With the evolution of digital banking and mobile-commerce, marketplace lending (MPL) has entered a new growth phase. If compared on the basis of loan volume, the U.S. is said to have one of the biggest P2P lending markets in the world (second only to China). According to a report by PwC, the size of the […]
With the evolution of digital banking and mobile-commerce, marketplace lending (MPL) has entered a new growth phase. If compared on the basis of loan volume, the U.S. is said to have one of the biggest P2P lending markets in the world (second only to China). According to a report by PwC, the size of the U.S. MPL market is expected to touch almost $1 trillion by 2030. The industry has already crossed $50 billion in originations for 2018, and such numbers have obviously attracted institutional capital to the sector. Financial institutions have been structuring their MPL investments in multiple ways, but, by far, the most important for the growth of the industry is securitization.
The Nascent Stage of Marketplace Lending Securitization
Securitization, in layman language, refers to the selling of illiquid loans by converting them into marketable securities via a process of bundling thousands of small loans into one single security. The buyers of the securities earn returns when people pay back their loans. Securitization provides the twin benefits of increased market liquidity because of easy buying and selling and lower cost to the borrower as the risk of holding (and managing) a small loan gets consolidated.
As per the U.S. Department of Treasury, P2P loan securitization has emerged as a prime funding avenue in the U.S., capturing investment of around $13 billion in 2017. The trend started when Eaglewood Capital Management undertook the first P2P loan securitization in 2013. The transaction was worth $53 million in value. The deal involved securitizing unsecured consumer loans originated by Lending Club.
The securitization of loans helps to tap a new market that may not be available otherwise. In the Eaglewood securitization deal, the final buyer was an insurance company that was not able to directly invest in Lending Club loans. But the securitization deal allowed the insurance company to fund the P2P loans. In 2014, Eaglewood announced yet another round of securitizations worth $75 million.
Along with institutional involvement, the participation of rating agencies in P2P securitizations has also gained momentum. For instance, Blackrock’s securitization of $327 million in Prosper loans was rated by Moody’s and it became the first rated MPL securitization in history. The first quarter of 2017 saw all securitization deals being rated by the rating agencies. Another Prosper loan (Prosper’s PMIT 2017-1) was rated by Fitch, which represents the growing acceptance of P2P securitizations across such agencies. With rating agencies entering the market, even the skeptical institutional investors should not be far behind.
The Growth of MPL Securitization
The increasing securitization of loans is seen as a shift in the P2P loan market as they fight the traditional banking industry for the multi-trillion dollar lending market. This will help the MPL industry go mainstream in its aim to raise funding, and will also deepen the market. Even more importantly, it will bring an additional level of oversight for young lending startups.
Large institutional investors and Wall Street are actively observing the developments in the sector and simultaneously undertaking their research. This signals a strong future of institutional participation in the industry. In the end, if MPL players are able to deliver the promised returns over an extended period of time, fixed income investors will be forced to invest in MPL securities in search for higher yields.
SoFi, the student loan giant, securitized a total of $727 million in loans by issuing SoFi Consumer Loan Program notes in November 2017. The transaction was recorded as the largest offering by an MPL company to date. The company claimed to be one of the U.S.’s biggest sponsors of ABS, completing deals worth $6.5 billion over the past year.
A total of seven deals worth $4.3 billion were finalized in the first quarter of 2018. The total volume indicated an increase of 34% year-on-year against the total volume in the first quarter of 2017. Out of the total issuance, student loan deals accounted for $2.1 billion. SoFi ,who had issued $1.8 billion in just two deals, led the student loan segment.
Average Deal Size Over Time
The Q3 2018 Securitization Report by PeerIQ confirms the growth trend. There were eight MPL securitizations this quarter worth a total of $3.5 billion. The industry has seen a cumulative $40 billion over 134 deals. All deals were rated, and rating agencies seem to be warming up to the sector with 119 upgrades as compared to just 12 downgrades. Wall Street has (as usual) joined the party with Citigroup, Deutsche Bank, and Credit Suisse dominating the issuance league with a combined 57% market share.
The Asset Backed Securities market is backing the MPL industry and record issuances with tightening spreads, and dropping yields are an important testimony to the fact. Investors are voting with their wallets, and they like what they are getting with the burgeoning MPL industry. But the Fed has started with its rate-tightening cycle, and the first wave of defaults will sooner or later hit marketplace lenders. This will help in determining the actual depth in the MPL market and how much the industry has matured.
News Comments Today’s main news: One student saved $20K on a SoFi student loan. PayPal, Google deepen partnership. Zopa to hire a social media strategist. Ant Financial is a top 10 global bank. Today’s main analysis: Improved MPL pools are no guarantee of ABS performance. Today’s thought-provoking articles: A deeper look at GreenSky. Quants and fundamentalists. Ways to impress a lead investor. Helping […]
Is it clear skies ahead for GreenSky? GreenSky is exiting the gate looking good. To raise this kind of money on an IPO and be profitable for the past five years is a startup’s dream, and they’re living it.
Millennials are leading an investment revolution. I’m all for making an impact and being socially responsible, but if it isn’t profitable, then don’t count on retirement. That said, the millennial generation is definitely a different generation, and it’s quite refreshing to keep reading about them.
Student debt is growing in the US and looming as a major ongoing issue. With a total of $1.48 trillion in student loan debt in the US, spread among 44 million borrowers, Americans now have more student loan debt than credit card debt, according to Student Loan Hero.
Interest rates, meanwhile, are punishing, even more so depending on the type of loan you get, and the level of education you’re paying for. According to data from the Department of Education, rates range from around 3.5% to as high as 8.5% — with most types of loans floating in the 5-7% range. That’s extraordinarily high when you consider that many auto loan rates and even mortgages are lower.
The company offered 38.0 million shares to the public that priced at the upper end of the range at $23. The over allotment grant added another 5.7 million shares to the total offering. Selling shareholders offered all of the shares with gross proceeds of $1 billion.
GreenSky ended the day virtually unchanged at $23.26 at a time when most IPOs trade in more volatile ranges. The stock only had a range of $22.05 to $23.36 suggesting minimal initial interest by traders.
At the current price of $26.70, GreenSky has a market value of over $5.1 billion on 190 million shares outstanding (including the 5.7 million over-allotment option) with sales on pace to likely top $400 million this year.
The numbers though suggest anything but a boring company. Transaction volume jumped 47% to $1.0 billion during the March quarter and active merchants grew equally impressive at 52%. The fintech is even profitable.
PayPal and Google are extending their payments relationship across Google’s entire ecosystem, according to Finextra and TechCrunch. The two firms have worked together for awhile, as customers are able to integrate their PayPal accounts directly into Google Pay, Google’s mobile wallet.
But now, they’re taking the partnership a step further, allowing customers to enter their PayPal credentials once and then have them available for various types of payments, including bill pay and peer-to-peer (P2P) payments, across Google offerings such as Gmail, Google Play, Google Store, and YouTube. The partnership is expected to roll out in full later this year.
Marketplace lenders such as LendingClub and Prosper have made strides in improving underwriting standards in the past year.
In a report issued Thursday, Fitch said investors should still be wary of assuming new-issue MPL securitizations are a step up in quality over previous ABS deals, even though firms such as LendingClub and Prosper have taken steps to tighten lending standards as well as pool greater concentrations of borrowers with higher credit scores into their recent ABS deals.
LendingClub (NYSE:LC), for instance, boosted the weighted average FICO of its most recent prime/near-prime consumer-loan securitizations in December to 703, compared with 692 in its first asset-backed transaction of 2017.
LendingClub’s most recent self-sponsored transaction, Consumer Loan Underlying Bond (CLUB) Credit Trust 2018-NP1, had its base-case loss range tightened to 13.25%-15.25% by Kroll Bond Rating Agency, compared with 14%-16% in its CLUB 2017-P2 transaction. (In December, LendingClub pooled a collection of subprime loans with credit scores below 660, with a base-case loss range of 19.65%-21.65%.)
But the Bloomberg Professional Services Blog has run a piece recently on “quantamental” investing, indicating that a merger of the two approaches is underway. Darwinian pressures aren’t kind to presuppositions or to the purity of paradigms. And it is survival of the fittest that is at work here, because fitness requires on the one hand that the quants use good (human) judgment to monitor and adjust the investment process to the prevailing market conditions, while it also requires that any workable fundamental approach employ “promising aspects of technology … to reduce bias and random noise.”
“Alternative data” means what it sounds like it means: every sort of datumthat one would not traditionally have expected to come up in a discussion of trades, investments, or portfolio allocations.
These sources can include (Bloomberg’s list), “social media posts, credit card accounts, online browsing activity, foot traffic and weather patterns.” Any and all of these can include clues to ongoing and future trends. The use of any such source, or any cross-referencing of sources that can produce patterns, may be novel this week, customary next week, and a bare minimum for survival in the trading jungle the week after that.
Some 92% of millennials agreed with the statement “I care more about having a positive impact on society than doing well financially” compared to 52% of nonmillennials.
We interviewed a handful of millennials, asking them what makes their generation different. They answered: access to information, aligning themselves with brands on social media, and growing up in more comfortable economic circumstances than their parents and grandparents.
Most of us are aware of the importance of small businesses in the US economy. Small businesses employ over half of private-sector workers in the US, so access to capital for small businesses is critical to their success. Fortunately, online lenders such as the ones mentioned in the report have focused on serving the needs of businesses and activity has picked up over the last few years. Both awareness of these alternative options and the amount lent on these platforms is increasing. Originations at five leading online small business lenders increased by 50% in three years, from $2.6 billion in 2015 to $3.9 billion in 2017.
Nearly $10 billion of funding was provided to 180,000 small businesses from 2015 to 2017 according to data which included leading platforms OnDeck, Kabbage and Lendio. This activity has generated $37.7 billion in gross output, created 358,911 jobs and $12.6 billion in wages.
Despite fears of trade wars and increased protectionism, foreign investment in the United States remains robust. In fact, the U.S. continues to be the single largest recipient of foreign direct investment (FDI) in the world: more than
The AI and algo game is nothing new really. A couple decades ago many called it neural networks and neural computing, and that has evolved into today’s version of AI. But what is different today and so disruptive are three elements that were not there in the early days of machine learning: computing power and cloud-based systems, a growing and global population of computer and data scientists and data. Lots of lots of data.
Those three are increasingly working together in the alternative investments markets space, enabling firms to make much more accurate, and potentially, more profitable investments. The AI topic, discussed at Lendit Fintech USA 2018 conference in San Francisco in April, revealed just how integrated it is already and where it is going in the coming months and years. Listen to the full recording HERE.
The former American Express chief Ken Chenault is backing a start-up company that provides credit scores for immigrants who struggle to rent apartments and access other basic services upon their arrival in the US.
Workers on overseas postings, international students and other newcomers have long struggled to secure credit cards and other loans because American institutions hold no records on them.
Nova Credit, which is among a new breed of Silicon Valley companies seeking to shake up the financial system, aims to address the problem. It has secured funding from General Catalyst, the venture capital group that has stood behind companies including Snap, Stripe and Warby Parker.
For online lenders, small business lending continues to grow into big business. Online lenders continue to grow their originations of small business loans, according to a new study released today by Washington D.C.-based economic research firm NDP.
Alternative financing in the form of crowdfunding may be a trending topic, but it’s hardly new. Mozart used the idea in the 1780s to finance the composition of one of his early piano concertos, offering prospective backers copies of his manuscript in exchange for their financial support.
Why choose alternative financing? Because a lot of great deals may never get done without it. Many banks and other traditional lenders won’t finance transactions valued under $50 million because there’s simply not enough profit in it for them. And, because of the late stage of the current real estate cycle, many other lenders are feeling skittish or are simply tapped out. That leaves a big gap in the financing market — and a big opportunity for nontraditional sources of capital.
Layered Insight announced today that Tim McKnight, EVP & Chief Information Security Officer at Thomson Reuters, and Richard Seiersen, SVP & Chief Information Security Officer at Lending Club, have joined Layered Insight’s Advisory Board.
Renew Financial, the inventor of Property Assessed Clean Energy (PACE) financing and a leading provider of financing for home improvements, today announced that Kirk Inglis, currently Renew Financial’s Chief Financial Officer (CFO), will succeed Cisco DeVries as Chief Executive Officer (CEO) of the company. Mr. Inglis brings more than 20 years of experience in financial services and technology with a deep expertise in consumer lending. His career includes senior finance and operating roles with Calypso Technology, Prosper Marketplace and Providian Financial Corporation. Mr. DeVries will become the company’s Chief Innovation Officer to focus on key growth opportunities and to help innovate new financing tools for clean energy. DeVries will continue to serve on Renew Financial’s board of directors.
ZOPA is hiring its first-ever social media executive in an effort to broaden its customer base.
The peer-to-peer lending platform is currently advertising for a person who can “translate the brand and social media strategy into tangible plans which encompass day to day content, product content and campaign content”.
The role will involve working with the wider marketing and product team, as well as analysing and optimising performance by channel.
LendInvest announced on Thursday it has named firms JMW Solicitors LLP and Lightfoots Solicitors as its first official panel of solicitors for its Buy-to-Let product. According to the online lender, JMW Solicitors is one of the North West’s leading full-service law firms, with significant experience in handling a range of real estate finance cases for both institutional and private lenders. Lightfoots are experts in complex property finance cases and have over 30 years experience providing legal services to mortgage lenders. Both firms are experienced in dealing with introducer-led business, offering dual representation and coverage across England and Wales.
Digital wealth manager Moneyfarm has got £40 million in a Series B funding round – meaning it has secured close to £60 million in capital so far.
Moneyfarm calls this the “largest funding round by a European digital wealth manager to date” and the company, which launched a personal pension (SIPP) in March this year, will use the capital to launch solutions and expand its investment strategy.
The round was led by Allianz Asset Management, the investment arm of global insurer Allianz, which first invested in Moneyfarm in September 2016.
It had been rumored for some time now. Ant Financial, the Chinese financial behemoth, was raising a very large funding round that would value the company at $150 billion. It has been reported extensively today that this funding round has in fact closed. Ant Financial has raised $10 billion at a $150 billion valuation.
For a brief primer on Ant Financial there is a decent summary on their English language websitebut for a deeper understanding I recommend you read Chris Skinner’s new book, Digital Human (the Kindle version is available now). This has a 30,000 word case study that not only shares the history of Ant Financial but also why they are one of the world’s most forward thinking companies. And if you think they are just a Chinese story, think again. Ant Financial embodies the future of financial services and they will, in my opinion, shape the future of financial services more than any other fintech company on the planet.
Dianrong (点融), a leading Chinese online P2P lending service provider today announced cooperation with R3, a global platform specializing in distributed data technology. The Chinese fintech company’s supply chain finance solutions will land on Corda, R3’s open-source distributed ledger.
Dianrong hopes the cooperation will enable the company’s end-to-end service through a comprehensive supply chain and increase efficiency by ensuring transparency. The company’s initiative is to allow micro and small businesses to access credit and financial services.
As of this week, Wisr will increase its personal loan limit from $35,000 up to $50,000, with a comparative interest rate up to 5% p.a. lower than the four major banks.
Loans will be available for any worthwhile purpose over three or five years, with a comparison rate of 9.36% p.a. for borrowers with a strong credit rating. The neo-lender also offers no early repayment or exit fees.
The report analyses the number of mortgages taken out in the 12 month periods to the end of March from 2014 to March 2018, and breaks them into borrower types – first home buyers, investors, people moving house, those staying put but refinancing and those buying a second home.
According to Real Estate Institute of New Zealand figures, Auckland property sales peaked in their current cycle in the 12 months to March 2016, when 30,631 homes were sold.
That number has steadily declined and in the 12 months to March this year had slumped to 21,628, a decline of 29.4%.
Today’s investors are undoubtedly looking at technology-driven startups with a difference. The best illustration here is Flipkart which managed to introduce the right technology-driven models at a time when people had to wait endlessly to buy products of their choice. With Walmart now having acquired majority stakes in Flipkart, more technology-driven models could potentially come to the fore.
The digital wallet company finally integrated its platform with government-owned unified payment interface (UPI) last week. A week later, numbers related to UPI have popped up that has reached a 5 million mark via @ikwik handles, a VPA (Virtual payment address) handle for UPI, according to an ET report.
The platform is also planning to partner with NBFCs to disburse loans to small businesses in the range of Rs 20,000 up to Rs 5 lakh.
South African investment fund Crossfin has concluded a deal with banking and asset management group Investec that will see the two companies identify early-stage fintech startups in which to invest through Crossfin’s angel funding arm Blue Garnet Investments.
The Crossfin fund, which has a particular focus on fintech startups, was formed in June of last year after South Africa-based private equity and venture capital firm Capital Eye and the Multiply Group signed a strategic investment partnership.
Capital Eye manages a portfolio of investments spread primarily across Sub-Saharan Africa, including South African fintech company wiGroup, which Investec has also invested in.
Today, Fundbox, the small business growth company, announced that the company has won the coveted Israeli Atlas Award for Best Fintech Start-Up. For a third year in a row, the 2018 Israeli Atlas Award event was held in cooperation with the Ayn Rand Center, The Marker and such leading partners as, BDI, IVC, Bank Hapoalim and Israel Aerospace Industries. The prize is awarded to those Israeli startups that have created a technology, idea or product of exceptional value in Israel over the past year.
