The Technology Edge: How Non-Banks are Seeking to Dominate Point of Sale Lending

The Technology Edge: How Non-Banks are Seeking to Dominate Point of Sale Lending

LendIt Fintech USA 2018, April 9-11 in San Francisco, was a huge success. One of the more interesting panels was on how the non-banking sector is taking over point-of-sale (POS) lending. Kim Gerhardt, director at the San Francisco office of Edgar, Dunn and Company, moderated the panel. Other panelists included Peter Kalen, Michael Garrity, Mark […]

The Technology Edge: How Non-Banks are Seeking to Dominate Point of Sale Lending

LendIt Fintech USA 2018, April 9-11 in San Francisco, was a huge success. One of the more interesting panels was on how the non-banking sector is taking over point-of-sale (POS) lending. Kim Gerhardt, director at the San Francisco office of Edgar, Dunn and Company, moderated the panel. Other panelists included Peter Kalen, Michael Garrity, Mark Lorimer, and Camilo Concha.

Kalen is founder and CEO of Flexiti Financial, a Canadian company founded in 2013 that specializes in providing easy, instant POS financing through its award-winning mobile application process.

Garrity is co-founder, CEO, and president of a platform that has enabled merchants to facilitate consumer lending since November 2010. Financeit has processed over $2.5 billion in loan applications from thousands of merchants.

Lorimer represents LendingPoint, a lending company founded in 2014 that focuses on personal loans and debt consolidation. He is chief marketing officer. LendingPoint recently acquired LoanHero, which is in the POS lending business.

Finally, Concha is founder and CEO of LendingUSA, a company that provides innovative financing solutions with a specialization in POS lending. LendingUSA was launched in 2013 and caters to consumer finance in a variety of sectors from medical, pet care, consumer goods and services, etc.

Over the years, the POS lending industry has gained scale and seen a radical change. A convergence can be witnessed in the way payments are made and fintech lending is facilitated. The opportunity in POS financing is massive, and banks seemed to have missed the ball. Traditional banks strive to serve everyone, but when it comes to POS lending, merchants have to filter their prospective customers through a narrow funnel extending loans to a comparatively small customer base.

Flexiti Financial’s Entry in POS Lending

When Peter Kalen was asked about what brought Flexiti Financial into the business, the product that it is offering, and the level of traction it has been able to create in the market among other merchants, he articulated that Flexiti’s product is somewhat similar to what Synchrony or Alliance Data System is offering. Flexiti differs in the way transactions take place and aims to reduce the time consumed in the loan application process.

Many organizations issue private label credit cards, but application processes are long and approval rates low. With its experience and vision, Flexiti Financial has successfully introduced a 100% paperless process to offer instant POS financing. Its virtual credit card application can be downloaded from the Google Play store and the Apple store.

These private label cards speed up the loan application process, bringing the process down to three minutes. This is a win-win for retailers and customers. The platform improves the online retailer’s UX by removing the friction at the front-end.

Financeit and Point of Sale Lending

Garrity also shared his views on point of sale lending. He put emphasis on the fact that personal lending is more about new transactions and focuses less on lending. Everything in POS lending, from the technology to APIs is obsessed with enabling easy sales for merchants, improving their experience, and supporting them as they try to close more business. Merchants and customers want financing options, but they do not want to indulge in complicated programs.

Another area that Financeit targets is debt consolidation. The company has delivered a platform that makes it easy for businesses to offer powerful financing options to their customers from any device.

When asked about how they excel at delivering services to customers, Garrity said they have acquired Centah Inc, a company operating in home improvement work-flow and lead management software with joint partner and investor Goldman Sachs. The company redesigned its website to create a platform that manages the process, helps businesses connect with customers, provide dispatch scheduling systems, and represent financing options to customers throughout the process. He warnes other players that if they only focus on financing and not on the transaction, they will be missing out on an important aspect of dominating this space.

LendingUSA’s Role in POS Lending

Gerhardt asked Concha about his journey into this industry. Concha shared that LendingUSA focuses on point-of-need financing, which sits at the intersection of point of sale and fintech. He believes that businesses in today’s era are not required to be good but great if they want to be successful, and they are required to be great in all aspects, namely, marketing, technology, underwriting, and risk mitigation.

Concha started with a company called 1800mysurgeon that matched cosmetic surgeons with consumers. After starting the company, he realized the need for financing as an important part of the business. He decided to create a platform to interact with both surgery and finance to enhance the merchant’s experience.

LendingPoint’s Emergence In POS Lending

LendingPoint started as a direct consumer online lender specializing in 600-700 FICO score customers. Lorimer emphasized that the company understood very early that customer experience is crucial to POS transactions. Although the players in the market now are very good at generating products that banks like to own, they do not necessarily focus on the merchandise. LendingPoint simplifies the lending process by sharing risk and administering payment plans. LendingPoint also offers merchants risk programs to extend in-house, end-to-end services.

Marketing With Established Merchants

All the banks playing in the market are working to deliver better services to customers in different ways. The biggest players historically are Wells Fargo, Citigroup, and Synchrony Financial. They all have significant relationships.

The question is whether these big banks can be a part of this game. Concha believes that banks are an important part of the ecosystem. These banks are good for purchasing loans but are constrained by reputational risks, marketing, and other issues. Lorimer added that LendingPoint also works with some established banks. Talking of the role of hard pull and soft pull in availing credit, he shared that because a hard pull impacts the credit report of the customer, it is a cause for low approval rates. Soft pulls, on the other hand, do not affect the credit score of the credit seeker leading to a higher approval rate for loans.

Garrity shared his point of view on the tie-ups with established banks and financial institutions that become balance sheet lenders. He said they are participants in securitization, originations, and selling. He believes there is clearly an opportunity for all the stakeholder businesses to grow. Online POS lending usually operates separately considering the fact that it is complicated and technology-driven. Banks are, therefore, slow followers of fintech companies.

The Technology Edge Leads to Domination

The next important aspect analyzed was whether it is the technology that enables online POS lending businesses to dominate the lending space.

Kalen believes technology is the most important element of this space. Concha believes this space is all about keeping merchants and customers happy and building long-lasting relationships with them in the process. Lorimer questions the integration of technology among banks and whether banks will be able to adapt to complex technologies. He believes banks aren’t set up to do that, but to deliver a mass homogenous customer service. Garrity, on the other hand, believes the less you see the technology, the more attractive it is; he also thinks it is better for the merchant to focus on increasing the business close rates.

Talking about data management, Lorimer believes technology definitely provides an edge to the business on the back end. The data is the source for everything and it is analyzed and configured to improve the experience. As technology enables automation and brings security, users can access everything at one place and find it already stored in the system.

Kalen agrees that technology is a boon for backend data management. He added to the discussion saying that the more established players have an edge as they have been in business for many years. They have been able to hone their skills over a period of time.

Concha also believes that technology will work for the POS lending as it is different from other businesses. There is a major role of risk, debt, and strong relationships in POS lending, and none of these can be managed properly without technology.

The Challenges of POS Lending

Technology, scale, and partnerships:
Kalen from Flexiti views POS lending as a very different business than retail lending. Getting customers and coping with technology are major challenges. Other challenges that non-bank businesses face are focusing on the scale. It is important for the business to look at the credit cycle and beware of fraudulent practices as it increases the scale of operations.

Credit cycle:
Being on the right side of the credit cycle is crucial to every lending business. The access to credit in the credit cycle determines the risk and therefore the value of the business. Businesses must prepare their strategies, keeping the future in mind.

Regulation:
Lorimer believes this space requires more regulation since the Consumer Financial Protection Bureau (CFPB) is not very active. Poor regulation and lack of control pose a major risk to the players in the market.

Availability of capital and credit risk:
Another challenge is the availability of capital to extend lending facilities. The fear of credit facilities drying up in a day also bothers businesses.

The Takeaway

Kalen has realized that success does not come easy. The companies in this space need to understand that a lot of lending capital is required along with an understanding of the tricks of the trade.

Concha believes it is a 3-step learning process where the business is required to go through a testing phase, an education phase, and an adoption phase.

With LendingPoint’s recent acquisition of LoanHero, it is comparatively a new entrant in the market.

The crux of the entire discussion is that POS lenders must be specialized to survive in the market. The business has to endeavor to offer value added merchant services instead of being a one-stop shop to be successful. There is a lot of room for growth provided one understands the complexities of the trade.

Author:

Stephanie Vaughan is vice president at  Allen TaylorPosted on Categories Alliance Data System, alternative lending, Analysis, balance sheet lending, Banks, CFPB, Citigroup, consumer lending, Credit, credit risk, Featured, FICO, Financeit, Flexiti Financial, instant financing, LendingPoint, LendingUSA, LendIt 2018, Online Lending, point of sale financing, point of sale lending, POS financing, POS lending, Regulation, Synchrony Financial, Wells Fargo

Alternative Lending In Canada

Canada alternative lending

In many ways, Canada has long lived under the shadow of the U.S. The alternative lending industry has proven to be no exception. The last few years, however, have seen Canada turn the corner on marketplace lending (MPL). With MPL markets around the world (especially Europe, U.S., and UK) maturing, startups around the world are […]

Canada alternative lending

In many ways, Canada has long lived under the shadow of the U.S. The alternative lending industry has proven to be no exception. The last few years, however, have seen Canada turn the corner on marketplace lending (MPL).

With MPL markets around the world (especially Europe, U.S., and UK) maturing, startups around the world are scampering to find new locations and new opportunities to tap. Though it is not fair to term Canada as a new entrant to the fintech ecosystem, it has finally garnered the attention as one of the most promising alt-lending hubs.

Canadian Alternative Lending Numbers

 

Source: Alternative Finance Benchmarking Report 2016

As the above image indicates, the Canadian alternative finance industry is on a strong growth momentum. All segments of alt-lending (consumer, SMB, real estate) have shown multiple times growth albeit on a very low base. With a GDP of over 1.5 trillion dollars, it is a massive market for lenders. The current size of the market does not even reach a billion dollars, a paltry sum for a country with household debt over 2 trillion dollars.

A Supportive Regulatory Framework

Ontario Securities Commission (OSC), the fintech regulatory body of Canada, has been very supportive of the industry and is one of the major tailwinds for alternative lending in Canada. In October 2016, OSC started LaunchPad with an aim to support and guide fintech startups with compliance. This initiative was followed by the establishment of a Fintech Advisory Committee in January 2017, which helps apprise the regulator on fintech-related developments as well as regulatory challenges faced by businesses. Feedback from the committee will be used by OSC to frame future regulatory guidelines.

Lending startups will still have to comply with different regulatory compliance obligations depending on what kind of financial services are offered by them. Also, depending on which province they are operating in, they will be subject to different regulation and licensing requirements.

Leading P2P Lenders in Canada

  • Lendified was founded in 2015 by Troy Wright and is headquartered in Toronto, Ontario. It raised $80 million in a couple of funding rounds. Small business owners can apply online in under 10 minutes, receive an instant quote, and get funded in as fast as 48 hours. It offers loans ranging from CAD $5,000 to CAD$150,000 with APR ranging from 8%-18% and terms ranging from 6-24 months.
  • Borrowell was founded in 2014 by Andrew Graham and Eva Wong.  It’s also headquartered in Toronto. It recently raised over $57 million in funding for aggressive expansion and offers free credit score monitoring, personal loans, and product recommendations. It has lent over $10 million to over 10,000 customers. Borrowell offers loans ranging from $1,000-$35,000 and offers two terms–36 months or 60 months–with APRs ranging from 5.6%-25%.
  • Financeit was founded in 2011 by Casper Wong, Michael Garrity, and Paul Sehr. Headquartered in Toronto, it has managed from inception to raise over $38 million and recently was acquired by Goldman Sachs for an undisclosed amount. Over the years, Financeit has worked with over 7,000 merchants and processed over $2.5 billion in loan applications. Financeit offers a platform that allows businesses to offer consumer financing to their customers from various devices in Canada. It works with multiple lending partners and automates the banking role for its partner financial institutions, entirely managing loan origination, credit adjudication, regulatory reporting, loan servicing, and collections.
  • FundThrough was founded in 2014 by Steven Uster. Its headquarters is in Toronto, and it has raised over CAD $26 million in multiple funding rounds. FundThrough is an innovative technology company helping American and Canadian small business owners improve their cash flow through invoice factoring and financing. It charges 0.5% fees on the top of the funding amount and the borrower has to repay within a period of 12 weeks. The average invoice ranges from $1000 to $100,000 while the average outstanding loan is around $50,000-100,000.
  • Lendful Financial was founded in 2015 by Alex Benjamin and is located in Vancouver, British Columbia. It has raised $15 million in multiple funding rounds and offers three-to-five-year, fixed-term loans to credit-worthy borrowers with a credit score of 650 and over. It offers loans up to CAD $35,000 with APRs starting from as low as 7.9%. Loan terms range from 3 to 5 years.
  • Lending Loop was founded in 2014 by Brandon Vlaar and Cato Pastoll. Headquartered in Toronto, it has raised $12 million in debt and equity. Lending Loop is Canada’s first and only regulated peer-to-peer lending marketplace focused on small businesses. Its core focus is on providing businesses with accessible capital at a fair rate of interest through a simple online process. Loans range from $5,000- $250,000 with rates starting as low as 5.9% and terms from 3-60 months.
  • Progressa was founded in 2013 by Ali Pourdad, David Gens, and Michael Jover. Since inception, it has raised over $11 million. Progressa is a direct-pay lending platform that helps Canadian individuals who are in debt pay back their due bills. It pays its users’ bills directly so they are able to manage debt, interest payments, and collections. The platform provides users with partial payment loans between $1,000 and $15,000 with payback terms ranging from 6 to 60 months. It enables its users to get access to automated interest rate reductions every six months helping them cut down borrowing costs with good payment behavior.

