capital, in the latest example of an online platform moving into territory historically dominated by bricks-and-mortar banks.

The social network has been trialling a scheme in partnership with Clearbanc, a Toronto-based firm, since February. Under the scheme, known as “Chrged,” customers connect their Facebook Ads account and their payment processor with Clearbanc, which then makes an offer.

Funds are not loans but merchant cash advances, giving Clearbanc the right to a certain portion of revenues flowing through the customer’s account until it gets its money back, plus a fee, typically of 5-10 per cent. The fee is set by analysing daily cash flows to determine the customer’s ability to repay.

About 1,000 small-business owners have so far taken up an offer.

MONEYTREE Q3 REPORT: STRONG AI AND FINTECH FUNDING PUSHING 2017 BACK ON TRACK (Betakit), Rated: A

According to CB Insights and PwC’s Canada’s latest MoneyTree report, 2017’s sluggish start may transform into a podium finish by year’s end.

The report, which tracks VC activity in Canada for Q3 2017, indicates that Canada could exceed $2.5 billion ($2 billion USD) across more than 300 deals for the year. The result would match or surpass activity from last year, when a total of $2.2 billion USD was invested, and 2016, which fell just below the $2 billion USD threshold.

Source: Betakit

Seed-stage deals accounted for 32 percent of deals in Q3 2017, a 19 percent drop from 51 percent of all deals in Q2 2017. However, early-stage and expansion-stage deals increased to 27 percent and 21 percent of deal share, respectively. Expansion-stage deals climbed to an eight-quarter high in Q3 — a strong contrast from past quarters where seed-stage deals were the most prominent, and perhaps a sign of a more robust investment ecosystem.

FinTech was another notably strong sector, as Canadian FinTech companies have received $252 million ($200 million USD) across 27 deals. This year is on pace to see $341 million ($270 million USD) invested across over 30 deals, on par with last year’s figure of $351 million ($278 million USD).

Source: Betakit

Authors:

George Popescu
Allen Taylor

Tuesday October 24 2017, Daily News Digest

fraud transactions

News Comments Today’s main news: OnDeck collaborates with Ingo Money, Visa on real-time SMB lending. Affirm’s new mobile app allows consumers to borrow money for almost any online purchase. N26 readies for launch in the UK. P2PFA reports over 700M GBP in Q3 new lending. Fincera issues $1B in Q2 lending. Kabbage automates SMB lending in France, Italy with ING partnership. […]

fraud transactions

News Comments

United States

United Kingdom

China

European Union

International

India

Africa

News Summary

United States

OnDeck Collaborates with Ingo Money and Visa to enable real-time Loan Funding to Small Businesses (PR Newswire), Rated: AAA

OnDeck (NYSE: ONDK), the nation’s largest online lender to small business, announced today agreements with Ingo Money and Visa to enable real-timefunding of loans to small businesses via their debit cards, powered by Visa Direct. OnDeck will be the first company in the online lending industry to offer real-time access to capital via a customer’s existing small business debit card.

The move by OnDeck comes in response to small business demand for improved cash flow and faster payment experiences. A recent survey found 70% of small business owners report they have a small business debit card, and of those without debit cards, 87% of them said they would get a new debit card to take advantage of real time transfers. The virtual card grants you a one-time card number, an expiration date, and a three-digit security code, which can then be used to make singular online purchases, while the repayment plan is managed through the app.2OnDeck plans to use Visa Direct through Ingo Money’s technology platform to disburse loan proceeds securely in real time to its line of credit customers via their existing small business debit cards. Visa Direct is Visa’s real-time push payments platform allowing companies to leverage Visa’s global scale to develop faster payments solutions for ubiquitous reach to consumers or small businesses with a debit card.

Ingo Push, the turnkey push payments service from Ingo Money, allows OnDeck customers to receive funds via a vast network of eligible debit or prepaid card accounts, including eligible Visa cards; online and mobile wallets; and a network of more than 40,000 cash-out distribution points.

SoFi priced itself at double its valuation during recent M&A talks (Pitchbook), Rated: AAA

SoFi reportedly mulled a potential sale earlier this year, but the talks evaporated over a hefty asking price. After receiving a non-binding offer of $6 billion from a foreign bank, the online lender pegged its target acquisition price at $8 billion to $10 billion as it negotiated with several US companies, including Charles Schwab, per the Financial Times. That price would have ranked the deal among the second most valuable VC-backed fintech companyin the US. It’s also one of eight American startups that have raised $500 million+ rounds this year.

But while SoFi could likely fetch a relatively high acquisition price, the $8 billion to $10 billion figure is far more than it appears to be worth. In February, the online lender raised a $500 million round at a valuation of $4.4 billion—and since then, its value has likely dropped amid sexual harassment allegations at the company.

Source: Pitchbook

Why Charles Schwab Held Talks to Buy Online Lender SoFi (Investopedia), Rated: AAA

Citing people familiar with the matter, the Financial Times (paywall) reported the deal talks with Schwab were prompted by a $6 billion offer from a foreign bank after SoFi raised $500 million in funding led by Silver Lake. With a more than $4 billion valuation after that, the unnamed foreign bank expressed interest in acquiring SoFi. That prompted the online lender to reach out to other potential suitors aiming to fetch $8 billion to $10 billion in a sale.

At first blush, a deal with Charles Schwab may not make sense, given it isn’t in the online lending business. But SoFi does have a wealth management unit that would give the San Francisco discount brokerage access to more customers and thus more assets under management. It’s also a low-cost provider on that front, something very much in Schwab’s wheelhouse. According to SoFi’s website, the company doesn’t charge customers for the first $10,000 invested and charges 0.25% per year. It also has a team of live advisors that give customers advice and ETF portfolios that are curated by the company. SoFi also has a large customer base, particularly of millennials, that would be attractive to Schwab. Earlier this year ex-CEO Cagney predicted SoFi would end the year with 500,000 customers.

Affirm’s new mobile app lets you borrow money for almost any online purchase (The Verge), Rated: AAA

Lending startup Affirm, founded by PayPal and Yelp co-founder Max Levchin, is out to destroy the credit card, or at the very least make a noticeable dent in its utter ubiquity. The company, which began in 2012 by offering simple and transparent loans for web purchases, is today launching a mobile app to the public that acts as a virtual credit card, so it can be used as a line of credit with no strings attached for pretty much any online purchase. The app is available now for iOS and Android.

The virtual card grants you a one-time card number, an expiration date, and a three-digit security code, which can then be used to make singular online purchases, while the repayment plan is managed through the app. To use the service, you need to provide proof of your identity, but credit is extended only for the item you want to buy, with the company determining your likelihood to pay back the loan based on your current credit and the total amount being lended.

You’ll need approval for every purchase you try to make, up to a maximum of $10,000. In total, Chou says Affirm has made more than 1 million loans for a total amount of more than $1 billion since it started roughly five years ago. It also now counts as over 1,000 merchants as partners, including mattress maker Casper, furniture site Wayfair, and Expedia.

Now, Affirm wants to extend its services to anyone and any merchant, by going directly to the consumer with a virtual card.

Although Affirm may offer as low as 10 percent APR, or in some cases zero percent for select partner merchants, you still run the risk of paying more for a purchase using the company’s virtual card than if you had a standard credit card. For those who are simply bad with money and borrowing, it has the same pitfalls as a credit card, though with a few more speed bumps and warning signs built in.

LexisNexis Risk Solutions True Cost of Fraud in Lending (LexisNexis), Rated: AAA

For every dollar of fraud, lending companies incur $2.82 in costs, which includes chargebacks, fees, interest, merchandise replacement and distribution, according to the LexisNexis Risk Solutions Fraud Multiplier. Large digital lenders, with over $50 million in annual revenue, are hit hardest by fraud in this space. These large digital lenders face a higher risk of successful fraud attempts than others within the lending space, but it really is a problem across the digital lending space, even with small and midsized digital lenders.

Source: LexisNexis

Get the full report here.

The Rise of Robo Advisors and the Death of Traditional Financial Advice (The Epoch Times), Rated: AAA

When BlackRock, the world’s largest asset manager with USD 5.7 trillion in AUM, decided to layoff talented stock pickers in favor of machines for portfolio management in March, it was a sure sign that times are changing.

The top performer in a group of the five leading robo advisors in the first eight months of 2016 generated returns that were encroaching on double-digit territory, and in some cases outperformed their more expensive mutual fund counterparts.

Source: The Epoch Times

And it’s not just BlackRock that’s demonstrated a willingness to favor machines over stock pickers. Robo advisors as a category, which is comprised of approximately 100 firms, oversee USD 60 billion in AUM as of year-end 2016 across 15 countries, according to Deloitte. That amount is expected to balloon more than fivefold to USD 385 billion in a half decade, according to Cerulli Associates research.

A recent Capital One Investing survey says in times of extreme market volatility, millennials are the least likely generation to turn to a person for financial advisory services at 69%. In fact, millennials are the generation that place the highest value on robo-advisory services, evidenced by 65% of them saying automated financial advice “enhances their financial peace of mind,” according to the poll.

Bloom seems to be the Vanguard of the robo advisory market, undercutting its competitors on fees and charging as little as USD 10 per month to manage a 401(k) or 403(b) account.

Leading the charge is robo-advisory firm Betterment, which boasts 270,000 usersand USD 10 billion in AUM.

FS Card Inc. Closes $ 150 Million Credit Facility to Continue its Build Card Product Expansion (FS Card Inc), Rated: A

FS Card Inc., an emerging financial services leader for underserved consumers, today announced it has raised $150 million in financing to fund future growth.  Through its Build Card product, FS Card will expand access to traditional credit and create an on-ramp into the financial mainstream for small-dollar loan customers.  The new credit facility closing comes as FS Card wraps up a year of rapid growth with Build Card portfolio expansion of nearly 500 percent in 2017.

