Thursday June 20 2019, Weekly News Digest

ASIC borrowers

News Comments Today’s main news: LendingClub expands borrower program. Funding Circle forced to narrow range of valuation. Yirendai revenues come from haircut loans. Chinese P2P lenders explore southeast Asia. Borrowell passes 1M members, raises $20M. Today’s main analysis: 5 ASIC findings on marketplace lending. Today’s thought-provoking articles: US Core, inflation ease. Fintech lending algorithms discriminate […]

The post Thursday June 20 2019, Weekly News Digest appeared first on Lending Times.

ASIC borrowers

News Comments

United States

United Kingdom

China

Other

News Summary

United States

LendingClub Expands Program to Help Borrowers Actually Pay Off Debt (Lend Academy), Rated: AAA

LendingClub shared a few stats on borrowers who choose this method:

  • Save an average of nearly $900 over the course of their loan
  • Cut their credit card interest rate nearly in half
  • Increase their credit score in just three months

The product has been tested for over a year and LendingClub is working with a partner network of over 1,700 credit card, bank and loan companies to make the process seamless. What’s interesting is borrowers can add up to 12 creditors per loan which is an important feature since borrowers often hold balances across many cards.

Turning Lending Club’s Worst Loans into Investment Gold (Towards Data Science), Rated: A

This is a writeup of a machine learning project I completed. In this post I hope to:

  • Describe my algorithm for predicting loan defaults.
  • Use the algorithm to construct a portfolio of clean loans

Inflation Miss (PeerIQ), Rated: AAA

US Core CPI rose by 2% YoY in May, just at the Fed’s target rate but below economists’ expectations. Consistently low inflation is boosting calls for a rate cut next week. The market is pricing in a 24% probability of a rate cut next week and a 76% probability of a rate cut in September.

Source: Bloomberg, PeerIQ

Fintech algorithms discriminate 40% less than traditional lenders (Quartz), Rated: AAA

Algorithmic fintech lending is less discriminatory against minorities than traditional loan officers, according to a recent study of US mortgages. The findings signal hope that technology could provide financing that’s more fair, but the research also underscores how widespread discrimination remains.

The US housing market has long been prejudiced against minorities. When Latino and Africa-American borrowers are looking to buy a home, they usually end up paying 7.9 basis points (0.079 percentage points) more than whites to take out the mortgage, and 3.6 basis points more when they refinance the debt, according to a National Bureau of Economic Researchworking paper published this month.

Buttigieg worries tech may add racial bias to credit decisions (American Banker), Rated: A

Pete Buttigieg said the way credit scoring is done in the U.S. is fraught with inequality and he’s worried the process may get worse with systems based on artificial intelligence.

Commercial Real Estate Crowdfunding Eyes ’18-Hour Cities’ for Small Investors (The Street), Rated: A

When Clear Point Gardens, a 604-unit apartment complex in Columbus, Ohio, recently changed hands, it produced a nearly 43% gain in 16 months, an amazing windfall for investors in the deal.

All 68 of them.

The sale of Clear Point, financed with help from investors on CrowdStreet’s online platform, is the latest example of how online syndication is revolutionizing the way deals are financed in the $6 trillion commercial real estate market.

HSBC launches digital mortgage platform with help from Roostify (HousingWire), Rated: A

One of the world’s largest banks is about to join the digital mortgage revolution, as HSBC Bank USA, the U.S. arm of HSBC Group, announced that it is partnering with Roostify to launch a digital mortgage platform.

Mirador’s Trevor Dryer: ‘The world doesn’t need another high price lender’ (Tearsheet), Rated: A

Trevor started Mirador to fill this void of bank-originated small business lending. We talk about why he started Mirador with a lending as a service model and what painpoints he was addressing.

Dave is launching a checking account that helps users build their credit score (Business Insider), Rated: A

The Los Angeles-based company, backed by investors including Mark Cuban, the DJ Diplo, and hedge fund Mark 2 Capital, said on Tuesday it’s rolling out a new checking account product that reports all rent payments to credit agencies. The new feature, added to Dave’s original app, helps customers to build their credit. Dave plans to begin reporting utility payments later this summer.

CoreLogic Launches Marketrac Platinum (CoreLogic), Rated: A

With Marketrac Platinum, lenders and title companies can utilize the interactive platform to identify top performing real estate agents and brokerage firms to prioritize professional relationships based on market trends.

Zirtue Revolutionizes Peer-to-Peer Lending (IT Business Net), Rated: A

Sprout Mortgage Launches ACORN Automated Underwriting System (Yahoo! Finance), Rated: A

Sprout Mortgage, the innovative force in Non-QM lending, today announced the launch of its ACORN automated underwriting system (AUS) as part of an ongoing effort to deliver value-added services to its third-party origination clients.

Finicity Integrates with LendingQB to Optimize Mortgage Origination Process (PR Web), Rated: B

Finicity announced today an integration with LendingQB. LendingQB’s platform now uses Finicity’s digital Verification of Assets (VoA) solution to allow lenders to free up resources, increase processing speed and reduce mortgage fraud while providing borrowers with a more efficient and positive experience.

Cardholders Seek to Capital-ize on Madden (The National Law Review), Rated: A

Last week, three Capital One cardholders filed a putative class action in the Eastern District of New York, Cohen v. Capital One Funding, LLC,1 alleging that the rates of interest they paid to a securitization trust unlawfully exceed the sixteen percent threshold in New York’s usury statutes.  The Plaintiffs seek to recoup the allegedly excessive interest payments and an injunction to cap the interest rates going forward.

Fundbox Tapped By Top B2B E-Commerce Software Provider OroCommerce to Power Net Terms (Fundbox Email), Rated: A

According to a 2019 research study by

Cross River poaches execs from student refinancing firm Laurel Road (American Banker), Rated: A

Cross River Bank, a Teaneck, N.J.-based bank that focuses most of its energy on supporting fintechs, is hiring several people from the student loan refinancing company Laurel Road to its capital markets team.

Cross River’s fintech partners include Affirm, Circle, Best Egg, Coinbase, Rocket Loans, Stripe, Upstart and Transferwise.

Optimizely Closes $ US105M Financing Round (Which-50), Rated: A

Optimisation platform Optimizely has closed US$105 million in financing, including US$50 million in Series D funding. The funding, led by Goldman Sachs Private Capital Investing, also included Accenture Ventures.

Austin Niemiec Named New Executive Vice President of Quicken Loans Mortgage Services (Yahoo! Finance), Rated: B

Quicken Loans Mortgage Services (QLMS), the second largest mortgage lender serving the needs of brokers, regional banks and credit unions, today announced that Austin Niemiec has been named Executive Vice President.

Self Lender Awarded Inaugural Inclusive Fintech 50 (PR Newswire), Rated: B

Self Lender is pleased to announce its inclusion in the inaugural list of winners of the Inclusive Fintech 50. The Inclusive Fintech 50 is a competition launched in February to help early-stage fintech companies attract capital and resources to benefit the world’s 3 billion financially underserved people. The competition was organized by MetLife Foundation and Visa Inc., with global nonprofit Accion and World Bank Group member IFC.

United Kingdom

No sign yet of breaking out of circle (The Times), Rated: AAA

The early days of a company’s life on the stock market tends to set the tone for what follows. The grief around Funding Circle’s listing began even earlier and has continued to plague it.

Days before trading in shares of the specialist online lender began at the end of September, Funding Circle and its bankers were gunning for a valuation of up to £1.75 billion, only to be forced to narrow the expected range shortly before it came to market, and then to price the shares at the lower level of 440p apiece.

Source: Refinitiv

Three Biggest Overperformers And One Underperformer In Peer-To-Peer Lending (4th Way Email), Rated: AAA

Landbay

  • Over £300 million lent.
  • Maximum loan size to property valuation (LTV) 80% – better than all the major high-street banks.
  • Average LTV: 72% – highly suitable for these kinds of mortgages.
  • Average rent: 190% of the monthly mortgage payment.
  • Over 90% of mortgages are to experienced and professional landlords.
  • Reserve fund: 0.6% of outstanding mortgages – modest but useful.
  • Type of lending: residential BTL.
  • Typical risk of this type of bank lending: very low.
  • P2P bad debts: none.
  • Interest rate: 3.54% after expected bad debts.

Proplend

  • £65 million lent.
  • Maximum loan size to property valuation (LTV) 75% and investors can choose to limit to 50% – lower than all high-street banks.
  • Average LTV  60% – highly suitable for these kinds of mortgages and loans.
  • Minimum rent on rental properties usually 110% of the monthly mortgage payment.
  • Type of lending: residential and commercial rented properties up to five years; some development lending; a mix of senior and junior debt (junior means other lenders get repaid first if the borrower’s property has to be forcibly sold to repay the loans).
  • Typical risk of this type of bank lending: low to moderate for shorter-term rental properties; moderate to high for developments and junior debt.
  • P2P bad debts: none.
  • Interest rate: 7.32% to 9.43% after expected bad debts (7.32%-12.13% before bad debts).

CrowdProperty

  • £35 million lent.
  • Maximum loan size to property valuation (LTV) 70% and investors can choose to limit to 50% – lower than all high-street banks.
  • Average LTV  61% (against starting value of property) – very low for these kinds of loans.
  • Type of lending: property development lending.
  • Typical risk of this type of bank lending: moderate to high.
  • P2P bad debts: none.
  • Interest rate: 8% after expected bad debts (7.32%-12.13% before bad debts).

Rebuildingsociety – the Underperformer

  • £15 million lent.
  • Type of lending: unsecured small business lending to sub-prime.
  • Typical risk of this type of bank lending: moderate to high.
  • P2P bad debts: 17% of total lent in pounds
  • Interest rates: estimate an average 5% after heavy losses.

British Business Bank adds £60m firepower to non-bank lender (AltFi), Rated: A

Simply, a non-bank lender, focused on SME asset financing has scored a a third financing tranche of £60m from the British Business Bank.

One fifth of UK investors upping exposure to debt investments (Investment Week), Rated: A

One-fifth of UK investors are increasing their exposure to debt amid low interest rates and Brexit uncertainty, according to research from FJP Investment, which found this number climbs to 34% when 18-to-35 year-olds are considered in isolation.

However, the independent survey – which comprises 950 investors – discovered 44% of participants are more focused on short-term debt investments over this financial year due to both political and economic uncertainty; this figure rose to 68% among under 35s.

OakNorth completes loan to Oncore IT for the acquisition of Fuse Technologies (Fintech Finance), Rated: A

OakNorth – the bank for entrepreneurs, by entrepreneurs – has provided a loan to Oncore IT, a managed service and cloud platform provider.

The finance has been used for the acquisition of Fuse Technologies, a London based provider of unified communications tools.

Brexit and drive for growth sees IT fintech salaries surge (AltFi), Rated: A

London-based java developers lead the pack, commanding starting salaries of up to £60,000, followed by software developers in the capital on up to £55,000.

Intense competition between UK-based fintechs – lead by Revolut, TransferWise, OakNorth and Funding Circle – and high street banks attempting to upgrade their services has led to bidding wars in order to gain top level IT professionals, said the report called The UK Fintech Revolution.

Lloyds first to launch open banking app for credit cards and savings (Fintech Futures), Rated: A

Customers of Lloyds Bank, Halifax and Bank of Scotland are the first to see their savings accounts and credit cards in one place, thanks to open banking technology, reports Jane Connolly.

J.P. Morgan working on a secretive digital banking project based out of London (TechCrunch), Rated: A

A number of incumbent banks are known to be developing new digital-first products in a bid to keep the new wave of challenger banks at bay and now it appears that the latest to make that move is J.P. Morgan.

According to sources, the investment bank has begun recruiting for a secretive skunkworks project within London’s booming fintech industry. Very few details are known about what exactly J.P. Morgan plans to build, although TechCrunch understands the bank is busy hiring high level developers with full-stack and cloud-based dev skills for the new project, along with other personnel.

Following Facebook’s Libra launch, UK regulator hints at greater Big Tech scrutiny (AltFi), Rated: A

The FCA says technology is dramatically changing the markets it regulates and blurring regulatory boundaries in a new report into its activities.

China

Yirendai Revenues Come From Suspect Haircut Loans (Seeking Alpha), Rated: AAA

Over 60% of YRD’s FY 2018 revenues stem from “haircut loans” (P2P service fees charged to borrowers) that are prohibited by Chinese regulation. Recent developments in the P2P lending sector with regards to questionable lending practices, unethical collections, and usury are not being disclosed in YRD’s SEC filings, leaving U.S., Canadian, and international investors completely in the dark.

The Chinese P2P Lending Market

Unlike in developed countries, there are no administrative bodies (such as the U.S. Securities Exchange Commission) which regulate peer to peer lending exchanges in China. Instead, such services are regulated by self-organized internet associations and retail banks. The lack of meaningful oversight has caused the Chinese P2P lending market to bubble into $178.9 Billion in FY2018, almost 22 times the size of the P2P lending market in the United States and 447 times that of Japan’s.

Over 850+ fraudulent/ponzi lending platforms were exposed in FY 2018 alone.

Source: iiMedia Research

But the bad numbers don’t end here:

– The total loan volume amounted to 245.9 billion in Q12019, down -55.5% Y/Y.

– 85.7 in new loans were lent in March 2019, down -53.5% Y/Y.

– Principal balance of all loans: 8,029 CNY billion, down -3.6% Y/Y.

– sum of P2P lenders and borrowers, up 21%.

Chinese P2P lending platforms look to Southeast Asia amid industry purge back home (Technode), Rated: AAA

A slew of Chinese fintech and peer-to-peer (P2P) lending platforms are looking to more lenient markets in Southeast Asia (SEA), following a prolonged industry crackdown in China that has left the sector reeling.

Over the past year, China’s regulatory clampdown on risky financial practices has wiped out more than half of the country’s P2P lending platforms. As of May, just 900 survived, down from almost 1,900 recorded a year ago.

In early June, Indian daily newspaper the Economic Times reported that Chinese fintech companies, including WeShare, 9F Group, and CashBUS, are exploring investment opportunities in the country’s burgeoning online lending sector, particularly in the P2P lending space.

XW Bank Welcomed by IMF as One of 6 Outstanding FinTech Companies From China (Yahoo! Finance), Rated: A

The International Monetary Fund (IMF) welcomed 6 outstanding FinTech companies from China including Ant Financial, WeBank and XW Bank.

European Union

Snask helps Klarna to communicate its ‘smooth’ banking offer with off-the-wall film and photography (Creative Boom), Rated: A

When Stockholm studio Snask was approached by Klarna, one of Europe’s biggest banks, to help communicate how its revolutionary payment solutions make life easier for its customers, it set out to create seven “never-seen-before” worlds.

LHV Bank Integrates Estateguru Investments in Online Banking Dashboard (P2P-Banking), Rated: A

You might wonder why that is relevant as most readers are unlikely to be LHV Bank customers. LHV Bank is a bank in Estonia.

I think it is highly interesting, as it is – to my knowledge – the first time a bank has integrated p2p lending investments in its customer interface. So the LHV bank customers, not only see their accounts and stock depots, but also their Estateguru investments conveniently listed in their online bank dashboard. Much has been talked about what role could banks have in p2p lending (mere transaction banks? providing credit lines?) and also there is a lot of speculation if PSD2 (open banking) will help fintechs to seize the access to the customer from banks because they could control the user interface in the future. But this is actually a first step a bank takes in the opposite direction. By aggregating “non-bank” information inside the dashboard, they aim to make the banking interface more useful for the customers.

International

How Klarna is Helping the World Shop Like a Queen (Power Retail), Rated: AAA

Klarna is the latest Buy Now Pay Later (BNPL) app to sweep through the world. Originating in Sweden, the BNPL platform allows users to purchase goods and schedule repayments in timeslots. At this point in time, Klarna is the first and only BNPL platform that’s available in the U.S. It’s also available in the UK, Denmark, Norway, Belgium and many other European countries.

Australia

Five key ASIC findings on marketplace lending (Cuffelinks), Rated: AAA

In April 2019, the Australian Securities and Investments Commission (ASIC) released its third report on marketplace lending, the Survey of marketplace lending providers: 2017–18The report paints a clear picture of a once-nascent industry enjoying growth with new borrowing increasing by nearly 45% in the 2017-18 financial year. The report notes that this growth is moderating compared to the near doubling in funds borrowed the previous year (from $156 million to $300 million). By contrast, the Australian Bureau of Statistics (ABS) reports that overall personal lending has declined by an astonishing 24% in the 12 months to March 2019.

Source: Cuffelinks

The ASIC report found that the average interest rate charged for marketplace loans entered into during the 2017–18 financial year was 11.5%, up from 10.5% in the 2016–17 financial year.

Source: Cuffelinks
India

All you need to know about P2P lending and Commodities (India Times), Rated: AAA

Vinay Mathews, Founder and COO, Faircent and Sanjay Gakhar, Vice President, MCX talks about the benefits of investing via the P2P platform and Commodities, ET Wealth investment Workshop in Delhi Listen in!

Watch the video here.

Asia

Indonesian firms turn to P2P lenders for funds (Asia-First), Rated: AAA

Small companies in Asia-Pacific are tapping new funding sources, according to the Economist Intelligence Unit (EIU) study commissioned by Mastercard, with peer-to-peer (P2P) lending platforms in Indonesia reportedly posting USD1.4bn worth of transactions in 2018, an increase from USD20m in 2016.

Canada

Borrowell passes one million members, raises $ 20 million in new capital (Zone Startups), Rated: AAA

RFI alumni company Borrowell announced that it had reached significantly more than a million users, making it Canada’s largest consumer fintech company by that measure.

In addition to this membership milestone, Borrowell also confirmed that it has received $20 million in Series B funding.

AltFi Toronto Summit 2019 (AltFi), Rated: B

WED, 9 OCTOBER 2019, 08:30 – 17:30 EDT

Blind Bird tickets are now on sale at a 50% discount ahead of the Summit’s agenda being announced later this Summer.

Authors:

George Popescu
Allen Taylor

The post Thursday June 20 2019, Weekly News Digest appeared first on Lending Times.

Thursday October 18 2018, Daily News Digest

Major US Banks Active Mobile Banking Users

News Comments Today’s main news: Upgrade to debut ABS bond. KBRA assigns preliminary ratings to Upgrade Receivables Trust 2018-1. Funding Circle launches free iPad incentive. China’s P2P lending is in trouble. Today’s main analysis: State laws put installment loan borrowers at risk. (A MUST-READ) Today’s thought-provoking articles: SoFi’s data science head on machine learning and non-traditional lending. LendingClub’s Bill Walsh says […]

Major US Banks Active Mobile Banking Users

News Comments

United States

United Kingdom

International

Other

News Summary

United States

Online lender Upgrade prepares debut ABS bond  (International Financing Review) Rated: AAA

Upgrade, an online lending company started by former LendingClub founder Renaud Laplanche, is looking to sell a debut asset-backed bond deal, four people with knowledge of the deal told IFR on Wednesday.

KBRA Assigns Preliminary Ratings to Upgrade Receivables Trust 2018-1 (Business Wire) Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by Upgrade Receivables Trust 2018-1 (“UPGR 2018-1”). This is a $286.390 million consumer loan ABS transaction that is expected to close October 30, 2018.

This transaction represents the first ABS securitization collateralized by unsecured consumer loans originated through the online marketplace lending platform operated by Upgrade, Inc. (“Upgrade”) and the first from the Upgrade Receivables Trust (“UPGR”) shelf. Upgrade Receivables Trust 2018-1 (“UPGR 2018-1” or the “Issuer”) will issue four classes of notes totaling $286.390 million. The proceeds from the sale of the notes will be used to purchase the loans and related rights from Upgrade Receivables Depositor LLC (the “Depositor”), who purchased the loans from the unaffiliated transferors, to fund the reserve account and to pay transaction expenses. The Depositor will in turn sell the loans to the Issuer.

Preliminary Ratings Assigned: Upgrade Receivables Trust 2018-1

Class Preliminary Rating Expected Initial Class Principal
A A (sf) $187,308,000
B BBB (sf) $32,569,000
C BB (sf) $28,440,000
D B (sf) $38,073,000

SoFi’s data science head: Opening the funnel to non-traditional borrowers with machine learning (Thomson Reuters) Rated: AAA

ANSWERS: What are some of the issues in machine learning that you are working to solve for right now?

WU: I think where machine learning plays the biggest role is in datasets that have extremely high numbers of dimensions, very low signal ratios and very sparsely populated values. For example, people in lending use data from the bureau. There are millions and millions of rows, there are thousands and thousands of columns. Each specific field has very little to no signal and each person has very few things that are actually populated. Those are opportunities where machine learning, particularly deep learning, has an extremely high potential.

ANSWERS: How can machine learning assist with lending decisions, and how does one keep bias from creeping into that?

WU: When making a decision on creditworthiness, machine learning can help lenders look at metrics beyond FICO and income. Whether it’s adding more information to traditional metrics versus determining creditworthiness of applicants without a full credit history, machine learning can drive tighter risk management while assessing borrower’s creditworthiness where traditional models cannot.

LendingClub’s Bill Walsh: ‘At its core, marketing is a data problem’ (Tearsheet) Rated: AAA

Today’s marketer on the hot seat is Bill Walsh, LendingClub’s general manager and head of marketing for personal loans. Bill brings an engineer’s approach to marketing. The MIT grad began his tenure at Lending Club in an operations role, where rigorous problem solving was used to solve some of the biggest problems in the business. Now that he’s leading marketing on the consumer side, he brings a similar approach.

We talk about how LendingClub defines marketing and approaches channels. We pay particular attention to a recent TV campaign you might have seen over the summer of 2018. Measuring and responding to the signal is core to LendingClub’s approach and in the course of this four week broadcast campaign, Bill’s team iterated twice. This puts ad agencies on notice — this is the new data-driven fintech marketing world.

Mobile banking is reaching a saturation point in the US (Business Insider) Rated: AAA

JPMorgan Chase counted32.5 million active mobile banking customers in Q3 2018 — an 11% year-over-year (YoY) increase from 29.3 million in Q3 2017.

That’s up from the 31.7 million active mobile customers in Q2 2018, but is also a slight deceleration from the 12% YoY growth in Q3 2017— following several quarters of decelerating growth: Chase has been adding around 800,000 mobile users on a quarterly basis.

Wells Fargo counts 29 million total active digital customers — 22.5 million of which use mobile banking. This marks an 8% annual increase in mobile banking customers, but a 4% YoY increase in total digital customers, demonstrating that most of its new customers are coming from mobile channels.