Conclusion

From a global point of view, Canada is a relatively small market and still at a nascent stage. But the supportive regulatory framework coupled with growing interest of VCs and investors in the Canadian market says that major expansion is just around the corner. The Canadian market would also be conducive for U.S. players looking to expand their geographical ambitions.

Authors:

Written by Heena Dhir.

Monday December 18 2017, Daily News Digest

Chinese share prices

News Comments Today’s main news: Investors are losing big on Chinese IPOs in the U.S. Funding Circle’s projected returns. Ablrate funds 30M GBP, launches portfolio loans product. Cash Suvidha raises $2.7M in debt funding. SimplyFi challenges banks in Russia. Goldman Sachs secures majority stake in Financeit. Today’s main analysis: Sharpe ratios for ex-ante forecasts of credit models. Today’s thought-provoking articles: What makes […]

Chinese share prices

News Comments

United States

United Kingdom

China

European Union

International

India

Asia

MENA

Canada

News Summary

United States

Chinese IPOs in the U.S. Are Saddling Investors With Big Losses (WSJ), Rated: AAA

Sixteen companies from China have debuted on the New York Stock Exchange or Nasdaq so far in 2017, making this year one of the busiest of the past decade for Chinese IPOs in the U.S., according to data provider Dealogic. Ten of the newly issued stocks this year are trading below their IPO prices, with some plunging within weeks of listing.

The worst performer is Qudian Inc., a three-year-old online lender whose shares have slumped 46% through Friday since the company raised $900 million in October in one of the larger U.S. IPOs this year.

Chinese companies have raised a total of $3.7 billion by listing their shares in the U.S. in 2017, representing about 8% of the total U.S. IPO funds raised, according to Dealogic. Firms from China broadly have also powered a global surge in IPOs this year, driven in part by investors who bought into expectations of robust growth in China’s economy.

Source: The Wall Street Journal

During a period of big stock market gains, shares of all companies that raised at least $50 million in U.S. IPO proceeds this year are up an average of 18.3% since their listings through Friday, according to Dealogic. But Chinese companies in this category have fallen by an average 5.7% through Friday, with more than half of them down by double-digit percentage terms.

Source: The Wall Street Journal

Introducing Sharpe Ratios (PeerIQ), Rated: AAA

Over the last few months, we have received investor inquiry on how to incorporate both expectations and uncertainty in expectations to manage risk. The motivation is two-fold—expected returns are an insufficient statistic to drive investment decision making. For example, an investment with a 5% expected return but a higher range of outcomes may be less attractive than an investment with an expectation of 4% that has a tighter distribution of outcomes.

The Sharpe ratio is designed to measure riskiness while controlling for risk-free rates and volatility. The ratio, introduced by Nobel Laureate Bill Sharpe, measure return per unit of total risk taken above the risk-free rate.

[ Quant Note: The Sharpe ratio is typically used for assessing performance on liquid traded instruments (such as equities), and should not be used to evaluate ex-postperformance for illiquid collateral – including whole loans. However, the Sharpe ratiocan be a useful tool to analyze ex-ante forecasts are drawn from a credit model that generates independent and identically distributed draws (such as a monte carloprocess drawing from a roll-rate model). ]

Source: PeerIQ

What is a good FICO score? (The Mortgage Reports), Rated: AAA

Credit scores do not reflect income – it’s entirely common for people with big earnings to have weak credit, and for people with small wages to have great credit.

Source: The Mortgage Reports

Credit scores may not include all of your bills. For example, if you rent a home from a private owner, he or she will probably not report your payment history to credit bureaus.

Incorrect or out-of-date information on your credit report can reduce your score. And that can cost you when you shop for a mortgage. Fannie Mae’s Loan Level Pricing Adjustment Matrix, pictured below, shows just how much extra a lower score can cost you.

Source: The Mortgage Reports

According to Ellie Mae, the typical closed mortgage in October had a credit score of 724. However, you can get mortgage financing with lower scores.

HUD, the Department of Housing and Urban Development, allows FHA borrowers to purchase with 3.5 percent down with a credit score of 580 or better. Those with credit scores between 500 and 580 must put at least 10 percent down.

How technology giants are using their reach and digital prowess to take on traditional banks (Business Insider), Rated: AAA

As headlines like “Amazon Is Secretly Becoming a Bank” and “Google Wants to Be a Bank Now” increasingly crop up in the news, tech giants are coming into the spotlight as the next potential payments disruptors.

Google, Apple, Facebook, Amazon, and Microsoft, collectively known as GAFAM, are already active investors in the payments industry, and they’re slowly encroaching on legacy providers’ core offerings. Each of these five companies has introduced features and offerings that have the potential to disrupt specific parts of the banking system. And we expect a plethora of additional offerings to hit the market as these companies look to build out their ecosystems.

Source: Business Insider

Lendio Announces New Franchise in Detroit (Crowdfund Insider), Rated: A

Lendio, an online lending marketplace for small business loans, announced on Thursday the opening of its new franchise in the Detroit Metro area.

Walmart employees should use the new early pay policy as a last resort (Yahoo! Finance), Rated: A

Walmart, the largest private employer in the U.S., will begin allowing its 1.44 million employees to access their paychecks before payday.

After two years of talks with Even, a fintech startup that helps users budget by accessing upcoming pay early, Walmart (WMT) is rolling out the app to its entire workforce. In conjunction with PayActiv, Even lets employees take up to 50% of the amount they have earned up to that point, prior to the standard 2-week pay period. Individuals can do this interest-free up to eight times annually.

“I think this is a great perk for employees to have, provided they are able to use it responsibly.  The key is to treat it the same as an interest-bearing payday loan,” said Corey Sunstrom, director at Hobart Financial Planning and founder of thepocketadvisor.com.

Bitcoin surge spawns startup lenders willing to accept crypto-collateral (American Banker), Rated: A

The woes of an early bitcoin investor. Until recently, people who paid virtually nothing for the virtual currency and watched it soar had only one way to enjoy their new wealth — sell. And many weren’t ready.

Lenders on the fringe of the financial industry are now pitching a solution: loans using a digital hoard as collateral.

While banks hang back, startups with names like Salt Lending, Nebeus, CoinLoan and EthLend are diving into the breach. Some lend — or plan to lend — directly, while others help borrowers get financing from third parties. Terms can be onerous compared with traditional loans. But the market is potentially huge.

Human vs. machine: The rise of the bionic advisor (FinancialPlanning), Rated: A

As technological innovations continue to revamp the way business is conducted in the industry, the human element of financial advice is more important than ever. Clients now demand an experience as convenient and advanced as the robo advice platforms but will also look to advisors who add value beyond the numbers and calculations, create a deep connection, and consider both financial and non-financial assets.

But one important question remains: Is the middleman between investors and markets still important?

JPMorgan Chase, Barclays join IBM quantum computing network (American Banker), Rated: A

Two major banks have become charter members of a quantum computing network established by IBM, another sign of how far financial services companies are going to make themselves more competitive and to steel themselves against security threats.

PMorgan is looking at using IBM’s quantum computing systems for trading, portfolio optimization, asset pricing and risk analysis, among other things. Barclays is just beginning to investigate potential uses for the financial industry.

New frontiers of investing (Centre Daily Times), Rated: A

Another investment practice that is gaining popularity — and has had a longer history than cryptocurrencies — is peer-to-peer lending. Depending on the credit worthiness of the person borrowing, the interest earned by a lender can vary from 5 to almost 20 percent.

Notice how in both cryptocurrency and peer-to-peer lending, an attempt is made to remove the central entity that acts as the source of trust in the transaction. The central entity is then replaced by a large number of people. While a great concept, I’m not convinced that the central entity — which benefits most from the transaction — is actually removed. What I think is taking place is actually an attempt to reshuffle power.

In the case of peer-to-peer lending, the central power may not technically be a bank, but for all intents and purposes performs the same functions as the bank. The facilitator’s duties may have changed and the process may be simpler, but there’s still someone charging a fee to set the loan parameters.

Private Equity, Hedge Funds Are Supercharging Payday Lending (ValueWalk), Rated: A

Private equity moguls have invested heavily in the payday and installment lending, putting additional resources, tangible and intangible, at the disposal of these often-predatory businesses, according to a new report by Americans for Financial Reform and the Private Equity Stakeholder Project.

The report, available here, documents 23 payday and installment companies in which private equity firms have invested, sometimes to acquire ownership stakes, other times to fund actual lending.

Using Bitcoin as Loan Collateral (BTCManager), Rated: A

Bitcoin’s current market value, with the price around the $18,300 level, is nearly $315 billion. And, just like in “real” currencies, nearly 40 percent of that wealth is held by around 1,000 users.

Someone looking to take $100,000 in cash would be giving the lender $200,000 in bitcoin as collateral, with about a 12 to 20 percent interest rate.

 Coinbase is now the No. 1 iPhone app in the U.S. (recode), Rated: A

The crazy spike in the value of a bitcoin — from around $1,000 at the beginning of this year to more than $18,000 today, according to CoinMarketCap — has made Coinbase, an app that lets you buy, sell and store bitcoin, a winner. As of this afternoon, it is now the most-downloaded iPhone app in Apple’s U.S. app store.

Source: recode

 

Firms clamp down on brokers taking clients when they leave (StarTribune), Rated: A

Recently, Morgan Stanley and UBS Financial Services pulled out of a private “cease fire” agreement among brokerage houses that has made it easy for brokers to move from firm to firm. By withdrawing, the two are signaling to brokers considering a move at the two firms that they and their new employer face the threat of lawsuits if they take client contact information with them, a practice allowed under the pact.

The defections by two of the largest players, employing more than 18,000 brokers between them, raises the prospect that the industry may return to the era when the client-adviser relationship was treated as the property of the firm.

Marlette Funding Appoints Sabrina Basht Chief Strategy Officer for Best Egg (Marlette Funding), Rated: B

Marlette Funding, LLC, the parent company of , today announced the promotion of Sabrina Basht to the position of chief strategy officer (CSO), effective immediately. In this role, Basht will continue to report to Josh Tonderys, President.

As part of her new role, Sabrina will also lead the company’s communication efforts for Marlette Funding and Best Egg.

How Much Would it Cost to Travel to Every Star Wars Filming Location? (OppLoans), Rated: B

The cost of traveling to the filming locations for every Star Wars movie prior to The Last Jedi (excluding studio lots) would be just a hair over $10,900.

Source: OppLoans

 

Modo Announces Brian Billingsley, Former CEO of Klarna North America, to Join Team (PR Newswire), Rated: B

Modo, the company that creates interoperability for payments, today announced Brian Billingsley, Former CEO of Klarna North America, as the latest to join their team. Billingsley has an extensive payments background that will play an integral role in continuing the expansion of Modo’s capabilities for their clients. Billingsley will be joining as Modo’s Chief Revenue Officer.

BFS Capital Names Former BankUnited Executive, Mary Harris, as Chief Marketing Officer (BusinessWire), Rated: B

BFS Capital, a leading small business financing platform, announced today the hiring of Mary Harris as its Chief Marketing Officer. Harris formerly led marketing and public relations for BankUnited, a leading U.S. business bank headquartered in Miami-Lakes, Florida. Harris will join the BFS Capital senior leadership team and report to the company’s Chief Executive Officer, Michael Marrache.

Harris brings over 25 years of experience to BFS Capital across financial services and retail sectors. For BankUnited, she helped to rebrand and position the company as a national commercial bank now listed as one of Forbes magazine’s “Best Banks in America.” At BFS Capital, Harris will be responsible for marketing, branding, advertising and public relations strategies as well as customer acquisition and loyalty.

MPOWER Financing Named “Growth Tech Company of the Year” (PR Newswire), Rated: B

Continuing its impressive momentum as a market-leading provider of student loans, MPOWER Financing has been named Growth Tech Company of the Year by Technical.ly DC.

United Kingdom

Funding Circle refines projected returns calculations (P2P Finance News), Rated: AAA

FUNDING Circle has changed the way its projected returns are calculated, so that the data applies to a larger proportion of its investors.

Funding Circle said on Friday that its projections will now show the minimum rate that 65 per cent of investors could achieve.

The target rate on the Balanced return portfolio is now 7.2 per cent rather than 7.5 per cent, while the Conservative product remains at 4.8 per cent.

Assetz Capital Announces New Website & Refresh Branding While Prepping For Upcoming ISA Debut (Crowdfund Insider), Rated: AAA

On Thursday, online lending platform Assetz Capital announced the launch of its new website and “refreshed” brand just ahead of its upcoming Assetz Capital ISA.

