Tuesday November 27 2018, Daily News Digest

Reliable Consumers for JP morgan, Citigroup, wells fargo and Bank of America

News Comments Today’s main news: LendingClub hits $1B in CLUB certificate issuance. Zopa boosts Augmentum Fintech fund returns. Monzo breaks record on crowdfunding round. Yirendai’s critical stage to regain growth. Judo gets $350M in funding. Today’s main analysis: How late-cycle expansions turn into recessions. Today’s thought-provoking articles: LendingClub does more lending during holidays. Turning LendingClub into a financial health club. Why […]

Reliable Consumers for JP morgan, Citigroup, wells fargo and Bank of America

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United Kingdom

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News Summary

United States

LendingClub Reaches $ 1bn in CLUB Certificate Issuance (Lend Academy) Rated: AAA

LendingClub has seen issuance of their new CLUB Certificate reach $1bn in less than a year after first announcing the pass-through security product last December at their investor day. The CLUB Certificate was created to make it easier for institutions to invest in LendingClub originated loans.

Loan for the holidays: Lending Club loans out more during holiday shopping months (Thinknum Media) Rated: AAA

This year was a record-breaking season for holiday shopping, as online spending surged 23.6% according to Adobe Analytics.

But where is all that money coming from? While some consumers saved up for the season, others might have turned to loans, such as ones offered at Lending Club ($NYSE:LC), to pay down huge gifts or refinance debt from credit card spending.

Outside of March 2016 — a month during an unusual stretch of time right before its chief executive Renaud Laplanche stepped down and a federal subpoena came in — Lending Club typically has the most loans issued by dollar amount in the months before the holiday season, according to data tracked since 2013.

Source: Thinknum

LendingClub CEO Working to Turn It Into a Financial Health Club (Web Pro News) Rated: AAA

The CEO of LendingClub, Scott Sanborn, says that they are really looking to make membership in the club mean something and are working to take Lending Club and turn it into a ‘financial health club’ that will help people successfully manage expenses. He says that LendingClub helps by shining a spotlight on credit card debt which is the first step to doing something about it.

A Looming Crisis in People’s Overall Financial Health

We are seeing really an epidemic happening which is incomes have been stagnant for more than 20 years. All of people’s major expenses, healthcare, college, housing, is going up and it’s creating a real looming crisis in people’s overall financial health and it’s something that people just aren’t talking about. Close to half of Americans have credit card debts and they are more than twice as likely to talk about spousal infidelity than they are about the fact that they have credit card debt that they need to manage. We believe that by shining a spotlight on the problem it’s the first step to helping people do something about it.

Top fintech VCs explain how PayPal missed a golden opportunity and why they wouldn’t invest in LendingClub today (Business Insider) Rated: AAA

PayPal is arguably one of the biggest success stories to come out of Silicon Valley in the last 20 years. It launched the careers of Peter Thiel, Elon Musk, and Max Levchin and paved the way for other members of the “PayPal mafia” to make seed investments in a next generation of startups.

“OnDeck and LendingClub have scaled, strong businesses now, but you’d never invest in those companies as startups today,” Harris said. “I don’t think you would look at unsecured personal lending or small-business lending, where you have to go out and acquire customers in the wild, with no special sauce. That’s 10-year-old thinking.”

The current model many VCs advocate is for companies to find ways to offer additional services, like loans, to existing customers. Acquiring new customers can be expensive, and there’s a competitive advantage when you underwrite or target new services to existing customers, because they know more about them.

PeerIQ’s Lender Earnings Webinar; Bank Exec Comments on the Credit Cycle (Peer IQ) Rated: AAA

One of the main themes that we explored in the LEI was how late we are in the credit cycle. Most C-level executives were extremely are sanguine on the economy but are nonetheless taking precautions. PeerIQ’s view is “The good news — and the bad news — is that conditions don’t get better than they are now.” We recommend reviewing Bloomberg Julie Verhage’s “US Banks See Good Times Ahead Even as Many Prep for Downturn” for more.

Source: Peer IQ

How Late-Cycle Expansions Turn into Recessions

The current US expansion that started in June 2009 is the longest on record at over 113 months. Late expansions are characterized by low unemployment, high consumer confidence, high asset values. We currently observe a near 50-year low unemployment rate, near record high consumer confidence, and the highest level of consumer credit outstanding (although well below peak per-capita debt levels).

Ironically, it is these solid economic indicators that are responsible for the party coming to an end. In a simplified model, credit availability expands to the marginal borrower (e.g., new entrants, cov-lite corporate loans, thin-file credits, etc.) just until the marginal consumer or corporate loans creates more losses than expected. Lenders feel the pinch on credit performance and on funding due to rising rates. Lenders individually tighten lending leading to a reduction in the supply of credit on an aggregate basis.

PeerIQ’s Q4 2018 Lending Earnings Insights Report (Lend Academy) Rated: A

PeerIQ released their Q4 2018 Lending Earnings Insights Report which points to a number of themes showing the economy is strong but CEOs are striking a cautious tone. Delinquencies and defaults continue to be low as consumers have seen their wages rise and taxes drop. Lenders are increasing reserves as they anticipate credit to renormalize in the near future, saying the economy right now was too good to be true.

Read the Full Report here.

Excerpts:

Regulators are increasingly focusing on the greater role of non-banks in consumer lending.Large money center banks continue to pull-back from riskier loans such as small business and consumer lending. Large banks instead have increased their credit facility volume 6x since 2010. FDIC Chair Jelena McWilliams cites the significant role of non-banks in origination as potential for systemic risk. The FDIC is contemplating granting ILC charters to non-banks – a major shift.

Delinquencies and charge-offs in FinTech asset classes are near all-time lows, although charge-offs on prime credit are increasing. Enova (Subprime) and OnDeck (Small Biz) are seeing near cycle-low charge-offs, while LendingClub (Prime) is seeing higher delinquencies on newer vintages. The change in LendingClub’s charge-off estimates across loan grades was mixed. Charge-offs on grades B and C are estimated to be higher by 28 bps and 16 bps respectively QoQ.

Small Businesses Are Poised for Growth, but Are Lenders Ready? (Business Wire) Rated: AAA

Source Business Wire

Betterment, Merrill Edge, Fidelity’s Go Lead the Pack in Digital Advice Branding, Claims Cerulli (Financial Advisor IQ) Rated: A

Robo-advice pioneer Betterment is the pack leader in digital platform awareness among investors, a new Cerulli Associates study reveals. But Merrill Lynch and Fidelity aren’t far behind, the study shows.

Among the more than 5,500 people polled, the Betterment brand was known by 15% of respondents, Merrill Lynch’s Merrill EDGE by 13%, and Fidelity’s Go by 12%. Trailing the three frontrunners was Charles Schwab’s Intelligent Portfolios and Vanguard’s Personal Advisor Services, which were each recognized by 10% of respondents, the study reveals.

For its digital platform marketing awareness study, Cerulli polled investors under the age of 45 earning more than $125,000 annually and with more than $250,000 in investable assets.

5 Business Loans You Can Get Without Being Profitable (NAV) Rated: A

With the Bureau of Labor Statistics reporting over 415,226 startup firms less than 1 year old in 2017, it’s apparent that this category of business will need funding like never before. However, business loans are tricky. On hand, they tend to offer a larger line of credit to companies than personal loans or lines of credit. On the other hand, qualifying can be difficult and often requires you to provide at least two years of documentation that you are profitable.

For the brand new business that hasn’t managed to turn a profit (yet), what is left? How can you get a cash infusion into your business in time to expand, add employees, support a product launch, or refinance existing debt? The following loans are a bit non-traditional, but just might be exactly what you are looking for in your quest for funding during your startup years.

TD Bank Launches New Digital Mortgage Experience Powered by Roostify (Business Wire) Rated: A

Roostify, a digital lending platform provider, announced that TD Bank, America’s Most Convenient Bank®, has leveraged Roostify’s technology to provide customers with a digital mortgage offering. This digital experience combines the latest in lending technology with a human-centric approach that gives TD Bank’s customers an accelerated, low-stress path to home ownership.

The deployment now provides prospective homebuyers with useful tools to assist them in finding a loan that fits their needs and budget. Leveraging Roostify’s proprietary DecisionBuilder lead tool, TD Bank’s Digital Mortgage allows consumers to explore which loan products they qualify for, right from a simple-to-use web page. Consumers can then move on to apply for their chosen loan in minutes, and follow a streamlined, all-digital process for moving their loan through closing. With easy access to TD Bank’s expert loan team, homebuyers can enjoy both the convenience of a digital solution and reassurance of expert guidance as they navigate one of the most significant transactions of their lives.

The Lending Alternatives Hopeful Investors Should Know Inside And Out (Forbes) Rated: A

People buy real estate for many reasons — generating cash flow, a tax write-off, appreciation value. Some of the greatest profits are made when buying real estate in a down market. Seasoned investors and fortunate newcomers who purchased coastal residential property from 2012-2017 are sitting on healthy equity appreciation as well as competitive interest rates in the 3.5-5% range.

The traditional path to buy a property is to obtain financing through banks, credit unions or a mortgage company. Following the 2008 housing crisis, traditional lenders implemented more strict guidelines: Stellar credit scores from 740 and above, stable employment, a low debt-to-income ratio, six months or more of liquid reserves.

For hopeful investors unable to meet these demands, alternatives are to pay all cash or to finance the purchase using hard money financing or a private lender. By utilizing one of these two methods, buyers also do not have to be concerned with the mounds of paperwork lenders requested. There are some advantages and disadvantages by using either type of alternative financing.

How Marcus by Goldman Sachs took to the streets of New York to market its high yield savings account (Tearsheet) Rated: A

Marcus, the online consumer bank by Goldman Sachs, has been running a man-on-the-street ad campaign about recent research the company conducted. According to the survey, 60 percent of Americans with savings accounts don’t know the interest rate on their savings account, and *more than half* of Americans with savings accounts (56 percent) opened theirs without exploring other options.

Dustin Cohn, head of brand and marketing communications at Marcus, joins the podcast to talk about the survey and why Marcus chose interest rates as a differentiator. We unpack the recent advertising campaign and explore the recent acquisition and integration of personal finance app, Clarity Money.

Ross: Easy money and the rise of ‘neo banking’ (My NorthWest) Rated: A

Banks are entering a whole new era. It’s called neo banking. Because it’s so “neo.”

You just sign over your paycheck, and suddenly you can buy things with a wave of the phone. As far as I can tell, you just look romantically at what you want to buy – and it’s yours!

You can even get loans. But it’s friendlier because neo banks don’t have loan officers who look at your income statement and say “Ha ha ha, you’re kidding!”

United Kingdom

Zopa helps boost Augmentum Fintech fund returns (Peer2Peer Finance) Rated: AAA

ZOPA’S latest funding round has boosted the value of Augmentum Fintech’s portfolio, helping the fintech investment fund report net asset value growth of 5.1 per cent in its maiden financial results.

UK-listed Augmentum Fintech unveiled its first financial results on Monday since launching in December 2017. It reported that a recent £60m private fundraise by Zopa had boosted the value of its stake in the lender by £3.5m to £22m.

Augmentum Fintech Sees Portfolio Rise In First Interims Since IPO (Morning Star) Rated: A

Augmentum Fintech PLC reported its first interim results Monday since listing on the London Main Market in March.

In the period from incorporation on December 19 last year to September 30, the fintech venture capital investor had a net asset value total return of 5.1%.

At September 30, Augmentum Fintech’s NAV per share was 104p. The company’s net assets at September 30 totalled GBP97.8 million.

The company’s portfolio fair value increased 62% since the company listed in March to GBP53.9 million on September 30 from GBP33.3 million on March 13.

Monzo confirms record-breaking UK fintech crowdfunding round (City AM) Rated: AAA

Digital bank Monzo has today announced it will be heading back to the crowd for the last chunk of its series E fundraising round, with a target of up to £20m.

The raise, first reported exclusively by City A.M. in August, will be the largest fintech crowdfunding round in the UK to date.

Going live on Exeter-based platform Crowdcube, existing Monzo investors will get early access to the round from 3 December. The round will then be opened up to other Monzo customers, who can invest up to £2,000.

Banking app Monzo explores expansion into high-cost loan products (The Telegraph) Rated: A

Monzo, the financial technology start-up,  is considering launching loans aimed at “the Wonga segment” of the market, its chief executive Tom Blomfield said.

Mr Blomfield said he hopes in future to offer loans to people with poor credit scores who may not be able to access more traditional loan products.

UK Competition and Markets Authority Questions PayPal Acquisition of iZettle (Crowdfund Insider) Rated: A

The UK Competition and Markets Authority (CMA) has issued a statement on the PayPal acquisition of iZettle – an event that was announced in early 2018 and closed in September. PayPal purchased Sweden based iZettle for $2.2 billion as the company seeks to gain access to iZettle’s point of purchase credit platform.

The CMA stated:

“… the CMA has found that PayPal could face insufficient competition in the UK after acquiring its market-leading rival. The finding raises concerns that the merger could result in customers, which include small and medium-sized businesses, paying higher prices or receiving a lower quality service.”

The CMA added that iZettle could have provided strong competition for PayPal if the company had not moved to take over the Fintech.

NatWest digital loan ceiling lifted to £700K (FinExtra) Rated: A

NatWest has today announced the launch of a new digital platform which will be available to all NatWest business and commercial customers allowing them to apply online for secured and unsecured loans of up to £750,000 – the largest digitally available loans in the industry.

The new platform, available to all business and commercial banking customers who use online banking, will allow applicants to complete the process in a matter of minutes, with a decision being communicated to customers usually within 24 hours, sometimes immediately. This fully digitised application process streamlines the customer experience and reinforces NatWest’s position as the UK’s leading commercial lender.

NatWest’s development underlines the bank’s commitment to further improving its digital offering and builds on the success of its ESME Loans platform, which provides loans of up to £150,000, Mettle – the standalone digital business current account, and LenderComm, the first production use of blockchain in the syndicated loan marketplace.

Arbuthnot Commercial Asset Based Lending supports acquisition of Euxton Tile Supplies Ltd (Bridging Loan Directory) Rated: B

Arbuthnot Commercial Asset Based Lending (ABL) has supported the acquisition of Euxton Tile Supplies Ltd (Euxton) by Earle Group with a £2m asset based lending facility, comprising a £1,250,000 confidential invoice discounting line and a £750,000 cash flow strip to provide the desired level of headroom in the transaction.

Wonga to automate compensation claims (TNT Magazine) Rated: A

Wonga, the payday lender that went into administration this August, plans to automate its compensation claims process – sparking fears that customers will lose out. Accounting firm Grant Thornton is in the process of winding up Wonga and is legally obliged to assess the claims of all customers who believe that they have been mis-sold loans.

The Guardian reports that in a bid to cut costs the administrators are creating an automated ‘adjudication tool’ that will decide which claims to pay out on, rather than processing each claim manually.

In its October letter to creditors, Wonga said that it had been receiving roughly 200 to 500 compensation claims every day after it went into administration on 30 August. Before that date the company had received 24,000 complaints from customers and a further 9,500 had been escalated to the Financial Ombudsman Service.

Proplend Milestone: Surpasses £50 Million in Online Lending (Crowdfund Insider) Rated: A

Less than six months after surpassing £40 million in online lending, UK based peer to peer lender in the property space, Proplend, announced on Monday it has now reached £50 million in online lending. According to the lender, all loans are commercial property backed, comprising a mix of bridging and mortgage lending risk-adjusted returns, which were funded by the lending platform’s growing band of Classic account, Pension account, and ISA “Lenders.” Proplend also revealed:

“By circumventing the traditional banking system, our Lenders have access to secured, inflation-beating fixed income returns whilst providing creditworthy commercial borrowers with an invaluable source of fast, flexible, interest only alternative funding. Having facilitated its first loan in 2014, Proplend has since accommodated over 50 commercial facilities, each loan typically funded within 24 hours by more than 100 participating Lenders. With a maximum loan term of 5 years, 20 loans have fully repaid to date with more than £15m capital returned and over £4m interest earned across the book – much of it tax-free.”

China

Yirendai Is At A Critical Stage To Regain Growth (Seeking Alpha) Rated: AAA

Yirendai Ltd (NYSE: YRD) released the third quarter 2018 earnings on November 12, with diluted Earnings per ADS of RMB2.43 (USD$0.35), decreased from USD 0.5 from second quarter. Considering the application of ASC 606, the adjusted earnings per ADS (if ASC were not adopted) is RMB 5.89 (USD 0.86), increased from RMB 4.91 in the same period from last year.

  1. The volume of newly originated loans has been decreasing, more than the loan volume decrease of the industry. We can compare YRD’s loan volume with the industry, as well as some competitors, as below.
    Source: Seeking Alpha

WeiyangX Fintech Review (Crowdfund Insider) Rated: A

Ping An Invests $47 million in Berlin-based Fintech Startup Finleap

The Ping An Insurance Group’s Global Voyager Investment Fund led a €41.5 million ($47 million) investment towards Berlin-based Fintech company Finleap.

Internet Finance Association of Jiangxi Province Issues P2P Exit Guidelines

On November 16, the Internet Finance Association of Jiangxi Province issued the “Guidelines for the Exit of Online Lending Intermediary Organizations in Jiangxi Province (Trial)”, stating that online lending institutions should put the rights of protecting lenders at the top of their exit work and minimize the loss of lenders. The guidelines specifically mention that when a P2P institution exit, it needs to take eight steps, namely:

(1) to file an application for withdrawal;

(2) to set up an exit work leading group;

(3) to issue an exit notice and close some platform functions;

(4) to prepare a business list of circumstances and formulate an exit plan;

(5) submit an exit plan and other related materials;

(6) publish relevant information such as the exit plan;

(7) implement the lender’s funds as planned, and steadily settle the stock items;

(8) completion of the exit.

European Union

Lendingblock Receives In-Principle Licence as DLT Provider in Gibraltar (Crowdfun Insider) Rated: AAA

Securities lending platform for digital assets Lendingblock has issued a statement indicating that the Gibraltar Financial Services Commission (GFSC) has made an in-principle decision to grant the firm authorization as a Distributed Ledger Technology (DLT) provider. Lendingblock adds that it continues to work closely with the GFSC as it seeks the full DLT licence.

Lendingblock says that following this decision, and the successful testing period, the Lendingblock platform is open for institutional onboarding in preparation for launch.

Market participants are now able to sign up for access and will be able to commence borrowing and lending  BTC, ETC, BCH, and LTC beginning early next year.

Digital lenders ‘must keep investing to grow’ (IBS Intelligence) Rated: A

Research from digital ID specialist Mitek has concluded that there is a huge opportunity for digital lenders to grow, if they continue to invest in digitisation.

The findings have been published as a whitepaper, authored by fintech research practice Autonomous NEXT. Titled European Digital Lenders, it looks into the state of the digital lending market in Europe.

He said the report found that venture capital investment is still flowing into the space and is set to hit $800m in Europe: “The UK alone has originations of over $6bn, and Europe-wide, the addressable market is $150bn – with current digital lender revenues estimated at $400m,” he added. “Moreover, the market shows impressive originations growth, with a 60% CAGR since 2013.”

Australia/New Zealand

Australian challenger bank Judo gets $ 350m funding boost (Fintech Futures) Rated: A

Melbourne-based challenger bank Judo Capital is edging towards a bank licence with a $350 million debt facility agreement with firm Credit Suisse.

The bank shared the news with Business Insider. David Hornery, co-founder and co-CEO of Judo, says the facility will provide further depth to Judo’s funding for Australian SMEs.

Short-term loan, long-term debt: Superloans under investigation after slew of complaints (Stuff) Rated: A

Short-term money lender Superloans has come under attack from people who say they target poor and vulnerable consumers, charge extremely high interest rates, and resort to illegal means for recouping their money.

The Commerce Commission has launched an investigation into Superloans after it received more than 20 complaints against the company since 2013 – several from financial advisors.

Copies of the complaints, obtained under the Official Information Act, reveal one complainant alleged Superloans threatened to take repayments out of a person’s pay cheque, illegally.

Another woman complained that a Superloans’ employee only looked at her bank statements before approving her loan application, and did not check her credit.

India

IvyCap Ventures makes first investment in P2P lending through Lendbox (The Ecomonic Times) Rated: AAA

Credit marketplace LendBox has secured the first investment by a large institutional investor in India’s peer-to-peer lending space, raising Rs 6 crore in a pre-series A financing round.

Major Trends Witnessed this year in Fintech (Entrepreneur) Rated: A

Online lending platforms have been quite phenomenal in filling in the credit void within our country. But how accomplished are they in doing so? MSME loans are considered as the trickiest element of lending given the sheer opacity that exists within the sector. This opacity has decreased the share of scheduled commercial banks in MSME credit from 95% to 90% between December 2015 and March 2018. The credit growth turned negative post-demonetization. During the same period, the share of loans by NBFCs (which are essentially used by online lending platforms) nearly doubled growing with an annual average of 35 per cent, largely because of cutting-edge technologies such as Artificial Intelligence and Big Data.

5 ways to reduce risk in P2P lending (The Economic Times) Rated: A

Lending money is a risky affair. However, there are ways to minimize the risk. Since peer-to-peer (P2P) lending is a relatively new concept and the RBI regulations for the P2P sector are barely about a year old, here are five effective ways in which you can reduce the risk to ensure getting your money back. Of course, with interest.

Understand the platform
You should try to understand how the online P2P model works before lending money on it. An investor should be aware how the money is lent on the platform and what are the risks involved in lending money on the platform.

Do not hesitate to ask the P2P player about the overall volume, defaults, recovery process and likely returns. You can do your own research or simply contact the P2P company through emails, chats or phone calls.

Do not go overboard
Sure, P2P platforms can offer your higher double-digit returns. But that doesn’t mean you should lend your entire in P2P lending. Choose the amount you wish to invest and then diversify,” says Raghavendra Pratap Singh, Co-Founder, i2ifunding.

Ex-Infosys CFO & Director V. Balakrishnan Joins Association of NBFC P2P Platforms as Patron Member (Indian Web) Rated: B

Within a month after the formation of NBFC-P2P industry bodyAssociation of NBFC P2P Platforms, the association today announced the joining of finance industry veteran & Former Infosys Chief Financial Officer V Balakrishnan as Patron Member.

P2P lending industry players have formed association to represent the Indian NBFC-P2P industry at various national as well as at international forums. The P2P operators participating in the operations are OML P2P, Monexo, PaisaDukan, Finzy, Cashkumar, Liquiloans, Micrograam, Lendsmartp2p, Peerlend and Indiamoneymart. The association aims to establish formal lines of communication between various government and regulatory authorities on matter of compliance and to create awareness about the industry and to work towards enhancement of public trust in this sector.

Asia

HonestFund Raises $ 12.2 million (USD) in our Series B round (Honestfund Email) Rated: AAA

HonestFund is one of the largest peer-to-peer lending players in South Korea. We were founded in 2015 and currently have about USD 300 million in cumulative originated loans. We have recently raised USD 12.2 million in our Series B round from the top VC firms, IT giants, and the largest financial institutions (i.e. Shinhan Bank and Hanwha Life Insurance) in South Korea.

Canada

Unlicensed online payday lenders are operating in New Brunswick (Global Newswire) Rated: A

Unlicensed online payday lenders are targeting New Brunswickers, warns the Financial and Consumer Services Commission.

FCNB has been receiving complaints from consumers about inappropriate collection practices by payday lending businesses not licensed to operate in the province.