The funding will be used for sustained portfolio build as part of the company’s ongoing commitment to financial inclusion in a market where a new rule from the Consumer Financial Protection Bureau is likely to impact access to alternative credit products.

According to Prosperity Now and The Federal Reserve, more than half of Americans are credit invisible or subprime, while 47 percent do not have $400 to pay for an emergency expense.  FS Card leverages its proprietary machine learning algorithms to actively meet the increasing demand of underserved consumers for fairly priced credit with a prime-like experience.

These 11 startups are re-inventing how money works and they’re worth more than $ 1 billion (Business Insider), Rated: A

Fintech is a multi-billion dollar industry, with startups in the US raising around $18 billion since 2015, according to PitchBook and nearly 1,400 venture capitalist-backed deals. Two of the most valuable startups in the country — Stripe and SoFi — are in the fintech sector. And there are 11 fintech startups valued at more than $1 billion.

10. Kabbage — $1.3 billion

Kabbage is valued at $1.3 billion, according to PitchBook estimates, thanks to a $250 million investment round in August 2017.

9. Robinhood — $1.3 billion

The zero-commission, US-focused stock brokerage is valued at $1.3 billion following a $110 million funding round in April 2017.

In total, Robinhood has raised $176 million, which is quite a lot considering the founders were initially rejected by 75 different venture capitalists.

5. Avant — $2 billion

Avant was valued at $2 billion after a $325 million funding round in September 2015.

Though its valuation makes it the fifth most valuable fintech startup in the US, it’s seen some rocky shores in the years since. In June 2016, the company reportedly laid off staff and lowered its monthly lending by half.

3. Credit Karma — $3.5 billion

Credit Karma scored a $3.5 billion valuation on a $175 million funding round in June 2015 which brought the company’s total funding to $368 million.

2. SoFi — $4.4 billion

SoFi was valued at $4.4 billion during its most recent round of funding in February 2017, which brought the company $500 million from investors. In total, the company has raised over $2 billion, including a $1 billion round led by SoftBank in 2015.

1. Stripe — $9.2 billion

Stripe was valued at $9.2 billion in its most recent $150 million funding round in November 2016. The company has raised a total of $440 million since its founding in 2010.

Groundfloor Launches Loan Origination Network As Investor Demand Surges (PR Newswire), Rated: A

In response to overwhelming investor demand, Groundfloor, the only real estate crowdfunding platform that is open to non-accredited investors, today announced the launch of its Loan Origination Network for mortgage brokers and third-party originators interested in tapping additional real estate loan opportunities. The company has opened up its innovative real estate financing platform to brokers nationwide who now have the opportunity to provide customers with low cost capital for fix and flip projects.

According to a recent report from ATTOM Data Solutions, the estimated total dollar volume of financing for homes flipped in Q2 2017 was $4.4 billion, up from $3.9 billion in the previous quarter and up from $3.4 billion a year ago to the to the highest level since Q3 2017, a nearly 10-year high. Also, more than 35 percent of homes flipped in Q2 2017 were purchased by the flipper with financing, up from 33.2 percent in the previous quarter.

Key benefits for mortgage brokers and third-party originators:

  • Competitive rates from six percent
  • Unique deferred payment option
  • Low documentation
  • Closing in as little as seven days
  • Costs rolled into loan principal
  • Discounted fees for high volume partners
  • Partners assigned dedicated Business Development Manager

Mortgage industry veteran Debora Valentine joins the team as Senior Vice President, Business Development. Valentine brings more than 25 years of experience in sales to Groundfloor’s senior leadership team.

Marqeta Partners with Alipay for US Transactions (Crowdfund Insider), Rated: A

Alipay has partnered with Marqeta on real-time payment processing for millions of Chinese travelers visiting North America.

Yesterday, Alipay announced  it had teamed up with smart terminal provider Poynt to enable its Chinese users to pay with its services through all Poynt devices in North America.

Alipay makes inroads into US with JPMOrgan Chase deal (Finextra), Rated: A

Alipay, the world’s leading third-party payment platform, today announced they are working with JPMorgan Chase, a global financial leader, toward a relationship by which Chinese consumers traveling in North America would be enabled to pay using their Alipay Mobile Wallet at Chase merchant clients.

The proposed relationship between JPMorgan Chase and Alipay would enable its acceptance at many of Chase’s merchants in North America. Through Alipay’s geolocation-based “Discover” function and push notifications within the Alipay app, Chinese travelers can locate merchants nearby, receive promotion information, and make purchase decisions. It also enables local merchants to better target and connect with Chinese consumers.

The Number of Consumers Opening HELOCs May Double During the Next Five Years (Globe Newswire), Rated: A

Approximately 10 million consumers are expected to originate a home equity line of credit (HELOC) between 2018 and 2022. This would more than double the 4.8 million HELOCs originated in the previous five-year period (2012-2016). The projection is part of a new TransUnion (NYSE:TRUstudy that evaluated recent dynamics in the HELOC industry, and was released today during the Mortgage Bankers Association’s Annual Convention & Expo.

TransUnion projects 1.4 million new HELOC borrowers in 2017 and 1.6 million in 2018, about a 30% increase from the previous two-year period of 2015 (1.1 million) and 2016 (1.2 million).

HELOC Originations – 2017-2022 Include Projections
Year 2012 2013 2014 2015 2016 2017 2018 2019-2022
HELOC Originations (In Millions)  0.7 0.8 1.0 1.1 1.2 1.4 1.6 8.4

The TransUnion HELOC study found that rising home prices and the resulting increase in equity is beginning to fuel interest in HELOCs. The Case-Shiller home price index rose as high as 180 in 2005 and 185 in 2006 before dropping to 134 in 2012. By July 2017 it had risen again to 194, and is expected to rise in the next few years to well over 200.

According to the study, there were 4.9 million HELOC originations in 2005 when home equity stood at $13.3 Trillion.  HELOC originations dropped to a mere 600,000 in 2011 as home equity declined to $6.3 Trillion.  Home equity has once again risen to $13.3 Trillion in 2016, yet HELOC originations continued to be low at 1.2 million.

Who are the HELOC borrowers?

The study explored the primary reasons why consumers open HELOCs and estimated the percentage of HELOCs opened under each motivating reason.

Types of HELOC Borrowers
HELOC Category Defining this Type of HELOC Borrower Percentage of
HELOCs
Debt Consolidation “Consolidate balances from other credit products, usually to a lower interest rate” 30 %
Large Expense “Finance a large credit need (e.g., home renovation project)” 29 %
Refinance “Refinance a HELOC, often to change terms or to get a better rate” 25 %
Piggyback “Concurrent with a mortgage origination, often used as part of a down payment” 9 %
Undrawn “Standby, undrawn line of credit for a ‘rainy day’” 7 %

Online Small Business Lending Provides Benefits to Small Business Owners, Finds New Survey (Electran), Rated: A

Four leading trade associations – Electronic Transactions Association, Innovative Lending Platform Association, the Marketplace Lending Association, and the Small Business Finance Association – commissioned a comprehensive survey of U.S. small business owners from Edelman Intelligence.  The survey conducted by Edelman Intelligence found that a large majority (70%) of small business owners believe there are more credit options today when compared to five years ago, and 97% of those feel that the growing number of financing options is a good thing.

Key findings of the study include:

  • 70 percent of small- and medium-sized business owners say there are more lending options now, and 97 percent of those believe that the increase in options is a positive thing for their businesses.
  • Most small business owners reported using online small business lenders to help them expand their locations, make necessary hiring and equipment purchases, and help manage cash flow.
  • Of the small business owners considering taking out a loan in the next 12 months, close to 40 percent say they will consider borrowing from an online lender.
  • According to the study, 98 percent of small business ownerswho have used online lenders say they are likely to take out another loan with an online lender.
  • For many small business owners, online small business lending platforms are a popular alternativeto asking friends and family for a loan.
Source: Electran.org

PeerStreet Launches Affiliate Blogger Program (BusinessWire), Rated: A

PeerStreet, a marketplace for investing in real estate-backed loans, is excited to announce its affiliate program at FinCon 2017. Backed by Andreessen Horowitz, PeerStreet’s platform provides investments in high-yield, short-term real estate loans. The newly launched program will allow PeerStreet to partner with the personal finance community to better serve both current and future investors.

PeerStreet aims to reach more investors through the affiliate program by working with financial writers and influencers to share thought leadership and market information about this unique space. In addition to high-conversion advertising opportunities, affiliate program partners will also have access to PeerStreet’s dedicated Affiliate Director, who can provide deep insight into PeerStreet’s service and offer tailored support.

Mastercard Takes Blockchain Mainstream with API (Finovate), Rated: A

Mastercard announced it has tested and validated its blockchain and will be opening access to it via a set of three APIs published on the Mastercard Developers website. The APIs include the Blockchain Core API, the Smart Contracts API, and the Fast Pay Network API.

Mastercard will pilot the blockchain for use in the business-to-business space, implementing it to increase speed and transparency in payments and decrease costs for cross-border payments.

Mastercard’s blockchain operates independently of a digital currency.

Fannie Mae Introduces New Tech Solutions to Lower Costs & Shorten Mortgage Processes (Crowdfund Insider), Rated: A

Online lender Fannie Mae announced on Monday the launch of its new single source validation, new API platform, and servicing marketplace for servicing transfers. 

