Any entrepreneur will tell you, starting a small business is not for the faint of heart. It takes vision, grit, determination, dedication, an overwhelming willingness to fight to the end, the will to overcome hurdles you never could have anticipated. But the result, for those with enough heart to see it through, can be massively […]
Any entrepreneur will tell you, starting a small business is not for the faint of heart. It takes vision, grit, determination, dedication, an overwhelming willingness to fight to the end, the will to overcome hurdles you never could have anticipated.
But the result, for those with enough heart to see it through, can be massively rewarding. It takes a certain, special type of work ethic to start something from scratch, to build something from the ground up. Many have ideas, but few can execute to fruition.
Perhaps that’s why so many veterans transition from the military to business owners. All of those characteristics mentioned above…those are just standard traits for the men and women who dutifully and proudly serve in the military. So it shouldn’t come as too much of a shock to hear that as many as 25 percent of transitioning service members aspire to become small business owners. In fact, there are more than 2.5 million U.S. businesses today that are majority-owned by veterans.
Yet veterans are at a serious disadvantage when it comes to seeing their business ideas come to light. The issue isn’t a lack of desire, skill, or intent…it’s something else. Where, exactly, is the system broken?
An Overall Decline of Entrepreneurship – Why?
It’s a topic well-discussed by Inc.com in recent years – the fact that entrepreneurship as a whole has been on the decline for decades. Some reports show the trend has been on a downward slide for nearly four decades.
Just why is the ability to fulfill that age-old American dream of starting your own business in a slump? The main answer is simple: lack of access to capital.
For millions of businesses across the nation (both veteran-owned and non), cash flow and capital are a huge struggle. The simple fact is that access to working capital is among the greatest of challenges small businesses face. All too often, business owners just can’t get funding to start or grow their businesses. The term “underbanked” represents the 77 percent of small/medium business owners who are declined by traditional banks after they apply for funding for their business ventures. And for veterans, this is even more the norm.
VOBs – Entrepreneur Assets to Our Economy
U.S. veteran owned businesses (VOBs) are an essential component of our overall economy. The leadership skill sets and values service men and women hone during their time in the military is a big part of what transforms many of them into natural leaders. They develop an uncanny ability to solve problems…many of them are able to overcome the types of challenges most small businesses face during the startup phase. And these leadership skills often carry them throughout their tenure as business owners, even years after they launch. After analyzing four year’s worth of credit data (of both VOBs and non-veteran-owned-businesses), a recent report from Experian notes that VOBs tend to have improved sustainability and longevity when compared to non-veteran-owned businesses.
There are countless other substantial benefits VOBs offer. They’re more likely to provide employees with retirement plans, health insurance, paid leave and profit sharing. They’re also 30 percent more likely than non-veteran-owned businesses to employ fellow veterans. Statistically, research consistently shows that VOBs report impressive numbers in relation to growth, employment opportunities and sales, including:
VOBs with more than two employees = over 490,000
Total number of VOB employees = 5.8 million
Annual payroll = $210 billion
Number of VOBs that are “small businesses” = 99.9 percent
6-digit sales of $100,000 or more = nearly 80 percent
Generate an annual revenue of $500,000 or more = more than 38 percent
VOBs have collective sales of = $1.2+ trillion
What does all this tell us? VOBs are a huge benefit to the economy. That’s in part what makes it so hard to ignore the other side of the story. Despite their success and contribution to our economic sustainability, many VOBs – just like most small businesses today – are struggling to make ends meet. The Small Business Association (SBA) Office of Advocacy says that over 69,000 VOBs closed as a result of inadequate cash flow.
Taking that leap of faith and starting your own business has always been a risk, for any entrepreneur, but with entrepreneurship across the board on an overall decline (for both VOBs and non-veteran owned businesses), that risk seems somehow even greater these days.
Challenges Veteran Business Owners Face
Of the many challenges entrepreneurs face when starting a new business, for most, funding is high on the list. For the majority of veterans, sources of capital can include personal savings (30 percent) and personal or business credit (nearly 11 percent).
According to the same Experian report, veterans tend to have significantly fewer mentorship options and a lack of networking opportunities. They’ve also historically had less access to capital than their non-veteran owned counterparts, says a report from the Federal Reserve Bank, who together with the SBA assessed the stats of both VOB and non-VOB small businesses.
The SBA’s Office of Advocacy partnered with the Federal Reserve Bank of New York to publish FINANCING THEIR FUTURE: Veteran Entrepreneurs and Capital Access. Their research shows that despite need being strikingly similar amongst VOB and non-VOBs, there is a glaring disparage in lending opportunities for the two groups. It’s one major reason why veteran entrepreneurship continues to see a generational decline.
The report notes that even though VOBs submitted more applications for funding than non-VBOs (47 percent versus 43 percent, respectively, submitted three or more applications), from a larger variety of lenders (online lenders, small banks and large banks), VOBs received less financing overall. During 2010 – 2017, SBA loans to VOBs increased by 48 percent, whereas they increased by 82 percent to non-VOBs. This is despite dedicated veteran-dedicated relief programs.
And some more results of those applications? It’s reported that 60 percent of VOBs still have a financing shortfall due to receiving less funds than they applied for. In comparison, only 52 percent of non-VOBs received less than requested.
The report also points out what we’ve already seen in multiple other studies, that:
“military service is highly correlated with self-employment probability,” and
“veterans are at least 45 percent more likely than those with no active-duty military experience to be self-employed”
What should all this data tell us? It’s pretty clear: we should be putting more faith and funding into VOBs.
Real-Life Success Stories
For those veterans who have been able to find funding through alternative resources, the results are both impressive and inspirational.
Just look at veteran and owner of The Texas Silver Rush, Joseph Remini. Remini creates custom jewelry and is considered a “destination” in Fredericksburg. He’s created custom pieces for the likes of stars including Santana, Ringo Starr and countless other country artists. Reliant Funding’s non-traditional funding options allowed him to purchase the silver he needed to make expensive, custom, one-of-a-kind pieces that are allowing him to make a name for himself. Remini knows that Reliant’s dedication to veterans is something unique.
“I will tell you that Reliant has given me peace of mind. I know I am with a company that cares about me, is willing to grow with me.” – Joseph Remini, The Texas Silver Rush
Christopher Adams is VBO of Cedar Creek Builders and a rental management company. When both companies were growing at a rapid speed, Adams used alternative funding to purchase and replace equipment he desperately needed for a job. Borrowed funds also allowed him to cover unexpected costs during the winter months. His success even meant he was able to purchase a personal condo without concern that it would affect his credit, and ultimately, his ability to access capital to grow his businesses. Adams is grateful for the opportunity non-traditional funding has afforded him.
“Reliant is there when you need funding. It is nice to know and have that peace of mind.” – Christopher Adams, Cedar Creek Builders
Reliant Funding is honored to represent so many veterans in small business. By eliminating origination fees for veteran and active duty service members and their families, and releasing a comprehensive resource guide for veteran owned businesses, Reliant has shown its dedication to the veteran community. We believe knowledge is power, so we’re committed to setting VOBs up with the know how to successfully navigate:
Cash flow management strategies
Funding options and how to use them
Franchise initiatives
Certification as veteran owned business
Training and education opportunities
How to take and apply advice from other successful veteran business owners
If you’re a veteran or family member of a veteran looking for funding and working capital for your new or existing venture, our special offering to veterans and the debut of our VOB guide is proof of our commitment to investing VOBs.
Sources:
Author:
Adam Stettner is the CEO and Founder of Reliant Funding
News Comments Today’s main news: SoFi gets BitLicense in New York. Funding Circle unveils 250M GBP securitization of SME loans. Zopa raises 1.4M GBP. RateSetter to close family finance product. RMBS gears up for securitization windfall. Reserve Bank of India raises P2P lending limit by 5x. Today’s main analysis: Prosper performance update – October 2019. […]
Prosper performance update (October 2019). Weighted average income of borrowers remains relatively flat month-over-month, but originations increased 30 bps month-over-month.
New York State Department of Financial Services (NYDFS) has approved SoFi’s BitLicense application, allowing SoFi Invest customers in New York to trade cryptocurrencies on its platform through SoFi Digital Assets, LLC.
Through the use of artificial intelligence, Upstart examines approximately 1,600 variables pertaining to loan applicants, says CFO Sanjay Datta. But he doesn’t like to draw attention to the artificial intelligence per se.
In a Nov. 8 report, Kroll rated the performances of five loan securitizations, worth a cumulative $1.5 billion, that Upstart offered from mid-2017 through early this year. Each one has significantly outperformed Kroll’s forecast at the time of the deal.
Kroll predicted that Upstart’s first securitization, dated June 21, 2017, would experience 13.07% credit losses by October 2019. But the actual losses were only 9.96%, 24% better than forecast.
Kabbage placed Vermont at the third-highest in the nation at 173.90 on the Kabbage Index Value, based on monthly median-revenue growth for small businesses.
The Kabbage Index Value (KIV), a value used to track revenue growth of small businesses, increased almost 22 points, from 136.8 to 158.4 points, indicating U.S. small businesses’ median revenue grew 15.7% in the first six months of the year. This represents a 22% increase compared to the same time period in 2018 and a large contrast from the second half of 2018 when small business revenue only grew 1.8 percent.
StreetShares quietly discontinued a major part of its financing business on November 15, a new disclosure filed with the SEC revealed.
The company has only facilitated $180 million in funding to small businesses since inception in 2014. That would indicate that the invoice factoring portion was roughly half of the company’s funding volume.
Monzo has hired a Visa executive — who was previously with Standard Chartered — to lead its US business as it ramps up efforts to become a fully-fledged bank in the country even though complex rules have deterred some rivals, according to the FT.
Innovation in online lending has shifted consumers away from traditional payday lenders. And while that’s a safer bet, the shift has also sparked a misguided policy conversation around online lending that is focused on the wrong thing: capping interest rates.
Consumers with spotty or no credit histories might find it easier to get loans after federal banking regulators endorsed alternatives to traditional methods of assessing creditworthiness.
The regulators on Tuesday backed the use of information such as borrowers’ cash flow as an alternative to the traditional credit-evaluation system, which relies on scores issued by companies such as Equifax Inc. and Experian PLC based on applicants’ past history of borrowing and repayments.
Assets managed by digital advisers grew 10% over the first three quarters of 2019 to reach a total of $283 billion, according a new report from Aite Group, a consulting firm.
Fintech lenders were supposed to be the next big thing in finance. Big data, machine learning, peer-to-peer platforms, social networking data: the list of buzzy new ideas that were supposed to upend the business of money lending went on and on.
Prosper is a peer-to-peer lending platform. The entire process is online, with no background check. Hence criminal history does not affect getting a loan.
2. HelpForFelons.org
HelpForFelons.org has lists of grants and loans for felons and links to reentry programs around the country.
Whether their families are higher income, lower income, or somewhere in between, a majority of all students today take out loans to cover at least part of their undergraduate degree. Which wasn’t always the case.
In fact, over the last 20 years, the percentage of students from higher-income families — defined here as making more than $114,000 a year — who take out loans to get a bachelor’s degree has more than doubled, from 30% in the mid-1990s to 60% now, according to a new report out Wednesday from the American Enterprise Institute. The percentage of students from low-income families who take out loans is higher, just over 75%, but hasn’t increased nearly as much since the 1990s.
Cred, a crypto lending and borrowing platform, announced earlier this week that it has added a local California mayor to its roster to further boost government relations for its business.
Ally Medina, mayor of Emeryville—a city in California, will lead the company’s strategic government relations and business development initiatives.
Curo Group Holdings Corp. failed to shake off a proposed shareholder class action after the District of Kansas found sufficient allegations that the company didn’t disclose facts that were bound to impact its financial performance.
Elevate Credit, Inc. (NYSE: ELVT), today announced that its Chief Executive Officer, Jason Harvison, and Chief Financial Officer, Chris Lutes, will attend the Jefferies’ Crossover Consumer Finance Summit on December 12, 2019 at The New York Lotte Palace Hotel. Mr. Harvison and Mr. Lutes will be available for 1×1 meetings with investors.
On Tuesday, November 20, Harvard University’s Real Estate Development Club together with ArborCrowd (the “Company”), the first crowdfunding platform launched by a real estate institution, hosted a panel of experts at Harvard University to discuss the future of commercial real estate investing. The panel was attended by graduate students interested in pursuing a career in commercial real estate.