“We are hearing that these businesses are contacting consumers who have fallen behind in their payments at their place of employment and in some cases, threatening to seek repayment from their employer. Sometimes they are contacting them up to 50 times a day,” said Alaina Nicholson, director of Consumer Affairs at FCNB. “It is against the law for a payday lender in the province to contact you at your place of work, or to contact your employers or coworkers to collect a payday loan that is late.”

Subscribe Technologies Upgrading Lendertech With Peer To Peer Lending Service And Integrating Platform Into Gingerly Marketplace (Stockhouse) Rated: A

Subscribe Technologies Inc. is pleased to announce it is upgrading the Company’s Lendertech financial technology platform with financial service auction and matchmaking features and has begun the initial phase of integrating the technology with the Company’s flagship Gingerly small business software application marketplace.

LenderTech facilitates greater and broader access to capital for those in need, including across a number of traditional and emerging areas such as mortgages, commercial lending, auto loans, student loans, and small business loans, among others.

As intended, our development team is now integrating this money lending service into the Gingerly software application marketplace and dashboard, with the addition of new Peer-to-Peer matchmaking features, designed for SMEs to have greater and faster access to lenders in one clean and simple to use interface.

IOU Financial Inc. Joins the FINSYNC Lending Network  (PR Newswire) Rated: B

 IOU FINANCIAL INC., a leading online lender to small businesses (IOUFinancial.com), is pleased to announce its strategic partnership with FINSYNC, Inc. (“FINSYNC”).

Small businesses of all types rely on FINSYNC to visualize, manage and project cash flow and analyze loan options.  IOU’s non-collateralized financing product has been assimilated by FINSYNC, enabling users who apply for financing through FINSYNC to quickly access IOU’s affordable, flexible financing for working capital and expansion.

Africa

Nigeria’s mixed signals on fintech (Euromoney) Rated: AAA

Earlier this year, the country’s central bank and the Nigeria Inter-Bank Settlement System opened a regulatory sandbox to enable budding fintech companies to develop new products freely and securely, becoming one of the first African countries to do so.

Even before that launch, Nigeria was frequently touted as the continent’s next big fintech hub, set to compete with South Africa and Kenya.

Bitcoin exchange NairaEx, online lender KiaKia and invoicing platform Payant are just three of the firms that have made a name for themselves in short order.

Authors:

George Popescu
Allen Taylor

Wednesday May 9 2018, Daily News Digest

Gross Revenue and Net interest

News Comments Today’s main news: SoFi is planning a credit card. LendingClub reports Q1 results. OnDeck reports Q1 results. Kabbage closes Orchard acquisition. Cross River passes $600M in monthly originations. Mintos achieves profitability. iZettle to pursue $1.1B valuation through IPO. TransferWise moves into Canada. Today’s main analysis: Review of OnDeck earnings. Today’s thought-provoking articles: Review of Marcus. Cities where borrowers save the most […]

Gross Revenue and Net interest

News Comments

United States

European Union

International

India

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News Summary

United States

SoFi Is Said to Plan Credit Card With Help From Former Citi Executive (Bloomberg) Rated: AAA

Social Finance Inc., a startup looking to offer a range of banking services to millennials, is working on a credit card and is bringing in a former Citigroup Inc. executive to help oversee the initiative, said people familiar with the matter.

The San Francisco-based company hopes to offer credit cards within the next year, said the people, who asked not to be identified because the plans are private. In preparation, SoFi is hiring Richard Garside to help lead the company’s operations, the people said.

Financial highlights for the first quarter include:

  • Delivered revenue of $151.7 million, up 22% year-over-year
  • Achieved 18% year-over-year growth in originations to over $2.3 billion
  • Improved Contribution Margin to 49.1% from 42.7% in the same quarter last year
  • Delivered Adjusted EBITDA of $15.3 million, or a 10.1% Adjusted EBITDA margin, compared to an Adjusted EBITDA of $0.2 million, or a 0.1% Adjusted EBITDA margin, in the same quarter last year
  • GAAP Consolidated Net Loss was ($31.2) million, including $17 million of expenses related to outstanding legacy issues disclosed by the Company in 2016, related to ongoing legal costs from government investigations, as well indemnification costs for the previous management.

Operational highlights for the first quarter include:

  • In the first quarter of 2018, LendingClub continued to execute on its mission to make credit more affordable and investing more rewarding, now having served over 2.4 million borrowers.
  • For Borrowers: LendingClub saw strong adoption of a new feature called Direct Payoff that allows borrowers to seamlessly pay off their credit card balances in exchange for a better rate – thereby improving their financial profile and lowering their monthly payments.
  • For Investors: LendingClub’s recently launched innovation, CLUB Certificates, attracted over $160 million in funding from several of the top names in asset management. The new CLUB Certificates give investors easy access to consumer credit and provide a single security that offers greater flexibility and liquidity.
  • Scott Sanborn, LendingClub CEO said, ‘We feel good about how we’ve kicked off the year and the fundamentals of our business continue to be strong. Our strategic initiatives are working on both sides of our marketplace and we’ll keep innovating to help more Americans on their journey to financial success.’.

 

OnDeck Reports First Quarter 2018 Financial Results (PR Newswire) Rated: AAA

OnDeck (NYSE: ONDK) today announced first quarter 2018 Gross revenue of $90 million, Net loss of $1.9 million, and Adjusted Net income of $6.4 million.

“Our first quarter results reflect a strong start to 2018 as we continue to execute on our strategic priorities to position our business for future success,” said Noah Breslow, chief executive officer, OnDeck. “We delivered 8% sequential loan growth while managing our sales and marketing costs, and had positive credit performance, as the 15+ Day Delinquency Ratio and Net Charge-off rate both improved significantly from a year ago.”

Review of OnDeck Q1 2018 Earnings Results (Lend Academy) Rated: AAA

While the company posted a net loss of $1.9 million for the quarter, this was within guidance. Gross revenues were $90 million, coming in at the top end of projections for the quarter. The increase in revenue was attributable to higher interest income or the company’s effective interest yield, or EIY which came in at 35.6%, compared to 34.8% in the previous quarter. OnDeck also beat on adjusted income which came in at $6.4 million (Q1 2018 guidance was between $1 and $5 million).

Source: Lend Academy

Originations were up 8% from the previous quarter at $591 million.

Source: Lend Academy

OnDeck swings to loss, but loan demand surges (American Banker) Rated: A

The New York company recorded a net loss of $2 million, or 3 cents per share, versus a loss of $11 million in the same period a year ago.

OnDeck earned $5.1 in fourth quarter, its first quarterly profit in two years. In a news release Tuesday, the company said that it would have earned $6.4 million in the quarter that ended March 31 if not for charges it took to cover the costs of leases terminations New York and Denver, severance for laid-off workers and other one-time expenses. The lease terminations are expected to save the company $2 million over the next eight years.

 

Kabbage’s Acquisition of Orchard Officially Closes (Crowdfund Insider) Rated: AAA

Orchard co-founder Matt Burton has emailed industry members stating the previously announced acquisition of his company by SME lender Kabbage has formally closed. The purchase had been rumored for weeks with an official announcement hitting the press at the end of April.

Burton, and co-founder and Chief Analytics Officer David Snitkof, have both joined Kabbage in leadership roles. In total, Kabbage will add more than twenty Orchard employees who are predominantly focused on advanced analytics, data science and engineering to its New York City office.

 

We tried Goldman’s Marcus, here’s our conclusion (Business Insider) Rated: AAA

Goldman Sachs’ consumer lending platform, Marcus, appears well on its way to becoming a full-scale digital banking offering. The platform has originated some $2.5 billion in loans since launching in October 2016, and now offers savings accounts with a minimum threshold of $1.

Source: Business Insider

Here’s why FIs should be worried about Marcus:

  • It’s backed by Goldman’s reputation, and deep pockets.
  • The interface is sleek and consumer friendly.
  • Its offerings are extremely competitive.

LendingTree Reveals Cities Where Borrowers Save the Most by Shopping Around for Mortgage Loans (PR Newswire) Rated: AAA

LendingTree today released its Mortgage Rate Competition Indexes for the 50 largest cities in the U.S. to assess how different markets behave across the country.

Source: LendingTree

Cross River Passes $ 600 Million in Monthly Loan Originations (The Public Opinion) Rated: AAA

Continuing its strong record of growth, Cross River, a leader in the emerging Fintech industry, announced today that it has set a new monthly loan origination record of more than $600 million in April.

Cross River’s April 2018 volume represents approximately 60% growth in loan origination from April 2017, and keeps Cross River on pace to exceed $7 billion in loan originations for 2018.

MoneyGram Seeks More Digital Gains In 2018 (PYMNTS) Rated: A

MoneyGram revenue declined 2 percent year over year in the first quarter, to $380 million. That was lower than analyst expectations of about $386 million. Net income declined 19 percent, to $7.1 million, with earnings per share at $0.15 per share — below analyst expectations of $0.26.

Moneygram.com, the digital business, posted a year-over-year revenue gain of 21 percent in the first quarter, with most credit going to customer acquisitions, the company said in its financial release. Digital revenue accounted for 16 percent of all money transfer revenue in the first quarter.

Credit Karma Partners with SpyCloud to Add Dark Web Data Monitoring (Finovate) Rated: A

Credit Karma has expanded its identity theft monitoring offering to include data from the dark web. Courtesy of a partnership with fellow Finovate alum – and Best of Show winner – SpyCloud, Credit Karma will dramatically increase the number of data breaches it is able to review for its 80 million users. Currently searching 4.5 billion public breaches, the new service will boost the total number of data breaches searched to 13 billion.

Data Sheet—Zillow’s Audacious House Flipping Plan Scares Wall Street (Fortune) Rated: A

Looking merely at the numbers, Zillow reported a fine quarter Monday. The Seattle company doesn’t make money. But it does grow quickly on top of a billion-dollar-plus annual-revenue clip. It is worth more than $10 billion and is the winner of its category, having absorbed competitor Trulia and outlasted others.

Yet Zillow isn’t satisfied. It is starting a new home-flipping business using its own balance sheet to buy, touch up, and sell homes. Wall Street hates the idea, wondering why a perfectly respectable online business would wade into the messy and highly variable world of investing real money in actual houses.

Fintech Companies Should Move On From The Millennials (Forbes) Rated: A

These days, for consumer fintech companies in wealth management (we will call them fintechs for short), it is, to paraphrase Meghan Trainor, all about the millennials. Fintech unicorns are courting millennials and garnering billion-dollar valuations for succeeding at it. The Robinhood is 28, and 78% are under 35. The average age of a Betterment customer is 35 and .  With three million accounts, Acorns has primarily a millennial customer base as well. However, if these companies and their millennial-chasing brethren are hoping to raise meaningful assets under management, it is time for them to move on from the millennials.

According to the , millennials today have just 4% of the nation’s wealth, compared to 50% for Baby Boomers and 33% for the Silent Generation.

3 Strategies To Help You Say “Bye, Felicia” To Student Loan Debt (Forbes) Rated: A

Goldman, Wells Fargo Look to Credit Cards for Bigger Returns (Bloomberg) Rated: A

Two of the biggest U.S. banks, Goldman Sachs Group Inc. and Wells Fargo & Co., are on the brink of piling into credit-card lending, seeking a share of the $183 billion in fees and interest tied to the product.

Making the Ask, Part 1: The Key to Entrepreneurial Success (Newswise) Rated: A

Professor Saras Sarasvathy, a renowned scholar of entrepreneurship at the University of Virginia Darden School of Business, has discovered that successful entrepreneurs are not only relentless “askers,” but they also have a repertoire of asks for different startup scenarios.

Rather than develop business plans to raise money, experienced entrepreneurs start with their means at hand — who they are, what they know and whom they know — exploring what they could do with those means. At the same time, they enlist others who want to work with them. Together, they iteratively co-create new products, ventures and markets. As more stakeholders self-select, committing their resources to the emergent ideas, the goals start to coalesce.

In the early stages of venture creation, effectual asks start as open-ended conversations.

SmartBiz Loans Adds Seacoast Bank to Technology Ecosystem (Business Wire) Rated: B

SmartBiz Loans today announced the addition of Seacoast Bank ( to the company’s unique technology ecosystem, taking the total number of banks on their platform to nine. SmartBiz Loans’ intelligent technology platform matches Florida-based Seacoast Bank to the right loan customers in a fraction of the time a referral typically can take, allowing the bank to originate SBA loans more efficiently while increasing the likelihood that small business owners get approved for funding.

 

With student debt levels reaching crisis proportions in the United States, Fidelity Investments announces significant response to its Student Debt Employer Contribution benefit, with 25 employers making plans to offer the Fidelity program and nearly 9,000 of their eligible employees expected to be enrolled in the program by the end of June.

 

 

 

 

 

 

 

 

 

 

United Kingdom

What are the benefits of IFIsas? (Bridging & Commercial) Rated: A

Over a third of UK savers (36%) would place their money in an IFIsa if they had the available funds, a new study has found.

The Next Gen: Investors and Savers report from P2P lending platform ArchOver found that 61% of respondents acknowledged the prospect of higher returns and better interest rates from an IFIsa.

However, over half (57%) claimed that they still didn’t fully understand the service.

China

Chinese Rural Fintech Firm Shenma Completes $ 47.3M Series C Round (Chinese Money Network) Rated: A

Shanghai-based Shenma Finance, a fintech company focused on rural mobility, has raised a RMB300 million (US$47.25 million) series C round led by China Growth Capital, Hina Group and Chinese fintech firm Tongbanjie Group.

Existing investors Credit Ease Financial Industry Investment Fund and ChinaEquity Group also participated in the round, the firm announced on its official WeChat account.

European Union

Riga-based fintech startup Mintos reaches profitability as it eyes global expansion (EU Startups) Rated: AAA

Three years after launch, the Riga-based fintech startup Mintos has turned an annual profit for the first time. The company’s revenue increased more than four-fold in 2017 to over €2.1 million and net profit for 2017 was €197K.

In more than three years since its establishment, Mintos has exceeded €660 million in cumulative investments by investors and the company expects the amount of loans funded to reach €1 billion by the end of the year.

Swedish fintech group iZettle to seek $ 1.1bn valuation in IPO (Financial Times) Rated: AAA

Some of the biggest names in payments, including Mastercard, American Express and Santander, have invested in iZettle, as have venture capital firms including Index Ventures and Dawn Capital.

International

ArthaCoin ICO (ATH Token): Long Term Crypto Lending Program? (Bitcoin Exchange Guide) Rated: A

Arthacoin is a sustainable investment-lending platform that aims at providing prosperity and guaranteed returns to its investors. Arthacoin is viewed as an alternative investment, which uses different investment methods to ensure investors get active returns using their collected funds. The platform purposes to create returns by use of derivatives and leverage in cryptocurrencies.

Besides, it is a self-managed financial system, which supports peer-to-peer transactions with a basis on the open-source platform. Arthacoin is built with a vision of creating a regular passive and sustainable income in the end for its investors.

What’s The Difference Between Trading Crypto VS. Lending Crypto (Finsmes) Rated: A

When it comes to investing in cryptocurrencies, the most common way to invest is by trading. Cryptocurrencies have revolutionized how we do business, make investments and raise funds. Some would even call blockchain technology the invention that would shape the 21st century. Trading cryptocurrencies is a fast and easy way to profit and can be interesting too.

But there is also another way to earn profits from cryptocurrencies and make your money work for you – crypto lending.

Let’s take a look at both crypto trading and crypto lending.

Crypto lending is a relatively newer way to earn profits. It revolves around the concept of shorting.

Australia

Do You Still Only Have One Bank Account? Here’s How Many You Should Have By Now (MyDomaine) Rated: A

If you’re living from pay cheque to pay cheque and can’t seem to break the cycle, chances are you’re not alone, dear millennial. In fact, it may not have even been bad shopping habits that landed you here. Whether it’s an underpaying job, or a weekly rent payment that is far from sensible, in the words of financial adviser, from Honest Money, Jacqui Park: “There’s no time like the present” to stop spending frivolously and start saving. But before you downsize, start a side-hustle, or, cut up the credit cards; it’s worth noting the basics of saving, so when you do decide to forgo life’s little luxuries you are able to make the most of it.

India

BigWin Infotech gets P2P lending licence (The Economic Times) Rated: AAA

Online lending platform BigWin Infotech has received an in-principle approval from RBI to start peer-to-peer lending operation as a non-banking finance company.

The company claims to be the first among all the P2P applicants to have received the licence and is planning to commence operations under the brand name of Paisadukaan.

The Future Of Credit Is Here (Businessworld) Rated: AAA

Fintech companies have netted the lower-middle income consumers who have, until now, been ill-served by banks as far as credit is concerned and have had to resort to gold loans or source other types of collateral. The lending landscape has transformed in the recent times with a host of startups that provide direct and simple credit for consumers. These companies broadly offer two types of products: Cash credit from companies such as Walnut & PaySense, that can be used for any purpose.

EMI loans to purchase electronics or white goods from companies like Zest Money or Kissht competing against industry giants such as Bajaj Finance. Then there are companies like MoneyTap that provide a flexible hybrid product that is an app-based credit line.

Fintech startups that provide credit to SMEs include CapitalFloat, KredX, LendingKart, NeoGrowth, Indifi and others.

P2P loan marketplace Finzy wants to change how India sees lending (Your Story) Rated: A

The rules of investment have changed over the years. First it was traditional methods like saving with fixed deposits, and then came insurance and stock markets.

However, the rules have changed yet again, and peer-to-peer lending is being viewed as an investment avenue that is expected to give returns to the tune of 18-22 percent, according to industry estimates.

According to the company, the rate of return for investing in Finzy is 15.5 percent for investors.

 

Latin America

Ripio CEO: Reinventing P2P Lending With The Blockchain (PTMNTS) Rated: A

Ripio has had more than one name in its evolution as a firm – but only a single goal. Originally known as BitPagos at launch, and then rebranding to Ripio in advance of its late 2017 ICO – the Argentina-based firm wants to use the blockchain to unlock the power of P2P lendingon a global scale.

The problem with traditional credit systems, according to Ripio, is that when it comes to access, geography is more or less destiny in many cases.

Canada

Fintech company TransferWise to launch borderless debit card in Canada in 2019 (Financial Post) Rated: AAA

European financial technology company TransferWise is planning a Canadian launch next year for its borderless debit MasterCard, which allows users to hold and spend a balance in multiple currencies with lower fees than traditional banks.

Kaarmann says there would be no transaction fees for people making purchases on the borderless debit card in the currency a balance is held in.

Authors:

George Popescu
Allen Taylor

Thursday December 14 2017, Daily News Digest

online lender delinquency rates

News Comments Today’s main news: LexinFintech relaxes on IPO funding goal. Welendus exceeds Seedrs funding target. LendingTree provides 2018 guidance prior to Investor Day. Yirendai invests in Lion Rock. Mercer delivers financial advice with AI through Facebook Messenger. Today’s main analysis: Online lenders test the faith of investors. Today’s thought-provoking articles: Why Google, Amazon scare BlackRock, Fidelity. A new chapter […]

online lender delinquency rates

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

South America

News Summary

United States

Why Google and Amazon Keep Fidelity and BlackRock Up at Night (Bloomberg), Rated: AAA

“Alexa…will I meet my retirement goal?”

“You are not on track to meet your retirement goal,” replies Amazon.com Inc.’s voice-activated digital assistant, with not a bit of sugar-coating. Then she suggests turning over $76 a month to Fidelity Investments and its advisers.

This won’t actually happen if you try it on your Amazon Alexa device at home. It’s a demonstration put on by EMoney Advisor LLC, a company owned by Fidelity, in its offices in Radnor, Pa. Amazon provides software for third-party developers to experiment with new functions. Fidelity is trying to find ways to apply artificial intelligence, computer algorithms, and voice-­recognition software to the hidebound world of money management and investing.

Earlier this year, Boston-based Acadian Asset Management LLC struck a deal so its portfolio managers could use Microsoft Corp.’s Bing Predicts, which makes forecasts using search and social media data, to help pick stocks; that agreement later ended.

BlackRock, led by chief executive officer Larry Fink, in recent years has been buying stakes in other companies, particularly technology firms. Through these purchases, the company is pushing into new lines of business.

Fidelity bought EMoney in 2015. It sells software to investment advisers that’s designed to make it easier to interact with their customers on budgeting for weddings, college, or retirement.

Online lending platforms test investors’ faith (Financial Times), Rated: AAA

Tianqiao Chen still wants to be part of Lending Club. Last week, while shares in America’s biggest listed online lender were tumbling after another cut to profit forecasts, the chief executive of Shanda Group bought 4m more of them, further cementing his position as the company’s biggest shareholder.

Many operators are feeling the effects of a big push for market share in the latter half of 2015 and early months of 2016, says David Snitkof, chief analytics officer at Orchard. As the platforms rushed to offer new loans, credit quality suffered, and loans originated during that period are among the worst performers, with loss rates well ahead of projections.

Across the sector, valuations have fallen. Earnest, a San Francisco-based student loans specialist, sold itself in October to Navient, the loan-servicing company, for $155m, or about 40 per cent of its peak valuation. Personal lender Prosper, once a “unicorn”, saw its pricetag drop from a peak $1.9bn to $550m in a fundraising last month.

That meant platforms had to spend heavily to bring compliance and controls systems up to scratch. Lending Club’s latest quarterly filing, for example, shows it had $1.21 of operating expenses for every dollar of fee income over the first nine months — up from $1.03 at the same point two years ago.

LendingTree Introduces 2018 Guidance Ahead Of Investor Day (Business Insider), Rated: AAA

Business Outlook – 2018

  • Revenue is anticipated to be in the range of $770 – $790 million, representing growth of 27% – 30% over the high-end of full-year 2017 guidance of $608 million.
  • Variable Marketing Margin is anticipated to be $270 – $280 million.
  • Adjusted EBITDA is anticipated to be in the range of $145 – $150 million, up 28% – 33% over the high-end of full-year 2017 guidance of $113 million.

The Analyst and Investor event is being hosted in New York at the Nasdaq MarketSite in Times Square.  The presentation will begin promptly at 10:30 a.m. ET.  A live audiocast with accompanying slides will be made available on the company’s investor relations website at investors.lendingtree.com.

 

Does the ICO Open a New Chapter for RE Crowdfunding? (Lexology), Rated: AAA

An ICO is simply the initial public sale of a new type of digital “coins”, or “cryptocurrency”.

Judging from the prolific way these new cryptocurrency ICOs are popping up, like mushrooms after a spring rain, one might imagine any clever techie could spin one up at the kitchen table with little more than an internet connection and some well-caffeinated daring-do. Yes, ICOs are easier than crowdfunding, they have that special “blockchain” cachet going for them, and the “regulators talons” have not yet sunk deep.

In a real-life example, on September 29, 2017, the SEC filed a civil complaint in federal district court against ICO promoter Maksim Zaslavskiy and two companies run by Mr. Zaslavskiy. According to the complaint, between July and October Mr. Zaslavskiy and his companies raised at least $300,000 in an ICO touting a new cryptocurrency called “REcoin” — “the first ever cryptocurrency backed by real estate.” According to the SEC complaint, Mr. Zaslavskiy and his companies have been peddling unregistered securities. Furthermore, the complaint alleges, the companies never had any real operations even though Mr. Zaslavskiy told investors in REcoin they could expect sizeable returns from those company’s operations; the securities he sold weren’t backed by any real estate or other assets as he claimed they were; and no “REcoin” digital tokens ever actually existed.