Single Source Validation saves lenders time and money

  • Allows lenders to validate a borrower’s income, assets, and employment with a single report from a single approved vendor that the lender chooses.
  • Uses source data for validation (a borrower’s bank account, including pay stream and direct deposit information).
  • Reduces the number of paper documents borrowers need to provide.
  • Amplifies savings already being realized by lenders who currently use Day 1 Certainty validation services.

New API platform levels the playing field for lenders

  • Provides lenders with all the information they need from Desktop Underwriter to originate a loan.
  • Allows lenders to access information that they can customize to their needs.
  • Uses industry-standard data formats and protocols so lenders can integrate the Fannie Mae API to their systems quickly and easily.

Servicing Marketplace 

  • Provides sellers greater access to servicers when they sell loans to Fannie Mae and creates more efficiencies in managing co-issue transactions with Fannie Mae.
  • Offers transparent pricing, a standardized process, and standardized data requirements when a loan is sold to Fannie Mae.
  • Improves data quality and simplifies the servicing rights transfer process for sellers and servicers.

Envestnet | Yodlee to Integrate Risk Insight Solutions With Fannie Mae’s Desktop Underwriter Validation Service (PR Newswire), Rated: A

Envestnet | Yodlee (NYSE: ENV), a data aggregation and data analytics platform powering dynamic, cloud-based innovation for digital financial services, today announced its integration with Fannie Mae through a pilot program to digitally validate borrowers’ assets. Fannie Mae will leverage Envestnet | Yodlee’s Risk Insight Solutions to fuel the Day 1 Certainty™ validation of assets offering, which gives lenders a faster and simplified borrower experience.

We’re doing fine . . . (CU Insight), Rated: A

Over a four-decade career in financial services I have witnessed, experienced and participated in transformational change.  The conversations around emerging technology like the ATM caused industry debate – consumers would never use a machine to make a withdrawal from their account.  Credit cards not tied to a specific gasoline brand, local merchant or one of the giants of the catalogue sales world – Montgomery Wards, Sears and that upstart JC Penney – would never be accepted.  Consumers would never do their banking over the telephone, and of course never accept online banking – remember the first versions using a floppy disk? And checks would always be the only way, other than cash, to pay for things (bill pay, PayPal, debit cards and other payment methods…all have dispelled that).

We should be concerned about the FinTechs.  They are not a fad nor are they going away.  They are very well capitalized, and they have revolutionized how to leverage big data in ways we can only dream of.  They have challenged credit score lending structures by leveraging their ability to engineer data.  They are mobile optimized, in fact they are mobile prevalent, and they strive for immediate decisions and funding.  Where traditional lenders are still caught up in past practices making it difficult to refinance student debt, underwrite small business loans in minutes, grant signature loans at the point of purchase, or embrace new credit models, the FinTechs are quickly gaining ground in market share because they can do those things today.

And we have not evolved our cornerstone lending program, the signature loan, to compete not only at the POS for autos, but for personal improvements and major retail purchases as SOFI, Lending Club and so many other FinTechs have.

Arizona seeks $ 250K from partners accused of defrauding investors in payday-loan venture (AZ Central), Rated: A

Robin Erickson, an Arizona snowbird, remembers the pitch she got from her life-insurance agent about LoanGo, a startup internet payday-loan company.

The Mount Vernon, Washington, resident said she was told that the investment would generate an 18 percent return, and she “more than likely” would get her money back in a year.

“I loaned him $30,000, and I haven’t heard from him since,” Erickson, a retired elementary-school teacher, told The Arizona Republic in a phone interview.

The Arizona Corporation Commission’s Securities Division alleges that Erickson and four other older investors were defrauded of a combined $250,000 after making investments in 2011 and 2012 with LoanGo.

Administrative Law Judge Scott M. Hesla on Oct. 10 sided with state regulators and ordered the men to pay a total of $250,000 in restitution to the five investors. The judge also ordered the men to pay penalties of up to $15,000 each for “multiple violations” of the state’s anti-fraud provisions.

The judge, in his ruling, noted that Billingsley failed to inform investors that their money would be used to repay business startup loans of $10,000 each to himself and Peterson. The judge also wrote that investors were not told Billingsley received a $15,000 commission for obtaining their investments.

The judge noted that Billingsley was repaid his startup loan the same day one person invested $45,000 in LoanGo, and that Peterson was repaid the same day a different person invested $25,000 in the company.

AIMA’S NEW DUE DILIGENCE TEMPLATE (All About Alpha), Rated: A

It has been 20 years since the Alternative Investment Management Association published its first due diligence questionnaire, a template designed to standardize the diligence process by which investors decide if a particular management is right for them.

Now it has published a new questionnaire/template, covering a broader range of entities/strategies. Specifically, for the first time there are questions specifically covering private credit and private equity strategies. The new document also integrates what were formerly separate questionnaires specific to commodity trading advisers and fund of funds managers.

A CFPB policy everybody seems to like (really) (American Banker), Rated: A

Banks have welcomed the statement of principles because they are non-binding, while fintechs are encouraged by the CFPB’s recognition of key issues in the debate.

Yet the principles could also lay the groundwork for future regulation if banks and fintechs cannot work out some outstanding issues on their own.

Screen scraping

The most controversial aspect of data sharing is screen scraping. Banks loathe data aggregators’ practice of asking a consumer to provide their online banking login credentials, so the firm can scrape their account data. They argue it’s unsafe to hand out banking credentials and that aggregators bombard their servers with these requests, preventing actual customers from accessing their accounts.

The CFPB’s principles seem to discourage screen scraping without banning it.

Knight said the principle may encourage banks to directly provide data to third parties.

Informed consent

The CFPB’s principles around informed consent appeared the most stringent, suggesting that it’s not enough to just disclose what a company is doing, but disclosures must be done in language anyone can understand.

The principle may pose a challenge for banks and fintechs. How many companies send notifications about how they’re using and storing consumers’ data, in easy to understand language?

OCC head discusses the fintech ecosystem (Business Insider), Rated: B

However, while Noreika again defended the OCC’s right to license non-depository companies on Thursday, he also said the agency has not decided whether it will “exercise that specific authority.” This is more ambiguous than the OCC’s previous stance, perhaps suggesting the regulator believes the measure won’t survive such strong opposition.

Noreika said there’s been progress here, as federal regulators are now more willing to engage in dialogue with each other and with fintechs.

Source: Business Insider

The Robo Report Announces 2 Year Return Numbers for Robo Advisors In New Q3 Report (Business Insider), Rated: B

The Robo Report, the first and only report on the performance and portfolios of robo advisors, published by BackEndBenchmarking, has been released for the third quarter 2017, the company announced.

The expanded Report now offers a first look two full years of a few robo advisors performance data, along with new sections that include interviews with WiseBanyan, Personal Capital and Betterment; the addition of Sofi, TIAA and WealthSimple; and upside/downside capture ratios for more specific quant on risk tolerance, as well as more detailed asset allocation and style analysis.

The company currently tracks Acorns, Betterment, eTrade, Fidelity Go, Future Advisor, Personal Capital, Schwab, SigFig, Tradeking, Vanguard, WiseBanyan, TD Ameritrade, Ellevest, Hedgeable and Merrill Edge, Sofi, TIAA and WealthSimple.

First Associates to Host Industry Networking Event in New York (PR Web), Rated: B

First Associates Loan Servicing announced today that they will be hosting an industry networking breakfast for Marketplace Lending and Investment Banking professionals the day prior to the American Banker Digital Lending + Investing Conference.

Hosted at Aureole Restaurant in Manhattan, this event will include a panel of marketplace lending superstars, including speakers from Prospect Capital, Macquarie, MoneyLion and more, who will discuss the state of the industry.

If you have interest in attending panel discussion and event, please click here to learn more.

CoinList spins out of AngelList (Axios), Rated: B

CoinList, a provider of financial services for staging and managing initial coin offerings (ICOs), is spinning out of AngelList as a standalone company that will be led by former Sidewire CEO Andy Bromberg, it tells Axios.

United Kingdom

German app-only bank N26 gears up for UK launch as it recruits country manager (Business Insider), Rated: AAA

Closely-watched German fintech startup N26 is recruiting a country manager to spearhead its launch into the UK.

A job listing on N26’s website says it is looking for someone to take “charge of the market entry of N26 in the UK.” The successful applicant will be “responsible for the operational setup and development of N26 in the UK market,” and should “build up the branding for N26 within the UK market in order to successfully attract and win new customers.”

P2PFA reports over £700m of new lending in third quarter (P2P Finance News), Rated: AAA

THE PEER-TO-PEER Finance Association (P2PFA) has reported that new lending among its members equated to more than £700m in the third quarter of 2017, despite losing ‘big three’ platform RateSetter during the period.

The self-regulated trade body said on Monday that cumulative lending by the existing P2PFA platforms came in at more than £7.1bn by the end of September 2017.

Peer to Peer Lending Exhibits Steady Growth in Q3 2017 (Crowdfund Insider), Rated: AAA

The UK Peer to Peer Finance Association (P2PFA) has published their quarterly numbers on sector growth for the third quarter of 2017. Covering the period between July and September 2017,  the P2PFA says the numbers confirm continued steady growth in levels of new lending and in the number of borrowers facilitating loans through peer-to-peer lending platforms.