Finicity, a provider of real-time financial data access and insights, and Ellie Mae, the cloud-based platform provider for the mortgage finance industry, today announced that Finicity’s digital Verification of Assets (VoA) solution is now available through Ellie Mae’s Encompass Consumer Connect, part of the Encompass Digital Lending Platform.
Marketplace lending company Funding Circle (LSE:FCH) recently unveiled its £250 million securitization of SME loans with Waterfall Asset Management. The duo reported that the portfolio brings the total amount of UK Funding Circle loans securitized to £1 billion and the deal will notably open up the small business loans asset class to an even wider range of investors such as insurance companies and pension funds.
On, average Funding Circle collects 4.86% of the total amount of new loans generated annually as transaction revenue and 0.82% of the annual principal balance of loans under management in servicing fees.
ZOPA’S struggle to raise last-minute funding so it can launch its banking brand should not be seen as a sign of trouble for the peer-to-peer lending sector, an analyst claims.
Uncapped, a London-headquartered and Warsaw-based startup that wants to provide “revenue-based” finance to growing European businesses, is officially launching today and disclosing that it has raised £10 million in funding.
Finastra today announced that it has joined the World Economic Forum. The move will see the company collaborating with industry leaders and policy-makers to drive change across financial services, world trade and beyond, to help build a better, sustainable future.
Southwest China’s Sichuan Province became the country’s latest province to ban all peer-to-peer lending (P2P) businesses amid regulators’ tightened grip on the internet financial industry due to monetary risks.
Volumes have picked up since then, and RMBS-related issuance is forecast to reach $100 billion in 2019, up from $86 billion in 2018, according to Standard & Poor’s. However, the market is still a shadow of its former self. The banks still dominate mortgage lending, but not nearly to the extent that they used to. Most are quick to point out that their online disruptors have yet to perform through a cycle.
The banks still dominate mortgage lending, but not nearly to the extent that they used to. Most are quick to point out that their online disruptors have yet to perform through a cycle.
There is no more ‘originate to distribute’, the grand name for the strategy behind so much of the dysfunctional lending that drove the sub-prime residential mortgage-backed securities (RMBS) crisis.
Today banks provide funding to a growing army of private and buy-side institutions that make the loans, and the banks then arrange securitization exits for them.
German fintech N26, valued at $3.5 billion in its latest funding round, views a stock market listing as an attractive option, but rather in 4-5 years than in the short-term, its Germany head told Reuters.
In a move to aid faster expansion and provide more security and regulatory compliance tools, Klarna Bank in Sweden is strengthening its longtime relationship with Amazon Web Services by making it the bank’s preferred cloud provider.
Klarna says it will leverage the AWS global infrastructure to support its scale, now at 60 million customers across 170,000 merchants in 17 countries.
Despite the influence of the US, we are finding something quite different when exploring the way the FinTech market is evolving. European technological innovation is having a profound effect on the approach US companies are taking, reversing the well-known ‘cultural influencing trend.’
While they turn to online banking, and given the rise in digital transformation, the most customers still appreciate the need for financial advice face-to-face, especially for complex transactions or help. Accenture’s recent study of financial service consumers show that on average two-thirds of consumers favour face-to-face interaction with their bank.
Today, the entire crypto loaning industry is estimated at $4.7 billion and the number of crypto loan platforms is growing rapidly, according to a report made by blockchain company Graychain Ltd. While lenders have only earned a combined $86 million in interest since 2018, the demand for cryptocurrency loans is growing. In the first quarter of 2019, over 5,400 new loans were issued, and in the second, at least 18,500. The volume of lending also increased, with lenders issuing $64.8 million in loans in the first quarter and $159.3 million in the second.
The OpenID Foundation has launched a new microsite focused on global open banking initiatives and providing resources for fintech developers implementing the Foundation’s Financial-grade API (FAPI).
The Financial Markets Authority (FMA) today published its third statistical report on peer-to-peer lending (P2P) and crowdfunding services in New Zealand.
Year-on-year, there were 34% fewer successful crowdfunding offers and 52% less investment from licensed service investors.
India’s central bank has raised the lending cap for peer-to-peer platforms fivefold, providing a boost to such lending.
The aggregate exposure of a lender to all borrowers at any point of time, across all non-banking financial company-peer-to-peer platforms, will be capped at Rs 50 lakh against Rs 10 lakh at present, the Reserve Bank of India said in a statement on Developmental and Regulatory Policies issued on Dec. 5.
MyMoneyMantra is taking on rivals like BankBazaar and Paisabazaar head on. The company is growing its giant distribution network even as it swiftly expands its digital footprint to scale faster. But its physical network will remain the core business. A digital-only model just doesn’t deliver, believes its founder.
Xiaomi on Tuesday announced Mi Credit, its digital lending solution in India. Mi Credit is Xiaomi’s second Mi Finance solution to be launched in India after Mi Pay.
The new venture is an app called Mi Credit, and it’s a marketplace for personalized lending, offering users credit between Rs 5,000 ($70) and Rs 100,000 ($1,400). Xiaomi said it offers a “low” interest rate.
The NBFC (non-banking financial company), which lends to the young salaried segment with a monthly income of Rs 15,000 and upwards, is already profitable. With a monthly run-rate of 19000 loans, the lender has 30,000 unique customers. Its CEO Ketan Patel, who had spent 18 years in Kotak Mahindra Bank before joining CASHe, told IBS Intelligence that as long as lenders use technology to focus on strong underwriting, they need not worry about collections or NPAs.
FinAccel’s mission is to improve financial inclusion across Southeast Asia’s “vast and fast growing middle class”. Its starting point is Indonesia, where most of the country’s 265 million people lack access to formal financial services but do have a cell phone.
Indonesian peer-to-peer lending company Komunal secured an undisclosed amount of seed funding in a round led by East Ventures, with local VC firm Skystar Capital also participating.
Goldman Sachs Group Inc. agreed to lend $125 million to Mercado Credito, the bank’s third loan to a Latin American fintech this year and the biggest ever in Mexico.
MercadoLibre dominates Latin American e-commerce with an almost 25% market share and 40 million unique monthly visitors, Julie Chariell, a senior analyst at Bloomberg Intelligence, said in a November report. It’s based in Argentina, but almost two-thirds of its $603 million in third-quarter net revenue came from Brazil, according to the company’s financial statements. Its market value more than doubled this year to $29 billion.
The borrower, a unit of MercadoLibre Inc., plans to use the money to triple in about one year its $100 million working-capital portfolio provided to small and midsize companies in Mexico, Martin de los Santos, a senior vice president, said in a phone interview.
Rebel, a Brazilian FinTech that offers unsecured credit to middle-class citizens in the country, has raised $10 million in new equity funding, according to a press release.
Migo, a fintech startup offering credit-as-a service to large companies, has raised $20 million in a Series B round led by Brazil-focused venture firm, Valor Capital Group. The round also saw participation from existing investors including The Rise Fund and Velocity Capital. It follows a $13 million Series A round in August last year.
News Comments Today’s main news: Funding Circle US launches Small Business Choice. LendingPoint closes $175.6M direct-to-consumer securitization. Chinese P2P lenders have 2 years to change business model. Klarna starts new merchant partnership every 8 minutes. Today’s main analysis: Cities where millennials have the highest credit card balances. Today’s thought-provoking articles: Schwab to acquire TD Ameritrade, […]
Funding Circle US today announced Small Business Choice. The newest feature of the Funding Circle US loan platform provides borrowers with three fully approved loan options with different terms and rates to give small business owners the flexibility to find the loan that best fits their needs.
Under Small Business Choice:
Loan options are suggested after being completely underwritten by Funding Circle. Borrowers are fully approved for all three options.
In line with Funding Circle’s global commitment to transparency, offers are presented in a straightforward way over the phone and in emails that directly outline the total loan amount, term, rate and monthly payment.
The feature applies to all small business owner applicants, including existing borrowers, at Funding Circle US.
Data and technology platformLendingPoint today announced that it has closed two additional securitizations of loans originated on the LendingPoint platform: LendingPoint Receivables Trust 2019-2 (“LDPT 2019-2”) issued $175.65 million of KBRA-rated notes backed by a pool of direct-to-consumer loans and LP LMS 2019-1 Asset Securitization Trust (“LPMS 2019-1”) issued $61.7 million of unrated notes backed by a pool of point-of-sale loans. Guggenheim Securities was sole structuring advisor and sole manager of both transactions.
Millennials accounted for about 20% of all credit card debt in Q2 2019, an increase of 2 percentage points year over year. Their generation was the only one to see a marked increase in overall credit card balances in Q2 2019. Since 2015, millennials have seen their average FICO Scores* increase 17 points and their average credit card balance increase by $1,390.
Cities With Highest Millennial Credit Card Balances in Each State
Charles Schwab Corp. is in negotiation to acquire TD Ameritrade. The deal would combine two of the largest online brokerages with strong banking capabilities. Shares of both companies were up significantly in the news.
PeerStreet, a platform for investing in real estate backed loans, today announced that as of last month, more than $3 billion in loans have been transacted through the PeerStreet marketplace. This milestone comes on the heels of the company announcing the close of its $60 million Series C funding round coupled with $4.25 billion in new capital commitments.
Entera, a San Francisco, New York and Houston-based real estate technology platform that enables investors to access, make data driven decisions and purchase residential real estate, raised $7.5m in funding.
If David Becker’s career were put to country song, the title might be “I was internet banking when internet banking wasn’t cool.”
Becker founded the online-only First Internet Bank in 1998, well before the term digital platform was thrown around. Online banking long had promise, but to hear Becker tell it, it’s really coming into its own — and he has a front-row seat to change.
Wolters Kluwer’s Compliance Solutions business has launched Online Applications for Consumer Lending (CLA), a digital offering that enhances the online loan origination capabilities of U.S. community banks and credit unions. CLA allows consumers to begin a loan application from any digital device, at any time. It integrates seamlessly with Wolters Kluwer’s ComplianceOne solution, an industry-leading loan documentation and processing system that helps lenders optimize their lending and document preparation processes in a secure, fast and cost-effective manner.
Just recently, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. proposed an important clarification to the “valid when made” doctrine, which provides that if a loan’s interest rate is valid in the state of origination, that loan continues to be valid when transferred to a party in another state. That long-standing doctrine was overturned by the so-called Madden case in 2015.
MoneyLion, the digital bank and financial membership platform, today announced the appointment of fintech and global finance industry veteran Samantha Roady as Chief Operating Officer, a new position within the company. She has served as a MoneyLion board member since September 2016.
The Supreme Court on Tuesday said it will hear arguments March 3 in a case challenging the constitutionality of the Consumer Financial Protection Bureau’s leadership structure.
PEER-to-peer lending giant Zopa faces a race against time to raise up to £150 million and satisfy regulators it is financially strong enough to become a bank.
Zopa rival Funding Circle has seen its shares crash from 400p a year ago to 99p today.
One of the UK’s best-known and oldest fintech companies is running up against a tight deadline to secure funding needed to maintain its banking licence, as a major investor is sidetracked by a funding crunch of its own.
Marketplace lending is expected to top £6bn this year but lenders will face a significant test of their risk management procedures, loan servicing and recovery practices should the economy worsen, a new report warns.
The report says that gross marketplace lending is likely to grow 16 percent from £5.3bn to £6.2bn from 2018 to 2019.
Royal Bank of Scotland has launched its standalone digital bank Bó in a plan to fend off competition from fast-growing online start-ups including Monzo and Starling.
Disrupting the traditional mortgage process has always been our goal at LendInvest.
From the way you apply for a loan, to case management to how that loan is funded, we believe the experience can be better at every stage of that journey.
LendInvest, the Fintech marketplace for property finance, has promoted Andy Virgo from Business Development Manager to Head of Key Accounts for LendInvest.
Finastra has hired Lisa Fiondella as Chief Data Officer to lead its comprehensive data strategy, including how data collected through the FusionFabric.cloud platform and various cloud-based solutions, can be best utilized. She will be responsible for developing a data product roadmap and manage the process of bringing new data products to market.
All existing peer-to-peer lending platforms in China must become small loan providers within two years, a notice seen by Reuters on Wednesday showed, the latest official edict aimed at curbing the once-booming industry.