ICOs and Crowdfunding

Circling back to the original crowdfunding thesis, we should also expect this disruptive new technology to begin surfacing in even more impactful nextgen “killer apps” for commercial real estate investment. That’s right, real estate crowdfunding may actually make a comeback by dint of being co-opted into the blockspace. New-age real estate crowdfunding ecosystems are already forming; for instance, the Real Estate Asset Ledger (“REAL”) is one application currently being talked up as a real estate crowdfunding network built on blockchain infrastructure.

The Rise of the ICO (Coinlist), Rated: AAA

Zeus CrowdFunding Earns Top-Ten Ranking in Real Estate Crowdfunding Industry (PR.com), Rated: B

Zeus CrowdFunding earned high marks recently from an independent ranking and reviews portal. The Real-Estate Crowdfunding Review named Zeus CrowdFunding the #7 real estate crowdfunding site on the Web based on its “incredible volume” and other impressive advantages.

The ranking also lauded Zeus CrowdFunding’s low default rate and semi-liquidity option and guarantee and called the company “one of the few platforms offering conservative loans below 65% LTV.”

To read The Real-Estate Crowdfunding Review’s ranking and review of Zeus CrowdFunding, visit

Open Banking Trends Shift to US Market (Lend Academy), Rated: A

Open Banking is set to launch in Europe next month. As banks and fintech firms rush to ensure compliance we wanted to explore the effects on the US fintech market. Recently the CFPB set forth data sharing guidelines for banks and fintech firms to share information. There has since been a number of articles in the news pointing to frustration among fintech companies as banks have not been forthcoming with data sharing.

The current process is clumsy and requires consumers to login many times across many different services. This has also been something banks have complained about to agencies like the CFPB. Services such as Personal Capital and Mint constantly ping bank accounts for information that users have open access to. Setting up a similar initiative in the US could not only allow for a better experience but will undoubtedly be safer for the banks and fintech firms.

LendingUSA Secures $ 60m Credit Facility (Finsmes), Rated: A

LendingUSA, a Sherman Oaks, CA-based point-of-need financing company, secured a $60m credit facility.

The funding was provided by CapitalSource, a division of Pacific Western Bank, and a provider of commercial lending and banking solutions.

 

U.S. Fintech Simility Secures $ 17.5 Million During Latest Funding Round Led By Accel With Participation From PayPal (Crowdfund Insider), Rated: A

Simility, a provider of machine learning–powered adaptive fraud prevention solution, today announced it has secured $17.5 million during its latest funding round. PayPal, Inc. also participated in the round as a new strategic investor along with existing investors The Valley Fund and Trinity Ventures.

First National Bank Plans Online SMB Lending Portal (PYMNTS), Rated: A

First National Bank and Trust Company is planning the launch of a digital small business lending portal and has tapped a partner to create the solution.

The financial institution (FI) said Tuesday (Dec. 12) that it is working with FinTech firm RCGILTNER Services to deploy the digital platform, which will launch in the first quarter of 2018.

Aspiration Taps $ 47 Million for Conscientious Banking (WSJ), Rated: A

Conscientious consumption and online banking services don’t typically go hand in hand. Andrei Cherny, co-founder and chief executive of Aspiration, aims to change that.

Aspiration, which offers online banking with optional fees and no penalties, provides its customers insights on how companies treat the environment and their employees, informing spending decisions.

Aspiration now boasts more than 200,000 account holders since launching in February 2015. On Tuesday, the Los Angeles company said it raised a $47 million Series B to further fuel its ambitions.

Will 2018 Be the Year of the Bank of Amazon? Experts Weigh In (Fortune), Rated: A

Payments

Matt Harris, Bain Capital Ventures: “SoftBank buys 20 percent of Stripe for $3 billion. PayPal continues to push itself down the path of being the leading financial services company for millennials and the mass market.” Dion Lisle, Capgemini SA: “‘Alexa, buy this’ or ‘Siri, I need an Uber, pay for it with my AmEx.’ Payments are going to be activated by that voice because that’s a great security method.”

Lending

Spencer Lazar, General Catalyst Partners: “Potential changes to the Consumer Financial Protection Bureau (CFPB) under the Trump Administration will likely turn back the clock on Obama-era regulations on non-bank lenders. This will be a boon to startup lenders, making it far easier to dole out capital. The fear is that rates could potentially become predatory.”

Amazon vs. JPMorgan

Andy Weissman, Union Square Ventures: “Some combination of Amazon, Google, Facebook, Apple, etc. will move deeper into online financing of small businesses.”

M&A

Tyler Sosin, Menlo Ventures: “Stripe and Adyen will merge, forming a $20 billion plus enterprise-value business and API-driven merchant processor.”

Funding

Charles Birnbaum, Bessemer Venture Partners: “Valuations in the alternative-lending space were overly optimistic in our opinion over the prior five years, but we do feel that the pendulum has likely swung back too far in the other direction following the recent pullback” leaving the sector ripe for potential funding or M&A.

Braviant Holdings Announces Launch of Chorus Credit Personal Loans (PR Newswire), Rated: A

Braviant Holdings, a leading fintech startup that offers analytics and technology-driven credit solutions for underserved Americans, is now offering personal loans up to $10,000 in Californiathrough its Chorus Credit online lending platform. Chorus will complement Braviant’s existing installment lending business, Balance Credit, by offering higher loan amounts at lower rates to the estimated 26% of California consumers who are underserved by traditional banks.

2017 YEAR-IN-REVIEW (Wunder Capital), Rated: A

In 2017, we increased our solar project pipeline by an order of magnitude. This is due in large part to more resources dedicated to pipeline development, advancements in our lending practice, and – at a macro level – a rapidly growing solar market and commercial sector.

Source: Wunder Capital

See the full report here.

Not “ripe,” says judge dismissing N.Y. fintech charter challenge (Banking Exchange), Rated: A

Yesterday U.S. District Judge Naomi Reice Buchwald of the Southern District of New York dismissed one of those lawsuits, Vullo v. Office of the Comptroller of the Currency. The judge dismissed the suit of the New York State Department of Financial Services, headed by Maria Vullo, against OCC on the grounds that the matter is not “ripe” for a decision on the legal ability of the Comptroller’s Office to issue such specialized charters.

Indeed, at the recent RegTech Enable conference in late November, OCC’s Beth Knickerbocker, chief innovation officer, characterized the proposal as “on hold.”

Why New York’s claim isn’t ripe

Judge Buchwald’s decision recapped the history of the proposal at length. Her decision came down to this sentence: “Claims are not ripe if they depend on the occurrence of contingent future event that may never occur at all.”

She pointed out that no injury would occur if OCC never issues such a charter to a fintech company.

Vanguard, the fund giant with nearly $ 5 trillion in assets, is using blockchain to underpin its mutual funds (Business Insider), Rated: A

Vanguard is moving to use blockchain to simplify how it updates index data underlying mutual funds, executives said on Monday, an important sign of confidence for the new financial technology.

Closely-held Vanguard, the top mutual fund firm with nearly $5 trillion under management, has successfully tested blockchain to automatically update data like the names and share prices of companies in index funds, processes that must currently be closely overseen by individuals, said Warren Pennington, a principal in Vanguard’s investment management group, in Pennsylvania.

UNOPPOSED MOTION FOR LEAVE TO FILE AMICIUS CURIAE BRIEF (U.S. District Court, D.C.), Rated: A

Further, to date, the parties have not raised an important argument that this Court should consider, namely, that restricting the President’s authority over the CFPB Director’s replacement only exacerbates the serious constitutional questions currently before the D.C. Circuit with respect to the CFPB’s structure. As CUNA explains, such questions could be avoided by adopting Defendants’ position in this case. Thus, CUNA’s perspective on the central issues in this case is invaluable and unrepresented by the parties.

Read the motion in full here.

(Coindesk), Rated: A

The startup revealed today that, through an existing partnership with MicroVentures, it will begin offering services to projects seek to use the blockchain funding model.

Specifically, accredited investors purchase Simple Agreements for Future Tokens (SAFTs), with the tokens set to be delivered at a later date. The mode has been used by a number of ICOs in recent months, and according to the page on MicroVentures, $915,000 has been raised from nine investors thus far in the new ICO.

Mastercard targets millennial clients with digital money management service (American Banker), Rated: B

The payments company today announced it is launching a new service called Assemble, which it calls a “prepaid innovation hub” designed to allow Mastercard partners or issuers to provide checking, budgeting, and payment features, as well as additional money management tools.

Longfin Corp. Becomes the First Public-listed FinTech Company Under Reg A+ on Nasdaq (GlobeNewswire), Rated: B

Longfin Corp. (NASDAQ: LFIN) announces that it will be traded on the Nasdaq market for the first day after its initial public offering (IPO) under Reg A+ closing on December 8, 2017.

U.S. News & World Report Names LendingPoint One of 2017’s Best Personal Loan Companies (BusinessWire), Rated: B

LendingPoint was named one of nation’s six best personal loan companies by U.S. News & World Report.

The media company evaluated personal loan companies in five key areas, reviewing data on eligibility, loan terms, fees, repayment methods and additional features. LendingPoint was cited as 2017’s top lender for people with fair to good credit, who have merit-based qualifications beyond FICO scores that make them worthy loan candidates.

Quesnay’s Female Founders in Tech Program Awards Goalsetter First Place (PR Newswire), Rated: B

Quesnay is pleased to announce that Goalsetter is the winner of the inaugural Female Founders in Tech, spotlighting female founders that positively impact the financial services and/or insurance technology industries.

The winners represented cutting-edge businesses that were also socially conscious:
– Goalsetter – Goalsetter is a goal-based savings and gifting platform, targeting millennials.
– Marinus Analytics – Marinus uses technologies to help identify and fight crimes like human trafficking and money laundering associated with it and other illicit activities
– LENDonate – LENDonate provides a marketplace lending platform for non-profits and supporters.

Approximately 100 women-led startups registered for the program with solutions ranging from artificial intelligence to blockchain to creative financial literacy and savings solutions. Seven finalists presented in New York to a panel of judges which included industry leaders from the sponsoring organizations: John HancockMassMutualRGAxSterling National BankTD Bank and Thomson Reuters.

 

United Kingdom

Welendus exceeds Seedrs fundraising target (P2P Finance News), Rated: AAA

WELENDUS, the peer-to-peer payday loan provider, has announced that its latest crowdfunding round on Seedrs has reached over 130 per cent of its target.

The firm had been seeking £150,000 but has already raised £197,991, according to Seedrs’ website.

Welendus said on Thursday that the funding round had attracted more than 250 investors.

Investec Provides U.K. Fintech With $ 67 Million for Online Loans (Bloomberg), Rated: A

London-based MarketInvoice, which arranges loans for small companies secured by accounts receivable, will handle the underwriting for Investec customers in the partnership, according to the bank’s website. Investec will provide 50 million pounds ($67 million) in the first year to fund the loans, Anil Stocker, the startup’s co-founder and chief executive officer, said in an interview.

The rise of the payday-style business loan (City A.M.),  Rated: A

British banks have been mired in criticism for not lending as much as they could.

Many businesses have meanwhile found that alternative lenders lack the data to provide products that are tailored to their needs.

Creative credit

Rate hikes typically result in an increase in lending profitability, and so the increase often stimulates the appetite to lend.

But an increased appetite to lend doesn’t always follow an increased ability to price risks on all loan applicants, and herein lays the risk: lenders become creative with the ways in which they entice borrowers and mitigate their risks.

These loans from mainstream lenders look like the payday loans that flooded the market in the height of the recession. They take minutes to apply for, turnaround is within one day, and command interest rates of up to 23 per cent APR – five times more than some personal loans.

Data shows increase in demand for alternative finance services (Londons School of Business Finance), Rated: A

The figures showed growth across the UK’s alternative finance market, including crowdfunding, invoice trading, and marketplace lending. The date found a year-on-year rise of 43 per cent in 2016 from £3.2 billion to £4.58 billion.

Business marketplace lending grew by 28.5 per cent from £881 million in 2015 to £1,232 million in 2016, placing it ahead of consumer marketplace lending, which previously had the biggest share.

LendInvest’s Latest Buy-to-Let Index Reveals: Manchester Tops Charts & Hull is Named Biggest Climber (Crowdfund Insider), Rated: A

On Wednesday, specialist property lender LendInvest released its latest LendInvest Buy-to-Let Index report, which ranks all 105 postcode areas around England and Wales based ona combination of four metrics, which are capital gains, transaction volumes, rental yields, and rental price growth.

The Index report’s key findings include:

  • Manchester, leader of the Northern Powerhouse, takes top spot
  • Leicester breaks into the Top 10 and Birmingham climbs 8 places from #18 to #11, signaling upward mobility in the Midlands markets
  • Hull marks itself as biggest climber for 2017, rising 93 places to #6
  • Enfield tumbles from Top 10 in February to Bottom 10 in December
Source: LendInvest

Download the full report here.

One in two advisers ‘fire’ clients with less than £50,000 (Money Observer), Rated: A

Those with pot sizes of less than £50,000 are increasingly being turned away by their financial adviser. In 2014 just under a quarter of clients were shown the door, whereas in 2017 this figure rose to 50 per cent.

Artificial intelligence is guiding venture capital to start-ups (Financial Times), Rated: A

Mr Bonanzinga thought he could combine internet data and machine learning to do a better job of ferreting out prospects. It took two years and £5m in investment for InReach Ventures to create the software, which has so far trawled through 95,000 European start-ups, picking out 2,000 that Mr Bonanzinga might be interested in.

The software determines this based on the people they are hiring, the products they are developing and the traffic on their website, among other things.

Tifosy: The sports crowdfunding platform that wants to help small teams grow and big teams reconnect with fans (City A.M.), Rated: B

The company has already partnered with 15 clubs in England and Italy, raising £2.9m from “fanfunders” for a variety of different projects.

So rather than owners selling equity stakes to unfamiliar outside investors, crowdfunding solutions such as mini-bonds or equity shares have emerged as alternative solutions to many sports franchises.

Top-flight rugby clubs Harlequins and Wasps raised £15m and £35m respectively by issuing their own bonds, while Surrey County Cricket club raised £5m in seven days in 2015.

China

Chinese Online Lender LexinFintech Shrinks U.S. IPO Fundraising Goal (WSJ), Rated: AAA

LexinFintech Holdings Ltd., a Chinese online lender that is planning to go public in the U.S., scaled back its fundraising ambitions after regulatory changes in China sparked a rout in shares of similar companies.

Lexin, a four-year-old company whose backers include Chinese online-retail giant JD.com Inc., is planning to raise $120 million in an initial public offering, according to a Wednesday filing with the Securities and Exchange Commission.

JD.com-backed micro lender slashes IPO by 70pc after China’s internet finance crackdown (SCMP), Rated: A

Lexin Fintech plans to offer 12 million American depositary shares at an indicative price range of US$9 to US$11 a share, raising as much as US$132 million, the company said in an updated filing on Thursday to the US Securities and Exchange Commission.

The fundraising value is sharply down from an originally planned US$500 million, as mentioned in the IPO prospectus issued last month.

Noncompliant P2P Lenders to Be Out by Mid-2018 (Caixin), Rated: AAA

Local banking regulators have until the end of June to weed out noncompliant peer-to-peer (P2P) lenders, according to a circular issued by a special working group led by the China Banking Regulatory Commission (CBRC).

Yirendai Announces Strategic Investment in Lion Rock (Business Insider), Rated: AAA

Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading fintech company in China, announced today that it has made a strategic investment in Lion Rock, a comprehensive financial services platform that is focused on global asset allocation, through Lion Rock’s Series A financing of HK$50 million.

Lion Rock is headquartered in Hong Kong and offers a wide-variety of high-quality financial products, financial news, robo-advisory services as well as asset allocation services through its online platform.

Hong Kong Fintech Start-Up Lion Rock Raises $ 6.4M Led By Marathon Venture (China Money Network), Rated: A

Lion Rock FinTech Ltd., a Hong Kong-based fintech company, has raised HK$50 million (US$6.4 million) in an equity financing led by Marathon Venture Partners.

In addition, 9F Inc., the strategic investor who backed Lion Rock’s last round of financing, continued to invest in this round.

European Union

The Culture of p2p Investors Across the EU (FastInvest), Rated: AAA

FastInvest, a p2p fintech platform, recently studied data from over 8500 EU investors daily and came across a really unexpected finding. Highly specific traits and behaviors were driven by nationality over and above other individual factors when looking at big data.

From traditional investment metrics like risk aversion, to outside the box items like nationalistic tendencies and compulsive behaviors.  Across numerous areas, national cultural traits could be seen solely based on country to country locales.

Source: FastInvest

Poland
Even with the EU offering a bit of a more stable currency, only 1.76% of residents prefer to invest in Euro based currency loans.

Belgium
Only 2.20% of Belgian investors choose PLN (Polish) currency based loans as opposed to their own Euro.

Germany
Germans appear to be the most open minded of EU countries, with 15.73% making investments in PLN currency.

Netherlands
The Netherlands followed behind Germany in diverting from the euro, with 9.08% of investors choosing PLN based loans.

Download the full report here.

iZettle Grabs $ 47M Additional Funding, Eyes Market Expansion (PYMNTS), Rated: A

iZettle has grabbed €40 million in funding (the equivalent of $47 million) that the Stockholm-based payments firm will use to expand into new markets.

International

Disruptive Startup, Etherecash, Concludes ICO Ahead Of Schedule (Coinidol), Rated: B

Etherecash is one step closer to actualizing its vision of bridging the financial divide between the banked and the unbanked with the successful conclusion of its ICO ahead of schedule. The ICO is now scheduled to finish on 12th Dec 6:29 PM (GMT) after four impressive bonus rounds that outperformed expectations.

With over $30 million raised and 45000 registered participants, Etherecashcan now set its sight on eliminating traditional borders, intermediaries and prejudices in the way money is lent, spent, and sent.

Australia/New Zealand

MERCER LAUNCHES SUPERBOT, ARTIFICIAL INTELLIGENCE DELIVERING FINANCIAL ADVICE VIA FACEBOOK MESSENGER (Mercer), Rated: AAA

Australia’s 17 million active Facebook users spend on average 1.4 hours a day liking, commenting and sharing stories with family and friends. Moreover, with roughly 17% of the earth’s population being active users of Facebook Messenger, there is irony in the fact that the smartphone generation is spending more time engaging on Facebook rather than thinking about their future financial readiness.

Accessed through Facebook Messenger, SuperBot represents the ultimate opportunity to scale financial advice across a very large proportion of the population.

Non-bank lenders lift profit 10% in 2017 (NBR), Rated: A

Eighteen of the 25 participants in the KPMG non-bank financial institutions performance survey posted increased earnings in 2017, generating a total net profit of $216.7 million, up from $196.6 million a year earlier. Total assets grew 12 percent to $10.96 billion, with lending boosted by the nation’s strong demand for new vehicles and several non-bank institutions testing the waters in the mortgage space as the major banks become more reticent in some of their credit criteria.

HNWI financial advice demand falls (Financial Standard), Rated: A

The use of financial advice among high-net-worth investors (HNWI) has fallen to a five-year low, according to the insights, which show 435,000 millionaires own more than $1 million of investable assets.

Almost 75% of HNWIs relied on the expertise of a financial advice professional in 2013 – but this has declined to 68% in 2017.

Credit Suisse found the number of Australian millionaires rose by 200,000 in the year to June, marking the third-largest increase after the US and Germany in its global wealth ranking.

CCR to help business financing (InvestorDaily), Rated: B

Indeed, interest rates on small business loans have “remained relatively high” due to a lack of competition – leaving banks as the major provider of lending to small businesses (80 per cent).

But a CCR regime would offer lenders more information about potential borrowers’ credit history than just negative credit information, as per the current standard.

The Australian government has determined a mandatory credit reporting regime to come into effect in July 2018, but a number of financial institutions such as NAB have already announced it will roll out such a regime.

Other forms of accessing finance for smaller firms or entrepreneur were large technology firms and alternative financing platforms, such as marketplace lending and crowdfunding, he added.

India

Online loans marketplace FinBucket gets funding from Impanix Capital (VC Circle), Rated: A

FinBucket Pvt. Ltd, which runs an eponymous online marketplace for loans and investments, has raised Rs 12 crore ($1.8 million) from Delhi-based early-stage venture capital firm Impanix Capital.

The startup plans to use the funds to increase its staff strength to 200 and expand operations.

‘Fintech can help assess credit score ’ (The Hindu), Rated: A

Financial technology firms that generate credit scores based on digital footprints of individuals will have a major role to play as banks begin to focus on lending to first generation customers who do not have credit history, former Deputy Governor of Reserve Bank of India H.R. Khan said here on Wednesday.

Fintech startup CapitaWorld raises funding (VC Circle), Rated: B

Mumbai-based fintech startup CapitaWorld Platform Pvt. Ltd has raised an undisclosed amount through convertible equity from high-net-worth individuals, corporate honchos and investors from Hong Kong and the Middle East.

The investors who participated in the latest round include former chief executive of Indian Banks’ Association Mohan Tanksale, Swift India CEO Kiran Shetty, Madhu Silica’s managing director Darshak Shah and former JP Morgan executive Mandar Mhatre, the startup said in a statement.

Asia

BHSI Launches Financial Institution Professional Indemnity Insurance in Asia (Insurance Journal), Rated: A

Berkshire Hathaway Specialty Insurance Co. (BHSI) announced it has introduced Financial Institution Professional Indemnity (FIPI) insurance in Asia.

The new BHSI policy is designed to cover a range of claims, from allegations of failure to disclose information, to misleading financial advice and breach of contracts, the company said in a statement. The policy combines coverage for civil liability, pre-investigations, mitigation expenses, bail bond costs, court attendance, loss of documents, and more.

The policy is designed for medium to large financial institutions, including securities dealers, regional banks, insurance companies, reinsurance companies, diversified institutions, and financial technology (fintech) and corporate advisory firms.

South America

Brazilian fintech Nubank starts international tech talent hunt (ZDNet), Rated: B

Brazilian fintech Nubank has launched an engineering center in Berlin as part of a plan to boost its software engineering function internationally.

Nubank has expatriated four of its engineers to Berlin to kickstart the European operations. It has also already started to hire local experts such as Gavin Bell, a senior engineer who previously managed the core data infrastructure platform at Soundcloud.

Authors:

George Popescu
Allen Taylor

Thursday November 16 2017, Daily News Digest

securitization

News Comments Today’s main news: Marcus surpasses 2017 goal. LendInvest gets into buy-to-let. Top 3 spots on KPMG Fintech 100 list are all Chinese. Lendix launches SME bridge loans in France, Spain, and Italy. Mauritia issues draft P2P lending rules. Marlette closes fourth securitization in a year. Today’s main analysis: Rising challenges unlikely to deter U.S. securitizations. Today’s thought-provoking articles: […]

securitization

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Africa

Canada

Russia

News Summary

United States

Marcus from Goldman Sachs Surpasses 2017 Goal (Bank Innovation), Rated: AAA

Martin Chavez, chief financial officer for Goldman Sachs, showed in a slideshow at a Bank of America Merrill Lynch event yesterday that Marcus had already surpassed $1.96 billion in originations as of Nov. 9.

What that means is that from Nov. 9 to Nov. 14, over a span of five days, Marcus originated more than $40 million in loans.

Rising challenges unlikely to deter U.S. securitization in 2018 (Asset Securitization Report), Rated: AAA

As a result, Fitch’s outlook for U.S. structured finance ratings is predominately stable for 2018. That said, given where we are in the credit cycle, Fitch is keeping a close watch on select asset types that could run into some issues over the next 12 months.

Entering 2018, Fitch has either Positive or Stable Outlook on over 90% of its rated securitized bonds.