Ablrate Launches Portfolio Loans Product After Topping £30 Million in Total Funding & Securing £3 Million in IFISA Funds (Crowdfund Insider), Rated: AAA

Asset-backed lending platform Ablrate announced on Thursday it launching a new range of portfolio loan lending products. This news comes just after the platform topped £30 million in total funding and achieved £3 million in IFISA funds.

Squirrel Announces Partnership With HM Government & Nesta While Crowdcube Campaign Nears £450,000 (Crowdcube Insider), Rated: A

Squirrel, a personal finance app designed to help users have more control over their money, announced on Friday it has formed a partnership with the HM Government and Nesta.

SBDA Group Closes Series A Investment Round (Finovate), Rated: A

Banking personalization company SBDA Group has landed a Series A investment today. FinSight Ventures and Digital Space Ventures contributed to the round, the amount of which was undisclosed. This marks the company’s first ever VC funding round.

Alternative Finance Boom Continues With 43% Growth (Forbes), Rated: A

The UK’s booming alternative finance market shows little sign of slowing down, with the value of funding for small and medium-size enterprises growing by well over a third last year, new research shows. Data from the Cambridge Centre for Alternative Finance (CCAF) suggests new funding models ranging from loan- and equity-based crowdfunding to invoice finance offer an increasingly important alternative to conventional SME funding such as bank support.

Overall, the UK’s alternative finance market grew by 43 per cent in 2016, to £4.6bn from £3.2bn in 2015, the CCAF said. The growth means that over the six years to the end of 2016, alternative finance has provided an additional £11bn of funding.

The research found that peer-to-peer business lending was the single largest market segment in 2016, growing by 36 per cent last year to reach £1.23bn, followed by peer-to-peer consumer lending at £1.17bn (up 47 per cent), and peer-to-peer property lending at £1.15bn (up 88 per cent).

Fintech startup Loot raises £2.2 million for its digital banking app (Tech.eu), Rated: A

UK fintech startup Loot has raised £2.2 million in funding from Portag3, the VC division of Power Corporation, and Speedinvest.

Nottingham fintech firm secures Open Banking investment (The Business Deck), Rated: A

Handle, based at the Accelerate Places tech hub, enables businesses to take control of their digital profile all the way from managing their credit score to optimising their online presence and presenting a professional face to the world.

Now, it’s been selected by the UK’s innovation foundation, Nesta, to help drive a revolution in small business banking opened up by the arrival in 2018 of the Open Banking initiative.

It’s been given £100,000 by Nesta to help it further develop its dashboard into a single app which makes it easier for small business owners to keep control of their cash position, grow top line sales, compare and save money on their key expenses and keep their credit score finance-friendly.

Rebuilding Trust In Money (MinuteHack), Rated: A

The credit crunch led to widespread job losses, loss of disposable income and a drought in available capital, all exacerbated by what is generally agreed upon as long-term irresponsible lending practices from some financial institutions.

In my opinion, we’re heading for even further mistrust with the trouble currently brewing in the peer-to-peer lending sector. Yield hungry investors are drifting into peer-to-peer (P2P) investing via the new Innovative Finance ISA, without being fully aware of the risks – the FCA have already identified this as an issue.

So how can the financial services industry, and the institutions and professionals who work within it, start to rebuild the bridges that have been burnt over the last 10 years and re-establish a trusting relationship with consumers?

Protect yourself against rising rates (The Times), Rated: B

A report by Lendy, the peer-to-peer lending platform, found a substantial drop in “bad debt” with £72 million worth of residential loans written off by banks and building societies in the 12 months to September, compared with £348 million in the previous year.

China

China Futures (Seeking Alpha), Rated: AAA

And of course, over 1.4 billion people live there, the most populous nation on the planet. It imports and exports over $3.7 trillion of products every year. China’s growth over the past 30 years has been truly astounding, a miracle of modern development.

Total debt – government, corporate, and household – has grown in recent years to over 200% of the Chinese economy.

China Total Debt to GDP. Source: Bloomberg

Despite Being World’s Largest Fund, Ant Financial’s Yu’E Bao Is Risky (China Money Network), Rated: A

Technology is both revolutionizing and super-sizing China’s financial services sector. But it’s not making it any safer, according to a report by Fitch Ratings that compares the world’s two largest money management funds, Ant Financial’s Yu’e Bao and JP Morgan U.S. Government Money Market Fund.

The report notes that in just four years, Yu’e Bao has ridden the fintech wave to become the world’s largest money market fund with RMB1.56 trillion (US$233 billion) in assets under management. Since its 2013 launch, Yu’E Bao has been growing at a CAGR of 125%, thanks to technological development and its links with Alibaba Group Holding Limited’s online payment platform, Alipay.

A Bonanza Awaits China’s Surviving Fintech Lenders (Bloomberg), Rated: A

China’s whac-a-mole approach to risk — hit it everywhere it pops up — is set to hand control of the surging $121 billion technology-driven lending market to a small group of leaders such as Lufax Holding and the finance affiliate of Jack Ma’s Alibaba Group Holding Ltd.

The survivors are in for a bonanza in coming years: Macquarie estimates credit extended by China’s fintech firms will jump more than seven-fold by 2022 to 6.2 trillion yuan ($940 billion) to pay for things like luxury and household goods or training and education. About half that market is micro-lending — typically small, short-term loans with high interest rates, Macquarie says.

WeiyangX Fintech Review (Crowdfund Insider), Rated: A

Zhima Credit, the credit services and rating agencies of Ant Financial, used to offer two types of credit report inquiries. The one in collaboration with SHULIDATA.com offers users access to individual credit reports issued by the PBoC and the other with CreditKarma, presents the channel for oversea credit inquiries (at present only available to users’ credit records in the U.S.).

On December 8th, a task force specially set up by China Banking Regulatory Commission (CBRC) released a rectification document towards micro lending, signaling a period of tightening oversight of the unregulated lending activities and related financial risks. This round of rectification will focus on 11 key areas: Source: Sina

  1. Tighter management of micro lending approval authority;
  2. Re-examination of micro lending enterprise qualification;
  3. Equity management;
  4. Balance sheet financing;
  5. Asset securitization financing;
  6. Real interest rates;
  7. Loan management and debt collection;
  8. Product category;
  9. Business cooperation;
  10. Information security;
  11. Illegal operation.

On December 13th, the NYSE-listed micro lender PPDAI released the unaudited financial performance report for Q3 of 2017. According to the report, in compliance with the recently issued cash loan regulations, PPDAI will

  1. Replace the one-time charges of fees into monthly fees;
  2. Reduce the overall fees and interests of its loan products to lower than 36%;
  3. Cancel the investor reserve funds from the year of 2018.

Here is the List of the Fintech 50 in China as Ranked by KPMG (Crowdfund Insider), Rated: B

Source: Crowdfund Insider

Figuratively Speaking (Global Times), Rated: B

0.78%

Nonperforming loan ratio as of end-November of Chinese online lender MYbank, backed by Chinese e-commerce giant Alibaba Group Holding.

European Union

Wealth Migrate Launches WEALTHE Coin to Democratize Access to Global Real Estate Investing (Euro Investor), Rated: A

Global online real estate marketplace Wealth Migrate today launched the WEALTHE Coin, a digital currency created to democratize access to wealth through international commercial and residential real estate ownership. Wealth Migrate allows for investment in real estate investment opportunities previously accessible only to high net worth individuals or institutional investors. While almost half of the world’s wealth is held in real estate, fewer than 13 percent of people have access or the resources to invest in and benefit from this lucrative market. Wealth Migrate aims to transform the real estate investment landscape and bridge the global wealth gap with its investment platform and WEALTHE Coin, with the vision of enabling anyone to invest with as little as $1.

WEALTHE Coin will be available in a token presale launching on the 15 December 2017, with the Public Crowdsale scheduled for February 1, 2018.

International

Three Blockchain Companies That Could Change Everything in Traditional Lending (Observer), Rated: AAA

More than $3.3 billion was raised with Initial Coin Offerings (ICO) this year alone.

SALT delivers an alternative route to make money from cryptocurrency assets without giving up your position. It’s a lending platform which uses blockchain to back loans. In simple terms, SALT brings the ability to list your blockchain assets as collaterals for a cash loan. Every crypto asset holder can lend them to anyone else, receive interests and regain their crypto asset as soon as the loan is paid back.

Another disrupting crypto lending project is Jibrel Network. It’s a place where users, brokers and investors can tokenize their financial assets and sell them on blockchain for profit. Even though the platform is still in development, it receives strong support from cryptocurrency enthusiasts and ICO investors. Moreover, its pre-sale ICO was more than success and raised over $3 million and attracted funds from both individual investors as well as institutions, such as TaaS Fund, Tech Squared, Aurora Partners and others.

ETHLend is a facilitating platform for both borrowers and lenders. Here, lenders and borrowers can meet up and decide everything from loan duration to the interest rate. Like Jibrel, the platform runs on Ehtereum network and uses ERC20 tokens act as a deposit on the loan.

Datarius Cryptobank Has Reached SoftCap in a Few Hours After Start of Pre-ITO (Digital Journal), Rated: A

Datarius Cryptobank has opened the doors to participate in the project to all comers and has gone to the pre-ITO stage. A SoftCap of $125,000 has been reached within just a few hours from the start of the campaign, as stated by information now available on the official website of the project.

ETHEREUM CO-CREATOR STEVEN NERAYOFF JOINS RCN ADVISORY BOARD AS THEIR GLOBAL LENDING ECOSYSTEM EXPANDS TOWARDS ASIA (Bitcoinist), Rated: B

Entrepreneur and venture capitalist Steven Nerayoffhas joined the RCN global lending project as a lead advisor.

RCN is a peer-to-peer credit protocol based on cosigned smart contracts that connect lenders and borrowers anywhere in the world and in any currency through the use of RCN tokens, the platform’s native cryptocurrency. Having successfully raised over $40 million during their recent token sale, the RCN network has the potential to democratize digital economy by increasing credit access for borrowers, eliminating the risk of default for lenders, and reducing asymmetric information between network agents.

Israel and Singapore fintech hubs sign MoU (Finextra), Rated: B

The Singapore FinTech Association (SFA) and the Israeli City TLV association have inked a Memorandum of Understanding (MOU) to foster greater FinTech co-operation between the two communities.

The Challenge Of Delivering Relevant Content To Educate Customers (Forbes), Rated: B

According to advisory firm KMPG, there was a total of $3.2 billion invested globallyin fintech companies in Q1 of 2017. What’s even more interesting is that a PwC report on fintech’s growing influence on financial services showed that 82% of financial services companies want to increase fintech partnerships in the next three to five years.

India

Fintech Startup Cash Suvidha Raises $ 2.7 Mn In Debt Funding (Inc42), Rated: AAA

Just a few days after fintech platform Finbucketannounced its $1.87 Mn funding, Delhi-based online lending startup Cash Suvidha has raised an institutional debt of $2.7 Mn from various financial institutions.

The funds have been raised from six financial institutions and will be primarily used to facilitate further lending to Small and Medium Enterprises (SMEs).

Amazon to strengthen fintech space with stake in Capital Float (Economic Times), Rated: A

Online retail giant Amazon is looking to expand its footprint in the financial technology space and is in talks to invest in digital lending startup Capital Float, two persons aware of the development said.

Bengaluru-based Capital Float, which has so far focused on small businesses, is also set to start consumer financing on Amazon’s platform, apart from the ecommerce seller financing it already does, they said.

Deal or no deal – 2017: transaction trends and regulatory reforms (YourStory), Rated: A

Online retail giant Amazon is looking to expand its footprint in the financial technology space and is in talks to invest in digital lending startup Capital Float, two persons aware of the development said.

 

Statistically speaking, at the close of the third quarter of 2017, FDI inflow was $25 million, with a growth of approximately 17 percent over the corresponding period last financial year.  Mauritius, Singapore and Japan topped the list of countries investing in India as of September, 2017.

From a VC-PE activity perspective, 2017 also recorded a six-year high in deal values, with deals worth approximately $48 billion, up 34 percent over 2016. According to data published by Venture Intelligence, ‘private equity firms invested about $17.6 billion in Indian companies in the first nine months of 2017, sailing past the previous high of $17.3 billion in 2015.’

The sectors that remained bullish in 2017 were fintech, digital innovation, IT e-commerce, logistics, infrastructure and life sciences. Within e-commerce, fintech, mobile gaming, and health apps contributed a significant pie in the growth trajectory.

Now, score high marks in exams to get low interest rates on loans (Times of India), Rated: A

Can 90% in your college exam get you an iPhone? It could as a number of online student lenders are scrutinising marksheets to assess credit worthiness, and hand out loans for consumer durables.

Nagaraju T, a 21-year-old student at Malla Reddy College of Engineering in Hyderabad bought a Lenovo i5 laptop for Rs 36,000 in 2016. “I got my dad to make the down payment of Rs 10,000, and I paid the EMIs of Rs 2,000. I closed the loan in 13 months, and then bought a MINote 4 for Rs 14,000 and paid monthly installments of Rs 850,” says Nagaraju.