All Chinese peer-to-peer (P2P) lending firms need to clear outstanding loans in less than one year before switching to small loans, according to a notice issued by China’s Internet Financial Risk Special Rectification Work Leadership Team Office, which was launched by Beijing to mitigate risks in the online lending sector.
Only 427 existing peer-to-peer (P2P) firms were still operating by the end of October, down from 6,000 at their 2015 peak
In order to transition, firms must meet a minimum capital requirement of 50 million yuan ($7.1 million) to become a small regional lender and 1 billion yuan ($142 million) to become a small national lender.
Ping An Insurance has received approval from regulators to set up a consumer finance arm, a representative from its peer-to-peer (P2P) loan affiliate Lufax confirmed on Friday, in a move that is reportedly the beginning of its transition away from P2P lending amid increasingly stringent regulations.
The following month Flender would reveal remarkable news, a new €75 million funding line, bringing their total to €109 million raised since the company’s founding in 2015. The company is backed by Eiffel Investment Group, Enterprise Ireland, entrepreneur Mark Roden and former Ireland rugby player Jamie Heaslip.
Meawnwhile, CEO Kristjan Koik told the Irish Times that the top 3 banks in Ireland have 92 percent of the SME lending marketshare so there is still a ton of opportunity for non-banks like Flender to grab hold of.
A new €100 million (appr. $110 million) agreement was finalized by the EIF, CNP Assurances, Bpifrance, Zencap, and various other entities in order to fund European SMEs via marketplace lending platform October. These companies are part of the recent institutional fund launched last year.
Three quarters, or 75%, of Ireland’s consumers, are only using a “high street” bank, which makes the country the most traditional in Europe.
Only around 10%, or one in ten, Irish consumers are banking only with a challenger bank. Around 11% of Millennials and 12% of Gen Z consumers in Ireland are using (only) challenger banks, the report revealed.
When looking five years ahead:
17% of Ireland’s consumers are expected to bank solely with a challenger bank (up from around 14% in 2019).
35% of Ireland’s citizens will be banking with some combination of challenger and traditional financial institutions (up from about 21% in 2019).
48% will be banking solely with a legacy bank (down significantly from 68% in 2019).
This, according to Fujitsu’s latest “From Demanding to Discerning: Tech and the New Banking Customer”report.
According to a new survey by Robo.cash, 64.9 per cent of the European P2P investors have full confidence in P2P lending. Remarkably, 52.3 per cent of respondents mentioned that P2P loans take a considerable share of their investment portfolio – over 25 per cent.
Citadele Bank is launching a partnership with Europe’s most advanced lending platform, Fellow Finance, which brings together individuals, businesses and investors.
During 2019, Klarna has once again seen stellar growth with 60,000 new merchants globally including River Island, Boohoo, Made.com, Michael Kors, Expedia, H&M, Abercrombie & Fitch, Timberland, Marchesa, Agent Provocateur, Rue 21, TOMS, WayFair, Microsoft, and Shein. Now over 190,00 merchants partner with Klarna.
– Consumer growth and preference builds, adding 16 million new consumers globally.
According to Crunchbase data, OakNorth ($1 billion) and N26 ($670 million) have received the most funding out of all other major US and European neobanks.
The Dubai Financial Services Authority (DFSA) and the Commission de Surveillance du Secteur Financier (CSSF) Luxembourg, entered into an agreement to cooperate in the development of FinTech.
The number of users that may consider changing their primary banking institution during the coming six-month period is currently 12% or 2.5 million Australian residents, which is reportedly 9% greater than the previous year.
The Nielsen surveys revealed that around 50% of Australia’s consumers noted that they had not heard of a neobank. Only a third, or about 33%, of the nation’s consumers said they’d be willing to use a neobank as one of their financial services providers, even after the benefits of using digital-only banks were explained to them.
A quarter, or 25%, of consumers who became aware of neobanks stated they would most likely use them as one of their primary financial services providers.
Indonesian peer-to-peer lending startup Amartha has raised an undisclosed amount of series B funding in a round led by Line Ventures, the venture capital arm of global messaging app Line.
Beehive, MENA’s first regulated peer to peer lending platform, has released an insightful new report revealing the state of MENA’s SME ecosystem, the same week as the company celebrates its fifth birthday.
Key findings from the report include:
Surveyed MENA SMEs have more women in senior positions than the global average.
28% of respondents see innovation as a priority for growth, yet only 2% of business owners are currently trying to access finance to fund it.
SMEs offer young people a great opportunity for development. 48% of SMEs would hire someone under 25 with no experience.
Over the last half decade, rates of account takeover have multiplied significantly. According to a PYMNTS.com report, account takeovers jumped 300% in 2017, and have been rising ever since. The trend was particularly pronounced in the lending space. Lenders lost $4 billion from account takeovers last year, according to Javelin Strategy and Research. In order […]
Over the last half decade, rates of account takeover have multiplied significantly. According to a PYMNTS.com report, account takeovers jumped 300% in 2017, and have been rising ever since. The trend was particularly pronounced in the lending space. Lenders lost $4 billion from account takeovers last year, according to Javelin Strategy and Research.
In order to combat this type of fraud with innovative technology, lenders must learn what account takeover entails.
Online Lending Fraud: What Is Account Takeover?
Account takeover is a form of financial identity fraud. It’s when a fraudster uses a victim’s identity and financial accounts to fraudulently secure a loan and then steal the funds. Fraudsters apply for a loan in the victim’s name, transfer the funds into the victim’s account, withdrawal the money, and then disappear.
Account takeover is riskier than other forms of identity fraud, but it comes with several advantages for fraudsters who want instant gratification. The fraudster does not need to build a fake identity or financial infrastructure to commit the fraud. The fraudster is essentially taking over a person’s identity, pre-existing accounts, and credit history to illicitly funnel money into a safe haven.
Account takeover is facilitated like most other kinds of identity fraud. A bad actor obtains sensitive information, such as bank account numbers, usernames and passwords, and other key credentials from personal contacts, malware, phishing, or other violations of a victim’s privacy. The fraudster takes out a loan in the victim’s name, and routes the funds into the victim’s account.
Once the funds are in the victim’s account, the fraudster moves the funds into an intermediary account by circumventing bank security protocols. These circumvention methods include SIM swaps, associating new phone numbers with the bank account, SMS-grabbing malware, cloning phone identifiers, and other methods.
After the money is in the intermediary account, the fraudster cashes out the funds by making ATM withdrawals, purchasing cryptocurrencies, transferring funds to online payment platforms, or buying e-commerce goods, among other methods. The fraudster might try to hide the origin of the money by employing “mules,” or agents who transfer illegally obtained money, either wittingly or unwittingly.
Combating Account Takeover with Technology Solutions
Account takeover poses unique challenges to online lending, but novel technologies can help lenders fight back against this form of fraud.
ThreatMetrix by LexisNexis Risk Solutions provides data that detects suspicious behavior or compromised devices before fraudsters can initiate account takeovers. ThreatMetrix’s Digital Identity Network analyzes millions of transactions across billions of devices for thousands of leading global businesses. This data allows organizations to verify that customers are who they say they are.
RSA Web Threat Protection uses behavioral analytics to separate fraudulent activity from legitimate transactions. The solution tracks a large variety of fraud threats, such as new account fraud, fraudulent money transfers, password guessing, credential harvesting, mobile and web session hijacking, and other behaviors that suggest potential account takeover attempts.
Fraud.net has an award-winning AI-powered suite of enterprise tools to manage risk for clients such as online lenders. Fraud.net’s AI, analytics, and data mining platform can quickly identify common schemes and attack methods, including account takeover. The suite’s ‘early-warning’ monitoring, powered by multi-dimensional risk analytics, helps to uncover account takeover fraud before it happens.
Account Takeover: A Manageable Issue With the Right Technology
Account takeover is one of the most expensive and fastest growing forms of online lending fraud. However, with the right solutions, lenders can combat account takeover and minimize the negative impact it has on profit margins, platform security, public image, and the customer experience.
Author:
Kevin Bartley is the content manager at Ocrolus.
About Ocrolus:
Headquartered in NYC, Ocrolus is an intelligent automation platform that analyzes financial documents with over 99% accuracy. By eliminating manual reviews, Ocrolus empowers companies to reinvest human capital and automate processes with industry-leading speed and accuracy. Ocrolus services hundreds of customers in the financial sector and analyzes millions of data points every day. The company has raised over $30 million in venture capital, backed by Oak HC/FT, FinTech Collective, Bullpen Capital, and QED Investors, among others. For more information about Ocrolus, visit www.ocrolus.com.
BlueVine raises $102.5 million for banking services. This is a welcome service, and a new milestone in online banking because most digital banks target consumers. As far as I know, this is the only online banking service specifically targeting small businesses.
The Fed rate inversion. A PeerIQ analysis. Plus, some interesting rundowns on digital wallets and Goldman Sachs’ robo-advisor.
10 worst cities for commutes. A LendingTree analysis, and well worth the read. The report was published in October, but Business Insider reported on it recently.
Pro.com, the premier digital platform focused exclusively on building custom homes and major remodels from start to finish, announced a new partnership Tuesday with online personal finance company SoFi, aimed at revolutionizing how homeowners finance and complete their remodels, renovations and upgrades.
The startup, which offers financing and other banking services to SMBs, today is announcing that it has raised $102.5 million, a Series F round of equity funding that is coming from a mix of financial and notable strategic investors.
Led by ION Crossover Partners, the round also includes existing investors Lightspeed Venture Partners, Menlo Ventures, 83North, SVB Capital, Nationwide (a major financial services player in the UK), Citi Ventures, Microsoft’s venture fund M12, and private investors; as well as new investors MUFG Innovation Partners Co., Ltd, O.G. Tech (the VC connected to Israeli billionaire and property magnate Eyal Ofer), Vintage Investment Partners, ION Group, Maor Investments and additional private investors.
There is finally some real light at the end of the tunnel. In the last two days we have heard from both the OCC and the FDIC on the Madden issue, something they called unfathomable in a joint amicus brief in Colorado a couple of months ago. They have each given notice of their proposal that would clarify the “valid when made” doctrine once and for all.
At the core of the issue is the ambiguity created by the Madden decision. A loan can be valid when it is made but if it is sold or transferred can suddenly become invalid in the Second Circuit states of NY, CT and VT. This has led to reduced consumer lending to these states and also concern that, given no regulatory clarity, this could expand to other states.
Here are links to the OCC and FDIC proposals. There will be a 60-day comment period where interested parties can weigh in.
The next move for Facebook would be to offer lending products most likely indirectly (e.g., via POS partnerships or via co-brand products such as Amazon Chase Visa, etc.).
Just two months ago, the ink was barely dry on a more than $24 million Series A that Sam Hodges raised for his startup Vouch Insurance. Now he is back with an even larger funding, led by Y Combinator‘s Continuity Fund, as the company seeks to join a crop of startups that cater to the needs of other startups.
Fireblocks (www.fireblocks.com), an enterprise platform for securing digital assets in transit, announced today, Celsius Network, the largest provider of interest income and digital asset loans in over 150 jurisdictions worldwide is enlisting Fireblocks to help protect over $400 million assets and 53,000 active wallets, securing both retail and institutional divisions.
The primary difference between using a crowdfunding site versus flying solo on your investment journey is that your investment is managed by a team of real estate professionals. Of course, that is also the biggest risk as you are completely dependent on the project developer to deliver what they promised.
If you are not an accredited investor but want to be involved in real estate crowdfunding, companies such as Fundrise, stREITwise, and RealtyMogul are a great place to start.
ArborCrowd (the “Company”), the first crowdfunding platform launched by a real estate institution, announced today that its Quarry Station Apartments investment (“Quarry Station”) has been realized in under two years, providing investors with returns quicker and higher than initial projections. The property’s $49.35 million sale price generated an internal rate of return (IRR) of 20.31%, surpassing the original return target of 16% to 19%.
Through real estate crowdfunding, the developer can utilize an online platform that enables a large group of people to invest small dollar amounts in the project. If the development company chooses to follow the crowdfunding option, here’s how that could work:
First, the developer identifies an online platform that is suited to the company or mixed-use development. Each platform is different and most real estate crowdfunding sites receive significantly more project applications than they select.
If the investment passes all the legal, physical, and financial due diligence requirements the platform requires, that platform will then allow the developer to solicit funds using their site.
An investor can then use that platform to contribute financially to the development.
The funds are then tied up until the investor delivers on the project.