Perhaps the most notable change that has manifested from risk retention is the shrinking universe of originators bringing new securitizations to market. This is particularly notable in the universe of CMBS originators, which has shrunk from a high of roughly 40 to now less than 20 due to a combination of risk retention and Reg A/B.

Competitive pressures, long in place for subprime autos, are escalating in a marketplace ABS environment that is struggling to find its footing by testing recent underwriting models, asset quality and, in some cases, business models. Delinquencies and chargeoffs of existing assets continue to increase as marginal borrowers increase their leverage. Not likely to help is the drive for growth among large marketplace lenders coupled with rising market pressure from competing banks like Goldman Sachs (Marcus), Discover, and Suntrust. And unless originators tighten their credit policies with discipline, the strain will intensify.

Source: Asset Securitization Report

Online lenders should heed criticism of their effect on borrowers (American Banker), Rated: AAA

The consumer lending industry is abuzz about the Federal Reserve Bank of Cleveland’s recent report on debt consolidation and online lending. This excellent piece of research concludes that, on average, online installment loan borrowers fall into more debt after taking out a loan, experience hits to their credit score and history as a result, and take out online loans despite having access to traditional banking and credit channels.

The first two conclusions are damning, especially as these loans are often marketed as a way to help consumers consolidate credit card debt and improve their finances. At the end of the day, a lender’s duty is not merely to avoid losses. Any loan must be suitable for the customer — which means it should be made only if the lender believes it is improving the customer’s financial health. A lender not guided by that principle should be prepared for severe criticism as well as elevated losses down the road.

But it would be nonsensical to discredit or ignore the study because it includes online lenders beyond well-known fintech names.

The Best of Both Worlds with Prosper for Borrowers and Lenders (DoughRoller), Rated: AAA

Founded in 2005, and generally recognized as the first peer-to-peer (P2P) lending platform in the US, Prosper has funded more than $10 billion in loans since.

While borrowers can get personal loans ranging in size between $2,000 and $35,000, investors can put as little as $25 toward funding those loans.

There is one exception, however. You cannot use loan proceeds for post-secondary educational expenses. That’s because some of the rules in federal law aren’t compatible with P2P lending. More specifically, with education loans, the borrower must have at least 30 days to accept or reject a loan offer.

Medical procedures available for financing under the PHL program include:

  • Cosmetic dentistry
  • Bariatric surgery
  • Cosmetic and plastic surgery
  • Fertility and reproductive procedures

All Prosper loans have a term of either three or five years.

The minimum requirements are:

  • A minimum FICO score of 640, based on a TransUnion FICO 08 score
  • Debt-to-Income (DTI) ratio below 50%
  • Stated income greater than $0 (you must have an income)
  • No bankruptcies filed within the previous 12 months
  • Fewer than seven credit bureau inquiries within the last six months
  • A minimum of three open trades reported on your credit report

Interest rates are between a minimum of 3.00% for the best AA rated borrowers to a maximum of 36.00% for the lowest rated HR borrower grades.

Source: DoughRoller

Prosper for Investors

Prosper advertises that the average rate of return by investors on the platform is 7.41% per year.

Loans rated HR have a much higher average return, at 11.73%.

You can open either a General Investment Account or an IRA. Available IRAs include traditional, Roth, SIMPLE, SEP and rollover IRAs (IRA accounts are held with Millennium Trust Company). At this time, Prosper has made only individual accounts available. You cannot hold an account jointly with someone else.

For regular investment accounts, the minimum is $25. For IRA accounts, the minimum is $5,000.

Similar to other P2P platforms, when you invest with Prosper, you don’t actually invest in whole loans. Instead, you invest in small slivers of those loans, referred to as “notes.” The notes are in denominations of $25. This means that you can spread an investment of $1,000 across as many as 40 different loans.

The servicing fee is 1% of the outstanding balance of a loan. That means that if the loan pays 8%, your net return will be 7%.

Source: DoughRoller

Marlette Funding Closes Fourth Personal Loan Securitization Within Past Year (LendEDU), Rated: A

Last week, marketplace lender Marlette Funding announced the closing of its fourth proprietary securitization. The transaction was worth an estimated $312 million, and it is the fourth securitization announcement since August of 2016 from Marlette Funding.

eOriginal Named as One of Fastest Growing Companies in North America on Deloitte’s 2017 Technology Fast 500 (eOriginal), Rated: A

eOriginal, Inc., today announced it has been named to Deloitte’s Technology Fast 500 list as one of North America’s fastest growing technology, media, telecommunications, life sciences, and energy companies. eOriginal earned the rank of 294 by more than doubling revenues during the evaluation period of FY 2013 through FY 2016.

Betterment, the investing startup with $ 11 billion in assets, is rolling out a new service to make charitable giving easier (Business Insider), Rated: A

Betterment, the New York-based roboadviser, announced Wednesday a charitable giving feature that’ll let users donate shares of their account to partnered charities.

The firm, which manages $11 billion for over 300,000 customers, partnered with 11 charities for Betterment Charitable Giving, including Big Brothers Big Sisters of NYC, UNICEF, and World Wildlife Fund, according to a news release. The new feature is set to go live November 28.

Subprime car loans souring faster at nonbank lenders (American Banker), Rated: A

Despite signs of trouble in subprime auto lending, U.S. banks and credit unions are well positioned to ride out any market turbulence, a new report from the Federal Reserve Bank of New York suggests.

More than $435 billion in auto loans to borrowers with credit scores below 660 were outstanding during the third quarter of this year, the report found. That total has been climbing steadily since bottoming out at $249 billion in early 2011. Delinquency rates have also been rising as it has become easier to qualify for an auto loan.

Fidelity latest financial firm to facilitate data sharing with fintechs (American Banker), Rated: A

Fidelity Investments is joining the ranks of financial firms sharing customer account data with others through an application programming interface.

The new service, called Fidelity Access, will give third parties access to Fidelity customers’ account data for use in apps and services like tax preparation, budgeting, financial planning, spending analysis and portfolio advice — provided the Fidelity customers give their OK. Customer data to be shared includes Fidelity account balances, securities holdings, and transactions.

These are the most valuable fintech companies in America (MarketWatch), Rated: A

Stripe Inc., whose software is used by businesses to accept and track digital payments, leads the way as the most valuable fintech startup in the U.S., with a $9.2 billion valuation.

And just to be clear, fintech startups are nowhere near close to catching up to the big banks. Wells Fargo & Co. has a market cap of more than $266 billion, and Bank of America Corp. has a market cap of more than $273 billion.

RealtyProfits Offers Accredited Investors an Innovative Platform to Invest in the Real Estate Sector (Digital Journal), Rated: A

RealtyProfits (www.RealtyProfits.com) announces today an exciting and innovative investment opportunity, RealtyProfits IV, with a Preferred Return of 12 percent per annum, available exclusively to accredited high net-worth individuals and institutional investors. The private preferred equity securities, available for purchase at www.RealtyProfits.com, are being offered through WealthForge Securities, LLC, a registered broker/dealer and member of FINRA/SIPC.

The geographically diversified portfolio includes properties in 700 cities coast to coast, with a current estimated value of $1.73 billion and more than $700 million of equity in more than 5,900 portfolio properties. The properties include primarily single-family homes and condominiums ranging in value from $100,000 to more than $2,500,000.

Accredited investors can start investing with as little as $20,000. RealtyProfits IV offers monthly cash distributions. Preferred equity investors receive all distributions made by RealtyProfits IV until fully repaid. The Preferred Return is 12 percent per annum, with initial monthly Base Preferred Return payments at 6 percent per annum anticipated depending on cash flow during each of the first 24 months.

Reality Shares Teams up with Nasdaq to Launch Blockchain Tech Index (BusinessWire), Rated: A

Reality Shares and Nasdaq announce the creation of the Reality Shares Nasdaq Blockchain Economy Index, a smart-beta index that tracks the growth and development of leading global companies creating and implementing blockchain solutions.

An ETF that will track the Index is already in the works, with Reality Shares filing for it on November 2, 2017.

Reality Shares and Nasdaq compiled the index by utilizing internal and external research and their proprietary Blockchain ScoreTM ranking system. The Index is comprised of global companies that seek to capitalize upon transformational blockchain technology that may potentially disrupt the markets in which they operate.

How to Choose Between a Peer-To-Peer Lending or Traditional Loan (Experian), Rated: A

Shopping for a loan at a P2P provider is a two-step process. First, based on a credit score (or credit scores) and your answers to a few basic questions—your full name, address, date of birth and annual income—the lender determines which loan offer(s) to extend to you. (It’s possible at this juncture that the lender will decide not to extend any loan offers; if they do, they’ll explain why.)

Once you choose the loan you want, the lender does a more detailed credit check and may ask you to verify your income and to provide additional background information.  Each P2P site has its own lending criteria, including minimum credit scores, and additional information requirements vary accordingly. Some P2P lenders want information on your educational background; others want work history or details about your financial assets. In most cases, you can submit the necessary documents electronically.

The first step in the P2P loan-approval process gets one or more of your credit scores by a method known as a soft inquiry—the same process you use when you check your own credit scores. Soft inquiries have no impact on your credit scores. However, the hard inquiries traditional lenders make when you apply for a credit cards or bank loans are reported to the national credit bureaus. They appear on your credit reports, and typically cause temporary credit-score drops of several points.

In the second step of P2P loan approval, the lender performs a hard inquiry to confirm your credit score and, likely, to review your full credit report.

Before you apply for a P2P loan

  • Take a look at the fine print on the bottom of each provider’s homepage, to get an overview of the loan amounts they offer and the rates and fees they charge.
  • Make sure the lender operates in your state.
  • Check your FICO Score and review your credit reports for any major negative entries. Accounts in collection, liens and civil judgments are among the items that could torpedo your loan application, even if you meet the credit-score requirements.
  • Determine the amount of money you need and watch out for tempting upsells.
  • Consider using the Experian loan-referral tool to explore offers from multiple P2P lenders (and possibly traditional lenders as well).

Resignation of CFPB head gives Trump opportunity to erase Elizabeth Warren’s legacy (Legal Insurrection), Rated: A

Richard Cordray, an Obama appointee and head of the Consumer Financial Protection Bureau (CFPB) announced to staff in an email Wednesday his plans to resign. While he’s yet to confirm his plans, there’s speculation Cordray will return home to run for Ohio’s governorship.

Seven Signs That the Bond Bull Market is Over (INTL FCStone), Rated: A

  • The bond bear market is already here: short and medium-term treasuries have lost value in the past 5 years
  • Buybacks have fallen to a five-year low, and big repurchasers have underperformed
  • Oil prices are at a 30-month high, and the futures curve is in backwardation
  • The long and the short ends of the yield curve are moving together again
  • The Chinese trade surplus has shrunk from 10% of GDP to almost zero in the past ten years
  • The U.S. deficit is growing again, an unprecedented phenomenon in times of expansion and peace
  • Small bubbles are popping out: Auckland houses, Ethereum crypto coins, and collectible cars
Source: Global Macro Report, INTL FCStone

Read the full report here.

Spring Framework Creator Launches Atomist for Development Automation With $ 22 Million in Series A Funding (Marketwired), Rated: A

Today on stage at Structure 2017, Atomist is formally launching and unveiling its Development Automation Platform with an Open Source client and API. As part of today’s launch, Atomist is announcing $22 million in Series A funding from Accel and Matrix Partners.

Bestow Gives Texas Residents First Access to On-Demand Life Insurance (PRWeb), Rated: A

Bestow Inc., the company behind a revolutionary new approach to life insurance, today announced the early access roll out of its comprehensive, full-stack, digital life insurance solution in Texas. For the first time Bestow’s solution is available to the public, giving Texas residents primary access to apply for the only on-demand life insurance solution, instantly and without a medical exam.

Leveraging applied intelligence and algorithmic underwriting, Bestow redefines the way consumers research, buy and manage life insurance. Using data to calculate risk, Bestow removes the need for a medical exam and streamlines the entire process into a matter of minutes. The Texas launch gives consumers access to choice term life insurance plans, including a unique two year term policy never before available for life insurance. Additionally, customers can choose between ten or twenty year term life insurance.

The Zebra Raises $ 40 Million, Taps New CEO To Expand Beyond Car Insurance (Forbes), Rated: A

The Zebra, which has always described itself as the Kayak of car insurance, has hired a longtime Kayak executive as its new CEO.

The Austin-based company, which allows drivers to compare prices for car insurance online, said on Tuesday that it has tapped Kayak’s former president Keith Melnick to run the company.

The Zebra also said it has raised $40 million in a Series B funding round, led by Accel Partners. That brings its total funding to $61.5 million.

MarketScout in Dallas Creates $ 25M Insurtech Venture Fund (Insurance Journal), Rated: B

Dallas-based insurance exchange and MGA MarketScout announced it has launched MarketScout InsurTech (MIT), which will make investments in tech-enabled insurance distribution. The initial funding of $25 million will come exclusively from MarketScout Corp., parent of MIT, according to the firm.

House Financial Services Committee Approves Legislation to Help Keep Lending Partnerships Between Banks and Online Lenders (Crowdfund Insider), Rated: A

The House Financial Services Committee has approved HR 3299 or the “Protecting Consumers’ Access to Credit Act of 2017.” The bill “restores consistency” in lending laws across state boundaries. HR 3299 impacts the case of Midland Funding, LLC v. Madden – an ongoing law suit that has the potential to undermine online lenders. Sponsored by Congressman Patrick McHenry, includes an important statement that clarifies allowable interest rates on loans potentially ending the issue associated with the law suit.

How Do You Beat a Robo-Advisor? Trust (Think Advisor), Rated: A

“Technology by itself cannot create trust,” Robert C. Merton, a Nobel laureate in economics now teaching at MIT, recently told ThinkAdvisor. “The successful advisor must have the trust of their clients.”

Given the importance of trust in the advisor-client relationship, Merton recommends financial advisors (the breathing kind) should:

  • Check what they are doing to retain and enhance trust with their clients.
  • Make sure the business model being used supports the creation of trust.
  • Take advantage of technology to improve/enhance what the advisor does.
  • Do not view technology as a “competitor or substitute” for the advisor.
  • Understand and assess the financial technology they employ to certify trusting its use in client solutions.

HFLA launches initiative to help underserved reach financial stability (Cleveland Jewish News), Rated: A

The Hebrew Free Loan Association has launched its Looking to the Future Initiative with support from the St. Luke’s Foundation and the PNC Foundation. The initiative accounts for $73,000.

The initiative enables HFLA to increase its lending of interest-free loans to Cleveland’s underserved neighborhoods and grows the organization by expanding its reach, according to a news release. HFLA received a $63,000 grant from the St. Luke’s Foundation and a $10,000 grant from the PNC Foundation to launch the effort.

Fundation Purchases Select Assets from Able Lending to Enhance Partnership Strategy (BusinessWire), Rated: B

Fundation Group LLC, a digitally-enabled lender and credit solutions provider, today announced that it has acquired a variety of assets from online small business lender, Able Lending of Austin, Texas.

Former Capital One Executive Troy Jamison Joins Victory Park Capital as Chief Risk Officer (BusinessWire), Rated: B

Victory Park Capital (VPC), an investment firm focused on middle-market debt and equity investments, announced today that Troy Jamison joins as chief risk officer for the firm’s nonbank financial services portfolio. Jamison is based in Chicago and reports directly to CEO and Co-Founder Richard Levy.

CFPB updates website to officially address end of arbitration rule (Housingwire), Rated: B

The Consumer Financial Protection Bureau finally updated its website to acknowledge President Donald Trump revoking the controversial arbitration rule.

blog post from Ballard Spahr previously stressed the importance of the CFPB updating its website to note the rule’s override since the rule was killed nearly two weeks ago.

The webpage for “Arbitration agreements” now has an update on the top that states:

On Nov. 1, 2017, the President signed a joint resolution passed by Congress disapproving the Arbitration Agreements Rule under the Congressional Review Act (CRA). Pursuant to the joint resolution, the Arbitration Agreements Rule has no force or effect. The materials relating to the Arbitration Agreements Rule on the Bureau’s website are for reference only.

HOUSE FINANCIAL SERVICES COMMITTEE PASSES SMALL BUSINESS CREDIT ACT (Coalition for Small Business Growth Email), Rated: B

The 

United Kingdom

LendInvest launches into buy-to-let (Mortgage Strategy), Rated: AAA

LendInvest is launching a range of buy-to-let loans aimed at professional landlords and investors.

Rates start at 3.69 per cent for a two-year fix at 60 per cent LTV.

The firm will offer loans of between £50,000 and £5m, up to a maximum LTV of 80 per cent.

Citigroup joins the AI bandwagon (Business Insider), Rated: A

Citigroup 

Source: Business Insider

SyndicateRoom Alum Squirrel Launches Crowdcube Funding Round (Crowdfund Insider), Rated: A

Squirrel, a personal finance app designed to help users have more control over their money, has launched an equity crowdfunding round on Crowdcube. This initiative debut comes less than one year after the company completed its SyndicateRoom funding round with £585,000 in funds. Squrriel is now seeking £400,000.

Government unveils financial package to support tech (P2P Finance News), Rated: A

THE GOVERNMENT has given a £21m boost to a technology programme that has supported firms such as Zopa and Funding Circle as part of a range of measures to boost the tech sector.

The funding will make Tech City UK and Tech North one national organisation called Tech Nation and help grow government-backed startup support programmes such as Founders Network, Northern Stars, Future Fifty and Upscale.

Cash Converters International Ltd reports security breach and ransom demand (The Motley Fool), Rated: A

Payday lending and pawnbroking business Cash Converters International Ltd (ASX:CCV) announced a cybersecurity breach in its UK operations last night.

Sadly, computer system integrity is becoming an increasingly relevant – and often overlooked – concern for investors, with a vast majority of companies relying in one way or another on computer systems.

Valorem Foundation Launches All-New Cryptocurrency Platform (PR Newswire), Rated: A

Valorem Foundation, a Blockchain startup specializing in stabilized value-based exchange and transactions, has announced the launch of its new cryptocurrency platform. The company has developed a multi-layered platform to disrupt and expand the following services globally: microloans, car loans, student loans, rent payment, P2P networks, buying and selling of goods & services, business investing, real estate crowdfunding, and insurance.

Empowering the world: How you can make money through improving lives (City A.M.), Rated: A

This sea change should explain why investment firm Ethex has managed to scoop up so much support in its short history – raising more than £50m since 2013.

Its business model has a peer-to-peer lending feel – that is, it uses a digital platform to allow retail investors to lend to individuals and entrepreneurs.

But it comes with a twist, because Ethex is a not-for-profit organisation which lets you invest in companies that have a positive impact – socially and environmentally.

If you want to get involved, the platform has a minimum investment of £50, which arguably makes it more accessible to younger generations.

Trussle hires VP engineering from Funding Circle (Mortgage Introducer), Rated: B

Trussle has appointed Matthew Gretton as vice president of engineering from peer-to-peer lending platform Funding Circle.

China

Alibaba affiliates sweep top 3 spots in global fintech ranking (Asian Review), Rated: AAA

Financial technology companies linked to China’s Alibaba Group Holding took over the podium in KPMG’s latest Fintech 100 list, announced on Wednesday.

Ant Financial, which runs Alibaba’s massive Alipay e-payments network, took the No. 1 spot on the list, which was compiled with fintech accelerator H2 Ventures. Online property insurer ZhongAn Insurance and microloan provider Qudian placed second and third; both have received investments from Ant.

See the full list here.

One of China’s hottest companies rebuffs criticism about transparency (CNBC), Rated: A

Despite public criticism about a lack of transparency in some practices, Ant Financial is doing things the right way, a senior executive at the company said Wednesday.

“The demand for these securities is very healthy and continuing to expand,” Douglas Feagin, senior vice president and head of global business at Ant Financial, told CNBC’s “Street Signs.” “That, at the end of the day, is the ultimate barometer of whether you’re giving enough information to investors to invest.”

Ant Financial will use local partners in Southeast Asia: executive from CNBC.

Earnings at Some U.S.-Listed Chinese Microlenders Taper (Caixin), Rated: A

In the three months ending Sept. 30, Yirendai’s net income was down 12% to 303 million yuan ($45.7 million) from 344.3 million yuan a year ago, the company said Wednesday. Another Chinese microlender, China Rapid Finance Ltd., earlier reported a wider net loss of $4.4 million in the third quarter. Although Qudian Inc., a larger player that listed in New York last month, recently posted a four-fold increase in its third-quarter net profit from a year ago, citing better operational efficiency and its growing borrower base.

Cinda International Leads Massive Round In Chinese Fintech Company 9f Group (China Money Network), Rated: A

Beijing-based fintech company 9f Group has raised a massive new funding round from Cinda International Holding Ltd, a subsidiary of state-owned China Cinda Asset Management Co., Ltd., Focus Media Information Technology’s Chairman Jiang Nanchun, video game developer Youzu Interactive’s chairman Lin Qi and an unnamed Chinese industry fund.

The company did not disclose financial details except to say that it raised “hundreds of millions of U.S. dollars” in the latest financing deal, according to a company announcement. It is also unclear how the company is valued in the round, but 9f Group is listed on China Money Network’s China Unicorn List with a US$1 billion valuation when it last raised a US$110 million series B round in 2015.

European Union

For Spain’s banks, survival means digital (Financial Times), Rated: AAA

Santander’s Openbank has changed a great deal since it was founded as Spain’s first telephone banking service in 1995. Now a fully digital operation, its mobile app allows users to temporarily disarm a lost credit card, as well as to check whether fellow Openbank customers are buying or selling a given stock at any moment. Currently, it has some 1.2m customers in Spain and more than €8bn ($9.3bn) in assets under management.

In recent years, Spain’s two biggest banks — Santander and BBVA — have increased their financial and managerial investment in fintech, digital banking and big data. Like their peers, they are convinced that the days of branch-based lending are drawing to a close.

Spanish banks average about €15m assets under management per employee, says Daragh Quinn, banks analyst at investment bank Keefe, Bruyette & Woods. At a digital operator like Openbank, that number is close to €60m.

The digital push is on two fronts: first, a mobile app that allows customers to access almost all of the bank’s products without going into a branch. Second, a venture capital approach whereby banks invest in or partner with fintech start-ups to add products.

Online Lender Lendix Launches Flexible SME Bridge Loans in France, Spain & Italy (Crowdfund Insider), Rated: AAA

Lendix, online lender for SMEs in continental Europe, has announced the launch of a new financing product: the Flexible Bridge Loan. This product is designed to will allow a greater number of French, Spanish and Italian SMEs to benefit from the speed of execution of Lendix’s lending platform while leaving them the possibility of setting up an overall refinancing solution with other financial institutions.

The Lendix Flexible Bridge Loan is a 5-year amortizable loan with a standard commitment for the first 9 months and the possibility of early repayment at no cost for the remainder of the loan term, even in the event of refinancing by other financial institutions.

Swedish $ 370 Billion Home-Loan Market Gets New Mortgage Fund (Bloomberg Quint), Rated: A

As investors wonder whether Sweden’s housing market is headed for a correction, the country’s first mortgage fund is about to enter the $370 billion Swedish home-loan industry.

Stabelo plans to pool capital from Swedish institutional investors in exchange for fixed-income securities. That money will then be lent to home buyers. The fund starts offering its products this week and will work with Avanza Bank AB, Sweden’s largest online lender. Avanza, which owns just below 20 percent of Stabelo, will handle distribution and marketing.

