Tuesday September 4 2018, Daily News Digest

Marketplace lenders have fared substantially worse on the stock market than other fintechs

News Comments Today’s main news: Zuckerberg, Bezos, Gates back Wagestream. Funding Circle plans 300M GBP IPO. P2P lenders take in 300M GBP in second year of IFISA. Hong Kong receives 29 bids for virtual bank licenses. Today’s main analysis: Does fintech has a vicious funding circle? Today’s thought-provoking articles: Samir Desai discusses Funding Circle’s IPO as plan to […]

Marketplace lenders have fared substantially worse on the stock market than other fintechs

News Comments

United States

United Kingdom

China/Hong Kong

Other

News Summary

United States

As Wonga Collapses, Zuckerberg, Bezos & Gates Back A Fairer Alternative To Payday Loans (Forbes), Rated: AAA

Samir Desai On Funding Circle’s $ 2 Billion IPO And His Plan To Conquer America (Forbes) Rated: AAA

Funding Circle has already facilitated over £5 billion ($6.37 billion) in loans since launching in 2010, mostly from its home U.K. market.

Funding Circle facilitated over £1 billion in loans to small businesses during the first six months of 2018 alone.

It’s now on track to become London’s biggest fintech IPO since global payments giant WorldPay’s bumper £4.8 billion ($6.1 billion) listing in 2015.

Source: Funding Circle

In the U.K. just 5% of businesses say Funding Circle when asked where they would go for finance, according to the company’s data, and 95% continue to chose their banks.

The Risk of a Vicious Funding Circle in Fintech (Bloomberg) Rated: AAA

There are fintechs, and then there are fintechs. Cheerleaders point to payments startups like Jack Dorsey’s Square Inc., whose stock has soared 242 percent in a year, as evidence of a Silicon-Valley-style revolution in the making. But there are sob stories, too: loan platforms LendingClub Corp. and On Deck Capital Inc. are still trading well below their IPO prices. Promises of break-neck expansion often crash into the reality of regulated finance.

Source: Bloomberg

Lending Earnings Insights (2018 Q3) (PeerIQ) Rated: AAA

We remain in the late stages of the credit cycle. The US consumer has benefitted from record low unemployment, rising incomes and home prices, and a lower tax rate. The supply of credit and competition to offer loans is increasing. Lenders are optimistic about consumer spending and debt levels, and are reserving for potentially higher losses in the future.

We see divergent credit performance across FinTech asset classes. Enova (Subprime) and OnDeck (Small Biz) are seeing near cycle-low charge-offs, while LendingClub (Prime) is seeing higher delinquencies on newer vintages. LendingClub also increased its charge-off estimates across loan grades by ~40 bps QoQ.

Card issuers are increasing loan loss reserves at a higher rate than loan growth, indicating expectations of higher losses going forward. Loan loss provisions are increasing at roughly twice the rate of loan growth across card issuers, but overall reserve levels are still low.

Scratch Introduces First Loan Servicing Platform To Align Financial Interests of Lenders and Borrowers (Scratch Email) Rated: A

Scratch, a new financial technology company started in 2015 to transform the antiquated business of getting America’s $13 trillion household debt repaid, introduced the first loan servicing platform to align the financial interests of lenders and borrowers.

The Scratch loan servicing platform empowers borrowers with a simple web application for understanding, managing and paying back their loans while providing lenders accurate, real-time portfolio insights. And, by automating the back-office complexities of loan management, Scratch can devote more resources to giving borrowers the attention and guidance they deserve.

Loan Servicing Crisis Persists

U.S. household debt composed of mortgages, student loans, auto loans, credit cards, home equity lines of credit, and other consumer loans, is at an all-time high and growing daily.

Today, household debt is at a high of $13 trillion and 8 out of 10 Americans carry some type of debt, including mortgages, credit cards, student loans, and auto loans. And everyone who has a loan has a loan servicer.

United Kingdom

Funding Circle plans to raise £300m in London IPO (Financial Times), Rated: AA 

Funding Circle has announced plans to become the first of Britain’s new generation of financial technology companies to go public, in a deal expected to raise £300m and value the peer-to-peer lender at more than £1.5bn.

The initial public offering of Britain’s biggest peer-to-peer lender will provide a significant test of investor appetite for the breed of fintechs that have sprung up in the past decade to challenge high-street banks.  Funding Circle has arranged £5bn of loans to small companies in the UK, the US, Germany and the Netherlands since its launch in 2010 by connecting businesses looking to borrow money with retail and institutional investors willing to lend them money. 

However, the company’s prospective value of more than £1.5bn is above the current value of US-listed peers OnDeck and Lending Club, which have both suffered tumbling share prices since their lPOs.

Funding Circle IPO will be open to platform’s existing investors (Peer2Peer Finance) Rated: A

FUNDING Circle has said it expects its existing investors will be able to become shareholders in the company after it goes public.

Funding Circle said that its initial public offering (IPO), if it goes ahead, would aim to raise around £300m, with at least 25 per cent of the company’s issued share capital to be placed on a free float.

In a blog post on its website, also on Monday, the P2P lender said that its customers would have the opportunity to apply to participate in the IPO and become a shareholder in Funding Circle via an intermediaries offer.

Don’t be blinded by the wizardry of tech darling Funding Circle (London Evening Standard) Rated: A

Given that Funding Circle’s flotation comes just days after the collapse of that other trailblazing fintech, Wonga, it’s hard not to compare the two.

Both were launched to fill the gaps in the lending market where traditional banks feared to tread. Both used tech wizardry to check they were lending to the right people at the right price. Both brilliantly deployed digital technology to make their services simple and fast to use.

Hopefully, for future investors, the similarities end there.

Funding Circle to host cryptocurrency event to promote women in fintech (Peer2Peer Finance) Rated: B

FUNDING Circle is to host a panel event focusing on cryptocurrency, described by the organisers as “one of the most interesting but least understood areas of fintech.”

The event is being held in connection with FinTechWomen, a London-based meet-up group, and is sponsored by Funding Circle.

UK sub-prime lenders shrug off political cloud (Nasdaq), Rated: AAA

UK sub-prime investors are shrugging off Wonga’s cloud. Customer complaints and a regulatory clampdown forced the payday lender to stop making loans. The likes of Amigo Holdings and Non-Standard Finance have different models, and regulators’ blessing. Yet, with Wonga out of the picture, they too risk becoming the focus of public ire.