Online loan marketplace Lending Tree published a report on the most expensive commutes in the 100 largest cities in the US in October.
Consider a resident in New York, which Lending Tree ranked as the city with the fifth most expensive commute. Using Lending Tree’s findings via 2017 Census Bureau data, the median annual earnings for a full-time employee in New York is $51,573; their hourly wage is $26. Now, consider the mean time of commuting one way, 41.8 minutes. If you make $26 per hour at your job, and you spend 83.6 minutes daily on your round-trip commute, then your time wasted commuting is worth $37 of time you would have been working.
Five cities in California – Oakland, San Jose, Irvine, San Francisco, and Fremont – took top 10 spots in the ranking, with four of those cities being in the increasingly expensive San Francisco Bay Area.
While the first generation of fintech companies created billions of dollars of value, because of new enablers like Plaid, Cross River Bank, Finix and Wisetack, we’re now moving past that phase to one where fintech moves from being a business model unto itself, to being the fourth layer in the stack or the “fourth platform,” wherein financial functions like payments, lending and insurance join connectivity, intelligence and ubiquity as layers of the stack upon which new companies can be built.
Online lender Balboa Capital released the results of its 2019 Black Friday Survey, which was conducted to examine how small business owners are preparing for this historically busy shopping day, and to find out what their Black Friday sales expectations are.
The survey reveals that 70% of small business owners are preparing for Black Friday early, and 83% anticipate meeting or exceeding their Black Friday sales goals. Balboa Capital’s survey was sent to a sample of small business owners in a wide variety of industries during the first week of November 2019.
American Financial Exchange (AFX), an electronic exchange for direct lending and borrowing for American banks and financial institutions, announced today the launch of its AMERIBOR on the blockchain. AFX now mints two ERC-721 non-fungible tokens for each AMERIBOR transaction on the AFX platform (for each counterparty to the transaction). The pair of tokens is automatically minted when the transaction is repaid by the borrowing counterparty to the lending counterparty. Each token contains encrypted transaction data and encrypted counterparty data. The counterparty data is normalized prior to encryption to further preserve counterparty anonymity.
The pros. Peer-to-peer lending tends to be a win-win: Investors get a higher rate of return on their money than a lot of banking products offer, and borrowers get an interest rate on their loan that’s usually less than bank-offered loans and credit cards.
The cons. Peer-to-peer lending won’t give you quick access to your cash if you need liquidity.
Alchemy, one of the SaaS fintech lending infrastructure companies, has partnered with Plaid to support businesses in account and asset verification for improved lending decisioning.
British peer-to-peer lender Zopa has obtained a U.K. banking license, clearing a key hurdle in its bid to launch a digital bank and compete with industry giants.
Funding Xchange (FXE), a company that helps people and organizations find suitable business loans and funding options from its marketplace of more than 45 established lenders, has raised £8 million (appr. $10.4 million) through an investment round.
Tymit, the London-based mobile-enabled credit card company, has secured £4m in a funding round, which it will use to develop its customer service offering.
Arbuthnot Commercial ABL, the specialist asset based lending arm of Arbuthnot Latham, has completed a £2m asset based lending (ABL) transaction in support of the strategic acquisition of Circum Ltd, a fire protection services specialist, by EA-RS Fire Engineering Ltd. (“EA-RS”). The facility comprises a flexible confidential invoice discounting line and a term loan.
Starling’s head of banking compliance Rachel Coote has quit to join startup Paybase. Coote is the sixth senior employee to leave the buzzy finance company in 2019.The company’s chief financial officer Tony Ellingham has confirmed he will also depart within the next year.
US fintech Robinhood, a commission-free trading startup valued at $7.6bn (£5.9bn), has today arrived in the UK.
Users will be able to invest in more than 3,500 US-denominated stocks, including Apple, Amazon and Tesla. They will also be able to access foreign stocks that are available to trade in dollars through depository receipts, such as Barclays and Burberry.
The finance will be used to fund the acquisition of a mixed-use property at 68‐86 Clapham Road in Oval, and in its place, develop an aparthotel with between 120-175 units, subject to receiving planning permission. The site is located within walking distance of several Zone 1 underground stations – Oval, Stockwell and Vauxhall – as well as the South Western railway line, providing services to Clapham, Waterloo, Guildford, etc.
Nexo, the dominant player in the crypto lending space, is joining the Foundation for Wallet Interoperability (FIO), the industry consortia bringing together leading companies in the blockchain ecosystem to solve the biggest problem faced by the industry — usability.
LexinFintech (LX) reported a solid set of Q3 results with loan origination growing 170% y/y that resulted in a beat on both revenue and EPS. More importantly, loan origination guidance was increased to RMB115-125b vs. the prior forecast of RMB115b.
Source: Seeking Alpha
Overall, asset quality remains stable at the end of Q3 with delinquency rate declining 9bps to 1.4% and the 6-month charge-off rate maintained at just above 2%.
Source: LexinFintech
Institutional funding has reached 75% of the total loan balance. In terms of origination, institutional accounts for 94% of the total loans originated, meaning that LX’s own P2P platform Juzi Licai is becoming less relevant going forward.
Twino founder Armands Broks is to standing down as CEO and will now focus on new business opportunities and bringing talent on board.
The management change comes as Twino, which offers European investors investment opportunities in unsecured European consumer loans, reports pre-tax profits of €13m (£11m) for 2018, compared to a €7.2m (£6.2m) loss the year previous.
Twino has also disclosed that it has also issued loans to the value of €1bn (£860m), since it was set up 10 years ago, half of the value of which have been issued in the past three years.
Up to date, Mintos has issued over EUR 3 billion in investments, making it one of the biggest crowdlending platforms in Europe. Investors can invest in consumer loans such as cars, mortgage, short-term, and personal, as well as business loans like invoice financing, agriculture, business, etc. starting from as little as EUR 10 with return on investment of 11% per year on average.
Smart Lenders AM announces the upcoming launch of a new fund dedicated to financing loans to European SMEs issued through marketplace lending platforms (crowdlending).
Real estate crowdfunding platform EstateGuru and OberHaus, real estate agency operating across the Baltic region, have joined together to produce shared real estate market research and analysis with a specialized focus on the needs of the crowdfunding platform.
The lowest fixed rate in Finder’s database right now is 2.68%, a single basis point lower than the lowest variable. This is unusual (the lowest three year fixed rate this time last year was 3.74%).
Another online lender I spoke to was fine with apartments in the same suburb but didn’t offer pre-approval. This meant I would have to start a full application with them even before I had found a place to buy. For some borrowers, this can be a significant turn-off.
Billionaire Jack Ma’s Ant Financial Services Group said it may apply for a virtual banking licence in Singapore, a move that would add a heavyweight contender to the race.
OneConnect Financial Technology Co. Ltd. (OneConnect), today announced it is leading Southeast Asia’s sustainable financing with the launch of two smart lending platforms – SeekCap, the Philippines’ first lending platform that helps the underserved micro, small and medium enterprises (MSMEs) manage cashflow and grow their business, as well as a multi-finance platform that will empower millions of unbanked and underbanked Indonesians with easy access to loans to finance their purchase of vehicles essential for their daily transportation so as to improve mobility and their lives.
MSMEs form the backbone of any economy. In the Philippines, more than 99% of all businesses are MSMEs and they contribute to almost 63% of total employment. Yet, at present, only 9% of loans and financing from the country’s major banks go to MSMEs.
Brazilian Digital bank Neon has reportedly raised $95.27 million in a funding round led by Banco Votorantim and the General Atlantic fund. This is according to a write up in Estado.
Neon claims a customer base of 2 million users. The additional funding will help the digital bank grow with expectations to triple that number by 2020.
There were 380 fintechs operating in the country in May 2019, per Finnovista, and around two-thirds (64%) of Brazilian consumers are defined as fintech adopters by EY — a rate that’s level with the global average and higher than the majority of G7 countries’.
Smartphone and internet penetration: Three-quarters of Brazilians used smartphones in 2017, which is expected to tick up to 86% by 2025 — and both figures are the highest across the region.
High fees charged by incumbents: Brazil’s four largest banks control almost 80% of the country’s deposits, with similar concentrations in credit and assets.
A large underserved population: Around 45 million people in the country don’t have access to or have not used a bank account in the past six months.
The economy in Mexico remains largely informal and cash dependent. An estimated 44% of the adult population in Mexico owns no financial products. This largely unbanked population, coupled with the new fintech legislation, has created immense opportunities for Mexico’s fintech sector to grow. In fact, roughly 100 new Mexican fintechs were established in 2018 alone, representing 52% growth for the industry. Mexico has become a regional leader with more than 273 fintech ventures operating in the country. When combined with Brazil’s 380 fintech ventures, the two countries make up 56% of the region’s total fintech activity.
On Deck Capital, Inc. announced today that it has priced $125 million initial principal amount of Series 2019-1 Fixed Rate Asset-Backed Notes (the “Notes”) in a private securitization transaction. The Notes, which will be issued in five classes, were priced with a weighted average fixed interest rate of 3.04% per annum. It is expected that DBRS, Inc., in satisfaction of one of the closing conditions, will rate the Notes at closing. The anticipated AAA(sf) DBRS rating for the Class A Notes would be the highest rating ever for a class of notes in an asset-backed securitization of small business loans in the online lending industry.
Online small-business lender Kabbage is adding $200 million in additional notes for its outstanding $700 million Series 2019-1 revolving securitization that was originally issued in March
The largest tranche is the $138.1 million in additional Class A notes that will carry a 3.825% coupon with a preliminary AA rating from Kroll, and will bulk up the AA-rated Class A tranche of $483.4 million in notes already in circulation. The additional notes will also benefit from 34.88% credit enhancement applied to the earlier tranche.
Is this different from PayPal or Square, which are offering small business lending based on the flows of receipts through their platforms?
“WHEN A SMALL BUSINESS OWNER GETS COMFORTABLE WITH THE FACT THAT THEY CAN TURN THE SYSTEM ON, AND IT WILL ANALYZE CASH FLOW AND TAKE ACTIONS IN A WAY THAT IS IN THE BUSINESS’S BEST INTEREST, THAT IS THE HOLY GRAIL OF WHAT WE ARE TRYING TO ACHIEVE”.
We realize the big payment platforms that have gotten into lending have a relatively clear view of money coming in, to the extent that those transactions happen over their technology, although small business owners often use multiple payment systems. But they don’t have a strong understanding of outflows. Business owners can connect Kabbage to key data, receipts of cash, payment processors, or receipts in the bank account, account data we have access to, as well as what we see through sources like Quickbooks. We often see cash flowing out in the bank account, so we get a pretty good view of both sides of the account. We can predict when their cash flow will ebb, and we can inject capital when there is going to be a drop below a specified level.
The labor department released the latest productivity data, which showed a contraction in productivity – a 30 bps decline in the recent quarter (vs +90 bps growth expectation), the biggest decline in 4 years. Economists have attributed the surprise decline to the ‘cat memes’ and Instagram. (#wekid.)
Below we show an excerpt of long-run productivity growth. Takeaways:
Long-run US GDP and productivity growth is at a lower trend level (2.3%) than observed during the 1960+ period (3.1%)
This means that the ‘speed limit’ for GDP and income growth is about ~2% (consistent with 10-year bond yields of ~1.9% – another rough correlation for growth)
Source: PeerIQ, Blackstone, St. Louis Federal Reserve
New TransUnion (NYSE: TRU) data from the just-released Q3 2019 Industry Insights Report point to a few factors that could portend good things for retailers this holiday season.
TransUnion found that private label card originations increased 2.4% to 12.4 million in Q2 2019 (latest data available), marking the first such year-over-year increase in 11 quarters. Origination growth is being driven by prime and above consumers, with their share of new accounts growing faster than non-prime borrowers. The number of new bank-issued credit cards also rose in Q2 2019, increasing 5.2% to 16.6 million, the fifth straight quarter of yearly growth.
As a result of this growth, the number of consumers with access to revolving credit now stands at a record high 200.5 million consumers as of Q3 2019, up from 198.0 million in Q3 2018. On average, bank-issued credit card balances for individuals have grown to $5,668, while private label average card balances, per individual, grew to $2,022 in this timeframe.