P2PFA Q3 2017 Q4 2016 Q1 2017 Q2 2017 Q3 2017
Cumulative lending £4,888,231,038 £5,708,635,402 £6,391,925,730 £7,168,727,657
o/w lending to businesses £2,922,779,264 £3,487,208,822 £3,924,226,666 £4,440,151,180
o/w lending to individuals £1,965,451,774 £2,221,426,580 £2,467,699,064 £2,728,576,477
Base stock of loans (outstanding loan book) £2,132,049,663 £2,497,408,800 £2,745,490,796 £2,958,326,435
o/w lending to businesses £1,213,693,991 £1,470,605,094 £1,630,765,546 £1,754,510,098
o/w lending to individuals £918,335,672 £1,026,803,706 £1,114,725,250 £1,204,816,337
New Lending £603,011,422 £703,047,838 £666,096,755 £733,270,490
o/w lending to businesses £404,171,535 £447,073,032 £419,818,940 £472,393,077
o/w lending to individuals £198,839,887 £255,974,806 £246,277,815 £260,877,413
Capital repaid £370,158,773 £401,358,998 £411,834,014 £508,891,428
o/w lending to businesses £249,776,784 £253,832,226 £253,477,742 £337,105,103
o/w lending to individuals £120,381,989 £147,526,772 £158,356,272 £171,786,325
Net Lending Flow £237,151,881 £305,679,840 £254,262,739 £228,055,356
o/w lending to businesses £158,793,983 £197,231,806 £166,341,195 £138,964,268
o/w lending to individuals £78,457,898 £108,448,034 £87,921,544 £89,091,088
Number of current lenders 121,476 128,000 140,098 134,658
Number of current borrowers 191,055 214,631 231,189 246,813
o/w are businesses 29,594 34,566 39,043 43,425
o/w are individuals 161,461 180,065 192,146 203,388


Q4 2016 Q1 2017 Q2 2017 Q3 2017
Folk2Folk £139,344,302 £176,419,805
Funding Circle £1,524,427,000 £1,830,397,245 £2,158,457,107 £2,747,357,362
Landbay £42,948,000 £43,142,119 £43,975,419 £59,561,822
Lending Works £33,636,000 £39,368,050 £48,864,686 £71,699,386
MarketInvoice £754,325,000 £837,793,900 £918,450,994 £1,201,857,191
ThinCats £196,907,000 £211,446,000 £226,981,000 £254,955,000
Zopa £1,731,685,000 £1,926,038,724 £2,172,561,894 £2,656,877,091
Total £4,888,231,038 £5,708,635,402 £6,391,925,730 £7,168,727,657

What getting servicing right really means (Mortgage Strategy), Rated: A

Earlier this year LendInvest received the highest possible rating for the quality of our loan servicing from ARC Rating, a regulated European credit agency, for the third straight year. It’s a big achievement for any lender, but particularly an online lender.

Here are some of the things that ARC looks for when rating a lender’s servicing standards:

  • Corporate governance and structure
  • Due diligence
  • Internal controls
  • Industry-standard technology
  • Data backup
  • Financial condition

A guide to Open Banking (Lexology), Rated: A

Open Banking refers to an open source technology that allows anyone to create apps and websites for the financial services sector. Developers use an application programme interface (API) to create software that allows customer data to be shared securely between banks and trusted third parties – with the customer’s consent.

The Open Banking Standard is publically available and can be accessed by developers when creating apps and websites. The final version of the Open Banking Standard is due to be in use by 2019.

Examples of Open Banking apps

  • Yolt is a money management app owned by ING Bank and launched in beta format in June 2017. Yolt allows users to view all their bank accounts, credit cards, bills etc. in one place – even if they are from different providers. Users can compare prices, including energy prices, and set budgets on their phone.
  • HSBC announced in September 2017 that it was testing an Open Banking platform that will allow its customers to view their current accounts, credit cards, loans, mortgages and savings from up to 21 different providers.
  • Wave offers a service for businesses to give clients access to all of their finances in one place. It acts as an invoicing service; tracks income and expenses to make accounting easier; allows for streamlined payment of staff and will leverage data from as many sources as possible. It also offers loans to clients by connecting with the online lender OnDeck.
  • DueDil is an app which uses data to make online due diligence passports for its clients so that they can prove their financial credentials.
  • Tandem collects the banking data of its customers from their banks, analyses their spending habits and provides suggestions for how they can save money.

Why buy-to-let investors are focusing on graduates in the London suburbs (The Telegraph), Rated: A

As rents continue their inexorable rise, the appeal of living in inner London boroughs such as Camden – where the average monthly rent is £2,219 – is starting to lose its shine.

According to peer-to-peer lending platform Landbay, the central areas popular among students are being eschewed by graduates, who are looking to make the capital their long-term base.

Faced with spending up to 75 per cent of their take-home pay on rent, graduates looking to work in London are choosing to live in areas where they can remain in commuting distance but pay less. And with average student loan debts of more than £50,000 according to the Institute of Fiscal Studies, any savings are welcome.

Top ten outer London boroughs | Average rent and yield

Year ending 31 August 2017

1 Bexley (YoY% 1.98 / Av.£ 1,004)

2 Sutton (YoY% -0.23 / Av.£ 1,056)

3 Havering (YoY% 1.59 / Av.£ 1,072)

4 Croydon (YoY% 0.02 / Av.£ 1,125)

5 Bromley (YoY% 0.47 / Av.£ 1,169)

6 Hillingdon (YoY% 0.38 / Av.£ 1,192)

7 Barking and Dagenham (YoY% 1.49 / Av.£ 1,203)

8 Lewisham (YoY% -0.16 / Av.£ 1,232)

9 Redbridge (YoY% 1.08 / Av.£ 1,249)

10 Enfield (YoY% 0.88 / Av.£ 1,252)

Source: Landbay

Fitbit Pay arrives in UK and Arcadia offers host of new ways to pay (Internet Retailing), Rated: B

Users of Fitbit can start to use their devices to pay contactlessly in stores a la Apple Pay from today.

Starling Bank, a mobile bank which offers money management and payment tracking through its app, is also the first UK bank to launch with Fitbit Pay, Apple Pay and Android Pay.

China

Fincera Reports $ 1 Billion in Loans for Q2 2017 (Crowddfund Insider), Rated: AAA

Fincera Inc. (OTCQB: YUANF), a provider of online financing and e-commerce services for small and medium – sized businesses and individuals in China, has reported financial results for the second quarter ended June 30 , 2017.

According to their numbers, loan transaction volume across both CeraPay and CeraVest platforms for Q2 2017 totaled approximately RMB 6.9 billion (USD $ 1.0 billion ).

Source: Crowdfund Insider

Chinese issuers prepare ‘supercycle’ of technology IPOs (Financial Times), Rated: AAA

Chinese companies have raised $38.6bn through IPOs in the year to date, according to Dealogic.

Issuers in financial services — which, like education and leisure is at the confluence of the hot segments of consumer services and tech — include Ppdai, which is raising $350m in New York, Yixin, Lexin and Jianpu Technology.

Yixin illustrates another trend: many of those coming to market are backed by China’s tech royalty including Tencent, Alibaba, Baidu and JD.com. Auto financier Yixin, backed by the latter trio, is expected to raise about $200m.

Like Qudian, which listed last week, fellow online lender Lexin is heading to the US and is expected to raise around $600m, according to bankers. Jianpu Technology, a financial comparison site akin to Lending Tree in the US or MoneySuperMarket in the UK, filed for its IPO last Friday.

Source: Financial Times

Rong360 starts listing process in USA, whose revenue nearly tripled in two years (Xing Ping She), Rated: A

Recently, Rong360’s JianPu Technology has filed an IPO prospectus to U.S. Securities and Exchange Commission. Rong360, which started with a diversion business, this time takes the VIE model to list in US. Its business scope covers loans, credit cards and finance, as well as big data risk controls. However, it is noteworthy that Rong360 is still in the red, and its big data risk control business has also led to a compliance controversy.

According to the prospectus, the company plans to go public in the U.S. with a maximum of $200 million deal for it, and the underwriters are Goldman Sachs, Morgan Stanley, JP Morgan and Huaxing Capital. Rong360 was founded in 2011 and has finished four round of equity finance. The listed entity is a wholly owned subsidiary of Rong360, which was registered in the Cayman Islands in June 1st this year.

With the net loss of $7.2 million in the first half of 2017, Rong360 is still in the red. However, the deficit of JianPu Tech has been shrinking. The prospectus shows that the company’s revenue has increased from 168.4 million RMB in 2015 to 182.1 million RMB in 2016. And in the first half of 2017, its revenue has grown to 393.4 RMB, nearly tripled in less than two years.

Criticism, regulatory tightening to weigh on share price (Global Times), Rated: A

Chinese online lender Qudian Inc is under fire in China after what observers said was a less-than-impressive interview by its CEO Luo Min Sunday that was aimed fending off criticism of the company’s business practices. The critics said it could instead exacerbate the company’s domestic image and hurt its share price.

Following its splashy debut in the US, Qudian was the subject of many negative news reports, mostly from popular social media accounts, about its business model, with some questioning its practice of targeting students for loans and others even describing the company as a “loan shark” – lending money at usurious rates.

“Our bad loan ratio is below 0.5 percent, that’s very low. So we can afford it when those people don’t pay up… Losses have been contained at a low level,” Luo said.

But part of the interview drew much attention and even mockery. Luo said, “Loans that weren’t paid on time were considered dead accounts. We never pushed people to pay back. We don’t even call. If you don’t pay back, then never mind, we’ll just give it to you as a gift.”

European Union

ING Partners with Kabbage, Inc. to Expand Automated Small Business Lending into France and Italy (Kabbage Email), Rated: AAA

Kabbage Inc., a global financial services, technology and data platform serving small businesses, and ING, a global bank, are expanding their strategic partnership into France and Italy to provide small businesses with real-time access to working capital. Building on ING’s successful launch in Spain with the Kabbage Platform TM , this partnership allows millions of small businesses throughout France and Italy to easily apply, qualify and access ongoing lines of credit up to €100,000 with ING in under 10 minutes.