International

Has P2P marketplace lending become B2P? (Cuffelinks), Rated: AAA

Due to this issue, the original incarnation of peer-to-peer lending has not lasted. As the CEO of Zopa, a UK-based P2P lender said,

“As bad debts soared, the approach was abandoned and Zopa was moulded into a ‘big sausage machine’. Its technology now links lenders with a pool of borrowers without any direct contact or the need for investors to make credit decisions.”

Australia’s major peer-to-peer lender is SocietyOne. It currently has $350 million borrowed through its platform, and is growing rapidly. In fact, loan volumes in the first three quarters of this year have totalled $141 million so far, surpassing the $139 million in loans facilitated over the entire course of 2016, as shown below.

Source: Cuffelinks
Australia/New Zealand

Exemption for personalised digital (robo) advice (Scoop), Rated: A

Following the FMA’s release of its second consultation paper on personalised robo-advice (now called digital advice), the leading law firm has published its tips for providers looking to develop digital advice platforms.

Head of Russell McVeagh’s Corporate Advisory group, Dan Jones, says the exemption is a necessary first step in putting the New Zealand financial advice regime on equal footing with overseas regimes, and may provide particular assistance to New Zealanders in KiwiSaver.

India

How P2P lending can be a route to creating financial inclusion (Daily News & Analysis), Rated: A

For years, banks have had a monopoly in lending money to businesses and individuals. However, the 2007-08 financial crisis created a havoc, rapidly-expanding the funding gap. This led to the advent of a niche fintech vertical, peer-to-peer (P2P) lending.

The geographical reach of a P2P lending platform is far superior, with the major differentiator being its online interface. Such digital financial services play an important role in supporting the objective of financial inclusion. Anybody, from the remotest areas, having access to internet, can be eligible to get/give a loan.

In the age of digitisation where almost everyone has access to internet, such platforms have the potential to change the financial graph of a country.

Are P2P platforms safe for lending and borrowing? (India Times), Rated: B

While banks and non-banking finance companies (NBFC) are the readily available sources for loans, who does the P2P platform cater to? “Unfortunately, banks in India follow mediocre credit assessment policies which are suited only for borrowers who can offer collateral or have an impeccable credit history. In practice, majority of the borrowers lie in between these extremes. Therefore, majority of Indians can borrow on P2P platforms,” says Raghavendra Pratap Singh, co-founder, i2ifunding, an online P2P lending marketplace.

RBI has put a cap on the amount that can be borrowed and lent. The aggregate exposure of a lender or the maximum that one may borrow at any point of time, across all P2Ps, shall be capped at Rs 10 lakh. Even the exposure of a single lender to the same borrower, across all P2Ps, shall not exceed Rs 50,000 and the maturity of the loans shall not exceed 36 months. “More clarity from RBI is expected on how the regulator intends to monitor the compliance of this aspect and how it will fix the responsibility,” says Singh.

Risks for a lender
Since this is an unsecured loan where there is no face-to-face interaction, a P2P lender needs to be aware of the risks involved. Bubna says, “All investments involve risk. However, in comparison to equity or commodity market investments or real estate, P2P lending has lower risk as it is addressed by on-boarding high quality borrowers. Further, lenders are suggested to create a diversified portfolio of loans.”

Asia

Introducing ACE, Crowdo’s New Artificial Intelligence Due Diligence System (Crowdfund Insider), Rated: A

Crowdo, a South East Asian online marketplace for P2P lending and crowdfunding unveiled today its proprietary Artificial Intelligence driven due diligence system, Crowdo ACE, aimed at benefiting both their borrowers and investors. Crowdo ACE takes into account a few thousand unconventional and alternative attributes and represents a new way to perform due diligence versus traditional means used by conventional financial institutions. It has already been applied to process more than 3,000 loans.

In a largely-unbanked Indonesia, Amartha uplifts women micro-entrepreneurs (YourStory), Rated: A

Twenty-six people, four nationalities, 10 days. Travelling across Southeast Asia as a Startup AsiaBerlin Roadshow delegate to explore startup ecosystems was an experience unto itself.

Amartha has so far disbursed over $13 million to 60,000 women micro-entrepreneurs and aims to improve their income, and ultimately quality of life.

Aria: Amartha is an Indonesian financial technology startup that focuses on providing affordable financial access, and mentorship to the unbanked population living below the poverty line. Amartha operates much like a peer-to-peer lending platform, and so far, has disbursed more than $13 million to 60,000 borrowers. The borrowers are mostly women micro-entrepreneurs and Amartha aims to improve their income, and ultimately alleviate their status through financial inclusion.

Aria: When we started operations in April 2016, we disbursed $40,000 a month. By the end of 2016, we were disbursing $800,000. Today, on average, we disburse $2.5 million per month. So far, we have disbursed more than $13 million, across more than 60,000 borrowers. The average ticket size of a loan now is around $300.

We charge a fee based on the profit sharing principle. Of the 22-30 percent annual interest rate paid by borrowers, we collect 11-13 percent for our revenue.

Africa

The Mauritian Financial Services Commission Issues Draft Peer-To-Peer lending Rules (Mondaq), Rated: AAA

Following the announcement of the Government on peer-to-peer lending and funding in the 2017-2018 Budget, the Mauritian Financial Services Commission (“Commission”) has issued draft rules on 10 November 2017 to regulate the peer-to-peer lending sector – as sector which has grown rapidly in other countries.

In the region, Kenya and Africa are leading in the peer-to-peer business lending market. According to a study conducted by the University of Cambridge, within Africa, South Africa had the largest number online alternative finance platforms, with $15 million raised in 2015 (The Africa and Middle East Alternative Finance Benchmarking Report, February, 2017).

Borrower and lender – a borrower must be a resident in Mauritius; however, there is no residency requirement for the lender.

Restrictions on amounts  Hence, a lender, who is a legal person, cannot lend more than MUR 500,000 (approx. GBP 11,000) in any 12 months’ period. A lender, who is a natural person, cannot lend an amount in excess of 10 per cent of his income or a maximum of MUR 300,000 (approx. GBP 6,600), whichever is lower, in any 12 months’ period.

Obligations of a P2P operator – the Peer-to-Peer operator must publish the following information on its website:

  • details of how the P2P lending will operate
  • measures to prevent money laundering and combatting terrorist financing
  • security measures to ensure data protection
  • dispute resolution mechanism.
Canada

Borrowell wins Deloitte Fast50 award (Borrowell Email), Rated: A

Borrowell has won a Companies to Watch award as part of the Deloitte Fast50 program. We are one of only eleven companies across Canada to win that award this year, and the only company from Toronto. Fast50 winners in the category for established companies include well-known names like Shopify, SkipTheDishes, Wave and Influitive. The list was announced an hour ago. 

Russia

Moscow Is On Its Way To Becoming A Smart City And Fintech Powerhouse (Forbes), Rated: A

Its citizens and businesses are also quick to adopt the latest disruptive technologies such as fintech and cryptocurrencies. Moscow has a 35 percent fintech adoption rate, higher than New York’s 33.1 percent.

Authors:

George Popescu
Allen Taylor

Monday December 19th 2016, Daily News Digest

Monday December 19th 2016, Daily News Digest

News Comments Today’s main news: Lending Club CTO resigns. Higher financing cost expected to be pushed to the borrower. Zopa lifts investment limits. Nigeria fintech startup Paystack raises $1.3M in seed money. Today’s main analysis: Novel underwriting criteria by SoFi in RMBS leads to a strong rating. Statistics of lending between friends and in families. Today’s thought-provoking articles: The rise […]

Monday December 19th 2016, Daily News Digest

News Comments

United States

United Kingdom

  • Zopa lifts investment limits. GP:” I didn’t expect this to last long. It did get Zopa some nice press. And I am glad it didnt’ last long. If it had lasted too long it would have been a bad sign.”AT: “That didn’t last long.”
  • Growth Street’s Sherwin-Smith says 34M GBP has been originated to date.
  • 25% fall out with friends over loans. GP:” Very interesting statistic : 1/4 or so of friends have a fall out over money.  And 3/4 of UK people polled lent money in the last 12 months and 4% lent more then 5,000 GBP. Inside friends and family loans estimated to 2.9bil GBP per year.”

European Union

Australia

India

Asia

Africa

  • Paystack raises $1.3M. GP:” We are pleased to cover the whole world and to see p2p lending and fintech growing everywhere.”

International

News Summary

 

United States

PeerIQ Weekly Industry Update (PeerIQ Email), Rated: AAA

In a widely expected move, FOMC officials increased the Fed Funds rate by 25 bps to a target range of between 50 and 75 bps. Higher financing costs on warehouse lines will reduce net interest margins for whole loan investors unless there is a commensurate rate increase for borrowers. Platforms are expected to pass on some or all of the increase in borrowing costs to consumers to demonstrate the resiliency of the business model to small changes in interest rates.

Much like the beginning of 2016, Fed officials expect several rate increases in the new year as the economy approaches full employment. However, we note that over the life of the current expansion officials have consistently over-estimated the pace of GDP growth and inflation and therefore the pace of rate increases has been slower than expectations.

We highlight two important benefits from issuer’s perspective for QM designation. Issuers are 1) insulated from claims and defenses by borrowers due to safe harbor, and 2) are not required to retain 5% of capital structure per the credit risk retention rule. Nevertheless, SoFi intends to retain risk in the transaction.

Collateral Quality of SFPMT 2016-1 is One of the Strongest in 2016

Unlike traditional RMBS underwriters, SoFi incorporates additional criteria such as Free Cash Flow (FCF) and Real Excess Cash Flow (REC) into its underwriting process. REC measures a minimum residual income after payment of housing expenses, taxes, debt obligations, and estimated discretionary and cost of living expenses based on the borrower’s location. SoFi assesses the borrowers’ liquidity position to ensure that they have consistent cash excess including their mortgage payments.

Besides this novel underwriting criteria, SFPMT 2016-1 also has a number of strong collateral characteristics that mitigates potential credit risk. For instance, its collateral pool has one of the lowest weighted average loan-to-value (LTV) and debt-to-income (DTI) ratios amongst recent prime jumbo deals.

Fed Fund Rate Hike led to Wider Pricing for SFPMT 2016-1

The Federal Reserve on Wednesday sent its key short-term interest rate up by a quarter of a percentage point. FNMA 30yr conventional loan pool with 3.0% coupon trades around at 3.3% yield today vs 2.6% yield a month ago. Due to the recent interest rate hike and other factors, SFPMT 2016-1 was priced wider than other recent comparable transactions. For instance, the Sequoia deal SEMT 2016-3 was priced over 100 basis points tighter over a month ago due to changes in the rate environment and other factors.

Orchard Weekly Online Lending Snapshot (Orchard Platform), Rated: AAA

Many banks were quick to announce an increase in their prime lending rates, and while we expect that some online lenders will follow suit, as of this writing we have not seen similar announcements. While 2016 has been a turbulent yearfor some online lenders, we expect the acceleration in positive deals and increased interest from traditional lenders looking to participate in the space will continue into 2017.

Why Lenders Should Embrace Alternative Credit Scores (National Mortgage News), Rated: AAA

It may take time and regulatory easing for depositories to emulate organizations like SoFi in transitioning to a “FICO-free” credit scoring model, but there is definite merit in leveraging alternative models to tap into a significantly underserved (yet creditworthy) segment of the population. Developing an alternative credit score or leveraging existing models enables a lender to penetrate this overlooked market and gain new consumers at a time of increased competition and reduced profit margins.

An Experian study estimated that 64 million consumers in the United States do not have a FICO credit score. Further, Vantagescore assessed 10 million of these so-called “unscoreable” consumers as prime or near-prime consumers, while another significant percentage have steady jobs and/or low liability levels. Clearly, there is a need to determine creditworthiness outside of the traditional models.

The traditional underwriting process can also be enhanced by leveraging nonconventional variables such as credit card transactions, social media presence and utility bills. This can potentially reduce credit risk through expanded risk modeling and monitoring. Lenders should consider back testing alternative scoring models as a challenger to compare against the FICO model in a champion-challenger sandbox environment.

Alternative credit scoring presents tremendous opportunities, but it is not without risks and challenges.

THE RISE OF INSURTECH IN THE AGE OF ALGORITHMS (Data Economy), Rated: AAA

As in banking, peer-to-peer is hot in insurance with older players like Friendsurance and also newcomers such as Lemonade, InsPeer, InSured, and Teambrella. Each promises insurance that is more transparent and social with shared costs – things that have wide appeal in today’s market where customization is king.

Another interesting area in insurtech is item-specific, event-specific, and on-demand coverage – “smart insurance.” Startups in this space collect data about a customer’s possessions and provide machine-learning enhanced risk pricing for single-item coverage of any duration. This model allows premium levels to scale down to pennies with durations down to the second for completely customized coverage.

Of course, even when insurance companies partner with IoT manufacturers, the question still remains: who owns the customer relationship? For complete control of the customer experience and customer proximity, it’s essential that today’s insurance companies embrace the age of algorithms and better leverage IoT technology and big data to drive innovation.

Insurance can’t continue to simply partner with IoT manufacturers for long – they have to lead the movement. This means appropriating the very tools giving their new competitors an advantage in both IoT and non-IoT spheres: big data and algorithms. By leveraging IoT technology to gather more data about customers’ homes, cars, and even the people themselves, insurance companies can then better use real-time data, predictive modeling, and machine learning to create new business models and new offerings for clients.

Current startups in the space are proving that the age of algorithms is a positive development for the insurance business itself and for its customers, who are looking for more options, flexibility, and transparency, all of which IoT and big data analysis can offer.

Fitch Expects to Rate SoFi Inaugural Residential Mortgage Backed Securities (Crowdfund Insider), Rated: A

Fitch shared last week its intent to rate SoFi’s RMBS transaction that included 270 loans with a total balance of approximately $168.79 million. The group of loans consists of prime fixed-rate mortgages originated on the SoFi online lending platform.

Fidelity gives BlackRock an early leg up in robo advice brawl (Reuters), Rated: A

Fidelity Investments unintentionally boosted BlackRock Inc’s prospects as a robo adviser with a small investment in a start-up company that BlackRock bought last year for an estimated $150 million.

BlackRock and Fidelity are only in the early stages of what is shaping up as a battle royale to become the go-to provider of cheap automated financial advice over the Internet.

Although rivals currently dominate the robo advising space, investment behemoths Fidelity and BlackRock are expected to grow quickly. BlackRock’s FutureAdvisor now has more than $1 billion in assets under management, while Boston-based Fidelity’s digital wealth manager, Fidelity Go, is still getting off the ground, with only a nominal amount of assets. Fidelity has yet to launch a full marketing campaign.

Still, Fidelity could overtake BlackRock next year because it has a built-in advantage that many rivals, including BlackRock, do not have: an online brokerage with 17.4 million retail accounts. Some 96 percent of those accounts don’t currently have any sort of management and Fidelity is ideally placed to woo them over to Fidelity Go.

Meanwhile, the U.S. robo industry’s early leader is Vanguard Group. Its robo business has 60-percent market share with $41 billion in assets. Charles Schwab Corp, which has 7 million fewer brokerage accounts than Fidelity, is No. 2 with $10.2 billion in assets after only 19 months since launching its robo product. Click here for a list of the top U.S. robo advisers: (tmsnrt.rs/2hy0z4S).

Lending Club CTO Resigns (Crowdfund Insider), Rated: A

Lending Club (NYSE:LC) filed an 8K yesterday indicating that Chief Technology Officer John MacIlwaine had submitted his resignation on December 15th. MacIlwaine decided to depart from Lending Club to pursue another opportunity.  Lending Club stated that Richard Southwick, Senior Vice President for Technology, will oversee the Company’s technology development and operations while they conduct a search for a new Chief Technology Officer.

Fast-cash loans are wild west for small business (App.com), Rated: A

As a result, these new lenders can – and often do – charge sky-high interest rates and pile on fees, often hidden from the borrower. A short-term loan can turn into a long-term nightmare.Some problems identified in the Harvard Business School report:

  • High costs. Lenders commonly charge APRs (annual percentage rates) above 50 percent and can easily reach over 300 percent.
  • Double dipping. Repeat borrowers incur additional fees each time they renew their loans.
  • Hidden prepayment charges. Unlike traditional loans, many alternative lenders require payment of the full interest even when loans are repaid early.
  • Misaligned broker incentives. Small-business loan brokers often recommend the most expensive loans because they earn the highest fees on those.
  • Stacking. Multiple lenders provide loans to the same borrower, resulting in additional and hidden fees.

What the Harvard Business School Report recommends:

  • Mandatory disclosure of APRs, fees, default rates and borrower satisfaction.
  • A national regulation option – rather than state-by-state.
  • Increased borrower protections for small-business owners.
  • Rules/guidance on partnerships between banks and new lenders.
  • Brokers/platforms to have a “fiduciary” duty toward borrowers, meaning they must act in the borrowers’ best interests and disclose conflicts of interest.

Bizfi Joins Forces With LendingTree For Small Business Grant Contest (Crowdfund Insider), Rated: A

Less than a week after LendingTree launched its $50,000 small business grant contest; Bizfi announced it has teamed up with the online lender for the contest. According to Bizfi, LendingTree is one of the 45 funding partners of its marketplace for small business finance.

Peer-to-Peer Lending Market – Top Vendors (SAT PR News), Rated: A

The research report published by Transparency Market Research states that the opportunity in the global P2P lending market was worth US$26.16 bn in 2015. Analysts predict that the market valuation will reach US$897.85 bn by 2024, as it expands at a significant CAGR of 48.2% from 2016 to 2024.

The reducing interest in conventional banking, increasing dependency on online platforms, and recent history of financial crisis in this region has prompted P2P lending market to take lead cater to the unmet financial demands of the population. Meanwhile, the P2P lending market is estimated to show rapid progress in Asia Pacific. The emerging economies of China, India, Japan, and Australia will make a significant contribution to the rise of this market in Asia Pacific. The primary growth driver for this region will also be small businesses that will seek financial alternatives to fund their projects.

Even Financial’s Phill Rosen on P2P Lending Industry’s Future: I Think We Will See Some Consolidation in the Space (Crowdfund Insider), Rated: A

Earlier this week, fintech firm Even Financial announced it increased loan originations by 205% quarter over quarter since the beginning of 2016 and surpassed $1.5 billion in loan requests. The company has experienced solid growth since it was founded in 2014.

Crowdfund Insider: What borrower categories are you seeing the most interest on EVEN?

Rosen: Aside from debt consolidation which is the top purpose across the industry, we see high demand in weddings, auto and home improvement

Crowdfund Insider: What is the average size loan requested?

Rosen: Across all purposes, $10,551.00

How to earn interest on your Bitcoin – P2P Lending with Bitbond (Deep Dot Web), Rated: A

Before we start, a few guidelines would be to stay away from any model that offers ridiculous interest rates like 1% per day or 10% per month. The same can be said for any model that is not transparent on how they get this interest or that simply state that profits comes from trading. Finally, do your research. A simple google search can make the difference.

Bibond is a peer-to-peer lending website that allows you to lend both Bitcoin and national currencies for an interest. The major difference between the two former websites (Poloniex and Magnr) and Bibond is that with Bibond you’ll be lending your funds directly to other users. There is no failsafe mechanism for stopping users from taking your money and leaving. Forever.

However, this isn’t the norm as users are required to reveal their personal information and to back it up with the ownership of social media accounts, ebay, and so on. The borrowers are ranked from A to F according to risk. The lower the risk, the lower the interest you’ll receive and vice-versa.

In the case of an unpaid loan, Bibond will provide you with all the necessary information to take legal action agains the borrower or Bibond will sell the claim for the loan to a debt collection agency. The latter is usually better for lenders but it requires the amount to be above a certain threshold which varies according to the location of the borrower (usually 1.0 BTC or more in the developed world and 0.5 BTC or more in emerging markets).

Social impact investing is an alternative way to do good (MarketWatch), Rated: A

In most cases, the investments are still limited to the wealthy or accredited investors, but that is changing, and crowdfunding is expected to alter the playing field even further. Calvert Investments, for example, offers a high social impact investments program in which investors can put as little as $20 into local projects.

For non-accredited investors looking for other options to invest for social impact, Hoyt mentions Kiva.org, which offers peer-to-peer lending through zero-interest notes and CuttingEdgeX, a clearinghouse listing direct public offerings for social enterprises needing to raise capital.

United Kingdom

Zopa’s investment limit lifts (altfi), Rated: AAA

Zopa, the original peer-to-peer lending platform, has lifted its recently enforced platform limit. The firm is once again accepting new money transfers, with £4.2m in capacity.

Although the investment limit has been temporarily lifted, Zopa’s usual run-rate would suggest that the £4.2m of space will be filled within a few short days. Zopa has lent out £56.9m during the past four weeks.

Growth Street’s James Sherwin-Smith: Over £34M Has Been Matched on Platform to Date (Crowdfund Insider), Rated: A

Growth Street announced last week it would not accept individual retail investors on its peer to peer lending platform. They may do this now as they are an FCA registered Appointed Representative pursuant to a partnership with another firm. 

Crowdfund Insider: What makes Growth Street stand out from other peer-to-peer lending platforms?  

Sherwin-Smith: Growth Street is the only P2P platform offering revolving credit, which we provide in the form of secured business overdrafts. Borrowers share their performance data with Growth Street on an ongoing basis.

Loan Danger: 25% Fall Out With Friends Over Money (Voice-Online), Rated: A

ALMOST ONE in four of us have fallen out with friends over money issues and 42% have lent money to a friend only for it never to be returned, according to new research out today.

The study found that 74% of us have lent money over the past 12 months, with half of us lending up to £500 and nearly one in 20 (4%) having lent over £5,000.

The UK social lending industry – loans between friends & family – is estimated to be worth over £2.9 billion a year.

Most (95%) of us have never charged interest to anyone we know, but half would consider doing so and feel it is acceptable to charge interest to those that we personally know (47%).

European Union

Popular Fintech Companies in France (TechBullion), Rated: B

Younited Credit is one of the biggest fintech start-ups in France, operating peer-to-peer lending platform recognized by the French central bank.

Lendix is an online marketplace for business loans, allowing investors to advance money directly to SMEs.
Ulule is a leading crowdfunding site created by Thomas Boucherot and Alexander in 2010. Since its launch, the company has funded thousands of projects in many fields, from music creation to audiovisual.

Founded by Ombline Lasseur, Adrien Aumont and Vincent Ricordeau in 2009, Kisskissbankbank provides a crowdfunding platform for athletes, humanists, and creatives to raise funds for their projects.

Created in 2012, SmartAngels is a crowdfunding platform that allows retail investors and professionals to fund start-ups and SMEs.

Founded in 2007, MyMajorCompany allows music fans and internet users to invest in their preferred artists’ projects.

Ledger is a start-up that combines its strong expertise in smart card, cryptography, security,  and embedded hardware. The launch of a hardware wallet, Ledger Nano, in over  80 countries established the company as a reference in the global bitcoin ecosystem.

Founded in 2011, Paymium is a European web-based exchange that allows all bitcoin transactions between traders and consumers.

Founded in 2012 by Camille Tyan and Antoine Grimaud, PayPlug is  the first service in France to allow small merchants and professionals to accept credit card payments with simple tools, no monthly costs, and signup fee.

Fundovino is the first crowdfunding platform devoted to the world of wine.

Weeleo is a P2P platform that enables the exchange of cash currencies.

Australia

REST’s industry-first online super advice product gives members ‘mobile first’ access to personalised financial advice (Professional Planner), Rated: AAA

REST Industry Super today became the first Australian super fund to provide its 1.9 million members with ‘mobile first’ access to personalised financial advice with the launch of the REST Advice Online platform.