Charging Up Credit Cards in November and December; Paying Them Down in the New Year
Year
Q4 Bankcard
Balance Growth
Percent of Bankcard
Debt Paid Down in the
Following Quarter
(Q1)
Q4 Private Label
Balance Growth
Percent of
Private Label
Debt Paid Down
in the Following
Quarter (Q1)
2018/2019
$31.9 billion
92%
$6.6 billion
102%
2017/2018
$32.6 billion
84%
$6.3 billion
94%
2016/2017
$33.3 billion
72%
$8.5 billion
30%
Gen Z is turning around credit: Survey of NearPrime borrowers finds Gen Z FICO scores higher than Millennials & Gen X (LendingPoint Email), Rated: AAA
We recently analyzed just over 5 million NearPrime loan applications received between July 2018 and July 2019 to find that Gen Z, or those born after 1996, have an average FICO score that’s higher than both Millennials and Gen X. This is especially interesting when you consider that how long you’ve had credit is a key factor when it comes to credit scoring. And even with the duration of credit use playing a role in FICO scores, Gen Z is off to a strong start in building their credit profile.
Data and technology platform LendingPoint today announced it ranked No. 9 on Deloitte’s Technology Fast 500, a ranking of the 500 fastest growing technology, media, telecommunications, life sciences and energy tech companies in North America and now in its 25th year. LendingPoint grew 8,812.87% since its start in 2015, hit successive usage records year-over-year and is now running $100 million per month in loan originations through its platform.
The first wave met demands resulting from the aftermath of the financial crisis: A need for credit fueled alternative lenders. Online and peer-to-peer marketplaces, such as Prosper and LendingClub, flourished, while laid-off workers seeking to re-skill buoyed student loan providers like Social Finance, or SoFi.
The next wave swelled atop a flood of mobile devices that came after Apple debuted the iPhone in 2007. Access to consumers became theprimary object for upstarts. Apps appealed to younger generations, used to flicking and tapping smartphone screens rather than visiting branch offices.
This paradigm is still in full swing. Some of its best-known champions: Credit Karma, a free credit score provider, Internet-only “neobanks” like Chime, Monzo, and N26, and online stock traders like Robinhood.
Even as the second wave crests, a third is beginning to rise: Automation.
Fundrise reports that during the past five year period, the platform portfolio has averaged a 10.79% return. In comparison, Vanguard’s Total Stock Market ETF and Real Estate ETF produced average returns of 7.92% and 7.40%, respectively, states Fundrise.
Some of the most proven use cases include agricultural supply-chain management and food safety, tokenization of real estate assets, foreign exchange transactions, immutable voting, interbank settlements, securing patient data and land registry. And the list goes on.
Be it company equity, asset-backed securities, cryptocurrencies or security token offerings (STOs), the age of digital assets is now, and they are real-deal investments, with
The Independent Community Bankers of America (ICBA) has issued a statement of “strong support” regarding pending legislation targeting Industrial Loan Charters (ILC).
The Eliminating Corporate Shadow Banking Act of 2019 (S 2839) was introduced to the Senate Banking Committee yesterday sponsored by Senator John Kennedy.
StreetShares increased revenue by nearly 40% year-over-year, according to the company’s latest fiscal year 2019 filing, but costs soared and increased by almost 90%.
StreetShares reported a staggering $12.3M loss on only $4.4M in revenue. That loss was much wider than the previous year’s loss of $6.5M on $3.2M in revenue.
In honor of celebrating America’s heroes during the month of November, Reliant Funding announces the release of “The Complete Veteran Business Owner Resource Guide.” The informative, 40-page handbook serves to provide industry tips and resources for veterans on entrepreneurial journeys.
According to Bunker Labs, nearly 25 percent of transitioning veterans indicate they would like to start a business. Currently, over 2.5 million businesses in the US are majority-owned by military veterans. Since 2008, Reliant Funding has provided working capital to veteran owned businesses across the US.
Toast has launched Toast Capital so its customers can secure loans, with restaurant-specific quirks in mind, like “seasonality and restaurant profit margins,” according to Tim Barash, chief financial officer at Toast. Toast will offer loans between $5,000 to $250,000 to restaurants that already work within the Toast network.
After something Silicon Valley averted, financial services like consumer loans have slipped into the offerings of pretty much every tech firm, a transition which highlights the rising pressure to find new sources of earnings.
The growth of peer-to-peer lending — where technology platforms connect people needing loans with individuals considering lending money — at the mid-2000s resulted in the initial”tech-enabled” consumer debt businesses, with a few, such as Lending Club, going people at multibillion-dollar values. However, those businesses remained a tiny fraction of their bigger U.S. customer and small-business debt businesses, which lend countless billions of dollars every year.
Loan Doctor, a fintech company focused on healthcare industry lending, announced the addition of two industry veterans to its team. Dr. Todd Marshall, DDS, MBA, FACD, previously a leader of Park Dental, a large Midwestern dental group, and board member at DentaQuest and Metlife, joins as the head of the large group relations division, focusing on Loan Doctor’s financing activities for larger medical practices.
To grow its relationship with institutional investors, to whom Loan Doctor resells the loans it originates, the company has also added Mr. Ranjeet Nabha, previously a Managing Director at WL Ross, where he oversaw a $300MM emerging markets and financial services fund.
Loan Doctor’s innovation in the industry extends to its unique consumer savings product, the HCF High Yield CD, which pays an industry leading 6% APY for a 1 month renewable term.
RefiJet is proud to have been recognized by LendingTree as the top-rated auto refinance company for the fourth consecutive quarter in customer satisfaction. LendingTree has been referring consumers who are interested in refinancing their auto loans to RefiJet since October 2016. Since then, RefiJet has demonstrated its commitment to providing a fast, easy and personalized auto refinancing process that puts the consumer in the best position for which they qualify.
BFS Capital today announced the appointment of Brian Simmons as Chief Operating Officer. Simmons will join the executive team reporting to the company’s CEO Mark Ruddock.
LendInvest has expanded its Buy-to-Let offering into Scotland as demand for long-term property finance in the Scottish housing market increases.
The move comes months after the announcement that LendInvest has received GBP200 million in funding from the National Australia Bank for the business to expand its capacity to lend in the UK BTL market.
Celsius Network, a cryptocurrency lending platform, announced that it has surpassed $4.25 billion in loan origination. In a press release shared with CryptoSlate, the company said that it was a 93 percent increase from the $2.2 billion it recorded at the beginning of 2019.
MarketInvoice has launched a new specialist team called Corporate Solutions to provide bigger loans for Britain’s larger businesses. Estimated to be a £13billion finance market, these businesses can now secure a credit facility of up to £5 million (based on their revenue) and up to £500K as a business loan on a flexible term of up to three years from MarketInvoice. These limits will increase steadily over the next 12 months.
MarketInvoice has today updated its name to MarketFinance. The fintech business lender established in 2011, has provided over £2.6 billion in lending to thousands of UK businesses.
MarketFinance current product suite
Invoice finance: All businesses can get finance for selected invoices or finance all of them on a rolling basis (up to £1m in finance).
Business loans: Qualifying business can access up to £250k over 1-3 years with monthly or weekly repayments. This will rise to up to £500k in the coming months.
Corporate lending: Larger businesses can access up to £5m in structured facilities combining invoice finance and a business loan.
Chinese conglomerate Tencent is planning to launch a blockchain-based digital bank after being granted a licence by the Hong Kong Securities and Futures Commission (SFC).
OneConnect Financial Technology, a Ping An-backed provider of operations management tools for financial firms, filed on Wednesday with the SEC to raise up to $100 million in an initial public offering.
Revenue for the nine months ended September 30, 2019 grew 72% to $222 million (33% gross margin); operating loss widened to -$160 million.
Alibaba Group Holding Inc. co-founder Jack Ma said on Nov. 13 results from the Singles’ Day annual online shopping festival had missed the Chinese e-commerce giant’s expectations.
Recent crackdowns on shadow banking—from insurance products to peer-to-peer lending—have likely put a dent in consumer income.
ID Finance, based in Barcelona, has closed its crowdfunding round raising £4.95 million. The equity offering was listed on Crowdcube Spain and topped the previous record for equity crowdfunding in the country. ID Finance is an online lender, data and credit scoring company operating in Europe as well as Latin America.
According to the offering page, 1223 individual investors participated in the round which sought 5.76% equity at a pre-money valuation of £81,037,856. Investors averaged £4,049 of investment.
1.2 Do any special regimes apply to specific areas of the fintech space?
With regard to fintech credit platforms (ie, crowdlending, marketplace lending, peer-to-peer lending platforms), the Dutch legislature and the Netherlands Authority for the Financial Markets (AFM) have established a specific regime. Fintech companies that operate an online credit platform match lenders with borrowers when attracting a loan.
Nederland Crowdfunding has drawn up a code of conduct with which its members must comply. Through this self-regulatory code, which aims to ensure more transparent business operations, member platforms can distinguish themselves from other crowdlending platforms active in the Netherlands ().
As of September 2019, 44 lending platforms were registered in the public register of the Netherlands Authority for the Financial Markets. Peer-to-peer and consumer credit platforms, as well as crowdinvesting / equity platforms, are less active in the Dutch market.
The French Crowdfunding Association (Financement Participatif France or FPF) has appointed Jérémie Benmoussa, co-founder of Fundimmo, as Chairman replacing Stéphanie Savel.
Now let´s look at what the peer to peer lending sector is doing instead.
According to Statista.com it was worth US$ 9 billion at its very inception in 2014, the next year was already worth US$ 64 billion and it is projected to grow to a US$ 1 trillion industry by 2025. Now, that´s not peanuts.
Source: Statista
Mintos is a Latvian Fintech company which was launched in 2015 to become a “global marketplace for peer to peer loans”.
Source: Mintos
According to their data small investors had lent through their platform almost € 1 billion up to August 2018. Then, in the following 15 months — thanks to the new wave of zero/negative interest rates — the investments have more than tripled to € 3.8 billion.
DeFi is a growth sector in 2019, and funds held in various schemes have doubled in 2019.
Crypto lending started off a few years ago, with rock-bottom lending rates of 0.5% for Maker DAO. Later, skepticism brough interest rates to above 20%, with the fear of a mass exodus and liquidations.
Now, trust is back and more than 1.793 million ETH is locked with Maker DAO. The issuance of DAI has increased to 102 million coins, with the permission to expand to 120 million.
TrustToken is enabling holders of TrueCurrencies (fully collateralized stablecoins) to earn up to 10 times the local bank savings rate in five global currencies.
Users of TrueUSD (backed by US Dollars) may accrue up to 12% APR (annual percentage rate) while holders of other TrueCurrencies may gain between 4-6% APR.
TrustToken’s full suite of stablecoins, with respective earning opportunities:
TrueUSD (backed by the US Dollar), offering up to 12% APR across all five partners
TrueGBP (backed by the British Pound), offering up to 5.2% APR on Celsius Network
TrueHKD (backed by the Hong Kong Dollar), offering up to 5.2% APR on Celsius Network
TrueCAD (backed by the Canadian Dollar), offering up to 5.2% APR on Celsius Network
TrueAUD (backed by the Australian Dollar), offering up to 5.2% APR on Celsius Network
Lending cryptocurrency is becoming a popular way of earning from cryptocurrency where owner lends to other users to return a predefined percentage per defined period. A good number of exchanges now allow their users to lend out their holdings and earn interests. You deposit cryptocurrency and choose desired time to lock in or lend although you can take it back any time. In most cases, those taking the loans do so for purposes of margin trading and such exchanges do have those margin trading features.
The excitement around fintech in India is palpable. This enthusiasm can be attributed to fintech’s potential as a market-led solution to the policy objective of financial inclusion. Fintech can expand the reach of formal finance by offering users personalized financial products in an economically viable manner. Unsurprisingly then, regulation of fintech is central to financial inclusion.
Indonesian sharia-based P2P lending platform ALAMI announced an undisclosed funding round led by Golden Gate Ventures, with the participation of Agaeti Ventures, RHL Ventures, and Hong Kong-based angel investor Aamir Rahim through Zelda Crown.
Loan originations increased 14.5% to US$41.4 million in Q3 2019 compared to Q3 2018.
Total loans under management increased 27.4% to $108.0 million as at September 30, 2019 compared to the same period in 2018.
Adjusted gross revenue increased 46.8% to $6.8 million in Q3 2019 compared to Q3 2018.
Adjusted Operating Expense Ratio decreased to 10.1% in Q3 2019 compared to 10.5% in Q3 2018.
Extended the maturity date of the convertible debentures from December 31, 2020 to December 31, 2023 .
