Tuesday August 29 2017, Daily News Digest

Global fintech

News Comments Today’s main news: Has Float shut down? Ford to use alternative data for credit scoring. OnDeck Capital, Scale Operations Management finalize partnership. Money Dashboard raises 1.33M GBP. Mintos adds Georgian ID Finance loans. Today’s main analysis: HNA raises billions from shadow banks. Today’s thought-provoking articles: SoFi personal loans help people pay off over $5B in credit card […]

Global fintech

News Comments

United States

United Kingdom

China

European Union

International

Australia

Asia

Middle East

News Summary

United States

Rumor: Online Lender Float Has Shut Down (Crowdfund Insider), Rated: AAA

Online lending platform Float has allegedly shut down. Crowdfund Insider has heard from several different sources the digital platform has called it quits. Earlier today, Crowdfund Insider attempted to contact the platform but no response has been forthcoming.

Ford to Look Beyond Credit Scores in Sales Push (Fox Business), Rated: AAA

The company says it is looking at ways to increase loan and lease approvals for applicants with limited credit histories. These consumers are often denied credit because they lack a history of managing debt and as a result have low credit scores. Ford’s credit division plans to review new data to try to determine whether these customers, as well as those with more robust borrowing histories, are likely to repay their loans.

Ford’s U.S. sales are down 4.3% during the first seven months of the year compared with the same period a year prior, while total U.S. new auto sales are down 2.8%, according to Edmunds.com. Wells Fargo & Co.’s auto lending volume fell 45% in the second quarter from a year earlier due to tightening underwriting standards. Ally Financial Inc.’s auto loan originations fell 8.5% for the same period.

Ford Credit is among the largest U.S. lenders to say that it is looking at using alternative methods of underwriting, beyond the traditional factors that are mostly centered around credit reports.

SoFi Personal Loans Help People Pay Off More Than $ 5 Billion In Credit Card Debt (PR Newswire), Rated: AAA

Today SoFi announced its members have cumulatively paid off over $5 billion dollars in credit card debt using SoFi Personal Loans, getting them out of debt faster and at lower interest rates.

Members who used SoFi Personal Loans to pay off credit cards reduced their effective interest rate by 42% on average. They also saw their credit scores rise by 17 points on average due to reduced credit utilization, a key component of credit scores.

Credit card utilization has been steadily rising since the 2008 financial crisis. Americans’ credit card debt eclipsed $1 trillion this year, according to Federal Reserve data, and the average credit card APR inched up to an all-time high of 16.14 percent, according to CreditCards.com.

SoFi offers an array of options for Personal Loans, letting members find their rate, choose their loan amount (up to $100,000), and choose their term (three, five, or seven years) through a simple, fully-online application process. Loans are funded in less than a week on average. Though SoFi Personal Loans can be used for lots of purposes, more than 70 percent of SoFi members report using them for credit card refinancing and loan consolidation.

On Deck Capital Finalizes Funding Partnership with Scale Operations Management (Digital Journal), Rated: AAA

At one point in recent history – the internet was the wild west of commerce and industry. It seemed as if anyone with a computer and an idea could start a company from their home office. Two decades later, way after the dot com bubble burst; it is clear that the internet is becoming saturated and more competitive.

The competition for attention has led to increases in advertisement costs.

Doing business online went from a luxury to a necessity and budgets went from small to large.

Andrew Ukpabi, Founder of Scale Operations Management – a business management company with 15 Million in client assets under management; believes that this trend in the short term will only grow and he explains cheerfully how this has impacted the growth of his company:

“I’ve been on a signing spree lately. In the last week I’ve signed deals with CRMS’s, chargeback mitigation platforms, and processing companies.”

The partnership with On Deck Capital (ONDK) a NYSE listed company that boasts 4 Billion in funding to more than 40,000 small business customers in the US, Australia, and Canada; is the latest in his signing spree.

NEPC SURVEYS E&F MANAGERS ABOUT ALTERNATIVE INVESTMENTS (All About Alpha), Rated: A

NEPC, the investment consulting group that caters especially to endowments and foundations, has posted a survey about what such institutions think of marketable alternatives.

This broad category “marketable alternatives” includes direct hedge funds, funds of hedge funds, liquid alternatives, and global asset allocation.

Where are these allocations headed, near future? Not quite two-thirds of the respondents (65%) planned to maintain their current level of allocation in such investments. Sixteen percent plan to make a “modest change” increasing the allocation. Symmetrically, another 16% plan to make a “modest change” in the opposite direction. Only 3% plan to decrease the allocation “substantially,” and no respondents plan to increase it substantially.