Investors love it. Amigo’s return on equity will be around 40 percent this year, using Thomson Reuters I/B/E/S, while it and Non-Standard Finance should grow revenue on average by more than 20 percent each year up to 2021, analysts reckon. NSF, which has a more diversified business including unguaranteed loans, is valued at over 17 times forward earnings. Amigo’s shares were priced at 12 times forward earnings even after a selloff promoted by disappointing results on Thursday. The consumer finance sector on average trades at less than 11 times forward earnings, according to Eikon.

Hedge fund Kreos Capital is first in line for Wonga payout deal after lending the collapsed payday loan company around £34m (This is Money) Rated: A

A Mayfair hedge fund is at the front of the queue to be paid by collapsed Wonga as fears grow that thousands of its hard-up customers will get nothing.

Kreos Capital lent Wonga about £34million two years ago and is understood to be still owed around £10million by the payday loan company.

Under the arrangement, it is thought to be in line to collect that sum ahead of other creditors.

P2P lenders record £300m intake in second year of the IFISA (P2P Finance News), Rated: AAA

ALMOST £300m was invested across Innovative Finance ISAs (IFISA) in the previous tax year, HMRC data reveals.

The latest ISA statistics from the taxman shows £290m of subscriptions in IFISA for the 2017/2018 tax year across 31,000 accounts.

P2P lenders saved £9,355 on average.

Zopa revealed it received more than £150m in its IFISA during the previous tax year.

The data shows that savers subscribed to 10.8 million Isa accounts during the 2017-18 tax year, down from 11.1 million in the previous tax year. This represents a fall of 10%.

P2P marketing clampdown ‘may restrict IFISA takeup’ (P2P Finance News), Rated: A

Stuart Law, who heads up the business P2P lender, warned that the strong take-up of the IFISA could be hampered by the FCA’s proposed marketing restrictions for the sector.

Under the proposed changes, platforms would be restricted to marketing to those who are certified as sophisticated or high-net-worth investors or those that certify that they will not invest more than 10 per cent of their net portfolio in P2P agreements.

Northern Irish housebuilder secures £250,000 from P2P platform (Development Finance Today), Rated: A

County Down Developments has received a £250,000 facility from Blend Network for the development of four luxury apartments in Bangor, Northern Ireland.

The loan from Blend Network came after the housebuilder was turned down for a loan by Barclays.

Mattress start-up Casper offered credit in UK without permission (Financial Times), Rated: B

A US online mattress start-up backed by rapper 50 Cent has been forced to stop offering credit to UK customers, after it emerged it had been doing so without permission from the regulator.

Casper, a five-year-old company that is on a major European expansion drive, was allowing UK customers to buy on credit from Swedish bank Klarna.

China/Hong Kong

China’s Fintech Giants Have The Money And Means To Dominate Despite The Wider Slowdown (Forbes), Rated: AAA

China has experienced a fintech explosion in recent years, with top companies dominating the industry. It’s not an accident that 

HKMA Receives 29 Bids for First Round of Virtual Bank Licences (Regulation Asia) Rated: AAA

Standard Chartered, WeLab, Zhong An Bank and HKT among several banking, technology and telecom firms applying for virtual banking licenses.

Twenty-nine financial and technology firms, including Standard Chartered and WeLab have submitted applications to obtain Hong Kong’s first online-only banking licenses.

Tencent-backed Airwallex to join push for Hong Kong virtual bank license (SCMP) Rated: A

The company shifted its headquarters to Hong Kong from Melbourne earlier this month as it prepares to submit a virtual banking license application, along with partners, ahead of Friday’s deadline.

Airwallex co-founder and chief executive Jack Zhang said the company will team up with a traditional bank and other local partners as part of the application process, although he declined to reveal their identities.

Another reason for the relocation to Hong Kong is proximity to major clients, including Tencent, online travel operator Ctrip, e-commerce JD.com as well as traditional lender Bank of East Asia.

Stable earnings growth expected by mainland banks, but bad-loan worries linger (SCMP), Rated: A

And Beijing’s crackdown on the peer-to-peer lending sector – the shadow banking system that saw rampant illicit and risky behaviour continue in the first half of this year – has helped increase demand for corporate lending levels too.

The country’s big four banks – Industrial and Commercial Bank of ChinaChina Construction BankAgricultural Bank of Chinaand Bank of China – reported profit rises of between 5.2 and 7.9 per cent in the three months ending June.

China’s state banks to boost lending as Beijing fans economy (Nikkei), Rated: A

First-half earnings showed the lenders rallying after several years of low growth. Collective net profit rose 5.7% year on year to 532.1 billion yuan ($77.9 billion), while the lenders’ average ratio of bad debt fell 0.06 percentage point in six months to 1.52% at the end of June.

European Union

INSTANTOR OPENS UP BANK API – PROVIDING UNIQUE ACCESS TO HALF A BILLION PEOPLE (Fintech Finance), Rated: B

Today Instantor, the Swedish fintech company making financial decisions easy, announces, WDSK, The World Domination Starter Kit. The WDSK is an initiative to support start-ups and scale-ups to develop next-generation products by giving them access to Instantor´s Bank API with no associated costs for new Instantor customers. By using Instantors bank API, developers will have access to transactional data from over 300 banks in 25 countries, with the potential to reach half a billion people. Instantor´s bank API has an unrivaled reach, and the WDSK initiative includes access to several markets outside new Open Banking legislation. The authentication and the end user’s interaction with banks are handled by Instantor, and the data can be accessed once the end user has given their consent.

International

Robo-advice not dead: GlobalData (Financial Standard) Rated: A

The analyst suggested robo-adviser may be ahead of their time, given high net-worth demand for robo-advice is on the rise among the next generation of investors.

“While robo-advice is here to stay, it will take time to cement itself. The digitally-savvy next generation will embrace an automated service and big banks should capitalize on this. However, a big brand is not enough to justify much higher fees,” Woldemichael said.

To succeed, incumbents will have to provide a level of service, and prices, that are genuinely competitive with those offered by startups.”

Australia

Collapse of UK payday lender Wonga sounds warning for Aussie fintech vigilance (Australian Financial Review) Rated:AAA

The collapse of Wonga, one of Britain’s most high-profile fintech lenders, provides salient lessons for Australia, which considers the UK a template for financial technology policy and where tighter laws to protect vulnerable customers from payday lenders appear to have stalled.