Adjusted net earnings amounted to $0.8 million in the third quarter of 2019, an increase of 64.2% over Q3 2018. Adjusted net earnings amounted to $1.5 million year-to-date.
IOU has repurchased 1,222,000 common shares since the beginning of its Normal Course Issuer Bid (“NCIB”).
Sezzle Inc. is opening an office in Toronto to expand usage of its “buy-now-pay-later” payments service by retailers and shoppers in Canada.
The Minneapolis-based financial-technology company first offered its service in Canada in April and subsequently hired marketers to reach out to retailers there. On Wednesday, it added a country manager, Patrick Chan, a former senior executive in PayPal’s Canadian office, to accelerate its growth.
News Comments Today’s main news: Prosper launches HELOCs with BBVA. LendingClub beats profit estimates. Pennsylvania fines SoFi subsidiary $110,000. Kabbage partners with GoDaddy. Zopa makes banking debut. RateSetter rolls out investor self-certification. Today’s main analysis: LendingClub Q3 earnings. International P2P lending volumes. Today’s thought-provoking articles: The hot stuff at Money 2020. China’s slowing economy. International […]
Prosper launches HELOCs with BBVA. This is one of the more prominent bank-fintech partnerships we’ve seen to date. It looks like a bow over the stern of Figure.
Kabbage, GoDaddy partner on providing capital to SMBs. This is an interesting partnership, and it should be a boon to Kabbage’s already thriving business. Partnerships, the right partnerships, have a way of propelling a business forward and Kabbage understands this.
China’s economy is slowing. I can’t help but think a part of this is due to the crackdown on P2P lending, but there are other factors–such as the U.S. trade war. Will the economy go so low it crashes?
It was last November when we first heard that Prosper had plans to expand their offerings from personal loans into HELOCs. In 2018 David Kimball noted that they would be partnering with banks on the new product and loans would be available both directly through Prosper.com and also as a white-labeled offering. Now we know their first bank partner is BBVA.
Online lending pioneer LendingClub Corp (LC.N) beat analysts’ estimates for third-quarter profit on Tuesday and forecast current-quarter largely above estimates, sending its shares up 4% in after-hours trading.
Transaction fees jumped 17% at the company, which helps connect customers looking for loans to individuals or institutional investors, such as banks, through its online marketplace.
Loan originations soared 16% to $3.35 billion in the third quarter, with total revenue rising 11% to $204.9 million.
Revenue also topped records at $204.9 million, up 11% year over year. Losses narrowed to a GAAP net loss of just $400,000 compared to the prior year period where they lost $22.8 million. Adjusted net income came in at $8 million, up from a loss of $7.3 million in the prior year period.
A subsidiary of Social Finance Inc. has agreed to pay a $110,000 fine in Pennsylvania after operating as a mortgage servicer for nearly a year without the required state licensing.
SoFi Lending Corp. is one of several mortgage companies that has been hit recently with enforcement actions in Pennsylvania after a change in state law in December 2017.
The new law required mortgage servicers that were operating in Pennsylvania to be licensed. Companies had until June 30, 2018, to apply without being penalized for unlicensed activity.
SoFi and Prosper are two companies that offer personal loans with competitive interest rates and no prepayment penalties. However, there are some major differences between the companies that could affect your decision on which one to choose.
Attendance was at record levels. Here’s our view on the areas attracting the most attention at Money 2020:
Lending-as-a-Service: lenders that enable non-banks, banks and credit unions originate loans (e.g., loan origination software, digital experience, bank workflow software, etc.). Examples: Better, nCino, Happy Money (backed by CUNA Mutual), Alchemy, Splash Financial, Blend, Roostify
International Lending: Non-banks expanding access to credit, particularly in the LatAm markets. Examples: CrediJusto (Mexico SME), Addi (Colombia POS), Nova Credit
The healthy Friday jobs report supports the ‘wait and see’ Fed view (although it is a backward looking indicator). The report indicated growth in employment of 128K in October and a tick-up in unemployment to 3.6%.
The partnership: Kabbage’s online lending platform is now available to GoDaddy’s U.S. customers to access a business line of credit in minutes.
Customers can access flexible lines of credit of up to $250,000 in minutes after filling out a short application.
Existing GoDaddy customers can get $100 off their first month’s fees
“We know that a lack of capital for marketing and other core activities remains a major roadblock to accelerate growth. Our partnership with Kabbage is key in our ongoing mission to empower our customers and provide them with the resources they need to fuel their business needs,” said Melissa Schneider, GoDaddy’s vice president of global marketing operations.
Ron Suber is one of the better-known names in the Fintech sector. Originally, Suber’s role as the President of the marketplace lending platform Prosper Marketplace brought Suber’s name to prominence as the Fintech emerged as an early leader in the US online lending market. Since departing Prosper’s management team several years ago, Suber has been associated with multiple Fintech’s as an investor, advisor or, perhaps, a board member. Today, Suber has invested in more than a dozen Fintech companies
CrowdStreet, a Portland-based commercial real estate crowdfunding startup, has raised a big new funding round, with a twist. Instead of relying solely on venture capital investors, the startup turned to its own community of real estate investors and developers to raise the bulk of the money for its Series C round.
The result: CrowdStreet this morning announced it has raised $12 million, primarily from the users of its platform, bringing lifetime funding to $25 million.
Robert Stiles, former chief financial officer at LendingHome, joined as CFO/COO. Londa Quisling was named chief technology officer, after serving as chief product officer at Treehouse. And John Havens, previously of BNY Mellon, joined as vice president of capital markets.
Many consumers do not have funds readily on hand to make big purchases like electronics or furniture and prefer turning to instant loan apps like Affirm, a point-of-sale installment lender established in 2013, rather than going into debt with a bank or credit card provider. Customers may feel thankful to be able to pay off a purchase over a year, but not at the cost of losing their identities to fraudsters or scammers.
A new digital banking platform promising to help reward people for positive financial behaviour has closed a $3.5 million seed round led by Accomplice Ventures and Walkabout Ventures nd joined by PayPal founder Max Levchin’s startup studio.
According to Moody Analytics, an average person under the age of 35 saves -1.8% of their income. HMBradley is promising to tackle this by increasing awareness and rewarding people for saving more.
Add HMBradley to the list of Los Angeles-based startups looking to shake up the world of high finance typically dominated by East Coast giants with names like JPMorgan Chase, Citigroup, Morgan Stanley and Goldman Sachs.
Minus the CEOs at the top-10 largest banks in the U.S., whose main concern is probably figuring how to deal with their trillions of dollars’ worth of assets, nearly the entirety of bank CEOs outside that tier have one primary concern, according to Bruhnke: How do they grow deposits? Meanwhile, he noted, bank customers also have a singular desire: How do they make the most money on the funds they have deposited?
Goldman Sachs’ upstart digital consumer bank, Marcus by Goldman Sachs, will help boost the reputation of its parent company, one of its leaders told Yahoo Finance recently.
The Office of the Comptroller of the Currency (OCC) recently faced another setback in its attempt to issue a special purpose national bank charter tailored to fintech companies (fintech charter). A federal district court in New York held that the OCC does not have the authority to grant charters to companies that do not accept deposits. The ruling is a blow to the OCC’s efforts to provide new avenues for innovation in financial services. The fintech charter would allow fintech companies, which do not accept deposits like traditional banks, to benefit from the same preemption of state laws and licensing requirements as national banks.
The other is Varo, which initially considered going for an OCC special purpose charter but then decided to apply for a full-service charter. Varo has preliminary approval from OCC and awaits approval of its FDIC deposit insurance application. Below, we look at how Lending Club, the online marketplace consumer loan platform, is exploring chartering options.
The Trading APIs service provides one Unified API that has integrated multiple crypto exchanges. Thus, users will now be able to link multiple exchange accounts to their profile, collect data and execute their portfolio management trades from a single point.
Crypto APIs is used by thousands of developers to create products like Crypto exchanges, Crypto wallets, Trading bots, Crypto PSP, Arbitrage solutions, Crypto Lending solutions and many more.
Brex, the fintech credit card startup, is teaming up with Bank of the West, the subsidiary of BNP Paribas, to roll out a co-branded credit card. It marks the first co-branded credit card to come out of Brex which caters to startups and entrepreneurs.
In one instance, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency angered borrower advocates by siding in court with a high-cost business lender. In the other, the Consumer Financial Protection Bureau signaled its intention to move forward with a small-business lending rule that has languished for nine years amid sharp disagreements over its proper scope.
On the global fintech scene, the US has been amongst the top leaders, accounting for 57% of the fintech market in 2018, according to a Mordor Intelligence research.
Fintech continues its momentum this year, with investment in US fintech companies surging to US$12.7 billion in the first half of 2019. That represents a 60% increase in value of deals and signals a trend of larger deals in already the world’s biggest and most active fintech market, according to data from Accenture.
Legitimate Shoppers Take Advantage of Deals, Outpacing Seasonal Growth in Fraudsters (Riskified Email), Rated: A
Elevate Credit, Inc. (NYSE: ELVT) today announced that its Interim Chief Executive Officer, Jason Harvison, and Chief Financial Officer, Chris Lutes, will attend the Stephens 2019 Nashville Investment Conference on November 14th at the Omni Nashville Hotel. Mr. Harvison and Mr. Lutes will be available for 1×1 meetings with investors.
Zopa, one of the UK’s three largest names in peer-to-peer lending, is to launch its first foray into banking after receiving partial authorisation last year.
RATESETTER has begun asking its customers to confirm their investor status ahead of the Financial Conduct Authority’s (FCA) new marketing and disclosure rules that come into effect on 9 December.
UK business lender nearly doubled its lending last year to £330m, helping the startup announce it has now reached a cumulative lending milestone of over £1bn.
The news comes as iwoca’s headcount has jumped 50% in the last 12 months, boosted further by the £10m BCR grant which the company secured in August to further expand its customer base.
Year-on-year growth has fallen by 0.2 percentage points per quarter this year, from 6.4 per cent in the first quarter to 6.2 per cent in the second quarter and to 6 per cent in the most recent quarter.
Recent data showed that the number of online P2P platforms plummeted to just 427 – a 59 percent drop compared to 2018-end. The total outstanding loan value and the number of borrowers also dropped correspondingly by 49 percent and 55 percent, respectively.
China is making rapid inroads towards reducing peer-to-peer lending risk to meet the 2020 target deadline but expects to keep alive the few remaining with strong fintech expertise and shareholder support.
China has been warned to avoid the same mistakes with blockchain that it made with its peer-to-peer lending, as the government vowed a “thorough revamping” of the controversial lending platforms as part of a continuing battle against financial risk amid the domestic economic slowdown and the trade war with the US.
From adopting unique business models to routing investments through Singapore, Chinese lenders are trying every trick in the book to win the Indian fintech-lending space. But getting money to India, deploying it, and dealing with stringent KYC norms is easier said than done.
The wave of closures of P2P platforms in China in the summer of 2018 garnered national attention. The latest blacklist for P2P lending published by “P2PEYE.COM” ( shows that as of the end of March 2019, the number of problematic P2P platforms reached 5,388.
Klarna, a popular BNPL provider used by over 4,000 UK retailers, offers three types of BNPL service:
delayed payment up to 30 days after purchase. This incurs no interest or fees, providing the payment is made within the timeframe.
instalment options whereby the purchaser can pay in three equal, interest-free payments every 30 days.
flexible financing, which spreads the cost of larger purchases into manageable monthly payments. The term for this repayment option ranges from six to 36 months.
On Wednesday 6th November at 05:00 CEST, we will perform an important technical maintenance which will prevent customers from seeing some order details within the Klarna app for a short time. We expect this maintenance to take approximately 15 minutes, after which time full details of orders will become accessible again.
Chinese firms have raised just $3 billion from American exchanges so far this year, less than a third of the 2018 total. In the last week of October, however, half a dozen companies filed for initial public offerings in New York, bringing the total backlog of Chinese floats to 24, according to data from Refinitiv. Rising trade uncertainties, tougher listing requirements on the NASDAQ and an upcoming U.S. presidential election have sparked fears that 2020 may prove even more volatile for debutants.
SMEs make up 97 per cent of Vietnam’s enterprises, but only account for 22 per cent of total bank lending. To meet a US$21 billion SME financing gap in the country, Validus Vietnam will partner corporates to provide SME growth financing to their vendors and subcontractors.