Source: Business Insider

State Laws Put Installment Loan Borrowers at Risk (PEW) Rated: AAA

Pew’s analysis found that although these lenders’ prices are lower than those charged by payday lenders and the monthly payments are usually affordable, major weaknesses in state laws lead to practices that obscure the true cost of borrowing and put customers at financial risk. Among the key findings:

  • Monthly payments are usually affordable, with approximately 85 percent of loans having installments that consume 5 percent or less of borrowers’ monthly income.Previous research shows that monthly payments of this size that are amortized—that is, the amount owed is reduced—fit into typical borrowers’ budgets and create a pathway out of debt.
  • Prices are far lower than those for payday and auto title loans. For example, borrowing $500 for several months from a consumer finance company typically is three to four times less expensive than using credit from payday, auto title, or similar lenders.
  • Installment lending can enable both lenders and borrowers to benefit. If borrowers repay as scheduled, they can get out of debt within a manageable period and at a reasonable cost, and lenders can earn a profit. This differs dramatically from the payday and auto title loan markets, in which lender profitability hinges on unaffordable payments that drive frequent reborrowing. However, to realize this potential, states would need to address substantial weaknesses in laws that lead to problems in installment loan markets.
  • State laws allow two harmful practices in the installment lending market: the sale of ancillary products, particularly credit insurance but also some club memberships (see Key Terms below), and the charging of origination or acquisition fees. Some costs, such as nonrefundable origination fees, are paid every time consumers refinance loans, raising the cost of credit for customers who repay early or refinance.
    Source: PEW

Read the full report here.

Bank Of America’s Zelle Boosts P2P Transactions 138 Pct In Q3 (PYMNTS) Rated: A

Bank of America cut expenses and reduced its provision for credit losses as the financial institution also beat analysts’ revenue and earnings expectations. Bank of America, in reporting its latest financials on Monday, also said that Zelle P2P payment transactions increased 138 percent year over year.

Revenue increased about 4 percent year over year, hitting $22.8 billion, higher than analyst expectations of $22.67 billion. The financial institution reported earnings per share of 66 cents, which represents a 43 percent year-over-year increase and is above analyst expectationsof 62 cents. Net income grew 32 percent to $7.2 billion.

Bank of America said its provision for credit losses decreased $118 million during the third quarter of 2018, to $716 million. “The net reserve release was $216 million, driven by continued improvement in consumer real estate and energy portfolios,” the bank said in its Q3 financial report.

As digital banks proliferate, so do risks (American Banker) Rated: A

Facing intense deposit competition from online-only banks such as Ally Financial and Goldman Sachs’ Marcus, many traditional banks are looking to turbocharge their deposit gathering by launching — or considering launching — digital banks of their own.

PNC Financial Services Group is the latest big bank to join the fray, recently rolling out a digital-only bank in markets where it lacks a brick-and-mortar presence. Like JPMorgan Chase, Citizens Financial Group and a number of other regional and community banks, PNC is counting on its digital bank to attract low-cost deposits to fuel loan growth while also helping it reach new demographic groups.

Early results have been promising — PNC CEO William Demchak said Friday that he’s been “pleasantly surprised” by the response in the Kansas City, Mo., market — but with the space becoming so crowded, industry watchers are beginning to question if the U.S. marketplace can reasonably support so many new digital banks.

Source: American Banker

Outside Financial Launches to Help Consumers Save up to $ 3,000 on Auto Loan Packages (PR Newswire) Rated: A

Outside Financial, an independent auto loan marketplace, launched its consumer-first platform today to bring transparency to auto finance. The company is the first to offer full auto loan packages outside of the dealership, which can save customers $1,000 to $3,000, along with time and hassle. Outside Financial also arranges refinances for existing borrowers.

In 2017, Americans racked up $568.6 billion in auto loans1, yet 60 percent of buyers don’t know they can bring their own financing to the dealership. The company’s new Outside Financial (OF) Markup Index* reveals that, on average, new car buyers are charged $1,717 in hidden markups when arranging their loans through a dealer.

Individual Investors Can Now One-Click Invest in Commercial Real Estate with CrowdStreet’s “Blended Portfolio” Offering (Benzinga) Rated: A

CrowdStreet, which operates the largest and most diversified online marketplace for direct equity investment in U.S. commercial real estate, is now raising $25 million for the company’s first CrowdStreet Blended Portfolio investment offering. To provide individual investors and registered investment advisors another way to diversify their investments with commercial real estate, the company plans a series of diversified and specialty portfolio investment options that will collectively raise and invest up to $170 million.

The first CrowdStreet Blended Portfolio’s proceeds will be deployed across 30-50 pre-vetted projects on the CrowdStreet marketplace, representing a broad range of commercial and multifamily asset types, risk profiles and geographies.

Credible.com Unveils First Truly Consumer-Centric Mortgage Marketplace (Business Wire) Rated: A

Credible.com, the leading online loan marketplace, announces the launch of its first-of-its-kind mortgage marketplace. Credible.com is the only mortgage marketplace that provides actual rates from top lenders in 3 minutes (without affecting a borrower’s credit score), and a streamlined digital origination process. The platform is designed to save borrowers frustration, time and money.

The Credible.com mortgage marketplace builds on the success of the company’s marketplaces for student loans, student loan refinancing, and personal loans, which have facilitated more than $1.6 billion in loans to date. The first product offered through the mortgage marketplace is mortgage refinancing, which went live today in 20 states that collectively represent 65 percent of mortgage originations.

Talking Regulation at the Online Lending Policy Summit (Lend Academy) Rated: A

The big topic of the day was the OCC’s Special Purpose National Bank Charter also known as the Fintech Charter. The topic was laid out for the audience by the first keynote speaker, Grovetta Gardineer, the Senior Deputy Comptroller for Compliance and Community Affairs at the OCC. She talked about the history of the OCC going back to 1863, with the National Banking Act, when the dollar supplanted state currencies as the sole currency of the United States, a revolutionary idea back then. Ms. Gardineer reaffirmed the authority of the OCC to introduce a national fintech charter and talked about how companies should proceed if they are interested. While she would not comment on specifics she did say that the OCC is currently having preliminary conversations with fintech companies but no formal application has been received yet.

The new head of the CFPB’s Office of Innovation, Paul Watkins, talked about the importance of the regulatory sandbox concept. He was one of the architects of the Arizona fintech sandbox and he is bringing that knowledge with him to Washington. He talked about the two main tools to help facilitate innovation at the CFPB: their trial disclosure program and the no action letter.

How Dealstruck Arrived, “Disrupted,” and Died – A Cautionary Online Lending Tale (deBanked) Rated: A

A self-described member of the “lucky sperm club,” a not-even 30-years-old Senturia went on to successfully raise $30 million of investor capital to fund his business, enough to fuel his rise and price-shame his competitors for years. But it wouldn’t last, as he detailed in book, Unwound, about the behind-the-scenes chaos that ravaged Dealstruck until the company closed for good in late 2016.

AFR Wholesale announces partnership with Floify (Housingwire) Rated: B

AFR Wholesale and Floify shook hands on a partnership, and AFR will now use Floify’s point-of-sale technology.

AFR’s goal in partnering with Floify, a 2018 HW Tech100 winner, is to reduce origination time and increase broker productivity. According to the release, Floify’s POS platform can save up to 15 hours of processing time per loan.

This is only one of an ever-increasing number of companies partnering with software companies or developing their own tech solutions in hopes of increasing productivity and getting some breathing room in the margin department in this tough mortgage market.

iintoo Launches Principal-Protection Product for Retail Investors Supported by Insurance Provided by Everest (iintoo Email) Rated: B

Online Real Estate Investment Management Company iintoo Investments Ltd. (“iintoo”) launched Epiic (Equity Protection Investment Community), the first-of-its-kind real estate investment product that provides principal protection for private accredited investors. Supported by insurance provided by an affiliate of Everest Re Group, Ltd. (NYSE:RE), a leading international reinsurance and insurance organization with operations that span the globe, and a social community pool, Epiic offers two layers of protection for investors’ principal.

iintoo opens up access to real estate investments that were once exclusive to professional funders and high-net-worth individuals. Starting at $25,000, accredited investors can invest in ownership shares in projected high yield, premium real estate projects.  Each project undergoes a rigorous due-diligence and approval process provided by iintoo.  In order to assess the risk factors in real estate investing, iintoo also conducted a thorough analysis of the real estate market in the United States, taking into consideration all sectors in all 50 states over the past 30 years.

TRANSACT Tech San Francisco to Examine the Impact of Software Providers on the Payments Industry (PR Newswire) Rated: B

The Electronic Transactions Association (ETA) will bring together executives from leading banking, payments and FinTech companies on November 1, 2018 for TRANSACT Tech San Francisco at the Wells Fargo Connections Center. The event will explore how software services are changing the way key ecosystems players – processors, banks and hardware manufactures – serve merchants and channel partners.

The day-long conference will kick-off with a fireside chat with Secil Watson, Executive Vice President and Head of Digital Solutions for Business at Wells Fargo. “Customer expectations are changing rapidly, and pace of change in technology is accelerating.” said Watson. “Yet we still have cash and checks. What can we learn from today’s customer experiences to build a better payments ecosystem for tomorrow?

Finicity Partners with Freddie Mac to Provide Industry-Leading Automated Income and Asset Assessment Solution (Finicity Corp) Rated: B

Finicity, a leading provider of real-time financial data aggregation and insights, announced today it has been selected as a third-party service provider for the new Freddie MacLoan AdvisorSM automated income and asset assessment capabilities, which provide a faster, easier way for lenders to verify loan application data upfront. Finicity’s digital verification reports greatly improve efficiency and accuracy, while also providing a simpler, more pleasant borrower experience.

Freddie Mac announced its new income and asset assessment capabilities at the Mortgage Bankers Association Annual Convention & Expo earlier today. Finicity’s verification reports are integrated within Freddie Mac Loan Product Advisor®, the cornerstone of Loan Advisor Suite.  When the capability goes live later this quarter, asset verification will be generally available and income verification will be available as a limited release.

United Kingdom

Funding Circle launches ‘free iPad’ incentive (Peer2Peer Finance) Rated: AAA

LISTED peer-to-peer platform Funding Circle is enticing new investors by offering a free iPads. But there’s a catch – they have to add at least £30,000 to their Funding Circle accounts before 16 November.

The P2P platform is also offering a number of other cashback and ‘giftback’ incentives to lenders who invest lower amounts of money.

Investors who add £20,000 to their Funding Circle accounts will receive £200 in John Lewis vouchers, while those adding £15,000 will get an Amazon Echo.

LendInvest Update: Accelerates BTL Production Application Volume Thanks to Rate Reductions (Crowdfund Insider) Rated: A

UK-based online lender LendInvest announced last week it has reduced rates and product fees across its Buy-to-Let product range. According to LendInvest, the pay rate for its five year fixed rate product has dropped to 3.60%, with the ICR calculation at a pay rate of 3.60%. Meanwhile, product fees for all BTL mortgages on standard property and HMO cases have been reduced to 1%, with borrowers who prioritize leverage in mind.

The lending platform also reported that for a limited time, valuation fees have been reduced to £100 for all standard property cases. LendInvest will now cover the borrower’s legal fee scale costs for standard property, standard conveyance cases, where dual representation is selected.

You think it’s going to be easy challenging the big banks? Think again (The Times) Rated: A

here has never been a more opportune moment for the pack of digital upstarts looking to topple the institutions that dominate the financial industry. Rarely does a week go by when a big bank does not suffer an IT meltdown, spewing sensitive data into the ether or freezing customers out of their accounts.

A decade after the collapse of Lehman Brothers, public distaste for the high street banks remains at elevated levels. Two thirds of Britons do not trust big banks to act in the best interests of society, according to a recent YouGov poll. The advent of smartphones, meanwhile, has fundamentally altered consumers’ expectations of their relationship with service providers.

Amex brings SME financing to UK with ezbob (Banking Tech) Rated: A

American Express (Amex) has partnered with online financing platform ezbob to offer UK SMEs competitive access to finance.

Through this partnership, eligible Amex business clients will receive a referral to apply for up to £300,000 in finance from ezbob at a fixed annual interest rate from 3%.

Carlos Carriedo, senior vice-president of global commercial services at Amex, says: “We know agility is crucial for smaller businesses to help retain a competitive advantage but accessing the finance needed to react swiftly to changing customer demands, or seize an opportunity, can be a challenge.”

Amex customers taking out a loan with ezbob will also benefit from a 40,000 Membership Reward points offer, the company adds.

Connect for Intermediaries announces new panel (Mortage Strategy) Rated: A

Connect for Intermediaries has announced the launch of a new unsecured lending panel.

Comprising Funding Circle, iwoca, Whitoak and Fleximise, the panel will be open to all of Connect’s AR members, and Connect will be able to obtain terms on behalf of other brokers as referrals.

Loans from £5,000 to £250,000 for up to five years will be available from 1.5 per cent.

Connect sales director Kevin Thomson says: “We have seen an increased demand for unsecured loans for trading businesses, as increasingly, brokers are coming to us with business clients who are looking to ease cashflow or expand their businesses.

P2P Lending Investment Returns Outstrip Many Market Competitors (CL News) Rated: A

P2P lending arrived in the UK back in 2010 with the launch of Funding Circle. The idea was simple. In the wake of the financial crisis, banks were – and still are – paying abysmally low rates of interest to savers. P2P platforms allowed savers to collectively lend money to businesses and individuals, usually over relatively short periods of time. By cutting out the middleman (or to be more precise, banks and other traditional lenders), P2P lenders were able to offer competitive rates to borrowers and superior returns to investors.

The market has evolved over the years. AltFi – which provides specialist news for the alternative investment industry along with a range of analytics services – says the market is growing rapidly. For instance, in 2015, P2P lending platforms brokered around £1.1bn in loans. In the first half of 2018 alone, the figure was £3bn. Separate figures from the Peer to Peer Finance Association reveal that its members have, to date, originated loans to a value of £9bn.

11:FS Foundry’s launch brings digital to banks (Banking Tech) Rated: A

Consultancy firm 11:FS has launched 11:FS Foundry, an approach to delivering digital banking services through a modular core banking architecture. It kicks off with the partnership with DNB, Norway’s financial services group, which has also become an investment partner.

DNB has invested £3 million for a 5% stake in 11:FS Foundry. This investment represents the long-term commitment between 11:FS and DNB to change how banks deliver digital banking services, the two companies say.

Watchdog warns payday lenders over customer complaints (Financial Times) Rated: A

The UK’s Financial Conduct Authority encouraged payday lenders to proactively compensate past customers; the industry has come under a lot of heat in recent months after a surge of complaints; companies say a lot of these complaints are bogus and a pushed by professional claims management companies (CMCs)

Wonga was forced to shut down a few months ago after they saw a significant rise in complaints, complaints now cost companies more than $725 per complaint after the first 25 complaints; the rise in complaints has come after new rules were put in place in 2015 where high cost lenders we ordered to drop fees and adhere to stricter standards; a new survey by Kantar TNS showed that 60 percent of payday loan customers still pay more than anticipated.

Fintech offers fresh ways to finance an MBA (Financial Times) Rated: A

According to David Simpson, admissions director at London Business School, MBA students spend just as much time trying to find funding as they do trying to find the right program; while struggling to find his own financing Prodigy Finance CEO Cameron Stevens though there had to be a better way so he started Prodigy with two former classmates.

The company is now growing fast by offering a service few others do, while also collecting credit records from across the globe; “You have talented people who have proved their potential in receiving offers to business school,” says Mr Stevens to the FT. “The only barrier for them is funding, because the banks are still incredibly localised, as they were in the 1500s.”

Arbuthnot Banking Group PLC Third Quarter Trading Update (Arbuthnot Group) Rated: A

Customer Lending balances are 28% higher than at the same time in the prior year and originations of new loans are 18% higher. However, as previously stated, the Group remains committed to maintaining its discipline in both credit underwriting decisions and return on capital when extending credit.

The newly launched Asset Based Lending division continues to develop ahead of the original business plan and has a strong pipeline of new opportunities. The Specialist Finance division has now completed the hiring of its core team of six employees and is currently setting up its operations based in Manchester. It is expected that it will write its first deals toward the end of the fourth quarter or early 2019.

OakNorth appoints form PRA director to board (Finextra) Rated: B

OakNorth – the bank for entrepreneurs, by entrepreneurs – today announces the appointment of Martin Stewart, the former Director of Banks, Building Societies & Credit Unions at the Bank of England, as an Independent Adviser on its advisory board.

Stewart joined the Bank of England in April 2013 and spent five and a half years there. In addition to supervising UK banks, building societies, credit unions and new entrants into UK banking, he was a Member of the PRA’s Executive Team responsible for PRA regulatory policy. His regulatory experience also includes spending three years at the FSA between 2010-2013, where he was a member of the leadership team that defined and implemented the UK’s post financial crisis prudential regulatory regime that now underpins the work of the Prudential Regulation Authority. In addition to this, he has almost two decades’ board-level experience having been Managing Director of a group of European subsidiary companies of the IFG Group PLC for almost four years, and as Chairman of the International Credit Union Regulators’ Network for the last six years.
China

China’s P2P Lending Sector Is in Serious Trouble (Money Makers) Rated: AAA

P2P lending has been lucrative in China with little constraining regulation. The industry is worth as much as $120 billion and has been high-risk, but high return.

Chinese regulators have been clamping down on debt and financial risk, the number of loan defaults is rising, capital investments are running out of the sector, and Chinese citizens are losing money. And getting pretty angry about it.

In July 2018, 114 P2P lending platforms in China were shut down or had funds suspended, without warning, by China’s regulators over liquidity concerns. Since June 2018, 243 online P2P lending platforms have gone bust.

Several Chinese Peer-to-Peer Lending Companies Have Submitted Self-Inspection Reports (Capital Watch) Rated: A

With hundreds of peer-to-peer (P2P) lending platforms having collapsed at the beginning of this year, different district-level financial bureaus recently rolled out a tougher reform on all P2P platforms’ risk compliance to ease a growing panic among investors.

This industry reform involves three major steps. First, all platforms have to complete a P2P Compliance Self-Inspection Report and submit it to the bureau by the end of October. Then, companies will be inspected by its local Internet Finance Industry Association, a non-state association. This will be followed by verification of inspection results by district-level Municipal Bureau of Financial Work with field inspection and a possible final check by higher-level government organizations.

New York-listed Hexindai Inc. (Nasdaq: HX) and PPDAI Group Inc. (NYSE: PPDF) both announced that they have completed and submitted the report.

European Union

A risky investment (Euro Weekly News) Rated: AAA

MANY UK nationals living part of the year in Spain, or visiting often, might spend months here but still retain tax residency in their home country.

This means those looking for investment opportunities can still take advantage of UK tax efficient products such as Finance ISAs – ones which use peer-to-peer lending to offer high rates of return. They may be nothing new but one legal justice firm has upped the ante offering returns of up to 8 per cent a year.

International

Advantages of P2B platforms in lending to SMEs (Lendit Conference Blog) Rated: AAA

In the EU and Australia, SMEs comprise 99.8% of all the firms and employ about 67% of the workforce. To tell the truth, SMEs might be rightfully called the economy, not just the backbone of it. A few other facts that follow are paradoxical. 2 years ago, International Finance Corporation (under World Bank) presented statistics that the gap for underfinanced SMEs around the world stood at 2.6 trillion $. One might expect, the situation got better in recent years with the global economy picking up and showing better and better numbers. On the contrary, most recent statistics from the same institution shows that the gap has widened to 5.2 trillion $.

P2P platforms make lending process global

P2B platforms can connect a business on one side of the world with an investor from another side of the world, and with a third party providing a service from yet another part of the world. All applications for loans can be made online, processed, assessed and the decision made within a matter of a few hours. Compare it to a similar process with the banks and the difference, that of speed and efficiency becomes clear. As an asset (loan) is put on the platform, investors can start investing within a matter of seconds. In such a way, a local business, somewhere in Eastern Europe can get funds from someone (or institutional investors) in UK or Germany and be able to use the collected amount for business operations within a couple of days.

4 developments that will shape the future of fintech (Business Matters) Rated: A

Within the past decade, we’ve seen the landscape of fintech move from a few disruptive start-ups to an industry that’s changing the landscape of business altogether. Consumers are becoming more and more accepting of technology as part of their day-to-day finance, a factor that has stretched the services sector and levelled the playing field with traditional institutions.

For instance, there has been a monumental shift in the way that consumers are managing their money. PwC’s Global Fintech Survey 2017 found that 84% of incumbent financial services providers believed their customers were already making payments with fintech companies, 68% thought customers were conducting fund transfers, and 60% said their clients were using fintech for their personal finances.

Quona Capital leads $ 5 million round for Brazilian small business lender BizCapital (Impact Alpha) Rated: A

Brazilian fintech firm BizCapital launched operations in January to help Brazil’s small business owners secure capital necessary for the day-to-day and growth needs of their businesses. Quona Capital, a financial tech investment firm that spun out of Accion, has led the company’s R$20 million ($5 million) investment round. Two existing investors, Monashees and Chromo Invest, both based in Brazil, also participated.

Roughly 70% of Brazil’s micro and small business owners are shut out of mainstream bank lending and instead resort to taking personal loans, which can carry interest rates as high as 200%. BizCapital offers short-term loans for up to R$150,000 ($40,000) at annual rates in the mid-double digits. The company hasn’t disclosed the size of its loan book but says it’s received more than 100,000 credit requests and serves customers in all 26 Brazilian states.

Australia

Global corporate lending platform, Trade Ledger has warned the Federal Government of substantial weaknesses in its proposed Open Banking implementation plan, when compared to the global best-practice model.

These primarily include the lack of an independent implementation and governance organisation, and limited consumer and small to medium-sized enterprise representation in the development of industry standards.

According to Trade Ledger, these omissions “risk a scaremongering campaign around data security that could stall progress and reduce the scope of the changes, leaving the door open for overseas financial markets to take over our local markets in the new era of Open Banking”.

India

UIDAI Asks Non-Banking Fintech Companies To Stop Aadhaar-Based Services (Inc 42) Rated: AAA

After getting telecom companies to submit their exit plans from Aadhaar-based services, the Unique Identification Authority of India (UIDAI), the Aadhaar regulatory body, has now asked digital payment companies to stop offering any sort of Aadhaar-based service on their platforms.