KrazyBee places a cap of Rs 15,000 for consumer durable loans, Rs 50,000 for two-wheeler loans and Rs 3.5 lakh-Rs 4.5 lakh for educational loans.

KrazyBee, Faircent and Buddy.com say their non-performing asset (NPA) levels are under 3%, which is below the industry norm. The low default rate, they say, is due to risk assessment and screening of applicants.

Online lender Deal4Loans’ Rishi Mehra says the use of proxies such as marksheets instead of CIBIL scores needs to be viewed with caution. In the early 2000s, a rash of NBFCs lent based on such proxies for credit scores, he says.

FinTech startup Cash Suvidha raises USD 2.7 mn for expansion (Outlook India), Rated: A

Delhi-based FinTech startup Cash Suvidha, the trade name of Usha Financial Services Pvt. Ltd., raised an institutional debt of USD 2.7 million from various financial institutions towards driving growth.

Sort your loan application issues with these fintech apps (Outlook India), Rated: B

Every borrower registered on Faircent is identity-checked, credit-checked and risk-assessed by our system as well as an experienced team. Its tech-enabled credit evaluation algorithms reject over 90 percent of the borrowers who apply for loans.

OHMY Technologies Private Limited is the owner and operator of OMLP2P, an online Peer-to-Peer (P2P) lending platform. The platform assesses creditworthiness of a prospective borrower using its proprietary algorithm developed in consultation with CRIF HighMark, one of the leading Credit Bureau.

CoinTribe is a leading online loan disbursement platform that provides quick and easy collateral-free loans to small businesses and individuals. It is the only online lending platform which has back-tested its credit model with large banks.

Aye Finance differentiates itself by creating a technically enabled process that builds credit insights through a variety of available business and behavioral data. This effective credit appraisal coupled with the use of modern workflow automation, and a small but engaged workforce is helping bridge the gap between the MSMEs and organized lending.

CreditMantri is a multi-services platform that helps borrowers secure loans from its partner financers.

Asia

Uber rival Go-Jek drives payments push with acquisition of three fintech start-ups (CNBC), Rated: A

Ride-hailing start-up Go-Jek has acquired three financial technology (fintech) start-ups as it looks to dominate Indonesia’s digital payments space.

Go-Jek said Friday it had bought offline payments service Kartuku, payment gateway Midtrans and saving and lending firm Mapan for undisclosed amounts.

MENA

Fintech News from the Middle East and North Africa (MENA) (Finovate), Rated: B

  • Al Baraka Banking Group partners with Path Solutions to deploy iMAL Islamic core banking system.
  • UAE Exchange to launch gocash card and mobile app courtesy of partnership with online travel firm, Cleartrip
  • Online real estate marketplace and KPMG Global Fintech Top 50 member Wealth Migrate opens office in UAE, announces new country CEO, Lee-Ann Rush.
Russia

Russian fintech company challenges banks (Banks.am), Rated: AAA

According to the press service of the company, SimplyFi’s new product gives Russian company the opportunity to apply and receive loans up to RUR 300 000 (around USD 5000) from private investors completely remotely through a fully-electronic application process, transferred to any bank account.

Through a scoring system developed on the basis of technological analysis of big data, decisions on applications are made automatically within two hours. The company will only need tax ID and a statement of turnover in the settlement account. SimplyFi provides a 100% guarantee for the raising of funds once an application is placed on the market.

Canada

Financeit Recapitalizaton Gives Goldman Sachs Majority Stake (Finovate), Rated: AAA

Point-of-sale financing provider Financeit completed an investment round today with existing shareholder Goldman Sachs. The round gives the firm a majority stake in the Toronto-based fintech.

Financeit helps merchants increase closing rates and transaction sizes by enabling them to offer customers affordable monthly or bi-weekly payment plans.

Authors:

George Popescu
Allen Taylor

Lesson from Canada’s P2P: from credit cards to point of sale

Lesson from Canada’s P2P: from credit cards to point of sale

According to industry estimates, point of sale (POS) financing is a 500 billion dollar business. The auto industry is clearly the leader with an estimated 80 percent of the sector sales going through POS financing.  Contrast that with home improvements, which is another high ticket item, but POS financing falls to 10% of sales. Traditionally, […]

Lesson from Canada’s P2P: from credit cards to point of sale

According to industry estimates, point of sale (POS) financing is a 500 billion dollar business. The auto industry is clearly the leader with an estimated 80 percent of the sector sales going through POS financing.  Contrast that with home improvements, which is another high ticket item, but POS financing falls to 10% of sales. Traditionally, point-of-sale financing has been complicated for merchants due to the heavy paperwork process and is mostly accessible to national level retailers. There is a massive opportunity available to push customer behaviour towards the Auto POS financing way.  Financeit saw the potential in this space and established a platform that allows businesses to offer consumer financing to their customers through multiple avenues.

Canada’s first P2P

Financeit came to life in 2011 and is headquartered in Toronto, Ontario but was originally started in 2008 under the name of CommunityLend. It was Canada’s first P2P lending platform at that time. But due to lack of interest in funding credit card debt consolidation amongst prospective lenders and a difficult regulatory process, they pivoted to POS financing. Over the years, it has been able to raise $21.4 million in various rounds of fundraising from high profile investors (Fidelity National Information Services, FinSight Ventures, FIS, IA Capital Group, Goldman Sachs Merchant Banking Division, Michael Garrity, Second City Capital, TTV Capital). Michael Garrity (Co-Founder and CEO) was the VP of Sales and Marketing at epost, a world leader in the electronic bill presentment and payment industry. Casper Woong (COO and Co-Founder) was earlier with Easyhome, Canada’s largest publicly traded merchandise leasing and non-prime lending company and before that he was working at BMO Capital Markets in their Merger and Acquisition team. Paul Sehr (CTO and Co-Founder) was CTO at Momentville, an online wedding planning website.

When the team started CommunityLend, the company ran into frosty waters. As P2P was a new concept in Canada back then, not many understood the industry. A lot of time was wasted in executing the compliance, security, insurance, regulations associated with operating an online lending platform. In the beginning, the company had more legal and compliance personnel than developers but this gave them the insight on the how to build an application for the financial service industry. During that time, while talking to businesses they realized the potential in POS lending space and they shifted their focus to POS lending and Financeit came to existence.

Point of Sale

Usually while granting credit to an individual at POS, the lending company asks the merchant to provide documents on behalf of the customer. That creates unnecessary hassles for all involved as documentation is not the primary business or trade skill of a merchant. This step was a deal breaker as it inconvenienced all involved. Therefore, Financeit created a platform where credit approval can be given right away and the customer can directly fill out the application, making it easier for all the parties involved.

Financeit is a cloud- based point –of-sale platform; therefore there is no paper chaos. The whole process takes just a few minutes; the customer has to provide little information upfront and the system automatically runs various analytics in the background. Since Financeit works with numerous lending partners, the rate of approval is relatively high as compared to others. The platform is aimed at consumers but its marketing campaigns are focused on retailers. Adding a POS financing option can help a business convert leads being lost due to the big ticket size. IN return, the startup gets an exclusive catchment area.

Traction

The startup uses three stats to measure its traction:

  • Number of merchants recruited and qualified- In its first year of operation, it had 200 merchants and now till date, it has 6000 merchants on board. Each unique location is considered as a merchant and is a POS for the company.
  • Loan Origination- Since 2011, it has processed over $1.5 billion in applications and has originated loans worth almost $375 million.
  • Capital- Right now it has over $300 million in lending capital and plans to raise it to $500 million for lending in 2017.

Financeit wants people to consider them as a bank and not a private money lender who charge steep APR. Therefore, it provides very bank like APR’s starting from 6.99% and going as high as only 12.99%. It wants its merchants to sell more and banks to earn high yield from good quality loan by using the Financeit platform. Its rate of default is under 1% and arrears are under 2% per annum. Though the average FICO score of its customer is around 730 but it is still not enough to explain such an amazing statistic for a company of this size. The CEO, Michael explains that the secret sauce is that they are not offering credit to a customer with an existing credit card debt, looking to consolidate. The platform is financing a transaction in which homeowners were looking to spend money on home improvements. This nuance of understanding the customer behaviour is an important part of why the company has been able to grow so aggressively.

Affirm and Bread

With its innovative product line and dedicated service, Financeit has been able to create its own niche. Looking at a broader spectrum, its closest competitors are Affirm and Bread.  But since they both concentrate on e-commerce businesses, the size of their transaction and loan duration is usually very small. Financeit’s average loan size is usually 20 times larger than Affirm and Bread (average loan amount for them is about $500 whereas for Financeit it is $10,000) and duration of the loan on average is 5 years versus 3-6 months for its rivals.

In an effort to expand its horizon, Financeit recently partnered with Concentra (a wholesale financier) to acquire TD Bank’s indirect home improvement financing business for $339 million. As a part of the agreement, about 45,000 TD loans were purchased by Concentra and 800 merchants were assigned to Financeit. In April it also struck a strategic partnership with Concentra for debt funding worth $100 million.

No business can be successful without understanding the needs of it customer and Financeit has leveraged its unique insights into the big-ticket home improvement industry to become the clear leader in its niche. Since the majority of its customers are small businesses, it has set up its underwriting process keeping that in mind. Fintech is still in its infancy in Canada but it is the future of the financial service sector, particular the POS lending space. Financeit has the foundation to take advantage of the market in coming years.

Author: Heena Dhir and George Popescu

George Popescu

Thursday October 6th 2016, Daily News Digest

Thursday October 6th 2016, Daily News Digest

News Comments Today’s main news: Zopa and AirBnb partner; PeerIQ’s quarterly securitization update. Financeit raised $US 17 mil in equity. Today’s main analysis : New 40-act funds launching in the US ;4 charts on the state of digital migration in banks Today’s thought-provoking articles: An interesting article on Insure-tech startups ; An interesting article on using character profiling in lending; CrowdLending Fund One in […]

Thursday October 6th 2016, Daily News Digest

News Comments

United States

Canada

United Kingdom

European Union

Australia

India

News Summary

 

United States

PeerIQ’s MPL Securitization Tracker for Q3 2016, (PeerIQ), Rated: AAA

  • Marketplace lending securitization remains a bright spot in the ABS market. Total issuance topped $2.3 billion this quarter—a record—and is up 34.8% from Q2, with cumulative issuance now totaling $12.6 billion.  YTD issuance of the sector stands at $5.4 billion as compared to $3.0 billion from the prior year, an 80% increase as compared to a 10% decrease in non-MPL ABS issuance.
  • Although MPL origination volumes have declined at some platforms, ABS issuance is increasing as is the proportion of loans funded by ABS. The percentage of loans funded by ABS is over 50%.
  • The movement towards rated securitizations at larger transaction sizes continues.  All the deals issued in the third quarter were rated, with the exception of LCIT 2016-NP1. Further, the growth in average deal size continued, growing to $267 million in 2016 as compared to $64 million in 2013.
  • New issuance spreads continued to tighten in—a friendly environment for securitization.  Across all segments in MPL, Q3 2016 saw spread compression across each part of the capital structure, indicating strong investor appetite for MPL ABS paper in the market.
  • We estimate $6.0 to $10.3 billion MPL ABS issuance for 2017. Goldman Sachs, Morgan Stanley, and Citi take top positions on the league tables.
  • Differences in execution and losses are emerging across issuers. SoFi maintains a significant execution advantage over peer originators, and remains the largest issuer in the category. PeerIQ expects 3 additional deals to breach loss triggers in the coming months.

With new mutual funds, marketplace lenders continue to seek diversified sources of capital, (Tradestreaming), Rated: AAA

The first two marketplace lending mutual funds were approved in the U.S.
Total size of marketplace lending securitization issuance volume to date is $10.3 billion.

The first two marketplace lending mutual funds, sponsored by Stone Ridge Asset Management and RiverNorth Capital Management, were approved recently in the U.S. by the S.E.C., with similar funds launched earlier in the U.K.

“This is an exciting opportunity for RiverNorth and our investors,” said Philip Bartow, co-portfolio manager of the RiverNorth fund. “The benefit of being early to the retail market will give us the enhanced ability to purchase loans directly from quality online lending partners with whom RiverNorth has negotiated loan acquisition and servicing relationships.”

More funds have filed to become ’40 Act funds for marketplace lending and are awaiting S.E.C. approval.

Though anyone can invest directly on the marketplace lending platforms, they are cumbersome compared to mutual funds, a product investors and advisors know how to manage. In order to invest in marketplace lending, one needs to open a new account and learn a new set of analytical tools to aggregate and select loans that fit his risk preferences. If an investor wants to invest in more than one platform, this problem might become prohibitive.

Alternatively, hedge funds, which comprise a big chunk of the capital in marketplace lending, are only open to accredited investors. Launching these mutual funds will give retail investors easier access to consumer debt.

“By expanding marketplace loans to a broader investor base, these new funds will transform the industry and could eventually move today’s platforms towards principal broker-dealer markets, similar to other fixed income instruments,” Monja, a marketplace lending analytics solution, explained in a blog post.