News Comments Today’s main news: Fitch rates Prosper Marketplace Issuance Trust, Series 2017-1. Zopa raises 32M GBP to start a bank. Evolute raises 5.5M Euro. Capital Match hits S$40M originations. Today’s main analysis: Fintech startups hit purple patch, VCs make a beeline. Today’s thought-provoking articles: 80s generation team made a difference. Family offices eye real estate online. United States […]
Why traditional financial service firms have difficulty competing with tech startups for talent. GP:”Talent moves based on quality of work and reward. If you have the opportunity to build something big and get a bigger reward in the same time, it is hard a proposal that is hard to beat. Intellectual workers are more motivated by seeing what they build then by increasing their salary most of the time.”AT: “Talent geared toward risk and innovation will gravitate toward startups. More conservative employees will gravitate toward traditional firms.”
Zopa completes fundraising ahead of bank transition. GP:”We covered this yesterday but we didn’t connect the raise to the bank license. SoFi and Zopa are looking at banks now. Will the rest of the industry wait to see how this goes or follow behind? Lending Club and Prosper used to be the innovators, are they still truly innovating?”
Fitch Ratings-New York-25 May 2017: Fitch Ratings has assigned the following ratings and Rating Outlooks to the notes issued by Prosper Marketplace Issuance Trust, Series 2017-1 (PMIT 2017-1):
–$311,300,000 class A ‘A-sf’; Outlook Stable;
–$70,670,000 class B ‘BBB-sf’; Outlook Stable.
Collateral Quality: PMIT 2017-1 has a weighted average (WA) FICO score of 706, including 28.1% of non-prime borrowers with FICO scores below 680. The introduction of PMI7, the latest generation of Prosper’s credit model, shifted the company’s risk appetite toward lower credit grades. Due to this, Fitch assigned cumulative gross default (CGD) assumptions for the 36- and 60-month loans in this pool of 13.75% and 20.75%, respectively, increased from previous transactions.
On May 31, 2017, Elevate Credit, Inc. issued a press release announcing the Elastic line of credit product surpassed $200 million in outstanding loans. A copy of the press release is attached hereto as Exhibit 99.1.
On May 25, 2017, Massachusetts Attorney General Maura Healey (“Massachusetts AG”) announced a final judgment and permanent injunction entered in Suffolk Superior Court against an unlicensed online auto title lender, permanently banning the company from operating in Massachusetts and voiding over 200 loans made by the company to Massachusetts borrowers. The judgment also prohibits the title lender from repossessing any of the vehicles connected to the loans, and orders the company to pay $1.135 million in civil penalties and nearly $200,000 in restitution.
Figuring out how best to approach fintech has many traditional financial institutions scratching their heads. According to a report earlier this year, almost 60 percent of them are developing fintech capabilities in house. Of these, only 2.8 percent say they’ve successfully embedded innovation into their company cultures. Even “moderately structured” fintech initiatives challenge these companies; less than a third (29.2%) have managed to implement such projects. Building a creative culture of innovation within a large, risk-averse institution is turning out to be a much more complicated problem than many of them expected.
It’s easy to dismiss big financial institutions as slow and sclerotic compared to startups. In reality, it’s not even fair to compare the two. Traditional banking and financial service firms operate under very different constraints and attract an entirely different type of employee. An engineer who is best suited for a startup likely won’t be a good fit at a traditional firm and vice versa.
Open source libraries, modern software design, the availability of cheap hardware, and the support of venture capital have provided the foundation for the current explosion of startups focused on developing financial technology. These attributes make them a big draw, attracting both top engineering graduates, battle-tested coders, and recent MBAs alike.
Lenders Optimistic that Policy Changes Could Benefit the Lending Environment (Altisource Email), Rated: A
A large majority of lenders surveyed (73 percent) believe the new administration’s policies will have a positive impact on the lending environment, according to the 2017 Lenders One® Mortgage Barometer, a survey of 200 mortgage lending professionals.
Lenders are also ready to make investments in their organizations’ business operations. In fact, 42 percent of lenders indicate their biggest investment is in operational changes (hiring new staff, compliance support and software support), and 25 percent of lenders surveyed say they are currently making the greatest investment in marketing. While these investments are necessary for the industry to keep pace with consumer demand, they may also be driving up the cost per loan, with 65 percent of respondents indicating that the cost per loan will continue to increase.
Regulations Don’t Weigh Quite as Heavy on Lenders in 2017
Lenders are ready for new regulatory requirements, such as updates to the Home Mortgage Disclosure Act (HMDA), with two-thirds (65 percent) indicating they are very prepared for HMDA changes. Yet, the biggest HMDA compliance challenge for lenders is around additional resources needed to report transactional data, such as home equity lines of credit (HELOC) and dwelling secured loans for apartments. While lenders are investing in staff and technology, about one-third (32 percent) of them cite challenges with securing additional resources to report, connect and analyze transactional data.
E-closings See Broad Adoption a Decade after Their Inception
Though 39 percent of lenders report they are not using electronic closings (e-closings) on mortgage loans, a third of those respondents expect their organizations to implement e-closings in one to two years, on average. The majority (61 percent), however, say their organization has implemented e-closings while seasoned lenders — those in the business for 10 or more years — are the predominant category of lenders utilizing them (67 percent).
As banks wade into digital advice, they do so knowing they will need to appeal to every stripe of client, rather than a specific niche.
The strategy then calls for relying on an advantage banks still have over virtual competitors and even wealth management firms, says Mark Jordahl, president of U.S. Bank’s wealth management group: meeting clients in multiple channels, including bank branches.
U.S. Bank is one of several institutions that paired with BlackRock to launch a digital wealth platform, and Jordahl says that it is on track to be launched this year.
As financial technology (fintech) startups enhance collaboration with traditional financial institutions to diversify and modernize financial services, a better understanding of how the regulatory environment impacts a company’s operations is becoming increasingly critical.
Two-way conversations: Regulators have set up new initiatives to allow them to engage directly with fintechs. Many of the regulators have designated a single entry point to make it easier for fintechs to open a dialogue.
Both the CFPB and OCC have begun holding office hours for fintechs in New York and elsewhere and have dedicated personnel to fostering engagement with fintechs.
Dissemination of information: The regulators are interested in learning about new technologies to ensure that information about emerging technology is spread throughout and between agencies.
Clear expectations: Regulators are focused on potential operational risks associated with the use of novel technologies and expect financial institutions to meet high standards for the due diligence and monitoring of their third-party service providers, especially around cybersecurity and data security.
No silver bullet: The regulatory landscape in financial services is complex, and there is no silver bullet for the adoption of new technologies.
Using CB Insights database we identified 5 cybersecurity startups to watch that are working on fighting fraud with a mix of behavioral biometrics and machine learning. We selected these private companies based primarily on CB Insights’ Mosaic scoring algorithm, which uses financial and non-financial signals to assess the health of private companies.
Ravelin offers a fraud detection and prevention platform that allows organizations that rely on online payments to automatically examine customer behavior in real-time and identify fraudsters before they do damage.
Simility offers a fraud prevention platform which combines machine learning and data visualization technology with a rules engine to help protect enterprises from fraud.
Shift Technology is a SaaS company designed to detect potential insurance fraud.
Socure’s social biometrics solution helps organizations detect fraudulent users on websites and in mobile applications using machine learning algorithms.
Sift Science provides machine learning software that automatically learns and detects fraudulent behavioral patterns, alerting businesses before they or their customers are defrauded.
In January, the Dow Jones surpassed 20,000 for the first time and the Case-Schiller Housing Index hit all time high at 185.56.
What then is causing the markets to continue to rise? Artificially low interest rates set by the Federal Reserve have allowed for cheap borrowing.
Thankfully there are many great financial technology companies giving individual investors new ways in which to diversify away from traditional markets.
Peer-To-Peer Lending: Lending Club and Prosper built the first platforms to directly invest in consumer loans. Low interest rates policy means low fixed income returns in the bond market. Peer-to-peer lending is one of the few fixed income investments left to obtain 8 percent plus in returns.
Family Office Networks announced today the launch of a new division in Los Angeles led by local resident James R. (Jim) Hedges, IV. Family offices, high net worth individuals and the top advisors who serve them are invited to join the Los Angeles Family Office Association, which will host events on a regular basis across Los Angeles. The group will celebrate its local kick off with an exclusive, invitation-only networking event this summer at the Beverly Hills Hotel.
The Los Angeles Family Office Association (losangelesfoa.org) will serve one of the most intellectually astute family office regions in the country. The group is designed to serve the extremely accomplished single and multi-family office community by creating an environment in which to share intellectual capital, leverage their years of industry expertise, and bring unique industry-generated deal flow and opportunities.
ZOPA has closed a £32m investment round led by Indian financial conglomerate Wadhawan Global Capital (WGC) and European venture capital fund Northzone, following which WGC’s chairman will join the peer-to-peer platform’s board, the firm confirmed on Thursday.
Kapil Wadhawan will join the consumer lender’s management board to help lead its transition towards a double-operation model comprising new banking propositions such as credit, savings and insurance products.
Zopa’s plans to become a “next-generation bank”, which first emerged last November, will enable the firm to expand its product range to service UK consumers more thoroughly.
The board of the £358m VPC Specialty Lending Investments fund is introducing a hurdle on its performance fees payable to its investment manager Victory Park Capital.
The new hurdle, which came into effect from 1 May 2017, means the payment of the performance fee to the investment manager will be conditional portfolio achieving at least a 5 per cent per annum total return for shareholders. This will be relative to a high water mark starting from 30 April 2017.
ALMOST 40 per cent of Growth Street’s investors are under 35 years old, research from the peer-to-peer lending platform showed.
The firm, which channels funds to small- and medium-sized enterprises, said that 37.5 per cent of its retail lenders are 35 years old or younger, contradicting recent criticism that millennials lack savings and investment skills.
More than a third of UK adults (37 per cent) have not saved or invested a penny in the last three months, according to a quarterly tracker launched by RateSetter this month.
On average, people put away £211 each month in the last quarter.
Men saved significantly more than women over the period (£246 a month, compared to £175).
25-34 year olds put away the most over that period (averaging £245 a month), followed by those of retirement age (£228 a month – aged 65+). Younger adults, aged 18-24, put away the least (£141 per month).
One in five (19 per cent) say that they currently have no savings at all, and two in five (43 per cent) no investments.
Average total savings and investments stand at £17,811 and £20,138 respectively.
Fintech firm Red Deer has partnered with brokerage firm Westminster Research Associates to provide what they describe as an end-to-end Mifid II solution for the asset management industry.
The two businesses will offer research valuation and payments solution that meet Mifid II regulatory requirements around research consumption and valuation—whilst at the same time improving operational efficiencies.
Several years ago, the best-selling book “Rich Dad Poor Dad” convinced people that a person knowing how to invest would be the winner of his life. If we see this as a criteria, then Yang Li, the founder of Xeenho, would be a “winner” already in young age. At his time in 2012, Yang Li was still pursuing his PhD at Central South University. Due to his research in P2P projects, he became considered as the “master of investment” by his friends and family,and even started investing their money for them.
P2P finance started to grow in China around 2008, but did not become well known among the public until 2012. Suddenly, individual investors discovered that the internet also could serve as an instrument for financial investment, allowing them to lend their money to other people for a financial return. This became attractive, especially as P2P companies started to promise clients over 10% returns. However, due to the large increase in number of platforms and lack of good practice, many scandals and bad press arose, consequently bankrupting a lot of the P2P platforms or getting them shut down. In addition, most P2P platforms were run from tier-1 cities, such as Beijing, Shanghai, Guangzhou and Shenzhen, far away from investors in sub-tier cities, i.e.borrowers and lenders on P2P platforms were located in areas with different capital needs and risk tolerance.
Although Yang Li researched P2P platforms from an academic perspective, he discovered a golden business opportunity, as there was an obvious demand from individual investors for professional investment advice. At the same time, the market for online investment advisory was just in its infant stage, with no players offering Robo-advisory services for investors, consequently a whole untapped market full of opportunities.
Yang Li founded Xeenho in 2014, a financial asset management platform, which evaluates P2P platforms risk profiles, and re-packs P2P assets into their own low-risk portfolio. He chose to headquarter Xeenho in Changsha, Hunan province, a second-tier Chinese city, with a clear purpose: “Since there are no financial institutions locating their headquarters in Changsha, many students cannot find a financial job in the city after graduation. They can only work in marketing or other areas.”
At that time, Yang Li only had one other partner, the co-founder Huang Zhenyu. The third co-founder Yang Xue, was still working with a large financial institution in Changsha, but realized that in order to advance in her professional development in her current company, she would have to re-locate to another province. Yang Xue and Yang Li studied their PhD together, and through her work experience she has developed a unique understanding of financial risk management. Yang Li finally managed to persuade her to join after many attempts, and as they already had known each other for many years, trust was already established between them.
Another key member of the team, Ding Yan, used to be a researcher in a listed company in Hengyang, Hunan province. She was not only a classmate to Yang Li before, but also his partner in several math contests. Consequently, she was an obvious choice when built the team.
Although Xeenho has strong theoretical know-how, the reality of building a company is tough with everyday ups and downs. Yang Li nicely told this with his anecdote of a special day. On the 2nd of May 2015, when his daughter was born, Xeenho also experienced a huge increase in number of fake users signing up to receive the registration reimbursement promoted through 10 RMB digital ‘Hongbao’s’, attracting thousands of new users daily. During normal days, this number was normally under 100. The fast increase offake users coupled with the inadequate marketing cost of acquiring them, forced Xeenho to start doing fraud assessment on each new registered manually by phone.
Xeenho’s business may look simple on the outside, but is actually complex looking under the hood. Through Xeenho’s platform, investors are introduced to and guided to the right P2P asset investment for their specific requirements. Compared to registering directly on a single P2P platform, Xeenho’s approach has several advantages. 1) Each asset package is composed of a range of P2P platform assets, which diversifies their portfolio and reduce risk. 2) Xeenho conducts in-depth research and risk management of each platform listed on their platform, in order to detect sudden changes and give investors first-hand information to lower their investment risk. In other words, Xeeno serves like an investor risk management assistant, which they are also earning commissions for.
This comes with a certain operational complexity, as Xeeno has to deal with more than a thousand different P2P platforms, on a real-time information basis. If investments has to be withdrawn from a platform, they need to monitor the original creditors’ rights and debts from the packaged assets. This is the core value of Xeenho, to have first-hand information before any retail investor in regards to debtors and P2P platforms.
Swiss fintech startup Evolute has raised €5.5 million in Series A financing. The investors were not disclosed. Evolute has also just been accepted into the Swiss Startup Factory’s Growth Accelerator Program.
The company says the new capital will be used for further development of its wealth management platform, and to develop more innovative technologies for personalized portfolio optimization.
Mastercard announced Monday (May 29) that Russian financial firms working within the collaborative FinTech acceleration program Fintech Lab has chosen 12 FinTech startups they plan to mentor and guide through the program.
A new generation of tech-savvy investment officers are providing family offices with access to buoyant global property markets via new innovative online real estate portals, says Emmanuel Lumineau, chief executive at BrickVest, the London-based online real estate investment platform.
Maintaining wealth across generations has always been a complex task and the fallout from the financial crisis of 2008 resulted in many family offices focusing upon avoiding risk. Preventing the permanent loss of capital, counterparty and credit risk and a lack of liquidity have been an ongoing concern in the family office sector in recent years. There are about 3,000 single family offices globally, at least half of which were set up during the past two decades, according to a white paper published in 2014 by Credit Suisse. Administrative family offices are estimated to have assets of between $50 million and $100 million US dollars, according to the Zurich-based investment bank.
Family offices and high net-worth investors – with €8 billion of assets – make up the bulk of investors using the platform. These investors are poised to deploy €300 million on the platform over the next year, primarily in European and US real estate. The BrickVest platform has attracted about 200 real estate sponsors with €170 billion of assets under management.
Gregoire de Lestapis has left traditional banking, most recently the direction of BBVA France, for the world of fintech entrepreneurship. In 2016, he joined Lendix, the French SME lending group, as head its Spanish subsidiary and member of the executive team.
Spain is home to very large banks and has among the highest density of commercial bank branches in Europe, why did Lendix decide to enter this overbanked market?
Firstly, the rapid consolidation of the Spanish banks after the financial crisis of 2008 has fractured the relationship between SMEs and their bank.
The credit crunch that followed the crisis made many otherwise viable SMEs bankrupt. Scandals such as the abusive practice of the “floor lending rate clause” emerged. SMEs felt betrayed. The shock was all the greater as they were completely dependent on banks.
Secondly, regulatory requirements such as Basel II are making it less profitable for Spanish banks to serve SMEs. They would prefer to limit their exposure to 25% of the overall liabilities of a given SME.
The third point is that Spanish banks’ credit processes are still very inefficient.