In a letter, the UIDAI also directed digital payment companies to submit confirmation of closure of Aadhaar-related authentication and their alternative plans to exit from the Aadhaar-based ecosystem.

According to reports, the UIDAI has sent the letter only to non-banking companies such as PayPoint, Eko India Financial Services, and Oxigen Services, among others.

Citing unnamed sources, an ET report stated that banks and payment companies such as Paytm, which have obtained banking licences, have not received the notice.

Africa

Kenya built a reputation as a pioneer of financial inclusion through its early adoption of a mobile money system that enables people to transfer cash and make payments on cellphones without a bank account.

Now, a proliferation of lenders are using the same technology to extend credit to the banked and unbanked alike, saddling borrowers with high interest rates and leaving regulators scrambling to keep up.

This week, the finance ministry published a draft bill on financial regulation which covers digital lenders for the first time. A key aim is to ensure that providers treat retail customers fairly, it said.

Authors:

George Popescu
Allen Taylor

Thursday October 25 2018, Daily News Digest

The Most Free and Clear Cities

News Comments Today’s main news: Funding Circle cuts price range for IPO. Nelnet withdraws industrial loan charter (ILC) application. China Rapid Finance names former Hewlett Packard exec as Co-CEO. Faircent drops prime lending rates. Today’s main analysis: The most free and clear cities in America. Today’s thought-provoking articles: Fincera grows as China’s P2P lending industry falters. BNP Paribas discusses […]

The Most Free and Clear Cities

News Comments

United States

United Kingdom

China/Hong Kong

International

India

Other

News Summary

United States

Nelnet withdraws application for industrial loan charter (American Banker) Rated: AAA

Nelnet, a student loan servicing company, has withdrawn its application to become a Utah-chartered industrial bank.

The Lincoln, Neb., company had filed an application with the Federal Deposit Insurance Corp. and the Utah Department of Financial Institutions in late June to form Nelnet Bank. Nelnet was pursuing an industrial loan charter.

The withdrawal is a “temporary step back” in what Nelnet knew could be a long process, Tim Tewes, the company’s president, said in a press release.

LendingTree Reveals the Most Free & Clear Cities in America (Lending Tree) Rated: AAA

Many U.S. property owners dream of the day they shed the mortgage, owning their homes outright. Reaching this milestone means not only skipping the monthly payment but achieving what is perhaps a lifelong goal of asset accumulation. LendingTree ranks U.S. cities by the proportion of such homeowners who are free and clear.

Source: LendingTree

The Federal Reserve’s measure of how much wealth households have in real estate equity has climbed from a $6-trillion level nine years ago to about $15 trillion in 2018.

Source: LendingTree

CreditShop Announces the Successful Conversion of More Than 500,000 Mastercard Credit Card Accounts (PR Newswire) Rated: A

CreditShop LLC today announced the successful conversion of more than half a million Mastercard credit card accounts and $1.4 billion in receivables. The portfolio, which was acquired in March 2017, was converted to the new Mercury Mastercard® which launched in May.  The Mercury Mastercard is marketed by CreditShop, and issued by First Bank & Trust of Brookings, South Dakota.

CreditShop believes that there are few reasonably priced credit cards available to credit-challenged consumers. There are about 75 million Americans in the “middle market” with FICO scores ranging between 575 and 675, and many are charged high fees by sub-prime credit card issuers.  The Mercury Mastercard is designed to give hard-working, middle market consumers access to a better credit card, at a reasonable price, so they can manage their financial lives better.

Covr Financial Technologies raises $ 10MM Series A from leading technology venture firms (PR Newswire) Rated: A

Covr Financial Technologies, a digital, multi-carrier life insurance platform for financial institutions, today announced it has raised $10 million in Series A funding. In addition to Covr’s existing individual and family investors that made additional investments during this funding round, Covr’s current venture partners all participated including Nyca Partners, Commerce Ventures, Countour Venture Partners and Connectivity Capital Partners and were joined by new investor Allianz Life Ventures. This most recent round brings Covr’s total fundraising to more than $20MM.

Fintech Leader OppLoans Appoints Stacee Hasenbalg to Chief Compliance Officer Role (PR Newswire) Rated: B

OppLoans has announced the appointment of Stacee Hasenbalg to the role of Chief Compliance Officer. Ms. Hasenbalg has held positions in banking and financial services for more than 20 years, including the role of Associate General Counsel, US Regulatory Liaison at Bank of Montreal, and Chief Compliance Officer at Avant. At OppLoans, Hasenbalg will join the executive team leading the company’s compliance and risk oversight function to ensure maximal transparency and efficiency as the firm delivers financing to underbanked consumers.

United Kingdom

Funding Circle cuts price range for London IPO (Financial Times) Rated: AAA

Funding Circle, the peer-to-peer lending platform, has cut the maximum valuation it is seeking in its upcoming stock market flotation, which is viewed as a test for UK investors’ appetite to back alternative lending vehicles.

The loss making company — which connects small businesses seeking credit with private and institutional investors willing to lend to riskier borrowers for potentially higher returns — originally set a price range of 420p to 530p per share for its IPO. This would have valued it at up to £1.8bn.

Funding Circle, which is the first peer-to-peer lender to go public in the UK, has now narrowed that price range from 440p to 460p, giving a maximum valuation of £1.5bn.

Lending to manufacturers grew over the last year (Business Insider) Rated: A

Lending to manufacturers grew by 7.4 per cent over the last 12 months, in contrast to a wider 2.1 per cent contraction overall in UK business borrowing, according to banking trade body UK Finance.

The figures released today also show that UK business deposits for non-financial companies grew by 1.5 per cent in the last 12 months.

PLATFORM RAISES £4.5M TO END ‘PAYDAY POVERTY’ CYCLE (Business Cloud) Rated: A

FinTech start-up Wagestream has raised £4.5m in funding from a group of the world’s leading technology and social impact investors.

The fledgling company’s ‘Get-Paid-As-You-Go’ service allows workers to access their monthly wages in real-time.

Backers include QED Investors, Village Global (a global VC backed by leading entrepreneurs, including Bill Gates and Jeff Bezos), as well as the London Mayor’s Co-Investment Fund and the Fair by Design fund, whose social impact charities include Big Society Capital, Nominet Trust and the Joseph Rowntree Foundation.

Frank Field asks City watchdog to protect Wonga borrowers from ‘disaster zone’ (AOL) Rated: A

MP Frank Field has written to the City watchdog to seek assurances that borrowers from collapsed payday loan company Wonga will be protected from “a financial disaster zone”.

Following a meeting with Wonga’s administrators Grant Thornton, the independent politician has written a letter to Financial Conduct Authority (FCA) chief executive Andrew Bailey asking what steps the regulator will take to protect customers from loan sharks.

Mr Field wrote that it was still possible “people of good will” could buy the company’s £400 million worth of outstanding loans and “treat borrowers without exploitation”.

Tandem Bank adds auto-savings rules (Fintech Futures) Rated: B

Tandem Bank is launching the possibility of setting auto-savings rules, designed to help customers automate regular payments to the savings pot.

When a rule is triggered, money will be automatically moved from their current account into their Tandem account. This money will then start to earn interest.

China

As China’s P2P Industry Stumbles, One Company Is Soaring (The Diplomat) Rated: AAA

China’s peer-to-peer (P2P) lending industry is going through a challenging time, as regulators ensure that companies follow a list of over 100 new rules. The rules have been put into place to eliminate the fraudulent or poor business practices that have plagued the industry since its inception in 2006. Many of these firms have struggled to reduce customer credit risk, lacking sufficient financial and technological expertise. But some companies have continued to perform well despite the chaos, and one of these is Fincera, which lends to businesses.

Fincera Inc. is one of the first companies in China to make loans to trucking businesses online. The company operates a P2P lending platform called “Qingyidai” that continues to thrive despite the turbulence in China’s P2P lending sector. As hundreds of P2P lending firms are shut down and/or bailed out due to China’s current regulatory and economic environment, the few that persist stand out. For Qingyidai, the secret to survival is in its risk control methods, which combine technology with traditional risk control methods.

China Rapid Finance Limited (XRF) Names Former Hewlett Packard Executive as Co-CEO (Street Insider) Rated: AAA

China Rapid Finance Limited (“XRF” or the “Company”) (NYSE: XRF), a leading consumer finance marketplace and technology platform in China, today announced the expansion of its leadership team with the appointment of Russell Krauss, a former Hewlett-Packard executive, as Co-Chief Executive Officer and Vice Chairman. The appointment is intended to help accelerate its strategic corporate transformation as it launches new initiatives and business lines.

Crypto.com Announces Advisory Board (PR Newswire) Rated: B

Huey Lin (Operations)

Huey Lin is COO of Affirm which offers services that empower consumers to advance their financial well-being. Affirm was founded by Max Levchin and is one of Silicon Valley’s fastest growing fintech startups, having raised over US$500m. As COO, Huey is responsible for all aspects of operations, and scaling the company. Prior to Affirm, Huey spent nearly 12 years at PayPal in several key roles, including director of international risk policy & strategy and senior director of Asia-Pacific operations. She played an instrumental role in helping PayPal expand in Europe, meet critical global compliance requirements and was one of the first product managers.

European Union

Aren’t we at the ‘peak of the cycle’? BNP Paribas responds (Altfi News) Rated: AAA

In an exclusive interview with AltFi, Stéphane Blanchoz said the firm plans to originate €1 billion a year in SME loans in Europe, with at least €400m in the UK. Blanchoz is heading up the operation as head of SME alternative financing.

BNP is working with a number of origination partners, including CODE Investing and Caple, but also plans to originate loans itself.

The operation will focus on ‘medium enterprises’, with loans ranging from £500k to £5m. According to a presentation delivered at its offices last week, the asset manager sees this as an underserved segment of the market, populated by around 34,000 companies. Companies within this segment are turning over between £1m and £50m a year.

Ronald Kleverlaan, Director European Centre for Alternative Finance, Shares Insight Into European Fintech Marketplace (Crowdfund Insider) Rated: A

Ronald Kleverlaan: The alternative finance market in Europe is currently preparing for the next growth phase with EU wide regulations, launch of new initiatives backed by large institutional funders and public support for cross-border investments.

Previously alternative finance was used in startups or specific higher risk industries and in several countries 10-20% of that market is already funded through alternative finance providers.

One of the main drawbacks is the maximum of €1 million to be raised by companies through a platform. In most member states this maximum has already been raised to €5 million or €8 million making it applicable also for larger scale-ups and growing companies to raise funding though these platforms.

The Finnish Financial Supervisory Authority approved Fellow Finance Plc’s prospectus (Globe Newswire) Rated: A

The Finnish Financial Supervisory Authority has today, on 26 September 2018, approved Fellow Finance Plc’s (“Fellow Finance” or the “Company”) Finnish language Prospectus (“Prospectus”) regarding the Company’s planned listing on the First North Finland marketplace of Nasdaq Helsinki Ltd and the initial public offering related thereto (the “IPO”).

The Prospectus will be available in electronic form on or about 26 September 2018, on Fellow Finance’s website at www.fellowfinance.com/company/ipo, at the website of Evli Bank Plc at www.evli.com/fellowfinance and at the website of Nordnet Bank AB Finnish Branch at www.nordnet.fi/fellowfinance. The printed versions of the Prospectus will be available on or about 27 September at the registered office of the Company at Ratakatu 1 b A 10, FI-00120 Helsinki, at Evli Bank Plc’s office located at Aleksanterinkatu 19 A, 4th floor, FI-00100 Helsinki and at the Nasdaq Helsinki Ltd (Fabianinkatu 14, 00100 Helsinki).

MYBESTBRANDS Launches Universal Checkout in Collaboration With Payment Provider Klarna (PR Newswire) Rated: B

Klarna, one of Europe’s leading payment providers, and MYBESTBRANDS, Germany’s largest online shopping mall for premium and luxury fashion, have joined forces to launch the Universal Checkout (UCO), the first cooperation of its kind in Germany. Innovative bot technology developed by MYBESTBRANDS combined with the Klarna Checkout will create a superior shopping experience for customers, driving increased order values, conversion and ultimately building loyalty for MYBESTBRANDS’ merchants.

Customers will now be able to add items from different merchants to a single cart on MYBESTBRANDS and then pay with a click via Klarna.

International

Striking the Delicate Balance Between Customer Experience and Fraud Prevention (TransUnion), Rated: AAA

Striking the delicate balance between customer experience and fraud prevention is not an easy feat. This was a common theme among newly released Forrester Consulting global studies exploring fraud in the financial services, insurance and single and multi-family rental industries.

Increases in fraud are corroborated by the research conducted by Forrester.

  • Nearly all financial services firms (94%) in the study recognized that they have experienced some sort of fraud, whether it’s identity theft/new account fraud, synthetic identity fraud, or account takeover fraud in the past two years.
  • Almost two-thirds of insurance companies (62%) have seen an increase in soft fraud and 57% have seen an increase in identity fraud in the past year.
  • Virtually all property management companies (97%) have experienced fraud in the properties they manage in the past two years.
Source: TransUnion

The studies come at a time when TransUnion’s own proprietary fraud data found that outstanding balances of suspected synthetic fraud for auto loans, bankcards, retail cards and personal loans have now surpassed $1 billion as of Q2 2018. Insurers and large and small property managers also face new fraud schemes as the prevalence of online applications continues to rise.

Source: TransUnion

See the full study on fraud here.

Speakers tell ABS pros not to sweat the credit cycle (GlobalCapital) Rated: A

Panelists speaking on state of the consumer ABS market on day two of ABS East told a packed audience that while the credit cycle is definitely in its late stages, material distress in consumer credit was unlikely to be seen for some time.

The comments reflect a broader sentiment that has been expressed at the conference, that the bull market is showing no signs of slowing down and is throwing the likelihood of a recession of any size into question (see related article).

This Exchange Protects User Funds by Keeping 98% in Cold Storage (News BTC) Rated: A

A new European exchange wants to protect their customer funds from governments and hackers by regulatory compliance and a special focus on security.

Blockchain.io is a newly announced exchange that intends on enforcing strict rules to comply with both international and local laws, even for future regulations. The company wants to stay regulatory-compliant, audit their records and only approve carefully selected coins in order to make sure that they stay on the right side of the law.

For instance, a variety of simple and complex order types will be featured. Moreover, there are plans to integrate a peer-to-peer (p2p) lending system to let user borrow from a fund managed and maintained by Blockchain.io. The interest rates of such transactions will be based on supply and demand.

Australia

Real Estate Startup Konkrete Gets Backing From Signum Capital (ThirtyK) Rated: AAA

Blockchain startup Konkrete announced it is receiving financial backing from Signum Capital, an investor in blockchain technologies.

Konkrete, which provides a platform for tokenizing real estate assets, is in the midst of raising $3 million. The Melbourne, Australia-based company has $2 million in precommitments with Signum as the lead investor, according to Australia’s Financial Review.

The announcement comes amid a flurry of blockchain-related real estate projects worldwide.

India

Faircent.com drops prime lending rates by 200Bps to 9.99% p.a. for unsecured loans (Economic Times) Rated: AAA

Leading NBFC-P2P Faircent.com on Wednesday announced a reduction in the interest rate on unsecured loans to 9.99% per annum for prime borrowers listed on its platform. According to a statement, the move is a first for India’s lending market, with such an interest rate being the lowest for unsecured loan offered by any private/PSU bank or alternative lending platform in the country, so far.

Faircent says this is the direct result of RBI regulating the peer-to-peer lending sector in India and recognizing it as an NBFC-P2P, thereby unlocking the alternative credit supply into the economy.

SC verdict on Aadhaar Act may make operations expensive for fintech players (Your Story) Rated: A

The Supreme Court of India on Wednesday, while upholding the constitutional validity of Aadhaar, struck down Section 57 of the Aadhaar Act, which allowed the sharing of citizen data with private entities.

Bhavin Patel, co-founder and CEO of P2P lending platform LenDenClub, says,

“The authenticity of data through Aadhaar is really high considering physical documents (like PAN card) can be copied. The costs of verification for delivering ultra-small ticket size loans (of say Rs 5,000) will definitely be a concern. We estimate that there will be a 30-percent increase in costs on physical verification, which will add up to another Rs 100 or Rs 150.  Also, deployment may take a day or more now (in an ideal scenario) since physical verification takes 24 hours at least.”

COAI to examine implications of Supreme Court verdict on Aadhaar linkage with mobile connections (Economic Times) Rated: A

Cellular Operators’ Association of India (COAI) Wednesday said it will examine and assess implications of the Supreme Court judgement, which states that it will not be mandatory for customers to link Aadhaar for mobile connections and bank accounts.

The apex court Wednesday struck down the Section 57 of the Aadhaar (Targeted Delivery of Financial and other Subsidies, Benefits and Services) Act, 2016 that permitted private entities like telecom companies or other corporates to avail of the biometric Aadhaar data.

Loan Rate DOWN: While HDFC, SBI, ICICI, Indusland Bank hike lending rates, this lender bucks the trend (Zee Business) Rated: A

Loan takers are having to pay interest through their noses and there has been no relief in sight for a long time. However, bucking the trend is this new-age online lender. Faircent.com has actually reduced interest rates on unsecured loans by a whopping 200 bps to 9.99% per annum for prime borrowers listed on its platform. This is lowest “lowest” interest rate for unsecured loans offered by any private/PSU bank or alternative lending platform in the country, Faircent claimed in a statement. It further said the reduction in lending rate is the “direct result of RBI regulating the peer-to-peer lending sector in India and recognizing it as an NBFC-P2P, thereby unlocking the alternative credit supply into the economy.”

Significantly, unsecured loans are issued without any collateral and are supported only by the borrower’s creditworthiness.

The Reserve Bank of India (RBI) had hiked repo rate in August 2018 from 6.25% to 6.50% to curb inflation. This affected both the existing as well as future borrowers taking loans from banks. Following RBI decision, several public sector and private banks have increased their Marginal Cost-based Lending Rates (MCLR), making the with borrowers pay higher interest rates and EMIs on their loans. Faircent.com has done the opposite.

Asia

BoT readies peer-to-peer lending service (Bankok Times) Rated: AAA

The Bank of Thailand plans to set regulations for peer-to-peer (P2P) lending service by the year-end, widening opportunities for small-business operators to access financial sources.

The central bank expects to set out regulations to cover all related parties, including P2P lending platforms, borrowers and lenders, said assistant governor Ruechukorn Siriyothin.

Authors:

George Popescu
Allen Taylor

Wednesday August 29 2018, Daily News Digest

US economic growth poised to accelerate

News Comments Today’s main news: Yirendai’s Q2 2018 financial results. Crowdstacker exceeds 50M GBP in funds raised for British businesses. Data breach complaints soar in the UK. Flender raises 10M Euro for SME lending. Google partners with banks on digital lending in India. Today’s main analysis: Moody’s says Q2 2018 has a strong outlook. Today’s thought-provoking articles: If Wonga […]

US economic growth poised to accelerate

News Comments

United States

United Kingdom

China

International

Other

News Summary

United States

Venmo is considering eliminating its public feed (Business Insider) Rated: AAA

PayPal executives are in talks about potentially eliminating the ability for users to publicly post and view transactions on Venmo, its peer-to-peer payments app, Bloomberg reported, citing a person familiar with the matter.

2Q 2018: Strong performance in line with positive outlook (Moody’s Email) Rated: AAA

The PMIs reported strong results in the second quarter of 2018, reflecting growth in new production, earned premiums from high-quality recent vintage business and lower incurred losses. Although mortgage rates have begun trending higher and housing affordability lower, we believe credit fundamentals will remain positive for the sector, and likely drive healthy performance through the second half of the year.

Other key areas the report looks at in-depth include:

  • New business volume rises in Q2. In Q2 2018, PMIs produced about $80.3 billion of new insurance written (NIW), up 14% from Q2 2017. For the first half of 2018, NIW totaled $138.8 billion while production was also up 14% on the year.
  • Premium rate cuts highlight competitive pressure. In April 2018, MGIC (senior Ba2) reduced its premium rates on its most popular policies by about 11%, effective June 2018. Competitors, inspired by corporate tax cuts, then cut rates themselves, essentially wiping out gains from the tax cuts. Given the current high persistency rates and expected ordinary loan amortization profiles, we do not expect the new lower premium rate business to become a majority of in-force business for several years.
  • GSE pilot programs signal potential changes in industry dynamics. In March 2018, Arch Capital Group (ACGL, senior Baa1 stable) and Freddie Mac (FMCC, senior Aaa stable) announced a new risk transfer pilot program, IMAGIN (Integrated Mortgage Insurance) through a newly formed Arch subsidiary that will cede 100% of the risk exposure to multiline reinsurers as an alternative to traditional mortgage insurance. A few months later, in July, Fannie Mae (FNMA, senior Aaa stable) announced a pilot program for enterprise paid mortgage insurance (EPMI). Both programs effectively serve as substitutes for single premium MI policies and highlight the evolution of the mortgage risk transfer market.
Sources: U.S. Bureau of Economic Analysis, Moody’s Analytics forecast

Read the full report here.

US credit card firm Deserve raises $ 17m funding (Fintech Futures) Rated: A

US-based credit card company Deserve has raised $17 million in Series C funding for its Generation Z ambitions.

The round was led by an unnamed investor, with additional participation from Accel, Aspect Ventures, Pelion Ventures, Mission Holdings, Alumni Venture Group and GDP Venture.

These are the most valuable cities in the US (Fox Business) Rated: A

The value of residential real estate in New York is greater than the GDP of all but six countries, according to a new study from online lenderLendingTree, which ranks the most valuable cities in the U.S. based on real estate values.

1. New York, $2.54 trillion

2. Los Angeles, $2.17 trillion

3. San Francisco, $1.25 trillion

4. Chicago, $813 million

5. Washington, $795 million

6. Boston, $697 million

7. Miami, $648 million

8. Seattle, $641 million

9. Dallas, $549 million

10, San Jose, Calif., $535 million

Docutech owner Serent Capital increases investments in fintech lending (Housing Wire) Rated: A

Serent Capital, a San Francisco-based private equity firm, and owner of Docutech, just made its 12th investment in fintech and fourth in the lending technology market.

GDS Link helps clients efficiently manage credit risk strategies and improves lending and account management efforts.

Why P2P lending should be a part of retirement portfolio? (The Financial Express) Rated: A

Below are four reasons why peer to peer lending should be an integral part of retirement portfolio:

1. Diversified Portfolio – Retired people should always have a backup option if in case one of the investment plans fails and someone suffers a loss.