Wonga, built around a slick app allowing customers to get expensive loans via their mobile phone, was “notorious for its extortionate interest rates and was a toxic symbol of Britain’s household debt crisis”, said The Guardian last week.

The payday lender “failed because it was too greedy and at times crossed the ethical line”, it said, quoting prominent UK financial columnist Martin Lewis, who described Wonga’s loans as “the crack cocaine of debt – unneeded, unwanted, unhelpful, destructive and addictive”.

Micro lender makes big difference (Latrobe Valley Express) Rated: A

Her heartfelt story was told at Good Money’s one-year anniversary last week during what Carol described as a “life-changing event” after borrowing money to buy essential appliances like a new fridge and washing machine.

The low to no-interest lender was set up in July last year in partnership with Good Shepherd Microfinance and the National Australia Bank, following a $2.3 million investment from the state government.

More than 2900 people made enquiries in the hub’s first year, and the store has provided more than 500 no and low-interest loans for household appliances, car-related expenses, household furniture and costs such as medical and education expenses.

India

China’s FinUp, existing investors back digital lending startup SlicePay (VC Circle) Rated: AAA

SlicePay, a digital lending platform which caters to college students and young professionals, has raised an undisclosed amount in an extended Series A round of funding led by Chinese firm FinUp Finance Technology Group.

The company said in a statement that existing investors Blume Ventures, Japan’s Das Capital, and Russia’s Simile Ventures had also participated in the round.

A person close to the development who did not wish to be named pegged the deal at $14.9 million (around Rs 105 crore at current exchange rates).

Asia

Southeast Asia’s startups suffer from Series B funding crunch, says Kredivo’s Gar (Deal Street Asia), Rated: AAA

Having recently raised what is estimated to be the largest Series B funding round for a fintech firm in Southeast Asia, Indonesia-focused lending platform Kredivo says the process was far from smooth sailing.

The company was forced to look beyond the region to raise the majority of its fund, as it found that there were simply very few investors in the region that specialized in doing Series B investments.

MENA

Tel Aviv Climbs on List of Top 10 Undergraduate Programs for Entrepreneurs (CTech) Rated: B

Tel Aviv University is among the top ten global undergraduate programs in terms of producing venture capital-backed entrepreneurs, according to a report published last week by Seattle-based market research company Pitchbook. Pitchbook ranked Tel Aviv in eighth place, up from ninth last year, above Yale, Princeton, and Brown.

Two other Israeli universities made the top 50 list: the Technion-Israel Institute of Technology came in at 14, while the Hebrew University of Jerusalem placed at 35.

Authors:

George Popescu
Allen Taylor

Monday June 25 2018, Daily News Digest

FREED 2018-1 collateral characteristics

News Comments Today’s main news: SoFi launches SoFi Money. Robinhood in talks with regulators about bank products. Orca Money plans to double in size this year. Monzo, TransferWise partner. Banco BNI Europa drops 50M Euro into Linked Finance. Today’s main analysis: FREED 2018-1 Deep Dive. Today’s thought-provoking articles: What financial service firms can learn from direct-to-consumer companies. Graduate degrees with […]

FREED 2018-1 collateral characteristics

News Comments

United States

United Kingdom

European Union

International

Other

News Summary

United States

SoFi’s Latest Product Called “SoFi Money” is Here (Lend Academy) Rated: AAA

At time of writing, SoFi is paying 1.1% on their account which is a competitive rate when you consider that it is a hybrid account. Other banks who continuously offer the highest rates available on the market such as Goldman Sachs’ Marcus are currently paying around 1.7% on savings accounts. The largest banks in the US such as Bank of America, Citi and JP Morgan Chase pay between 0.01% and 0.1% on savings accounts which varies depending on deposit amounts and current promotions.

Source: Lend Academy

Continued Yield Curve Flattening, FREED 2018-1 Deep Dive (PeerIQ), Rated: AAA

The yield curve continued its unrelenting flattening after last week’s Fed meeting. The spread between 10-year and 2-year treasury yields now stands at 36 bps (about 1 to 2 rate hikes from inversion). An inverted yield curve and lower-long term yields have presaged economic slowdown or recessions in the past. You can read our analysis of the Fed’s interest rate decision here.

FREED 2018-1 Deep Dive

FREED 2018-1’s collateral pool consists of 2 types of loans – 61.6% Freedom Plus (F+) and 38.4% Consolidation Plus (C+).

F+ Loans: F+ loans are unsecured consumer loans to near prime and prime borrowers. F+ collateral has a WA age of 8 months and WA remaining term of 41 months. The WA current FICO score of the pool is 723 and the WA interest rate is 14.8%.

C+ Loans: C+ loans are offered to select qualified debt settlement clients as an option to shorten the duration of their debt settlement program by making funds immediately available to fund settlements reached by Freedom Debt Relief. C+ collateral has a WA age of 8 months and WA remaining term of 44 months. The WA current FICO score of the pool is 654 and the WA interest rate is 22.9%.

Source: Source: PeerIQ, KBRA, DBRS
Source: PeerIQ
Source: PeerIQ

There’s plenty more. See the rest of the charts here.

Robinhood is said to discuss bank products with regulators (American Banker) Rated: AAA

Robinhood Markets has more than 4 million U.S. consumers using its free stock-trading platform. Now, it’s in talks to offer them other banking services like savings accounts, according to people familiar with the matter.

KeyBank Acquires Digital Lending Platform For Small Businesses Bolstr (Crowdfund Insider) Rated: A

On Wednesday, KeyBank announced it has acquired digital lending platform for small businesses Bolstr. According to Key, the fintech software, which is expected to be implemented later this year, will enable the banking group to provide faster and easier access both to SBA loans and to traditional capital for business owners. The acquisition comes just after the OCC recently called on banks to issue more SME loans. 

Capital One Co-Founder Is Making a Bet on Risky Borrowers (Bloomberg) Rated: A

The co-founder of Capital One Financial Corp. is betting now’s a good time to lend to the riskiest borrowers.

Nigel Morris, Richard Fairbank’s partner in creating the company that became Capital One, is joining the board of LendUp Global Inc. and boosting his investment in the firm, which uses machine learning to look beyond traditional credit scores in the subprime market.