REST Advice Online is delivered on Midwinter’s next generation Advice Operating System (AdviceOS) and provides REST members with the ability to receive instant financial advice and make immediate changes to their super account from any mobile device.

The digital advice offering leverages Midwinter’s Digital Advice technology which means that regardless of which method REST members choose to receive advice (phone based, web chat or self-service), it is delivered, recorded and processed from the same integrated advice system.

Hayden steps into new COO role (Australian Broker), Rated: B

Digital home loan marketplace HashChing has appointed Siobhan Hayden, former CEO of the Mortgage & Finance Association of Australia (MFAA), as its new COO.

India

Uberisation disrupts multiple sectors (Times of India), Rated: B

The financial services industry is also undergoing transformation with digital. Crowdfunding startups like Ketto and Wishberry and peer-to-peer lending platforms like Faircent, Lendbox and i2ifunding are offering platforms to connect people who have a cause or a financial need with those who have excess funds to lend.

Asia

Vietnam: P2P lending startup Tima gets funding from Singapore investor (Deal Street Asia), Rated: AAA

Vietnamese P2P lending startup Tima has closed a US dollar 7-figure series A funding from a Singapore fund to accelerate service growth in the local market, a senior executive of the company told this portal.

Launched in 2015, the platform has seen cumulative money from its lender partners reach over VND2.5 trillion ($115.45 million).

About 80 per cent of loan seekers based in Vietnam do not have prompt access to financial services, says a World Bank report. P2P lending, still a fledging business in the country, is said to be a solution in addressing this gap.

In Vietnam, fintech has started to emerge as one of the most favourite verticals for startups and investors, fueled by the increasing mobility yet unbanked population in the country.

Africa

Nigerian Fintech Startup Paystack Raises .3 Million (Forbes),Rated: A

Paystack, one of Nigeria’s most hotly anticipated tech start-ups, has just secured $1.3M Seed investment from both international and homegrown investors. The company, founded by Shola Akinlade and Ezra Olubi, initially caught the eye of industry commentators as it was one the first Nigerian tech company to be accepted into the world-famous Y Combinator progam, based in Silicon Valley. Since then, having taken Paystack through Private beta, and securing $120,000 early-stage investment from Y Combinator, Akinlade [CEO] and Olubi [CTO] have quietly been building the company, working to secure this Seed investment round, whilst also building a network of partner merchants in Nigeria, over 1,500, who are now using the platform to accept online payments.

International

6 Fintech Players Changing the Face of Global Payments (Business2Community), Rated: A

A leading mobile payments company, iZettle offers small businesses portable point-of-sale solutions as well as free sales overview tools. This allows any individual or merchant to take card payments anywhere, anytime.

Another player in this space is Klarna, a Swedish e-commerce company that supplies payment services for online storefronts. The Klarna system eliminates the risks for buyers and sellers by taking over stores’ payment claims and by managing customer payments.

Consumer to business payment fintech is increasingly well established. But some fintech firms are looking to facilitate business to employee payment services.

Doreming, for instance, focuses on financial inclusion for workers, an emerging theme for fintech firms, with the World Bank estimating that 2.5 billion adults worldwide are excluded from traditional banking services.

Adyen is a multichannel payment company outsourcing financial transfer services to international merchants giving them a single solution to accept payments anywhere in the world.

Azimo is also an international money transfer service harbouring a large digital network that allows customers to send money to over 190 countries, from any internet-connected device.

Microfinance fintechs are riding a wave of popularity with their social media partners and increasingly facilitating the online sharing community. For example, Flattr, a fintech founded in 2010, enables users to ‘flattr’ creators for their digital content by clicking the Flattr-button next to their content. Each month, you add money to your account and at the end of the month your monthly budget is divided between all the things you flattered and sent to the creators.

Authors:

George Popescu
Allen Taylor

August 3rd 2016, Daily News Digest

August 3rd 2016, Daily News Digest

News Comments Today’s news are focused on the monthly volume data published below. In the UK we see the 1st crowdfunding platforms slowdown in five years. And in China, we learn that P2P platforms, apparently, need to have a very tough to get bank relationship to continue doing business in 18 months. International July 2016 […]

August 3rd 2016, Daily News Digest

News Comments

  • Today’s news are focused on the monthly volume data published below. In the UK we see the 1st crowdfunding platforms slowdown in five years. And in China, we learn that P2P platforms, apparently, need to have a very tough to get bank relationship to continue doing business in 18 months.

International

  • July 2016 volume numbers are in. We made a list of companies who stand out either for good growth or major decrease. Notice : we can not guarantee the accuracy of the volume numbers.

United States

United Kingdom

Australia

New Zealand

China

International

International P2P Lending Marketplaces – Loan Volumes July 2016, (P2P-Banking), Rated: AAA

P2P Banking publishes monthly volumes for p2p lenders.  Please note that the information is not guaranteed and P2P Banking has made relatively large mistakes in the past. Example: LendInvest in May 2016 was reported as a 80% decrease from April while as it was not the case.

For July 2016: Zopa leads ahead of Funding Circle and Ratesetter. Assetz Capital and Lendinvest achieved a big surge in volume. The total volume for the reported marketplaces adds up to 341 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file I can publish statistics on the monthly loan originations for selected p2p lending services.

Comments:

Negative stand out:

  • LandBay decreased 62% 
  • Folk2Folk 38% 
  • Kokos -90% 
  • ThinCats -37% 
  • Wellesley -33% 

Positive stand out:

  • Assetz Capital +460% , 13.9m EUR/month origination last month.
  • Funding Circle +1% vs same month last year.
  • LendInvest +14% vs last year’s month.
  • Mintos +523% vs last year’s month and last month volume of 6.9m EUR
  • MoneyThing +462% and last month volume of 3.6m EUR
  • Twino 7.2m EUR last month and huge growth

 

 

 

United States

National Charter May Be the Devil Marketplace Lenders Don’t Know, (Bloomberg BNA), Rated: A

For some online marketplace lenders, the devil they know might look better than the devil they don’t when it comes to proposals for federal bank regulators to issue national charters to financial technology companies.

The issue surfaced in March, when Amy Friend, senior counsel for the Office of the Comptroller of the Currency (OCC), said at a conference in Washington that the agency had fielded inquiries from fintech companies about obtaining a national charter tailored to their needs. Since then, the concept has come up repeatedly at industry conferences and elsewhere. At an OCC-sponsored event in Washington June 23, for example, Maryann Kennedy, deputy controller for large bank supervision, said the agency was forming a committee to examine the question.

A charter for a non-bank fintech company that provides financial services would be modeled to some degree on the charters the OCC issues to banks. A key feature of the bank charters that a marketplace lender potentially would value is “pre-emption:” A national charter would establish a single set of nationwide standards that a company would have to meet, overriding the necessity of complying with an array of state standards.

The danger in a national charter is that it would effectively represent the law of the land, with little or no room for maneuvering by the lenders.

Much of the testimony at the July 12 hearing involved a separate issue agitating marketplace lenders: whether federal regulators should continue to treat loans of $100,000 or less to small businesses — loans that make up the overwhelming majority of small-business borrowing — as business loans, or to treat them as consumer loans, which are subject to many more rules on disclosure and other factors.

The OCC has not disclosed what might be regulated by a national fintech charter, nor little else about its ongoing evaluation. The agency also has not said if it will decide to offer the charters, or when it might make that decision.

Negative interest rates creating increased anxiety, (Bloomberg), Rated: AAA

Sovereign bonds are supposed to be the safest investments in the world, but according to Bill Gross, one of the best-known investors in the world, sovereign bonds are now too risky:

[Begin quote]”Sovereign bond yields at record lows aren’t worth the risk and are therefore not top of my shopping list right now; it’s too risky. Low yields mean bonds are especially vulnerable because a small increase can bring a large decline in price.”[End quote]

This was supported by a release from Fitch Ratings:

[Begin quote]”This year’s dramatic fall in yields on bonds issued by investment grade sovereigns has again raised the risk that a sudden interest rate rise could impose large market losses on fixed-income investors around the world, Fitch Ratings says. A hypothetical rapid reversion of rates to 2011 levels for $37.7 trillion worth of investment-grade sovereign bonds could drive market losses of as much as $3.8 trillion, according to our analysis.”[End quote]

Most people look at the stock market, and think that everything is rosy, but there’s a lot going on that isn’t reflected in the stock market. In 2007, it was the collapse of the real estate bubble and, more importantly, the disastrous collapse of collateralized debt obligations (CDOs) backed by subprime mortgages. The disaster had already occurred before the stock market started falling.

Bloomberg columnist Lisa Abramowicz on TV on Wednesday commented on the warnings from Bill Gross and Fitch (my transcription):

[Begin quote]”There’s a high level of concern about how sustainable all of this is – when profits are declining, when you have growth slowing, when you have stimulus efforts that are not working and that are running out of steam — how long can this last? But at the same time, it’s very hard to see what could reverse it. The only thing that people possibly can point to is inflation, or if some country decides not to pay back their debt, or just forgive it, or come up with some kind of engineering that creates a technical problem.”[End quote]

According to Abramowitz’s contacts, the only thing that can stop the current plunge in bond yields is for some country to decide not to pay back their debt — essentially to declare sovereign bankruptcy. In other words, there’s a major financial crisis coming no matter what.

Medallion Financial Corp. Reports 2016 Second Quarter Results, (Business Wire), Rated: AAA

Medallion Bank anticipates entering into a new line of business developing relationships with marketplace lending platforms.

Consumer loans originated by Medallion Bank were stronger than expected. In June alone, nearly 2,500 loans were funded for over $45 million in volume
Medallion Bank’s six month’s earnings increased by 39%
Managed assets reached $1.760 billion, including $1.159 billion at Medallion Bank, both all-time highs

Man claims Marlette Funding LLC made harassing phone calls to collect alleged debt, (West Virginia Record), Rated: A

Jeffrey Warren filed a complaint on July 7 in the U.S. District Court for the Southern District of West Virginia against Marlette Funding LLC alleging violation of the West Virginia Consumer Credit and Protection Act and the Telephone Consumer Protection Act and other counts.

The plaintiff requests a trial by jury and seeks compensation for all damages, costs of litigation, attorney’s fees and such other relief as the court shall deem just and proper. He is represented by Daniel Armstrong and Benjamin Sheridan of Klein & Sheridan LC in Hurricane.

Banks are rolling out personalized customer experiences, (Tradestreaming), Rated: A

Customer satisfaction with big banks has surpassed levels with midsize banks for the first time this year.
17 percent of large banks reported implementing contextual, personalized insights and solutions to consumers.

Considering the high cost, it isn’t surprising that big regional or national banks have the lead in this arena. 17 percent of big regional or national banks reported implementing contextual, personalized insights and solutions to consumers, compared to only six percent of community banks and 2 percent of credit unions, according to Digital Banking Report’s  The Power of Personalization in Banking. More than 50 percent of each category reported having a basic level of digital prowess with plans to increase future investments in digital.

There are some estimates of ROI on digitization of banking services. McKinsey identified several areas of digitization that drive more profitability than others. These areas include product back office automation, digitization of document management, automation of credit decisions, and big data analytics applied to sales campaigns.

What brokers lost by focusing so much on the desktop experience, ( TradeStreaming), Rated: A

Sticky products build engaged audiences.

That’s why Yahoo Finance continues to get a firehouse of traffic. For those of us who built our portfolios on the site ten or more years ago, that’s enough of a reason to go back. We’ve invested enough of our time and energy into the service that leaving it becomes difficult.

The thing is, as internet usage has shifted from desktop to mobile, so should trading volumes.

It isn’t enough for a broker to just recreate a web experience on mobile, either. Today’s users don’t want non-native apps. People want to feel that an app is trustworthy and vetted through the Apple Store. According to comScore, 87 percent of all time spent on mobile in the U.S. was spent in mobile apps.

United Kingdom

Brexit blamed for fall in crowdfunding deals, (FT), Rated: AAA

Crowdfunding platforms have experienced a slowdown in deal flow for the first time in five years, in a sign that “armchair investors” are taking a more cautious approach to alternative investments.
However, the number of investments offered online fell 17 per cent in the first half of 2016, compared with levels seen in the last half of 2015, according to research company Beauhurst. The fall follows 10 consecutive half years of growth in terms of the number of deals offered to investors.

Beauhurst’s head of research Pedro Madeira said the slowdown in crowdfunding was “particularly noteworthy”.

Beauhurst’s data also show that venture capital and private equity firms slowed investment into UK start-ups and high-growth companies in the same period.

Bruce Davis, spokesman for the UK Crowdfunding Association (UKCFA), the trade body of crowdfunding platforms, said the dip in deals offered was just “a pause”. The UKCFA said it was confident deal numbers would begin to grow again.

RateSetter to close 3-year market, (Alt Fi News), Rated: AAA

RateSetter says that demand for its 5 year product is the primary impetus behind the planned closure. The 3 year market has become less and less popular ever since the platform introduced its 5 year offering, and now accounts for less than 5 per cent of new investments. The company says that investors have voted “with their wallets” and that they clearly prefer to lend in the 5 year market. The 5 year market currently pays a rate of 5.7% per annum, with the 3 year sitting at 4.0%.

TISA launches P2P forum, (Mortgage Finance Gazette), Rated: A

The Tax Incentivised Savings Association (TISA), the trade association working with the retail financial services industry, has launched a peer-to-peer lending forum to enable those in the sector to develop policy recommendations for regulators and legislators, address operational challenges and determine best practice.

Initially the peer-to-peer forum will concentrate on four key areas:

-Building an effective dialogue with the FCA, HMRC and HM Treasury

-Developing standardised terminology, operational technology, data governance principles and best -practice

-Enhancing accessibility to the sector by improving the understanding of intermediaries, discretionary managers, consumers and related parties including PI insurers

-Identifying unintended regulatory and technical blockages – for example in relation to the inclusion of P2P within SIPPs – and proposing solutions

Fintech investor joins Fidelity’s venture push, (Financial News), Rated: A

A former fintech investor at Accel Partners, who was involved in high-profile investments in WorldRemit and Funding Circle, has joined the London-based proprietary investment arm of Fidelity International as it seeks to strengthen its European business.

GLI Finance Hires Two Senior Executives, (Crowdfund Insider), Rated: B

GLI Finance Limited (LSE:GLIF) has announced the hiring of two senior executives. Russell Harte has been appointed Chief Operating Officer and Steven Simpson has been selected as the Head of Group IT.

Harte is a Chartered Accountant with extensive general management experience. His recent roles have included being Finance Director of Liberty Holdings Limited, a JSE listed long-term insurer, where he played a key role in the turnaround of that business. Most recently he was CFO of Standard Bank Jersey Limited. Simpson is currently Head of IT at one of GLI’s subsidiaries Platform Black.  He has over 25 years of experience in the design, implementation and administration of secure and highly-available enterprise and web-based solutions for corporate customers across various sectors including finance and telecoms. Russell and Steven will join the senior management team. Russell will report to the Group CEO and Steven will report to Russell.

GLI has been going through a period of change as Whelan took over the Chief Executive role at the very beginning of 2016.

Australia

Disruptive partnership forms between two Australian platforms, (Alt Fi), Rated: A

ThinCats Australia has joined forces with DomaCom, a soon to list real estate equity investment platform.

The partnership will involve using ThinCats loans in order to gear properties on the DomaCom platform. This may be the first time that a peer-to-peer lending company and real estate equity investment platform have collaborated in this way.

The ThinCats partnership may also open up future investment opportunities for investors across the two platforms. Naoumidis said: “This also provides the 350 lenders on the ThinCats platform the opportunity to gain exposure to property assets and the ability to lend funds at an attractive interest rate with a lower risk profile.”

New Zealand

Profiling the typical ‘peer-to-peer’ investor, (Stuff), Rated: A

Investor Tom Enright was the first person to invest through LendMe, a peer-to-peer property lender.

He invested $542,000 by funding a fully-secured residential mortgage loan on an Auckland property, getting a 7.84 per cent return on his money.

There are four peer-to-peer businesses: LendMe  (direct secured property lending), Harmoney  (unsecured personal loans), Squirrel Money (diversified secured property lending), and Lending Crowd (focus on secured car lending). Harmoney is by far the biggest peer-to-peer lender with $275m of loans made.

Figures from Harmoney  show most peer-to-peer lenders are 50 or under, with 41 being the average age.

REASONS TO BE A PEER-TO-PEER INVESTOR

Harmoney says people invest in peer-to-peer because:

– They are looking for an investment that could offer regular repayments over time. This includes people trying to generate income to live off

– They are spreading risk by putting a percentage of their portfolios into consumer lending.

– They understand they are taking the risk of a loan defaulting, but believe the risk is manageable and the return fair.

– They enjoy the process of lending.

China

Failing Grade: Many Chinese P2P Lenders Do Not Meet Government Requirements, (Crowdfund Insider), Rated: A

According to ECNS, the majority of P2P platforms have not yet established a relationship with a bank as a fund depository agent. Even though 149 P2P sites had signed agreements with banks “few had materialized.” Overall only 48 P2P lenders or just 2% of these online lenders have qualified, according to  Shanghai Ying Can Investment consulting.  These 48 platforms were some of the largest platforms in the country. These same platforms are poised to benefit by the additional regulatory scrutiny as undercapitalized and poorly managed P2P lenders may leave the market.

Chinese regulators are allowing a transitional period of 18 months for P2P lenders to adopt the new requirements. It will be interesting to see what happens after that.

P2P Finance in China: Why Firms Need Better Risk Controls, (Knowledge @ Wharton, UPenn), Rated: AAA

Since 2015, many P2P platforms including Ezubao, the Dada Group, the Kuailu Group, the Zhongjin Group and others have been charged with illegal fundraising, involving tens of billions of yuan. This is not confined to China. In May, the U.S. Treasury Department released a report criticizing the peer-to-peer (P2P) lending business and recommended it be more tightly regulated.

According to the industry website WDZJ.com, China’s P2P online finance industry reached 2.036 trillion yuan (about $300 billion in transaction volumes) by the end of May 2016. It took seven years to reach its first trillion yuan and just seven months to reach the second trillion.

Take the Lending Club in the U.S., for example. It originally hoped to evaluate personal risk based on data extracted from Facebook, Twitter and other social platforms. That is in America, which has much more sophisticated credit investigation and personal data systems than in China. So you can imagine a large amount of P2P business based on personal credit in China will meet trouble in operation if there is no appropriate risk control system in place.

“There is one feature of the finance industry — the one that grows the fastest, will also collapse the fastest.”

Author:

George Popescu

July 27th 2016, Daily News Digest

July 27th 2016, Daily News Digest

News Comments Today we have a very long US section, I guess we are compensating for yesterday. Quite a few very interesting pieces of info. And a fun Chinese section as well. Do note the fund raises in P2p in China despite the overall doom and gloom feeling. Reminder 1 USD  = 6.67 RMB United […]

July 27th 2016, Daily News Digest

News Comments

  • Today we have a very long US section, I guess we are compensating for yesterday. Quite a few very interesting pieces of info.
  • And a fun Chinese section as well. Do note the fund raises in P2p in China despite the overall doom and gloom feeling. Reminder 1 USD  = 6.67 RMB

United States

United Kingdom

European Union

China

News Summary

United States

Elevate Announces 5 Million Expanded Credit Facility from Victory Park Capital, (Business Wire), Rated: AAA

Comment:  Elevate was planning an IPO early 2016. See below.

Elevate, a provider of innovative online credit solutions for non-prime consumers, today announced it has increased its credit facility with Victory Park Capital (VPC), a privately held registered investment advisor dedicated to alternative investing, by an additional $100 million to a total of $545 million. The company will use the additional capital to support the rapid growth of its credit products in the U.S. and U.K. and for further investment in its suite of online credit solutions.

Despite market turmoil in the online lending space over the past few months, Elevate has continued to benefit from high consumer demand for its products and has experienced year-over-year loan portfolio growth of more than 80% since Q1 2015,” said Ken Rees, CEO of Elevate. “We believe that more responsible non-prime credit products like RISE, Elastic and Sunny are making a positive difference in the lives of our customers who often struggle with limited financial options. This expanded credit facility with Victory Park Capital will help us continue to serve this growing consumer need.”

Old article, context relevant: This Should Be The First Tech IPO of 2016, (Fortune), Rated: AAA

Comment: article published January 11 2016.

Elevate Credit has improving financials, but regulatory risks.
Elevate Credit, a Texas-based provider of online credit solutions to non-prime consumers, on Monday said that it plans to offer 3.6 million shares at between $20 and $22 per share. It’s the first company to set an IPO range so far this year, and likely will attempt to price before the end of January.

Elevate was formed in 2014 as a spin-out from Think Finance, which had been founded in 2001 to provide analytics and tech services to “lenders looking to meet the needs of Americans underserved by today’s traditional banking system.” Elevate represented Think’s branded consumer lending products group, including Rise(installment loans in the U.S.), Elastic (open-end lines of credit in the U.S.) and Sunny (installment loans in the UK). It is led by former Think Finance CEO Ken Rees, who previously founded CashWorks, which was bought by GE Money Services in 2004.

The company reports a $20 million net loss on $300 million in revenue for the first nine months of 2015, compared to a $44 million net loss on $180 million in revenue for the year-earlier period. Elevate also today disclosed preliminary fourth quarter data, showing that it broke even on around $134 million in revenue. This compares to an $11 million net loss on $94 million in revenue for the fourth quarter of 2014.

The numbers are promising, but Elevate will have to answer two major questions before its IPO.

The first revolves around Victory Park Management, a private equity affiliate that is the sole source of debt financing for all Rise and Sunny loans. There is no indication that VPM is in any sort of trouble―and it recently amended its credit facility with Elevate in order to accommodate increased loan volume—but investors may balk at backing a financial services business that relies so heavily on a single debt provider.

Second, Elevate may need to get some investors comfortable with a tech-enabled business model that shares certain elements of brick-and-mortar payday lending. In particular, Elevate charges very high interest rates in certain markets. For example, the APR on a Riseloan in Idaho can total 365%. Same for a Rise loan in Elevate’s home state of Texas. The company says it is different from payday lenders in that its loans don’t contain balloon payments and that repayment can help borrowers improve their credit scores. At the same time, however, its listed IPO risk factors includes promised new rules on payday lending from the Consumer Financial Protection Bureau. The company also says that the introduction of new rate caps by state legislatures could “make it difficult or impossible to offer [Rise] at acceptable margins.”

IPO on horizon, subprime lending startup Elevate adds 5M in credit from Victory Park Capital, (Tech Crunch), Rated: AAA

Elevate’s niche right now is providing loans to borrowers with creditscores between 575 and 625. As the company expands, it wants to provide loans to customers with even lower credit-scores.

Ken Rees, CEO of Elevate, is quick to note that 65 percent of Americans are underserved as a result of their low credit-scores. With additional lending data, it might just be possible to underwrite loans with confidence for these underserved customers. Previously, customers of Elevate would have been forced to take title or payday loans.

“20 percent of all title loans result in the customer losing their car,” noted Rees.

Elevate’s revenue run rate is hovering around $500 million even while average customer APR has been falling. The company has seen an 80 percent growth in loans outstanding over the last year, while charge-off rates have decreased from 17-20 percent in early 2014 to 10-15 percent today. Charge-off rates monitor loans that a company feels it can’t collect.

Rees’ previous company, Think Finance, backed by Sequoia and TCV, got itself into legal troubles last year and was accused of racketeering and the collection of unlawful debt.