2. Low Risk Investment – While it is a common belief that P2P lending carries higher risk, the reality is different.

3. Compounding Benefits – Since one receives a part of interest and principal amount back every month, the retired person can reinvest this amount and earn interests on the whole amount.

4. Is It Safe To Invest Retirement Money In P2P Lending? – Since P2P lending removes the intermediary and is a relatively new concept, many people are sceptical about this investment option.

United Kingdom

Crowdstacker Milestone: Online Lender Exceeds £50 Million in Funds Raises For British Businesses (Crowdfund Insider) Rated: AAA

Crowdstacker, a UK-based peer-to-peer (P2P) lending platform, recently announced it has exceeded £50 million in funds raised for UK businesses that are featured on its portal. According to the online lender, 100% of the P2P lending funds raised for British businesses through Crowdstacker has come directly from Crowdstacker’s “crowd.”

Top tech investors stand to lose millions if Wonga collapses (The Times) Rated: AAA

Some of the technology industry’s most respected investors face losing tens of millions of pounds as Wonga stands on the edge of failure.

Early investors including Accel, Balderton Capital and Greylock Partners are among the backers of the sub-prime lender that face losing their entire investment as it teeters close to collapse amid a rise in compensation claims.

Wonga’s backers had put about £90 million into the payday lender, including £10 million in the past month. However, if Wonga is placed into administration, shareholders are likely to be left with nothing as its assets are sold off to pay creditors, including customers with outstanding claims for redress.

If payday lender Wonga collapses what will it mean for customers? (The Guardian) Rated: A

Aside from the well-rehearsed arguments about whether or not to take out payday loans (on Monday Wonga’s website was advertising a short-term loan at an annual percentage rate (APR) of interest of 1,509%) the latest news about the company’s struggles should not particularly affect that choice. The company is still operating and is making loans. If Wonga collapses, those loans will likely end up being owned by another lender.

If Wonga falls, responsible credit providers must be there for those in need (Metro News) Rated: A

Research from StepChange Debt Charity found that an estimated 1.1million people used high cost credit for everyday household costs in 2016. A recent update of this research found that this had increased in 2017 to an estimated 1.4million people. It’s becoming a bigger and bigger problem.

This has led to a situation where one in four working adults in the UK are now unable to afford an unexpected £500 bill and a growing number of low income households are becoming reliant on credit to cover basic needs.

UK data breach complaints soar under new EU rules (Financial Times) Rated: AAA

The Information Commissioner’s Office (ICO) said they received more than 6,200 complaints in the first 6 months of GDPR; the majority of complaints were from customers saying their data was shared without permission and companies self reporting cases where data was accessed.

10 percent of complaints come from the financial services market, other sectors include education, healthcare and local governments.

The ICO is looking to increase funding by almost 50 percent and hire more than 200 more workers to handle the amount of complaints.

Victory Park Capital fund holds steady with dividend, eyes performance fee (Altfi News) Rated: A

The £332m VPC Specialty Lending investment trust has announced its second consecutive dividend of 2p per share this year, its target level, following a two year turnaround amid lower than expected returns, according to an investor update.

Following on from recording its highest monthly return to date for May 2018 the closed-ended fund has declared an interim dividend of 2p pence per share for the three-month period to 30 June 2018.

Tide CEO: Why SMBs Need Their Own Bank (PYMNTS) Rated: A

Small business (SMBs) are distinct from other customer groups, Tide CEO Dr. Oliver Prill told Karen Webster during this week’s Monday Conversation, with a specific set of product and service needs that often go unmet because they are so unique. That means small businesses of all sizes — particularly the small businesses with fewer than 10 employees — simply deal with inefficiencies in their work flow that are actually rather damaging.

Starling looks for further funding as users grow fivefold (Financial Times) Rated: A

UK based digital bank Starling Bank is looking to raise additional capital as the bank has seen user growth reach more than 200,000, up from 43,000 in November.

The bank is also making significant progress on account balances, Starling accounts averaged £420 while competitor Monzo came in at less than £150.  The fresh capital raise will be led by existing investor Harald McPike who owns more than 50 percent already and is a Bahamas based hedge fund investor.

Starling to help RBS develop digital bank (FinExtra) Rated: A

Royal Bank of Scotland (RBS) has reportedly enlisted the help of challenger bank Starling in its efforts to develop a digital bank of its own.

The news, reported by The Times newspaper, came as a result of a letter to shareholders from Starling’s chief executive Anne Boden which stated that it has signed a contract “to provide payment services to support new initiatives at RBS/NatWest”.

China

Yirendai Reports Second Quarter 2018 Financial Results (PR Newswire) Rated: AAA

In the second quarter of 2018, Yirendai facilitated RMB 11,736.2 million (US$1,773.6 million) of loans to 177,754 qualified individual borrowers through its online marketplace, representing a year-over-year growth of 38%; 23.4% of loan volume were generated by repeat borrowers who have successfully borrowed on Yirendai’s platform before; 76.3% of the borrowers were acquired from online channels; 100% of the loan volume originated from online channels was facilitated through mobile.

In the second quarter of 2018, Yirendai facilitated 202,380 investors with total investment amount of RMB 12,175.4 million (US$1,840.0 million), 100% of which was facilitated through its online platform and 96% of which was facilitated through its mobile application.

Chinese fintech company X Financial files for a $ 250 million US IPO (Nasdaq) Rated: AAA

X Financial, which operates a peer-to-peer lending platform in China, filed on Tuesday with the SEC to raise up to $250 million in an initial public offering.

The Shenzhen, China-based companywas founded in 2014 and booked $445 million in revenue for the 12 months ended June 30, 2018. It plans to list on the NYSE under the symbol XYF. X Financial filed confidentially on January 8, 2018. Deutsche Bank and Morgan Stanley are the joint bookrunners on the deal. No pricing terms were disclosed.

China Holds to Hard Line on Peer-to-Peer Lending, Pledged-Stock Loans (Caixin) Rated: A

At a recent meeting entitled “Disposing of Financial Risk,” regulatory officials devoted most of their time to discussing China’s peer-to-peer (P2P) lending industry and pledged-stock loans.

In fact, they spoke of little else.

Beijing (Failed) Protests Over Collapse of China’s Peer-to-Peer (P2P) Industry (Whats on Weibo) Rated: A

China’s P2P industry has seen a quick rise and fall over the past year, causing some panic and chaos.

Earlier this week, China’s New Fortune magazine reported of one case where an investor had just invested 360,000 RMB (±US$52,700) into P2P platform Guojinbao, when they discovered the platform was already abandoned the day before, and there was no way to get their money back. It is just one among many recent cases.

European Union

Irish P2P Lending Platform Flender Raises €10 Million Through Latest Funding Round For SME Lending (Crowdfund Insider) Rated: AAA

Irish peer-to-peer lender Flender has reportedly raised €10 million through its latest funding round to lend to small and medium-sized enterprises (SMEs). Flender, which was launched in early 2017,  is authorized and regulated by the Financial Conduct Authority under Registration Number 657861. The online lender is now on a mission to enable businesses and consumers the ability to borrow money through their existing networks of friends, family, and customers. 

Flender also reported that it intends to offer established small businesses an innovative new way to access finance by leveraging their loyal customer base. The lender will facilitate and formalize an existing and large market of social lending across the UK and Ireland.

International

Aussie super asset allocation “riskier”: Research (Financial Standard) Rated: AAA

UBS Asset Management’s latest pension fund indicator report highlights the propensity of Australian superannuation funds to invest a substantial portion of retirement savings in “risker” assets such as equities.

According to the report, the asset allocation of Australian superannuation funds is heavily geared towards equities, with 45% of assets allocated to equities. The asset manager said Australia’s equity allocation is almost double its bond allocation, which attracts 26% of assets.

Source: Financial Standard

MAKING SENSE OF PRIVATE CREDIT FUNDS (all About Alpha) Rated: AAA

The paper distinguishes among five strategies, then adds a catch-all “other” category. The five are:

  1. Business Development Companies. The BDCs operate under specific regulations mandating their “significant managerial assistance” to their debtor companies. The majority of BDCs are treated as RICs for tax purposes, which involves additional regulatory oversight.
  2. Senior Loan Funds. These are closed-end vehicles that make first or second lien loans to small- and mid-sized companies. They use floating rate spreads composed of a risk premium and the benchmark rate, and typically target gross returns in the neighborhood of 10%.
  3. Mezzanine Funds. These are also closed-end vehicles. Typically, they make junior capital investments (often a hybrid between debt and equity) in small- and medium sized companies funding acquisitions, growth, recapitalizations, or buyouts. They typically target return in the mid- to upper teens, given their position subordinate to the senior liens.
  4. Distressed Debt Funds. These can be either closed- or open-end vehicles. They invest in the debt securities of mid- to large-sized companies that are experiencing financial distress, seeking deeply discounted purchases. There are a variety of strategies involved under this broad heading, including loan-to-own or turnaround lending.
  5. Special Situation Funds. These are typically closed-end vehicles. They, too, target mid- to large-sized companies in tight circumstances. They have a much broader mandate than the distressed debt funds, investing across the capital structure.

Getmoder Foundation Offers a Reliable Platform for Lending and Borrowing Crypto Currencies and Digital Assets (Digital Journal) Rated: A

Cryptocurrency has significantly opened a new world in financial sector which was primarily owned by bank namely lending and borrowing capital. Even through peer to peer lending and borrowing has developed in the recent years in fiat currency space, it’s only recently hat options for lending and borrowing cryptocurrencies are on the rise. Getmoder Foundation provides reliable platform for this recent practical option.

Getmoder is a known open-platform for lending and borrowing cryptocurrencies and digital assets. This platform allows lenders and borrowers to enter to fully collateralized crypto versus crypto lending agreement. With Getmoder lenders will be able to earn increased interest income on their long-term digital assets investments.

Australia

Australia: How can you avoid unfair contract terms? (Mondaq) Rated: AAA

Have you heard about Prospa? This startup shot to Australian Financial Review fame in early June this year. It is an online lender which offers unsecured business loans to small businesses which big lenders consider to be too risky.Their own business was going remarkably well. So well in fact that Prospa was getting ready to take the ASX by storm and launch an IPO. The excitement was surely palpable, the founders would have been so proud of themselves and their strong team for getting to this point. The dollars were about to roll in!

And then, right before the IPO was about to take place, ASIC raised concerns purportedly regarding Prospa’s potentially unfair contract terms. This is not surprising given the climate of industry-wide reviews of lending practices. This concern led to postponement of the IPO on 6 June 2018, only 15 minutes prior to launch. A $576 million dollar ASX float on hold, indefinitely, whilst these standard form contracts were scrutinised. The issue? Potentially unfair terms in their standard form contracts contrary to the Australian Consumer Law.

India

Google Teams With Banks to Launch Digital Lending for India (Bloomberg) Rated: AAA

Alphabet Inc’s Google is partnering with four Indian banks to grant consumer loans online, as the fight for a $1 trillion digital finance market intensifies.

The U.S. search giant is teaming with HDFC Bank Ltd.ICICI Bank Ltd.Kotak Mahindra Bank Ltd. and Federal Bank Ltd. to offer instant, pre-approved loans to customers “right within Google Pay in a matter of seconds,” it said in a statement.

From Facebook Inc.’s WhatsApp to Jack Ma’s Ant Financial, internet giants are joining a race to provide financial services in the world’s fastest-growing mobile arena. Online lending is becoming the next frontier as mobile users look for small loans with minimal paperwork, served to them even without credit ratings as fintech companies use data and algorithms to determine risk.

Digital Lending Startup ZestMoney Raises $ 13.4 Mn From Xiaomi, Others (Inc42) Rated: A

Bengaluru-based digital lending startup ZestMoney has raised $13.4 Mn in extended Series A round of funding led by Chinese smartphone maker Xiaomi.Existing investors PayU, Ribbit Capital and Omidyar Network also participated in the round.

The company plans to strengthen its technology and data science capabilities as well as expand use cases for the core ZestMoney Affordability Product.

How digital lending is helping bridge the credit gap in India (Qrius) Rated: A

Over the past two years, digitisation and the rising penetration of internet in India have irrevocably transformed the lending process from being extremely long and complex to a quick and technologically-exercise. The emergence of digital lending has challenged the stronghold of traditional financial institutions as the chief credit enablers in the economy while presenting consumers with an opportunity to access credit in a simplified and efficient manner.

Credit lending in India: Then and now

For decades, the credit lending market in India has been dominated by traditional banks and Non-banking financial companies (NBFC’s). Their complex policies and methods of operation have made it extremely difficult for the majority of Indians to avail credit. As a result, the gap between the demand for and supply of credit has amplified, while the number of underserved consumers in the country has risen exponentially.

Asia

Indonesia offers a fresh battleground for fintech (Nikkei Asian Review) Rated: AAA

Coinhako is just one of the many “fintech” startups flocking to Indonesia. The Indonesian Fintech Association said there are more than 200 fintech companies in the country, including the 31 e-payment providers that have secured licenses from Bank Indonesia and more than 60 peer-to-peer lending companies registered with the Financial Services Authority.

Despite still seeing fintech companies as potential threats, Indonesia’s major banks are also investing in local startups. Bank Mandiri has invested in P2P lending startups Amartha and KoinWorks through its venture capital arm Mandiri Capital Indonesia.

P2P Lending Fintech May Contribute Rp25tn to GPD, Indef Says (Indonesian News Portal) Rated: B

The Institute for Development of Economics and Finance (Indef) said that fintech-based companies offering peer-to-peer lending services can improve Indonesia’s macroeconomics capability.

Indef’s review, done together with the Indonesian Fintech Association (Aftech), estimates that fintech development in Indonesia can contribute up to Rp25.97 trillion to the GDP.

Speaking at the discussion with the theme “Lending Fintech Roles to Indonesia’s Economy” in Jakarta, August 28, Indef economist Bhima Yudhistira Adhinegara said that the Rp25.97 trillion contribution includes both direct and indirect impacts.

Authors:

George Popescu
Allen Taylor

Wednesday August 22 2018, Daily News Digest

Elevate Credit

News Comments Today’s main news: Elevate Credit expected to announce $203.49M in sales. Ant Financial delays IPO again. SocietyOne getting close to $500M in total lending, six years in. ClearScore to offer credit scores in India. Capital Float buys Sequoia and Walnut. Today’s main analysis: 10 years after financial crisis, credit market on upward curve. Today’s thought-provoking articles: New […]

Elevate Credit

News Comments

United States

China

International

India

Other

News Summary

United States

Brokerages Anticipate Elevate Credit Inc (ELVT) Will Announce Quarterly Sales of $ 203.49 Million (Baseball Daily Digest) Rated: AAA

Equities research analysts forecast that Elevate Credit Inc (NYSE:ELVT) will post $203.49 million in sales for the current fiscal quarter, Zacks reports. Two analysts have issued estimates for Elevate Credit’s earnings, with estimates ranging from $201.00 million to $205.97 million. Elevate Credit reported sales of $172.85 million during the same quarter last year, which indicates a positive year-over-year growth rate of 17.7%. The firm is expected to report its next quarterly earnings report on Monday, October 29th.

According to Zacks, analysts expect that Elevate Credit will report full-year sales of $803.23 million for the current financial year, with estimates ranging from $801.00 million to $805.45 million. For the next financial year, analysts expect that the company will report sales of $927.09 million per share, with estimates ranging from $926.97 million to $927.20 million. Zacks’ sales calculations are a mean average based on a survey of research firms that follow Elevate Credit.

Financial Crisis – 10 Years Later: Consumer Credit Market on an Upward Curve (Nasdaq) Rated: AAA

Ten years after the biggest financial crisis to hit the United States since the Great Depression, much has changed in the consumer credit marketplace. Serious delinquency rates have recovered since that period, and the credit quality of consumers has broadly improved. Yet the crisis has had a profound effect on consumer access to credit and the relationship they have with it.

TransUnion’s (NYSE:TRU) just-released Q2 2018 Industry Insights Report allows for comparisons between Americans’ credit preferences today versus 2008, specifically in the auto finance, credit card, mortgage and unsecured personal loan markets.

Source: TransUnion

Lawmaker Questions FinTech Industry Over Lending Practices (Govtech) Rated:A

Rep. Emanuel Cleaver (D-Mo.) released a report Friday detailing the lending practices of some prominent fintech companies, finding that some companies could be discriminating against minorities and calling for more transparency from the fintech sector.

Fintech companies are somewhat controversial because many engage in traditional banking practices, and some consumers and regulators are calling for them to be regulated like traditional banks.

Small banks need big data to maintain customer service edge (American Banker) Rated: A

Big data isn’t just for big banks.

The modern banking customer wants advanced online and mobile banking options, and delivering such services requires even the smallest community bank to get a handle on customer data, said Corey LeBlanc, chief technology officer and vice president at Origin Bank.

Blockchain Meets REIT – A New Era in Real Estate Investing (Market Insider) Rated: A

Building Block, Inc. announced today it is the first North American REIT (Real Estate Investment Trust) to embrace the emerging efficiencies of blockchain technology and provide a new way to invest in one of the world’s most well-known and trusted assets, real estate.   Blockchain technology will enable Building Block REIT to virtually eliminate friction in REIT shareholder communication by allowing direct dividend disbursement, secure user voting, and smart contract functions that execute automatically when pre-set parameters are met.

Building Block REIT plans to raise funds in the form of a digital initial public offering (Digital IPO) accepting payments via U.S. Dollars or fractional Ethereum cryptocurrency.  Investors worldwide will be able to purchase shares in Building Block REIT on SEC compliant alternative trading systems (ATS) or peer-to-peer exchanges with whitelisted parties to invest in US commercial office, multi-family and mixed-use real estate.

JPMorgan launching Roar platform for crowdsourced data (Business Insider) Rated: A

JPMorgan’s corporate and investment bank is best known for advising businesses on billion-dollar acquisitions, helping private unicorns tap into the public markets, and managing the cash of Fortune 500 companies.

But now it is quietly working on a new platform that would go far beyond anything the firm has previously done, using crowdsourcing to accumulate massive amounts of data intended to one day help its clients make complex decisions about how to run their businesses, according to people familiar with the project.

The platform, called Roar by JPMorgan, would store sensitive private data, such as hospital records or satellite imagery, that’s not in the public domain. Typically, this type of information is exchanged between firms on a bilateral arrangement so it is not improperly used. But Roar would allow clients to tap into this data, which they could then use in a secure fashion to make forecasts and gain business insights.

New Report Shows Identity Verification a Priority for eCommerce and Online Lending Businesses (Global News) Rated: A

A new report from Whitepages Pro shows that an overwhelming majority of North American companies in ecommerce and financial services surveyed consider identity verification to be a top business priority but many still don’t believe they do it well or have all the data and tools they need to be successful. For the report, “The State of Identity Verification Maturity in North America,” businesses were asked, among other things, to rank themselves on a 4-stage scale of identity verification maturity for how they use identity data to combat fraud and improve the customer experience.

Among the report’s key findings:

  • Driven by the belief that fraud attempts are increasing in frequency and sophistication, identity verification is a priority for most organizations (93 percent). While they vary in the degree to which they use advanced techniques, most organizations want to improve their identity verification methods and outcomes. Just 2 percent believe they are completely successful at identity verification.
  • Organizations want access to more data points (just 13 percent say they have all the data they need) and see data linkages (the relationships between data elements) as a way to improve their identity verification processes. While access to traditional data (like a street address) is common, many still don’t have or use digital data (like an IP address). Most of the survey respondents believe linking data reduces fraud with 77 percent believing it increases confidence in a customer’s identity.
  • Organizations want more and improved identity verification automation. However they often rely on in-house (such as historical data and white/black lists) that make it difficult to expand the use of automation, resulting in an over reliance on costly and time consuming manual reviews. A large majority (71 percent) believe machine learning can play a role in reducing manual reviews and making identity verification more effective.

Bank of the West exec bolts for startup, sees chance ‘to redefine retail banking’ (American Banker) Rated: A

Thibault Fulconis, who until recently was chief operating officer of Bank of the West, has joined the fintech digital banking startup Varo Money as its chief financial officer.

Varo Money is a mobile-first challenger bank that aims to help Americans achieve financial health. It is in the same league as Chime, Digit, Moven, MoneyLion, Qapital and N26.

White Oak Healthcare Finance Closes $ 40 Million Financing for LifeCare Holdings, Inc. (Business Wire) Rated: A

White Oak Healthcare Finance, LLC (“White Oak”), today announced it acted as lead lender and administrative agent on the funding of a $40 million asset based senior credit facility for LifeCare Holdings, Inc. (“LifeCare”). The funds were primarily used to refinance existing indebtedness. White Oak previously announced the financing of LifeCare Home Health LLC, the home health entity owned by LifeCare.

TradeStation Launches New Fully Paid Lending Program (GlobeNewswire), Rated: A

TradeStation, a Monex Group company and award-winning online broker-dealer and futures commission merchant, today announced the launch of its Fully Paid Lending Program. This program allows qualified equities account holders the opportunity to earn interest income on lendable securities in their accounts.

Under the Fully Paid Lending Program, TradeStation identifies stocks in qualified accounts that are eligible for lending. Based on market demand, some or all of a qualified client’s fully paid positions or excess-margin securities may be lent out to other financial institutions to satisfy their customers’ position requirements. While their stocks are on loan, clients automatically receive 50% of the net proceeds earned by TradeStation for lending out the shares, which is accrued daily and automatically posted monthly to their accounts. Daily income ceases to accrue when the client sells a lendable stock or the stock is no longer on loan.

US wakes up to SME cybersecurity needs (Fintech Futures) Rated: B

US President Donald Trump has signed the National Institute of Standards and Technology (NIST) Small Business Cybersecurity Act, a bill which will provide a set of resources for small businesses to best protect their digital assets from cybersecurity threats.

United Kingdom

Private credit offers an escape from miserly bond yields (Citywire) Rated: AAA

For reasons that are quite clear if you follow my writings on a regular basis, equities and bonds will most likely deliver disappointing returns for many years to come.

My central forecast is an annual average inflation-adjusted return of 0-2% on a global portfolio consisting of 40% bonds and 60% equities between now and 2050.

The good news next.  Fortunately, there are many things you can do to improve on those lacklustre numbers. Those returns are for the lazy investor; someone who invests passively.

China

Ant Financial IPO plans pushed back again (Financial Times) Rated: AAA

A blockbuster listing of Ant Financial, the fast-growing electronic payment affiliate of China’s leading tech group Alibaba, has again been delayed as it continues to burn through cash and come under pressure from Beijing’s crackdown on non-traditional financial institutions.