What Financial Services Can Learn from Direct-to-Consumer Companies (Crowdfund Insider) Rated: AAA

2016 Bain study found that nearly a third of customers globally would change their bank if they could do so easily. With dissatisfaction that high, traditional financial institutions should look to emulate the branding strategies of direct-to-consumer retailers, rather than leaning on their well-established names, to engage with millennial and Gen Z consumers.

Research from BCG found that brands that create personalized customer experiences with technology and data can increase revenue by six to ten percent, and direct-to-consumer brands have capitalized on the benefits of personalization.

Many fintech companies’ value proposition is to leverage technology to provide less expensive financial advice, lower interest rates on student loans, or more fair and reflective insurance rates. For example, robo-advisor Betterment charges only 25 basis points for wealth management services and no minimum to enroll, as opposed to traditional financial advisors that charge one to two percent on assets under management and often require high minimum investments to qualify for on-boarding.

A recent PricewaterhouseCoopers study found that 75 percent of bank customers base their purchasing decisions on whether or not they’ve had a positive customer experience at the bank.

Which Graduate Degrees Deliver More Debt than Income? (Credible) Rated: AAA

Credible’s analysis of student loan debt levels and salaries across 16 graduate school majors shows that the most important consideration isn’t how much debt you’ll take on to obtain an advanced degree — or how much you’ll earn after graduation — but achieving the right balance between the two.

Source: Credible
United Kingdom

Scottish fintech Orca Money hopes to double in size (Insider), Rated: AAA

Scottish fintech firm Orca Money hopes to double its staff to ten over the next year following its second funding round.

The Edinburgh-based company raised £280,000 seed capital last January and is now talking to investors about follow-on funding.

P2PFA accused of reducing transparency after loanbook changes (Peer2Peer Finance) Rated: A

THE PEER-TO-PEER Finance Association (P2PFA) has been accused of reducing transparency and hindering efforts to enhance investor protection after changing the rules governing how firms publish their loanbook.

Previously, members of the self-regulated trade body were obliged to publish their full loanbook, showing information about all the loans on their platform.

But at the start of June, the P2PFA announced that members now have the option to “either continue to publish their entire loan book, or provide a detailed breakdown of loans in their overall loan book to enable a consumer to be informed about the nature and number of loans of different descriptions presently originated through the platform according to standards to be approved by the P2PFA board.”

Asset management giant warns on ‘exotic’ peer-to-peer lending pension investing (AltFi News) Rated: A

Pension investors should avoid high yielding assets such as peer-to-peer loans, according to new research by UK-based Royal London Asset Management.

The firm, which manages £114bn of assets, says investors looking generate income in retirement should beware for high risk, higher yielding investments.

How I invest: Ayo Adesina, a software engineer with £32,000 in peer-to-peer (iNews), Rated: A

Ayo Adesina, 34, was lucky enough to come into a £50,000 windfall when he won series two of Channel 4’s TV programme Hunted in 2016.

Mr Adesina, who describes himself as a novice investor, put the majority of the money – £32,000 – into a peer-to-peer property lending platform. He says his investment has grown 7 per cent, or £3,000, since he opened an account a year ago.

Who’s switching jobs at BWB Compliance (City A.M.), Rated: B

BWB Compliance has recruited Dena Chadderton as a senior adviser. With wide-ranging experience both as a regulatory consultant and across the financial services industry, Dena will primarily be advising firms in the fintech and asset management space. In particular, Dena will continue to specialise in the regulation of P2P lending and crowdfunding platforms, a growing part of the current team’s client-base.

China

Online lender seeks small-scale borrowers (The Standard) Rated: AAA

China’s FinUp Finance Technology Group, which operates a technology-enabled finance platform with a focus on marketplace lending, aims to widen its market in the country by going public in Hong Kong.

The fintech firm also provides a variety of other personal credit services including point of sale instalment services to automobile financing services.

Chinese Fintech PINTEC Launches Installment Financing on E-Commerce Platforms (Crowdfund Insider) Rated: A

Chinese fintech Pintec Technology Holdings Limited (PINTEC) announced on Wednesday it has launched installment financing on its e-commerce platforms. This news comes just a couple of weeks after PINTEC secured $103 million through its latest financing round, which as led by Mandra Capital and SINA Corp.

European Union

Monzo partners with TransferWise for international payments (TechCrunch) Rated: AAA

The partnership, which TechCrunch outed nearly three weeks ago, will see TransferWise power international payments for the U.K. challenger bank’s 750,000 customers. It is the second new bank partnership that TransferWise has unveiled this month, after the fintech unicorn announced that it has begun working with France’s second largest bank BPCE Groupe.

Asked why Monzo  has chosen to work with TransferWise, Blomfield reiterates the challenger bank’s goal of becoming a “hub or control centre” for your money. This won’t necessarily all be done by Monzo, he says, “but with partner organisations who plug into this hub”. TransferWise is the first of these.

LINKED FINANCE SECURES €50M FUNDING FOR IRISH SMES FROM BANCO BNI EUROPA (Irish Tech News) Rated: AAA

Linked Finance, Ireland’s leading peer-to-peer (P2P) lending platform, has secured backing from Portugal’s fastest growing digital bank, Banco BNI Europa, who will deploy up to €50m over a 2-year period, to lend to Irish SMEs.

As part of a wider strategy to identify the best P2P lending platforms in key European markets, Banco BNI Europa will deploy its capital alongside Linked Finance’s existing lenders. Linked Finance, connects Irish SMEs who need loans with an online lending community of more than 19,000 users.

HAVE YOUR CAKE AND ‘HODL’ TOO: TAKING OUT A LOAN WITH BITCOIN (Bitcoinist), Rated: A

P2P lending platform InLock wants to change this by enabling cryptocurrency to be used as collateral for a loan in fiat — effectively solving the short-term spendability problem. At the same time, borrowers can remain ‘hodlers‘ with the option to get their cryptocurrency back in full after the loan is paid off, regardless of any changes in price.

Csaba: When we looked at the Bitcoin blockchain, we found that 40% of all bitcoins existing today had not been moved at all in the past year. Looking back at 2017, there were plenty of reasons to move them: hard forks, the mempool crisis, regulation problems, an amazing bull run, followed by a 70% correction.