Joey Kim, chief executive officer at PeopleFund, discusses what his company does, the growth drivers for his company, his latest funding round, P2P lending in South Korea, regulation, the possibility of consolidation in the industry and how the Korean economic headwinds are impacting his business. He speaks exclusively on “Bloomberg Daybreak: Asia.”
Vietnam’s fintech industry is expected to reach US$7.8 billion in revenue by 2020. A rising middle class, growing internet usage, and a young population present a great combination for the fintech sector to thrive. An estimated 120 companies and brands cover a wide range of services, from digital payments to wealth management and blockchain.
Instead of competing against each other, banks and financial technology (fintech) companies are joining hands and combining their resources to tap into the country’s growing financial services market.In an effort to keep up-to-date with recent technology and stay relevant amid the latest changes in financial services, many banks have signed partnership deals or bought into nimble start-ups as an alternative to building costly technology projects.For the banks, the logic behind a partnership with fintech companies is simple: It gives them the opportunity to reach a wider customer base, unlock their technological capabilities without having to buy one of their own and penetrate the country’s unbanked population — all without having to spend too much money.“We are partnering with 12 fintech companies from peer-to-peer [P2P] lending and payment apps to SME [small, middle, enterprise]…
Temenos has concluded the LatAm results for its annual retail banking survey, conducted by the Economist Intelligence Unit (EIU). The survey titled ‘A whole new world: How technology is driving the evolution of intelligent banking in Latin America’ stated that 35% of retail bankers prioritize investments in digital technologies along with cost-cutting or margin improvement for furthering their financial inclusion goal.
Modern Small and Medium Enterprises (SMEs) represent a significant part of the global economy, accounting for nearly 90% of all modern businesses. Modern SMEs are large contributors to the creation of workplaces and economic growth, especially in developing countries. Although they’ve become a vital part of the financial ecosystem, these businesses are facing extreme difficulties […]
Modern Small and Medium Enterprises (SMEs) represent a significant part of the global economy, accounting for nearly 90% of all modern businesses. Modern SMEs are large contributors to the creation of workplaces and economic growth, especially in developing countries.
Although they’ve become a vital part of the financial ecosystem, these businesses are facing extreme difficulties in accessing finances. SMEs are often associated with higher risks, sizeable transaction costs, and a lack of collateral—about 50% of small business loans get rejected.
Many business owners cite this financial exclusion as a key obstacle to the growth of their venture. The common hurdles in obtaining a loan include burdensome processes, low level of transparency, and the high costs associated with searching for a loan. For instance, the research by the Federal Reserve indicates that small business borrowers spend nearly 24 hours on paperwork alone during the loan application process at a bank.
The problem is global: businesses from East Asia and Pacific regions represent the largest share (46%) of the total number of underbanked SMEs worldwide, followed by Latin America and the Caribbean (23%) and Europe and Central Asia (15%). In 2018, the finance gap between the needs of global SMEs and available funds reached $5.2 trillion, according to SME Finance Forum.
The Crisis
Following the financial crisis of 2008, with the idea of de-risking their balance sheets, large banks started to avoid lending to SMEs by introducing stricter requirements to receive funds. For instance, in the UK, where SMEs represent a tremendous 99.9% share of the 5.7 million businesses, the value of issued bank loans fell to £55.6 million in Q4 of 2018, a 78% drop from its maximum of £255 million in 2009.
The other reasons include the variety of regulations banks have to cope with, insufficient credit history, and the high transaction costs of underwriting and onboarding customers. All in all, providing loans to small businesses has become less of a priority for banks. “If you look at the great recession, what you’ve seen is a bounce-back of commercial lending, but lending to small businesses really hasn’t come back,” sums up Darrell Esch, Vice President of global credit at PayPal. The majority of banks are not interested in lending relatively small amounts of money on a frequent basis. Some banks have introduced a sort of a loan threshold (commonly around $100,000 to $250,000), and won’t engage in loans below this level. The others will not address requests from SMBs with less than $2 million in revenue.
But technology changed the scenery for many small and medium-sized enterprises. In comparison to traditional financial institutions, digital lending companies provide favorable terms on credits. With low-interest margins, faster approval, and without initial fees, they are scaling up quickly and already capitalizing on new scoring methods.
On the Path to Digitalization
Top decision-makers in the banking sphere are aware of the success of alternative lending companies. However, still slowed down by legacy systems, banks are only dipping their toes in digital lending. The outdated technology at banks isn’t the sole issue. At the recent Lending Fintech Europe in London, lga Zoutendijk, a career banker with several decades of experience, said that “legacy culture is a bigger problem at large banks than legacy tech and a much more difficult challenge to overcome.”
For traditional lenders, fintech is an opportunity to innovate and modernize. However, one can’t fight legacy culture alone: on their path to embrace digitalization, bank institutions need a fintech partner to bring technology, speed, and flexibility to the table.
Fintechs are looking for such partnerships as well. With all the improvements in customer experience, they predictably lack the expertise in areas such as risk management, loan monitoring, and servicing that banks have in spades. This mutual knowledge gap creates partnership opportunities. Denise Leonhard from Paypal is sure that “nobody is going to be able to do it alone. To get to the next evolution of payments, it’s going to be really partnership-driven.”
Addressing the Challenge
But what is the biggest challenge in initiating the loan process for banks? Moody’s Analytics, a financial intelligence provider, conducted a poll among bank institutions. The results revealed that 56% of bankers consider manual collection and data processing to be the greatest obstacle in the process of underwriting.
These outdated methods lack consistency, accuracy, and auditability, not to mention, they are time-consuming. This results in additional work for risk officers at a bank, and assessing an SME’s creditworthiness becomes a challenging and unprofitable task. Traditional players just can’t compete with agile, fast-moving alternative lenders and their “time-to-money” credit decisions which take less than a day.
Lending to SMEs is not profitable for banks unless they change their operational approach. The solution lies in the automation of manual processes. Banks have to adopt such solutions for enhanced data collection, scoring, and further rule-based decisions, and solve the problem of the data’s inconsistency and delay. Igor Pejic, the renowned author of Blockchain Babel, sums it up: “It is simply not possible to offer the customers the speed they need in today’s economy with manual processes.”
But what’s more important for banks, those changes mean investing in the future: alternative lending options make customer experience of SMEs convenient, transparent, and adapted to the way those businesses operate.
The Future of SME lending
Partnerships between banks and fintechs are one of the most-discussed topics in the industry as they have the immense potential to impact long-term growth, customer experience and client retention for both parties. Industry professionals agree that bank-fintech collaboration is evolving as a common industry practice that will shape the future of the lending domain.
By partnering with alternative lenders, traditional players fight the challenges associated with the process of credit risk assessment, increase the quality of the loan portfolio, and stay competitive in the SME lending sector. More importantly, they have the opportunity to offer small businesses a shortcut to finance with fast access to cash, less paperwork, and fewer rejected applications.
In return, alternative lenders benefit from partnerships by getting experience in handling a complex regulatory environment, reaching new markets, and scaling quickly. In regards to this, old-fashioned “collaboration” is the new industry trend, while “disruption” is regarded somewhat as a thing of the past. Effectively, change is almost impossible without industry-wide cooperation and consensus.
The question: is how will banks and fintechs manage their respective strengths to proceed with deeper integration in a newly-formed system? It’s important to note that these integrations shouldn’t be regarded as acquisitions by any means. In other words, the technological vision of fintechs shouldn’t be at odds with the slow processes within banking institutions: one needs to convince multiple stakeholders and departments that the partnership makes sense. Here’s Chris Skinner on the partnerships: “Banks are slow to move, particularly at the beginning. Realistically, you should consider allowing at least 12-months from the moment you engage to the moment you have a partnership agreement signed.”
However, the financial industry holds little pessimism about collaborations: 82% of top executives at banking institutions have plans to partner with a fintech within the next 5 years. That’s only a matter of time before both parties streamline their processes to completely change the dynamics of SME lending.
All in all, given the competitive advantages that come with strategic partnerships, banks and fintechs have better chances to achieve their scale ambitions and reinvent their business models.
According to the CGAP report, the global opportunity for SME credit is estimated to be around $8 trillion. At the same time, more than 50% of overall applications are being rejected regularly. If banks want to take their share of the lucrative market, they need to modernize, and that’s totally good news for small businesses, technological partners, and the whole fintech ecosystem.
Author:
Dmitri Koteshov
Dmitri Koteshov is the digital content marketer at HES (HiEnd Systems), a fintech company behind comprehensive lending and credit scoring solutions. As a seasoned professional, Dmitri maintains a longstanding interest in providing insights on fintech software development and analyzing current technology trends.
News Comments Today’s main news: Prosper Marketplace Issuance Trust (PMIT) 2019-4 to sell $138M in securities. PeerStreet raises $60M in Series C round. Funding Circle revamps secondary market. ID Finance Crowdcube campaign overfunds. Stablecoin loans surge 38%. Flender raises 75 million euro. Today’s main analysis: Genesis Capital’s digital asset lending snapshot (A MUST-READ). Today’s thought-provoking […]
Prosper Marketplace Issuance Trust, (PMIT) 2019-4, is counting on a de-leverage transaction structure that will boost its credit enhancement levels over time, as it seeks to sell $138 million in securities backed by unsecured consumer loans.
PMIT is also utilizing total subordination of 23.79% for the class A notes and 11% for the class B. The deal’s credit support also includes excess spread of about 9.75%, based on a collateral weighted average interest of 14.32%.
PeerStreet, a platform for investing in real estate backed loans, is excited to announce it has completed a $60 million Series C funding round. Colchis Capital led the round with a consortium of institutional investors. Existing investors Andreessen Horowitz, World Innovation Lab and Thomvest Ventures also participated.
Some things, such as pool parties and potlucks, are just better the more people that get involved. Another one of those things is participation in real estate investment. The more people that invest, the more capital there is to fuel deals and improve everything from office quality to housing availability. People make money and society progresses. It’s how the market should work.
Genesis continues to see sustained growth in its digital asset lending business. In the third quarter of 2019, Genesis added $870M in new originations, breaking our record of $746M set in the previous quarter. As of September 30, 2019, active loans outstanding stood at $450M, roughly flat from the previous quarter despite a significant decrease in Bitcoin’s price.
Originations increased 38.1% QoQ marking a sixth consecutive quarter of strong growth and bringing total originations to $3.1B since we launched the lending business in March 2018. Our loan portfolio largely sustained its value through increased cash (USD and stablecoin) loan issuance, offset by a decrease in the notional value of crypto loans outstanding.
The availability of cheap, cryptocurrency-collateralized loans is growing unsustainably and could induce a crisis, two former Wall Street traders now working in crypto lending have told Bloomberg.
Interests rates for these services started at 11% but now sit at around 5% APR.
Crypto credit has expanded too quickly and is headed for a blow-up, says a group of former Wall Street traders who are now seeking riches in digital assets. A near $5 billion industry has emerged from nothing just two years ago and the number of loan platforms is rapidly proliferating, according to blockchain data company Graychain Ltd.
Want to start and grow a tech unicorn — a privately held startup company valued at over $1 billion? You have to target a large market. The Atlanta-based fintech company, Kabbage, has a valuation of $1.2 billion and is on the Forbes Fintech 50 2019.
While less than what small businesses borrowed from banks before the recession, small business loans are still a huge market — more than $600 billion lent each year, according to Small Business Lending in the United States, 2016.
Entrepreneurs become successful, essentially, by refusing to do what everyone else is doing, or by doing the thing everyone else refuses to do. But even when you know you’re onto a great thing, it can be difficult to ignore the naysayers and skeptics you’ll encounter on your way to growing a business.
Five of the top 10 cities where buyers are stretching themselves the most are in California. Though there is some speculation that the housing boom in California may be nearing its end, home prices in the state are still high. As a result, many buyers, especially those who don’t work in lucrative industries like tech, will take out large loans to cover the cost of their homes.
Since last year, Los Angeles and San Diego have remained the 2 cities where borrowers have to stretch their budgets the most. The leverage ratios in these two cities are 3.91 and 3.64, respectively.
Salt Lake City is the place with the highest leverage ratio not in California. A housing shortage is one of the key reasons buyers in Salt Lake may need to stretch their budgets so much in order to be able to afford a home.