Ant was valued at $150bn in its last private fundraising in June, a round that bankers said paved the way for an initial public offering as early as this year.

Moody’s: China’s new measures on P2P lending are credit positive (ECNS) Rated: AAA

The global credit rating agency Moody’s called China’s newly-issued regulations on peer-to-peer lending platforms are “credit positive”, because they will strengthen protections to individual lenders and prevent risk spilling over to the broader financial system.

Moody’s commentary came after Chinese regulators announced 10 measures to address risks related to P2P lending platforms on August 12. The P2P platforms enable individuals to lend directly to borrowers through the Internet.

The new regulations clarified responsibilities of P2P platforms and their shareholders, stipulated conditions for orderly liquidation of failed platforms, outlined penalties for borrowers that escape their debt obligations and prohibited registration of new platforms.

Next Step to Regulating P2P Lending Platforms — Figuring Out Who Owns Them (Caixin Global) Rated: A

Months into the crisis in China’s online lending industry, regulators want to know who actually owns the country’s peer-to-peer (P2P) lending platforms.

The National Internet Finance Association of China (NIFA) issued a notice on Monday designed to help it keep tabs on key stakeholders in China’s online P2P lending platforms as financial and legal difficulties continue to engulf the business.

The effort to bring greater clarity to the workings of P2P platforms comes after hundreds of online platforms have encountered financial and legal troubles in the last few months. In July, at least 165 P2P platforms had difficulties meeting cash-withdrawal demands, saw their owners abscond with investor funds, or were investigated by police, according to a report by internet lending research firm Wangdaizhijia. The number was nearly triple that in June, Wangdaizhijia said.

In-Depth: Police Launch Global Hunt for ‘Solar King’ Caught Up in P2P Bust (Caixin Global) Rated: AAA

Peng Xiaofeng was once China’s youngest billionaire and a rising star in the solar industry. But the founder of now-bankrupt LDK Solar has been put on China’s most-wanted list, hunted by law enforcement agencies for illegal fund-raising by his peer-to-peer (P2P) lending platform Solarbao.com.

Police in the city of Suzhou, where Solarbao.com is registered, want Interpol to issue a Red Notice against 43-year-old Peng, who is accused of swindling more than 5,000 investors and leaving a trail of debt amounting to 220 million yuan ($32.1 million). They have also branded the platform, a subsidiary of Nasdaq-listed SPI Energy Co. Ltd., a fraud.

HuaAn Finds Itself Target of Investor Ire After P2P Company Accused of Fraud (Caixin Global) Rated: A

The Shanghai office of fund manager HuaAn Future Asset Management Co. Ltd.was surrounded on Monday by throngs of angry investors who blame the company for what they perceive to be its role in an online-lending fraud. HuaAn denies any involvement.

Monday’s protest centered on P2P site PPMiao.com, which was accused of illegal fundraising by police in the eastern city of Hangzhou, where PPMiao.com operator Guangxi PPMiao Internet Technology Co. Ltd. is registered. HuaAn held a 37.5% stake on behalf of an asset management plan in PPMiao.com’s former operator, Hangzhou Fuqian Network Technology Co. Ltd., as of June 30, making HuaAn the target of investor ire when PPMiao.com’s financial problems surfaced.

International

Many countries don’t use credit scores like the US — here’s how they determine your worth (Business Insider) Rated: AAA

In the US, a good credit score can feel like a key determinant of success. It defines how good an interest rate you can get on a car loan or mortgage, the quality of credit card you can get approved for, or if you’ll get approved for any credit at all.

The better your score, the better the perks. A bad score can become a black mark that leads to missing out on the home you want (credit checks are a common aspect of apartment applications), higher car insurance rates, or even difficulty getting a cell phone, according to Nerdwallet.

But as monolithic as the credit score seems, many countries in the world handle credit very differently — with many having no credit score system at all.

Blockchain Can Help Peer-To-Peer Car Lending Schemes Gain Traction (Market News) Rated: A

Blockchain technology can help car-sharing companies to track a person using the car any time. According to industry analysts, the car sharing economy is expected to hit $335 billion by the year 2025.

The car sharing idea has been gaining a lot of interest among car drivers over the recent years. According to estimates by Global Market Insight, the peer-to-peer car sharing sector will amount to $11 billion. The growth has largely been attributed to raising cost of owning a car.

The biggest challenge with the Peer-to-peer lending system is trust. The car owner has to have total trust in the person hiring the car. Additionally, the car owner has to be sure that the hirer has enough money to cover the period the car is hired. The owner of the vehicle would also like to track where the car is as well as the condition in which it is being driven. On the side of the hirer, they would love to know if they are hiring the car from the original owner and that the data exchanged between the two parties is secure.

Australia

SocietyOne Celebrates Sixth Anniversary; Total Lending Now Approaching $ 500 Million (Crowdfund Insider) Rated: AAA

Australia-based marketplace lender SocietyOne announced celebrated its sixth anniversary of operations as total lending since inception approaches $500 million.

SocietyOne also reported it has more than 20,000 customers and since the beginning of 2016, total lending has grown nearly 6 times and the lender’s loan book now totals over $220 million, up from $41 million at the start of 2016.

India

UK’s fintech startup ClearScore set to offer credit scores in India (Economic Times) Rated: AAA

UK-headquartered fintech startup ClearScore is all set to start its business in India offering credit scores to Indian consumers in partnership with Experian, free of cost, to improve the awareness levels of the consumers regarding credit. India is their second international market after the company started operations in South Africa last year.

ClearScore will be available on Google Play Store and will provide details of the credit score, giving alerts about changes in the score and provide details about how consumers can improve the score.

Capital Float buys Sequoia & SAIF-backed Walnut for $ 30 mn (VC Circle) Rated: AAA

Bengaluru-based digital lending platform Capital Float has acquired personal finance management app-maker Walnut for $30 million (Rs 209 crore) in a cash and stock deal, a company statement said. Both the companies count Sequoia Capital and SAIF Partners as common venture capital investors.

Walnut allows users to track spends, check on credit and bank balance, bill payments and split expenses within a group. In July 2017, it launched a small ticket credit line for its users called Walnut Prime based on user data and consumer behaviour. The platform has so far disbursed Rs 100 crore in consumer loans.

OfBusiness Raises INR 200 Crore in Series C Financing (FinSMEs) Rated: A

OfBusiness, a Gurgaon, India – based technology enabled SME financing platform, raised INR 200 crore (approx $29m) in Series C financing.

The round was led by Creation Investments and Falcon Edge with participation from existing investors Matrix Partners India and Zodius Capital. With this new round of funding, the company has raised a total of INR 500 crore of equity and debt funding to date. It has also raised debt lines from Kotak, Tata Capital, RBL Bank and Northern Arc amongst other lending partners.

The capital will be used for continued rapid growth and model scaling.

Five Star Business Finance Raises USD$ 100M in Funding (FinSMEs) Rated: A

Five Star Business Finance Limited, a Chennai, India–based fully-secured small business financing company focused on South India, raises USD$100M in funding.

The round was led by alternative asset firm TPG, with participation from existing investors Norwest Venture Partners, an investment fund managed by Morgan Stanley, and Sequoia Capital. The company’s first investor, Matrix Partners India, continues to stay invested in the company.

Led by D. Lakshmipathy, Chairman and Managing Director, Five Star is a non-bank finance company providing loans to nearly 40,000 customers.

P2P Online Lending Startup Finzy Completes $ 2.3 Mn Pre-Series A Fund Raise (Indian Web) Rated: A

Bangalore-based peer to peer (P2P) lending platform Finzy on Monday announced raising funds worth USD 2.3 million in Pre-Series A round, including USD 1.3 million raised in the first tranche in March 2018.

This funding round has been funded by senior professionals from BFSI industry and successful entrepreneurs. The startup plans to use the freshly raised capital for geographical expansion, technology investment and stronger distribution networks.

Founded in 2016, by Abhinandan Sangam, Amit More and Vishwas Dixit, Finzy is a premier P2P lending solution in India that connect borrowers with investors and make the entire process simple and easy so that one can get a loan in as little as 48 hours.

Five things you should know before lending on P2P platform (Economic Times) Rated: A

Don’t let greed cloud your judgment. If you are in a tearing hurry to pocket double-digit returns, you are likely to overlook many warnings signs. That is why it is always better to start with a small amount, learn the ropes, before going for the kill.

Different platforms have different ticket size for lending. With companies like Faircent offering as low as Rs 750 per loan. The ROI would vary as per the borrower profile and loan tenure. The total amount invested by a lender across all P2P-NBFCs is capped at Rs 10 lakh, as per the existing RBI norms.

The RBI came out with regulations for P2P companies in October. There are around 30 online P2P companies in India, of which only eight have received a certificate of registration (CoR) from the RBI to carry out P2P lending activities.

Asia

Singapore police recover S$ 27 million linked to China Ponzi scheme (Channel News Asia) Rated: AAA

Singapore police said on Tuesday (Aug 21) they have recovered more than S$27 million linked to one of the biggest Ponzi schemes in China, which saw 1.15 million investors cheated out of 38 billion yuan (S$7 billion).

Ezubao, once China’s biggest peer-to-peer lending platform, folded in 2016 after it turned out to be an online scam that concocted fake projects to attract investment and pocketed funds instead of passing them to borrowers to generate returns.

Latin American

Mexico’s new government wants fintech, banks to help financial inclusion (Channel News Asia) Rated: AAA

Mexico’s next government will look to fintech companies and large corporate banks to increase financial inclusion in the country, where only one-third of adults have a bank account, senior officials said on Tuesday.

Arturo Herrera, one of two future deputy finance ministers, said in an interview that the lack of financial inclusion was one of the biggest obstacles in the new government’s fight against poverty, inequality and slow economic growth.

Authors:

George Popescu
Allen Taylor

Monday July 30 2018, Daily News Digest

TransUnion

News Comments Today’s main news: Prosper tops 1 million loans. KBRA assigns preliminary ratings to SoFi Consumer Loan Program (2018-3) Trust. Elevate Credit earnings preview. Zopa CEO on FCA regulatory review. 60 firms apply for Hong Kong banking license. Today’s main analysis: Credit bureau earnings. Today’s thought-provoking articles: FCA to crack down on UK P2P lenders. What to expect in […]

TransUnion

News Comments

United States

United Kingdom

European Union

International

Other

News Summary

United States

Marketplace Lender Prosper Tops One Million Loans (Crowdfund Insider) Rated: AAA

Online lender Prosper announced a new milestone yesterday. The marketplace lending platform topped one million loans this past week representing over $13 billion in originations.

In May, Prosper announced strong loan originations saying the platform experienced a 27% year-over-year increase in the first quarter to $744 million.

The net loss for Q1 decreased by $12.6 million to ($24) million but EBITDA was positive for the fourth consecutive quarter.

KBRA Assigns Preliminary Ratings to SoFi Consumer Loan Program 2018-3 Trust (Business Wire) Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by SoFi Consumer Loan Program 2018-3 (“SCLP 2018-3”). This is a $546.00 million consumer loan ABS transaction.

Preliminary Ratings Assigned: SoFi Consumer Loan Program 2018-3

Class Preliminary Rating Class Principal
A-1 AA+ (sf) $278,000,000
A-2 AA+ (sf) $136,000,000
B A (sf) $69,000,000
C BBB (sf) $63,000,000

In Second Act, a Silicon Valley CEO Opens Up About Affairs (Wall Street Journal) Rated: A

Seeking a fresh start in Silicon Valley, former Social Finance Inc. chief and co-founder Mike Cagney now admits that an affair with a subordinate was a reason for his abrupt departure last year from the firm.

Now, Mr. Cagney is adding another reason for deciding to leave a startup he led for six years. In an interview with The Wall Street Journal, he said that he had consensual sexual relationships with female subordinates, something he had previously denied publicly. He also said he had misled SoFi’s board of directors about one of the affairs.

Sex Scandal Toppled a Silicon Valley Chief. Investors Say, So What? (The New York Times) Rated: A

Yet just months after Mr. Cagney departed SoFi, two venture capitalists who had been on the company’s board and knew many details of his actions invested $17 million in his new start-up, called Figure. Since then, Mr. Cagney has raised another $41 million from others for the lending start-up, which will open soon.

Mr. Cagney’s swift comeback — from ouster to new company took four months — provides one of the starkest illustrations of the speed with which the technology industry is moving past the sexual harassment allegations that swept Silicon Valley and many other industries over the last year.

Highest GDP Growth since 2014, Credit Bureau Earnings (PeerIQ), Rated: AAA

The US economy grew at a blistering 4.1% pace, the highest GDP growth reading since 2014, driven by consumer spending. Consumer spending grew by 4%, higher than economists’ estimates. Consumer spending has been driving US economic growth and outstanding consumer debt has reached all-time highs, although consumer debt per capita is still well below its pre-crisis peak.

Credit Bureau Earnings

PeerIQ’s partner TransUnion released its 2Q earnings this week, along with Equifax. TransUnion’s earnings beat market expectations with revenue of $563 Mn, up by 19% YoY. TU’s revenue growth was driven by Online Data Services, where revenue grew by 23% YoY.

Source: TransUnion and PeerIQ

Equifax’s revenue increased by 2% YoY to $877 Mn in 2Q, while net income decreased by 12% YoY to $145 Mn. Below we compare the latest earnings of the 3 credit bureaus – TransUnion, Equifax and Experian. Note that Experian’s earnings are for the 6 months ending 3/31/18.

Source: Bloomberg and PeerIQ

Elevate Credit earnings preview: what Wall Street is expecting (Markets Insider) Rated: AAA

  • Elevate Credit is reporting earnings from Q2 on July 30.
  • Analysts predict earnings per share of $0.073.

Elevate Credit releases earnings for the most recent quarter on July 30.

9 analysts are estimating earnings of $0.073 per share as opposed to earnings of $0.080 per share in the same quarter of the previous year.

Analysts are expecting the company to report $186.8 million, an increase of 24.13% over the prior year quarter.

5 Ways to Earn a Truly Passive Income (Zing Blog) Rated: A

In recent years, investors have started putting their money into peer-to-peer lending companies. By lending out your own money to peers in the form of personal loans, you are able to earn interest – similar to the way that banks and other lenders produce income. On sites such as Lending Club and Prosper, you can open an account and begin investing in this passive income venture.

Like all investments, the ROI varies, but Lending Club and Prosper boast an average investment return of about 5 – 10%. Both of these platforms also give opportunities for users to make their investment semiautomatic, meaning you wouldn’t need to constantly monitor your investments or reinvest returns. But there would still be some work involved. If you want this to be a completely passive income stream, Lending Club offers a PRIME account, in which you’ll have a fully managed account. You’ll need to have a minimum investment of $5,000, though, and it will be subject to a one-time .8% fee.

85% of Small Business Owners Say They’re Living the Dream (Small Business Trends) Rated: A

According to recent findings from Kabbage, a financial services and data platform, 85 percent of small business owners believe that being your own boss and owning a business is achieving the American Dream. In addition, 84 percent said they hope their children will also one day become small business owners.

The survey, which consists of responses from more than 1,000 small business owners, found that 38 percent of those who hope their children become entrepreneurs feel that way because they want them to turn their passion into a career. 24 percent appreciate that being their own boss allows them to create a flexible schedule. And 22 percent feel that building a small business is rewarding, and they want their kids to feel that sense of pride.

ArborCrowd Wants HNW Investors to Understand the Appeal of Workforce Housing (National Real Estate Investor) Rated: A

ArborCrowd targets IRRs from 12 percent to 15 percent in top-tier markets and IRRs in the mid-teens or low 20s in secondary and tertiary markets, according to Adam Kaufman, co-founder and managing director of the online crowdfunding platform.

MILLENNIUM TRUST COMPANY REFRESHES ALTERNATIVE INVESTMENT PLATFORM (STL News) Rated: B

Millennium Trust Company, LLC, (“Millennium Trust”) a leading retirement and custody services provider to advisors, financial institutions, businesses and individuals, announced today the launch of its enhanced education platform on the Millennium Alternative Investment Network (MAIN). MAIN is a free research, education and alternative investment resource to help investors and advisors increase their understanding of alternative assets, and invest through simplified and streamlined investment processes.

United Kingdom

Zopa CEO Jaidev Janardana Welcomes FCA Regulatory Review of P2P Lending (Crowdfund Insider) Rated: AAA

This past Friday, the UK Financial Conduct Authority (FCA) finally released their reviewof the crowdfunding industry regulations. While the investment crowdfunding sector (equity crowdfunding) came away mostly unscathed the loan based sector (or peer to peer lending) took a bit of a lashing.

The FCA said the peer to peer lending had become “increasingly complex” and sited occurrences of operations that lacked transparency and instances where interest rates were not matched with the appropriate level of risk. The FCA subsequently announced a new consultation as it looks to firm up compliance for UK online lenders. Gillian Roche-Saunders, a partner at the law firm of Bates, Wells & Braithwaite – and Fintech expert, said this will be “the foundation of a much more sophisticated and targeted supervisory approach from the regulator.“

Zopa CEO Jaidev Janardana welcomed the reappraisal and added scrutiny of P2P operations calling it a positive step. Janardana said they “wholeheartedly agree” with the FCA assessment;

Crackdown is looming for peer-to-peer lenders (The Times) Rated: AAA

The City watchdog is to crack down on peer-to-peer lending and the crowdfunding industry amid fears that consumers are being exposed to risks they do not understand.

The popularity of peer-to-peer lending, where individuals or small businesses borrow from members of the public and institutions on the internet, has soared in recent years.

About 150,000 Britons have handed over nearly £10 billion in the past decade through these forums, earning an attractive average of 4.5 per cent interest.

U.K. Watchdog Proposes New Regulations On Lending Platforms (PYMNTS) Rated: A

The Financial Conduct Authority is looking to tighten up oversight over crowdfunding platforms, which provide short-term lending for small businesses and consumers, in part to make sure customers have clear information about the rules, terms and conditions.

A 156-page report by the watchdog found that some customers were subject to poor practices by certain online platforms and that they were provided with unsuitable products and poor treatment.

The reform measures have been backed by platforms like Funding Circle, a leading crowdfunding lender, as a way to gain more legitimacy as competition heats up with traditional banks. RateSetter, one of the three-largest P2P lenders in the U.K., has also sought clarity on regulations as a means to better compete against established banks.

We would remain in EU now, say small companies (The Times) Rated: A

The majority of small companies would vote to stay in the European Union if there were to be a re-run of the Brexit referendum, a survey shows.

A poll of 965 small businesses found that 56 per cent now want to stay in the EU and 32 per cent wish to leave. The remainder were undecided or declined to state their preference.

The survey, which was conducted by Funding Circle, a peer-to-peer lending platform, highlighted a 7 per cent swing towards remaining since April last year.

Tougher P2P lending rules proposed over poor practice concerns (Your Money) Rated: A

The Financial Conduct Authority (FCA) has opened a consultation on loan-based crowdfunding platforms (peer-to-peer) following its original review of the sector in 2016.

It said since then, it’s observed that the new and growing area has become increasingly complex and has found evidence of “poor business practices” that could cause actual or potential harm to investors.

For example, P2P platforms have a much more active role by taking decisions on behalf of investors, structuring the loans they’re exposed to, and splitting loans across a number of investors (lenders) in order to receive a target rate of return.

Here’s what the industry thinks of the FCA review (Peer2Peer) Rated: A

THE FINANCIAL Conduct Authority released its long-awaited review into the peer-to-peer lending sectoron Friday. Here are some of the industry reactions so far…

Rhydian Lewis, chief executive, RateSetter-“I believe peer-to-peer lending will become a part of every investor’s diversified portfolio and the proposals from the FCA do not change that belief.”

James Meekings, co-founder and UK managing director of Funding Circle-“Funding Circle has consistently campaigned for proportionate regulation that protects consumers, whilst allowing innovation to boost choice and competition in the lending and investment markets.”

Stuart Law, chief executive at Assetz Capital-“While we have just received this latest FCA consultation document, and therefore have not as yet fully digested it, we will always be supportive of any regulation that ultimately benefits our investors, borrowers and the wider peer-to-peer industry. Proposals that advocate greater transparency, appropriate investor remuneration and good corporate governance are very much welcome.”

China

Hong Kong prepares to usher in virtual banks, as 60 firms apply to be pioneers in financial revolution (South China Morning Post) Rated: AAA

When SagaDigits, a HK$2 million (US$254,820) start-up, wanted to add post-merger shareholders and signatories to its corporate bank account, its chief executive approached a Hong Kong bank for help.

What happened next turned into many months of back-and-forth paperwork and arguments with the lender, said the company’s chief executive officer, Arthur Chan. He even spent a month tracking down his bank relationship manager after the staff was relocated to another branch.

Good news may be at hand for him, as the Hong Kong Monetary Authority (HKMA) is poised to issue the city’s first virtual banking licence by year’s end to promote fintech and offer customers “a new kind of experience.”

Ning Tang, founder and chief executive officer of CreditEase, a Chinese wealth-management firm and the majority owner of U.S.-listed peer-to-peer lending platform Yirendai, talks about China’s P2P lending industry. He speaks with Tom Mackenzie on “Bloomberg Daybreak: Asia.”

European Union

What Can FinTech Expect In The Next 24 Months In The Central And Eastern Europe (Forbes) Rated: AAA

Trend #1: Further development of payment and money transfer solutions., FinTech incumbents started historically with niches that were on the one hand abandoned by traditional banks and, on the other hand, not as strictly regulated. That is why there has been more transaction service providers originating in the region, compared to different types of FinTech companies.

Trend #2: Business-to-business. Retail banking requires relatively more effort and brings in lower returns in exchange than servicing Small and Medium Enterprises (SME’s), not to mention large enterprises, which has been one of the remaining strongholds for banks (aside from trading, mortgages and services for corporations). Therefore, FinTech startups began offering their products to individuals but are slowly entering the corporate sector.

One of the examples is

Trend #3: Growth in complexity. From single service providers with excellent client experience, FinTech incumbents have evolved into mature companies with the high tech background.

Trend #4: Blockchain.  

FinLeap moves into the fintech platform-as-a-service space (FinExtra) Rated: A

Berlin-based fintech factory FinLeap is positioning as a provider of bundled solutions for startups and banks, melding stand-alone products across a common platform.

The company is rolling out two platform-based products to connect disparate applications in the consumer markets – FinReach – and in business process management – Infinitec.