TransUnion Launches Fraud Prevention Exchange to Reduce Online Fraud, (TransUnion Email), Rated: AAA

TransUnion data show that, on average, 4.5% of borrowers take out more than one personal loan on the same day.

TransUnion (NYSE:TRU) today announced the launch of its

4 charts on the state of digital transformation in banks, (Tradestreaming), Rated: AAA

Only 11 percent of banking executives plan to enhance mobile or omnichannel banking this year.
Projects prioritized in the next 24 months, are more likely to be middle- and back-office focused, like building an enterprise-wide compliance architecture.

Ten fintech start-ups that are causing a stir in insurance, (Financial Times), Rated: A

Insurtech — or instech — is now attracting entrepreneurs and the investors that back them.

The start-ups are targeting all parts of insurance. Many are focusing on distribution, using new technology to reach consumers that traditional insurers miss. Others are looking at analytics, helping insurers to use data to make better underwriting decisions. Blockchain — the technology that underpins bitcoin — is increasingly popular, while health insurance has been a big area of start-up activity in the US. Nor have start-ups ignored the potential of the “internet of things” — the growing use of data-collecting devices in everyday items, from cars using telematics systems to connected homes.

Few start-ups have become full, risk-bearing insurers. Analysts say that the capital requirements, regulatory burden and complexity required, combined with the desire of investors for short-term returns, means that very few of them underwrite their own policies.

Form D Alert: Crowd Lending Fund One Filing. Daniel Najarian Submitted Oct 5 SEC Form, (Frisco Fastball), Rated: A

The Massachusetts-based Crowd Lending Fund One, Llc had published FormD because of $10.00 million offering. This is a new filing. The Limited Liability Company raised $1.05 million so far. That is 10.50% of the $10.00 million offering. The total offering amount was $10.00 million. This form was filed on 2016-10-05. Crowd Lending Fund One, Llc’s clarification was: none. The offering has $8.95 million left to be raised and is still open.

Crowd Lending Fund One is based in Massachusetts. The company’s business is Pooled Investment Fund. The SEC form was submitted by Daniel Najarian Manager. The company was incorporated in 2016. The filler’s address is: 17 Main Street, Watertown, Ma, Massachusetts, 02472. Daniel Najarian is the related person in the form and it has address: 17 Main Street, Watertown, Ma, Massachusetts, 02472. Link to Crowd Lending Fund One Filing: 000168619216000001.

On average, companies in the Pooled Investment Fund sector, sell 37.80% pooled investment interest. Crowd Lending Fund One sold 10.50% of the offering. The average offering amount is $24.76 million for companies in the Pooled Investment Fund industry sector. The total amount raised is 95.76% smaller than the average for companies in the Pooled Investment Fund sector.

Payoneer raises $ 180 million for its global payments technology, (TechCrunch), Rated: A

Payoneer, a global provider of payment processing technologies, has added another $180 million to its already sizable war chest as it looks to continue to grow its payment services.

Already profitable, and with a solid amount of cash on the balance sheet, the new money will double the company’s product development and technical staff, according to the company’s chief executive officer Scott Galit.

For now, the company’s focus seems to be on China, where Payoneer has launched local bank account services in China for customers that don’t have Chinese accounts.

Oleg Seydak on Blackmoon & Marketplace Lending as a Service, (Crowdfund Insider), Rated: A

Blackmoon Financial Group is a newer entry into the marketplace lending sector.  Launched in 2014, Blackmoon is marketed as “marketplace lending as a service” or MLaaS. Focusing on balance sheet lenders, Blackmoon has developed technologies to provide integration with  loan originators with institutional investors. The platform started in Europe – starting with Russia – and adding multiple platforms before crossing the Atlantic. Blackmoon has also launched a $100 million fund, along with Target Asset Management, to invest in loans originated by European balance sheet lenders. Announced early in 2016, the fund is open to international investors with minimum commitment size of €125,000 and targeting annual returns of 12-13% net of fees.

This past July, Blackmoon entered the US marketing opening an office in Manhattan.

Blackmoon has set an ambitious goal of $1 billion in brokered loans by the end of 2017.

So far, Blackmoon has had a “good experience in the US”. They currently have 5 institutional investors using their platform including 3 family offices and 2 private equity funds.

The most difficult part of setting up operations in the US?  The regulatory environment.

“We have already spent a good amount of money on counsel and attorneys. It is hard to get a clear answer and it is costly.  There is no “stop factor”…”

Tests of character, (The Economist), Rated: AAA

How personality testing could help financial inclusion.

In rich countries, lenders use credit scores to weigh risk. But just 7% of Africans and 13% of South Asians are covered by private credit bureaus. Bailey Klinger of the Entrepreneurial Finance Lab (EFL), which explores new kinds of credit data, argues that psychometrics could scoop many more people into the financial system. Everyone has a personality, after all.

Some lenders are convinced. Grupo Monge, a retailer, uses psychometrics to sell household goods on credit to low-income Peruvians. “Most of the time we are the first company to give them credit,” says Gabriel Trelles, its boss in Peru. The biggest market for psychometrics is for such consumer loans. But microlenders and banks are catching on. EFL’s software has been used in 690,000 loan decisions in 27 countries. Creditinfo will use its psychometrics unit, recently acquired from a marketing firm, to expand in emerging markets.

The technique is still in its infancy and will not replace credit bureaus, says Miriam Bruhn of the World Bank. The best way to tell if somebody will repay a loan in future is to see if they have repaid one in the past. But bureaus improve more slowly than technology. Lenders, looking for an edge, will find ever more ways to peer into their customers’ souls.

Canada

Financeit announces $US17 million investment round led by The Pritzker Organization, DNS Capital and existing investors, (Email), Rated: AAA

Financeit, a point-of-sale financing provider, today announced a new round of equity financing led by new investors–Pritzker family business interests advised by The Pritzker Organization, L.L.C. (“TPO”) and DNS Capital, LLC (“DNS”)– as well as existing investors.

The capital raise, which follows the close of a minority equity financing round led by Goldman Sachs in October 2015, will also support the ongoing needs of the company as it continues its rapid growth.

This investment round of $US17 million ($CAD22 million) enabled Financeit to fund the recently-announced acquisition of TD Bank Group’s indirect home improvement financing assets, which included the purchase of more than 800 merchant dealer agreements and the transition of a number of former TD relationship managers and operational staff.

After a transition period, the transaction will also lead to Financeit servicing approximately 45,000 existing TD consumer loans.

United Kingdom

Two P2P Sharing Economy Players Team Up– Airbnb and Zopa, (Finovate), Rated: AAA

Here’s how it works, upon logging into their Zopa dashboard, borrowers click a link to sign up to become an Airbnb host. If they earn £500 from Airbnb within six months, they get £50 off their loan. If they earn £1,000 from Airbnb rentals, they get £100 off. U.K. hosts earn an average of £2,000 per year for renting their home for 46 nights, which means borrowers would need to rent out their homes around 18 times over the course of a year to take full advantage of Zopa’s offer.

While the partnership makes sense for Zopa– it’s a focused way to help borrowers increase their income– I don’t envision banks making the same move.

Zopa debuted at FinovateSpring 2008. Since then, the company has weathered the ups and downs of the financial crisis and the P2P lending industry itself. Earlier this year, Zoparevamped its product lineup, debuting Classic, Access, and Plus, which allows institutions to lend to higher risk borrowers. In May, the company began offering auto loan refinancing, tapping into the used car financing market. Most recently, Zopa appointed Ronen Benchtrit as its CTO in an effort to grow its technology strategy.

CrowdBnk Re-Launches & Rebrands as Code Investing, (Crowdfund Insider), Rated: A

Our focus on supporting proven small businesses seeking larger sums of growth capital, means we no longer feel the name CrowdBnk is fully representative of what we do and the services we provide. We have never been a bank and neither do we wish to emulate their position.

Management stated that around one-in-ten firms are considering P2P lending in the coming year. Additionally, one in six firms with revenues over £10 million are considering this option.  This data supported the decision to reposition their platform and help SMEs raise between £1 million to £20 million in financing.

European Union

Aztec Exchange launches online early payment solution ePayMe in Spain through Grupo SERES, (Email), Rated: A

DUBLIN, IRELAND and MADRID, SPAIN – Aztec Exchange, a global supplier of invoice finance products and services, today announced the launch in Spain of its early payment solution ePayMe (payme.cloud/es/) through Grupo SERES, reaching their 6,000 SME clients.  With this partnership, Aztec continues to grow its position among European SMEs seeking early payment – a nearly €1.6 trillion market.[i]

ePayMe takes traditional early payment services like factoring and turns it on its head.  Typically issuing payment within 24 hours, ePayMe offers complete transparency, so there are no hidden costs or interest charges, and suppliers only pay minimal fees. Additionally, a supplier can sell as many invoices as it wants, provided the corporate debtors are creditworthy, and there are no long-term contracts.

Kreditech announces former Bank Managing Director Michal Panowicz as CPIO, (Email), Rated: B

Hamburg, October 6 2016 – Kreditech, the consumer finance technology Group, today announced that Michal Panowicz is joining as Chief Product and Information Officer (CPIO). In the newly created role of the CPIO, Michal will be responsible for the product and technology departments. Michal joins the Executive Team in the Hamburg Headquarters together with Founder and CEO Alexander Graubner-Müller, CFO Rene Griemens, CDO José Garcia Moreno-Torres and COO Oliver Prill.

Kreditech Group’s mission is to improve financial freedom for the underbanked by the use of technology. Combining non-traditional data sources and machine learning, the Company is aiming to provide access to better credit and a higher convenience for digital banking services.

Australia

Marketplace Lender DirectMoney Appoints New CEO, (Crowdfund Insider), Rated: A

Australian marketplace lending platformDirectMoney has appointed Anthony Nantes as CEO. Former CEO Peter Beaumont will move into the Chief Operating Officer role. DirectMoney released a statement that Nantes will bring a set of skills that will deliver the next phase of company growth.

He was previously Chief Operating Officer at Prospa, a fintech lending company, which during his tenure in 2015 was recognised by Deloitte as the fastest growing technology company in Australia.

DirectMoney is listed on the ASX and shares have performed poorly during the past 12 months. The company has garnered some support from Macquarie Group but has struggled at times to find sufficient capital to fund loans.  The most recent financial results published indicate top line growth of 177% and loan originations growth of 77%.  The company continues to deliver a net loss.

India

Faircent forays into secured loan, (Business Standard), Rated: A

Faircent, country’s largest peer-to-peer (P2P) lending firm, has now started focusing on secured loans, a segment that these players had so far not been present in. Now, with tie-ups with the firm has forayed into auto loans and is eyeing dispensing loans for other asset backed products.

Vinay Mathews, Co-founder and Chief Operating Officer,explained that apart from personal loans, even for the secured products some consumers may find it difficult to take a because of their income or risk profile.

Apart from this is also looking at exploring other products such as gold loans, against property etc.

As per a RBI report in April, there are around 30 start-up P2P lending in India, RBI said. Globally, the cumulative lending through P2P platforms at the end of fourth quarter of 2015 reached ?4.4 billion, from just ?2.2 million in 2012. And in most countries where these firms are allowed to exist they are treated as banking intermediaries. Now, even RBI is looking at regulating this sector and is supposed to come out with guidelines pertaining to it.

Author:

George Popescu

Monday September 26th 2016, Daily News Digest

Monday September 26th 2016, Daily News Digest

News Comments Main news: Jefferies-Loan Depot securitization breaks trigger; Lending Club’s fund 1st down-month; Funding Circle’s results; GLI’s results; Lufax signs banks for IPO. Main analysis: PeerIQ’s summary of last 9 months. Main thought provoking: The causes and effects of low rates, a must read Economist article; China’s number of p2p lenders will keep growing […]

Monday September 26th 2016, Daily News Digest

News Comments

United States

United Kingdom

Canada

Australia

China

 

United States

Internet Lender’s Bond Deal Starts to Sour a Year After Sale, (Bloomberg), Rated: AAA

Comment: I am not an expert in securitization, nor in investment banking. But it looks to me that Jefferies’ made securitization have by far the highest probability of breaking triggers. This is very strange. See Circle Back and OnDeck’s. And now LoanDepot’s. 

Online consumer loans made by LoanDepot Inc. are going bad faster than underwriters expected, threatening payments to investors who bought bonds backed by those debts less than a year ago.

Cumulative losses rose to 4.97 percent in September, breaching the 4.9 percent “trigger” in the $140 million securitization that Jefferies Group assembled last November and sold to investors that now include the Catholic Order of Foresters, according to data compiled by Bloomberg. Bondholders in the riskiest portion of the deal who may see funds diverted couldn’t be identified because the offering is private.

LoanDepot, which for years has specialized in traditional mortgage banking, began making small consumer loans over the internet last year.

Jefferies has been a lead underwriter of other securitizations backed by loans made by online startups, and at least two of its deals, for CircleBack Lending Inc. and OnDeck Capital Inc., have also breached their triggers. Those include Marketplace Loan Trust 2015-CircleBack 1 and Marketplace Loan Trust 2015-OnDeck 3.

CircleBack Lending hired Jefferies to explore a sale, people familiar said in June, as funding for online-finance companies tightened amid concern about loan performance.