Elevate rewards borrowers for watching financial literacy videos with better interest rates on products like RISE that are targeted at financial progression. The company also offers free credit monitoring. The average weighted APR for RISE is a hefty 160 percent, but it’s relatively tame next to a traditional 500 percent APR payday loan. RISE loans drop by 50 percent APR after 24 months, and fall to a fixed 36 percent APR by 36 months.

Over 65 percent of Elevate borrowers have experienced a rate reduction. All of these lending practices have improved customer retention for the company, 60 percent of Elevate borrowers who payoff their loan will get another. Typically these new loans will be granted at even lower interest rates.

Prosper Said to Pitch Fund That Would Buy Its Online Loans, (Bloomberg), Rated: AAA

Prosper Marketplace Inc. is setting up a private fund that will purchase consumer loans arranged through its online platform, providing another source of capital to fuel growth after other investors pulled back.

Executives at the closely held company are meeting with potential clients this week to pitch the Prosper Capital Consumer Credit Fund, according to a person familiar with the matter who asked not to be identified discussing confidential talks. The fund’s managers are targeting returns of 6 percent to 8 percent.

The goal is “sustainable and attractive risk-adjusted returns,” according to a presentation obtained by Bloomberg. The fund will buy a cross-section of “unsecured consumer loans originated through the Prosper marketplace on a passive basis.”

LendingClub, for instance, has run investment vehicles for several years similar to the one being started by Prosper. And Social Finance Inc., an online lender that gained popularity by refinancing student debt, started a hedge fund this year to buy its loans and potentially those of competitors.

The Prosper fund plans to start buying loans for clients as soon as September and could manage as much as $1 billion over time, according to the person. The fund won’t use leverage or charge investors performance or management fees, though loans in the portfolio will still be subject to Prosper’s standard servicing fees of 1 percent. The minimum investment is $250,000 and Prosper expects it to be attractive to family offices, high-net-worth individuals and foundations, the person said.

A similar fund managed by a LendingClub unit has had a rough ride this year. Returns slumped. The company disclosed that it had improperly allocated some loans to the portfolio. And by mid-June, clients had asked to pull out $442 million — or 58 percent — of the fund’s assets, forcing managers to limit withdrawals, according to a letter sent to investors. In response, LendingClub has said it overhauled the fund’s governance.

The new Prosper fund will allow quarterly resumptions of up to 5 percent of net asset value, according to the presentation.

Goldman Sachs: The Newest Online Lender, (Seeking Alpha), Rated: AAA

The emphasis it has placed on this initiative, and the speed with which it has been accomplished, demonstrate that it is a priority for Goldman Sachs.

 

(Source: GS report)

Harit Talwar would head up the project. His last position was at Discover , where he ran the U.S. cards division. Unusually, Talwar was hired as a full partner, giving some idea of how seriously Goldman took the Mosaic initiative. Abhinav Anand, head of Analytics, also came from Discover, where he was in charge of the risk division.

Boe Hartman, formerly of Barclay’s credit card division, was Chief Technology Officer. David Stark, formerly of Citigroup’s credit card division, was Chief Risk Officer, in charge of the underwriting. These men worked for traditional banks.

However, Darin Cline, head of operations, was formerly head of operations at Lending Club. And Greg Berry, Chief Architect, used to work for OnDeck. These officers had experience with the new online lenders. Goldman wanted the best of both breeds as it put its own product together.

The benefits of sticky capital: steady growth

When you are a lender, you need funds to lend, and when you want to grow as an online lender, you need a source of funds that won’t dry up when the credit market contracts a few points. This is one of the problems Lending Club has faced recently. Its originate-to-distribute model, plus its meteoric growth (until recently), meant that it was heavily dependent on institutional funding. But it turns out that institutional funding flees quickly when credit markets turn slightly less rosy. The impacts of a recent, fairly small, capital drought have ramified into internal mismanagement, crippled growth, and a share price collapse for Lending Club.

The benefits of cheap capital: profit (with a regulatory wrinkle)

Those same depositors also provide just about the cheapest capital there is. The average interest rate on a Lending Club loan is 12.8% and 14.6% at Prosper. With a cost of capital at 1.05%, comparable rates would give GS Bank a fat interest margin of 11.75-13.55% (not counting allowances for losses).

In its “New Shadow Banking” report, Goldman’s researchers estimated a TAM for the consumer loans business at $258B, with an average ROA of 2.2%. That is $5.67B of profits up for grabs, and you can bet that Goldman intends to own a big piece of it. Every percentage point of that amount would add about one additional percentage point to the bank’s 2015 net income.

How to build your own bank, (Tradestreaming), Rated: AAA

Large financial institutions are opening up their APIs.
Exposing the tech underbelly of the finance industry is leading to an increasingly collaborative partnership environment.

BBVA offers an API marketplace for its European and US business units. In the US, the bank’s Compass unity provides connectivity for pre-authorized users to access key account data. It also offers an open security hookup that application developers can integrate to have BBVA clients authorize access to BBVA account information in their name. In Europe, the APIs go further, providing data on card purchases, identify verification, and money transfers.

In August 2015, technology industry bank SVB acquired a fintech startup, Standard Treasury. The startup had raised a couple of million dollars and was working on developing APIs for banking and that activity, the technology, and the team that developed it, was brought in-house at SVB.

Some banks have created APIs for just a select group of partners. They’re not necessarily interested in opening them widely for general use. Instead, they’re a quick and easy way to get vetted entities on their platforms. Barclays’ Developer Network (BDN) is the UK bank’s offering for approved firms to build applications using bank data and infrastructure. Barclays uses BDN in conjunction with the 13-week accelerator it runs together with Techstars. Participating startups in 4 locations (London, New York, Cape Town and Tel Aviv) get access to BDN in addition to working with decision makers at the bank and a group of mentors.

RBS has taken a similar approach to Barclays. The RBS API was made available as part of the Open Bank Project, an open source API and app store for banks. RBS uses its API as part of hackathons the bank sponsors.

Fidelity officially launches retail robo-adviser, (Investment News), Rated: A

Comment: What is happening in the robo-advisor space is very relevant to the p2p lending space.

Boston-based fund company Fidelity Investments on Wednesday officially launched its retail robo-adviser, Fidelity Go, after months of testing it out with about 1,000 users. Geode Capital Management, a Boston-based investment firm that has acted as a sub-adviser for Fidelity products for 13 years, will invest, monitor and manage Fidelity Go portfolios. The account minimum is $5,000, and clients are charged 35 to 40 basis points.

The company is focusing on younger, emerging and digitally-savvy investors with the platform, and has worked with this target audience to develop the robo.

Fidelity is also working on an institutional platform, which will be an integrated experience for investment advisers, bankers and broker-dealers, a spokesman said. More details will be available by the end of the year, he said.

How One Community Bank Closed Its Branches And Went Fully Digital, (The Financial Brand), Rated: A

A few years ago, Radius Bank had six branches. Today it has only one. How did they pull off this massive transition from brick-and-mortar to virtual?

An Amalgamation of Partnerships Solves the Fintech/Product Puzzle.

With traditional marketing media, it is difficult to accurately measure account acquisition, so the bank made the shift to go 100% digital in late 2014, bringing all consumer/retail marketing in-house. Now, instead of airing a commercial on television, Radius uses YouTube in conjunction with the Google Display Network. Billboards have been replaced with banner ads across the internet.

The mortgage industry (finally) moves online, (Tradestreaming), Rated: AAA

75 percent of home buyers would use online mortgages if they knew they could speak with someone when needed.
“I was frustrated by how offline, opaque and inefficient the mortgage application experience was,” said Rajesh Bhat of Roostify.

Roostify offers originators the technology to build a consumer-facing one-stop shop for the mortgage process with the ability to integrate additional products through an API.

Some of the newer players, like LendingHome or LandBay, try to replace current originators. Both are peer-to-peer home lenders. Sindeo and Blend Labs help customers through their mortgage applications by providing information or streamlining data collection and processing. SoFi, known more as a student loan provider, is now also active in the mortgage market, offering online applications for mortgages.

Quicken Loan’s Rocket Mortgage — which promised that home buyers could get approved for a mortgage in 8 minutes — was a big catalyst for that process.

Crowdlending platform uses Bitcoin, (Springwise), Rated: A

BTCJam is a lending platform that deals in Bitcoin to facilitate international P2P lending.

Founded in 2012 with the aim of providing affordable credit, the system boasts 19,905 loans funded, USD 24 million borrowed in over 200 countries to date, with 24 loans currently fundraising.

Although recent reports claim the business is withdrawing from trading in the US leaving uncertainty amongst many American users, BTCJam continues to service its customers worldwide.

Another Bone of Contention Between Political Parties: Student Loan Debt, (Real Money), Rated: A

In 2013, the amount of money student loan borrowers owed the federal government crossed the $1 trillion threshold for the first time, according to the Consumer Financial Protection Bureau. For the class of 2016, the average student graduated with $37,172 in loan debt.

Five of the top lenders in this space include Sallie Mae (SLM) , Action Alerts PLUS holding Wells Fargo (WFC) , Discover (DFS) , Citizens Bank and SoFi — which acts as an online loan marketplace.

“The federal government should not be in the business of originating student loans. In order to bring down college costs and give students access to a multitude of financing options, private-sector participation in student financing should be restored,” the party’s official platform stated.

That stance is a repudiation of the 2010 federal legislation that scaled back the role of private lenders providing student loans. The banks now act as middlemen, collecting fees and keeping records while students go through federal channels to secure the loans.

However, the federal government has also taken steps to provide relief for borrowers in recent years as the interest rate on federal loans for undergraduate students dropped to 3.76% in 2016 from 4.29% in 2015. The government also adjusted the maximum Pell grant amount for inflation to $5,815 from $5,775 last year. Pell grants are used by nearly 8 million lower-income students in the country.

Democratic presidential candidate Hillary Clinton recently released her campaign’s college financing plan. The main tenets of her plan aim to allow students from families making up to $125,000 annually to go to school without having to incur any debt. Another tenet states that all community colleges will offer free tuition.

Kabbage enlists Marketo for marketing, (Finextra), Rated: AAA

Marketo, Inc. (NASDAQ: MKTO), the leading provider of engagement marketing software and solutions, today announced that Kabbage Inc., a disruptive financial technology platform that provides businesses with access to working capital, is leveraging the Marketo platform to improve email open rates and cut down on campaign production time.

Up until October 2015, Kabbage, relied on a different marketing automation provider and a number of other tools to manually engineer communications with potential customers. As the company grew, the team needed to consolidate and integrate these tools with its existing CRM for better alignment between marketing and sales. In this way, the team hoped to strike the right cadence of communication with its customers, serving them with a premiere customer experience, at any time and from virtually any device.

Kabbage chose Marketo for its ability to track the return-on-investment of email campaigns and also for its proven track record of security in highly regulated industries such as financial services and healthcare. Since implementing Marketo, Kabbage has seen email open rates and click-to-open rates jump more than 10 percent compared to campaigns deployed via the company’s previous marketing automation system. The marketing team attributes this success to the speed and ease-of-use of the Marketo platform, saving on average 2-3 hours in day-to-day production time.

OnDeck Capital’s Hidden Margin Of Safety, (Seeking Alpha), Rated: A

This article explores how GAAP accounting is obscuring the earnings power of ONDK.

ONDK is optically profit-less, but has the potential to ramp up earnings substantially if it slows down its expansion.

While this is not what the company will or should do, it’s a helpful illustration of another source of margin of safety in the stock.

This is ignoring the substantial opportunity ahead of the company and the value creation over the longer-term.

Credibly Interview: Innovative Online Lending Is Changing The Industry, (Nasdaq), Rated: A

After the bust of the first Internet bubble, folks did not go back to using fax machines. The fact is, what the lending industry has done in terms of creating a far superior user experience — following on how gaming, social, travel, and virtually every other industry has moved online — has created an opportunity to get more capital to the folks who need it and lowering people’s cost of funds along the way.

[Another myth I see] is the demise of innovative lending. But I just want to spend a second talking about what I mean by “innovative lending.” We as an industry have been challenged in coming up with what we should be calling ourselves. “Peer-to-peer,” in the early days, captured the essence of what the models were about in many ways, but that quickly evolved to perhaps institutional-to-peer. “Marketplace” implies that there’s a pure marketplace that’s operating, matching up borrowers and lenders in a hands-off kind of way. But that also implies a singular source of financing; that the financing for those individual loans comes from “the marketplace.”

I talk a lot about the importance of having diversified sources of funding available to you regardless of how you originate assets.

we all know that small businesses represent roughly 60% of GDP and roughly 60% of our labor force — and during the short time we’re sitting here today, our industry will probably do more of that to the tune of $10 million to $20 million. There’s a significant social benefit that we’re helping to create, and none of what we’re reading about in the press is going to change any of that.

MPL Policy Summit to be Held on September 13th in Washington DC, (Business Wire), Rated: AAA

Spearkers :

Thomas J. Curry, Comptroller of the Currency

Congressman Patrick McHenry, (R, NC-10th), House Financial Services Committee.

Goldman Sachs Gets Closer To Taking On The Marketplace Lenders, (PYMNTS), Rated: A

When asked by a JPM analyst if the firm was considering the “case for buying something? … So you get to a critical mass more quickly?” Schwartz neatly shot that idea down.

“This particular effort, when we looked at it, we really felt like it was best designed from scratch. The reason for that is we are kind of uniquely positioned. It allows us to leverage our technology skills and our risk skills … if you look at the competitive landscape, there are benefits that online lending platforms provide to consumers, and there are benefits for large commercial providers of credit … we are really looking to bridge the gap between those strengths and offer consumers, the best we can, a really thoughtful, differentiated product.”

Goldman purchased $15 billion in consumer accounts from GE Bank during Q2. He noted the two efforts were separate — Goldman Sachs isn’t becoming Goldman Sachs Savings & Loan — but connected insofar as they both buttress and diversify the Goldman brand.

“We view those as separate. Having said that, the acquisition went well, adding in excess of $15 billion of deposits to the firm … We have had in excess of 20,000 consumers open up new accounts with us. We have had very significant growth in a short period of time. It really speaks to the brand strength.”

It also remains to be seen if Republicans will win the election in November and reinstate Glass-Steagall as is a plank of their party platform. Such a regulatory change could statutorily bar Goldman from entering into these types of retail functions because it is an investment bank.

United Kingdom

Dear Mr. Bailey, “The Peer-to-Peer Lending Sector Has Embraced a Level of Transparency Which is Unrivaled in Financial Services”, ( Crowdfund Insider), Rated: AAA

The letter is embedded here.

The UK Peer to Peer Finance Association has released a letter addressed to Andrew Bailey, Chief Executive of the FCA, buttressing their position regarding the recent dialogue with the House of Commons’ Treasury Select Committee.

This past June, Andrew Tyrie, MP, Chairman of the Committee, expressed concern regarding the risk of peer to peer lending. In an open letter to Bailey (then Deputy Governor of the Bank of England for Prudential Regulation) the Committee expressed its concern “to ensure that the FCA is paying due attention to the risks – and the opportunities – afforded by the growth of peer-to-peer lending”.

Today Farnish is responding to oral evidence presented by Bailey last week to the House of Commons Committee.

In her response, Farnish asserted that peer to peer lending platforms “exist solely because they create value to consumers on both sides of the platform: investors are able to earn fair predictable risk-adjusted net returns that can outperform other investment products, whilst borrowers can access fast and flexible finance.”  Farnish asked that Bailey and the FCA “would start from first principles, based on risks and benefits to consumers.”

Farnish assured Bailey, and others, the sector “accepts its responsibility for ensuring that those investing in peer-to-peer products understand the nature of their investment, and appreciate the degree of risk incurred.”

European Union

Rocket Internet to Develop Banking Services With FinTech Group, (Wall Street Journal), Rated: AAA

FinTech Group is developing a digital bank for Rocket Internet using the banking license of FinTech subsidiary Bank biw as a first step of a comprehensive partnership of the two companies. Rocket and FinTech Group plan to develop joint banking business models at an EU level.

China

Chinese P2Ps plagued by flaky guarantees, ( FT # Fintech), Rated: AAA

China’s peer-to-peer lending industry is experiencing breakneck growth. Yet the industry is yet to deal with the “rigid repayment” problem – the perception afflicting the Chinese fixed-income universe that default is impossible.

A fintech conference in Shanghai last week, known as LendIt, attracted standing-room-only crowds. A conference staffer called the scene on the first day “chaos” and tightened entry restrictions on the second day to prevent un-registered guests from sneaking in.

Loans outstanding from

P2P platform focused on property collateral mortgage Hepan Finance received RMB 66M Series A Investment, (Crowdfund Insider), Rated: A

Founded in 2013, Hepan Finance is a P2P platform focused on providing operating capital to small businesses in the Shanghai area. Prior to launching the lending platform, the company’s experience, and expertise was primarily in value assessment and foreclosure of real estate properties. This experience has transferred to the P2P platform’s ability to confidently control risk and deal with collateral assets after default. On the investor side, the platform offers a 12% return for its 12-month wealth management product, which recently decreased from a 15% return in early 2016. The 1-month short-term product provides a 7.2% return. According to its website, Hepan has managed RMB 2.4 billion in investments and has over 220,000 registered investors.

Hepan’s recent Series A Investment was led by Chinese VC firm ZCZB Capital. According to its website, ZCZB Capital focuses on providing fast, small loans (under RMB 5 million) to startups in a variety of industries. Prior to this injection of funding, Hepan had shrunk in borrowing and only made loans against high-end properties. It was stated that the new funds would be used in recruiting, engineering upgrades and offline promotions.

Online finance marketplace Caogen Investment received RMB 1B Series B Investment from a state-owned fund, (Crowdfund Insider), Rated: A

Founded in 2013, Caogen Investment is an open lending platform focused on providing operating capital to small businesses. More flexible than other P2P platforms, Caogen accepts property, equipment, material and even products as collateral. The platform now works with suppliers and distributors in over a dozen industries including fishery, furniture, hard rock mining and energy. On the investor side, returns range from 6.5% to 12% with terms ranging from 31 to 365 days. According to its website, Caogen has managed RMB 34 billion and has 6 million registered users.

P2P platform focused on banker’s acceptance-secured business loans Yinpiao.com received RMB 120M in funding from SOE, (Crowdfund Insider), Rated: A

Banker’s acceptance (BA) bills are a promise of future payment guaranteed by a bank. These are often traded on the secondary markets. P2P platform Yinpiao.com relies on BA assets to back online investment products. The platform not only sells BA before maturity but also originates loans secured by BA. Before launching Yinpiao.com in 2014, the platform’s finance team had over seven years of experience in trading BA and handled over RMB 50 billion each year. On the investor side, the platform provides an average return of 8.8% with terms varying from 7 to 180 days. According to its website, Yinpiao.com investors purchased 6 billion wealth management from August 2014 to June 2016.

Investing RMB 120 million in Yinpiao.com, Huayu Economic Development Ltd. is a state-owned corporation that controls 26 companies in nuclear power, munition technology, aerospace, and mining. Aside from the funding, Huayu may introduce Yinpiao.com to high-quality borrowers from multiple supply chains in the industrial sector.

P2P platform focused on supply chain financing Ziben Online raised RMB 200M in funding from four strategic investors, (Crowdfund Insider), Rated: A

Ziben Online (ZO) provides short-term capital to small businesses in certain supply chains. ZO typically works with large corporations by providing loans to their suppliers.

Author:

George Popescu

July 5th 2016, Daily News Digest

July 5th 2016, Daily News Digest

News Comments United States According to the bond market yield-curve there is 60% chance of recession. However, the equity market doesn’t agree. Interesting times. A short survey on the different US regulators’ interaction with the marketplace lending space. New Capital Rules likely to be imposed on wall street will likely push bank-dealers to shut down […]

July 5th 2016, Daily News Digest

News Comments

United States

  • According to the bond market yield-curve there is 60% chance of recession. However, the equity market doesn’t agree. Interesting times.
  • A short survey on the different US regulators’ interaction with the marketplace lending space.
  • New Capital Rules likely to be imposed on wall street will likely push bank-dealers to shut down trading units in debt-securitization due to insufficient return on equity. This change could have a huge impact on marketplace asset backed securitization.
  • Wells Fargo continues to push FastFlex, their own quick SME financing product competing with OnDeck, Kabbage, CAN Capital and all other SME marketplace lenders.
  • Morgan Stanley is pointing out all the positive data coming out of Lending Club: higher origination than predicted in Q2 2016 and much more.
  • Lending Club’s CIO unvailing the future plans for Lending Club : Point-of-Sales, offline and a cloud-base micro-services platform.
  • CFPB’s monthly report points out the most-complained-about companies in consumer loans. It would be interesting to plot company size vs number of complaints.
  • Square analysts believe that more regulation in marketplace lending will favor Square vs its competitors.
  • Last week news, worth a reminder after the long weekend: Avant is downsizing, again.
  • Boston, feeling left behind in fintech, is launching a fintech hub initiative supported by Fidelity, Putnam, Santander Bank, U.S. Bank and Boston Private Financial.

United Kingdom

  • An interesting way to leverage your p2p investments: buying discounted P2P public fund shares at the present 20% discount, and relying on stock buy-backs to bet on up side in yield + equity appreciation.
  • Brexit: in short, fintech firms fear for staff shortages and lost EU customer access.

European Union

  • Insurer Aviva France, in partnership with Eiffel Investment Group and AG2R La Mondiale launching a €100 million fund to invest in “crowdlending SME debt” in France and elsewhere.
  • A list, without any transparency on the inclusion criteria,  of the top 11 p2p lending platforms in Europe, (Pre-Brexit), per Fintechnews.ch. And a very interesting map of relative p2p lending market size in European countries.

Australia

  • Public p2p lender DirectMoney preparing a new share issuance to finance loans as loan demand outstrips funding.”DirectMoney chief Peter Beaumont yesterday defended the fintech company’s stockmarket listing and expressed disappointment over losses worn by shareholders.”
  • OnDeck Australia and Commonwealth Bank (CBA) receiving the Fintech-Bank Collaboration of the Year Award.

India

  • P2P players are moving towards institutional capital for growth. Following in the footsteps of their US cousins, we hope the Indian p2p lenders have learned their lessons from Prosper, Lendnig Club and Avant’s experiences with institutional capital.

China

  • P2P lenders exiting office space in Shanghai have brought office space vacancies supply to a 10-year-high level.

Korea

  • Interesting data and information on one of the 1st Korean p2p lending companies we learn about.

News Summary

Unites States

Bond Markets Have a Message About the Economy That Stock Investors Might Not Want to Hear, (Bloomberg), Rated: AAA

There’s a big disagreement brewing in global markets.

There’s 60 percent chance of recession, according to a Deutsche Bank model.

While risky assets including equities have surged following the U.K. electorate’s historic vote to leave the European Union, government bonds have also rallied; two things that ought to suggest different outlooks for economic growth. Soaring bond prices have sent yields on the perceived safe havens of government debt plumbing fresh lows, even while expectations of looser monetary policy produce a burst of animal spirits in stock markets.

The flight to safety has prompted some analysts to question the durability of the rally in equities, where the S&P 500 was up 3.5 percent last week and the FTSE 100 has erased its post-referendum dip — at least, in local-currency terms. Still others say that money is pouring into stocks as lower bond yields force investors to search for returns in alternative asset classes.

The spread between the yield on 10-year and two-year U.S. Treasury notes narrowed in the immediate aftermath of the June 23rd referendum, widened briefly, and is now shrinking again as investors continue to flock to the perceived safety of U.S. government debt. A model maintained by Deutsche Bank AG’s Steven Zeng, who adjusts the spread for historically low short-term interest rates, suggests the yield curve is now signaling a 60 percent chance of a U.S. recession in the next 12 months — up from a 55 percent probability as of mid-June, and the highest implied odds since August 2008.