The FinTech50 2018 (The FinTech 50) Rated: B

Listings include:

  • Monzo
  • N26
  • OakNorth
  • Raisin
  • Revolut
  • Seedrs
  • SolarisBank
  • Starling Bank
International

34 Fintech and Insurtech Unicorns (Inside Bitcoins), Rated: AAA

According to data compiled from CB Insights and Crunchbase, they are currently 34 fintech unicorns, or startups valued at over $1 billion.

32. Funding Circle — $1 billion

Value: $1 billion | Raised: $413 million

Founded: 2009 |  | HQ: London

What it does: Peer-to-peer marketplace for business loans.

Why it’s hot:Over £3 billion has been lent across the platform and the company is tipped for a blockbuster European float later this year.

31. Kabbage — $1 billion

Value: $1 billion | Raised: $500 million

Founded: 2009 |  | HQ: Atlanta

What it does: Fast online small business loans.

Why it’s hot: The company has written over $4 billion-worth of loans and has partnered with Spanish bank Santander.

24. ACORN OakNorth — $1.2 billion

Value: $1.2 billion | Raised: $486 million

Founded: 2015 |  | HQ: London

What it does: A fintech firm focused on unlocking the potential in bespoke SME lending globally using its data and technology platform, ACORN machine.

Why it’s hot: ACORN machine is a fintech platform that helps automate the way banks penetrate this underserved and underestimated market. It does this by leveraging process excellence, machine learning and technology to fuel data-driven decision making across the loan lifecycle.

22. Tuandaiwang — $1.46 billion

Value: $1.46 billion | Raised: $380 million

Founded: 2012 | HQ: Dongguan

What it does: Peer-to-peer lending platform.

Why it’s hot: The company has helped individuals and companies borrow $11.4 billion and helped lenders make $335 million in returns.

17. NuBank — $2 billion

Value: $2 billion | Raised: $527 million

Founded: 2013 |  | HQ: Sao Paulo

What it does: Brazilian app-only bank.

Why it’s hot: The bank has 3 million customers and has raised money from Sequoia Capital, Goldman Sachs, Tiger Global, and more.

16. Affirm — $2 billion

Value: $2 billion | Raised: $720 million

Founded: 2012 |  | HQ: San Francisco

What it does: A hire-purchase provider, letting people buy products and pay them off in installments.

Why it’s hot: The company works with over 1,200 retailers in the US and its technology helps retailers increase average order sizes by 51%. Morgan Stanley and Singapore’s GIC are both investors.

15. Avant — $2 billion

Value: $2 billion | Raised: $1.8 billion

Founded: 2012 |  | HQ: Chicago

What it does: Online personal loans.

Why it’s hot: The company has lent over $1 billion and is backed by the likes of Tiger Global, KKR, and Jefferies.

13. Klarna — $2.5 billion

Value: $2.5 billion | Raised: $636 million

Founded: 2005 |  | HQ: Stockholm

What it does: User-friendly payment systems for mobile and web that lets people buy now and pay later.

Why it’s hot: The company processes 800,000 transactions a day and has been used by 60 million people globally. Sequoia Capital, the Silicon Valley fund that backed PayPal, is an investor.

9. GreenSky — $3.6 billion

Value: $3.6 billion | Raised: $350 million

Founded: 2006 |  | HQ: Atlanta

What it does: Provides technology to banks that is used in processing loan applications.

Why it’s hot: Steven McLaughlin, a former Goldman Sachs banker whose firm advised GreenSky on a funding deal, told Bloomberg in 2016 that GreenSky “is the single best fintech company created in the last 10 years, by far.”

8. Credit Karma — $3.5 billion

Value: $3.5 billion | Raised: $868 million

Founded: 2007 |  | HQ: SanFrancisco

What it does: Provides free online credit reports, offsetting the cost of paying for them with targeted advertising of financial products.

Why it’s hot: Over 75 million people in the US and Canada have used the service. Google Capital is an investor.

7. SoFi — $4 billion

Value: $4 billion | Raised: $2.1 billion

Founded: 2011 |  | HQ: San Francisco

What it does: Peer-to-peer student loan refinancing, mortgages, and other types of personal loans.

Why it’s hot: Like Zenefits, SoFi struggled with a slew of setbacks in 2017. Allegations of sexual misconduct and loan misstatements forced out founder Mike Cagney. Former Twitter CFO and ex-Goldman banker Anthony Noto is now leading a turnaround of the business.

3. Lu.com — $18.5 billion

Value: $18.5 billion | Raised: $1.7 billion

Founded: 2011 | HQ: Shanghai

What it does: Chinese peer-to-peer loans and financing platform.

Why it’s hot: Lu.com, also known as Lufax, is one of China’s largest online lenders and is tipped for an IPO this year.

ETHLend Blockchain Lending Platform Adds MyBit Token (MYB) in Partnership (Bitcoin Exchange Guide) Rated: B

MyBit is an Ethereum-powered ecosystem that aims to connect the global Internet of Things (IoT) industry. ETHLend works with the Ethereum blockchain as well and is a marketplace for peer-to-peer lending services that use smart contracts. The company provides low interest rates and a transparent technology for processing transactions.

Currently, it allows users to lend with Ethereum, but it may be ready to introduce new altcoins at the end of this year, including MYB.

Australia

RateSetter to ‘accelerate’ broker strategy with new appointment (The Adviser) Rated: A

Last week, The Adviser broke the story that Mark Woolnough had left his role at ING after 18 years at the lender to join the fintech RateSetter.

It has now been confirmed by RateSetter that Mr Woolnough has joined its ranks as head of third-party distribution.

India

P2P lending marketplace ‘PaisaDukan’ to open branches in Noida and Bangalore (Knowledge & News Network) Rated: AAA

PaisaDukan, a P2P lending platform fully owned by Mumbai based fintech startup BigWin Infotech, has decided to launch 2 branches in Noida & Bangalore as a part of its PAN India expansion and growth plans by the end of next month.

This will enable the company to have better control over their operations and widen its reach.

Asia

Bills on P2P lending, cryptocurrency pending in National Assembly (The Korea Herald) Rated: AAA

Rep. Min Byung-doo of the ruling Democratic Party and Rep. Kim Su-min of the minor opposition Bareunmirae Party filed two separate bills to regulate P2P lending firms in July last year and in February, respectively.

With the bills still pending in the National Assembly, financial authorities have been struggling to tackle abusive and deceptive P2P lending practices.