Contrary to what the term “alternative lending” says, we don’t view Lendix as an alternative to banks. All our customers, lenders as well as borrowers, have one or several established banking relationships. Our strategy is to position our offering as complementary to banks’.
What about the competition from other SME lending marketplaces?
Isn’t the Spanish default rate of business loans quite high?
Indeed, the default rate has steadily decreased from its peak of 13%, but it remains high at 8%. We are therefore very cautious. However, the main cause of defaults was the real estate sector. Outside of this sector, the default rate is much lower. Spain’s GDP growth rate is a solid 3% per year.
Olivier Goy, the founder and CEO of Lendix talks about the company’s international expansion as being multilocal, can you explain?
What mutilocal means is that, while sharing the European goal, vision and values, local teams are on the ground and fully immerse themselves in the local context. They make sure that the company respects local regulations. For example, a Spanish retail investor can lend a maximum of €3,000 per project and a total of €10,000 per year, whereas there is only a limit of €2,000 per project in France. As we enable French, Spanish and Italian investors to lend across borders, implementing these different thresholds is quite challenging.
A VCCircle analysis shows that since the beginning of the year, at least 24 fin-tech startups have raised venture funding. And the inflows have been well-distributed across the broader fin-tech space—while digital wallet firm Paytm may have got the biggest slice of the funding pie, raising a whopping $1.4 billion from SoftBank, online lending and payment gateway startups are also hot in terms of investor interest.
Wealth and expense management, financial advisory and investment platforms have also managed to raise capital over the last five months.
The most recent one was US-based Ebix Inc. acquiring an 80% stake in India’s ItzCash Card Ltd for $120 million (Rs 778 crore), a move aimed at gaining a foothold in India’s fast-expanding digital payments market.
Rahul Chandra, co-founder and managing director at Helion Venture Partners, is looking to raise $100 million for early-stage fund Unitary Helion. Rahul Chandra, co-founder and managing director at Helion Venture Partners, is looking to raise $100 million for early-stage fund Unitary Helion.
Banks are no longer fighting financial-technology startups, instead they are gaining from them in terms of acquiring more customers and reducing operational costs leading to a flurry of partnerships in recent months.
RBL Bank, which has partnerships with more than 90 startups, has been able to acquire 30% of its total 2.8 million customers through these tieups, said Rajeev Ahuja, head of strategy retail and financial inclusion at RBL Bank.
MoneyTap, a startup that has tied up with RBL Bank to give lines of credit to customers, was able to bring 2,00,000 users to the bank through downloads of its app, chief executive Bala Parthasarathy said. The app targets the lower-middle income group and offers chatbot tech to be the “front end of the bank”, he said.
Another bank to have seen significant impact from such partnerships is Yes Bank, which acquires nearly 20% of its customers through digital channels, such as through its partnerships with PaisaBazaar and Niyo.
Indian online P2P lending platform Faircent.com announced a new semi-secure student loan product in collaboration with Bangalore-based micro-lending startups. Lenders ay also opt for a partly-secured alternative-investment opportunity that delivers a higher return. Under the partnership, college students may fund purchase of items such as laptops, books and smart mobile, by registering their loan requirements on the platform at a “reasonable rate” with a flexible loan period ranging between 6 and 36 months.
News Comments Correction: In yesterday’s Lending Times, March 21s 2017, we have stated that the reason why Lending Club recently increased borrowing rates was due to an increase in defaults. In fact, Lending Club is matching the US FED central rate increase and plans to continue doing so. We, in fact, believe that this is the […]
Correction: In yesterday’s Lending Times, March 21s 2017, we have stated that the reason why Lending Club recently increased borrowing rates was due to an increase in defaults. In fact, Lending Club is matching the US FED central rate increase and plans to continue doing so. We, in fact, believe that this is the proper decision in order to keep the investors attracted to this investment.
Prosper reports wider loss on loan slowdown. GP:” The story here is that in 2016 Prosper revenues came down by 33% while expenses rose by 11%. In the same time Lending Club and OnDeck also lost money. A few thoughts: 2016 was a change year for the industry and Prosper who changed board members, CEOs, CFOs. So the Prosper team were aware changes were needed and they are in place. The second part is that it’s unclear at what scale Prosper needs to be to be profitable. Do they need to originate $2bil per year as they did in 2016 , $20 bil or $200 bil? Zopa and other companies showed that in the billions the scale is enough for profitability. Therefore I think it’s fair to expect 2016 to have been the transition year and 2017 to be the poster child year where Prosper and their competitors probably break even.” AT: “Huge drop. Maybe next year will be better for Prosper since payments on its 2013 settlement of a class action lawsuit were to end after three years.”
SoFi inks office lease in NYC. GP:” SoFi is clearly hiring in NYC or will very soon. If you read Lending Times and are looking for your next opportunity perhaps you should email them a CV and you may beat the crowd.”
Jilliene Helman on the future of investing. GP:” RealtyMogul has 110,000 investors on the platform. To me that seems very valuable beyond real estate investing. These investors probably need also fixed income and other asset classes allocation.” AT: “Mostly about RealtyMogul.”
Carrefour launches online banking service. GP:” Possibly this is a play for a cheap source of capital for Carrefour? Would US retailers be interested for something similar? How about a fintech startup to help any large corporation launch an online bank? “
San Francisco-based Prosper reported an annual loss of $118.7 million, compared with a loss of $26 million for 2015. The company said the bigger loss was due to lower loan volumes and higher costs related to restructuring efforts and a legal settlement.
Prosper’s loss compared with $85.5 million red ink for 2016 at online small-business lender On Deck Capital Inc. and a $146 million loss at online consumer lender LendingClub Corp.
Prosper’s loan volume fell 41% to $2.2 billion as a result of money managers “pausing or significantly reducing” their purchases of the company’s credits,” according to the filing. Prosper makes money mostly from fees it charges borrowers who take out unsecured personal loans, and the slowdown contributed to revenue falling by one-third to $132.9 million.
Fitch Ratings-New York-20 March 2017: Fitch Ratings has taken the following rating actions on Citi Held for Asset Issuance 2016-PM1 (CHAI 2016-PM1), which is backed by marketplace loans originated via the Prosper platform:
–Class A upgraded to ‘Asf’ from ‘A-sf’; Outlook Stable;
–Class B upgraded to ‘BBBsf’ from ‘BBB-sf’; Outlook Stable;
–Class C affirmed at ‘Bsf’; Outlook Stable.
CE and Liquidity Support: Hard CE for class A, B, and C is 52.7%, 39.4%, and 17.3%, respectively. Liquidity support is provided by a non-declining reserve account, which is currently 0.84% of the pool balance. While subordination available to the class A and B notes will grow as the transaction pays down, overcollateralization (OC) is at its target release level of 16.5%, and will not grow until it hits its floor of 2% of the initial balance ($6.29 million). In addition, a growing proportion of the OC consists of delinquent assets. As a result, the class C notes are particularly exposed to defaults occurring later in the transaction life, which is currently the key constraint to their ratings.
Lending Club has made the process easy if you use TurboTax to file your taxes. They have dedicated part of the help section of their website to outline the step by step process of how to accomplish the import. If you’re not a TurboTax customer, Lending Club has provided a 2016 update to their Tax Guide for Retail Investors.
My 1099-B shows proceeds of $151.17. This is the total amount of proceeds I received from charged off loans. The “Cost or Other Basis” is the cost basis for the loans that have charged off. If you take any proceeds and subtract it from the basis you calculate the losses which is broken down by loan in the tax statement and also totaled at the bottom. In my case I had $366.62 short term losses and $980.52 long term losses totaling $1,347.14 in total losses for the year.
Generally, gains and losses from recoveries, sales or charge-offs related to Lending Club Notes are reported for tax purposes as capital gains or losses, rather than ordinary gains or losses. Generally, Lending Club Notes are considered capital assets because they are owned for the purposes of investment (similar to a stock or a bond).
Filing Taxes on Prosper Loans
Filing your taxes if you’re an investor on Prosper is similar to that of Lending Club. Your Prosper tax documents can be found by clicking on “History” under your name. Next, click “Statements”. Prosper provides each document separately instead of a consolidated report. In my case I received a 1099-OID and two 1099-B documents (one for short term and one for long term). Prosper breaks down what documents you will receive on the help section of their website.
My 1099-OID outlined the interest received of $1,226.42 and below that is my 1099-B outlining proceeds and losses from charged off loans. Although these documents look different than the ones Lending Club provides, the information and how it should be reported on your taxes is the same.
Capital losses first offset capital gains. With no capital gains, the losses will be deducted from ordinary income. Depending on your ordinary income tax rate, this means that your capital losses may be offset first by long-term gains that have more favorable tax treatment, usually 15% (depending on your income), as opposed to your potentially higher ordinary income tax rate. Short-term gains on the other hand have a higher tax rate, similar to the ordinary income tax rates (see Capital gains tax in the U.S.).
The $4.3 billion startup inked a lease at the Meatpacking District’s 860 Washington Street covering the full second floor, which sits level with the High Line and the millions of visitors who traverse the trendy park each year, sources told The Real Deal.
The 10-year lease covers 13,000 square feet of space in the 10-story building developed by Property Group Partners and Romanoff Equities, with 280 feet of frontage along the High Line and West 13th Street. Asking rent in the deal was $155 per square foot.
It’s almost always close to the top of the list when companies are seeking advisors to help them out with deals. And it’s not just wealthy and powerful corporations that beat a path to its door. The wealthy and powerful individuals that run them also seek its advice when it comes to their personal finances.
There are a lot of people lower down the food chain that might quite like the idea of showing off about the performance of an investment portfolio created for them by Robo Sachs. Yeah, this new set of golf clubs? Robo-Sachs came through for me. You should try it!
However, a lot of finance houses are working on similar projects, so if Goldman is planning to create Robo Sachs to advise the mass market, it wouldn’t be alone.
Since the Great Recession, snapping up prime real estate in coastal American cities, sometimes sight unseen, has become an increasingly popular sport with China’s wealthy. In 2014, for the first time, the Chinese bought more Manhattan apartments than did the Russians, according to Reuters. The strength of the U.S. dollar compared to the fragile yuan is making China’s middle class a major force in the Brooklyn real estate market. The existing cultural infrastructure of its Chinatowns aside, the potential profit margin of owning property in Brooklyn’s up-and-coming areas is hard to beat.
Despite the $50,000 cap, China’s foreign direct investment in the United States hit a record $45.6 billion in 2016, according to a report by the Rhodium Group, a policy group that tracks global economic trends. That figure is triple the recorded amount of FDI that flowed from China to the United States in 2015, making the United States the world’s largest recipient of Chinese foreign direct investment.
For Chinese real estate investors who can’t reach the $50,000 level, or the combined $500,000 that often leads to working with a broker, smaller sums can now be invested through real estate crowdfunding platforms.
Cross River today announced the appointment of David Cotney to the bank’s Board of Directors. Mr. Cotney joins a team of experienced banking, regulatory, business and technology leaders who work with Cross River’s executive management team to provide the bank’s strategic direction and regulatory compliance framework.
Mr. Cotney holds a Masters of Public Administration from the John F. Kennedy School of Government at Harvard University, and an MBA from Boston University. He is a graduate Tufts University where he earned a BA in Political Science.
Crowdstacker, a peer to peer lender that has received the necessary regulatory approval and is offering the IFISA, says that recent research indicates that about half of investors have never heard of an IFISA.
Crowdstacker found at the top of the list of investment priorities included fixed income (17%), the opportunity to self-select how and where their money is invested (18%), and tax efficiency (24%). About 50% of savers are unaware of IFISAs with 29% uncertain as to what an IFISA is (but may have heard the name) and 5% indicating they understand the IFISA well enough to explain it to others.
Tandem, which is set to launch in the coming months as a mobile app-based bank, was due to receive £29m from House of Fraser, the UK department store chain that was bought by China’s Sanpower Group in 2014.
However, the bank said on Monday that House of Fraser had pulled its funding due to “uncertainty about whether China’s State Administration of Foreign Exchange would approve the transaction”.
Tandem said it was still planning to unveil its app in the coming months, with the aim of helping people manage their money by categorising their spending. The bank is planning to offer credit cards later this year.
A many-to-many model that works well and in which – much like the US experience – the lender base has changed quite a bit since it started. These online exchanges mostly appeared following the 2008 financial crisis to alleviate the shortfall in lending to individuals and were viable as a result of low-cost technology and fair margins. P2P today embraces lending to SMEs, student loans, personal credit and real estate lending.
Relendex launched its platform in 2013, so can claim to be one of the veterans. When platforms first start, they need to attract retail lenders (individuals) because institutions aren’t interested in these platforms until they scale up.
In the US, Lending Club started out with only retail lenders: the man or woman in the street looking for a return on their capital. Eventually the institutions began to take an interest in the space, and for good reason. First, the returns were good (averaging around 9% back then). Second, there was a good portfolio spread across thousands of personal loans (mostly from refinanced credit card debt) and the institutions didn’t need to do any administration to achieve that return. What’s not to like?
In the UK, that trend towards institutional lenders has also become evident. Some platforms even have the UK government or local authority funds as co-lenders. Investment trusts have been created just to lend through P2P platforms.
RATESETTER is among the latest round of firms to sign up to the government’s Women in Finance Charter, which aims to tackle gender inequality in financial services.
The ‘big three’ peer-to-peer lender is one of 122 firms that have now signed up to the Charter, employing over half a million people in the UK and covering almost 50 per cent of the financial services sector.
RateSetter is the second P2P lender to sign up to the Charter, alongside Landbay who joined last year.
Ireland’s fintech community is set to expand as social payments firm Circle announced plans to double its Irish workforce, while US firm Kabbage said it intends to base its European headquarters in Dublin.
Kabbage, a Georgia-based online financial technology company that provides funding through its automated lending platform, on Tuesday confirmed plans to set up shop in Ireland after one of its key investos secured a €50 million investment from a major State fund.
Separately, digital currency start-up Circle is to double staff numbers at its Dublin office over the next two years following a 300 per cent quarter-on-quarter increase in new customer acquisitions in the wake of its recent international expansion.
French retailer Carrefour on Tuesday joined the crowded French online banking field with the launch of C-zam, a current account for anyone over 18 that can be opened on presentation of two identity cards and activated online in 10 minutes.
Plassat said this month that Carrefour targeted a group business volume of 4 billion euros ($4.3 billion) from E-commerce by 2020 against 1.2 billion in 2016.
Good news for thousands of online merchants in the U.S., U.K., and several other European countries, as they can now offer instant financing options to their customers courtesy of an integration between Klarna and Shopify.
Depending on the particular country involved, these options include flexible or fixed rate monthly payments, promotional interest rates and in Europe, the chance to delay payment for nearly 14 additional days at no extra cost.
According to PaymentsSource, countries include the U.S., U.K., Austria, Sweden, Norway, Finland, Denmark and the Netherlands.
Moody’s Investors Service says that the marketplace lending sectors in both China and the US have shown differences in their development and prevailing characteristics, while both have also experienced a string of governance and misconduct issues over the past two years that have marred investor confidence.
Moody’s Investors Service says that the marketplace lending sectors in both China and the US have shown differences in their development and prevailing characteristics, while both have also experienced a string of governance and misconduct issues over the past two years that have marred investor confidence.
In China, marketplace lending ABS may be exposed to commingling risk, while in the US, deal structures include features to mitigate such risk. In addition, in China, such ABS are exposed to set-off risks, while in the US, such risks do not exist.
Furthermore, peer-to-peer (P2P) lending is still a significant part of the Chinese marketplace lending sector, but less so in the US.
News Comments Today’s main news: SoFi among largest mortgage originators. SoFi Superbowl ad caused 100x in traffic. Prosper launches seventh-generation credit model. AssetAvenue stops originating. XOR Data Exchange raises $2mil Today’s main analysis: Comments on OCC National FinTech Charter Today’s thought-provoking articles: D+H launches auto lending platform. United States Fitch adds SoFi to originator assessment list. GP:” To me the interesting […]
Fitch adds SoFi to originator assessment list. GP:” To me the interesting news here is that SoFi is among the top retail mortgage originators. One usually thinks of SoFi as a student loan company. Now we should think of them as a two-headed … rocket?” AT: “This signifies more than the alternative lending industry getting mainstreamed. It could actually be evidence that SoFi itself has crossed over into traditional finance.”
Proposed OCC charter comments & feedback. GP:” I believe most of the comment are encouraging and positive. This OCC charter is needed.” AT: “The comments from industry insiders and top influencers are instructive. It seems the alt lending climate is ripe for regulation, but the right kind of regulation.”
Prosper launches seventh-generation credit model. GP:” It is normal to see lenders modify and update their lending models. As the borrower population changes regularly as a function of the marketing channels the models also need to keep being updated.”
Dead end for AssetAvenue? GP:” Finding lending capital and borrowers in a competitive space is difficult and one needs a real differentiation in product, team, market, technology, or something else.”
SoFi, et. al. bet on Super Bowl overtime ads. GP:” It sound to me like a free option from Fox. Why wouldn’t you buy this? Somebody at FOX messed up. ” AT: “This was a huge gamble that paid off for SoFi. I applaud their ‘thinking outside the dome’ aproach to mainstream advertising.”