“This relentless flattening of the curve is worrisome,” Deutsche analysts led by Dominic Konstam said in their note on the model. “Given the historical tendency of a very flat or inverted yield curve to precede a U.S. recession, the odds of the next economic downturn are rising.”

The 10-year yield is currently at 1.44 percent, making a recession just about 40 basis points away according to this particular interpretation of the bond market’s moves.

Rundown of Regulator Interest in Marketplace Lending, (Lend Academy), Rated: AAA

U.S. Treasury

The Treasury first publicly showed interest in marketplace lending with a request for information(RFI) back in July 2015. Over 100 companies responded to the RFI and the Treasury reported on their findings in May 2016 where they shared their response in the form of a white paper. It did not provide any recommendations for new regulations and was generally quite positive on the industry.

Office of Comptroller of the Currency (OCC)

On March 31, the OCC released a white paper titled Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective. More recently, the head of the OCC, Thomas Curry, reaffirmed his commitment to responsible innovation in a speech just last week. He brought up the idea of a “regulatory sandbox” – a place where fintech companies can have a conversation about what the rules of the road are for their new ideas. He also brought up the idea of a limited purpose charter for fintech firms as a possible way forward.

Federal Deposit Insurance Corporation (FDIC)

The FDIC first addressed marketplace lending in a paper titled Supervisory Insights. They are concerned about the impact on banks as well as the general risk to financial services.

Consumer Financial Protection Bureau (CFPB)

Early this year, the CFPB made two announcements impacting marketplace lending. They said that they would begin accepting complaints directly from consumers about marketplace lending companies. Around the same time they issued a new No-Action letter policy that was designed to encourage innovation in financial services.

According to the Wall Street Journal the CFPB is planning to supervise marketplace lenders and will release a proposal some time in the fall. The CFPB has not commented publicly on this news so right now it is just a possibility but it makes sense.

Securities and Exchange Commission (SEC)

SEC involvement in marketplace lending goes back to the early days of Lending Club and Prosper. In 2008 the SEC decided that the notes issued by these companies were securities and should be registered as such. The result was Lending Club and Prosper filing a S-1 registration and becoming quasi public companies with quarterly financials being filed with the SEC.

Now that Lending Club is a public company it is has more responsibilities to both equity and debt investors both of which come under the purview of the SEC. The reality is while the SEC keeps a close eye on marketplace lending it is unlikely there will be much in the way of new developments here.

Federal Trade Commission (FTC)

The FTC recently hosted a financial technology forum on marketplace lending. The forum sought to look at consumer protections in marketplace lending and fintech more broadly. According to Jessica Rich, director of the FTC’s consumer-protection bureau marketplace lenders haven’t done enough in borrower protection.

United States Congress

In May 2015, the House Small Business Committee held a hearing on Capital Hill.

In January, in the wake of the San Bernardino shooting tragedy, the House Financial Services Committee held a hearing on terrorism financing that included a discussion of marketplace lending. But no new initiatives have come yet from these hearings.

Financial Stability Oversight Council (FSOC)

The FSOC most recently included their thoughts on marketplace lending in their annual report. Although the report highlights the lower cost and efficiencies of marketplace lenders they also discuss risks and concerns. One of the main concerns listed are the new and untested underwriting models used by platforms.

Conclusion

This list is only a start of the involvement we are likely to see from regulators as it pertains to marketplace lending. Due to the attention, we’ve seen many industry associations created to ensure a productive dialogue is being undertaken in Washington with all the organizations discussed here. We sincerely hope that any new regulation to come is thoughtful and comes from a well informed view of the industry.

Capital Rules Stifling Securitized-Debt Trading Profit: JPM, (PeerIQ), Rated: AAA

New layers of regulatory capital expected to be imposed on Wall Street are likely to further pressure banks to exit trading of securitized-debt, JPMorgan analysts John Sim, Kaustub Samant, Carol Zhang wrote in client note Friday.

NOTE: Reports of dealers paring or shutting down trading units have grown; banks include Barclays, DB, MS, SocGen, Jefferies, RBS, Nomura, CS

  • There’s “no path to profitability” under current and recently released capital rules
  • JPM analysts calculated ROE (return on equity) for hypothetical RMBS portfolio based on impact from Basel’s Fundamental Review of the Trading Book
  • Concluded ROE of ~4%, “clearly not attractive enough to entice dealers to enter the space and make markets”
  • Adjusted model to various hypotheticals, such as reallocation, bid-ask, turnover rates
  • Concluded the “cumulative effect of all of these realistic and unrealistic changes would only increase the return to 7%, which is far short of our 10% to 15% ROE threshold”
  • “Running ROEs for hypothetical ABS and CMBS businesses would not result in markedly different results”
  • Primary market and business of underwriting new-issue securitizations can still be attractive, however, contingent  underwriting volumes
  • Revenue derived from underwriting fees without consuming much capital; when balanced with secondary trading, ROEs for the business can become attractive, depending on volumes
  • Liquidity will continue to be constrained for non-agency RMBS, particularly in legacy space where dealers have no commensurate underwriting
  • CRT deals will also suffer from limited trading activity relative to market size; expect limited liquidity for Jumbo RMBS and SFR deals

How Wells Fargo Aims to Satisfy ‘Need for Speed’ From Millennial Borrowers, (The Street), Rated: AAA

Known as FastFlex, the San Francisco-based bank’s product offers customers with a business checking account a one-year loan of up to $100,000. Wells Fargo is considering expanding the availability of the loan next year, Lisa Stevens, the company’s head of small business, said in an interview.

FastFlex is designed for businesses with under $5 million a year in revenue who have “quick short-term needs to do some type of expansion or cash management,” Stevens said.

Some 67% of millennials are willing to take some financial risks to grow their businesses, compared with just 54% of older owners.

The FastFlex loan is one effort to meet that demand, he said, by providing a digital service with a rapid turnaround, two of the qualities that millennials have said they value most highly in financial services products. “We wanted to design our own product that would compete well in the marketplace-lending environment,” Case said.

Lending Club Corp : Positive Updates from the Annual Meeting, (Morgan Stanley), Rated: AAA

2Q16 originations down ⅓ from 1Q equates to ~$1.8bn in originations or -4.4% YoY,vs. our $1.4bn (-25% YoY) estimate.Assuming volumes for the first five weeks in the quarter (prior to

Assuming volumes for the first five weeks in the quarter (prior to announcement of irregularities and CEO resignation) were consistent with the 1Q run rate, this suggests volumes over the remaining 8 weeks were down ~50% sequentially and 37% YoY.

LC has had dialog with hundreds of investors,and none have outrightly refused to come back as an investor on the platform. Most investors need to go through a due diligence process and LC appears confident in its ability to bring them back to prior levels of investment over the long term.

While investors from every category have returned to the platform, banks and large investors are taking longer with their audits, which is in-line with our expectations.It is unclear if 2Q represents the trough in terms of origination volumes, but management commentary on investor appetiteand conservativeapproach on origination expectations suggests 3Q and

It is unclear if 2Q represents the trough in terms of origination volumes, but management commentary on investor appetiteand conservativeapproach on origination expectations suggests 3Q and
4Q volumes should be similar to 2Q with potential for upward bias.

LC expects to incur $9mn of investor incentives (to be booked as contra-revenues) in 2Q , which are likely to continue in 3Q with a plan to eliminate these by 4Q.

LC expects to “resume revenue and EBITDA growth in 1H17” though it remains unclear to us if this comment suggests sequential or YoY growth.We expect LC to return to origination, revenue,and adjusted EBITDA growth by 2Q17, though we expect 1H17 to remain below 1H16 given tough comps on 1Q17e.

2016 Bay Area CIO of the Year Innovation/Transportation finalist: A conversation with LendingClub’s John MacIlwaine, (Silicon Valley Business Journal), Rated: AAA

How do you predict your company will be different in two years, and how do you see yourself shaping that change?

We’ll also have a wider set of financing products that will be accessible online, offline, and at point of sale, while expanding our partnerships with banks and other non-financial institutions. We’re enabling that change by building our cloud-based micro-services platform, which simplifies integration of our solution for our partners and allow us to quickly and efficiently scale our core business and expand our product set.

What do you feel has been your biggest impact/success at this company? My biggest impact on LendingClub has been building a world-class team of engineers, scaling our technology platform to support the company’s incredible growth (compound annual growth rate of 124 percent Q4 2009 to Q4 2015 and well over $16 billion in loan originations to date), and setting a clear vision for a technology platform that is flexible and adaptable enough to handle future loan origination growth, partnership integration, and regulatory compliance updates.

What are your top three priorities for 2016-2017?

  1. Transform our current technology platform into a suite of cloud-based micro-services;
  2. Move our platform hosting environments to AWS (Amazon Web Services);
  3. Double the size of our world-class technology team.

CFPB June 2016 complaint report highlights consumer loan complaints, complaints from Arkansas consumers, (JDSupra Business Advisor), Rated: AAA

The CFPB has issued its June 2016 complaint report which highlights complaints about consumer loans and complaints from consumers in Arkansas and the Little Rock metro area.

The report does not specifically identify any complaints as involving marketplace lending.  Unlike prior monthly complaint reports, the June 2016 report includes a “Sub Product spotlight” section that highlights auto lending.

  • The most-complained-about issue involved managing the loan, lease or line of credit.  Other complaint issues included problems arising when the consumer was unable to pay, such as issues relating to debt collection, bankruptcy, and default.
Source: CFPB June complaint report.

General findings include the following:

  • Complaints about student loans showed the greatest percentage increase based on a three-month average, increasing about 61 percent from the same time last year (March to May 2015 compared with March to May 2016).  As we noted in our blog posts about the April and May2016 complaint reports, rather than reflecting an increase in the number of borrowers making student loan complaints, the increase most likely reflects that in March 2016, the CFPB began accepting complaints about federal student loans.  Previously, such complaints were directed to the Department of Education.
  • Payday loan complaints showed the greatest percentage decrease based on a three-month average, decreasing about 15 percent from the same time last year (March to May 2015 compared with March to May 2016).  Complaints during those periods decreased from 479 complaints in 2015 to 405 complaints in 2016.  In the March, April, and May 2016 complaint reports, payday loan complaints also showed the greatest percentage decrease based on a three-month average.

Square Inc Better Risk Reflection Leads to Upgrade: Wedbush, (Bidness Etc), Rated: A

Helmed by Twitter CEO, Jack Dorsey, the Square’s lending business encountered a substantial obstacle in May, in the form of new and strict scrutiny from regulatory authorities. In a comprehensive study, the US Department of Treasury along with several other government agencies put forward recommendations, to safeguard the access and growth to credit through the continued developments of online marketplace lending.

Wedbush analysts believe that regulatory scrutiny is likely to increase the company’s lending business.

For the 2Q, Square projects revenue to fall between $151–156 million. Wedbush expects the company to surpass its own expectations — reporting closer to the sell-side firm’s own $168 million estimates — but foresees considerable downside to the financial services company’s shares, if it reports within its given guidance range.

Interestingly enough, in a research note published yesterday, Morgan Stanley lowered its prices target on Square stock from $12 to $10, following a meeting with the company. The sell-side firm also raised its Stock-Based Comp estimates, in light of the company’s transition from private to a public entity and higher comp to select personnel vs. prior expectations.

Why Online Lender Avant Is Cutting Down Its Workforce Again, (Fortune), Rated: A

After also deciding to pull back in May from new verticals such as auto loans to concentrate on its core personal loans business, Avant is now cutting its lending target for that unit by 50% to about $100 million per month, Bloomberg reported.

Avant’s problem, like much of the so-called peer-to-peer lending market, isn’t a lack of demand from potential borrowers. Instead, the company and other online lenders are having increasing difficulty raising money to lend out as hedge funds and other investors outside the usual banking circles that backed the industry have grown wary.

The company had grown quickly for the past few years, reaching $3.5 billion in total loan volume. But with less access to capital, business has slowed recently, and loan volume declined 27% in the first quarter from the fourth quarter—the first such quarter-to-quarter drop since Avant started in 2012.

LendingClub’s Negative Press Blitz Continues, (Yahoo Finance), Rated: A

An $800 million LendingClub Corp (NYSE: LC) fund that invests in the company’s online consumer loans is expected to report its first monthly loss in the past 64 months in June. According to a letter to investors from LendingClub CEO Scott Sanborn, LendingClub’s Broad Based Consumer Credit (Q) Fund’s June return “is likely to be negative.”

The fund is LendingCub’s largest and has regularly returned around 0.5 percent per month throughout its five-year history. However, default rates on the fund’s loans have begun to rise in recent months and returns have dropped, prompting a number of investor redemption requests

The Wall Street Journal’s Peter Rudegeair reported that as of June 17, LendingClub had received $442 million in redemption requests representing about 58 percent of the value of the fund. In response to the large number of redemption requests, LendingClub announced it was placing restrictions on withdrawals and would be considering winding down the fund entirely.

Group led by State Street, Putnam launches fintech initiative, (Boston Business Journal), Rated: A

The Boston Financial Services Leadership Council and the business consulting group Mass Insight have created Financial Technology Boston, under which they will host networking events and possibly job fairs involving fintech professionals from the corporate, startup, government and higher-education worlds.

In addition to State Street (NYSE: STT), Fidelity and Putnam, the BFSLC includes Santander Bank, U.S. Bank and Boston Private Financial (Nasdaq: BPFH).

Boston is already home to fintech-focused incubators FinTech Sandbox and the DCU Center of Excellence in Financial Services, as well as a monthly meetup for fintech professionals.

United Kingdom

Why investors should scoop up discounted P2P funds before putting cash into platforms, (AltFi News), Rated: AAA

Analysis by AltFi Data shows loan origination has more or less been static across the UK P2P lending industry in 2016. This somewhat contrasts with the rapid growth seen in 2015 and 2014. Any number of explanations are given for this including a broad risk-off attitude from markets as well as the ongoing fiasco at the major US platform Lending Club.

However, for professional and private investors alike who are not dissuaded from the adverse headlines, and attracted by the high yields on offer from investing in the market, there is a clear argument to avoid investing directly on platforms. While this is the normal route for many, buying shares in the investment trusts offering exposure to loans originated from the platforms that are heavily discounted at present arguably makes more sense.

Over time in addition to the 7.4 per cent yield on offer, a narrowing of this discount or perhaps even a move to a premium could significantly bolster returns.

The table below shows what will happen to the share price following a 20 per cent return in net asset value alongside changes in the discount/premium. It clearly shows that buying at a premium massively adds to the total return.

Of course there is always the risk that the discount moves out further. This could be caused by investors going off the trusts even more. Or it could be broader negative sentiment towards equity markets that sees index level selling of the FTSE 250 – in the case of P2P GI – or FTSE All Share selling in the case of VPC Specialty Lending. This would add to weakness in both trusts’ share prices, and potentially widen the discount.

However, as AltFi reported last week P2P GI has started to defend its discount by buying up its shares using spare cash. Last week it bought £2m of its shares at an average price of 827p, says Monica Tepes, analyst at Cantor Fitzgerald.

This did temporarily lower P2P GI’s discount to 17.5 per cent although it has since moved back to over 20 per cent.

Brexit: FinTech firms fear for staff shortages and lost EU customers, (Tech Republic), Rated: AAA

London is a major player in the international FinTech market, with startups in the UK capital securing more venture capital funding last year than their European counterparts.

That status won’t necessarily change after Britain leaves the EU but FinTech firms have said it will complicate the picture, particularly when it comes to their ability to sell services to Europe and attract new talent.

Controlling migration was the second most important reason for quitting the EU, according to those who voted Leave in last week’s referendum.

Access to the single market allows goods and finance to be moved between EU countries without tariffs. However, full access also requires free movement of workers between European countries, something many Leave voters oppose.

Nevertheless, for peer-to-peer (P2P) lending platform MarketInvoice, as for many other London-based FinTech firms, free movement of European labor is essential to meet its demands for skills.

“Here at MarketInvoice we have a super-diverse team from all corners of the globe. Most notably within our software-engineering and data-science teams. Many FinTech founders themselves come from outside the UK,” said Anil Stocker, CEO of MarketInvoice.

European Union

Insurer Aviva France to Lend €50 Million to SMEs Through Crowdlending Platforms, (Crowdfund Insider),Rated: AAA

Aviva France, together with two partners, alternative asset management firm Eiffel Investment Group and insurer AG2R La Mondiale, is launching an investment fund called “Prêtons Ensemble” (Lending together) dedicated to financing loans to small and medium-size enterprises (SMEs) provided through crowdlending platforms.

Starting with an initial endowment of €50 million from Aviva France and €20 million from AG2R La Mondiale, the fund is expected to quickly grow to €100 million by rallying other institutional investors around the project.

The goal is to invest in the French real economy by financing SME loans granted through regulated crowdfunding platforms. Eiffel Investment Group is a specialist with more than eight years of experience in investing on crowdlending platforms, notably in the more advanced UK and US markets. Eiffel Investment will be in charge of the due diligence on the platforms and their loan portfolios. Currently, they have identified around 100 platforms and have made contact with 50 of them. Eventually, in five years from now, the fund should be invested to 70% in lending to SMEs and minimum to 50% in France. At the onset, we’re starting with a dozen platforms, mostly, but not only from France as the market is still emerging here. The (soon-to-be published) list includes names such as Younited Credit, Finexkap and Lendix.

The fund will be diversified in terms of the platforms’ business model and of the type of credit provided to SMEs. This means that it will include both unsecured and secured loans, short-term invoice financing as well as mid-term loans. On average, the loans are expected to have a maturity of 2.5 years.

Our decision was made long before the Lending Club problems surfaced. Upon hearing about them, we conducted a thorough analysis of their actual causes and impact. We were quite reassured to find out that the scale of the financial issue was small, that it had been fixed, and that a subsequent audit did not uncover any other impropriety.

Europe’s Top 11 Peer-to-Peer Lending Platforms, (Fintech News), Rated: A

Comment: As author chose to label the article Europe’s top 11, and includes UK companies, we chose to do the same.

In Europe today, although the vast majority of the P2P lending activity is concentrated in the UK – which accounts for over 84% of the whole European market –, Germany, France and Nordic countries are experiencing strong growth and development in the P2P lending space with a number of homegrown startups starting to emerge as regional leaders.

Australia

Fintech losses blamed on rerating, (The Australian Business Review), Rated: AAA

DirectMoney, which writes personal loans, slid to 4.5c a share after coming to market last year at 20c via a backdoor listing. On Friday, the company unveiled a $5.7m non-renounceable capital raising at 4.2c a share on a one-new-share-for-every-two-held basis.

The raising, underwritten by Bell Potter, opens on July 11.

It follows a mixed ride for investors, with the stock exchange in February querying its financial position and DirectMoney subsequently unveiling a deal with Macquarie, which bought $5m of the company’s personal loans and took shares in the company in exchange for advisory services.

In May, DirectMoney revealed loan demand was outstripping funding as the company slowly gained traction for its personal loan fund for retail investors. In the interim, the company turned to two “large financial institutions” for funding facilities, signing a non-binding term sheet with one for $20m.

Part of the cash from the $5.7m raising will be used as upfront collateral for the funding facilities. “We’ve proven our ability to originate loans; that is difficult for some organisations and what we are now doing is establishing committed funding programs of sufficient size so we can leverage the assets we’ve built,” Mr Beaumont said.

DirectMoney has written $17.6m of unsecured personal loans up to $35,000 for three to five years. Revenue in the financial year to the end of May was $1.19m, compared to $435,513 in the six months to December 31.

DirectMoney chief Peter Beaumont yesterday defended the fintech company’s stockmarket listing and expressed disappointment over losses worn by shareholders, arguing there were many benefits and the sector globally had suffered a de-rating.

“We’re disappointed there were investors that came in at higher prices and have had capital losses at this point, but marketplace lending globally has experienced a resetting of valuations, whether it’s LendingClub in the US or others, since last year,” he said.

The inaugural Australian Fintech Awards regonised innovation in the finance industry, with OnDeck Australia and Commonwealth Bank (CBA) receiving the Fintech-Bank Collaboration of the Year Award. OnDeck entered the Australian market last year with CBA and online accounting software provider, MYOB, as distribution partners.

India

P2P players bank on institutional lenders for growth, (Economic Times), Rated: AAA

I-lend has stitched a partnership with Hyderabad-based non-banking finance company Star Finserve, becoming the first peer-topeer online lending platform to join hands with an institutional lender while several other players including MicroGraam, Faircent and LenDenClub are in talks for similar pacts.

“The cost of loan origination is going up steadily for NBFCs and banks, the number of successful applications is declining and through these partnerships the institutional lenders can cut down on incurring origination of loan and administration costs,” said VVSB Shankar, founder of i-lend.

Shankar said the decline in the number of applications could be attributed to several factors such as competition among institutional lenders, quality of borrowers or involvement of non-performing assets. The company’s loan book size is about `1.5 crore and lenders on the platform can opt for borrowers who pay 18-21% interest.

Peer-to-peer platforms have reported an increase in the number of high net worth individuals or HNIs they have attracted over the past six months. “HNIs and family offices are showing interest in the peer-to-peer space. Since there is a criterion for lenders to have an income of over `10 lakh, this is bound to happen. Our top lenders have invested more than `40-50 lakh each, with the highest being around Rs 60 lakh,” said Rajat Gandhi, founder of Faircent, which has a loan book size of Rs 6.5 crore.

Smaller players including LenDen-Club said they have also seen increasing interest from HNIs, specifically from Maharashtra and Gujarat, spending about Rs 15 lakh individually. Since retail investors are central to how such platforms function, the companies aim to firm up a select few partnerships with institutional lenders over the next one year.

China

Exit of P2P lenders from Shanghai office market poses a challenge, (South China Morning Post),Rated: A

The recent collapse and exodus of numerous peer-to-peer lending (P2P) companies in China after a government crackdown on fraud has rattled the Shanghai CBD office market and may “pose a challenge for landlords”, experts say.

In the second quarter of the year, supply spiked to a 10-year high, according to real estate firm Colliers International, as overall vacancy rates in the area increased 3.2 per cent quarter on quarter to 7.2 per cent.

Korea

8PERCENT: Men in 30s Major P2P Investors, (The Korea Bizwire), Rated: A

8PERCENT, a P2P (peer-to-peer) lending company, revealed on July 4 that 30-something men who live in metropolitan areas are their primary investors.

As of June 30, top P2P lending company 8PERCENT’s total accrued loans summed up to 26.6 billion won ($23 million), with a total of 8,283 investors investing 3.21 million won ($2800) on average per person.

The average age of the investors was 34.3, and more than 90 percent of the investors were between the ages of 20 and 40. 8PERCENT also revealed that 77 percent of the investors lived in metropolitan areas, and that 67.5 percent were male and 32.5 percent, female.

The largest investment made so far was 453 million won ($395,000) diversified into 1,115 different bonds.

“Until last year, 90 percent of investors were from metropolitan areas, but the portion from non-metropolitan areas increased to 23 percent this year. Investment from women also increased from the low 20s to 30 percent, and we’re seeing growth in the number of investors in their 50s as well,” said Kang Seok-hwan, chief marking officer of 8PERCENT.

Small credit loans of 24.2 billion won ($21 million) comprise more than 90 percent of the total investments. Out of the total amount, 13.4 billion won ($11 million) was loaned to individuals, and 10.8 billion won ($9.4 million) to corporations.

Besides credit loans, borrowers also obtained real estate mortgage loans of 2.4 million won ($2 million).

 

Author:

George Popescu