Open Banking: no leisurely walk in the DX park (Enterprise Innovation) Rated: A

The 2018 Global Payments Insight Survey: Retail Banking report by ACI Worldwide and OVUM  claimed that 86% of banks in Asia are developing their open banking strategy.

Ovum’s 2017 Payments Insight Survey said 87% of surveyed banks report having a clear strategy for developing open APIs, up from 59% in 2017.

Africa

FINT is changing the narratives in the Nigerian lending space (Nairametrics), Rated: AAA

In a recent report by the International Finance Corporation (IFC) and the Central Bank of Nigeria (CBN), less than a third of MSMEs have successfully obtained loans from financial institutions, and that is not for a lack of trying.

Nigeria currently has over 35 million MSMEs and if approximately only 10 million MSMEs have been able to get loans from financial institutions, hence, a credit gap of about 25 million in the country.

What exactly is FINT?

FINT is an online lending marketplace, basically we connect verifiable income borrowers looking for access to affordable credit with lenders who are looking to fund the loans for attractive returns. We have consumer loans i.e. loans between N60,000 and N2 million at rates as low as 8% for 3 – 12  months, with retail and institutional lenders (banks and asset managers).

For lenders, they can lend in the multiples of N20,000 grows at 26-39% for one-year loan tenures, for 6 months 15-22% for 3 months it is 8-14%.

Authors:

George Popescu
Allen Taylor

Monday April 30 2018, Daily News Digest

LendingClub

News Comments Today’s main news: GreenSky files for IPO. LendingTree hits $181M consolidated revenues. KBRA assigns preliminary ratings to Morgan Stanley resecuritization. Zopa says savers are abandoning cash ISA. KBRA assigns first European ratings. Today’s main analysis: FTC vs. LendingClub, dueling unicorns. Today’s thought-provoking articles: JD Supra on LendingClub’s FTC issues. Aussie borrowers should embrace for rate hike. Brazil’s amended payment […]

LendingClub

News Comments

United States

United Kingdom

China

International

Other

News Summary

United States

Fintech Firm GreenSky Files for IPO (Wall Street Journal) Rated: AAA

Financial-technology firm GreenSky Inc., a provider of point-of-sale financing and payments technology, disclosed plans to go public.

The Atlanta company, which operates a lending platform that enables retailers, health-care providers and home contractors to offer loans to their customers, filed preliminary documents Friday for an initial public offering with the Securities and Exchange Commission.

FTC Sues Lending Club For Deceptive Advertising (JD Supra) Rated: AAA

According to the FTC, this deception is made worse by the fact that Lending Club never adequately discloses the up-front fee to consumers during the entire online application process.  The fee is only mentioned once—inside an explanatory “pop-up bubble” that only appears if the applicant happens to click or tap on a relatively small and inconspicuous icon. Because applicants are not required to click or tap on the icon in order to move forward with their loan application, many applicants never saw the disclosure at all.

LendingTree’s 1Q consolidated revenue grows to record $ 181m (Mortgage Professional American) Rated: AAA

Online loan marketplace operator LendingTree saw its consolidated revenue rise to a record $181m during the first this year – up 37% from the same period in 2017, according to a financial statement released Thursday.

January to March revenue from mortgage products stood at $73.5m, up 17% from the first three months of 2017. In particular, purchase and refinance revenues went up 13% and 18%, respectively. Citing the Mortgage Bankers Association, LendingTree said originations industry-wide were projected down 4% in the comparable period.

KBRA Assigns Preliminary Ratings to Morgan Stanley Resecuritization Pass-Through 2018-SC1 (Business Wire) Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to one class of notes issued by Morgan Stanley Resecuritization Pass-Through Trust 2018-SC1 (“MSRP 2018-SC1”). This transaction represents the securitization of the consumer loan asset-backed trust certificates issued by SoFi Consumer Loan Program 2015-1 Trust (“SCLP 2015-1”) and supported by a portfolio of prime unsecured personal loans (“Underlying Loans”) that were originated by SoFi Lending Corp (“SoFi”).

Preliminary Ratings Assigned: Morgan Stanley Resecuritization Pass-Through 2018-SC1

Class Preliminary Rating Initial Class Principal
B BBB (sf) $36,700,000

 

Diversify Into Real Estate With Your IRA Or 401(k) (Forbes) Rated: A

The IRS does allow 

Navient Reports Greater Earnings and Fewer Student Loan Charge-Offs (Lend EDU) Rated: A

On April 24, Navient stated from its earnings report in the first quarter that it had $500 million of originations in private education refinance loans, a 43 percent fall in private education loan charge-offs and a 32 percent jump in business processing fee revenue year over year, according to a press

Business processing earnings: Earnings were $10 million in the first quarter, compared to $3 million in 2017’s first quarter.

Consumer lending earnings: Earnings were $50 million in the first quarter, up from $38 million in 2017’s first quarter. This jump came from a $7 million increase in net interest income, an $18 million decline in loan losses provision and a $9 million fall in income tax expense.

Federal Education Loans earnings: Earnings were $141 million, up from $129 million in 2017’s first quarter.

Unitus Ventures Marks The First Close Of Its $ 45.2 Mn Fund II With $ 15 Mn (Inc42) Rated: A

Unitus Ventures (formerly known as Unitus Seed Fund), an impact venture fund investing in early-stage startups, has announced to have raised $15 Mn (INR 100 Cr) towards the first close of its $45.2 Mn (INR 300 Cr) Unitus Ventures Fund II.

The fund will be utilised for onward investing of $753K – $2.2 Mn (INR 5 Cr -INR 15 Cr) each to 25 to 30 startups specialising in education, healthcare and inclusive fintech.

Yolande Piazza of Citi Fintech (Lend Academy) Rated: A

In this podcast you will learn:

  • The origins of Citi Fintech and the goal of their group within Citi.
  • How they have created a new and innovative culture within Citi Fintech.
  • Why Citi Fintech released a global open banking API.
  • Citi’s Canvas platform that is their internal sandbox product.
  • How they create these products hand in hand with their customers.
  • Why this is about more than just creating mobile offerings.
  • What Citi’s newly announced national digital bank means for the overall bank.
  • How Citi will help non-bank customers as well as their own customers.