Fitch Ratings added SoFi, also known as Social Finance, to its special report containing operational assessments of U.S. residential loan aggregators and originators, along with six other entities.
The update to the special report marks the first update since the report was last published in July 2016, bringing the total number of entities covered in the report to 31.
Fitch notes that because SoFi is now one of the largest online residential mortgage retailers, it deemed it prudent to expand its prime coverage by completing an operation risk review of the SoFi residential mortgage origination program.
The report added that as of Sept. 30, 2016, SoFi originated $7.9 billion in student loan refinancing, $3.3 billion in personal loans, and $900 million in prime jumbo mortgage loans.
Last December, the Office of the Comptroller of the Currency (OCC) – part of the Department of Treasury- proposed a “National Bank Charter for Fintech Companies”. The exploration stirred up a hornet’s nest of public officials that were not too pleased the OCC would think outside the box about financial innovation. The deadline for comments was January 15, 2017, and have been made publicly available here.
Below are some anecdotal excerpts from almost 100 comments posted online.
“We applaud the OCC for its work to support this responsible innovation. The proposed special purpose national bank charters present marketplace lending with an additional path to continue to grow and serve consumers and small businesses nationwide more efficiently, fairly, and affordably.”
“As OCC considers the issuance of a special purpose national bank charter, it should, no doubt, consider how the recipient addresses, or plans to address, financial inclusion. The financial inclusion topic is likely unfamiliar and new to many of the firms potentially examining the OCC chartering process. In that regard, firms new and old would benefit from additional guidance on OCC’s working definition of “financial inclusion,” how firms will be scored against OCC’s financial inclusion framework and what those firms should proactively focus on as they approach OCC for initial exploratory conversations.”
“We believe that, from a public policy perspective, it is far better for financial services regulators to be active participants than onlookers. Protection of consumers, small businesses, and the financial system itself will be more effective if carried out by supervisors who are fully informed and knowledgeable.”
“By encouraging the growth of responsible, compliant online lending platforms, such as Avant, regulatory agencies can help encourage beneficial competition in both the online and traditional lending industries generally. This will lead to more lending opportunities for borrowers and ultimately lower rates and better pricing for consumers.”
“As someone without a background in finance what struck me when I began learning about this industry was how inefficient it was. With 50 states, many of which have their own licensing, fee and interest rate requirements, there was no way for an online platform to operate in a uniform manner. With all the advances in technology, I would have thought that financial intermediation would have become many times more efficient.”
Peter Renton, Co-founder and Chairman, Founder and CEO, LendIt Conference LLC Lend Academy LLC
Prosper Launches Seventh-Generation Credit Model (Prosper Email), Rated: AAA
Prosper recently launched their seventh-generation credit model. The net return of the overall book has increased to an estimated 7.86% after the implementation.
While most of its rivals embrace the hybrid model of combining digital advice with human advisors, robo-advice pioneer Wealthfront is bucking the trend by offering even more automation, Reuters writes.
The company is introducing an automated financial planning tool that connects its clients’ outside accounts to track spending and savings to assist with retirement planning, according to the news service. Using a mobile app, clients can then get projections on what they’ll have to save to meet their retirement objectives, Reuters writes.
Crowdfund Insider received a tip this past week that real estate crowdfunding platform AssetAvenue has stopped originating loans. Emails to the company have not been returned, and repeated attempts to contact AssetAvenue by phone have not been successful. Portions of the AssetAvenue site now generate a 404. AssetAvenue social accounts have not been updated in months. A post on BiggerPockets from several months back indicated that a potential borrower had been told they were no doing any funding.
Attune, the data-enabled company established by American International Group, Inc. (AIG), Hamilton Insurance Group, Ltd. (“Hamilton”), and affiliates of Two Sigma Investments, LP (“Two Sigma”), today announced that James Hobson, Chief Operating Officer of OnDeck® (ONDK), has accepted an offer to assume the position of Chief Executive Officer.
Mr. Hobson, who will step down from his role at on March 15, will be responsible for achieving Attune’s goal of using data science and advanced technology to streamline the submission and insurance underwriting process to meet the needs of small businesses in the US.
XOR Data Exchange closes $ 2M Series A Extension (XOR Data Exchange Email), Rated: A
This morning XOR Data Exchange closed a $2M extension of our Series A to support some big contracts and development work I’ll be announcing soon (some at LendIt). This extension is important to us because it represents the confidence of our investors in our business model and the work we’re doing. Here is a statement from our CEO regarding the close:
We’re grateful for the support of our investors as XOR continues to grow and address bigger industry challenges in 2017. The majority of this $2 million extension comes from our existing Series A investors, which speaks to their confidence in our business model and the innovative approach to data sharing we have employed with our clients and partners. This additional funding will allow XOR to distribute its fraud and credit risk models across the U.S. through strategic partners in order to bring security and accountability back to the companies that rely on our personal information. It’s going to be an exciting year for XOR Data Exchange and we’re thankful for the support of our community and the industries we serve.
Mike Cook, Founder and CEO, XOR Data Exchange
XOR Data Exchange raised $4.2M in its Series A round led by Fenway Summer Ventures. Details at Crunchbase.
Patrick T. Harker, President of the Federal Reserve Bank of Philadelphia, delivered a speech today on Fintech innovation and the importance of regulation. Harker stated that regulation is not only about protecting consumers but it is important to protect innovators as well;
“It’s in their best interest to have an established framework in which to operate,” said Harker.
Recently there has been much discussion about emerging Fintech firms, more pointedly with online lenders and bank alternatives.
Mentioning online lending Harker said;
“Peer-to-peer lending has been going on since time immemorial. What makes Fintech different is that the scope of its ability to match people with one another is infinitely broader.”
Credit Peers is today launching its innovative new business – an online lending platform which allows individuals to lend from £500 upwards for property transactions that were previously only available to institutions and banks.
Recent research undertaken by Credit Peers amongst 1,000 consumers found that 59% trust their bank less than they did a year ago. 44% of respondents are looking for the rate of return on their investment to be between 5-10%*.
UK consumers are extremely open to property as an investment option, with 65% stating that they would like lenders to invest their money into property or real estate, almost double the next most popular options – stocks and shares (33%) and commodities (33%)*.
Credit Peers only deals with professional real estate investors and developers as borrowers, and implements strict lending criteria.
DH Corporation (DH) (“D+H”), a leading provider of technology solutions to financial institutions globally, today announced that it is onboarding its first major automotive captive client on CollateralGuard Enterprise (CGe). The client, which boasts significant market share in Canada, will use CGe as part of its standard lending due diligence process.
CGe, D+H’s next generation search and registration solution, is a risk management technology platform for lenders, which provides a single point of entry to registries across Canada, streamlining all search and registration transactions.
CGe is a scalable platform that leverages the Microsoft technology stack, a combination of tools including Azure, which enables testing, development and agility in a secure environment.
Consumer lending is very different in Japan. Loans to individuals only make up six percent of social lending, according to Crowdport’s research. It is easy to find a one to three percent loan from a bank so the prospect of crowdfunding is less appealing.
From 2015 to 2016, the total amount raised through social lending funds grew 71 percent from around US$300 million to well over US$500 million, according to completed fund data gathered by Crowdport from each lending platform.
Crowdport launched last week and currently is the only service in Japan which compares all 18 Japanese social lending services. Users can sort by company, investment genre, and availability of collateral, as well as filter funds by interest rate and payback period.
News Comments Today’s main news: Lending Club CTO resigns. Higher financing cost expected to be pushed to the borrower. Zopa lifts investment limits. Nigeria fintech startup Paystack raises $1.3M in seed money. Today’s main analysis: Novel underwriting criteria by SoFi in RMBS leads to a strong rating. Statistics of lending between friends and in families. Today’s thought-provoking articles: The rise […]
The rise of insurtech in the age of algorithms. GP:” I also agree that insurtech is the next frontier for fintech.” AT: “This is probably understated. Insurtech will be the next big splash in FinTech and likely will go on to be bigger than mobile payments.”
Zopa lifts investment limits. GP:” I didn’t expect this to last long. It did get Zopa some nice press. And I am glad it didnt’ last long. If it had lasted too long it would have been a bad sign.”AT: “That didn’t last long.”
25% fall out with friends over loans. GP:” Very interesting statistic : 1/4 or so of friends have a fall out over money. And 3/4 of UK people polled lent money in the last 12 months and 4% lent more then 5,000 GBP. Inside friends and family loans estimated to 2.9bil GBP per year.”
PeerIQ Weekly Industry Update (PeerIQ Email), Rated: AAA
In a widely expected move, FOMC officials increased the Fed Funds rate by 25 bps to a target range of between 50 and 75 bps. Higher financing costs on warehouse lines will reduce net interest margins for whole loan investors unless there is a commensurate rate increase for borrowers. Platforms are expected to pass on some or all of the increase in borrowing costs to consumers to demonstrate the resiliency of the business model to small changes in interest rates.
Much like the beginning of 2016, Fed officials expect several rate increases in the new year as the economy approaches full employment. However, we note that over the life of the current expansion officials have consistently over-estimated the pace of GDP growth and inflation and therefore the pace of rate increases has been slower than expectations.
We highlight two important benefits from issuer’s perspective for QM designation. Issuers are 1) insulated from claims and defenses by borrowers due to safe harbor, and 2) are not required to retain 5% of capital structure per the credit risk retention rule. Nevertheless, SoFi intends to retain risk in the transaction.
Collateral Quality of SFPMT 2016-1 is One of the Strongest in 2016
Unlike traditional RMBS underwriters, SoFi incorporates additional criteria such as Free Cash Flow (FCF) and Real Excess Cash Flow (REC) into its underwriting process. REC measures a minimum residual income after payment of housing expenses, taxes, debt obligations, and estimated discretionary and cost of living expenses based on the borrower’s location. SoFi assesses the borrowers’ liquidity position to ensure that they have consistent cash excess including their mortgage payments.
Besides this novel underwriting criteria, SFPMT 2016-1 also has a number of strong collateral characteristics that mitigates potential credit risk. For instance, its collateral pool has one of the lowest weighted average loan-to-value (LTV) and debt-to-income (DTI) ratios amongst recent prime jumbo deals.
Fed Fund Rate Hike led to Wider Pricing for SFPMT 2016-1
The Federal Reserve on Wednesday sent its key short-term interest rate up by a quarter of a percentage point. FNMA 30yr conventional loan pool with 3.0% coupon trades around at 3.3% yield today vs 2.6% yield a month ago. Due to the recent interest rate hike and other factors, SFPMT 2016-1 was priced wider than other recent comparable transactions. For instance, the Sequoia deal SEMT 2016-3 was priced over 100 basis points tighter over a month ago due to changes in the rate environment and other factors.
Many banks were quick to announce an increase in their prime lending rates, and while we expect that some online lenders will follow suit, as of this writing we have not seen similar announcements. While 2016 has been a turbulent yearfor some online lenders, we expect the acceleration in positive deals and increased interest from traditional lenders looking to participate in the space will continue into 2017.
It may take time and regulatory easing for depositories to emulate organizations like SoFi in transitioning to a “FICO-free” credit scoring model, but there is definite merit in leveraging alternative models to tap into a significantly underserved (yet creditworthy) segment of the population. Developing an alternative credit score or leveraging existing models enables a lender to penetrate this overlooked market and gain new consumers at a time of increased competition and reduced profit margins.
An Experian study estimated that 64 million consumers in the United States do not have a FICO credit score. Further, Vantagescore assessed 10 million of these so-called “unscoreable” consumers as prime or near-prime consumers, while another significant percentage have steady jobs and/or low liability levels. Clearly, there is a need to determine creditworthiness outside of the traditional models.
The traditional underwriting process can also be enhanced by leveraging nonconventional variables such as credit card transactions, social media presence and utility bills. This can potentially reduce credit risk through expanded risk modeling and monitoring. Lenders should consider back testing alternative scoring models as a challenger to compare against the FICO model in a champion-challenger sandbox environment.
Alternative credit scoring presents tremendous opportunities, but it is not without risks and challenges.
As in banking, peer-to-peer is hot in insurance with older players like Friendsurance and also newcomers such as Lemonade, InsPeer, InSured, and Teambrella. Each promises insurance that is more transparent and social with shared costs – things that have wide appeal in today’s market where customization is king.
Another interesting area in insurtech is item-specific, event-specific, and on-demand coverage – “smart insurance.” Startups in this space collect data about a customer’s possessions and provide machine-learning enhanced risk pricing for single-item coverage of any duration. This model allows premium levels to scale down to pennies with durations down to the second for completely customized coverage.
Of course, even when insurance companies partner with IoT manufacturers, the question still remains: who owns the customer relationship? For complete control of the customer experience and customer proximity, it’s essential that today’s insurance companies embrace the age of algorithms and better leverage IoT technology and big data to drive innovation.
Insurance can’t continue to simply partner with IoT manufacturers for long – they have to lead the movement. This means appropriating the very tools giving their new competitors an advantage in both IoT and non-IoT spheres: big data and algorithms. By leveraging IoT technology to gather more data about customers’ homes, cars, and even the people themselves, insurance companies can then better use real-time data, predictive modeling, and machine learning to create new business models and new offerings for clients.
Current startups in the space are proving that the age of algorithms is a positive development for the insurance business itself and for its customers, who are looking for more options, flexibility, and transparency, all of which IoT and big data analysis can offer.
Fitch shared last week its intent to rate SoFi’s RMBS transaction that included 270 loans with a total balance of approximately $168.79 million. The group of loans consists of prime fixed-rate mortgages originated on the SoFi online lending platform.
Fidelity Investments unintentionally boosted BlackRock Inc’s prospects as a robo adviser with a small investment in a start-up company that BlackRock bought last year for an estimated $150 million.
BlackRock and Fidelity are only in the early stages of what is shaping up as a battle royale to become the go-to provider of cheap automated financial advice over the Internet.
Although rivals currently dominate the robo advising space, investment behemoths Fidelity and BlackRock are expected to grow quickly. BlackRock’s FutureAdvisor now has more than $1 billion in assets under management, while Boston-based Fidelity’s digital wealth manager, Fidelity Go, is still getting off the ground, with only a nominal amount of assets. Fidelity has yet to launch a full marketing campaign.
Still, Fidelity could overtake BlackRock next year because it has a built-in advantage that many rivals, including BlackRock, do not have: an online brokerage with 17.4 million retail accounts. Some 96 percent of those accounts don’t currently have any sort of management and Fidelity is ideally placed to woo them over to Fidelity Go.
Meanwhile, the U.S. robo industry’s early leader is Vanguard Group. Its robo business has 60-percent market share with $41 billion in assets. Charles Schwab Corp, which has 7 million fewer brokerage accounts than Fidelity, is No. 2 with $10.2 billion in assets after only 19 months since launching its robo product. Click here for a list of the top U.S. robo advisers: (tmsnrt.rs/2hy0z4S).
Lending Club (NYSE:LC) filed an 8K yesterday indicating that Chief Technology Officer John MacIlwaine had submitted his resignation on December 15th. MacIlwaine decided to depart from Lending Club to pursue another opportunity. Lending Club stated that Richard Southwick, Senior Vice President for Technology, will oversee the Company’s technology development and operations while they conduct a search for a new Chief Technology Officer.
As a result, these new lenders can – and often do – charge sky-high interest rates and pile on fees, often hidden from the borrower. A short-term loan can turn into a long-term nightmare.Some problems identified in the Harvard Business School report:
High costs. Lenders commonly charge APRs (annual percentage rates) above 50 percent and can easily reach over 300 percent.
Double dipping. Repeat borrowers incur additional fees each time they renew their loans.
Hidden prepayment charges. Unlike traditional loans, many alternative lenders require payment of the full interest even when loans are repaid early.
Misaligned broker incentives. Small-business loan brokers often recommend the most expensive loans because they earn the highest fees on those.
Stacking. Multiple lenders provide loans to the same borrower, resulting in additional and hidden fees.
What the Harvard Business School Report recommends:
Mandatory disclosure of APRs, fees, default rates and borrower satisfaction.
A national regulation option – rather than state-by-state.
Increased borrower protections for small-business owners.
Rules/guidance on partnerships between banks and new lenders.
Brokers/platforms to have a “fiduciary” duty toward borrowers, meaning they must act in the borrowers’ best interests and disclose conflicts of interest.
Less than a week after LendingTree launched its $50,000 small business grant contest; Bizfi announced it has teamed up with the online lender for the contest. According to Bizfi, LendingTree is one of the 45 funding partners of its marketplace for small business finance.
The research report published by Transparency Market Research states that the opportunity in the global P2P lending market was worth US$26.16 bn in 2015. Analysts predict that the market valuation will reach US$897.85 bn by 2024, as it expands at a significant CAGR of 48.2% from 2016 to 2024.
The reducing interest in conventional banking, increasing dependency on online platforms, and recent history of financial crisis in this region has prompted P2P lending market to take lead cater to the unmet financial demands of the population. Meanwhile, the P2P lending market is estimated to show rapid progress in Asia Pacific. The emerging economies of China, India, Japan, and Australia will make a significant contribution to the rise of this market in Asia Pacific. The primary growth driver for this region will also be small businesses that will seek financial alternatives to fund their projects.