LoanDepot aborted a planned initial public offering last November and turned to other sources of funds, including a $150 million term debt financing completed in August. The company says it recorded 80 percent year-over-year average annual growth from its founding in 2010 to 2015, funding more than $70 billion of loans. Second-quarter fundings reached almost $10 billion in home, personal and home equity loans, the company said.

“Mark-to-market” from Q1’s ABS West to Q3 ABS East, (Peer IQ email), Rated: AAA

This past February, at ABS West, conversations centered on deteriorating collateral performance and liquidity concerns. A steady flow of negative headlines–Madden-Midland, negative ratings actions, San Bernadino, platform layoffs, and global slowdown concerns–weighed heavily on investor sentiment.

Two events marked the peak of investor apprehension:
In the bond market, the pricing of CHAI 2016-PM1 (PeerIQ analysis here) where Mezzanine bonds delivered greater returns than the whole loans themselves.
In the equity market, investor capitulation after the Lending Club May 9th disclosures.

Turning of the Tide

Global credit markets began to firm in April. Lending Club tightened DTI criteria, elevated the role of the capital markets function, and strengthened leadership on the board and executive team.

In May, the US Treasury report published “Opportunities and Challenges in Marketplace Lending”–a constructive regulatory development. Treasury acknowledged the role of securitization in funding growth, and consistent with the PeerIQ RFI, recommended the need for standardized reps & warranties, consistent reporting standards for loan origination data, loan securitization transparency, and consistent market-driven valuation standards.

SoFi achieved a AAA rating for an MPL bond and cracked open the MPL ABS investor market to global investors via its hands-on marketing approach.

PeerIQ observed that secondary ABS spreads continued to tighten despite volatility in the equity markets. PeerIQ also observed in the Q2 tracker that the combination of stricter underwriting, higher coupons, and tighter secondary ABS spreads meant the conditions for securitization were strong.

In June, SoFi brought to market its first rated

LendingClub Fund Has First Negative Month on Valuation Overhaul, (Bloomberg), Rated: AAA

A LendingClub Corp. investment fund that’s struggled with withdrawals this year posted a negative return for August, the first decline in its five-year history, after overhauling how it values holdings and incurring losses on riskier debts.

The fund, overseeing about $700 million at the start of the month, had disclosed plans earlier in the summer to overhaul how it tracks assets. It enlisted outside valuation firm Duff & Phelps Corp. and shifted methodology to forecast how debts will perform individually, rather than in groups. August marked the first month under the new system, resulting in a one-time 0.95 percent reduction to returns, Sanborn wrote.

The LC Advisors Broad-Based Consumer Credit Fund ended the month down 0.49 percent, cutting this year’s net return to 1.24 percent, LendingClub Chief Executive Officer Scott Sanborn told stakeholders in a letter and report Friday.

In June, the investment vehicle was forced to limit redemptions after stakeholders asked to pull out $442 million, or 58 percent of assets under management.

But in the case of the August slump, key developments had already been signaled, with the largest hit coming from a one-time adjustment as the firm improved how it values holdings, Sanborn wrote in the letter.

In the future, “investors should expect more movement in fund returns month-over-month because the new methodology is more responsive to changes in each individual loan’s delinquency status,” he said.

Global P2P (Peer-to-peer) Lending Market Analysis 2016 Forecasts to 2021, (News Maker), Rated: A

Comment: this article is promoting a report.

The analysts forecast the global P2P lending market to grow at a CAGR of 53.06% during the period 2016-2020. To calculate the market size, Technavio considers the lending amount through P2P platforms in the Americas, Asia Pacific (APAC), and Europe, the Middle East, and Africa (EMEA).

Low pressure, (The Economist), Rated: AAA

Interest rates are persistently low. First we ask who or what is to blame. Then we look at one outcome: a looming pensions crisis.

On September 21st the Federal Reserve kept its target for overnight interest rates at 0.25-0.5% but indicated that, after raising the target for the first time in a decade last year, it hoped to raise it for a second time soon—possibly in December, after America’s presidential elections.

Earlier that day, the Bank of Japan (BoJ) said it was staying with its target of raising inflation to 2%. Indeed it went further. The bank said it would continue to buy bonds at a rate of around ¥80 trillion ($800 billion) a year, until inflation gets above 2% and stays there for a while. To help meet this “inflation-overshooting commitment”, the bank said ten-year-bond yields would remain at around zero.

The debt-laden are delighted with the persistence of a low-rate world. It costs much less to service their obligations. But savers are increasingly grumpy. Economists are simply baffled. In the 1980s and 1990s, the high real cost of borrowing (ie, after adjusting for inflation) was the puzzle. Today’s interest-rate mystery is more troubling and there is division over the reasons for it.

One side says it is simply the consequence of the policies pursued by the rich world’s central banks. The Fed, ECB, BoJ and Bank of England have kept overnight interest rates close to zero for much of the past decade. In addition, they have purchased vast quantities of government bonds with the express aim of driving down long-term interest rates.

It is hardly a mystery, on this view: central banks have rigged the money markets.

On the other side of the divide are those who argue that central banks are merely responding to underlying forces. In this view the real interest rate is decided by the balance of supply and demand for the pool of global savings. The fall in interest rates since the 1980s reflects a shift in this balance: the supply of savings has increased as demand for it has crashed.

This ongoing glut in savings is due to two factors in particular. The first is changing demography, mostly in the rich world but also in some emerging markets. Populations are aging. At the same time, the average working life has not changed much. So more money has to be squirreled away to pay for a longer retirement (see article).

A second, related, factor is the integration of China into the world economy. “A billion people with a 40% savings rate; that brings a lot more supply to the table,”

Aging is not the only long-run influence that has tilted the savings-investment scales. By skewing income to the high-saving rich, an increase in income inequality within countries has added to the saving glut. A fall in the relative price of capital goods means fewer savings are needed for a given level of investment. Both trends predate the fall in real interest rates, however, which suggests they did not play as significant a role as demography or China.

A related reason for more saving is fear. The severity of the Great Recession belied the relative economic stability that preceded it.

Consider the business of life-inssurance companies. They pledge to pay a stream of cash to policyholders, often for decades. This promise can be likened to issuing a bond. Insurance firms need to back up these promises. To do so they buy safe assets, such as government bonds.

The trouble is that the maturities on these bonds are shorter than the promises the insurers have made. In the jargon, there is a “duration mismatch”.

When bond yields fall, say because of central-bank purchases, the cost of the promises made by insurance companies goes up. The prices of their assets go up as well, but the liability side of the scales is generally weightier (see chart 4). And it gets heavier as interest rates fall. That creates a perverse effect. As bond prices rise (and yields fall), it increases the thirst for bonds. Low rates beget low rates.

If a growing bulge of middle-aged workers is behind the secular decline in real interest rates, then the downward pressure ought to attenuate as those workers move into retirement. Japan is further along this road than other rich countries. Yet its long-term real interest rates are firmly negative.

A concern is that as more people retire, and save less, there will be fewer buyers for government bonds, of which less than 10% are held outside Japan. Another of the Geneva Report’s authors, Takatoshi Ito of Columbia University, reckons there will be a sharp rise in Japanese bond yields within the next decade. There may be political pressure on the Bank of Japan to keep buying bonds to prevent this.

Swedish FinTech Klarna Partners with SAP on Whirlwind Three-Month Business Overhaul, (PR Newswire), Rated: A

SAP announced today that Klarna, has become the first customer to go live with smart accounting for financial instruments (smart AFI), a new functionality based on the SAP® Bank Analyzer set of applications, 9.0 release. In just three months SAP implemented the solution including accounting rules configuration, data integration and a full setup of the SAP HANA® database environment, proving that up-leveling market and product growth does not have to be a long and arduous process.

 

United Kingdom

Global expansion almost doubles losses at fintech unicorn and peer-to-peer lender Funding Circle, (City A.M.), Rated: AAA

The peer-to-peer lending group is set to post a full-year loss of £36m when it publishes its accounts on Tuesday, after expanding into Europe and the US ate into profits. However, revenues at the firm, which was founded in 2010 and has lent more than £1.5bn to small and mid-sized businesses, rose 140 per cent from £13m to £32m last year.

“We expect our UK business to be profitable in the fourth quarter of 2016 and to generate significant cashflow in 2017 to finance international operations” said chief executive Samir Desai.

In 2015 the company raised $150m (£116m) of new equity for the business and listed the first and only single platform investment trust – the £150m Funding Circle SME Income Fund – on the London Stock Exchange.

GLI Finance Limited Unaudited Interim Results for the six month period ended 30 June 2016, (Email), Rated: AAA

Full report can be found here.

Highlights

  • The Company losses for the period were GBP6.9m (June 2015 profit of GBP5.3m), impacted by GBP13m write downs in investments in underperforming or liquidated platforms following the strategic review;
  • Group organized with Three Pillars to improve operational focus and assist reporting our strategy;

Pillar One

  • Sancus BMS Group on a pro forma* like for like basis, increased consolidated revenues from GBP2.7 million in H1 2015 to GBP4.0 million in H1 2016. The period was notable for the consolidation of the Sancus group and its amalgamation with BMS and Platform Black to establish our specialty lending business.

Pillar Two

  • Valuations in our prioritized platforms, The Credit Junction, LiftForward, Funding Options and Finexkap increased by GBP5.5m in aggregate. Investments in underperforming or liquidated platforms were written down by GBP13m. We have been very prudent in reorganizing this portfolio and we fully expect to see value of this portfolio build materially in future periods;

Pillar Three

  • Amberton Asset Management remains de minimus and we expect to make progress on this pillar in the next 12-18 months;

Group

  • As a consequence of the considerable restructuring in the period together with writedowns in Pillar Two, the Net Loss for the period on the GLI Measurement Basis** was GBP10.3m (H1 2015: Net Profit of GBP0.2m).
  • As a consequence of making early write-downs and recognizing losses in underperforming assets, together with raising capital and reorganizing Sancus BMS Group, the Companies’ balance sheet is significantly strengthened. Nonetheless, during the period the Company Net Asset Value “NAV” per share decreased from 42.73p to 37.07p;
  • Company debt to gross asset ratio is 30% (31 December 2015 33%)
  • Company Net Assets have increased in the period from GBP98.2m to GBP105.6m and;
  • The Company’s weighted-average cost of debt decreased from 8.6% (year to 31 December 2015) to 6.8% (period to 30 June 2016).

Post period end

  • Ordinary share placing raised GBP7.1m from Somerston Group in August 2016;
  • New wholly owned subsidiary, FinTech Ventures Limited (“FVL”), created to hold, initially, the four Prioritised FinTech platforms thereby enabling independent capital raises to support these investments.
  • Name change of GLI Alternative Finance Limited Plc to the SME Loan Fund (“SMEF”) on 1 September 2016.

Zoopla partners with Landbay for P2P lending solution, (Financial Reporter), Rated: B

The new channel on the Zoopla website includes a peer-to-peer lending solution, in partnership with Landbay, where anyone can invest from as little as £100 into buy-to-let mortgages, statistically the lowest risk form of peer-to-peer lending.

Canada

Financeit expands management team by tapping CFO from Capital One Canada, (Morningstart), Rated: A

This addition to Financeit’s management team will help propel the Toronto-based company into its next stage of maturity as it continues to expand its market share in the point-of-sale financing industry.

With 20 years’ experience managing and leading finance teams in Canada and the United Kingdom, Hanning served as Capital One Canada’s Chief Financial Officer for nearly five years. Prior to becoming CFO, Hanning held various senior positions within the bank’s Canadian and United Kingdom operations over the previous 12 years. He started his career at Glenfield Hospital NHS Trust in Leicester, United Kingdom.

Hanning’s entry into Financeit comes on the heels of the company’s $339 million acquisition of TD Bank Group’s indirect home improvement financing assets in partnership with Concentra.

Australia

Beyond Bank Australia and SocietyOne announce key partnership, (PR Wire), Rated: A

Beyond Bank Australia is continuing its expansion into the fintech sector, forming a significant partnership with the nation’s leader in marketplace lending, SocietyOne.

The agreement sees Beyond Bank tip in $1.5 million for an equity stake in SocietyOne as well as increasing its existing funding commitment in personal loans to $10 million. The arrangement was formalised on Friday, September 23.

SocietyOne now has ten mutual banks and credit unions among its 200 investor funders and is actively engaged with a number of other potential investors as it undergoes further expansion, targeting a 2-3 percent share of the $100 billion consumer finance market by 2021.

China

P2P lender Lufax taps four banks for Hong KongIPO, (China Daily), Rated: AAA

CITIC Securities, Citigroup, JPMorgan and Morgan Stanley have started preparatory work,although no formal mandate has been awarded, the people said.

The volume of Chinese P2P loans stood at 680.3 billion yuan ($102 billion) at the end ofAugust, more than 20 times levels seen in January 2014, according to industry data providerWangdaizhijia.

One third of China’s 3,000 peer-to-peer lending platforms ‘problematic’: new report, (SCMP), Rated: A

The 2016 Blue Book of Internet Finance, published on Friday, found 1,263 of the P2P platforms on the mainland up to the end of 2015 were problematic, which included cases of fraud or firms going out of business.