Like last year, homes in the Rust Belt and the South are the most affordable in the nation. The average home price in our 10 most affordable cities is a bit more than $171,000, which is $90,000 less than the average home price for the whole nation. Furthermore, the leverage ratio in the most affordable cities is 2.25, compared with a ratio of 2.81 for the whole country.
Pittsburgh, Cleveland and Detroit are where buyers are taking the smallest loans relative to their incomes. An average leverage ratio of 2.08 could make these cities attractive to potential homebuyers.
Aura, a mission-driven financial technology company that offers affordable loans to hard-working families, today announced it has closed a $130 million asset-backed revolving credit facility with Varadero Capital, L.P. This new facility comes during a period of rapid growth for Aura in which the company has provided approximately $635 million in loans to more than 475,000 borrowers at over 1,250 partner locations since its founding in 2014.
Amount, a fintech company helping financial institutions reinvent the retail experience, today announced Amount Pay, an installment point-of-sale (POS) financing solution launching in Q1 2020.
Marqeta, the world’s first modern card issuing platform, unveiled its new Marqeta Reserve Financing product at the Money2020 conference in Las Vegas today, a reserve financing option built into its core platform workflow. Marqeta Reserve Financing is uniquely tailored to the needs of companies struggling with the logistical, practical and administrative burdens of funding a reserve account to launch new payment card programs and keep it actively replenished with funds.
Become, the online platform for SMBs to find and optimize their funding solutions, today announced the closing of a $10 million Series A investment round led by Benson Oak Ventures and Magenta Venture, supported by RIO Ventures Holdings, iAngels, and Entrée Capital. The company has also secured an additional $2.5 million in venture debt from Viola Credit, bringing the total to $12.5 million. The funds will be used to scale up operations in the United States and Australia in order to execute Become’s mission to remove ecosystem friction and enable more SMBs to “become” the businesses they aspire to be.
The current small business lending landscape is fundamentally flawed, with 58% SMBs denied access to funding with no recourse or guidance on how to solve it.
In fact, with 9% of all jobs in the state falling under the fintech umbrella, Delaware has the highest share fintech employees of any U.S. state, according to a report conducted by the Delaware Prosperity Partnership, First State Fintech Lab and University of Delaware in June.
At the same time, the number of fintech startups in Delaware is small: There are a few mid-stage companies like Marlette Funding, Fair Square Financial and Acorns, but early-stage fintech companies are not exactly booming.
IDology, a GBG company, today released its Seventh Annual Fraud Report, revealing the growing impact of large-scale data breaches and fraud on consumer trust and the critical need for businesses to balance the digital consumer experience with strong identity verification processes. The report also found that senior executives believe their companies are still not prepared to combat synthetic identity fraud and mobile attacks. Additionally, the California Consumer Privacy Act (CCPA) is expected to have significant implications in 2020 and many businesses may not be ready to comply.
Five Key IDology Fraud Report Findings:
The true impact of data breaches: A decline in consumer trust – 49% of businesses report a decline in customer trust over the past year. Additionally, 46% indicate that increased regulations are a top impact of large-scale data breaches.
Fraud vectors are shifting away from point-of-sale (POS) – 58% of businesses report fraud is increasing in their online channels.
New fraud threats, synthetic and AI fraud on the rise – 40% of businesses across industries experienced an increase in synthetic identity fraud (SIF) over the last 12 months and 92% percent expressed concern over SIF. The study found 33% believe that the fraudulent use of artificial intelligence and machine learning will be the most severe form of fraud in the next three years.
Compliance is an increasing burden – 28% of businesses believe CCPA compliance will be more burdensome than GDPR while 30% believe it will be equally as burdensome. CCPA contains additional rules with respect to identity verification that go far beyond what is required for GDPR.
How to thrive in the changing environment– 96% of businesses see identity verification as a competitive differentiator. Also, 80% believe accurate address verification is very or extremely important to the identity verification process.
Digital banking brand Varo has 1 million customers, and is pushing ahead with plans to become a nationally-chartered bank early next year, CEO Colin Walsh told Bank Innovation Tuesday.
Varo offers checking accounts, savings accounts and installment loans. Becoming a nationally-chartered bank will help Varo differentiate through an expansion of its product suite, said Walsh. Like other digital-only banks, Varo intends to grow relationships with customers through multiple product relationships and integrations with other platforms. According to the company, 60% of its customers have more than one product relationship with the brand.
Blend, a fintech that initially specialized in software for mortgage lenders, is expanding into auto loans in the latest example of a startup broadening well beyond its initial area of expertise in an effort to appeal to more customers.
The San Francisco-based firm launched an auto lending product on Monday that is designed to enable consumers to upload documents quickly using mobile devices to get loan approvals faster. It comes on top of two other recent consumer-facing expansions, into home equity loans and deposit account opening products.
Walmart announced a new seven-year contract agreement with Green Dot to continue as the issuing bank and manager for the retail giant’s MoneyCard program. The partners also agreed to launch a new financial tech accelerator.
For every dollar of fraud loss, financial services companies now incur $3.25 in costs (losses related to the transaction face value for which firms are held liable, plus fees and interest incurred, fines and legal fees, labor and investigation costs and external recovery expenses), up from $2.92 in 2018. This represents an 11.3% year-over-year increase. Lenders see $3.44 in costs for every dollar of fraud loss, up from $3.05 in 2018, a 12.8% increase. Banks and credit lenders, in particular, were found to have the highest costs of fraud, with both percentages jumping double digits since last year – 17% and 16%, respectively.
Trends
Expansion of Mobile – There has been a significant increase in the use of mobile channels since 2018, with 73% of financial services (a 66% increase) and 71% of lending firms (an 8% increase) now offering this option to customers. This growth stems primarily from small financial services firms and digital financial services and lending firms now transacting through the mobile channel.
More Cross-Border Transactions – International transaction volume has risen among both mid/large-sized digital banks and all digital lenders. However, mortgage lenders have reported a significant drop in foreign transactions, which coincides with a decline in global growth and housing inventory.
The Rise of Botnets – A majority of banks reported double-digit year-over-year growth in botnet activity, which appears to at least be related to banks with international business reporting more transactions. Nearly half (47%) of mortgage lenders reported an average increase of 16% in botnet activity since last year. While surveyed firms appear to be aware of botnet activity, they have not been able to adequately prevent it.
Despite representing nearly 25% of consumer spend, until now rent, utility, cable, and telecom tradelines have been severely underreported in traditional credit reports, with only about 1% of consumer files currently including rent data and 2.4% including utility data according to FICO. When alternative data is included, it has proven to accurately score more than 90% of thin or no-file applicants, representing a powerful revenue tool that lenders can use to safely expand their markets, increase assets, and build lasting relationships with borrowers.
Urjanet and LevelCredit today announced a strategic partnership enabling lenders, banks, and fintech companies to confidently qualify thin and no-credit file consumers using rent and utility bill payment history. The partnership enhances LevelCredit’s existing rent reporting services with consumer-permissioned payment history from thousands of utility, cable, and telecom providers, helping financial services organizations safely extend credit to a growing number of consumers who aren’t getting the credit they deserve today.
It all started with a cold LinkedIn message back in 2016. The co-founder of the (then) tiny startup Nova Credit, Nicky Goulimis, reached out to an executive at American Express to discuss a potential partnership. It was an audacious move but one that, three years later, has paid tremendous dividends for the company.
Credit Karma built a wonderful business providing almost 100 million people with free products to help them manage their debt. It was inevitable that they move into the asset side of their customers’ personal balance sheets. Last week, the firm announced a new savings account.
AccountScore and Equifax have today announced the release of a new credit risk index for the consumer lending sector which allows financial institutions to more effectively understand consumers applying for credit products.
Sunrise, a Lendio company, today announced a strategic partnership with WePay, the integrated payments business of JPMorgan Chase & Co. Through this collaboration, Sunrise will provide its small business clients with a new feature called Sunrise Pay, powered by Chase, which gives users immediate access to invoicing capabilities as well as the ability to set up recurring payments.
Cred, the leading global digital asset lending and borrowing platform serving customers in over 180 countries, today announced that veteran technology executive Cliff Edwards has joined the company as chief marketing officer to help accelerate understanding of blockchain technology and to promote innovative use cases for digital assets.
Funding Circle also announced that it is introducing a 1.25 per cent transfer payment, which will be deducted from the seller’s proceeds and go to the buyer of the loan part.
ID Finance, the fintech company operating in Europe and Latin America, has surged past its £2m crowdfunding target on Crowdcube and is now overfunding with £2.3m raised from over 700 investors. The Barcelona-based lending-tech scaleup is the second-fastest growing fintech in Europe, according to Financial Times, has enjoyed strong investor demand as it looks to disrupt the LatAm market. The company will continue to take commitments from investors at crowdcube.com/idfinance
Trade Ledger, the ground-breaking business lending platform, which automates commercial lending processes for global banks and alternative finance providers, today announces strategic investment in a £1.5M round led by Hambro Perks, to further accelerate revenue growth.
Marks & Spencer is the latest retailer to adopt a “buy now, pay later” payment model, in the hope that it may attract younger customers in the run up to Christmas.
The retailer has partnered with Clearpay to launch the initiative, which allows customers to pay for purchases via a series of four instalments paid over a period of six weeks. The payments can be made via a smartphone app.
The regulator in China’s financial center has ordered Shanghai’s more than 40 peer-to-peer lenders to exit the business, people familiar with the matter said, the latest blow to an online industry that’s shrunk by half this year.
Some of the nation’s biggest platforms including Ping An-backed Lufax and Dianrong.com have been told in recent meetings with Shanghai’s financial services bureau to stop issuing new products and to wind down existing peer-to-peer lending services, the people said, asking not to be identified as the matter is private.
In a Nutshell: Blockchain technology has helped many industries innovate in recent years. Max Crowdfund is one company using the technology to make investing in real estate easier and more accessible. The platform also simplifies investment managment for real estate professionals. Through the use of blockchain technology, properties can be tokenized — or broken down into investment opportunities as low as €1,000 — something that can’t be done through traditional real estate investing. Overall, the Max Crowdfund platform makes real estate investing faster, cheaper, and easier for everyone.
CNH Industrial and the fintech lending platform October entered into a partnership agreement in July 2019 to support Small and Medium Enterprises (SMEs) working with IVECO and CASE Construction Equipment brands through the adoption of crowd-lending in France, Italy, the Netherlands and Spain.
Genesis Capital, a subsidiary of Digital Currency Group (DCG), one of the largest investment firms in the crypto sector, has reported a 38% increase in stablecoin loans in the 3rd quarter of 2019.
Mr Tax Refund was incorporated in 2012 and majority-owned by online lender, Paid International. In January 2015, Paid was sold to ASX listed, Money3 Corp Ltd.
The 19 P2P lenders have now facilitated disbursals of close to Rs 500 crore, estimate industry executives who say that a good chunk of this growth has come in the last twelve months. While P2P lenders are registered with the Reserve Bank of India, the regulator does not release lending data for these platforms. As such, BloombergQuint could not independently verify the extent of loans given out via these platforms.
Aye Finance Private Limited (Aye Finance) is among the few in the Indian online lending space that has been posting profits for the last two years. The company, which provides micro-financial services, has reported a net profit of INR 250 million during fiscal 2019, a 10x increased from INR 23 million net profit a year ago.
As India donned its festive hats to celebrate a whole week of Diwali, the real gift went to the peer-to-peer lending exchange Paxful. It saw the country’s Bitcoin trading volume on its platform reach an all-time high.
Digital financial services from lending to asset management are expected to generate at least $38 billion of annual revenue across Southeast Asia by 2025, more than tripling from $11 billion in 2019, according to a new study by Bain & Co., Google and Temasek Holdings Pte.
Online lending will comprise about half that total for the region, which houses some of the world’s fastest-evolving internet and mobile industries. Growing smartphone penetration promises to unlock internet-based services such as insurance to more than 70% of an adult population neglected by traditional banks, according to the report.
While celebrating its fourth anniversary this week, the fintech start-up that set the peer-to-peer lending ball rolling in Indonesia is preparing for its third major round of investment, possibly in the next month.
Aside from regional expansion, Investree intends to intensively develop its Shariah-compliant business unit over the coming year.
Indonesia’s Software as a Service (Saas) startup Paper.id announced that it has closed an undisclosed amount of Series A funding from Southeast Asia-based venture capital firm Golden Gate Ventures and Indonesia’s P2P lending platform Modalku.
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