Earlier this week, fintech firm Even Financial announced it increased loan originations by 205% quarter over quarter since the beginning of 2016 and surpassed $1.5 billion in loan requests. The company has experienced solid growth since it was founded in 2014.
Crowdfund Insider: What borrower categories are you seeing the most interest on EVEN?
Rosen:Aside from debt consolidation which is the top purpose across the industry, we see high demand in weddings, auto and home improvement
Crowdfund Insider: What is the average size loan requested?
Before we start, a few guidelines would be to stay away from any model that offers ridiculous interest rates like 1% per day or 10% per month. The same can be said for any model that is not transparent on how they get this interest or that simply state that profits comes from trading. Finally, do your research. A simple google search can make the difference.
Bibond is a peer-to-peer lending website that allows you to lend both Bitcoin and national currencies for an interest. The major difference between the two former websites (Poloniex and Magnr) and Bibond is that with Bibond you’ll be lending your funds directly to other users. There is no failsafe mechanism for stopping users from taking your money and leaving. Forever.
However, this isn’t the norm as users are required to reveal their personal information and to back it up with the ownership of social media accounts, ebay, and so on. The borrowers are ranked from A to F according to risk. The lower the risk, the lower the interest you’ll receive and vice-versa.
In the case of an unpaid loan, Bibond will provide you with all the necessary information to take legal action agains the borrower or Bibond will sell the claim for the loan to a debt collection agency. The latter is usually better for lenders but it requires the amount to be above a certain threshold which varies according to the location of the borrower (usually 1.0 BTC or more in the developed world and 0.5 BTC or more in emerging markets).
For non-accredited investors looking for other options to invest for social impact, Hoyt mentions Kiva.org, which offers peer-to-peer lending through zero-interest notes and CuttingEdgeX, a clearinghouse listing direct public offerings for social enterprises needing to raise capital.
Zopa, the original peer-to-peer lending platform, has lifted its recently enforced platform limit. The firm is once again accepting new money transfers, with £4.2m in capacity.
Although the investment limit has been temporarily lifted, Zopa’s usual run-rate would suggest that the £4.2m of space will be filled within a few short days. Zopa has lent out £56.9m during the past four weeks.
Growth Street announced last week it would not accept individual retail investors on its peer to peer lending platform. They may do this now as they are an FCA registered Appointed Representative pursuant to a partnership with another firm.
Crowdfund Insider: What makes Growth Street stand out from other peer-to-peer lending platforms?
Sherwin-Smith: Growth Street is the only P2P platform offering revolving credit, which we provide in the form of secured business overdrafts. Borrowers share their performance data with Growth Street on an ongoing basis.
Younited Credit is one of the biggest fintech start-ups in France, operating peer-to-peer lending platform recognized by the French central bank.
Lendix is an online marketplace for business loans, allowing investors to advance money directly to SMEs. Ulule is a leading crowdfunding site created by Thomas Boucherot and Alexander in 2010. Since its launch, the company has funded thousands of projects in many fields, from music creation to audiovisual.
Founded by Ombline Lasseur, Adrien Aumont and Vincent Ricordeau in 2009, Kisskissbankbank provides a crowdfunding platform for athletes, humanists, and creatives to raise funds for their projects.
Created in 2012, SmartAngels is a crowdfunding platform that allows retail investors and professionals to fund start-ups and SMEs.
Founded in 2007, MyMajorCompany allows music fans and internet users to invest in their preferred artists’ projects.
Ledger is a start-up that combines its strong expertise in smart card, cryptography, security, and embedded hardware. The launch of a hardware wallet, Ledger Nano, in over 80 countries established the company as a reference in the global bitcoin ecosystem.
Founded in 2011, Paymium is a European web-based exchange that allows all bitcoin transactions between traders and consumers.
Founded in 2012 by Camille Tyan and Antoine Grimaud, PayPlug is the first service in France to allow small merchants and professionals to accept credit card payments with simple tools, no monthly costs, and signup fee.
Fundovino is the first crowdfunding platform devoted to the world of wine.
Weeleo is a P2P platform that enables the exchange of cash currencies.
REST Industry Super today became the first Australian super fund to provide its 1.9 million members with ‘mobile first’ access to personalised financial advice with the launch of the REST Advice Online platform.
REST Advice Online is delivered on Midwinter’s next generation Advice Operating System (AdviceOS) and provides REST members with the ability to receive instant financial advice and make immediate changes to their super account from any mobile device.
The digital advice offering leverages Midwinter’s Digital Advice technology which means that regardless of which method REST members choose to receive advice (phone based, web chat or self-service), it is delivered, recorded and processed from the same integrated advice system.
The financial services industry is also undergoing transformation with digital. Crowdfunding startups like Ketto and Wishberry and peer-to-peer lending platforms like Faircent, Lendbox and i2ifunding are offering platforms to connect people who have a cause or a financial need with those who have excess funds to lend.
Vietnamese P2P lending startup Tima has closed a US dollar 7-figure series A funding from a Singapore fund to accelerate service growth in the local market, a senior executive of the company told this portal.
Launched in 2015, the platform has seen cumulative money from its lender partners reach over VND2.5 trillion ($115.45 million).
About 80 per cent of loan seekers based in Vietnam do not have prompt access to financial services, says a World Bank report. P2P lending, still a fledging business in the country, is said to be a solution in addressing this gap.
In Vietnam, fintech has started to emerge as one of the most favourite verticals for startups and investors, fueled by the increasing mobility yet unbanked population in the country.
Paystack, one of Nigeria’s most hotly anticipated tech start-ups, has just secured $1.3M Seed investment from both international and homegrown investors. The company, founded by Shola Akinlade and Ezra Olubi, initially caught the eye of industry commentators as it was one the first Nigerian tech company to be accepted into the world-famous Y Combinator progam, based in Silicon Valley. Since then, having taken Paystack through Private beta, and securing $120,000 early-stage investment from Y Combinator, Akinlade [CEO] and Olubi [CTO] have quietly been building the company, working to secure this Seed investment round, whilst also building a network of partner merchants in Nigeria, over 1,500, who are now using the platform to accept online payments.
A leading mobile payments company, iZettle offers small businesses portable point-of-sale solutions as well as free sales overview tools. This allows any individual or merchant to take card payments anywhere, anytime.
Another player in this space is Klarna, a Swedish e-commerce company that supplies payment services for online storefronts. The Klarna system eliminates the risks for buyers and sellers by taking over stores’ payment claims and by managing customer payments.
Consumer to business payment fintech is increasingly well established. But some fintech firms are looking to facilitate business to employee payment services.
Doreming, for instance, focuses on financial inclusion for workers, an emerging theme for fintech firms, with the World Bank estimating that 2.5 billion adults worldwide are excluded from traditional banking services.
Adyen is a multichannel payment company outsourcing financial transfer services to international merchants giving them a single solution to accept payments anywhere in the world.
Azimo is also an international money transfer service harbouring a large digital network that allows customers to send money to over 190 countries, from any internet-connected device.
Microfinance fintechs are riding a wave of popularity with their social media partners and increasingly facilitating the online sharing community. For example, Flattr, a fintech founded in 2010, enables users to ‘flattr’ creators for their digital content by clicking the Flattr-button next to their content. Each month, you add money to your account and at the end of the month your monthly budget is divided between all the things you flattered and sent to the creators.
News Comments Today’s main news: Fitch says OCC charter could harm innovative firms. UK’s Govt. bank funds almost 10% of MarketInvoice’s loans. Rakuten invests EUR10M in Kreditech. Today’s main analysis: CCI highest since before great recession. Today’s thought-provoking articles: Bank SME lending surges, alt-lenders flop. Vaya, RateSetter launch online mobile shop. United States OCC FinTech charter could harm agility, […]
OCC FinTech charter could harm agility, cost of innovative firms. GP:” Absolutely everything has a good side and a bad side, including OCC’s new fintech charter. It goes without saying that getting an OCC charter is more onerous than no regulation at all. But is it more or less onerous than partnering with a FDIC Bank ? I think that only once a few fintech companies jumps the gun and get a charter will we be able to compare. In my eyes even if it is more onerous, the benefits of being independent and not at the merci of a life-or-death partner (the FDIC bank) is worth a lot and if I would advise fintechs to setup a separate structure and test the waters with an OCC charter while continuing to operate as they have been so far with their primary structure.”
Consumer confidence high. AT: “This is political commentary, but it’s not just political commentary. There is a great deal of insight here regarding the economy on the whole and consumer confidence in the economy specifically, especially regarding investments. If Halbert is correct and consumer confidence leads to increased investments in equities and stocks, how will that affect alternative investments? My guess is, there will be a negative correlation. Remember, part of the reason for the rise in alternative investing has been the decline in the stock markets. On the other hand, millennials are full of surprises, so continued distrust of banks may keep alternatives interesting to a segment of the investor class. Any way you look at it, the next four years should be an interesting run.”
Bank SME lending surges, alt-lenders flop. GP:” The interesting number here is the 23.7% approval rate for traditional bank’s SME loan approval rate in Nov 2016. It seems high to me but if it is true, and it could be, that is much higher than the single digits numbers we all had in mind I believe. “. AT: “It’s possible this renewed faith in bank lending is tied to consumer confidence in the economic outlook.”
Possible credit score changes for 2017. AT: “The initial comment on this Reddit thread has been redacted. Judging from some of the comments, it likely had something to do with medical bills being removed from credit scores if paid off.”
UK bank funds MarketInvoice loans. AT; “The UK government clearly is backing the marketplace loan sector despite FCA concerns. This is presumably because they enjoy the bragging rights of being in the top spot globally in at least one industry.”
Fitch Ratings is out with a note on the recently announced Comptroller of the Currency (OCC) Fintech charter. The OCC has crafted a document to allow digital banks to become regulated entities by receiving federal bank charters. Fitch is of the opinion the Fintech charter could have significant impacts on the operating strategies and regulatory environments of these innovative firms. And the impact may not be all good.
As for benefits, some Fintech firms such as marketplace lending platforms may no longer have to partner with banks to facilitate loan origination. This echoes a similar comment that Moody’s made just a few days back. A Fintech banking charter may also reduce uncertainty regarding state usury rate caps that have become a more prominent issue recently following the Madden versus Midland decision in June, which stated that agreed upon interest may not be enforceable in certain circumstances.
A special purpose digital bank charter may not allow for insured deposit-taking, which would require FDIC approval and regulation, but in Fitch’s opinion, it could be an initial, gradual step in that direction.
The US Consumer Confidence Index has been soaring since the end of the Great Recession, and it hit another recent new high last month. The Conference Board reported Friday that its Consumer Confidence Index rose to a surprising 107.1 in November, versus the pre-report consensus of 101.1, the highest reading since 2008.
On the other hand, the Commerce Department reported that 3Q GDP rose by 3.2% in the 3Q as reported on November 29. That surprising estimate will be revised again on December 22. But if the next GDP estimate confirms that GDP growth is above 3%, we will need to upgrade our outlook for the US economy going forward.
The post-election surge in the major stock market indexes also has buoyed feelings about equities, with 40% saying now is a good time to invest, up 10 points from before the election. Here again, Democrats became somewhat more negative on stocks while Republicans grew significantly more optimistic.
Those differences are also clear in the choice for what Americans believe are the best investments right now. While real estate remains the top choice for the third straight year, stocks gained the most ground at the expense of gold, real estate and Treasuries. For now, the shine is off of gold for Republicans and they, along with Independents, have grown more favorable toward equities.
Virtually everyone expects the Fed Open Market Committee to raise its short-term interest rate by 0.25% at the meeting today and tomorrow. Fed Funds futures put the odds at 97%. While the first rate hike last December sent stocks sharply lower, stocks are today at yet another new record high.
Investors are aggressively seeking alternative investments to generate income in today’s continued low interest rate world. While the US equity markets have soared to new highs since the election, many are wary of an overdue downward correction. That’s understandable.
Reports Tuesday (Dec. 13) said Biz2Credit’s latest index showed surges in traditional banks’ SME loan approval rates in November, hitting 23.7 percent. According to researchers, eight out of the past nine months have seen loan approval rates for small business applicants increase among traditional, large banks.
Even small banks have seen their loan approval rates tick up to 48.8 percent.
At the same time, Biz2Credit found continuing declines in alternative lending activity for SME borrowers. November saw a decline in SME loan approval rates among alt-lenders, down to 59.2 percent in November, according to the report.
I had over 12 collections on my credit as of a year ago and about 8 of them were hospital bills. What I did was write each creditor a letter saying essentially: “I dispute this debt. I don’t not recall this debt in anyway and it was not me. However, I am willing to pay the debt in full if you will agree to remove the debt from all credit bureaus. If you agree to these terms please send me on company letterhead the terms. Once I receive the agreement I will send payment by certified mail the same day I received your letter. If you do not accept these terms I am asking you to send me all proof that this debt is mine and I will dispute it further. You and I both know that paying this debt without you agree g to remove it from my credit report will not benefit me at all and I may as well wait until it falls off naturally.”
I now have 3 collections left, the rest were removed and
I’m working on the last few. You don’t even have to offer to pay 100% I’ve seen others offer 50% for a pay for delete and it went through. I offered 100% because I have the funds and I really wanted it off my credit report.
Edit 2: one of the collections was for capital one. They sent me a letter saying they denied my pay for delete request. Then about a month later they sent me another letter saying since I requested proof of the debt and they couldn’t provide it they are removing the debt from my credit report and my balance is $0. So they denied the request then started to assemble the proof and couldn’t find it. Was pretty funny.
SmartBiz Loans, the first online SBA marketplace and bank-enabling technology platform, has announced that they will now offer SBA 7(a) Commercial Real Estate (CRE) Loans up to $5 million to eligible business owners based in the U.S.
The CRE loans are now available through SmartBiz for purchase or refinance through an automated, mobile-optimized online flow that allows eligible businesses to pre-qualify online (even on their mobile phones) in less than five minutes without impacting their credit score. Loans are available for amounts between $350,000 to $5 million with 25-year repayment terms, variable rates as low as 5%, no balloon payments and no prepayment penalty after the first three years. Unlike traditional bank commercial real estate loans, SmartBiz SBA 7(a) CRE loans do not require re-qualifying every three to five years.
The loans are available to small-business owners based in the U.S. with a personal credit score of 675, a minimum of three years in business and $250,000 or more in annual revenue.
Today, Bizfi (www.bizfi.com), the premier fintech company with a platform that combines aggregation, funding and a marketplace on a single platform for small businesses, expands its business lending capabilities through a funding partnership with InterNex Capital, an asset-based digital lender. The partnership will allow small to mid-sized businesses in manufacturing, wholesale, trucking, business and consulting services to apply for and access an asset-based revolving line of credit from $250,000 to $5 million through the Bizfi marketplace at www.bizfi.com.
Along with short-term financing, equipment financing, SBA loans, and many other products, small businesses that require $250,000 or more can easily and quickly apply for the revolving line of credit online. In addition to InterNex, the Bizfi platform features 45 lenders providing financial options to small businesses in the United States. Bizfi also acts as a direct lender on the platform.
As a real estate investor, are you staying current with the latest investing technology? Just like all modern industry, the real estate industry continues to evolve and how investments are made has a new technology that is on the cutting edge for real estate investors, welcome to real estate crowdfunding.
Both dealmakers and lenders found a strong interest in private financing following the Great Recession. Dealmakers needed access to capital that the banks quit providing. Qualified investors and individuals with 401k funds to invest quickly became attractive. For money investors, more reliable and more secure investments (real estate) outside of the stock and bond markets also became attractive. Now, with crowdfunding, this match becomes even more powerful as more investors (beyond qualified investors) are able to participate in the market.
The taxpayer-backed British Business Bank is providing a major boost to fintech MarketInvoice, new figures show.
9% of loans by value made over MarketInvoice’s platform to date have been financed by money from the government-backed British Business Bank, according to a Freedom of Information request seen by Business Insider.
The bank has provided the cash for £93.2 million-worth of loans on the platform, out of a total of just over £1 billion made by the platform.
The new breed of crowdfunding platforms that have followed in the wake of P2P are far riskier than many realise.
City regulator the Financial Conduct Authority (FCA) is looking to crack down on these crowdfunding platforms to protect savers who do not understand the dangers.
It is lining up tough new regulations after warning that some platforms fall short of its demands to be “clear, fair and not misleading”.
The best-known platforms are Zopa.com, which has taken £1.89billion from savers since 2005, and RateSetter.com, which has taken almost £1.6billion since 2010.
Their interest rates have dipped lately, but Zopa still pays a variable 3.1 per cent and RateSetter pays 2.9 per cent.
Hannah Maundrell, editor-in-chief of Money.co.uk, says P2P platforms need a robust fallback plan so people do not lose money if the company goes bust: “They will also have to carry out more thorough checks on borrowers.
“Some do, but the FCA’s rules could make it compulsory.”
Mobile service provider Vaya has teamed up with peer-to-peer lending platform RateSetter to launch an online mobile phone shop.