 

Mastercard: Serving The Financial Needs Of The ‘New Middle Class’ (PYMNTS) Rated: A

Whether an applicant has recently immigrated and lacks the background data to be approved, or is recovering from a drastic life event such as a divorce or death of a spouse, demonstrating their creditworthiness is often impossible by traditional means – i.e. the FICO score – leaving as many as 160 million Americans up the creek with no paddle.

Haymond said Mastercard has already put its philosophy into practice by partnering with CreditStacks, a FinTech that focuses on providing credit to new Americans, as well as launching its Inclusive Futures Project in December 2017 to address the needs of gig and on-demand workers.

Mastercard Meets Elevate

Some of the features of the new product will include purchase and fraud alerts, credit score monitoring, a full-service mobile app and on/off functionality for the credit card. Cards will be awarded based on the analysis of data from alternative sources, Haymond said, which can fill in the blanks to evaluate a customer’s creditworthiness when traditional data points are not present or don’t meet requirements.

Millennials now more bullish about finances than baby boomers — study (Spears Magazine) Rated: A

Almost nine in ten (88 per cent) HNW millennials feel more confident about their finances than a year ago- but less than half of baby boomers (47 per cent) shared the same sentiment.

A new study from SunTrust Bank also found that millennials are more confident than their generation X counterparts, of whom 66 per cent are more confident than last year.

Some 16 per cent of those surveyed attributed their increased optimism to ‘having a great investment firm’, while 13 per cent cited increases in income and assets.

Possible Finance launches with small, short-term loans designed for low-income borrowers (Geek Wire) Rated: B

Tony Huang was inspired to create Possible Finance because “it’s so damn expensive to be poor.”

Possible Finance customers can apply for small loans and receive approval quickly using a mobile app. Customers can build credit when they make payments, unlike traditional payday loans, which typically do not report to credit agencies unless a borrower misses payments.

LendingPoint is the fastest-growing company in metro Atlanta (Atlanta Business  Chronicle) Rated: B

Being a successful financial technology (fintech) lender requires focusing more on the lender portion of your business than the fintech portion. That’s the way Tom Burnside, CEO and founder of LendingPoint, runs his company, the number-one overall fastest-growing private company in the metro area.

 

 

United Kingdom

Zopa executive: “Savers are abandoning the cash ISA en masse” (Peer2Peer Finance) Rated: AAA

SAVERS are “abandoning the cash ISA en masse”, as the personal savings allowance (PSA) makes the tax-free wrappers less relevant for consumers, a Zopa executive has said.

New data from UK Finance showed that investment in cash ISAs fell from £773m in March 2017 to just £332m in March 2018 – a decrease of 42 per cent.

Immigration rules ‘could choke fintech’, says lobby group Innovate Finance (The Times) Rated: A

The prospect of tighter immigration rules after Brexit risks choking off a boom in Britain’s burgeoning fintech industry, according to a new study by lobby group Innovate Finance.

The report says the financial technology sector is on course to top 100,000 employees by 2030, with 30,000 jobs set to be created.

The result would be a shortfall of 3,200 highly skilled workers by 2030, at a cost to the fintech sector of £361m, the report said.

Investment trusts back “substantial opportunity” in alternative lending (Peer2Peer Finance) Rated: A

Victory Park Capital Specialty Lending (VPC) and P2P Global Investments (P2PGI) released their annual reports on Friday morning, insisting there were still opportunities for online lending and consumer credit as banks continue to scale back.

VPC reported a NAV return of 3.07 per cent for 2017, up from 0.95 per cent in 2016 but below its eight per cent target.

Similarly, P2PGI posted NAV total returns of 3.03 per cent for 2017, down from 4.1 per cent in 2016 and below its target of six to eight per cent.

Is there still life left in P2P investment trusts? (Peer2Peer Finance) Rated: A

But four years on from the launch of P2PGI, the investment trust has admitted in its 2017 annual report that historic performance was ”more volatile than we would like.”

But P2PGI still sits at a discount to NAV of 17.5 per cent and VPC is at 12.5 per cent.

Putting Your Bitcoin Investments to Work (Coinspeaker) Rated: A

One pioneer in the field to consider is Nebeus, a crypto bank that brings together cryptocurrency opportunities and a standard bank service. Its Nebeus trading platform supports peer-to-peer (P2P) lending and a multi-cryptocurrency wallet. The platform enables customers to buy, sell, store, remit, lend and borrow cryptocurrency funds.

Nebeus offers two cards that allow holders to spend their cryptocurrency at their convenience online, offline, or to get cash at ATMs, and the convenience and protection this card offers is hard to beat.

The Nebeus Exo Card lets users top up their card with all major cryptocurrencies and spend that money with over 30 million merchants online. Users can make $1,500 ATM withdrawals per day, worldwide. And they get 3% cashback In NBTK tokens monthly. There is no monthly fee for the card for NBTK holders.

China

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

On April 23, China’s leading financial inclusion platform FINUP filed a listing application for the Hong Kong Exchanges and Clearing Limited (HKEX).

Ant Financial Invests in Bangladesh-based Fintech Startup bKash

On April 26, Bangladesh-based mobile financial service provider bKash and Ant Financial jointly announced a strategic partnership to promote the development of financial inclusion for the unbanked and underbanked communities in Bangladesh.

NIFA Establishes e-Contract Standards for Online Lending

On April 23, the National Internet Finance Association of China released a draft of standards on “Safety Regulations for Internet Finance Contracts”.

With $ 1.9 Billion Investment, Former Baidu Unit Challenges Fintech Rivals (Wall Street Journal) Rated: A

Baidu Inc.’s former financial-services unit has attracted a $1.9 billion investment from firms including U.S. private-equity giants TPG and the Carlyle Group, giving it fresh ammunition to compete in China’s increasingly crowded financial-services space.

Chinese VC Firm Sky9 Capital Reaches Final Closing Of $ 200M For New Fund (China Money Network) Rated: B

Sky9 Capital, a venture capital firm founded by a former partner at Lightspeed Venture Partners, announced today that it has completed the final closing of a new fund with total commitments of US$200 million.

Sky9 Capital Fund III, L.P. will invest mainly in China-based businesses with a focus on early-stage companies in the Internet, enterprise, and deep technology sectors.