10 Irish startups to look out for in 2018 and beyond (EU Startups) Rated: A

This week we took a closer look at the Irish startup scene with the goal to introduce you to some of the most promising startups from there. Below you’ll find 10 Irish startups to look out for in 2018 and beyond.

Flender: Successfully funded through the Seedrs equity crowdfunding platform, Dublin’s Flender is a peer-to-peer (P2P) lending platform for businesses and consumers to borrow and lend money through their existing networks. Flender was launched in early 2017, offering a combination of social network, low-interest rates and an excellent mobile experience. They have so far raised €2 million from investors to formalise the social lending market among friends, family and business connections.

International

Libra Credit Receives Investment from Binance Labs (Crowdfund Insider) Rated: A

Libra Credit, an online lender in the cryptocurrency space, has received an investment from Binance Labs – the tech incubator and VC portion of Binance – one of the largest cryptocurrency exchanges in the world.

According to a post on Medium, the agreement enables BNB holders to receive loans collateralized by the crypto. So Libra Credit will lend fiat and digital assets to users who pledge BNB.

Nexo Crypto Lending Platform Offers to Acquire SALT Lending’s Qualifying Assets (Bitcoin Exchange Guide) Rated: A

Known for being the first-ever instant, cryptocurrency-backed loans provider, Nexo took to Twitter to express its offering to acquire what remains of SALT Lending, a membership-based lending and borrowing network and a worthwhile competitor.

The tweet made on July 27, 2018, made it seem as if the Nexo was doing a favor or “lends a helping hand” to its competition, while sharing its willingness to “provide instant liquidity to its community, up to $2,000,000 per client without “proof-of-access” requirements.” To add to this public announcement, the firm also shared what appears to be its letter of intent to SALT Lending.

Global Debt Registry Bolsters Executive Team To Help Transform Structured Credit Market (Payment Week) Rated: B

Global Debt Registry (“GDR”), today announced two new executive hires from the banking industry. Evan Psaropoulos, formerly of Credit Suisse, has joined GDR as CFO, and Patrick Dietz, formerly of BNY Mellon, has joined the organization as Product Director. This follows Charlie Moore assuming the role of Chief Executive Officer, in addition to President, in recognition of his leadership and vision.

In his role as CFO, Evan will oversee the finance function within GDR, including overseeing equity financing and commercial strategy. He will lead investor relations for GDR across the capital markets space leveraging his investment banking and corporate development experience.

Australia

Online Lender Prospa Receives Recognition as Top Fintech (Crowdfund Insider) Rated: AAA

Prospa, a leading online lender for Australian SMEs, has received a nice recognition being named National Fintech Lender of the Year in the 2018 MFAA Excellence Awards.

The Mortgage & Finance Association of Australia  or “MFAA” is the national body representing finance brokers, mortgage managers, lenders, aggregator/broking groups and other industry participants, in the mortgage and finance industry in Australia.

The MFA also recognised Prospa’s Roberto Sanz as the National Winner of Business Development Manager in the Lender and Support Service Provider category for 2018.

Strong First Half for Fintech Lending (Livewire) Rated: A

It has been a very active half year in the Australian Alternative Finance (AltFi) market. Since my previous wire on the key themes expected for 2018, the market has continued to grow and evolve. The themes were: 1) Continued Growth, 2) Consolidation of Lenders; and 3) Transparency via Listings.

These themes have been present in the first half, however we have seen two other themes present that will accelerate the development of the Australian Fintech lending market. One being the participation of banks in funding the AltFi lenders, the other, Government support for SME lending.

India

i2i Funding Helps Break Away from Traditional Banking (The Tech Panda) Rated: AAA

The Peer to Peer or P2P lending market has doubled in China. Though it might be at a nascent stage in India, according to co-founder of P2P lending platform i2i Funding Raghavendra Pratap Singh, it has a lot of potential. In a chat with The Tech Panda, Singh explained the intricate process and i2i Funding’s plans for the future.

I2i Funding had started with loan amounts of INR 10-15 lakhs per month, and now are doing INR 1.5 crore. Currently, they have around 30,000 registrations for borrowers and around 4000 for investors.  They add around 200-300 new investors per month. So far, the company has disbursed over 500 loans of over INR 8 crores.

How to earn money by investing (Economic Times) Rated: A

Many individuals still consider keeping money in their bank savings accounts akin to investing. Yes, it earns an interest rate but over a longer period of time, the earnings heavily fall short of negating the impact of inflation.

Currently, most banks offer 4 percent or even lower return on their savings accounts. It, therefore, becomes important to look out for other better alternatives and investment options to make your money earn you money.

Asia

Economy in brief: Half of unlicensed P2P lending from China (The Jakarta Press) Rated: AAA

The Financial Services Authority (OJK) has discovered that more than 100 unlicensed peer-to-peer (P2P) lending providers in the country had been developed by Chinese firms.

The OJK reported its findings on Friday, pointing out that out of 227 unlicensed P2P lenders it had listed, at least half originated from China.

What Imran Khan’s Election Win Means For Pakistani Fintech (Forbes) Rated: A

Imran Khan has claimed victory in the 2018 Pakistani election for his PTI party after a campaign that has been marred by violence and allegations of vote rigging. Although Khan’s party is expected to fall short of an overall majority and would have to form a coalition, his economic policies have been questioned.

As per his 

MENA

Thinking outside the (financing) box (CPI) Rated: AAA

Can you describe the development of peer-to-peer lending in MENA?
Marketplace lending is still a relatively new phenomenon in the MENA region. A big part of what we do is to educate investors in the potential for diversifying their existing portfolios with a different type of investment. It offers them a wide-range of choice as investors are able to browse through campaigns and select the ones that match their criteria best.

Liwwa only lends to small and medium enterprises (SMEs), and we continue to scale up that lending activity. As our underwriting activity grew from $2.3 million in 2016 to $5.2 million in 2017, the level of funding from retail investors nearly doubled. Retail lenders want to see a credible company, a solid portfolio and a low default rate. As long as Liwwa continues to deliver on those three criteria, we can build trust in the platform and hopefully build an ongoing relationship with new and existing investors.

Over the last 18 months banks have significantly scaled back lending activity to the SME sector. How as this affected P2P lending activity in the region?
IFRS 9, with its provisioning rules, is one of the main drivers of banks’ reticence to lend to SMEs. The market demand for loans hasn’t appreciably changed, and one could argue that market risk has stabilised in many MENA economies—so the accounting rule change is having an outsized impact. Alternative financing structures such as these are poised to fill a need because much of the debt is treated on an off-balance sheet basis. Retail lenders and non-bank institutions can contribute to filling the SME lending gap given a difference in risk appetites and a more generous perspective on solvency ratios.

Africa

Peer to peer lending: from Nigerians, to Nigerians (Stears Business) Rated: AAA

When societies were small and closed-off, people lent freely among themselves based on trust. At worst, the lender believed that he could take up his case with the local community. But as globalisation and technology came, people began to migrate, and personal lending became inefficient. The solution? Banks.

At the centre of this story is FINT, a Nigerian online peer-to-peer lender founded in early 2017. The idea is simple. Emeka signs up to the FINT platform and requests for a loan. Chinyere signs up, funds her account, and chooses which loan(s) she wants to finance from a pool of anonymous borrowers. In its simplest form, Emeka wants ₦120,000 for six months, and Chinyere lends it to him and gets monthly payments of the principal (₦120,000) and interest (e.g. 10%) every month – or ₦13,200 each month.

FINT has been pioneering this simple form of lending in Nigeria. Its aim to “empower Nigerians by making loans more accessible and affordable; and lending more rewarding” speaks to the core idea of peer-to-peer lending.

Latin America

New rules for credit fintech companies (Lexology) Rated: AAA

The Central Bank also issued Circular 3,898 in May 2018, which set out the procedural rules for establishing such entities.

The Central Bank has introduced these rules in order to continue the modernisation of Brazil’s financial sector – something which has been ongoing since 2013, with more intensive actions being taken since 2016. The main goals of the rules are to:

  • incentivise innovation;
  • increase legal certainty;
  • enable the entrance of new players in the market;
  • increase competition; and
  • reduce interest rates.

Authors:

George Popescu
Allen Taylor

Wednesday July 25 2018, Daily News Digest

Lending Club IPO

News Comments Today’s main news: Square, eBay partner on businesss loans. BNP Paribas launches UK fund for SME lending. Crowdstacker seeking 800K GBP on Seedrs. PPDAI to boost tech investment. Alipay, WeBank competition heats up. Today’s main analysis: The good news and bad news about Lending Club. Today’s thought-provoking articles: Americans are splurging on personal loans. How irresponsible mortgage lenders […]

Lending Club IPO

News Comments

United States

United Kingdom

China

Other

News Summary

United States

eBay & Square Partner on Business Loans (Crowdfund Insider) Rated: AAA

eBay (Nasdaq:EBAY)  and Square Capital (NYSE:SQ) have signed an agreement to provide up to $100,000 in credit to sellers – in as little as one day. The partnership is not only a streamlined offering of financing for small businesses that use eBay but also a whack at traditional banks which are mostly unable to match such a speedy lending agreement.

Scott Cutler, Senior Vice President, Americas at eBay, says that eBay is committed to helping their sellers and providing credit in partnership with Square simply makes sense.

For example, if you have $30,000 CC debt and good credit you can get a 3-year payoff at about 6% and a 5 year at about 7%. That is a big improvement over a typical rate of 17.5% on purchases and an amazing 23.5% on cash advances. So you take out the $30,000 loan, pay off your credit cards and save thousands in interest while you are at it. In addition, your CC is now zero and you can start using it again.

Source: Seeking Alpha

They came to market via an IPO late in 2014 and were an immediate hit rising over 50% their first day. They were immediately valued at over $9 billion. Today they are at less than $2 billion, a drop of almost 80%.

And finally here is LC’s chart since the IPO. Talk about ugly.

Source: Seeking Alpha

Americans are splurging on personal loans thanks to fintech startups (Quartz) Rated: AAA

The stock of personal loans outstanding has grown to about $120 billion as of March, according to TransUnion data. That compares with $71.9 billion a decade ago—worth around $90 billion adjusted for inflation—when the subprime mortgage crisis crescendoed. About 17 million Americans have this type of debt which, unlike mortgages and automobile loans, isn’t collateralized by an asset.

Source: Quartz

Upstart financial technology companies like Lending Club, Prosper, and Avant account for about a third of this lending, up from less than 1% in 2010.

Source: Quartz

How Irresponsible Mortgage Lenders Created A Second Housing Bubble (Seeking Alpha) Rated: AAA

Rents Are Falling, But Prices Are Surging

I believe the culprit is a new crop of lenders who are outside of Fannie Mae and Freddie Mac regulations on FICO scores and DTI. For example, San Francisco lender Social Finance (SoFi) is offering up to 3 million dollar loans with 10 percent down and “flexible DTI.

Source: Seeking Alpha
Source: Seeking Alpha

Firms like SoFi are the engine driving the madness in the California housing market. Here’s what Michael Tannenbaum, former Vice President of SoFi, had to say about their loans in 2016, “Sixty-five percent of the business we do is first-time home buyers; it’s a big deal we’re opening up to the jumbo first-time market.” A year later, he was gone. Other gems from the San Francisco Chronicle article – SoFi’s average loan at the time was $800,000 and two-thirds were in California. I shudder to think what their average loan size and DTI is now. Also, in addition to not being big fans of debt to income ratios, SoFi isn’t big on using other traditional measures like FICO scores to evaluate borrowers. In 2016, they declared their company a “FICO Free Zone” in a press release. Said a former business development associate, “The volume of applications coming in was crazy.” Other sources reported on the wild sex culture at the firm. As for their underwriting practices? As long as housing prices went up, they were more or less irrelevant. But, if prices go down, SoFi and their backers stand to lose a lot of money.

A Conversation with Figure’s Mike Cagney (Financial Revolutionist) Rated: A

Mike Cagney’s return to fintech’s center stage had been foreshadowed by a handful of reports suggesting that his new company would be focused on the origination of real estate-related assets and that, somehow, blockchain would figure into the mix. But Cagney, who played a foundational role in building SoFi into one of fintech’s biggest success stories before his departure, isn’t the type of entrepreneur who thinks small and nichey. With his new company, Figure, and the blockchain protocol it has built, Provenance, Cagney and his team of 80 professionals are taking aim at the gigantic world of institutional capital markets transactions. Why? Because that’s one place where the vig (i.e., rent-seeking) still sloshes around in copious amounts. But unlike SoFi, which is taking aim at banks, Cagney is now fixing his gaze on the administrators, trustees, custodians and other intermediaries who take a cut out of each securitization and other types of deals. On the eve of the first transaction to be put on Provenance (a HELOC), The FR’s Gregg Schoenberg sat down with Cagney to learn more about his plans and how blockchain is central to his mission.

Could Fintech & Blockchain Lending Further Drive The Housing Market Boom? (Forbes) Rated: A

Those who do not have the scores to secure loans from traditional lenders now have alternatives particularly in the form of P2P lenders. These platforms pool together money from interested investors and loan them out to borrowers.

They also have a much quicker turnaround compared to what customers might experience with banks and other large lenders. While these services started out only to fund smaller personal loans, some like LendingClub have grown and expanded to allow larger-value loans like mortgages to be made on the platform.

Blockchain-based lenders have built upon this crowdfunding concept and enhanced it with blockchain’s capabilities with smart contracts and tokenization. While initial efforts as espoused by the likes of 

Employer-focused PFM company gets $ 40 million (Business Insider) Rated: A

US-based personal finance management (PFM) company Even has raised a $40 million Series B funding round led by Keith Rabois of Khoshla Ventures, and including Valar Ventures, Allen & Company, Harrison Metal, Ron Conway, and Silicon Valley Bank.

Source: Business Insider

Even integrates with attendance, payroll, and banking systems to help consumers improve their financial health. Its features include Instapay, which enables users to request the money they have earned before their actual payday, and it uses AI to give users an “okay to spend” amount, so they don’t get surprised by sudden expenses. Additionally, it offers an automatic savings feature, similar to other PFM companies including Acorns and Cleo.

Fintech Startup LoanSnap Raises $ 8m in Series A Financing (Finsmes) Rated: A

LoanSnap, a San Francisco, CA-based developer of technology that protects people against dumb loans, raised $8m in Series A financing.

The round was led by True Ventures with participation from Baseline Ventures, Richard Branson’s Virgin Group, Core Innovation Partners, Joe Montana’s Liquid 2 Ventures, OVO Fund, Transmedia Ventures, and angel investors.

BlockFi Raises $ 52.5M for Cryptoasset-backed Loans (Business Wire) Rated: AAA

BlockFi, the leading cryptoasset to USD lender, announced today it has raised $52.5M to expand operations. Galaxy Digital Ventures LLC, a digital currency and blockchain technology investment firm founded by Mike Novogratz led the deal. This marks the industry’s first institutional investment in cryptoasset backed loans. BlockFi’s existing investors, which include ConsenSys Ventures and PJC, also participated in the funding round.

  • BlockFi planning rapid expansion of cryptoasset-to-USD lending platform
  • BlockFi partners with Galaxy Digital Lending LLC on loan purchasing facility and receives equity investment from Galaxy Digital Ventures LLC
  • Marks first institutional investment in cryptoasset backed loans

Credit Card Payoff App Tally Raises $ 25 Million (Cheddar) Rated: A

Tally, an automated debt-managing app, has raised $25 million in Series B funding with the goal of expanding its reach and finding new ways to alleviate consumers’ financial anxiety, Cheddar has learned.

Southern States Multifamily Portfolio Sells, Exceeding Targeted Returns for ArborCrowd Investors (The Daily Times) Rated: A

ArborCrowd (the “Company”) today announced its Southern States Multifamily Portfolio (SSMP) investment has been realized ahead of schedule, outpacing targeted return estimates. One of the properties in the portfolio is located in Mississippi and sold in late 2017. The two remaining properties, located in Alabama, recently sold. The aggregate portfolio sales price was $25.85 million, generating an internal rate of return (IRR) of over 29% for ArborCrowd investors.

The transaction marks the first of ArborCrowd’s six deals to complete its investment cycle, and its success is a great sign of the long-term viability of the Company’s growing platform. The SSMP investment opportunity was quickly oversubscribed when ArborCrowd presented the deal on its platform in February 2017, raising over $2.1 million in just 5 days. The over 29% IRR generated by the sale of the portfolio far exceeded the targeted 17% to 20% IRR projected by ArborCrowd at the time of the offering.

Lendio Reports Q2 Results: 90% Year-Over-Year Revenue Growth (Lendio) Rated: A

Lendio, the nation’s leading marketplace for small business loans, today announced record growth across all areas of its business, including 90 percent year-over-year quarterly revenue growth. To date, Lendio has helped facilitate more than $900 million in financing to over 45,000 small businesses across the U.S. and Canada through its marketplace of more than 75 small business lenders. The growth milestone comes after an 80 percent increase in loans funded through the Lendio platform in the last year.

From July 2017 to June 2018, Lendio facilitated nearly $400 million in loans to more than 22,000 small businesses. The average initial loan size among Lendio’s small business customers grew to nearly $35,000. The top five industries funded through Lendio’s marketplace include construction, retail, restaurants, health care and information media.

GM Maven CEO: Peer-To-Peer Auto Lending Will Be A Large Market (Bloomberg) Rated: A

Julia Steyn, Maven CEO, on their new peer-to-peer lending program for GM car owners, and the progress Maven is making in the shared economy.


Whitepages Pro Unveils Pro Insight, a Global Identity Review Solution Powered by Machine Learning (Global Newswire) Rated: A

Whitepages Pro, a global leader in digital identity verification, today announced Whitepages Pro Insight, a new and improved manual review solution designed to help businesses assess the identity risk of their customers, approve good transactions, and investigate fraud on a global scale. As the only global identity review solution that provides six ways to search, it enables users to balance accuracy and efficiency through direct workflow integrations, machine learning-informed insight, and robust analytics.

Within Pro Insight, users are first presented with Identity Review, a comprehensive interface that verifies and cross-checks both digital and traditional identity attributes (name, email, phone, primary and secondary addresses, and IP) to verify the identity behind a transaction. The solution analyzes and presents the relationships between the five core identity attributes in several intuitive ways:

  • Confidence Score – An overall measure of the risk associated with a transaction that cross-references the five core identity attributes. The Confidence Score is powered by machine learning insights from billions of transactional patterns across the Whitepages Pro Identity Network and the 70+ data signals of the Identity Check API.
  • Positive and negative signals – A concise list of primary factors that influence a given Confidence Score.
  • Results columns – A detailed list of matches, mismatches, and invalid inputs based on the links between a transaction’s identity elements. Users can click on specific attributes to further investigate associated people, historical data, and more.
  • Distance Map – A visual representation of geographical distances between phone, primary address, secondary address, and IP address.

Center For The New Middle Class: Non-Prime Consumers Spending More Responsibly On Vacation (Payment Week) Rated: A

Non-prime consumers are significantly less likely to be taking to the road for vacation this summer, opting for staycations instead, and spending far less on vacations if they take one, a new study released today from Elevate’s 

Source: The Center for the New Middle Class

Key findings from the CNMC survey conducted in June include:

  • The non-prime are 29% less likely to take a vacation
  • The non-prime are 22% more likely to “staycation”
  • If they do take a vacation, the non-prime spend half as much
  • The non-prime are 2x as likely to have turned down a vacation due to financial constraints
  • The non-prime are 61% more likely to borrow money for a vacation
  • Non-prime spend 18% less per child on summer entertainment
  • Those with children were more likely to take vacations and borrow money to cover costs

The research also indicated that across both credit segments, summer community resource utilization (i.e. pools, parks, libraries, etc.) was relatively high, with more than 85% in both segments using these facilities. Summer entertainment expenses per child were also very similar between the prime and non-prime groups.

Read the full report here.

United Kingdom

P2P Lender Crowdstacker Now Seeking £800,000 Through Seedrs Funding Round (Crowdfund Insider) Rated: AAA

Crowdstacker, a UK-based peer-to-peer lending platform, is now seeking £800,000through its equity crowdfunding campaign on Seedrs. Founded in 2014, Crowdstacker describes itself as an award-winning FCA regulated online alternative investment platform that provides ISA eligible P2P loans, bonds, and loan notes.

BNP Paribas launches UK fund for SME lending (FinTech Futures) Rated: AAA

BNP Paribas Asset Management will launch BNP Paribas UK SME Debt Fund 1, offering clients access to the UK SME lending market.

The asset management arm of the bank’s new fund will invest in senior loans to SMEs with an annual turnover of less than £50 million through its BNPP AM’s SME Alternative Financing platform.

The platform uses proprietary big data technology, which pairs with the bank’s balance sheet and infrastructure.

Podcast 159: Christoph Rieche of iwoca (Lend Academy) Rated: A

Christoph Rieche is the CEO and Co-Founder of iwoca, a small business lender based in London with operations also in Germany and Poland. The name iwoca stands for instant working capital so they have leveraged technology in order to provide capital to small businesses quickly and efficiently.

In this podcast you will learn:

  • Why Christoph decided to start iwoca.
  • The segment of the small business market they focus on.
  • What is behind the continued decline in overall small business loan volumes.
  • The loan product offered by iwoca.
  • The typical size of their credit lines.
  • The kinds of businesses applying for credit at iwoca.
  • How their underwriting works and level of automation they use.

Navigating through the P2P property maze (Peer2Peer Finance) Rated: A

Landbay investors can expect returns of around 3.54 per cent on its fixed-rate product, or 3.18 per cent with its tracker-rate option, by investing in loans secured by UK property.

The Peer-to-Peer Finance Association member launched its IFISA in February last year, meaning that Landbay customers can also benefit from tax-free earnings on their investments.

LandlordInvest’s investors have earned average annual returns of 11.3 per cent to date, secured by residential or commercial property, with the option of an IFISA wrapper

London Proptech Firm Goodlord Forms New Open Banking Partnership With TrueLayer (Crowdfund Insider) Rated: B

Goodlord, a UK-based proptech platform, has formed a new open banking partnership with TrueLayer. Founded in 2014, Goodlord reports that its cloud-based platform is trusted by hundreds of agencies across the UK. The company has created a one-stop-shop by providing access to a dynamic suite of specialized services, including insurance, e-signing, referencing, and e-payments.

Starling Bank takes on Monzo with daring debit card design (FinTech Futures) Rated: B

UK digital challenger Starling Bank is upping its design game with the launch of a new teal-coloured vertical debit card as it plays catch up with Monzo.