This total included 896 P2P platforms that got into problems in 2015, with more than half involved in fraudulent tricks that took advantage of loopholes in regulations, the report said.

“China’s slow economic growth has led to plunging business for small and medium-size companies; It increases the risk of loan defaults,” the report said, adding that the risk of financing usually rose after accumulating over a long period.

In one typical case of fraud, highlighted in the report, one P2P platform, Rong Zuan Dai, went online in November 2015 and published 37 financing projects that promised high interest rates to hundreds of investors. But after two weeks the website suddenly closed.

Of the current total, Guangdong province had the largest concentration of P2P platforms, with 18 per cent of the national total, the report said.

It estimates that the number of P2P platforms nationwide will continue to rise at a rate of 90 per cent over both of the next two years as the industry further consolidates, and could eventually reach 10,000.

The number of active users of P2P is also expected to surpass nine million in 2016.

Author:

George Popescu

Thursday September 15th 2016, Daily News Digest

Thursday September 15th 2016, Daily News Digest

News Comments Today’s main news: FastPay raises $15mil in equity; MoneyLion closes financing line with Macquarie,; 2 fintechs, Financeit and Concentra, purchase TD Bank’s (a bank’s !) home improvement financing assets. Today’s main analysis: LendKey releases student loan cohort default data, strange data. Today’s main thought provokers:  The future of Finance; UBS wealth manager tries AI; […]

Thursday September 15th 2016, Daily News Digest

News Comments

United States

United Kingdom

Canada

China

 

United States

The future of finance: Banking as a platform, (The Next Web), Rated: AAA

A new law is going into effect in 2018 called the Revised Payment Services Directive in Europe, or PSD2 for short.

This law and the possibilities new technologies bring, means the role of banking is changing and emphasizes the trend towards ‘open banking’. Financial services and banks such as Dutch bank ABN AMRO see new technologies on the horizon and are working to find the trends in which they can gravitate toward and adapt to.

PSD2 works to provide a foundation for the creation of a single-wide market for payments. It allows consumers the ability to connect their bank accounts with third party services, allowing the services through an API to access data generated by their bank accounts.

In other words, with PSD2, banks will essentially become a platform for banking with providing APIs to access data.

Entrepreneurs can use the new law of PSD2 to drive innovation and creation of new services to offer to customers, and can now use bank APIs to do it. For example, an entrepreneur can create a way for one customer to have a central dashboard that has all of their financial data in one place, regardless of the bank or how many different financial institutions they do business with.

For instance, ABN AMRO works closely together with startups and scale-ups to bring customers simple and user-friendly apps. Recently, the financial institution worked with Swedish startup Tink to develop a new app allowing customers to easily overview their earnings and expenditures.

 Acquire Real Estate Creates Liquidity for Investors in Commercial Real Estate, Facilitates First Fully Automated Secondary Market Exchange, (Email), Rated: AAA

Acquire Real Estate, a commercial real estate crowdfunding platform, has completed its first fully automated secondary market exchange between two of its real estate investors.

The investors relied on Acquire’s patent pending Investor Exchange,which facilitates a blind auction process that enables a seller to identify a buyer, establish a value and generate the required documentation and consents. The investors exchanged an interest in the DoubleTree by Hilton Dallas-Fort Worth, a 282-room, 8-story hotel located adjacent to the Dallas-Fort Worth Airport.

“We built the Investor Exchange with our investors’ need for liquidity in mind,” said Gerry Polucci, Co-Founder and CTO of Acquire Real Estate. “We also built the technology with an understanding that it had to be simple and modernize the process.”

Acquire’s technology allows the exchange process to unfold quickly without the inconveniences usually associated with such transfers. Investors can use the exchange to post all or part of an Acquire investment for exchange with any other member of the Acquire community. The seller then specifies the terms of the auction and provides up-to-date information concerning the investment. Acquire investors can then bid on the opportunity based on the terms proposed. If successful, the transaction takes place for an undisclosed amount, which could be higher or lower than the initial acquisition price.

LendKey Introduces Bellwether Report On Private Student Loans, (PR Newswire), Rated: A

LendKey, today released an inaugural industry-specific report entitled Positive Signal for Private Student Loans. This is the first in a series that aims to share summarized risk and other unique insights within data from LendKey’s 275 bank and credit union client-lenders nationwide.

To access the full report, please visit: 

Highlights of the report include:

  • Originations and portfolio balance
  • Performance of the LendKey client-lender portfolio over time
  • Cosigner statistics and geographical spread such as 90% of loans are originated with a cosigner and most are from northern states
  • Over the last seven years, defaults and charge-off rates have significantly declined
  • Statistics and growth in serial borrowing

Lenders and asset managers are partnering with LendKey to bring borrowers a powerful, white-labeled lending platform that has redefined Lending-as-a-Service—and gives financial institutions of all sizes the ability to attract new business, grow relationships, manage liquidity, and mitigate risk.

LendKey’s Key results from the report above, (See above), Rated: AAA

Improvement in default performance:

 

FastPay Secures $ 15 M in Funding, (Business Wire), Rated: A

FastPay is the market-leading provider of liquidity and financial workflow solutions to the global digital media industry. Through its proprietary technology platform, IGNITE, FastPay can dynamically assess the credit of digital media businesses and deploy payment workflow solutions for media businesses globally.

FastPay, has raised $15 million from Oak HC/FT to support FastPay’s continued growth, development of proprietary technology and acquisition of strategic new hires. The investment is the first FinTech investment from Oak HC/FT’s recently launched $500 million growth-equity fund.

Mobile Finance Platform MoneyLion Closes Portfolio Financing Line with Macquarie Group, (Email), Rated: A

Moneylion, to date, has access to $650m of debt capital from Macquarie and other institutional lenders.

To date, MoneyLion has originated over 120,000 loans from its balance sheet.  Through its website and mobile app, available on Apple and Android devices, MoneyLion offers personal finance tools and a suite of credit products designed to foster better, more informed financial decision-making across the lifetime of its growing community of users.

Orrick Launches Legal Portal for Direct Lending, (Fin Alternatives), Rated: A

Global law firm Orrick has jumped into the rapidly-growing world of private credit with the creation of what it describes as the first legal portal for the corporate direct lending community.

The site breaks new ground by offering fast, simple solutions to a wide variety of common issues that arise in direct lending transactions, Orrick said in a statement.

Lending Club will Pay New CFO Signing Bonus & $ 4.5 M Stock Grant, (Crowdfund Insider), Rated: A

According to an 8-K filed with the SEC, Lending Club will pay Thomas Casey, their newly appointed CFO, a base salary of $425,000 with a 75% bonus target plus $4.5 million in an initial equity award to vest quarterly over the next four years. On top of this, Casey will also receive a one-time signing bonus of $600,000. Casey will receive half of this bonus immediately and the other half a year from his start date (later this month).

Simultaneously, Lending Club announced the creation of a Rabbi Trust – a non-qualified retirement vehicle to help compensate senior executives.

Why Lending Club Isn’t Worth Your Money…, (Seeking Alpha), Rated: A

Earnings expectations are now expected to be negative this year and Wall Street is looking for only $0.07 in earnings per share in 2017. At this stage in its life cycle and growth, one could argue a P/E is irrelevant. Even if there were not questions about Lending Club’s future growth, we would feel uncomfortable owning this company at a P/E approaching 80x.

Looking at Enterprise Value to EBITDA, we also are not attracted to a business at roughly 60x 2017 expectations. The problems of 2016 wipe out more than a full year of growth for this early-stage business, but they also highlight a going concern issue. With its large debt balance and lingering interest costs, Lending Club needs to generate significant cash flow just to stay afloat.

Earnings can be manipulated, so we tend to focus our attention on cash flow. The cash flow statement rarely lies. Before the surprising revelations in May, Lending Club averaged nearly $50 million of cash flow from operations for three quarters straight.

Cash flow went negative last quarter and will likely stay this way for a few quarters. Will investors look to purchase Lending Club loans? Will Lending Club only draw the most risky borrowers to its platform? These are troubling questions we struggle with.

At the 2002 Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) annual meeting, the legendary duo of Warren Buffett and Charlie Munger had some wonderful comments regarding investing in financials. After Munger discussed how he is often uncomfortable around most financial institutions’ lack of transparency, Buffett had this great financial quote:

“There is so much about a financial institution that you don’t know just by looking at the figures that if anything bothers you a little bit, we’re never sure whether it’s an iceberg situation”.

UBS trials artificial intelligence wealth managers, (V3), Rated: A

Wealth management firm and investment bank UBS is running artificial intelligence(AI) trials with some of its richest clients. AI applications being tested include tools designed to read facial expressions and uncover clients’ unconscious biases towards or against certain types of investment.

The aim is to help the company’s cash-rich, but time-poor, clientele to ask the right questions about their decisions, according to UBS.

RBS announced earlier this year  that the bank may replace hundreds of face-to-face customer service staff with automated services, which it claimed will free its remaining human agents to be expert advisers.

Fraud detection is another area ripe for AI applications, and companies such as Ravelin have deployed machine learning capabilities to identify online payment fraud and other pattern-based behaviour.

IBM and Aldebaran Robotics (now majority owned by Japan’s SoftBank) have been testing a robotic concierge service using IBM’s Watson service in the cloud via industry-specific datasets provided by ‘cognitive travel agent’ WayBlazer.

UK government-backed startup PingGo announced last week that its mission is to automate PR, giving rise to the real possibility that press releases may soon be produced by robots for other robots to read and disseminate as machine-readable news.

Dr Anders Sandberg, James Martin Research Fellow at Oxford University’s Future of Humanity Institute, observed earlier this year that if you can describe your job it can and will be automated.

United Kingdom

Funding Circle SME Income Fund Ltd (FCIF) to Issue Dividend Increase – GBX 1.63 Per Share, (BBNS), Rated: A

Funding Circle SME Income Fund Ltd (LON:FCIF) declared a dividend on Wednesday, September 14th. Investors of record on Thursday, September 29th will be paid a dividend of GBX 1.63 ($0.02) per share on Monday, October 31st. This represents a yield of 1.59%. The ex-dividend date is Thursday, September 29th. This is a boost from Funding Circle SME Income Fund’s previous dividend of $1.00. The official announcement can be seen at this link.

Separately, Jefferies Group started coverage on shares of Funding Circle SME Income Fund in a report on Wednesday. They issued a “hold” rating for the company.

Funding Circle SME Income Fund Limited is a United Kingdom-based closed-ended fund. The Fund’s investment objective is to provide shareholders with a level of dividend income, primarily by way of investment in credit assets, both directly through the marketplaces and indirectly. The Fund holds credit assets through maturity.

Bank of England sticks with rate cut signal despite Brexit bounce, (Reuters), Rated: AAA

The Bank of England said on Thursday it was still likely to cut interest rates to just above zero later this year, even though the initial Brexit hit to Britain’s economy was proving less severe than it expected only last month.

The Bank’s nine rate-setters voted unanimously to keep Bank Rate at its new record low of 0.25 percent, the lowest level in the BoE’s 322-year history.

They also voted 9-0 to keep the Bank’s bond-buying program target at 435 billion pounds and to continue with its new plan to buy up to 10 billion pounds’ worth of corporate bonds.

A Reuters poll of economists showed on Thursday that Britain is likely to narrowly avoid a recession.

Property Development Academy: LendInvest to Help Small Developers Build More Homes, (Crowdfund Insider), Rated: AAA

LendInvest, an online mortgage marketplace that has facilitated over £740 million in financing, has launched the “first” Property Development Academy in an attempt to boost construction of new homes.

The UK government estimates the need for additional housing in England at between 232,000 to 300,000 new units per year, a level not reached since  the late 1970s and two to three times current supply.

According to LendInvest, the Property Development Academy will be a two-day intensive programme that takes 20-25 individuals through hands-on, practical modules covering the full development project: from land valuation and acquisition, through to planning permission, supplier contracts, cost management and final sale. Sessions are led by experienced advisers. On top of education, the network of relevant contacts from their local area may become a vital resource for these aspiring developers to call upon in the future.

Canada

Financeit and Concentra acquire TD Bank Group’s indirect home improvement financing assets, (Email), Rated: A

Financeit, a cloud-based point-of-sale financing platform, and Concentra, a leading wholesale finance and trust solutions provider for Canada’s credit unions, today announced the acquisition of TD Bank Group’s indirect home improvement financing assets, with a book value of approximately $339 million.

As part of the agreement, approximately 45,000 TD loans were purchased by Concentra and over 800 merchant dealers were assigned to Financeit.

Financeit has a nationwide footprint in the home improvement industry and has increased its lending activity in this market by almost 200% since last year.

With the transaction now completed, current TD merchant partners can begin submitting loans on Financeit’s platform immediately and can take advantage of the company’s unique approach. This includes mobile-enabled technology, customer self-serve application options, paperless document signing, extended credit and 180-day approval windows. Loan origination on the TD platform will end in October 2016.