European Union

KBRA Issues First European Ratings (Business Wire) Rated: AAA

Kroll Bond Rating Agency Europe Limited (KBRA) is pleased to announce its first published European Structured Finance ratings. KBRA issued its inaugural published European ratings on Small Business Origination Loan Trust 2018-1 DAC (“SBOLT 2018-1”), a £206.6 million ABS transaction collateralized by unsecured loans made to small and medium-sized enterprises (“SMEs”) incorporated in the United Kingdom (“UK”). This transaction represents the second ABS securitisation collateralised by unsecured loans to SMEs originated through the online lending platform operated by Funding Circle Limited (“Funding Circle”). The full rating report can be accessed here.

This is KBRA’s first publicly rated European ABS securitisation after being registered as a Credit Rating Agency by ESMA in November 2017.

International

The FTC vs LendingClub, Banking through the Post Office, Dueling Unicorns (PeerIQ), Rated: AAA

On Thursday, Amazon reported $3.27 EPS earnings well above the $1.26 estimates. The stock jumped 7% to record highs in reaction to the beat. The news comes just days after Amazon invested $22mm into Capital Float, India’s self-proclaimed largest online lender. We recently discussed Amazon’s path to the banking sector via its reported partnership with JP Morgan.

The lines between tech and banking continue to blur. Square announced the acquisition of Weebly for $365 Mn.

Dueling Unicorns

Source: PeerIQ, Company Websites, Crunchbase

FTC vs LendingClub

On Wednesday, the FTC charged LendingClub with deceiving borrowers.

In response to the lawsuit, LendingClub posted a detailed rebuttal, refuting the FTC’s claim. As seen in the image below from LendingClub’s blog post, the company believes they provide borrowers multiple opportunities to understand the Origination Fees mentioned in the FTC’s lawsuit. LendingClub goes on to refute each claim made by the FTC individually.

Source: LendingClub

In a post on Lend Academy, Peter Renton questions the cause of this lawsuit, and points to the fact that only two of the five FTC Commissioner seats were occupied at the time of the complaint, and one of the two left on Friday. Renton’s understanding is that LendingClub and the FTC were cooperating and this lawsuit “came out of left field.”

Are You Ready To Give Fintech A Try? (Forbes) Rated: A

In just three years, Germany’s 

Blockchain Startup ShareRing is Facilitating the Adoption of Cryptocurrency (Coinspeaker) Rated: A

ShareRing will achieve this by employing a dual-coin mechanism through its own ShareLedger blockchain that will operate with two distinct tokens. The first – ShareToken (SHR) – will be the utility token of ShareRing. SHR will drive the consensus algorithm and act as a tradable coin on cryptocurrency exchanges.

The second currency, SharePay (SHRP) will be pegged to fiat and can be purchased directly from the ShareRing app using a credit card. A user can then use their SHRP to buy sharing services within the ShareRing application. ShareRing foresees a wide range of partners for the platform, sharing not just apartments and cars, but time, labor, as well as peer-to-peer lending and group tours.

FintruX Network (FTX) Will Be Listed In 3 Exchanges in their first week of token unlock (satPRNews) Rated: B

Qryptos exchange was the first exchange to list FintruX (FTX) On April 22, Bancor network quickly followed suit by listing Fintrux on April 24.

Potential investors, who missed their ICO, will now be able to buy the tokens on Qryptos, Bancor Network and HitBTC as well.

Australia

Borrowers should ‘brace’ themselves for rate hikes (The Adviser) Rated: AAA

After online lender ME claimed that it was “forced” to hike interest rates on its owner-occupier and investor loans as a result of increased funding costs, comparison site finder.com.au asked a panel of economists whether they believed other banks would follow.

According to the finder.com.au survey of 17 economists, 78 per cent said that they expected more lenders would raise their rates out of cycle as a result of rising US interest rates.

 

India

Fintech Startup Rubique Raises Fresh Round Of Funding (Inc42) Rated: AAA

Kalaari Capital-backed online lending marketplace Rubique has raised fresh funding led by Japan’s Recruit Group and Russian venture capital management company Emery Capital.

Blacksoil and existing investor Kalaari Capital also participated in the funding round. Apart from this round, the startup is also in the final stages of closing another tranche’ of funding, to be led by a couple of marquee investors

The startup plans to use the funds to hire more data scientists, enhance technology and reach a monthly revenue of $1.8 Mn (INR 12 Cr) by September.

Crowd Genie Opens India Office to Expand Asia-Pacific Asset Exchange (BC Focus) Rated: A

Crowd Genie Financial Services Pte. Ltd. is incorporated in Singapore and was granted a “Dealing in Securities” license by Monetary Authority of Singapore (MAS) in March 2017. This makes Crowd Genie one of the handful licensed platforms in Singapore.It is a peer-to-peer lending online platform that lets Singapore-based SMEs obtain financing from investors.

Crowd Genie is contemplating to establish a blockchain based Asia-Pacific asset exchange. It recently started an office in Bangalore, India and named Kunwar Singh as its Chief Technology Officer. The company completed its CGCOIN token sale in March this year. It intends to work on the regulatory elements to drive India centric assets onto its exchange.

A primer on crowdfunding (The Hindu BusinessLine) Rated: A

P2P lending is when individuals lend to small businesses/individuals for either a social or a commercial initiative. P2P lending can also be for non-income-generating activities. The consideration here is the interest on the amount lent. The return varies with the risk associated with the business and the individuals running the business — higher the risk, higher the return. Some of the prominent P2P platforms include Milaap, Kiva, Faircent and Cashkumar.

P2P platforms insist on KYC fulfilment for both lenders and borrowers. Diligence exercise is done on borrowers to assess credit-worthiness, genuineness and repayment capability.

Crowdfunding for non-financial consideration is of two types — social lending/donation crowdfunding and reward crowdfunding. Here the return or consideration may or may not be commensurate with the money raised.

 

Latin American

Brazil: Amended payment method regulation (IFLR.com) Rated: A

On March 26 2018, the Brazilian Central Bank enacted amendments to the existing regulation on payment methods, proposing more flexible rules on payment arrangements, payment institutions and on interchange fees charged to issuers of debit cards. The Central Bank expects these changes to foster competition among market players and as a result provide reduced debit card costs for end users.

This new regulation follows an international trend already observed in several developed and developing countries. In the US and Mexico, for instance, maximum limits for interchange fees charged in debit cards transactions led to average cost reductions on such fees of 40% and 50%, respectively.

Authors:

George Popescu
Allen Taylor