IRELAND’S FIRST SYNDICATED PROPERTY FINANCE PLATFORM LAUNCHED WITH €1.5 MILLION CROWD-LENDING LOAN (Irish Tech News), Rated: A

Initiative Ireland has today announced the launch of Ireland’s first syndicated property finance platform.

The launch coincides with the company’s pre-approval of a €1.5 million secured loan, which has been approved for funding via the platform. The largest crowd-lending loan approved to date in Ireland, the loan will fund the development of 10 social housing apartments and a ground floor restaurant on the North Strand Road, Dublin.

International

Empowering the Unbanked through Fintech and Microfinance (Huffingtong Post), Rated: AAA

One angle that needs to be discussed more is how the introduction of these new services is also lowering barriers to most financial activities.

For instance, the rise of cashless options has given the unbanked access to financial services especially in regions that banks find unserviceable. So, it is quite refreshing then that some new Fintech efforts are focused on this particular area since financial inclusion is considered as a key aspect to poverty reduction.

I recently spoke with Sharone Perlstein who is currently working on delivering microfinance services to emerging markets.

What attracted you to microfinance?

There are about 2.5 billion people in the world who are unbanked. Microfinance bypasses the banking system and can help unbanked people develop their own personal economy that will enable them to support their families, their communities, and ultimately the economy of their country.

What are the key challenges in microfinancing and how do you think they can be overcome?

Human resources: Until now, a very large workforce was required to provide this service to those who need it. Today, with automation and smarter information systems, we can significantly reduce manpower and streamline processes to make loans more economically viable for borrowers and lenders.

Most microfinance companies operate where they are most needed, namely in rural areas where the technological infrastructure is unadvanced and unstable. These areas are usually far from urban centers and transportation is inconvenient and expensive. As a result, communication between the microfinance service provider and its potential customers is complex and challenging.

Granting loans to people without a bank account may be risky from a business point of view, since it is difficult to know whether potential borrowers are trustworthy or will be able to meet the terms of the loan. It is also difficult to monitor their business and economic activity. In other words, it is very difficult to build a financial profile for a borrower with no banking activity. Here, too, mobile technology changes the picture.

Some argue that microfinance loans, supposedly meant to help poor people succeed financially, often leave them with debts they can’t afford because of the high-interest rates. What is your opinion on this matter? Is this a real problem? What causes it? And how can it be solved?

I think the best solution is to ensure that:

A. Potential borrowers understand the terms of the loan in depth.

B. The Microfinancier knows the potential borrower in depth.

Why do you choose to focus on Indonesia?

I researched the region’s economy a bit and discovered that there were more than 50 million small and medium-sized businesses, representing about 97% of the business sector in Indonesia and responsible for 30%, if not more, of its GDP growth. However, many of these businesses don’t have enough money to realize their full potential, especially in rural areas, and the banks do not provide the right solution. For this reason, the Bank of Indonesia has enacted a law according to which banks will have to devote at least 20% of their loans portfolio to microloans by 2018, thus opening a window of opportunity for businesses and other microfinance companies wishing to enter the local ecosystem.

Will Your Next Loan Be in Bitcoin? (The Street), Rated: A

Bitcoin could have you covered on your next home loan.

In this line, the longstanding contribution of traditional banks in the worldwide economy is undeniable. But due to their credit selectiveness, renowned bureaucracy and transactional costs, the question is: Can this system can be improved to better serve the 2 billion underbankedaround the world? Greater financial inclusion provides benefits far beyond improved economic health for underserved societies; it is also way for governments to reduce corruption and fraud and promote entrepreneurship and growth.

Anecdotally, at the end of 2015, Lending Club had a total loan volume of $15.9 billion. Year-end of 2016 shows a total volume of $24.6 billion so the annual volume for 2016 is the difference or $8.7 billion.

Just last year, Ripio Credit Network, which wrapped up a $31 million Ethereum ICO, entered the credit service market using Bitcoin as the transaction vehicle. A year later, BitPagos launched Ripio as a digital wallet that enables consumers to send, receive, store, and buy or sell Bitcoin in local currency and to make online payments. In January 2017, BitPagos rebranded as Ripio, with around 100,000 users in tow across North and South America.

Mambu: A Truly Global SaaS Banking Platform for Traditional Finance & Fintechs (Crowdfund Insider), Rated: A

Mambu is a Software as a Service (SaaS) platform that has quickly differentiated its product as a leader in the white label global online banking space.

Mambu is operating in 45 different countries indicating its ability to quickly adapt to diverse regulatory regimes.

Co-founded by CEO Eugene Danilkis and COO Frederik Pfisterer, Mambu is Berlin based Fintech, a standout in the emerging German Fintech scene. Danilkis started his career developing NASA-certified software for the International Space Station.

Can you please provide an update on Mambu and global utilization? How many different companies are using your digital banking services? Which countries are you operating in?

Mambu is live on 6 continents, countries of operation include the UK, Netherlands, Germany, Sweden, the US, Kenya, Australia, Philippines, China and Argentina, to name a few.

We have more than 180 live operations in over 45 countries, our solution powers over 5000 loan and deposit products which serve over 4 million end customers.

Our clients range from FinTech revolutionaries to traditional banks.

  • Oaknorth
  • N26
  • New10, ABN AMRO’s newly launched SME lending Fintech, went from concept to launch in 10 months and is offering a fast and fully digital loan application process for Dutch businesses.
  • Globe Telecom’s lending business Fuse
  • PayU Colombia

Is online lending, including P2P, marketplace and balance sheet lending, the most demanded service right now?

Eugene Danilkis: Across all lending verticals, consumer, business and marketplace, there is significant demand for digital and customer centric loan products.

That being said, we have experienced a rise in demand from institutions looking to launch new digital banking services, offering both deposit and loan products.

We’ve also seen a growth in institutions looking to explore a different approach and take a marketplace model similar to that of N26.  They want to collaborate with product providers to offer clients a wider range of products and services.

There appears to be more traditional lenders (IE banks) more inclined to go it alone and launch their own platforms. Goldman Sachs launched Marcus which they developed in house. Is this a trend? Or an opportunity for Mambu?

Eugene Danilkis: As mentioned above, this is a trend that is gathering momentum and it is an opportunity for Mambu.

From Bitcoin To Equity: Fintech Terms Explained (International Business Times), Rated: B

Cryptocurrency: A digital currency that uses cryptography, the art of coding messages to keep them secure.

Blockchain technology: A type of software pioneered by the bitcoin community. It is a new way to structure data by spreading it out across the network so no single party can meddle with the records.

Ethereum: A type of open source blockchain network created by a Russian-Canadian programmer named Vitalik Buterin.

Smart contracts: A piece of software that runs on a blockchain platform and is programmed to automatically complete transactions based on specific circumstances.

Mining: The process of verifying transactions on decentralized cryptocurrency networks is called “mining.”

ICO: An initial coin offering is a type of fundraising campaignwhere a high-tech project raises cryptocurrency by selling tokens, usually a new token unique to this project or startup.

P2P: This stands for peer-to-peer, direct transfers between two people. If you send a friend money through the Venmo mobile app, that’s a P2P money transfer.

Altcoin: A generic term for almost any cryptocurrency that isn’t bitcoin, short for alternative coin.

Cryptocurrency wallet: In the crypto space, a wallet is a piece of software that manages your coins and assets.

Utility token: A cryptocurrency that activates a product or service, grants access to a community or network, or otherwise spurs the blockchain-based project’s development.

India

Connect adds State Bank of India to panel (Mortgage Introducer), Rated: B

Mortgage network Connect for Intermediaries has added State Bank of India – the largest bank in India – to its panel.

The bank offers limited company and special purpose vehicle buy-to-let mortgages with rates starting from 2.59% to 60% LTV and 2.89% to 75% LTV.

It also offers buy-to-let mortgages for individuals from 2.09% to 60% LTV, while it accepts applications from first-time landlords if they have a residential mortgage.

Connect now has a panel of more than 100 lenders, with Octane, West One and Funding Circle being added this year.

Africa

Mastercard Foundation Announces Fifth Annual Symposium on Financial Inclusion (BusinessWire), Rated: AAA

The Mastercard Foundation today announced that its fifth annual and largest Symposium on Financial Inclusion (SoFI) will take place in Accra, Ghana, on November 7 – 9, 2017. The Symposium champions the idea that, to achieve greater financial inclusion, financial service providers in developing countries must do more to meet the needs and expectations of people living in poverty.

Each year since 2013 the Foundation has convened hundreds of industry professionals to focus on barriers to greater financial inclusion around the world.

This year’s event will reflect on progress made over the past five years, explore challenges that still lie ahead, and plan how to expand and deepen financial inclusion for the world’s most underserved people.

Attendees will hear from an impressive lineup of keynote speakers, including:

  • Opening Keynote Address: Juliet Anammah, Chief Executive Officer, Jumia Nigeria
  • Keynote Address II: Dr. Ernest Addison, Governor, Bank of Ghana

The Mastercard Foundation first awarded the Clients at the Centre Prize in 2015 to the Swedish mobile microinsurance firm BIMA. Last year, the Prize was presented to the South African international remittance company, Hello Paisa. Each year draws nearly 100 applicants from companies around the globe. The three 2017 finalists are:

  • Jumo, a large-scale, low-cost financial services marketplace that uses behavioral data from mobile usage to create financial identities for micro, small, and medium-sized enterprises;
  • ftCash, one of India’s fastest growing financial technology ventures which aims to empower micro-merchants and small businesses with the power of digital payments and loans; and
  • Destacame, a free online platform that empowers users by giving them control over their data to build their financial capabilities and to access financial products.