Since launching in 2011, Financeit has worked with over 6,000 home improvement, vehicle and retail businesses to process more than $1.5 billion in loans in Canada and the United States. Financeit is a private company and has raised money from a variety of investors, including a division of Goldman Sachs and FIS Global.

Concentra is a provider of national wholesale banking and trust solutions to credit unions across Canada. Concentra is serving over 80 percent of Canada’s credit unions. The company has over $37 billion in assets under administration, including over $8 billion in consolidated assets

China

Shanghai P2P Lender Raided After Failing to Make Payments, (CaixinOnline), Rated: A

Police raided the Shanghai offices of a major peer-to-peer (P2P) lending platform operator on Tuesday and arrested five people on suspicion of illegal fundraising, nearly half a year after the company stopped paying returns to its investors.

Police said they will urge the company to meet its financial obligations, but didn’t say whether criminal charges will be filed.

Kuailu is a typical case, promising investors 10 percent annualized returns, far higher than they could get from traditional banking products. Founded in 2003, the company entered P2P lending in 2014. It found a niche in lending for film production in both China and Hollywood using connections of its then-chairman, Shi Jianxiang.

In the past two years alone, Kuailu raised about 14 billion yuan ($2.1 billion) from about 260,000 investors, and poured the money into such high-profile projects as the Hollywood film The Bombing starring Bruce Willis.

But the company ran into financial difficulties and stopped paying out returns about six months ago, around the same time that Shi resigned, citing health concerns.

In June, Kuailu promised at least 600 investors, most of them elderly and in urgent need of cash, that they would receive priority in getting back 5 to 20 percent of their principal, a pledge requiring up to 100 million yuan, according to a notice on its official account on the popular WeChat mobile instant messaging platform.

Author:

George Popescu

August 23rd 2016, Daily News Digest

August 23rd 2016, Daily News Digest

News Comments Today’s most interesting piece of news are LendUp’s $47m raise;  how the new fiduciary retirement rules will help the robo-advisor industry; how the Dodd Frank securitization risk-retention rules already affect Lending Club , Prosper and Web Bank; Financeit leveraging merchants for consumer loans; and last but not least how Australian banks are fighting […]

August 23rd 2016, Daily News Digest

News Comments

  • Today’s most interesting piece of news are LendUp’s $47m raise;  how the new fiduciary retirement rules will help the robo-advisor industry; how the Dodd Frank securitization risk-retention rules already affect Lending Club , Prosper and Web Bank; Financeit leveraging merchants for consumer loans; and last but not least how Australian banks are fighting an open-data APIs mandate.

United States

Canada

United Kingdom

China

Australia

United States

LendUp fights big banks with $ 47 M for compassionate credit cards, (TechCrunch), Rated: AAA

Banks win when the poor lose. Credit cards can trap people in debt and bleed them dry with late fees. But it’s this exploitative experience that makes banks vulnerable to fintech startups like LendUp that are willing to undercut them and make up margin with software efficiency.

It’s that strategy of building an enduring consumer banking brand on the principle of compassion that let LendUp raise a new $47.5 million round led by Y Combinator’s growth fund. This Series C values LendUp “substantially higher than the last time” it raised in January 2016, says CEO Sasha Orloff. That’s an impressive feat during a rough season for late-stage fundraising.

LendUp will apply the cash toward scaling out its L Card, a credit card with no hidden fees and a flexible payback schedule.

LendUp was founded in 2011, and first attacked the scammy payday-loan business. It stole customers from the cash-advance storefronts that blanket low-income neighborhoods, and retained them by providing financial education.

Credit cards are 100X larger market, though, so earlier this year it raised $100 million in debt to fund the lending, and $50 million in a Series B.

Even though it still had plenty of money left from that, LendUp chose to accelerate its plan with today’s $47.5 million led by Y Combinator Continuity and joined by Google Ventures, Thomvest Ventures, QED Investors, Data Collective, Susa Ventures, Radicle Impact, Bronze Investments, SV Angel and some angels.

Luckily, LendUp is doing one thing to make it more nimble than its competitors: It’s building its whole tech stack in-house. “Everyone else outsources their tech,” Orloff notes.

Technology’s rising role under DoL fiduciary, (Tradestreaming), Rated: A

In April 2017, retirement guidance over 401(k)s and IRAs will need to be given under a fiduciary responsibility. The DoL rule, meant to protect common investors, requires financial advice and retirement guidance over 401(k) and IRAs to be given under a fiduciary responsibility. This means advisors must put the interests of clients first, before the advisors’ own interests or those of the advisors’ firms.

About 50% of 401(k) rollovers to IRAs can be attributed to a decision by an advisor, a sum totaling about $320 billion each year, according to Yuval Zurel, CEO of FeeX, a company that uses big data to determine whether a 401(k) rollover is compliant with the new DoL fiduciary rule.

Large firms surveyed by Deloitte estimate their costs of becoming compliant to be over $38 million, with additional ongoing expenses to vendors and suppliers to manage the duplicate systems at $9.5 million.

One concern raised by opponents to the rule package is that smaller retirement accounts may be orphaned, as lower fees will make them unprofitable for brokers. Technology consultancy CGI recommends that firms handle smaller accounts through roboadvisors, which will lower the cost of managing those accounts.

Issuers Flummoxed by Risk-Retention Rule, (Anonymous tip), Rated: AAA

A swat of asset-backed bond issuers have fallen behind schedule in their preparations to comply with the Dodd-Frank Act’s risk-retention rule.

Securitization attorneys initially expected the process to be straightforward, with most sponsors keeping the required 5% stakes in their deals via either “horizontal” interest in a single class or “vertical” positions in each tranche. But a number of unforeseen complications have sent them back to the drawing board.

The obstacles appear largest for issuers of securities backed by auto loans, equipment cash-flows and personal loans.

WebBank, which serves as the originator of record for Lending Club and Prosper loans, apparently has received inquiries about acting as a sponsor but has turned down any such proposals. One option, at least for Lending Club, would be to create a new sponsor entity through a hedge fund that the company already uses to fund some of its loans.

How Wise Are Crowd? A Comparative Study of Crowd and Institutions in Peer-to-Business Online Lending Markets, (Social Science Research Network), Rated: A

This paper examines the performance of crowd to screen the creditworthiness of small and medium sized enterprises (SMEs) compared with institutions in the context of new online peer-to-business lending markets. Exploiting the randomized assignment of originated loans to institutions and the crowd, we find that crowd underperform institutions in screening SMEs, thereby failing to lend at interest rates that adjust for the likelihood of defaulting on a loan. Moreover, the underperformance gap of crowd compared with institutions widens with risky and small loans, suggesting that crowd lack the expertise to assess the risks or the incentive to expend resources to perform due diligence. Overall, our findings highlight when crowd face limitations in screening SMEs.

THE REGTECH REPORT: Global regulatory requirements are creating a huge opportunity for regtech firms, (Business Insider), Rated: A

Here are some of the key takeaways:

  • Regtechs can help in many areas of compliance. This goes beyond automating legacy processes and can include interpreting legislation, designing new compliance processes, and managing and processing data.
  • Large financial firms represent the biggest opportunity for regtechs, but they’re also well suited to help fintech startups.
  • Regtechs face a number of hurdles to achieving significant scale and success. These include competition in the industry, the challenges of international growth, and building trust with customers.
  • Implementation of regtech solutions will result in staff reduction. These technologies will augment compliance teams in the short term, but could lead to job losses among compliance professionals in the longer term.

 In full, the report:

  • Defines what regtech is and the problems regtechs are trying to solve.
  • Highlights the advantages regtechs have over legacy compliance solutions.
  • Provides regtech company case studies.
  • Details the outlook for regtechs globally and the impact they will have on compliance teams.

 Canada

Businesses and consumers win as Financeit launches Canada’s next-generation point-of-sale financing platform, (Email from Financeit), Rated: A

Financeit, Canada’s leading cloud-based point-of-sale financing platform, has launched Financeit Direct, a direct-to-consumer tool geared towards merchants looking to offer financing solutions to customers for big-ticket purchases, such as home renovations.

Financeit is a free-to-use platform that makes it easy for businesses to offer powerful financing options to their customers from any device. The company provides financing solutions through a safe and secure platform that traditionally were only available to big box retailers.

Since launching in 2011, Financeit has worked with over 6,000 retail, vehicle, home improvement and healthcare businesses to process more than $1.5 billion in loans in Canada and the United States.  Financeit is a private company and has raised money from a variety of shareholders, including Goldman Sachs and FIS Global.

With Financeit Direct, service providers retain control of the sale but can invite their customers –by email or text– to participate in the application anytime, anywhere. For example, merchants may ask their customers to upload a picture of a void cheque or pay stub directly to Financeit via their mobiles phones, thereby avoiding awkward financial discussions and making the application process smoother and faster. Consumers get instant credit decisions, fair rates and full transparency during the financing process via their own devices, and are then able to work directly with Financeit throughout the loan period.

United Kingdom

Misys eyes £5.5bn IPO – Sunday Times, (Finextra), Rated: A

Core banking supplier Misys has appointed advisors ahead of a possible £5.5 billion London initial public offering, according to the Sunday Times.

The float would prove a boon for Vista Equity Partners, which acquired Misys in 2012 for just £1.27 billion after merger talks between the core banking vendor and Swiss rival Temenos collapsed.

Vista is understood to have been looking for a buyer since late 2014, with Singapore’s state-owned investment fund Temasek Holdings and Canadian pension funds among those rumoured to have shown interest.

Bank of England may cut rates again in September: BAML, (Markets), Rated: A

The Old Lady of Threadneedle street could reduce rates even closer to zero if UK data prints don’t start improving, according to one American investment bank, and that may still not be enough to boost the ailing economy.

China

China Lending Corporation Reports 2016 Six-Month Financial Results, (Business Wire), Rated: AAA

China Lending Corporation (NASDAQ:CLDC; CLDCW) (“China Lending” or the “Company”), a leading non-bank direct lending corporation servicing micro, small and medium sized enterprises (MSME), currently underserved by commercial banks in China, today reported its financial results for the six-month period ending June 30, 2016.

Founded in 2009, China Lending is a non-bank direct lending corporation and provides services to micro, small and medium sized enterprises, farmers, and individuals, who are currently underserved by commercial banks in China. Headquartered in Urumqi, the capital of Xinjiang Autonomous Region, with a registered capital of $94.7 million as of June 30, 2016, China Lending is one of the largest direct lending companies in the region in terms of registered capital.

First Half 2016 vs. First Half 2015

Total interest and fee income (revenue) increased 30% to $17.8 million from $13.8 million;
Interest expense was $2.4 million compared to $1.6 million;
Net interest income increased 18% to $13.8 million, compared to $11.6 million; and
Net income increased 30% to $9.9 million, compared to $7.6 million.

As of June 30, 2016

Registered capital was $94.7 million
Total assets were $147.8 million
Total liabilities were $37.1 million

Jingping Li, Co-Founder & CEO of China Lending, stated, “The 30% increase in revenue and net income for the 2016 six-month period as compared to same period of last year is due to the sustained growth in funding demand in the region, higher interest lending rates supported by China’s government policies, and also revenue generated from our newly established consulting and credit risk analysis business segment, which we launched in August of 2015. This segment generated approximately 23% of total revenue for the first six months of 2016 as compared to zero in the same period of last year. Our average interest rate was 22.77% in the first six-months of 2016 vs. 21.24% in the same period of last year.

Currently, China Lending is one of the largest direct lending companies in Xinjiang, in terms of registered capital which reached $94.7 million at June 30, 2016.

Australia

Banks resist fintech push for open data regime, ( AFR), Rated: A

The issue of start-up access to data is a global one. The Competition and Markets Authority in the UK said last week that banks should be required to implement open banking by early 2018 and to share their data securely with other banks and with third parties, enabling them to manage their accounts with multiple providers through a single digital ‘app’, to take more control of their funds (for example to avoid overdraft charges and manage cashflow) and to compare products on the basis of their own requirements.

The Productivity Commission’s review into ‘Data availability and use’ is looking at whether a system of “open APIs” [application programming interfaces] could be created along the lines of a new regime in Britain to allow competitors to plug directly into data sets held by banks, such as transaction account activity.

Fintech Australia has asked the commission to recommend an “open banking API” regime be mandated within two years.

In its submission to the commission, the Australian Bankers’ Association acknowledges that increasing access to data could create more targeted and tailored products but said this should be allowed to occur organically.

But Fintech Australia, on behalf of 25 start-ups, data aggregators and venture capital investors, says an “open banking API” standard would increase productivity, reduce the cost, time and effort required to switch banks, and would “empower consumers to use their data to be able to make better financial decisions”.

Separate submissions by the ABA, Commonwealth Bank of Australia, ANZ Banking Group, Insurance Australia Group and the Australian Securities Exchange all urge the government to not regulate to mandate open-data sharing.

The ABA said building an open banking standard was “likely to be a very costly exercise for banks” and would provide competitors with access to a valuable commercial asset. “The banking industry notes that business and customer relationship data are a valuable commercial asset and are subject to extensive investment, privacy and other obligations,” the ABA said. “Changes should not be made that may affect the ability of businesses to manage their data in the interests of customers and owners.”

Author:

George Popescu