Vaya says it has worked with RateSetter to provide fair financing terms and an easy online sign-up process for mobile phone customers – combining “some of the sharpest handsets on the market with the choice of outright purchase or wallet-friendly payment terms over 12 or 24 months”.
The two companies say they are bucking the trend of telcos locking people’s mobile plans up with their handset repayments.
Taplend is a financial help service. With our app, people can get up to £2,500 in a few minutes, provided by friends or lending companies.
The problem we are solving is a fairly common one for all of us – situations when you need money urgently, but cannot get it immediately. The mechanism of Taplend is a very simple one: after the user downloads the application, he sets the desired amount of money and return terms, submits detailed information and sends a request via the service to his friends or credit companies.
After the request is accepted, it takes a couple of minutes for the money to come to the user’s bank account or mobile wallet.
While working in the p2p lending area, we noticed that the average time to get a loan through such a platform is around three days, under affordable rates. It is clear that millions of people have the urgent need for money.
Our business model can be split into two parts:
We let friends help each other with money under a 0% interest rate. Taplend would be useful for these people, who might face the strong need for the financial assistance to be provided as soon as possible. In other words, Taplend is a p2p money transfer tool for friends to help each other. In this case, we charge a small split fee from transactions between the users.
Besides asking from friends, Taplend lets the user request the loan from our partners – financial institutions. In this case, we let the user to choose the lender among the list of companies, after this we provide him with specific loan application form (depends on the lender).
When the user finishes filling the application form, we send this data to the lender. If everything is ok with this data, the user gets his request approved, receives the money and the lender pays Taplend a lead generation fee.
Denheath Desserts, a custard square brand from South Canterbury, has officially closed its crowdlending campaign, which raised nearly $369,001 from 161 investors, on PledgeMe. Denheath Desserts currently produces 10,000 custard squares per day from its Timaru factor.
One of the most important risks when it comes to crowdfunding and online lending, which will be fairly obvious to anyone with investment experience, is asset risk.
Then there is the risk in the instrument. What do you get for your money? Share, bonds, a loan contract? Are there other lenders? Are you senior or junior? Is the investment secured?
Crowdfunding should not say it is transparent, but be transparent. You don’t think people are funny because they tell you they are comedians. You think they are funny when they tell you a joke that makes you fall off your seat.
That means being transparent about fees for starters. How does that platform get paid? By the lender, the borrower or a bit of both? When does it get paid, and do they take a spread?
Platforms should earn their fees – and yes, those should be completely and clearly set out too.
Appropriateness tests and caps on the amount of investment are just some of the other methods that platforms can implement to help manage risk. Each of these are worth an article in their own right, but the most important thing for investors to be aware of, for now, is that not all platforms offer the same levels of disclosure and protection.
This is another landmark investment in fintech by Rakuten, a leader in internet services and global innovation headquartered in Japan. Rakuten joins Kreditech’s outstanding group of backers, including J.C. Flowers and the World Bank’s International Finance Corporation. Michael Piechalak of the Rakuten FinTech Fund will join the Board as an observer.
Kreditech aims to invest the new funding into further developing its partnership business. The company has launched its Lending-as-a-service in spring 2016. Renowned partners such as PayU (Naspers) are making use of Kreditech’s POS financing integration.
Irish peer-to-peer (P2P) lending firm Linked Finance has completed the country’s largest ever P2P loan, raising €150,000 for serviced workspace provider Iconic Offices.
The loan, which is double the size of the previous biggest amount raised by Linked Finance, will be used to fit out Iconic Offices’ location at Herbert House, Dublin 2.
Linked Finance, which targets the non-bank SME-lending sector, said the loan was fully subscribed in less than 20 hours.
EstateGuru’s average historic return highest in the market! (EstateGuru Email), Rated: B
In December, EstateGuru’s average historic return reached the level 13.4% (since December 2014), which is the highest return among crowdfunding platforms for secured property loans.
Within two operational years, EstateGuru has offered its investors the chance to invest in 95 secured property loans with a record high annual average historic return 13.4%,“ said EstateGuru’s founder and CEO Marek Pärtel.
In comparison, some of Europe’s most popular and most established crowdfunding platforms like LendInvest, PropLend and Saving Stream have an annual average return of respectively 7.06%, 9.39% and 12%.
EstateGuru has managed to offer its investors the best returns due to high-quality projects and additional bonuses (e.g when the loan is repaid earlier, the borrower is obligated to pay the minimum 3-4 months interest). Our platform allows both professional and still experimenting investors earn equally great returns. Moreover, our more eager investors can take advantage of our affiliate program,“ Marek Pärtel added.
EstateGuru’s more than 5600 investors from 34 countries have earned a cumulative interest revenue €648,421 and more than €15 million worth of loans have been funded. Largest investment portfolios on the platform exceed €700,000 and the investors have not lost a single euro on the EstateGuru platform throughout its entire history. EstateGuru’s priority is to offer its investors secured and high-quality investment opportunities in Estonia and abroad.
The report tallied numbers for 2015, tracking 100 online platforms including both rewards and investment, stating that Canada reached $133 million in total volume. This amount is predicted to increase to $190 million during 2016.
The NCFA is not totally complimentary of the current crowdfunding ecosystem. Earlier this year, one industry insider labeled the regulatory approach as a “mess”. Another called it “dead in the water.”
One of the leading social trading networks in the foreign exchange and CFDs space, eToro has announced that it has signed a strategic partnership with Lufax Holding Ltd. The cooperation agreement between the firms is aiming to boost eToro’s profile with Chinese clients.
News Comments Today’s main news: Zopa’s securitization ; SoFi’s new life insurance product; New true lender decision in California. Today’s main analysis: 4 charts about emerging markets; Today’s thought-provoking : Ant Financial is worth more than Goldman Sachs. Are you paying attention yet ? ; Lemonade’s charity model to reduce fraud. United States SoFi is about to […]
SoFi is about to launch Life Insurance. Insurance companies typically have large funds from premiums payment under management waiting for payouts. I would expect that the insurance premiums may be the cheapest capital out there, if regulation accepts it, for lending. The reason why SoFi chose life insurance is likely because the policies have similar or longer maturity than the loans maturity.
Most famous US P2P insurance company, Lemonade launched. Why is this interesting ? First, because SoFi may be the 2nd P2P insurance company in the US. Second because insurance premiums may be a great source of capital for lenders. And 3rd, and most interesting here, they will pay to charity any leftovers in each fund after payouts and the company takes its toll in an effort to reduce fraud. A very interesting approach, isn’t it ? Imagine if Prosper and Lending Club paid to charity any profit left after paying investors their due and taking a set fee that is proportional to the loan performance. Yes it will cap the upside to investors, but it may be able to, in fact, increase the return to investors from the (about) 7% to maybe 9% or higher.
The San Francisco company will soon start selling term life insurance to its base of mostly millennial customers, said people familiar with the matter. SoFi expects to roll out the product, which pays out a benefit if a customer dies during the period of time covered by the plan, before the end of the year or as soon as next month.
SoftBank Group Corp. led a $1 billion investment in the startup last year, valuing it at $4 billion, and it’s now seeking to sell an equity stake of about $500 million to help fund its rapid growth, people familiar with the matter said this month. Last year, the company issued $5 billion in loans and is on pace to double that this year, two of the people said.
SoFi could take a slice of the $159 billion in U.S. life insurance premium revenue generated last year, according to data from the National Association of Insurance Commissioners, a trade group.
People are more likely to purchase policies around certain life events, such as getting married, having children or buying a home, according to a study published last year by Deloitte LLP. SoFi may be well positioned to capitalize on that demographic thanks to its already sizable base of young customers.
Mike Cagney, SoFi’s chief executive officer, chairman, and co-founder, has said his goal is to eventually render banks obsolete.
On September 20, the U.S. District Court for the Central District of California dismissed a class action suit alleging illegally charged usurious interest rates on private student loans in violation of California law. Beechum v. Navient Solutions, Inc.
In doing so, the court rejected the plaintiff’s arguments that the defendants were the de facto “true lenders” of loans made by a national bank under a bank partnership with a non-bank partner.
The plaintiffs, in this case, obtained private student loans using loan applications that identified Stillwater National Bank and Trust Company, a national bank, as the “lender.”
The plaintiffs alleged that the “actual lenders” of the loans were the Student Loan Marketing Association (SLMA) or subsidiaries of the SML Corporation.
Under the agreement, SLMA would originate, underwrite, market and fund loans on which Stillwater would be identified as the lender and which SLMA would then purchase from Stillwater.
The court relied on two California appellate decisions in holding that courts “must look only at the face of a transaction when assessing whether it falls under a statutory exemption from the usury prohibition and not look to the intent of the parties.”
In looking “solely to the face of a transaction” in determining whether the subject loans were exempt from California’s usury prohibition, the court applied an objective standard that, unlike the highly subjective and fact-sensitive “true lender” line of reasoning, would result in consistent outcomes from one case to the next.
While this recent decision does not address the question of whether the claims were preempted by the National Bank Act, the case represents the latest “true lender” case, with a reasoned and measured approach to bank partnerships. In dismissing this case, the court rejected the idea of looking beyond the face of the transaction and into the intentions of the parties.
The Central District of California is the same court that, just three weeks prior, provided the decision in Consumer Financial Protection Bureau v. CashCall, Inc.Unlike the CashCall decision, the court did not use the “predominant economic interest” test for determining “true lender” status and acknowledged the negative effect on the secondary market of looking to the intentions of the parties instead of the transaction on its face.
Lendio, a marketplace for small business loans, today announced a partnership with Supplier Success, LLC, a Detroit-based company focused on providing working capital solutions, and on improving minority and women business owners’ access to capital.
Through this strategic partnership, Lendio and Supplier Success will provide minority and women business owners access to transparent lending rates and respectful business practices. Lendio recently reported facilitating more than $250 million in funding to more than 10,000 small businesses.
By joining forces with Supplier Success, we’re able to expand our capabilities to provide minority business owners easier access to financing,” said Brock Blake, CEO, and co-founder of Lendio.
Lemonade raised $13 million in the biggest seed round of 2015 and, having secured a license as a full-stack insurance carrier by New York State, the firm is now inviting homeowners and renters to sign up online and through its app. Under the peer-to-peer model, Lemonade will ask customers to nominate a charity when they buy a policy.
Claims are paid out of these pools and any funds that are left at the end of the year go to the chosen charity. Policies start at $35 a month for homeowners and $5 for renters, with the entire process digitized, “replacing brokers and bureaucracy with bots and machine learning”. Lemonade takes a flat 20% fee and says that its model not only benefits charities but also customers and the company itself by reducing the incentive for fraud.
When Facebook Messenger launched five (!) years ago this month, it was not immediately clear why or what it might do — messages already existed within Facebook, everyone was texting madly already, so why launch a whole new app?
A Forrester report in August warned banks off bots. Today’s bots are not ready for regulated industries that demand a certain level of user experience.
But the warning came too late — banks embraced bots, and a whole host of bots was wheeled out at Finovate. Perhaps most significantly, Kore (from the guys that brought you Kony) introduced its Smart Bot platform for banks to build their own bots. (In response to Kore’s demo a few fintech watchers at the show tweeted various versions of, “Uh oh.”)
Hardest hit will be independent broker-dealers, who stand to lose $4 billion in revenue, or 22%, of the industry’s total, according to the study, which was released in August. IBDs are also expected to see a decline of $350 billion in client assets, or 11% of the industry’s total.
MoneyLion is headquartered in New York with offices in San Francisco and Kuala Lumpur, Malaysia.
MoneyLion’s free mobile app will help Malaysian consumers gain a 360-degree view of their finances through a suite of analytics tools that track spending and saving activity across multiple bank accounts.
Following last month’s launch of MogulREIT I, RealtyMogul.com’s first crowdfunded real estate investment trust, the company announced today that it had closed five transactions in markets across the country. Four of the five deals were equity investments into multifamily properties, while the fifth marked the commercial real estate platform’s largest 1031-qualified transaction to date.
Africa has long been touted as the continent whose specific geographical challenges and the widespread poverty of many of its inhabitants have enabled it to skip over traditional banking infrastructures into the waiting arms of cost-efficient fintech solutions.
The statistics, for those who are rooting for a cashless, bankless Africa, are encouraging. The following charts, sourced from a recent report on financial inclusion in emerging markets published by the institute of international finance, demonstrate that the economy is Africa is starting to pick up, along with mobile phone ownership.
Mobile money accounts aren’t exactly threatening the banks, even in developing countries.
According to an analysis from the Global Findex, 2.2 billion, or 95 percent, of the total 2.3 billion adults in low- and middle-income countries with a financial account held the account at a financial institution in 2014.
Moreover, contrary to popular belief, financial incumbents are major drivers of economic inclusion in developing countries.
Banks have a number of reasons aside from profitability to expand their activities in emerging markets, such as CSR and investment. Whatever the cause, the way forward for banks in developing countries will probably start with cellphones, smart or otherwise.
The first securitisation of loans issued by leading consumer lending platform Zopa – “Marketplace Originated Consumer Assets 2016-1 plc” (“Moca 2016-1”) – has been provisionally rated by Moody’s. The loans that make up the £138m portfolio were funded in the first instance by P2P Global Investments, the £870m investment trust.
Deutsche Bank was heavily involved in Funding Circle‘s inaugural securitisation and is now acting as the sole arranger and lead manager for the Zopa deal.
Moody’s has assigned a rating of (P)Aa3 to the £114m senior tranche of Class A Notes. The Class B Notes, of which there are £7.5m, were rated (P)A2. The £7.5m of Class C Notes were assigned a rating of (P)Baa2. The £9m of Class D notes were rated (P)Ba3. There are also £12m of Class Z Notes which will not be rated. All Notes are due October 2024. Target Servicing Limited has been appointed as the back-up servicer of the portfolio.
We now learn that Fitch has conferred a landmark rating on the Zopa deal. Fitch rated the Class A Notes “AA-(EXP)”. This is the highest rating to have ever been assigned to a marketplace lending transaction by Fitch. There has been over $10bn in global securitisation issuance by the marketplace lending sector to date. Fitch declined to rate Funding Circle‘s SBOLT 2016-1 earlier this year.
This will be the UK marketplace lending sector’s second securitisation to date. Funding Circle’s SBOLT 2016-1, a £130m transaction, received an Aa3 rating from Moody’s in April. The Class A Notes, which were sold to KfW, came with a guarantee from the European Investment Fund attached.
The securitised portfolio as of 31 August 2016 consists of unsecured consumer loans to UK private borrowers. According to the borrower but not verified by the platform provider these loans are mainly used to finance cars (36.2%), for debt consolidation (34.0%) and for home improvements (22.3%). The portfolio consists of 27,137 contracts with a weighted average seasoning of 10 months and a maximum loan term of five years. Most borrowers are employed full-time (89.9%) and their average outstanding loan balance with Zopa is GBP 5,500.
According to Moody’s, the transaction benefits from: (i) a granular portfolio originated through the Zopa marketplace lending platform, (ii) a static structure that does not allow to buy additional receivables after closing, (iii) continuous portfolio amortization from day one, (iv) an independent cash manager and liquidity provided through two reserve funds, (v) an appointed back-up servicer at closing, and (vi) credit enhancement provided through subordination of the notes, reserve funds, and excess spread.
Moody’s notes that the transaction may be negatively impacted by: (i) misalignment of interest between the platform provider Zopa and investors who finance the loans, (ii) the fact that Zopa does not retain a direct economic interest in the securitized portfolio, (iii) the limited historical data that does not cover a full economic cycle, (iv) a higher fraud risk due to the online origination process, (v) an unrated servicer with limited financial strength, and (vi) the regulatory uncertainty due to the still developing regulation for the marketplace lending segment.
Moody’s determined the portfolio lifetime expected defaults of 7.0%, expected recoveries of 5% and Aaa portfolio credit enhancement (“PCE”) of 35.0% related to the loan portfolio. The expected defaults and recoveries capture our expectations of performance considering the current economic outlook, while the PCE captures the loss we expect the portfolio to suffer in the event of a severe recession scenario. Expected defaults and PCE are parameters used by Moody’s to calibrate its lognormal portfolio default distribution curve and to associate a probability with each potential future default scenario in the ABSROM cash flow model to rate Consumer ABS.
The principal methodology used in these ratings was “Moody’s Approach to Rating Consumer Loan-Backed ABS” published in September 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.
In rating consumer loan ABS, default rate and recovery rate are two key inputs that determine the transaction cash flows in the cash flow model. Parameter sensitivities for this transaction have been tested in the following manner: Moody’s tested six scenarios derived from a combination of mean default rate: 7.0% (base case), 7.5% (base case + 0.5%), 8.0% (base case + 1.0%) and recovery rate: 5.0% (base case), 0% (base case – 5%).
BurningNight Group, a city center bar chain, successfully raised over £500,000 within the first week of its crowdfunding campaign on UK’s peer-to-peer lending platform, Crowdstacker. The company is currently offering 7% p.a. interest to those investing in the £3.5 million raise.
According to Crowdstacker, approximately half the funds raised so far have been invested through the Innovative Finance ISA.