Authors:

George Popescu
Allen Taylor

Thursday May 18 2017, Daily News Digest

Thursday May 18 2017, Daily News Digest

News Comments Today’s main news: Lending Club increases minimum investment to open account. Consumers pay off unsecured personal loans first. American Households Return To Peak Debt, Thanks To Booming Student Loans. RateSetter sells off bad debts. Today’s main analysis: The fast lane to better small business funding. Today’s thought-provoking articles: Consumers pay off unsecured personal loans first. American Households […]

Thursday May 18 2017, Daily News Digest

News Comments

United States

United Kingdom

China

European Union

Australia

India

Middle East

News Summary

United States

Lending Club Increases Minimum Investment to Open an Account to ,000 (Lend Academy), Rated: AAA

Until today new investors at Lending Club could open an account with as little as $25. This has now changed. Going forward to open a new account at Lending Club you must deposit $1,000. The $25 minimum investment per loan still applies but you will no longer be able to start an account with less than $1,000.

The reason for this move can be explained in one word: diversification. We have written manytimes before about the importance of diversification and Lending Club has a page on their site dedicated to this topic. With $1,000 investors will be able to invest in 40 notes; while that is still not very diversified it is a lot better than investing in, say, four notes when someone starts with $100.

American Households Return To Peak Debt, Thanks To Booming Student Loans, (Buzz Feed), Rated: AAA

American households are back at peak debt, with new data showing the highest level of household debt since 2008.

Kind of.

Americans now sit on a $12.73 trillion pile of household debt, meaning mortgages, loans, credit cards, home equity lines of credit, car loans, and student debt. That figure previously peaked at $12.68 trillion in the early days of the Great Recession.

Those numbers aren’t adjusted for inflation, and $12.68 trillion 2008 dollars would be equal to more than $14.5 trillion today. And while debt number is at it’s highest ever, the economy has grown significantly in the last nine years, meaning that as a percentage of the total economy, it’s still well below its 2008 high.

“Almost nine years later, household debt has finally exceeded its 2008 peak but the debt and its borrowers look quite different today,” said Donghoon Lee, a Research Officer at the New York Fed. “This record debt level is neither a reason to celebrate nor a cause for alarm.”

The makeup of American household debt has changed in a big way. Back in 2008, people held $10 trillion in housing debt; that has fallen to $9.1 trillion today. In its place, student loan debt has boomed, and car loan and credit card debt also rose.

Home loans have become harder to come by for middle- and low-income buyers in the decade since the housing crisis began. And as the recession kicked into high gear and unemployment spiked, people poured into colleges in huge numbers, looking to weather the storm. That led to a boom in the for-profit college industry — and a soaring national student debt pile.

When household debt peaked in 2008, Americans had $610 billion in student loan debt, about 5% percent of all consumer debt and 23% percent of all non-housing debt. Today, student debt balances have more than doubled to $1.3 trillion, 11% of all consumer debt and 37% of all non-housing debt.

But people are now defaulting on those student loans at at a higher rate than any other form of debt. 11% of all student debt is now more than 90 days overdue, compared to 7.5% for credit cards and 3.8% for home loans.

“The standout, however, has been student loans—with new serious delinquency flows that deteriorated steadily between 2004 and 2014 and have remained stubbornly high since then,” the Fed researchers said.

The Fast Lane to Better Small Business Funding (Lendio Email), Rated: AAA

Consumers Place Personal Loans Atop the Credit Mountain (GlobeNewswire), Rated: AAA

When faced with the choice of which debts to pay and which to miss, consumers in financial distress tend to prioritize unsecured personal loans ahead of other credit products such as auto loans, mortgages and credit cards. These findings were released today during TransUnion’s annual Financial Services Summit, attended by more than 300 senior-level financial services executives from around the globe.

The most recent study incorporates unsecured personal loans for the first time since TransUnion began analyzing the payment hierarchy dynamic in 2010. Beyond personal loans, this most recent analysis is consistent with prior TransUnion studies in finding that consumers have historically prioritized auto loans over their mortgages and credit cards, and have done so consistently since at least the beginning of 2004.

Personal Loan Delinquencies* Consistently Remain Lower Than Other Loan Types
Delinquency* Rates for Consumers Possessing

Auto Loans, Credit Cards, Mortgage Loans and Unsecured Personal Loans

Year Personal Loan Auto Loan Mortgage Credit Card
Q4 2012 1.10% 1.86% 3.49% 3.11%
Q4 2013 1.17% 1.84% 3.13% 3.23%
Q4 2014 1.19% 1.76% 2.63% 3.05%
Q4 2015 1.26% 1.68% 2.32% 2.87%
Q4 2016 1.49% 1.75% 2.44% 3.65%

*Delinquency rates after 12 months for consumers who possess and are current on all four credit products at the beginning of the respective performance measurement period.    

Recent TransUnion data show that average term lengths are much shorter for unsecured personal loans. For loans originated in Q4 2016, unsecured personal loans had an average term of 28 months. In this same timeframe, the length of auto loans averaged 60 months and mortgages averaged 230 months.

Why Millennials Are Interested In Real Estate Investing (Forbes), Rated: AAA

RealtyShares recently teamed up with Harris Interactive to put out the Real Estate Investing Report, surveying Americans on their investment preferences. And according to the survey results, 55 percent of millennials are interested in investing in real estate, the highest percentage of all demographics questioned. Research from Fannie Mae supports these findings, reporting that 85 percent of millennials think real estate is a good investment.

According to a recent Pew report, there are 75.4 million millennials compared with 74.9 million baby boomers.

In the RealtyShares survey results, 20 percent of millennials indicated they believe real estate has performed the best since 2000. In fact, millennials were the age group with the largest percentage with that belief. The next highest group to believe real estate outperformed the stock market since 2000 is comprised primarily of Generation X (ages 35–44), 16 percent of whom chose real estate as the top performer.

Millennials, ever-vigilant on the internet, are paying heed to online financial experts. One of these experts especially popular among millennials is personal finance blogger Financial Samurai, who recently shared his preference for investing in real estate over the stock market.

While the large down payment needed to invest in real estate is the biggest reason millennials aren’t buying real estate, thanks to online real estate investing platforms, millennials can now invest in real estate without saving tens of thousands of dollars for a down payment.

Juvo Appoints Financial Services Expert Ron Suber As Strategic Advisor (Juvo Email), Rated: A

Juvo, a pioneer in mobile Identity Scoring, today announced the appointment of Ron Suber, president of Prosper Marketplace, as strategic advisor to the company. An investor in Juvo, Suber is a prolific presence in fintech and is well known as an industry influencer around the world. In his advisor role at Juvo, he will help direct the company through its global growth, ongoing product development and expansion into new markets.

Ron’s appointment helps round out the Juvo advisory team, which includes:

  • Nils Puhlmann, leads Juvo’s security and privacy efforts: former Chief Security Officer & co-founder of Cloud Security Alliance
  • Vicente Silveira, fraud and risk management advisor: head of fraud data science at Uber
  • Allison Duncan, social impact advisor: founder and CEO of Amplifier Strategies
  • Ken Laversin, enterprise software/SaaS advisor: senior vice president, worldwide sales at Jasper
  • Monica Rogati, data science advisor: equity partner at Data Collective, former VP of data at Jawbone and LinkedIn data scientist

LendingHome Hires New CFO. Receives Fannie Mae Approval to Expand Home Loans (Crowdfund Insider), Rated: A

LendingHome says it is ready to ratchet up platform growth. The marketplace lending platform that finances residential mortgages has made two announcements today.

First, the online lender has announced that former Nationstar Mortgage CFO, Robert Stiles, has been appointed to become LendingHome’s CFO.

Simultaneously, LendingHome has been approved by Fannie Mae as a seller and servicer provider which will enable  LendingHome to expand its consumer home financing business, a bit of a big deal.

By working directly with Fannie Mae, LendingHome may streamline operations and offer better loan pricing to its customers.

Is the CSBS Vision 2020 the Answer to the OCC Fintech Charter? (Crowdfund Insider), Rated: A

Earlier this week, the Conference on State Bank Supervisors (CSBS) announced their “Vision 2020” initiative.

The CSBS outlined their initial objectives:

  • Redesign the Nationwide Multistate Licensing System (NMLS). CSBS has launched a technology effort that redesigns and expands NMLS, the common platform for state non-bank regulation. The redesign will use data and analytics to provide a more automated licensing process for new applicants, streamline multi-state regulation, and shift state resources to higher-risk cases. State regulators also will ensure transparency through NMLS Consumer Access, which was viewed 3.7 million times last year.
  • Harmonize multi-state supervision. CSBS has created working groups to establish model approaches to key aspects of non-bank supervision. The groups will work to enhance uniformity in examinations, facilitate best practices, and capture and report non-bank violations at the national level. To further streamline the process, CSBS will create a common technology platform for state examinations.
  • Form an industry advisory panel. CSBS will establish a fintech industry advisory panel to identify points of friction in licensing and multi-state regulation, and provide feedback to state efforts to modernize regulatory regimes. The panel will focus on lending and money transmission, and discuss a wide range of solutions. Individual state regulators already have been engaging the fintech industry in formal dialogue.
  • Assist state banking departments. CSBS education programs will make state departments more effective in supervising banks and non-banks. Updated standards and analytics will help states determine where new expertise is most needed, identify and address weaknesses, update supervisory processes, and compare themselves to and learn from other state departments. These higher standards will be validated through an enhanced CSBS accreditation program.
  • Make it easier for banks to provide services to non-banks. CSBS is stepping up efforts to address de-risking – where banks are cautious about doing business with non-banks, due to regulatory uncertainty – by increasing industry awareness that strong regulatory regimes exist for compliance with laws for money laundering, the Bank Secrecy Act, and cybersecurity.
  • Make supervision more efficient for third parties. Banks of all sizes work with a variety of third-party service providers, including fintech companies. CSBS supports federal legislation that would allow state and federal regulators to better coordinate supervision of bank third-party service providers.