The new card has all customer details, including name, card number and expiry date, on the back – and it’s rolling them out this week.

The card is inspired by the blue-green tones of the plumage of the starling bird. It is also one of the initial group of 16 original “web colours” formulated in 1987 to display web pages, reflecting Starling’s digital heritage.

China

PPDai to boost technology investment (Shine) Rated: AAA

PPDai, China’s first online peer-to-peer lending platform listed in the US, said today it would increase its registered capital to 1 billion yuan (US$149 million) and expand its artificial intelligence applications to hedge risks and improve investor confidence amid concerns over P2P lending.

The Shanghai-based company, which has about 71 million users ,employs AI, Big Data and blockchain to fight against risk and fraud.

Alipay and WeBank competition heats up as China reins in leverage (Financial Times) Rated: AAA

Alipay and WeBank are set up perfectly to take advantage of new priorities from Chinese policymakers to increase the flow of capital to small companies and households, their approach is different as WeBank looks to use bank partnerships to make capital connections.

Alipay uses scale, data and technology capabilities to compete with banks for deposits and funds its borrowing through the ABS market.

Alipay and WeBank plan to list their finance arms soon which will continue to put pressure on the rivalry as well as the broader financial market in China.

Zennon Kapron on what’s next for Chinese fintech (China Economic Review) Rated: A

Analysing these questions is all part of the day job for Zennon Kapron, the head of fintech research and consulting firm Kapronasia. In this interview with China Economic Review, Kapron gives his take on some of the market’s recent developments, and explains why China’s fintech industry is such an exciting space to watch.

CER: How worried should we be about the recent panic surrounding China’s small P2P lending platforms?

ZK: The fact that P2P lending platforms are failing is not surprising. Many of these platforms had inadequate internal operational processes, poor lending practices, and in some cases, were just complete scams. What will be interesting to see is if retail investors will still want to put new money on these platforms. I get the impression at the moment that many investors are just trying to get their money out. Even if the P2P industry manages to right itself, it may find that all the investors are gone.

China’s P2P Online Lending Dominoes Continue to Fall (Ciaxin) Rated: A

Another domino in China’s peer-to-peer lending industry fell.

Beijing-based iqianbang.com was the latest online P2P lending platform to close down. The company announced a “benign exit” last Friday night, citing “deteriorating online lending environment and drying up liquidity.”

Investors in several P2P platforms, including iqianbang.com, gathered Monday at a local Beijing police station to report the loss of money to police.

Chinese P2P Lender’s Controller Disappears After Sponsoring Portugal (Yicai Global) Rated: A

Zheng Yansen, the controller of peer-to-peer lender Guangzhou Leader Internet Financial Information Service has disappeared, the firm announced yesterday.

It also acknowledged that ‘some of its projects are delayed’ and said it will set up a work group as soon as possible to inventory its assets and businesses, request borrowers to repay loans earlier than scheduled, and liquidate collateral as quickly as possible.

European Union

FinLeap Partners With Fabrick to Launch Financial Management Startup for Small Businesses (Crowdfund Insider) Rated: AAA

FinLeap, the fintech start-up platform behind Germany’s SolarisBank, announced on Monday it has teamed up with Italian open banking platform Fabrick to launch a new financial management startup specifically for small businesses. According to FinLeap, the startup, called Beesy, will simplify accounting, tax and banking services for micro-enterprises and freelancers.

As soon as Beesy is launched, FinLeap added it will provide more details about the services and how they work.

Rabobank’s novel approach to protecting customer data (American Banker) Rated: A

Take Dutch-based Rabobank, for example, which now converts customer data to the Latin names of flowers and animals in order to comply with the General Data Protection Regulation that sensitive client information be disguised.

At the heart of all these regulations is the mandate that companies must make sure no one can access customer data who shouldn’t, and that every effort is made to protect that data from breaches. Storing customer data in the clear — not encrypted, anonymized, or pseudonymized — is not acceptable, to regulators or anyone else.

Source: American Banker
International

MoneyGram And Visa Team To Deliver Real-Time Global P2P (PYMNTS) Rated: A

MoneyGram and Visa announced today (July 24) that they have partnered to deliver real-time digital disbursements to MoneyGram customers using Visa’s push payments platform, Visa Direct.

Launching in October in two key markets, Mexico and the Philippines, MoneyGram will expand its options in which receivers from those markets may receive and use funds instantly  via their bank-issued Visa-branded debit card or Visa-branded prepaid card  and senders may choose the option by which to send those funds. The partnership leverages the trust that consumers globally have in the MoneyGram and Visa brands, as well as the ability for receivers to access funds 24/7/365 without having to visit an agent location to pick up cash.

Australia

Property Connect enters technology agreement with Clearmatch to market new lending products (Small Caps) Rated: A

Realty services group Property Connect Holdings (ASX: PCH) has entered into a minimum five-year licence agreement to use a technology platform powered by marketplace treasury company Clearmatch, in the development and marketing of its own lending products designed to ease property market transactions.

The binding heads of agreement allows Property Connect to use the SocietyOne platform owned by Clearmatch to develop products focused on the emerging project development finance and residential mortgage sectors within the private peer-to-peer lending market.

India

P2P lending platform Monexo partners with Cube Wealth for new-clientele (Business Standard) Rated: B

Peer-to-Peer (P2P) lender, has partnered with to provide clients with an alternative avenue for investments. The app-based firm’s user-base of 350,000 customers will have an option of placing a portion of their investments onto Monexo’s platform.

The market space is only three years old and until last October operated without any regulatory oversight. While there are 3,000 lenders in China with a total lending book of $500 million, the Reserve Bank of India (RBI) is said to have approved licenses to around eight firms.

Authors:

George Popescu
Allen Taylor

Tuesday May 29 2018, Daily News Digest

alternative loans

News Comments Today’s main news: How SoFi, Robinhood trick investors into saving money. The highest paying green IFISAs. Ant Financial’s $10B fundraising is oversubscribed. HashChing gets $700K loan. Today’s main analysis: Alternative loan borrowers may be traditional prospects. Today’s thought-provoking articles: The challenges online lenders would face in a recession. Crowdfunding in Switzerland is at a record high. Only 4% […]

alternative loans

News Comments

United States

United Kingdom

China

European Union

International

India

Other

News Summary

United States

Designers at SoFi, Robinhood explain how they trick users into saving (and making) money (Business Insider) Rated: AAA

  • Personal finance apps have gained traction with customers — especially millennials — thanks to the ease with which they let users sock money away, save towards big goals, and make big purchases more possible.
  • From the loan refinancing company SoFi to the stock trading platform Robinhood, many of these companies are now worth billions of dollars thanks to enthusiastic investors.
  • At the heart of their success: A good product which combines smart design with financial psychology to convince users to meet the goals they set for themselves.
  • Here’s how the best companies in fintech design their apps to convince users to save and make money.

Alternative loan borrowers may be traditional prospects (Banking Exchange) Rated: AAA

The latest example of this comes from a new study by TransUnion that indicates that some borrowers who use “alternative loans” may actually be good candidates for traditional consumer credit products.

Alternative loans typically don’t appear in traditional credit bureau files. These services include short-term debt, such as “payday loans”; point-of-sale finance offered by retailers or third-party lenders; virtual “rent-to-own” finance; and auto-title loans.

Release coincides with OCC announcement

Elizabeth Pagel, vice-president, market strategy, consumer lending at TransUnion, notes that while many consumers in the FactorTrust database of alternative loan users skew subprime, nearly 40% are not subprime credits, and 12% are actually prime or above.

One example given by TransUnion demonstrating the general pattern concerns near-prime borrowers (those with VantageScore 3.0 credit scores of 601-660):

• About 14% of those borrowers with only one short-term loan went 90 days or more past due on a traditional account 12 months later.

• The delinquency level fell to less than 12% when a consumer possessed two alternative loans.

• The delinquency level fell to about 9% when a consumer had eight or more alternative loans over the course of seven years.

Source: Banking Exchange
Source: Banking Exchange

The Unique Challenges Online Lenders Would Face In A Recession (Forbes) Rated: AAA

Technology has reshaped the lending industry over the last decade. Companies like Lending Club, Prosper and SoFi built billion dollar business (even if valuations have come down from their respective peaks) by better connecting lenders to borrowers and streamlining what was previously a slow and bloated consumer lending process. Dozens more companies have launched in their wake and are contributing to this wave of change. In fact, TransUnion data shows that fintech lenders now account for over a third of personal loan origination by volume. That Goldman Sachs launched their own online lending business, Marcus, shows that much of this change is here to stay.

But these businesses have all come of age during an unprecedented period of economic expansion and low default rates. Low defaults have helped performance, while low yields in other asset classes have driven up investor demand for higher yielding personal loans.

If the market needed a warning sign, look no further than auto loans. Delinquencies in the subprime auto market have 

PeerStreet Review 2018 – Real Estate Crowdfunding Platform (Dough Roller) Rated: A

Some real estate investors come to the platform looking for financing, while others come looking for above average returns on their money.

The difference is that while other P2P platforms provide personal loans to individuals, PeerStreet supplies financing for real estate transactions. The purpose of the platform is to make these sophisticated investments in commercial real estate available to ordinary investors.

The loans are generally short-term, between six months and 24 months. They also have conservative loan-to-value (LTV) ratios, of not more than 75% of the value of the underlying property.

Types of loan investments include:

  • Single-family residential buy-to-rent properties
  • Single-family refinances
  • Single-family Value Add (This is a property that is purchased then renovated for sale, sometimes referred to as a fix-and-flip loan.)
  • Bridge loans

Kabbage Sees More Mobile Lending, Women and Minority Owned Businesses Seeking Funds (Small Business Trends) Rated: A

Online lending platform Kabbage says it sees more mobile lending, more women and minority owned businesses seeking loans and more businesses from rural and lower to middle income communities too.

Today 140,000 small businesses use Kabbage. Today, Kabbage has delivered over $4.5 billion in funding, moving the loan process from long lines at a physical bank to a  shorter wait on mobile or the web.

Expect More Bank Mergers After Dodd-Frank Rollback (Barrons) Rated: A

But the legislation known as the Crapo bill (named after Idaho Sen. Mike Crapo), which President Donald Trump signed into law on Thursday, could provide another boost to bank investors by unleashing mergers, dividend increases, and buybacks among regional and local banks.

By raising the threshold for stricter supervision under Dodd-Frank from $50 million in assets to $250 million, the new law effectively removes a disincentive for mergers and acquisitions.

Banks had been wary of doing deals that would put them over the $50 billion level, which required more capital and more stringent supervision. CIT Group’s (CIT) deal for OneWest was a rare case where an acquisition broke that barrier since Dodd-Frank was enacted in 2010.

Vermont Passes First-of-Its-Kind Law to Regulate Data Brokers (Gizmodo) Rated: A

Earlier this week, Vermont became the first state in the nation to enact a law that will regulate data brokers that buy and sell personal information in an attempt to add a new layer of accountability to the massive, data-trading companies that often operate without much oversight.

As TechCrunch noted, under the guidelines of the bill—which passed into law Tuesday without the signature of Republican Governor Phil Scott—data brokers will have to pay a $100 annual fee to register with the state, and will have to comply with new rules meant to protect Vermonters from suffering at the hands of another data breach like the one that befell Equifax last year and exposed the data of 145 million (and counting) Americans.

United Kingdom

The highest paying green IFISAs of 2018/19 (Peer2Peer Finance) Rated: AAA

Earlier this year, Assetz Capital closed its Green Energy Account due to a lack of deal flow, while Trillion Fund closed in 2015 after the government scaled back its green energy subsidies.

So in alphabetical order, here are the highest-paying P2P green IFISAs available right now…

Abundance

  • Target returns for IFISA: 3-15 per cent

Downing Crowd

  • Target returns for IFISA: 3-7.6 per cent

Goji and Prestige-Prime Group

  • Target returns for ISA: 6.5-8.3 per cent

Triodos Crowdfunding

  • Target returns for IFISA: 5-7 per cent

Ethical bank Triodos launched its own P2P platform earlier this year, named Triodos Crowdfunding. Within the first few months of the year it had already funded seven projects, four of which were IFISA eligible.

Could savers be given access to multiple IFISAs each tax year? (Peer2Peer Finace) Rated: A

The Office of Tax Simplification (OTS) – an independent adviser to the government on simplifying the tax system – has said ISA rules should be made more simple for investors to administer.

It suggests changing the rule where only one type of ISA can be opened at a time and instead letting savers hold multiple products, such as more than one Innovative Finance ISA from different peer-to-peer lenders or a variety of cash ISAs, as long as they remain within the annual allowance.

Rage against robo-advice machines (FT Adviser) Rated: A

Despite the FCA offering this assistance now the regulator has found several causes for concern in the robo-advice that is being given to clients.

The watchdog revealed some robo-advice firms were failing to properly disclose prices and services, and crucially, the regulator flagged risks clients were not receiving suitable advice.

As a result, the FCA has required many of the robo-advisers which took part in the study to make “significant changes” to their businesses.

Christian Faes of LendInvest (Lend Academy) Rated: A

In this podcast you will learn:

  • How the financial crisis formed the backdrop for the founding of LendInvest.
  • How their first foray into raising capital online transformed their business.
  • The kinds of loans that LendInvest offers today.
  • The typical borrower who uses LendInvest today.
  • How they have applied technology to the borrowing process.
  • How they attract these kinds of borrowers.
  • The four different channels for investors.
  • Details of their London Stock Exchange listed bond.
  • What is being done in the UK to address the housing shortage there.
  • How Brexit has affected their business over the past two years.
  • Who has provided equity capital for LendInvest.
  • Christian’s thoughts on international expansion for LendInvest.
  • How he feels about a potential LendInvest IPO.

Crowdfunding faces withholding tax clampdown (The Times) Rated: A

Revenue has tightened the rules on peer-to-peer lending by requiring businesses that raise money through crowdfunding to deduct a 20% withholding tax on the interest they pay.

The move will make it harder for individuals to avoid tax when they use crowdfunding to lend spare cash to small businesses rather than earning paltry returns by leaving it on deposit.

Can this lending buy-to-let startup help agents sell more homes? (The Negotiator) Rated: A

A buy-to-let finance start-up founded by the entrepreneur behind crowd-funding mortgage firm Landbay says it wants to help agents sell properties faster and in greater volumes.

Officially launched this week after being set-up in November last year, Dot offers agents and developers a one-click buy-to-let purchase button for their ‘properties for sale’ listings (see mock-up above) which, the company’s claims suggest, could offer an antidote to the current sluggish sales market.

After clicking the button, investors will be offered the opportunity to buy the property on the spot if they put down a 30% cash deposit via Dot.

FCA urged to extend cap on payday loan fees to other forms of credit (The Guardian) Rated: B

The City watchdog is facing mounting pressure to extend its cap on payday lending fees and interest to a broader range of high-cost financial products before a major review of lending practices this week.

Likely to result in a series of new rules for banks and finance companies, the review comes as hard-pressed Britons increase their personal borrowing to levels unseen since the financial crisis.

China

China: WeiyangX Fintech Review (Crowdfund Insider) Rated: AAA

Ant Financial’s $10-billion fund-raising faced oversubscription

The ongoing $10-billion fund-raising of Ant Financial Services has attracted the attention of multiple investors.

According to informed sources, investors expected to participate in this round of financing include private equity group Carlyle, General Atlantic, Silver Lake, Sequoia Capital China, Warburg Pincus, sovereign wealth fund Temasek, institutional funds Canada Pension Plan Investment Committee (CPPIB) and BlackRock; while many other investors were rejected.

According to a person involved in the funding, this round of financing will value Ant Financial at more than US$150 billion. 

Traditional banks can be the ‘trusted face’ of fintech and online finance firms (South China Morning Post) Rated: A

While banks see fintech as their biggest threat, they can use their trusted position among customers and regulators to collaborate in the shift to digital banking, software firm Temenos says

In a recent survey of 400 banking executives, Temenos said more than 53 per cent of respondents cited e-financial services like PayPal, Alipay, WeChat Pay and Apple Pay as their biggest non-traditional competition in the next two years.

European Union

Crowdfunding in Switzerland at Record High: CHF 375 Million (PR Newswire) Rated: AAA

The Swiss crowdfunding market has reached a record high volume of CHF 374.5 million in 2017, almost three times more than in the previous year. This has been revealed by the latest Crowdfunding Monitoring report issued by the Lucerne University of Applied Sciences and Arts. The financing of SMEs and investments in real estate are key drivers of the strong growth. The authors of the report are expecting a further marked increase to about CHF 1 billion this year. Compared to the more advanced markets in the United Kingdom and the United StatesSwitzerland is two to three years behind, but catching up rapidly.

Hungary ready to join the global blockchain market (Budapest Business Journal) Rated: B

Europe is starting to take blockchain-based solutions seriously, and Hungarian players seem ready to be part of the game. The largest international blockchain summit in the CEE region, Blockchaineum 2.0, gathered major stakeholders in Budapest to discuss the hottest issues on the global agenda.

Peer-to-peer lending is considered another blockchain target area. Ray Youssef, CEO of Paxful gave the example of Nigeria, the biggest economy in Africa, where high inflation and foreign currency restrictions push many people towards finding shelter in cryptocurrencies.

International

Mobile ventures to take on payments (Daily Sabah) Rated: A

Square, one of the most popular payment solutions Visa invested on, allows street vendors the opportunity to accept credit cards. It brings the convenience of payment for consumers, who can shop safely anywhere in the world.

Klarna is another venture that has received Visa investments. It is one of Europe’s leading payment providers, aiming to make the payment process simple, smooth and secure for customers and trading partners. Klarna offers payment solutions for over 60 million users in Europe and North America.

Cryptocurrency Cap Waiting to be Unlocked by Lenders (The Merkle) Rated: A

Today, cryptocurrency has an estimated market cap of $300 to $800 billion USD. Asset-backed tokens have been expected to reach $5 trillion USD by 2025.

Now, Depository Network (DEPO) has made it even easier for digital asset owners to cash in on their holdings while offering peace of mind to lenders.

DEPO is developing the world’s first decentralized, multi-platform collateral network. The depository will be a secure place for borrowers to deposit their coins or tokens as a collateral for loans while offering lenders full control over the details of the loan agreement.

Australia

Mortgage marketplace receives $ 700k loan (Australian Broker) Rated: AAA

An online home loan marketplace has received a $700,000 loan from Jobs for NSW, which is set to help the business create 46 jobs over the next five years.

HashChing reports it now has over $900million settled through their platform from more than 1,950 loans. It also says it has 586 mortgage brokers on the platform and is growing at 700% year-on-year.

India

Only 4% Indians get easy personal loans from banks and NBFCs (Sify Finance) Rated: AAA

27 public sector banks, 93 commercial banks, over 10,000 non banking financial and Gold companies and several micro-finance institutions, but ask any entrepreneur the ease of getting a loan. A mixed response is most likely, with majority opting for diplomatic correctness over factual accuracy.

Getting a loan is certainly a monumental feat in this era of digitisation. And this is the exact demand that peer-to-peer companies such as LenDen, i2i Funding, Faircent, Lendbox are keen to fulfill.

i2i Funding is India’s second largest p2p lending platform, with a size of 50,000 customers. The company aspires to cross Rs 2 crores in monthly disbursal by October 2018.

How do Investors Invest in Startups – From a Venture Capitalist’s Point of View (Entrepreneur India) Rated: A

In this regard, to decode what goes on in the minds of leading venture capitalists, Entrepreneur India interacted with Bhaskar Majumdar who is Managing Partner at Mumbai-based Unicorn India Ventures. At this point in time, Unicorn India has dedicated equity funds worth INR 100 crores under deployment, while another INR 600 crores worth debt fund has been launched.

He also states that with aspects such as credit scoring, data collection, and even lending to MSMEs having now received the digital touch, Fintech is exciting considering the fact that startups in the sector could effectively collaborate with banks to bring more people into the formal banking system.

Xiaomi Launches Mi Credit, A Lending Marketplace Exclusively for MIUI Users (BW Disrupt) Rated: B

Chinese smartphone manufacturer Xiaomi has introduced Mi Credit which aims to deliver instant loans exclusively to MIUI users.

Mi Credit provides a hassle-free approach to avail loans instantly.

MIUI users can apply for a loan anytime and from anywhere. The company is offering loans starting from Rs 1,000 up to Rs 1 Lakh.

According to a report published by ET, the loan will be extended at 3% interest per month and focuses on salaried professionals.

Africa

Kenya moves to regulate fintech-fuelled lending craze (Reuters) Rated: AAA

Kenya built a reputation as a pioneer of financial inclusion through its early adoption of a mobile money system that enables people to transfer cash and make payments on cellphones without a bank account.

Now, a proliferation of lenders are using the same technology to extend credit to the banked and unbanked alike, saddling borrowers with high interest rates and leaving regulators scrambling to keep up.

This week, the finance ministry published a draft bill on financial regulation which covers digital lenders for the first time. A key aim is to ensure that providers treat retail customers fairly, it said.

Eurasia

Russia Has Significant Opportunity to Advance Financial Tech Services – Analyst (Sputnik International) Rated: AAA

Bob Contri: I think that in financial services, which is where I work, digital is very important. I would say for our clients globally it’s probably the most important topic right now. I think it’s very important from a client perspective so how do they provide financial services to their clients in a very efficient way. And I think it’s also very important how they manage their business so how can they use their technologies to create more efficiency in the middle and back office. So it’s probably the biggest topic right now in our practice globally with working with our clients.

Sputnik: Do you think there’s big potential for new approaches in banking such as peer-to-peer lending, crowdfunding?

Bob Contri: Sure, I think that the face of financial services is changing pretty dramatically. I think that obviously automated money transfers and cross-border payments will change dramatically. I think peer-to-peer lending has a big opportunity to grow significantly. So I think the whole face of financial services is changing pretty dramatically. That’s not to say that the market leaders of today won’t be the market leaders of the future.

MENA

RentSher — a firm with a hire purpose (Gulf News) Rated: AAA

Founders Vaibhav and Purvashi Doshi and Harsh Dhand originally conceived of RentSher as a peer-to-peer lending platform, the Airbnb of stuff.

But after they launched the firm in Bengaluru in 2015 (Dubai followed in 2016), they noticed a problem.

“We figured out that peer-to-peer alone is not scalable enough,” said Vaibhav, the firm’s CEO, in an interview at his and Purvashi’s Dubai villa.
That forced a rethink, and a move towards a business-to-business (B2B) and business-to-consumer (B2C) model, a centralised one-stop rental platform for companies already offering rental services to connect with a pool of customers through an easy-to-use interface.