Last month, the two firms announced their partnership as an industry first and will see LendInvest pre-qualify lots at LOT11 auctions which fall within the lender’s criteria. Lendinvest, the world’s first online lending business for the property, has announced today that details of the properties it has pre-qualified ahead of the next LOT11 auction are now live.
The partnership begins with LOT11’s quarterly auction on 27 September.
HarmoneyCorp Ltd. (www.harmoney.co.nz) – Harmoney became the first FMA-licensed P2P lending platform in mid-2014. The platform has helped match borrowers and lenders for more than $307 million in loans.
Lending Crowd Ltd. (www.lendingcrowd.co.nz) – The platform can be used by either individuals or businesses. It was the fourth P2P lending platform to obtain a license in New Zealand.
Lendme Ltd. (www.lendme.co.nz) – LendMe, New Zealand’s second authorized P2P lender, got licensed in April 2015 and commenced operations just five months later.
Pledgeme Ltd. (www.pledgeme.co.nz) –PledgeMe is a platform that combines three different crowdfunding models in one place – project (aka reward), equity, and lending (aka P2P lending) crowdfunding.
Squirrel Money Ltd. (www.squirrelmoney.co.nz) – Squirrel Money is part of the Squirrel Group, which also provides mortgage brokerage services. The platform helps people borrow funds to finance everyday needs such as renovations or buying a car, or events such as marriage or starting a family. In August 2016, the platform launched New Zealand’s first P2P secondary market, which allows loans to be on-sold to other investors.
Leung estimates that most of Ant Financial’s value is in Alipay, China’s most popular online payment service, with a projected worth of $50 billion. Its micro loans service is probably worth another $8 billion, while Ant’s wealth management unit is given a valuation of $7 billion. The rest of Ant Financial’s valuation comes from investments and cash on hand, outstripping Goldman’s roughly $70 billion market value as of Monday.
The company could grow to $100 billion in two years, as the current valuation doesn’t include growth brought in by insurance, credit scoring, and cloud computing, Leung said.
Ant Financial is considering an initial public offering in Hong Kong in the first half of next year, people familiar with the matter said last month.
Regulators have unveiled a series of measures to head off signs of rising risks in its fast-growing P2P market, including borrowing limits and forcing P2P platforms to use third-party banks as custodians of investor funds. The regulator’s announcement knocked 22 per cent off the New York-listed shares of Chinese P2P lender Yirendai Ltd, while Chinese stocks fell to a two-week low, weighed by banking shares on concerns over the crackdown on riskier lending practices.
But many larger P2P companies including Lufax, Yirendai, PPDAI and Dianrong.com say they already comply with many of the new requirements, so could benefit from the restrictions.
The volume of P2P loans surged more than 20 times to 656.8 billion yuan ($US98.7 billion) at the end of July from just 30.9 billion yuan in January 2014, according to industry data provider Wangdaizhijia.
Nomura estimates that could reach 880 billion yuan by the end of 2016 and 1.5 trillion yuan by the end of 2018.
Several lenders already segregate investors’ funds into custodial accounts with banks to prevent fraud, while for companies like Lufax, a typical unsecured loan would be in the 100,000 yuan to 200,000 yuan range, below the government cap.
News Comments Today’s main news : Sharestates hits $1.3bil in funding capacity; MeasureOne raised $2.3 mil for student loan analytics ; Indian p2p market is growing at 30-35% per month, examples, and data; Fitch claims the Chinese structure finance market is heating up. Today’s main analysis : Moody’s SME securitization challenges ; US SME loans are […]
In a new report, Moody’s Investors Service examines several credit risks in securitizations backed by loans to small businesses which are originated by US marketplace lenders (MPLs) that focus on lending to businesses with less than $10 million in revenues. These key risks have been recent topics of discussion and debate among sector participants. As small business MPLs originate more loans, they are likely to continue to turn to asset-backed securities (ABS) to fund their loans.
1. As a result of the short history of MPLs, the lenders often have not calibrated their proprietary credit models for a long enough period of credit history, such as a full credit cycle, to be considered dependable.
2. Lack of alignment of interest between the MPL and securitization investors could pose risks to the securitizations.
3. Moody’s says the regulatory environment with regards to small business marketplace lending is relatively new and susceptible to change.”If MPLs are negatively affected by regulatory scrutiny or changes, a weakening of their financial strength could damage their securitizations in a scenario in which that outcome leads to servicing disruptions or leaves MPLs unable to honor obligations to repurchase ineligible loans from the transactions under their representations and warranties, among other potential risks,”
4. The ability of small business MPLs to carry out servicing responsibilities through a credit downturn is a risk in small business marketplace lending transactions because MPLs have short operating histories and may be financially vulnerable in a credit downturn if loan origination volumes deteriorate significantly.
I’ve been fortunate to oversee financial services, banks, and savings associations of all shapes and sizes for more than 30 years, at the federal and state levels.
Marketplace lending may use new technology or techniques, but it’s still about extending credit to borrowers—something that’s been done for more than 3,000 years. As entrepreneurs, you recognized an opportunity to deliver greater value by improving how credit is provided, making it faster, cheaper, and more convenient.
The rapid growth in marketplace lending over the past few years suggests that, as a group, you are on to something. The surging demand for this type of service has gotten investors’ attention. Whole loan sales to institutional investors have been increasing as a source of cost-effective funding, and asset-backed securities have provided an additional source of funding. In 2015, institutions originated about $6.6 billion in securities backed by marketplace loans—that’s three-fourths of the $8.2 billion in such securities originated to date.2 Maintaining strong, stable funding sources is critical to sustaining the sort of growth we’ve seen in marketplace lending.
However, the growth that we’ve witnessed has occurred under relatively positive conditions.
Long-term performance is just one thing to watch. The expansion of marketplace lending raises four other important policy and regulatory questions.
First, do new techniques, technologies, and products raise concerns about compliance with existing laws and regulations? Let’s take the example of the new algorithms for determining the creditworthiness of a consumer. While they have the potential to make credit available to more people who may not have otherwise qualified, do they raise issues of illegal bias? Does an underwriting model create a disparate impact on a particular protected class? New companies and companies deploying new technology should understand and ensure their products and services comply with existing laws, such as the Equal Credit Opportunity Act, that apply to all creditors—even those that are not banks. Lenders who operate without considering these questions may be accruing underappreciated financial risks and reputational liabilities.
Second, are existing laws and regulations adequate? I understand that earlier today, you heard from Congressman McHenry, who has been a real thought leader on these issues, about his views on the adequacy of the current statutory framework.
Third, do innovative activities, products, or services present a need for entirely new regulation or law to protect the public’s interest or prevent risk to the broader financial system?
The fourth type of policy question regarding innovation involves answering should innovation be regulated and, if so, “who” should be responsible for regulating an organization or activity. To some extent, the conversation about whether there should be a national substantive law or a federal license or charter for marketplace lenders and fintech firms is part of answering the question of “who” should regulate the activity.
We have heard voices on both sides of whether to grant federal banking charters to fintechs. Some have suggested that federal charters could ensure that fintechs engaging in banking activity receive rigorous, bank-like federal regulation and ongoing supervision. This may also provide a more level playing field for financial services offered on a national scale. Others have suggested that federal charters could help fintechs better navigate the existing regulatory landscape by consolidating oversight, reducing licensing burden, and applying a single uniform set of rules
On the other side, some have expressed concerns that, if granted a limited charter, companies might face lighter supervision or fewer consumer protections would apply. Others expressed concern that fintechs may seek federal charters to avoid consumer protections granted by state laws. The agency faced similar questions when it granted the first charter for Internet based banks in the late 1990s.
If we at the OCC do decide to grant limited-purpose charters in this area, the institutions who receive the charters will be held to the same strict standards of safety, soundness, and fairness that other federally chartered institutions must meet.
These four types of policy questions are among the many that our Innovation Framework Development Team is considering in their work to create a framework to enable the OCC to assess responsible innovation.
One. The framework will support responsible innovation.
Two. The framework will foster a culture within the OCC that is receptive.
The U.S. Comptroller of the Currency said on Tuesday his agency plans to complete this autumn a framework to regulate marketplace lending, citing concerns that new financial-technology innovations may pose risks to consumers and the banking system.
New York based Sharestates, one of the US online real estate crowdfunding platforms, announced today that it has surpassed $1 billion in committed capital for the purchase of loans.
Sharestates launched its full operation less than two years ago in February of 2015. Since then, the firm has originated over $150 million in loans across more than 210 projects, with an average loan size of approximately $728,000. To date, Sharestates has returned over $50 million to investors with an average return rate of 11.36% for 2016, with zero loss of principal. Sharestates’ current trajectory has it on a $25-$30 million month to month origination volume, leading it to break over $200 million in originations by years end.
To compete in the market, Sharestates leverages proprietary technology and a close partnership with The Atlantis Organization, which – founded by Radni Davoodi and Raymond Y. Davoodi in 2004 – has become one of the nation’s leading title agencies with over $4 billion in closed transactions.
Only 48 percent of small- and medium-sized businesses said they can get financing at rates below 8 percent, according to a new survey from C2FO, a financial technology startup that has created a marketplace where small- and medium-sized businesses can get paid early by the large companies they supply. The inaugural such survey, released last year, showed nearly 60 percent of respondents were able to secure funding at rates below 8 percent.
C2FO canvassed more than 1,800 small- and medium-sized businesses (SMEs) in the U.S., U.K., Germany, France, and Italy, with 80 percent of those firms having $2 million or less in gross annual revenue. It found borrowing was priciest in the U.K. and the U.S. with 42 percent and 47 percent of SMEs borrowing at a rate of below 8 percent, respectively. That compares with 52 of respondents in France, 51 percent in Germany, and 58 percent in Italy.
An apparent higher cost of capital has caused some of these firms to look at other sources, such as peer-to-peer, or marketplace, lending that involves directly matching would-be borrowers with lenders. On average, 18 percent of respondents in each country reported using peer-to-peer lending at some point.
More expensive credit in the U.S. stands somewhat at odds with the most recent survey from the National Federation for Independent Business (NFIB), which showed just 3 percent of small business owners reporting in July that their borrowing needs were not satisfied — 1 percentage point above the record low reached in September of last year. Still, the NFIB small business optimism survey has been sputtering with sentiment making little to no improvement over the last year, falling 0.2 point in August to a three-month low of 94.4.
“Uncertainty is high, expectations for better business conditions are low, and future business investments look weak,” NFIB Chief Economist Bill Dunkelberg said in a statement. “Our data indicates that there is little hope for a surge in the small business sector anytime soon.”
MeasureOne, a higher education data and analytics firm focused on the $1.4 trillion-dollar student loan market, today announced $2.3 million Seed financing led by Socratic Ventures along with Colchis Capital and University Ventures. The investment will allow MeasureOne to expand its rich data repository and analytics capabilities to help higher education institutions and lenders invest in talent, with better insights into student risk and potential.
MeasureOne specializes in data-driven insight for the higher education finance industry, and its most recent report on private student lending shows that families are effectively managing their private student loans.
MeasureOne, founded in San Francisco with offices in Dallas, TX and Ahmedabad, India. MeasureOne is applying data science and industry expertise in order to increase understanding of student loans and empower student loan lending, risk assessment, repayment, capital market investments and public policy development.
A new species is prowling America’s most obscure industry conferences: the data hunter.
In one recent example, Mr. Haines discovered a mobile advertising company that also collected data on the type of device someone was using when displaying an ad to them. The data helped estimate iPhone sales ahead of Apple Inc.’s announcements in 2011 and 2012, and it was lucrative for Mr. Haines’s old company, Quanton Data.
Erik Haines, head of data and analytics at New York-based Guidepoint Global LLC, trawls the globe for meaningful data to sell to hedge-fund clients.
Hedge funds and other sophisticated investors are increasingly relying on intermediaries like Mr. Haines, 35 years old, as they seek insights into a company’s sales and health that aren’t readily available from conventional sources.
Gone are the days when a hedge fund would call up a random sampling of Aéropostale stores to ask managers about sales or simply visit big-box retailers to get a feel for the traffic.
The firm struck a deal with a large insurance company to find out every day what kinds of cars received insurance policies, a possible indicator of how sales are going for automobile manufacturers. Another deal is with a company that surveys construction permits across county municipal offices, which is a “proxy for construction activity,” he said.
There are also companies set up to create exhaust. In those cases, often a person’s data is the price of a free phone application or service. For example, app provider Slice Technologies Inc. lets users track the arrival of packages to their homes in its signature Slice app or block spam through another service it owns called Unroll.me without charge. But in exchange for those services, about four million users allow the company to read their emails. Slice, in turn, also analyzes receipts and other data in a person’s email which it packages into anonymized data for advertisers and hedge funds. It might showAmazon.com Inc. selling more of a particularly profitable item or an increase in Netflixsubscriptions, which investors can use as a factor in their trades.
Steve Schwarzman, Blackstone CEO, interview analysis, (Termsheet, Email), Rated: AAA
Dan Primack in Termsheet reports:
“Blackstone boss Steve Schwarzman was interviewed at a CNBC conference yesterday by Becky Quick, and said four things of particular interest: (1) He believes much of the hedge fund industry will deviate from 2/20 due to performance troubles; (2) When asked what Blackstone’s stock price drop over the past year is a reflection of, he replied: “That’s a reflection that investors are wrong.” (3) The Fed will eventually raise rates (in part because the media is “daring” it to do so), but he believes the only real impact will be on financial markets, not on the real economy. (4) He declined to endorse either presidential candidate, and also seemed to accept the idea of changing the tax treatment of carried interest, as part of a more comprehensive tax reform package.”
Comment: We covered these news yesterday. More information today.
Thomas Casey will start his term at Lending Club Sept. 19. He was the finance head at WaMu prior to its sale to J.P. Morgan Chase & Co. in 2008 and was most recently finance chief for Acelity LP Inc.
In mid-July, Lending Club appointed BlackRock Inc. veteran Patrick Dunne as its new chief capital officer, as the company continues to struggle to restore investor confidence after forcing out its former CEO amid a lending scandal. Dunne is well known in Bay Area finance circles, having formerly headed BlackRock’s S.F. office.
A new wave of online marketplaces is offering savers, investors and those running their own super funds much higher interest rates on their cash than they can get from banks.
All use “risk-based pricing”, where borrowers with the best credit scores pay lower rates of interest than those with poorer creditworthiness.
With a bank, everyone who wants a car loan who is considered a good risk pays the same interest rate.
With P2P lenders, the investors say how much money they want to invest, the term and the interest rate they want to receive. Then it is an auction process to match-up lenders with borrowers. [Comment: To my knowledge there are very few P2P lenders who still do reverse auction if any at all ].
While P2P lenders could be a good option as part of a well-diversified portfolio, they are not like having your money with a bank. [Comment:It is in the entire industry’s interest to make sure retail investors have a realistic expectation of risk vs reward of what they are getting into. Unhappy retail investors who have the impression that fraud was committed usually attracts draconian regulation. ]
For banks, just keeping up with customer expectations forces them to run at breakneck speed. To do this, some institutions run hackathons or add bean bags and an open space floor plan.
A new model developed by Israeli fintech hub, The Floor, solves this problem. Four of the world’s largest banks, HSBC, Santander, RBS and Intesa SanPaolo partnered with the the coworking space, looking for better dealflow. In addition, Accenture, KMPG and Intel are also cooperating with the new program.
The Chinese Pando Group, a $250 million venture firm, is an investor in The Floor and also provides a bridge to the East Asian market, traditionally ignored by Israeli companies.
Citi and Barclays also operate fintech accelerators in Israel, but those are focused on seed stage startups and operate as any other accelerator. The Floor targets companies in growth stage that have already raised at least $1.5 million in equity. “The goal is to get these startups integrated in banks,” explained Cohen.
The banks have a final say in approving companies into the coworking space. “We are a boutique coworking space,” said Moises Cohen, one of The Floor’s founders.
The Floor targets companies in growth stage that have already raised at least $1.5 million in equity. “The goal is to get these startups integrated in banks,” explained Cohen.
The Floor’s management team uses their industry connections to dramatically shorten the time it takes a participating fintech firm to get a pilot with a major bank. In at least one case, the team managed to get a startup integrated with a partner in under 2 months.
The model has attracted 10 companies since the hub was founded early this year. The Floor plans to expand that number to 25, or 5% of the fintech firms located in Israel. The new coworking space opened in August in the Tel Aviv Stock Exchange building. Before that, the companies worked in their own spaces. One company relocated from Russia to join The Floor.
China’s structured finance market will continue expanding in both scope and scale, with increased asset-class diversification.
A total of CNY193.4bn (USD29.8bn) of Chinese structured finance transactions were issued in 2Q16, representing a 96% yoy increase. The increase was principally driven by 242% growth in the Asset-Backed Specific Plan scheme, which is regulated by the China Securities Regulatory Commission.
Issuance under the Credit Asset Securitization (CAS) scheme, which is regulated by the People’s Bank of China and China Banking Regulatory Commission and is the leading structured finance market by size, increased 43% yoy. The increase was predominately due to residential mortgage-backed securities (RMBS) and auto-loan asset-backed securities (ABS) issuances, although limited by a significant fall in collateralised loan obligation issuance. Fitch expects both RMBS and ABS asset-classes to maintain the growth momentum in 2H16.