Fintech Lawyers on State Regulators’ Possible Alternative to OCC Charter Plan (Corporate Counsel), Rated: A

Lawyers who work for and with fintechs are encouraged that the state regulators at the CSBS are at least thinking about changes to the system that they believe would modernize state regulations of nonbanks or help centralize regulation among the states.

The state banking regulators’ plan for nonbanks such as fintechs outlines six ways in which it seeks to provide “a regulatory system that makes supervision more efficient and recognizes standards across state lines” by 2020, according to a press release.

Initial actions will include: redesigning the Nationwide Multistate Licensing System, harmonizing multistate supervision, forming an industry advisory panel, assisting state banking departments, making it easier for banks to provide services to nonbanks and making supervision more efficient for third parties, according to the association.

LendUp And Beneficial State Bank Announce Major Expansion Of Credit Card Partnership (PR Newswire), Rated: A

LendUp, a socially responsible lender for the emerging middle class, and Beneficial State Bank (Beneficial State), a social enterprise bank, today announced a significant expansion of the L Card, its credit card joint venture. The move is expected to quadruple the availability of L Cards, a Visa credit card product designed by LendUp and issued by Beneficial State for consumers traditionally shut out of mainstream banking due to poor credit scores or damaged credit files. The expansion builds on the firms’ partnership that extends back to the L Card pilot in April 2015.

According to the Credit Builders Alliance, a person with subprime credit pays on average $250,000 more in interest than borrowers with good credit over the course of their lifetime — and that doesn’t even include fees on financial products. In addition, according to LendUp research, many of its own customers are currently shut out of mainstream credit card products, such as rewards credit cards (98.5%) and retail rewards cards (66.5%).

In response, LendUp created a card for Beneficial State that meets borrowers’ immediate credit needs while helping to build their long term financial health. Features include:

  • Instant decisions
  • No over-the-limit fees or security deposits
  • Reporting to the three main credit bureaus
  • Affordable payments

The L Card carries an annual fee of $0$60 and APR ranging from 19.99% to 29.99%; it has a 4.8 average star review on CreditKarma.

Addepar To Buy Alternatives Data Provider AltX (Financial Advisor), Rated: A

Mountainview, Calif.-based Addepar announced on Thursday that it is purchasing AltX, an alternatives market intelligence platform.

Addepar hopes that the acquisition will boost it’s capabilities around alternative investing by enabling advisors to make better-informed decisions, said Eric Poirier, Addepar CEO, in a statement released on Thursday.

AltX’s platform uses machine learning to gather intelligence on alternative investments, incorporating reference data, public filings and news into a database of performance, holdings and key reference data for more than 17,000 funds.

Ascentium Capital Surpasses $ 3.0 Billion in Origination Volume (Ascentium), Rated: A

Ascentium Capital LLC, the top private independent finance company in the United States by new business volume, announced surpassing $3 billion in origination volume since the Company’s inception in August 2011.

Milwaukee FinTech firms aim to help consumers (Biz Times), Rated: A

The pace of FinTech disruption is increasing in the financial industry, with about $22 billion raised by FinTech startups over the past five years, Schedler said.

Northwestern Mutual has invested in two key early FinTech leaders, Betterment and Learnvest. And with its Future Ventures program, it plans to invest $50 million in series A and series B funding rounds over the next five to six years to bring in more partnership opportunities.

Bank My Biz has 13 bank partners in Wisconsin and many more across the country, he said. So if one of those banks isn’t able to extend an equipment or working capital loan of less than $100,000 to a small business, Bank My Biz may be able to do so with its financial partner, Brookfield-based national direct lender Advantage+.

Banks earn income off the term loan and Bank My Biz earns its revenue through the interest rate spread. It charges interest rates of between 9 and 13 percent.

Looking Glass buys marketplace loans on lending sites Funding Circle, LendingClub, Peerform and Prosper. Using its custom predictive analytics software, LGI evaluates and underwrites loans it has determined are unlikely to default. The alternative investment model promises investors a less volatile environment than the equity markets.

It also runs LoansOfTheDay.com, which uses big data, predictive analytics, artificial intelligence and machine learning to distribute risk and optimize returns on peer-to-peer lending sites. LGI contributes a minimum of $25 to each loan on the site.

And its newest product is LendSight, a SaaS underwriting tool banks can use to improve their profit margins by doing predictive underwriting, while allowing Looking Glass to capture more market share, Siefkes said.

Redpoint Capital Group Names Alex Dunev as Managing Partner (BusinessWire), Rated: B

Redpoint Capital Group, LLC (“Redpoint”), an alternative investment company focused on providing financing solutions to companies in the Specialty Finance and FinTech sectors, announced today that it has added Alex Dunev as a Managing Partner. Alex will be responsible for driving Redpoint’s strategic priorities, including sourcing new investment opportunities and raising capital to deploy into Redpoint’s investment strategies. Alex will also manage Redpoint’s office in Westport, Connecticut.

Alex was previously a Managing Director in the Investment Banking Division at UBS, leading the bank’s Specialty Finance efforts in the Americas. Prior to UBS Alex also covered Specialty Finance companies at Morgan Stanley and Credit Suisse.

DiversyFund, Inc. Brings New Innovations to Real Estate Crowdfunding (Digital Journal), Rated: B

Mr. Cecilio and Mr. Lewis formed DiversyFund, Inc. to create the industry’s first online crowdfunding real estate platform where the company acts as the real estate developer on all of its investment offerings in order to deliver to its investors better quality control and more detailed and robust investor reporting, including monthly construction updates on each real estate project with pictures of all work in progress.

Because DiversyFund, Inc. acts as the developer and receives a developer fee that is paid at the project level, DiversyFund does not charge any platform fees, servicing fees or other sales commissions to its investors, enabling investors to keep 100% of their investment returns.

Additionally, DiversyFund, Inc. is the only crowdfunding real estate site that focuses exclusively on strong-performing Southern California real estate markets.

United Kingdom

P2P Lender Sells Off Bad Debts Worth £2.1 Million (iExpats), Rated: AAA

A British peer-to-peer lender has become the first platform to sell non-performing debt.

RateSetter has completed a deal with undisclosed terms to 1st Credit, a debt purchasing company.

The lender says the loans were taken out between 2010 and 2015 and that the company felt borrowers were unlikely to settle the debt.

RateSetter has a £22.23 million provision fund to cover bad debts and expects to pay out £18.78 million compensation to investors.

Landbay introduces retention fee for intermediaries (P2P Finance News), Rated: AAA

LANDBAY has announced that its intermediaries will now receive a retention fee for all customer renewals.

The peer-to-peer lender, which specialises in buy-to-let mortgages, said that it introduced the 0.3 per cent fee because of its ongoing recognition of the role of intermediaries in offering advice in the retention process of customers.

Investing in the UK’s growth when it needs it most (FT Adviser), Rated: A

The notoriety and growth of crowd funding, and its variations, has gathered a great deal of attention. For good and bad. Only last year, Lord Turner warned: “The losses which will emerge from peer-to-peer lending over the next five to 10 years will make the bankers look like lending geniuses.”

While investing in VCTs has its risks, just as any investment has, these risks are for more measured and disciplined with quality offerings. Many quality VCT providers have more recently felt lumped in the same bucket as the under fire feel peer to peer (P2P) lenders and equity crowdfunders (ECFs) both of which now the subject of a clampdown by the FCA.

Despite some of the misconceptions, VCTs raised £458m in the 2015-16 tax year, making it the third highest year for VCT investment since records began in 1995. In the tax year that has just closed, most but not all were fully funded by the end of 2016-2017.

VCTs invest in small, largely unquoted, companies in the UK of up to £15m in size.

London-based VC Notion Capital has announced a new $ 80 million startup fund (Business Insider), Rated: A

Notion Capital, a London-based venture capital firm that backs startups across Europe, has announced a new $80 million (£60 million) startup fund that will be used to back later stage companies.

The VC, which focuses on backing enterprise software and cloud companies, also announced on Tuesday the final closing of a $140 million (£107 million) venture fund to back early stage startups.

Ford: Wine, watches and cars: the rise of alternative investing (Automotive World), Rated: B

As savvy investors champion alternative commodities such as wine and watches, classic Fords have proved themselves another sound investment.

For those who think there’s no money to be made from cars, think again – total growth over the past decade was 457 per cent***. This is a bigger increase than even property, which has increased in value on average 20 per cent in the last decade and 152 per cent since 2000 across Europe*****. And it’s not just new super cars such as the latest Ford GT newly on sale in excess of $450,000 that command a hefty price tag and appreciate rapidly. Among the list of top investor car makes, Ford offers among the lowest entry costs.

In March 2016, a Ford Escort Cosworth with less than 2,500 miles on the clock sold at auction for £67,580 after originally going on sale at £22,050 in 1992. The average price of a Cosworth is now more than double that original price and the Fiesta XR2 which went on sale in 1981 for £5,150, has trebled in value since 2014 to prices well in excess of £10,000, with the best advertised at close to £20,000.******

China

Alibaba Invests In Its First Fintech Company In Hong Kong (Crowdfund Insider), Rated: AAA

As reported by Forbes today, Alibaba has invested in online invoice exchange marketplace Qupital, marking the Chinese e-commerce giant’s first foray into fintech investment in Hong Kong. Qupital raised a total of $2 million in its seed round.