Reaping the fruits of hard work (Khaleej Times) Rated: B

It was while discussing a common problem that Marie-Christine Luijckx and three friends came up with a successful business model. Luijckx and her friends were doing long working hours in their corporate jobs with very few healthy food choices resulting in loss of productivity at the workplace. They thus decided to establish Fruitful Day, a business that delivers curated selections of fresh fruit to workplaces and homes across the UAE in 2015.

Luijckx says all partners believe passionately in the business and they funded it with their personal savings. “Our only external funding to date has been through Beehive, which is a debt crowdfunding platform,” she says.

Authors:

George Popescu
Allen Taylor

Tuesday May 22 2018 Daily News Digest

GreenSky vs. LendingClub

News Comments Today’s main news: Kabbage to launch payment services. Funding Circle SME Income Fund limited force signal moves past key line. Zopa boosts TruFin results. DEPO launches to help lenders accept digital assets as collateral. Qudian stock drops 16.5%. Today’s main analysis: Deep dive into MFT 2018-2 vs. AVNT 2018-A (A MUST-READ). Today’s thought-provoking articles: Credit score improvement […]

GreenSky vs. LendingClub

News Comments

United States

United Kingdom

European Union

International

Other

News Summary

United States

Online lender Kabbage to launch payment services by year-end (Reuters) Rated: AAA

Kabbage Inc, a U.S. online lender for small businesses, plans to launch payment processing services by year-end, President Kathryn Petralia said on Monday, helping it to diversify and compete more directly with industry leaders PayPal Holdings Inc and Square Inc.

The Atlanta-based startup will offer tools to enable clients, mostly brick-and-mortar businesses, to accept card payments in-store and online, Petralia said in an interview.

Deal Deep Dive MFT 2018-2 vs AVNT 2018-A (PeerIQ), Rated: AAA

This week we compare 2 very different MPL personal loan securitizations – Marlette’s MFT 2018-2 Prime deal and Avant’s AVNT 2018-A Near Prime deal.

Collateral Comparison 

AVNT 2018-A has lower average loan size by $6,435, shorter weighted average loan terms by 9 months and higher WAC by 16.28%. This is a reflection of the quality of borrowers that Avant and Marlette target. Marlette’s prime borrowers have higher weighted average FICO scores by 59 points than Avant’s near prime borrowers. The geographic distribution is quite similar between the two deals.

Source: PeerIQ, KBRA

Bond Characteristics and Pricing

The significantly higher WAC on AVNT 2018-A leads to a 14.8% pickup in excess spread. KBRA’s base case loss estimate is 7.4% higher on AVNT 2018-A, which leads to a 7.4% higher loss-adjusted excess spread on AVNT 2018-A.

Source: PeerIQ, KBRA

Capital Structure

AVNT 2018-A has 3.3% lower O/C which is compensated by 14.8% higher excess spread. The A tranches have similar CE in both deals but Marlette’s A is rated one notch higher.

Source: PeerIQ

Avant continues to benefit from tighter underwriting criteria (Asset Securitization Report) Rated: A

The introduction of tighter underwriting criteria continues to pay off for the online consumer lender Avant.

The company, which was founded in 2012 and is based in Chicago, was able to lower the credit enhancement, again, on its latest securitization, the $221.9 million Avant Loans Funding Trust 2018-A.

Kroll Bond Rating Agency assigned an A- to the $149 million senior tranche of notes to be issued, which benefit from 38.42% credit enhancement. That’s down from 41.8% on the comparable tranche of its prior transaction, completed last year.

LendingTree Study Finds More than Half of My LendingTree Users Improved Credit Scores in Majority of 50 Metros Analyzed (PR Newswire) Rated: AAA

LendingTree today released its study on the top places with rising credit scores. With credit scores being a crucial component of personal financial stability and opportunity, LendingTree analysts decided to look at anonymized My LendingTree users who logged into their accounts in both the first quarter of 2017 and the first quarter of 2018 to determine the top metros for rising credit scores among the 50 largest in the United States.

Below are some of the key takeaways from the study.

  • JacksonvilleIndianapolisDenver and Tampa saw the highest rate of rising credit scores among the 50 biggest metros from Q1 2017 to Q1 2018.
  • Virginia Beach, Va.Los Angeles and Birmingham, Ala., had the lowest rate of rising credit scores, with 47 percent of Virginia Beach users raised their credit scores.
  • San Jose (Silicon Valley) saw the most dramatic rises in credit scores, with the highest rates of people who raised their score by more than 75 points and 100 points.
  • In the majority of the 50 metros analyzed, more than 50 percent of users improved their credit scores between Q1 2017 and Q1 2018.
  • About one in three increased their scores by over 20 points, and 3.5 percent were able to improve their scores by 100 points or more.
Source: Lending Tree
Source: Lending Tree

New Fintech IPO Offers Litmus Test for Online Lenders (Wall Street Journal) Rated: AAA

It wasn’t long ago that online lenders were ascendant. More than $3 billion in capital from investors as diverse as Japanese conglomerate SoftBank Group Corp. and celebrity chef David Chang gushed into lending startups in 2015, according to Dow Jones VentureSource. Analysts at Morgan Stanley predicted that year that the nascent industry would account for 10% of all unsecured consumer and small-business loans by 2020.

Investors soured on the sector. Shares of LendingClub, which once had a market value of about $10 billion, are down 77% from their IPO price. Prosper’s valuation was slashed by more than two-thirds in a private fundraising round last year.

Source: The Wall Street Journal

GreenSky said in its IPO filings that it has facilitated more than $12 billion in loans to consumers for home-improvement projects and elective medical procedures.

Part of GreenSky’s advantage comes from its relatively low customer-acquisition costs. LendingClub’s biggest expense is sales and marketing, which last year rose to $229.9 million, equivalent to 40% of revenue.

Source: The Wall Street Journal

 

How to responsibly invest in bitcoin (Bankrate) Rated: A

Recently, Bank of America, Chase, and Citigroup joined Capital One and Discover in banning cardholders from using them to buy cryptocurrencies. Credit cards were one of the most popular payment methods because of their relatively low fees and instant transaction rates, and investors are having to look at other options to make their investments.

Source: Bankrate

You can borrow money from a family member or friend, or you can use a peer-to-peer lending platform like SoFi to leverage funds for Bitcoin investments. However, be cautious when borrowing money for an investment. Interest rates can eliminate any gains you get from the investment, and the risk of losing money in such a volatile market is high.

Is Mulvaney targeting fintech or nonbanks? (Respa News) Rated: A

The acting director also responded to a question about qualified mortgages which has left the industry scratching its head since. Was Mulvaney separating fintech marketplace lending from traditional mortgage lending, or was he drawing a line between depository mortgage and non-depository mortgages?

 

Banking overhaul heading for likely passage in Congress (Yahoo! Finance) Rated: A

Legislation that would ease banking regulations — and modify rules governing credit reports and some consumer loans — is headed for likely passage in Congress any day now.

The bill cleared the Senate in March with some bipartisan support and is expected to be voted on by House lawmakers this week, perhaps as early as Tuesday.

The measure rolls back some of the regulations imposed by the Dodd-Frank Act of 2010. That legislation came on the heels of the financial meltdown that rocked the U.S. economy a decade ago, when risky and unaffordable mortgages contributed to millions of homeowners losing their houses to foreclosure.

Main Street Banks’ New Lending Rivals: Hedge Funds and Private Equity (Wall Street Journal) Rated: A

Main Street banks are feeling squeezed by competition from new rivals: nonbanks like hedge funds and private-equity firms that are elbowing into business loans.

Growth in business lending has picked up recently—it was up 3.3% year over year as of May 9, according to Federal Reserve data released Friday, after falling below 1% earlier this year. But the growth rate is still far below where it’s been in recent years, when loans to businesses grew at a double-digit clip for much of 2014, 2015 and 2016.

Making technology the solution, not the problem, at small banks (American Banker) Rated: A

The board members of R Bank in Round Rock, Texas — who include the Hall of Fame fireballer Nolan Ryan, a co-founder of the bank — hold accounts there, and they, like most other patrons, knew its old technology made for clunky customer service.

So, says president and CEO Steve Stapp, he channeled those irksome experiences into board support for an investment in a systems overhaul at the $455 million-asset bank.

For community banks in highly competitive markets, service with a personal touch can be a differentiator to win and keep customers. But when legacy technology hampers the customer experience, all the cups of coffee in the world won’t help.

 

Vota turns your credit card transactions into recommendations, helps you spot fraud (Tech Crunch) Rated: A

Blippy, which was hyped up to a $46.2 million valuation back in 2010 before the world realized that almost nobody wanted a dedicated network for sharing and viewing each others’ purchases. Well, guess what? Someone’s trying a Blippy-like thing again — this time, in the form of a new app called Vota, which automatically records your credit card purchases and the places you visit so you can share them with friends or family, or view them privately for your own reference.

As a byproduct of this data collection, you may spot credit card fraud or other errant charges, too, or just get a handle on your spending.

Optimal Blue First-to-Market with Pipeline & Lock Management APIs (Business Wire) Rated: B

Optimal Blue is proud to recognize enterprise SaaS digital mortgage solution leader, Capsilon, as its first strategic partner to complete certification with the highly anticipated Pipeline & Lock Management APIs. By debuting these innovative system-to-system API interfaces in the mortgage industry, Optimal Blue has enabled Capsilon’s digital mortgage platform to fully support the creation, management, registration, and locking of first-lien mortgages instantaneously with Optimal Blue. As a result of this advanced integration, a completed application and pre-approval are done in half the time of the traditional back-and-forth processes, empowering loan officers to be more competitive in today’s purchase market and win more business from real estate agents.

Mastercard Unveils Fintech Initiative Aimed at Digital Banking (Banker & Tadesman) Rated: B

The company on Monday announced the creation of Accelerate, a new initiative to drive growth at scale for the fast-evolving fintech industry, reflecting the company’s ongoing commitment to this sector.

Designed to operate alongside its successful Start Path program, Accelerate will broaden Mastercard’s engagement with the payment fintech community including the next generation of digital banks.

United Kingdom

Funding Circle Sme Income Fund Limited Force Signal Moves Past Key Line  (Concordia Review) Rated: AAA

Checking on current RSI levels on shares of Funding Circle Sme Income Fund Limited (FCIF.L), the 14-day RSI is currently standing at 58.31, the 7-day is at 65.97, and the 3-day is resting at 83.22.

Funding Circle Sme Income Fund Limited (FCIF.L) currently has a 14-day Commodity Channel Index (CCI) of 148.41.

Shares of Funding Circle Sme Income Fund Limited (FCIF.L) have a 200-day moving average of 103.52. The 50-day is 104.93, and the 7-day is sitting at 104.82.

 

Zopa stake boosts TruFin annual results (AltFi News) Rated: AAA

TruFin, the AIM listed fintech lender and payments provider, has released its first set of annual results following on from its public listing back in February. The numbers show a 7.67 per cent uptick in its valuation of its stake in p2p lender Zopa in 2017.

TruFin, which says it used an external company to aid the valuation of Zopa, re-valued its holding upwards by £2.6m to £36.5m over the course of the year. The firm, which was spun out of hedge fund Arrowgrass’ fintech holdings, holds a c.15 per cent stake in Zopa bought by Arrowgrass in 2014 for £15m. TruFin was set up by Henry Kenner, one of the founders of Arrowgrass, who is also its CEO and chairman. The hedge fund itself was launched by a group of Deutsche Bank traders in the wake of the financial crisis, including Kenner.

UK watchdog says automated financial advice falls short (Rueters) Rated: A

Advice doled out online or via smartphone apps, referred to in the industry as “robo advice”, aims to cut costs for customers looking to save or invest. It also seeks to foster innovation and increase competition in financial services.

But the Financial Conduct Authority (FCA) said two reviews of the industry uncovered problems among early entrants.

Exclusive: Former ADS Securities exec Jamieson Blake joins specialty lender Basset and Gold (Leaprate) Rated: B

Following our exclusive report from earlier this month that Jamieson Blake, Head of Client Experience at the FCA regulated London based arm of ADS Securities, had resigned from the company, LeapRate has now learned that Mr. Blake has landed – at specialty lending and retail investment firm Basset and Gold, as Head of Relationship Management.

China

Why Qudian Inc Stock Dropped 16.5% Today (Motley Fool) Rated: AAA

Shares of Qudian (NYSE:QD) closed down 16.5% on Monday after the Chinese online lender announced earnings that fell short of expectations.

Qudian reported “diluted adjusted net income per share” of $0.16 but GAAP diluted net income per share of only $0.15 per share. Whichever yardstick you use, though, these numbers appear to be lower than the $0.17-per-share estimate quoted on Yahoo! Finance. Revenue, on the other hand, came in at $273.7 million, significantly above consensus expectations for $214.6 million.

European Union

European Company Helps Turning Cryptocurrency into Collateral (the Merkle) Rated: AAA

Following a similar model as traditional depository services, DEPO gives lenders the freedom to accept digital assets as loan collateral. The platform also allows borrowers to keep ownership of their digital asset during the entire loan period.  The platform also protects future financial gain of the asset for borrowers with its decentralized design.

By employing the DEPO platform, lenders will be able to accept cryptocurrency as collateral for loans. To be protected, lenders can request additional collateral, or a partial sale of the asset should the market become excessively volatile at any time during the loan period.

Matthias Setzer of PayU (Lend Academy) Rated: A

In this podcast you will learn:

  • The history of Naspers, the parent company of PayU.
  • What PayU does and the markets where it operates.
  • Why Matthias decided to leave PayPal after 12 years and move to PayU.
  • How PayU approaches going into a new international market.
  • The Naspers investment in Chinese giant Tencent and the PayU footprint in China.
  • Why the number one country PayU is focused on today is India.
  • Why they invested €110 million in Kreditech and how they are leveraging that partnership.
  • The point of sale lending product they have launched in India with Kreditech.
  • The biggest growth drivers for PayU over the next 12-18 months.

New Insight will change the way you think about data (Instantor Email) Rated: A

Today Instantor, the Swedish fintech company making financial decisions easy, announces Insight. A new product that will transform the way financial organisations assess risk for loan applicants. By using robust machine learning, Insight analyses more than 70 predictive features and insightful patterns in historical banking, and can be used to make better risk and opportunity decisions. Instead of having a risk team spending months testing risk models, Insight ́s intelligent features will build the most optimal risk model using the clients own data and can be up and running within a week.

Bricknode and Lendytech unite under Untie Group banner (Finextra) Rated: B

Untie Group used to be several companies, the largest of which were Bricknode and Lendytech. They had a common founder in Stefan Willebrand and used, at least to a degree, the same self developed software. Also a number of people have gone from one firm to the other over the years.

International

Decentralized Lending Promises Easy And Global Access To Credit, But Is It Too Good To Be True? (Forbes) Rated: AAA

Since the rise of cryptocurrencies, the term “decentralized” seems to be everywhere. Decentralization has been proposed in many industries as a way to heighten transparency and make transactions simpler. One field in particular which has shown great potential for the application of decentralization is money lending. As many might rightly ask, don’t we need banks who are willing to take the financial risk and approve loans? As it turns out, maybe we don’t.

For lenders, the use of smart contracts allows for much easier assessments of the counter-party’s trustworthiness. Something that would take traditional audits weeks, not to mention the costs of such a traditional audit. Validating transactions and follow-up can become fully automated. Collateral is automatically returned at the end of the loan period or liquidated if the loan is defaulted on, removing many of the time-consuming actions that come with it.

Automation, ‘platformisation’ tipped to take hold in banking (AltFi News) Rated: A

The report, entitled Whose customer are you? The reality of digital banking, shows that 73 per cent of bankers believe retail banking will be at least 80 per cent automated in the next two years. A further 78 per cent see ‘platformisation’ steering the market in the future.

71 per cent of respondents are focusing their digital investment budget on cyber security, up from 34 per cent last year. Yet a mere 17 per cent are thinking about the risks of third-party integrations under Open Banking.

Fin-tech changes the loan process: Meet new lending models (Bankless Times) Rated: A

The new FinTech lending model opens new opportunities to people who were not able to borrow from traditional banks and other financial institutions because of the poor credit history and other factors. Such loans are now available to the new groups of people who need an instant funding, for instance, small business owners, students etc. In particular, entrepreneurs got a chance to get a loan without collateral, which a while ago was a real obstacle for many business owners.

Millennials Choose FinTech

Millenials are the first generation to accept the real advantages of new technologies and ready to use them for their own convenience. When it comes to lending process, millennials no longer wish to visit bank branches personally, stand in lines, deal with unnecessary paperwork and wait for months to get the approval.

End of the Line…

Today we are already witnessing a drastic change in the lending model that existed for centuries. Consumers want to have a more flexible way to lend money but most importantly, they want this process to be quick. The FinTech industry already gave us this opportunity and hopefully, the following changes will be for the better.

 

Asia

Kieran Arasaratnam to Join Credify Founding Team as CFO (Digital Journal) Rated: B

Credify Inc., a pioneer in decentralised reputation systems, is pleased to announce that Kieran Arasaratnam is joining the founding team as Chief Financial Officer.

Authors:

George Popescu
Allen Taylor

The Latin American Alternative Lending Landscape

Latin American alternative lending

The alternative lending juggernaut shows no sign of slowing down and is enjoying remarkable growth all around the world. The Latin American & Caribbean (LAC) industry is also enjoying the wave; the 2017 Americas Alternative Finance Industry Report highlighted the region as a hot spot of lending growth with volumes jumping by over 200% in […]

Latin American alternative lending

The alternative lending juggernaut shows no sign of slowing down and is enjoying remarkable growth all around the world. The Latin American & Caribbean (LAC) industry is also enjoying the wave; the 2017 Americas Alternative Finance Industry Report highlighted the region as a hot spot of lending growth with volumes jumping by over 200% in the completed year 2016. The industry grew from $110 million to an estimated $342 million with business lending accounting for 57% of the total pie.

Source: 2017 Americas Altenative Finance Industry Report

Brazil: A Gold Mine for Alternative Lenders

The so-called Big 5 economies of the region are Brazil, Mexico, Argentina, Chile, and Venezuela. In total, there are 25 countries across Central America, South America, and the Caribbean. The South American market (i.e. basically ex-Mexico) in general, and specifically Brazil, has always been hampered by a lack of banking services, which has opened the floodgate for fintech startups to tap this $6.5 trillion economy. Brazil is an extreme case in point on how lucrative the market can be. 160 million adults are using some kind of banking service, but only 55 million are borrowers, as per Brazil’s central bank. Add to that almost 20 million unbanked people, and you can see the size of the opportunity for a lending startup. Moreover, 85 percent of Brazilians now live in cities; but, 40 percent are excluded from the traditional banking system as per São Paulo-based Itaú Unibanco, the largest private bank in South America.

Yet, the Brazilian population is heavily smartphone-dependent, and fintech lenders have leveraged this to offer differentiated banking and credit services. This gap seems to have been identified by leading US VCs as well. Nubank, a digital finance company that launched a no-fees credit card in Brazil, became the first investment in South America for Sequoia, DST Global, Founders Fund, and QED. It has now raised a cumulative equity and debt funding of over $377 million.

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An underlying reason behind the unprecedented adoption of alternative lending has been the severe banking crisis that hindered the region for more than a decade. With the economy gaining momentum, there is huge latent credit demand, both from individuals as well as SMEs. For instance, Brazilian consumers pay an average of 190 percent a year for unsecured overdraft, credit cards, and consumer loans from banks. The Brazilian government is firmly behind these fintech startups as they look to democratize lending, and more importantly, lower borrowing costs for their voters.

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Leading Players in Brazil Fintech Lending

  • Creditas – Creditas was founded in 2012 by Sergio Furio and has a headquarters in São Paulo, Brazil. It has raised over $77 million in various rounds of funding. Formerly BankFacil, Creditas is a digital lending platform focused on secured lending. The firm funds its customer loans both through investors and financial institutions. Core products include a version of home equity and auto loans in which borrowers offer their residences or vehicles as collateral.
  • Geru – Launched in 2013, Geru is headquartered in São Paulo. A simple, fast, fair, and cost-effective online loan platform, Geru was inspired by the international model of marketplace lending and provides registration and credit rating services for people who wish to obtain a loan. It offers loans up to $10,000 with an interest rate ranging from 1.88%-5.02% per month, and terms ranging from 12 to 36 months.
  • GuiaBolso – Brazil’s leading personal finance platform, GuiaBolso has millions of users who have downloaded its finance app and consumer credit marketplace. It has raised over $60 million in funding.

Apart from the above, there are many Brazilian fintech lending startups like Simplic, Biva, and Noverde that are charting their own path in the Brazilian lending market.

Non-Brazilian Alternative Lenders

  • Credivalores-Crediservicios – Launched in 2003, Credivalores-Crediservicios is headquartered in Bogotá, Colombia. It has raised $34 million from various rounds of funding. It is a non-banking financial company that provides consumer loans for individuals and small companies. The firm also focuses on payroll-deduction loans and consumer lending collected through public utility bills as well as discounting checks and insurance policy financing to low and middle-income individuals.
  • Sempli – Sempli was started in 2016 by Esteban Velasco and Felipe Llano. Its headquarters is in Colombia. An online lending platform for small and medium enterprises in Colombia, the firm has raised $3.6 million from various rounds of funding. It offers loans ranging from $10k-$100k for working capital and/or business expansion.
  • Afluenta – Started in 2010 by Alejandro Cosentino, Afluenta is headquartered in Buenos Aires, Distrito Federal, Argentina. It has raised over $13 million in various rounds of funding. Afluenta is the first and only marketplace lending company for consumer and SME loans operating in more than one country in Latin America. Afluenta successfully launched its services in Argentina where their lender base achieved net USD yields of +20% in the last three years. It currently operates in Argentina, Mexico, and Peru with plans to expand to Colombia & Brazil. It has lent over $460 million and has granted 11,403 loans so far.

Future Outlook

Even though the region has been engulfed by a recession for the last decade, the World Bank still expected the Latin American economy to grow by 1.8 percent in 2017 and 2.1 percent in 2018. The UK and US have matured as markets with leaders in almost every emerging niche. South America provides an untouched hunting ground for fintech lending expansion. The light-touch regulatory rule and implicit government banking to expand credit services should see the region emerging as a hot bed for alternative lending innovation.

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Written by Heena Dhir