Highlights for 2H16 include the issuance of three non-performing loan (NPL) ABS and two asset-backed note (ABN) securitisation transactions.
The three NPL ABS deals, originated by Bank of China Ltd. (A/Stable) and China Merchants Bank (BBB/Stable) were pilot transactions, as the regulators have restricted the market during the 2008 global financial crisis.
Fitch expects more NPL ABS to be launched in the near-term, as the government has granted quotas of CNY50bn to six commercial banks to help them deal with rising NPL ratios.
The two ABN securitisation transactions adopted a special purpose trust structure similar to CAS scheme, the first time this asset-class has used this structure since inception in 2012. This type of instrument allows non-financial corporates to issue asset backed notes in China’s interbank bond market.
The opening up of the interbank securitisation market to non-financial corporates leads Fitch to expect a continued flow of ABN issuance, as it provides a deeper investor-base than the stock-exchange bond market
A full copy of the report, China Structured Finance Quarterly – 2Q16, can be found here.
While RBI prepares the blueprint to regulate the sector, for some of the pioneers in the field, business is growing at the rate of an average 30-35 per cent on a monthly basis.
Delhi-based Faircent, which started operations around 2014, saw almost more than ten times growth in loan transactions in the last one year, according to Rajat Gandhi, founder and CEO, Faircent. So far, the company has raised close to $3.5 million, with one of the investors being Mohandas Pai, former director at Infosys. On an average, there has been an almost 35-40 per cent growth in monthly business for the company, according to Gandhi. The number of loan requests in the platform too has doubled between April-September 2016, from about 14746 in April to about 29108 in the beginning of September.
Another P2P lending platform, Lendbox, which started operations about ten months back, has already facilitated loans of around Rs 9 crore in its platform. Loan disbursements through the platform has been growing at around 30-32 per cent on a monthly basis, according to Ekmeet Singh, CEO, Lendbox. Further, the company is looking to raise around $3 million from investors.
The industry is expecting RBI to create separate category of NBFCs (non-banking finance company) for P2P lending on the lines of NBFC MFIs (Microfinance Institutions), which in turn is expected to give a strong footing to P2P facilitators.
“Since P2P platforms do not undertake lending themselves, and are mere facilitators, capital requirement of Rs 2 crore, which is at a par with NBFCs, could be too high for most P2P platforms to meet. Hence, we suggested RBI to create a separate category of NBFCs,” according to the founder of a P2P company.
“After RBI came out with draft regulations on P2P lending, there has been an increase in interest in the sector from institutional investors as well as borrowers and lenders. We are in advanced stages of discussions for raising around $3million to fund growth,” said Singh.
Micrograam, a rural-centric P2P firm is looking to raise around Rs 10 crore from investors, said Rangan Vardan, founder, Micrograam. At present, the capital base of the company is close to Rs 2.5 crore. The company has facilitated lending of about Rs 21 crore in the last five years. In 2014, the company had roped in V Balakrishnan, former Chief Financial Officer of Infosys, as its chairman.
Hyderabad-based i-Lend, which started operations around 2013, has been going slow in lending, but is expecting a surge in business and institutional lending after RBI comes out with final guidelines on P2P lending. The company is looking to raise around $1.5-2 million from investors.
“At present, we are growing at a rate of around 15-20 per cent on a monthly basis. We are present in three cities–Hyderabad, Chennai and Chandigarh. We are planning to expand to Bangalore soon. The sector is waiting for RBI guidelines. Once it comes out, institutional investments are likely to increase significantly,” said Shankar Vaddadi, Founder & Director, founder and director, i-lend.
There are about 40 [P2P lending] entities in the country, according to Xeler8, which tracks startup activity in the country. Mohandas Pai, who has backed Faircent, said the Reserve Bank of India’s regulatory guidelines will bring clarity, which will attract more players and intensify competition.
On the other hand, regulation may also lead to many players shutting shop if they’re unable to meet requirements such as maintenance of Rs 2-crore capital and an interest rate cap, which were published in the RBI’s discussion paper in May.
“I know of at least five startups from this space that will have to shut down once the final guidelines are out,” said Sunil Kumar, founder, Bengaluru-based P2P startup Loan-Meet, which has been bootstrapped since it started operations last year.
News Comments Today’s news are focused on the monthly volume data published below. In the UK we see the 1st crowdfunding platforms slowdown in five years. And in China, we learn that P2P platforms, apparently, need to have a very tough to get bank relationship to continue doing business in 18 months. International July 2016 […]
Today’s news are focused on the monthly volume data published below. In the UK we see the 1st crowdfunding platforms slowdown in five years. And in China, we learn that P2P platforms, apparently, need to have a very tough to get bank relationship to continue doing business in 18 months.
July 2016 volume numbers are in. We made a list of companies who stand out either for good growth or major decrease. Notice : we can not guarantee the accuracy of the volume numbers.
The 1st decrease in crowdfunding volumes. Is there a coincidence with Brexit or a relation of cause to effect ? This article claims it’s caused by Brexit. The trend is very interesting regardless of the cause. Worth a read.
P2P Banking publishes monthly volumes for p2p lenders. Please note that the information is not guaranteed and P2P Banking has made relatively large mistakes in the past. Example: LendInvest in May 2016 was reported as a 80% decrease from April while as it was not the case.
For July 2016: Zopa leads ahead of Funding Circle and Ratesetter. Assetz Capital and Lendinvest achieved a big surge in volume. The total volume for the reported marketplaces adds up to 341 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file I can publish statistics on the monthly loan originations for selected p2p lending services.
Negative stand out:
LandBay decreased 62%
Positive stand out:
Assetz Capital +460% , 13.9m EUR/month origination last month.
Funding Circle +1% vs same month last year.
LendInvest +14% vs last year’s month.
Mintos +523% vs last year’s month and last month volume of 6.9m EUR
MoneyThing +462% and last month volume of 3.6m EUR
For some online marketplace lenders, the devil they know might look better than the devil they don’t when it comes to proposals for federal bank regulators to issue national charters to financial technology companies.
The issue surfaced in March, when Amy Friend, senior counsel for the Office of the Comptroller of the Currency (OCC), said at a conference in Washington that the agency had fielded inquiries from fintech companies about obtaining a national charter tailored to their needs. Since then, the concept has come up repeatedly at industry conferences and elsewhere. At an OCC-sponsored event in Washington June 23, for example, Maryann Kennedy, deputy controller for large bank supervision, said the agency was forming a committee to examine the question.
A charter for a non-bank fintech company that provides financial services would be modeled to some degree on the charters the OCC issues to banks. A key feature of the bank charters that a marketplace lender potentially would value is “pre-emption:” A national charter would establish a single set of nationwide standards that a company would have to meet, overriding the necessity of complying with an array of state standards.
The danger in a national charter is that it would effectively represent the law of the land, with little or no room for maneuvering by the lenders.
Much of the testimony at the July 12 hearing involved a separate issue agitating marketplace lenders: whether federal regulators should continue to treat loans of $100,000 or less to small businesses — loans that make up the overwhelming majority of small-business borrowing — as business loans, or to treat them as consumer loans, which are subject to many more rules on disclosure and other factors.
The OCC has not disclosed what might be regulated by a national fintech charter, nor little else about its ongoing evaluation. The agency also has not said if it will decide to offer the charters, or when it might make that decision.
Sovereign bonds are supposed to be the safest investments in the world, but according to Bill Gross, one of the best-known investors in the world, sovereign bonds are now too risky:
[Begin quote]”Sovereign bond yields at record lows aren’t worth the risk and are therefore not top of my shopping list right now; it’s too risky. Low yields mean bonds are especially vulnerable because a small increase can bring a large decline in price.”[End quote]
This was supported by a release from Fitch Ratings:
[Begin quote]”This year’s dramatic fall in yields on bonds issued by investment grade sovereigns has again raised the risk that a sudden interest rate rise could impose large market losses on fixed-income investors around the world, Fitch Ratings says. A hypothetical rapid reversion of rates to 2011 levels for $37.7 trillion worth of investment-grade sovereign bonds could drive market losses of as much as $3.8 trillion, according to our analysis.”[End quote]
Most people look at the stock market, and think that everything is rosy, but there’s a lot going on that isn’t reflected in the stock market. In 2007, it was the collapse of the real estate bubble and, more importantly, the disastrous collapse of collateralized debt obligations (CDOs) backed by subprime mortgages. The disaster had already occurred before the stock market started falling.
Bloomberg columnist Lisa Abramowicz on TV on Wednesday commented on the warnings from Bill Gross and Fitch (my transcription):
[Begin quote]”There’s a high level of concern about how sustainable all of this is – when profits are declining, when you have growth slowing, when you have stimulus efforts that are not working and that are running out of steam — how long can this last? But at the same time, it’s very hard to see what could reverse it. The only thing that people possibly can point to is inflation, or if some country decides not to pay back their debt, or just forgive it, or come up with some kind of engineering that creates a technical problem.”[End quote]
According to Abramowitz’s contacts, the only thing that can stop the current plunge in bond yields is for some country to decide not to pay back their debt — essentially to declare sovereign bankruptcy. In other words, there’s a major financial crisis coming no matter what.
Medallion Bank anticipates entering into a new line of business developing relationships with marketplace lending platforms.
Consumer loans originated by Medallion Bank were stronger than expected. In June alone, nearly 2,500 loans were funded for over $45 million in volume
Medallion Bank’s six month’s earnings increased by 39%
Managed assets reached $1.760 billion, including $1.159 billion at Medallion Bank, both all-time highs
Jeffrey Warren filed a complaint on July 7 in the U.S. District Court for the Southern District of West Virginia against Marlette Funding LLC alleging violation of the West Virginia Consumer Credit and Protection Act and the Telephone Consumer Protection Act and other counts.
The plaintiff requests a trial by jury and seeks compensation for all damages, costs of litigation, attorney’s fees and such other relief as the court shall deem just and proper. He is represented by Daniel Armstrong and Benjamin Sheridan of Klein & Sheridan LC in Hurricane.
Customer satisfaction with big banks has surpassed levels with midsize banks for the first time this year.
17 percent of large banks reported implementing contextual, personalized insights and solutions to consumers.
Considering the high cost, it isn’t surprising that big regional or national banks have the lead in this arena. 17 percent of big regional or national banks reported implementing contextual, personalized insights and solutions to consumers, compared to only six percent of community banks and 2 percent of credit unions, according to Digital Banking Report’s The Power of Personalization in Banking. More than 50 percent of each category reported having a basic level of digital prowess with plans to increase future investments in digital.
There are some estimates of ROI on digitization of banking services. McKinsey identified several areas of digitization that drive more profitability than others. These areas include product back office automation, digitization of document management, automation of credit decisions, and big data analytics applied to sales campaigns.
That’s why Yahoo Finance continues to get a firehouse of traffic. For those of us who built our portfolios on the site ten or more years ago, that’s enough of a reason to go back. We’ve invested enough of our time and energy into the service that leaving it becomes difficult.
The thing is, as internet usage has shifted from desktop to mobile, so should trading volumes.
It isn’t enough for a broker to just recreate a web experience on mobile, either. Today’s users don’t want non-native apps. People want to feel that an app is trustworthy and vetted through the Apple Store. According to comScore, 87 percent of all time spent on mobile in the U.S. was spent in mobile apps.
Crowdfunding platforms have experienced a slowdown in deal flow for the first time in five years, in a sign that “armchair investors” are taking a more cautious approach to alternative investments.
However, the number of investments offered online fell 17 per cent in the first half of 2016, compared with levels seen in the last half of 2015, according to research company Beauhurst. The fall follows 10 consecutive half years of growth in terms of the number of deals offered to investors.
Beauhurst’s head of research Pedro Madeira said the slowdown in crowdfunding was “particularly noteworthy”.
Beauhurst’s data also show that venture capital and private equity firms slowed investment into UK start-ups and high-growth companies in the same period.
Bruce Davis, spokesman for the UK Crowdfunding Association (UKCFA), the trade body of crowdfunding platforms, said the dip in deals offered was just “a pause”. The UKCFA said it was confident deal numbers would begin to grow again.
RateSetter says that demand for its 5 year product is the primary impetus behind the planned closure. The 3 year market has become less and less popular ever since the platform introduced its 5 year offering, and now accounts for less than 5 per cent of new investments. The company says that investors have voted “with their wallets” and that they clearly prefer to lend in the 5 year market. The 5 year market currently pays a rate of 5.7% per annum, with the 3 year sitting at 4.0%.
The Tax Incentivised Savings Association (TISA), the trade association working with the retail financial services industry, has launched a peer-to-peer lending forum to enable those in the sector to develop policy recommendations for regulators and legislators, address operational challenges and determine best practice.
Initially the peer-to-peer forum will concentrate on four key areas:
-Building an effective dialogue with the FCA, HMRC and HM Treasury
-Developing standardised terminology, operational technology, data governance principles and best -practice
-Enhancing accessibility to the sector by improving the understanding of intermediaries, discretionary managers, consumers and related parties including PI insurers
-Identifying unintended regulatory and technical blockages – for example in relation to the inclusion of P2P within SIPPs – and proposing solutions
A former fintech investor at Accel Partners, who was involved in high-profile investments in WorldRemit and Funding Circle, has joined the London-based proprietary investment arm of Fidelity International as it seeks to strengthen its European business.
GLI Finance Limited (LSE:GLIF) has announced the hiring of two senior executives. Russell Harte has been appointed Chief Operating Officer and Steven Simpson has been selected as the Head of Group IT.
Harte is a Chartered Accountant with extensive general management experience. His recent roles have included being Finance Director of Liberty Holdings Limited, a JSE listed long-term insurer, where he played a key role in the turnaround of that business. Most recently he was CFO of Standard Bank Jersey Limited. Simpson is currently Head of IT at one of GLI’s subsidiaries Platform Black. He has over 25 years of experience in the design, implementation and administration of secure and highly-available enterprise and web-based solutions for corporate customers across various sectors including finance and telecoms. Russell and Steven will join the senior management team. Russell will report to the Group CEO and Steven will report to Russell.
GLI has been going through a period of change as Whelan took over the Chief Executive role at the very beginning of 2016.
ThinCats Australia has joined forces with DomaCom, a soon to list real estate equity investment platform.
The partnership will involve using ThinCats loans in order to gear properties on the DomaCom platform. This may be the first time that a peer-to-peer lending company and real estate equity investment platform have collaborated in this way.
The ThinCats partnership may also open up future investment opportunities for investors across the two platforms. Naoumidis said: “This also provides the 350 lenders on the ThinCats platform the opportunity to gain exposure to property assets and the ability to lend funds at an attractive interest rate with a lower risk profile.”
Investor Tom Enright was the first person to invest through LendMe, a peer-to-peer property lender.
He invested $542,000 by funding a fully-secured residential mortgage loan on an Auckland property, getting a 7.84 per cent return on his money.
There are four peer-to-peer businesses: LendMe (direct secured property lending), Harmoney (unsecured personal loans), Squirrel Money (diversified secured property lending), and Lending Crowd (focus on secured car lending). Harmoney is by far the biggest peer-to-peer lender with $275m of loans made.
Figures from Harmoney show most peer-to-peer lenders are 50 or under, with 41 being the average age.
REASONS TO BE A PEER-TO-PEER INVESTOR
Harmoney says people invest in peer-to-peer because:
– They are looking for an investment that could offer regular repayments over time. This includes people trying to generate income to live off
– They are spreading risk by putting a percentage of their portfolios into consumer lending.
– They understand they are taking the risk of a loan defaulting, but believe the risk is manageable and the return fair.
According to ECNS, the majority of P2P platforms have not yet established a relationship with a bank as a fund depository agent. Even though 149 P2P sites had signed agreements with banks “few had materialized.” Overall only 48 P2P lenders or just 2% of these online lenders have qualified, according to Shanghai Ying Can Investment consulting. These 48 platforms were some of the largest platforms in the country. These same platforms are poised to benefit by the additional regulatory scrutiny as undercapitalized and poorly managed P2P lenders may leave the market.
Chinese regulators are allowing a transitional period of 18 months for P2P lenders to adopt the new requirements. It will be interesting to see what happens after that.
Since 2015, many P2P platforms including Ezubao, the Dada Group, the Kuailu Group, the Zhongjin Group and others have been charged with illegal fundraising, involving tens of billions of yuan. This is not confined to China. In May, the U.S. Treasury Department released a report criticizing the peer-to-peer (P2P) lending business and recommended it be more tightly regulated.
According to the industry website WDZJ.com, China’s P2P online finance industry reached 2.036 trillion yuan (about $300 billion in transaction volumes) by the end of May 2016. It took seven years to reach its first trillion yuan and just seven months to reach the second trillion.
Take the Lending Club in the U.S., for example. It originally hoped to evaluate personal risk based on data extracted from Facebook, Twitter and other social platforms. That is in America, which has much more sophisticated credit investigation and personal data systems than in China. So you can imagine a large amount of P2P business based on personal credit in China will meet trouble in operation if there is no appropriate risk control system in place.
“There is one feature of the finance industry — the one that grows the fastest, will also collapse the fastest.”