Qupital bills itself as Hong Kong’s first and largest online invoice discounting exchange. The company aims to solve the problem of companies not having quick access to cash by allowing them to raise funds on the site through the auctioning off of unpaid invoices, essentially securitizing their accounts receivable.

Dianrong Announces Next Technology Agreement Outside Mainland China (Military-Technologies), Rated: AAA

Dianrong today announced a new technology agreement with Maggie Ng, a leading consumer banking executive in Asia Pacific, to launch the first global fintech marketplace connecting Asian investors with high-quality, low-volatility and largely untapped asset classes, including U.S. consumer lending. The new strategic alliance combines Dianrong’s advanced technology with Ms. Ng’s extensive consumer-lending experience.

Ms. Ng and Dianrong engineers are currently completing beta testing for the new fintech platform that will provide Asian investors with an integrated solution to access U.S. marketplace lending assets. The platform will utilize multiple U.S. marketplace lenders and a single onboarding and know-your-customer process. It will also offer advanced risk modeling capabilities, added credit enhancement and structuring features, and blockchain solutions to safeguard data integrity. Investors will also have access to real-time performance monitoring, U.S. tax-exemption filing capabilities and a secondary market for liquidity.

Chinese Celebrity-Backed Fintech Firm QuantGroup Considering US IPO (Crowfund Insider), Rated: A

Fintech company QuantGroup, which was founded by several notable Chinese movie stars, is considering a US IPO, according to an article published in Bloomberg last week. The firm is looking to raise an estimated $200 million according to unnamed sources.

The Beijing-based QuantGroup is a financial services company that provides estimated credit ratings using big data.

QuantGroup joins a growing list of Chinese fintech firms in the process of launching US IPOs. Fenqile, a Chinese online shopping mall that lets customers pay in installments, is also looking to raise over $600 million through a US IPO.

LCQ5: Regulation of online crowdfunding and lending platforms (7th Space), Rated: B

Platforms for raising funds from and lending small loans to members of the public through the Internet (crowdfunding and lending platforms) have become popular in recent years. However, some financial advisers have pointed out that investors participating in crowdfunding activities are exposed to considerable risks. In this connection, will the Government inform this Council:

(1) whether it knows the number of companies currently operating local crowdfunding and lending platforms, and the number of complaints received by the authorities in the past three years concerning crowdfunding activities, with a breakdown by type of complaints;

(2) how the current legislation regulates the fundraising and lending activities conducted through crowdfunding and lending platforms;

(3) as some financial advisers have pointed out that investors provide funds through such platforms, which in turn lend the funds to borrowers, whether the authorities will, to avoid such investors breaching the law inadvertently, clarify if such investors are regarded as money lenders under the Money Lenders Ordinance (Cap. 163) and therefore are required to obtain money lender licences; and

(4) whether the authorities will conduct public education activities on the risks faced by investors participating in crowdfunding activities; if so, of the details?

Answers:

Year No. of complaints about crowdfunding No. of complaints about lending platforms
2015 0 6
2016 4 1
2017
(as at end March)
0 0

 

(2) and (3) Depending on the specific structure and features of the relevant arrangement, some types of crowdfunding activities, in particular equity crowdfunding and peer-to-peer lending, may be subject to the provisions of the Securities and Futures Ordinance (Cap.571), and/or the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32).

(4) We will ensure that investors and consumers of crowdfunding and lending platforms will receive proper protection under Hong Kong’s regulatory rules and standards. In view of the rapid development of financial technologies (Fintech), the Investor Education Centre (IEC) is working on a series of articles to introduce various Fintech services/products, associated risks and regulatory framework to the public.

European Union

Older Swiss fintech additiv gets $ 21.3 million in new capital (CNBC), Rated: AAA

A Zurich-based Swiss financial technology (fintech) firm, additiv, has today raised CHF21m Swiss Francs ($21.3m) in capital from core investors including BZ Bank, acting on behalf of its clients, and the investment vehicle Patinex.

Additiv provides systems to help with the digitalization of banks, asset managers and insurers.

Additiv’s key software product is the Digital Finance Suite (DFS). It has offices in Switzerland, Hong Kong and Singapore, as well as an international network of reselling partners and customers around the world.

Additiv’s key software product is the Digital Finance Suite (DFS). It has offices in Switzerland, Hong Kong and Singapore, as well as an international network of reselling partners and customers around the world.

Lendity: ideal marketplace lending exposure for pension funds, asset managers, family offices, private banks (Daily Fintech), Rated: A

A sea of 300 suits is what I faced last week at the first Swiss Alternative Lending conference hosted at SIX and in partnership SIX and Lendity.

Lendity is focused on developing structures that a family office, an asset manager, a pension fund, can book on their books or a private bank can list in their private debt product offering for qualified investors. And at the same time include:

o   Global exposure – US and Europe for now (USD, CHF)

o   Asset diversification – Consumer, SME, real estate etc

o   Platform diversification

o   Tax efficiency, despite the cross-border exposure

o   Regulatory compliance, despite the cross-border exposure

o   Private debt without additional counterparty risk from the issuer.

Lendity is really solving a pain point for both marketplace lending platforms and for institutional investors.

For marketplace lending platforms, Lendity acts as a marketplace that matches them with institutional capital from Financial advisors, Private Bankers, Pension funds, Family offices, and Asset managers (the 5 “investor” types).

FinTech: the influence of technology on the future of the financial sector (Lexology), Rated: A

The European Parliament’s Committee on Economic and Monetary Affairs (ECON) has published its final report on ‘ (2016/2243(INI))’.

On the other side of the coin, the report stresses the following:

  1. Financial services legislation at both the EU and national levels should be sufficiently innovation friendly.
  2. Fintech companies should continue to contribute positively to the development of financial intermediation.
  3. There is scope for improvement in the means that can be used for cross-border payments (while noting the regret of the European Parliament that there is no EU-wide European-owned credit or debit card scheme).
  4. There are no clear European rules or guidelines for outsourcing data to the could with regard to the financial sector.
  5. It is concerned about the increased use of permissionless blockchain applications for criminal activities.

See the full report here.

Australia

Retirees are riskier investors than millennials, says ASX report (Financial Review), Rated: AAA

The latest ASX Australian Investor Study found the proportion of 18 to 24-year-olds who invested in the ASX over the past five years had increased from 10 to 20 per cent. The proportion of 25 to 34-year-olds had also increased, from 24  to 39 per cent.

The survey shows that 81 per cent of 18 to 24-year-olds are seeking guaranteed or stable returns, compared to 67 per cent of 25 to 59-year-old investors and 60 per cent of retirees.

Millennials have grown to recently become the largest generational cohort in Australia, with 4.9 million people, eclipsing Gen X (4.8 million) and baby boomers (4.1 million), Roy Morgan Australia says.

According to the ASX research, 44 per cent of 18 to 24-year-old investors hold cash, 31 per cent hold shares and 25 per cent have investment properties.

The ASX survey also revealed that the proportion of 18 to 24-year-old investors using professional financial advisers was 37 per cent, but Mr Mahony said the number of people who used Google to see where they should be investing was 48 per cent.

NAB’s fintech arm brings robo-advice to home loans (AltFi), Rated: A

The fintech arm of Australian banking giant NAB, UBank, has unveiled a robo-advisor aimed at helping customers complete their home loan applications.

In a national first, “RoboChat” will offer real time help for online home loan applications available 24/7. The robot will answer FAQs, such as “what term do you offer on home loans?” and “do you offer redraws and how do they work?”, as well as stupid and unrelated questions with a sense of humour.

India

Robo advisors: Stay relaxed while getting accurate financial advice (DNA), Rated: A

Robo advisors give users access to advice by highly qualified experts who have multiple decades of financial experience with them as against serviced by a 22-25 year sales executive, or a family member. Also, since this is available online and requires minimal human intervention, it is the best and most economical way to make customised expert financial advice available to the masses.

Capacity (Who will cater to masses?): Bank relationship managers and advisors are a privilege of the rich as reduction in distributor commissions have made intermediaries vacate the low/ medium end of the market.

Robo-advisors reduce a lot of unpleasant experience of interaction. There is no pressure for you to buy right now, in addition to having the option of doing it at your own convenience. The design and UX at certain platforms are created to engage users without being too intrusive.

The unbundling of banking (CB Insights), Rated: A

Paytm, the private Indian mobile payment unicorn, is now coming for the banks.

Middle East

Abu Dhabi Global Market admits first five fintech start-ups into its Reglab sandbox (CNBC), Rated: B

Abu Dhabi Global Market (ADGM) has announced its first batch of financial technology (fintech) regulatory laboratory (Reglab) companies that will go through its new innovation center.

They are:

  • Now Money – UAE: provides mobile technology to allow low income migrant workers in the UAE to access banking and remittance services, which would otherwise be out of reach.
  • Titanium Escrow – UAE: This is an automated escrow service that aims to increase trust in counterparties and stabilize the cash cycle for small businesses.
  • CapitaWorld – India: A one-stop digital platform that automates the entire loan value chain from loan application to credit appraisal and post-disbursement credit monitoring. Rather than needing to physically visit multiple banks to apply for a loan, the CapitaWorld platform allows a borrower to submit a loan application just once online, and its platform will use analytics to carry out verification and credit risk scoring. It will then match the borrower with multiple banks that have signed onto the platform and ensure that the credit risk appetite matches the borrower’s profile.
  • Rubique – India: Rubique is an online platform that connects banks and fund seekers/borrowers via a smart financing process that links to a range of loan, credit card and financing options that attempt to bridge the gap between lenders and borrowers.
  • Finalytix -US: This is a robo-advisory platform for wealth management applications that seeks to help clients optimize their holdings, mitigate risks and costs, and identify new investment opportunities.

Authors:

George Popescu
Allen Taylor