As to what they have done over the past year: 18% have increased their allocation to such alternatives, 32% have decreased it, so the remaining half have kept it where it is.

Source: All About Alpha

There is a split on the question of the classification of marketable alternatives within a foundation or endowment’s portfolio, one that reflects a series of evenly divided binary choices. Not quite half (48%) of respondents say they have a dedicated allocation to this asset class, and that’s the end of the issue for them.

So that leaves 52% who do something else. A little more than half of them (about 28% of the whole) say that they have marketable alternatives both within a dedicated allocation and as part of an allocation to another class.

Should SoFi be granted a bank charter? Rep. Waters isn’t so sure (HousingWire), Rated: A

SoFi outlined in the application that the purpose of the charter is to provide its customers a FDIC insured NOW account and a credit card product. The bank will offer no other products or services.

In response to Waters’ comments, a SoFi spokesperson said, “We’re happy to discuss our application with Rep. Waters and other interested parties, and confident the FDIC will conduct its review of our application expeditiously and in accordance with the law.”

The Independent Community Bankers of America also sent a letter to the FDIC over the application, urging the FDIC to reject the application.

ICBA also stressed that Congress should close the ILC loophole, stating it not only threatens the financial system but creates an uneven playing field for community banks.

1 Popular Way Millennials Are Cutting Back on Living Expenses (and Why There’s Nothing Wrong With It) (CheatSheet), Rated: A

Co-living has been a popular option among young people just out of college. And now businesses are also jumping on the co-living bandwagon, hoping to make some quick cash from this idea.

The act of sharing housing, work, and commuting space is second nature to millennials. Co-living is just one more option young people have to stretch their resources and meet new people if they so choose.

Research shows more millennials are living with their parents than with a spouse. Living with parents is the No. 1 living arrangement among millennials, according to Census Bureau research. In 2016, 22.9 million (31%) young adults lived with their parents.

One company that joined the co-living movement is WeWork, which originally started out offering co-working spaces to individuals and companies. WeWork branched out to co-living spaces, called WeLive, in 2016.

Some co-living buildings, such as PodShare, even provide free food and fully furnished apartments, further helping their residents keep costs down.

Thinking of going the co-living route? Here are some of your options in three major cities.

Chicago

Los Angeles

New York

Malkiel Provides Investment Advice For IRA Allocations (Financial Advisor), Rated: A

Although the top leading robo-advisor firms grew by 65 percent in eight months to $19 billion assets under management in 2014, according to Financial Advice Market Review (FAMR), robo-advice is limited to assembling a group of stocks and bonds to avoid risk in a portfolio.

CAN WE ALL PARTICIPATE IN THE NEXT UNICORN? (All About Alpha), Rated: A

With the passage of the Title III portion of the JOBS Act, this paper tries to address a very critical question: can non-accredited investors find and invest in the next unicorn?

AltFi Data [2015], a data aggregator of equity crowdfunding, published a report on equity crowdfunding from 2011 through June 30, 2015 using the five most significant online platforms based on origination volume. These include Crowdcube, Seedrs, SyndicateRoom, CrowdBnk and Venture Funders. There were 431 investment crowdfunding rounds from 367 companies. The UK report indicates that crowdfunding has revolutionized the funding of small and medium sized enterprises involving both professional and small retail investors. It is reported that 62% of crowd funding investors describe themselves as retail investors with no previous investment experience.

3 Keys To Earning Up To 7% With Peer-To-Peer Lending (Forbes), Rated: A

Lending Club, the world’s largest P2P platform, has served over $55 billion in new loans in 2017. That’s a 40% growth in loan volume compared to last year.

Now, the likes of Goldman Sachs serve about 70% of all peer-to-peer loans.

P2P lending is still a place to earn market-beating yields of up to 7%. But private investors are now competing against the world’s biggest financial institutions.

  1. Spread Your Risk and Invest No Less Than $5,000
  2. Use Automated Rebalancing Tools – NSRInvest.com is a registered advisor that offers managed accounts to P2P investors. Investors can link their Lending Club and Prosper accounts to the website and have NSR experts invest for them based on their loan selection criteria.

Depending on the selected strategy, NSR users have outperformed the market by as much as 2.6% (average is 1.5%).

  1. Enhance Your IRA with P2P

Tell Us Who Your Favorite Fintech Companies Are: Forbes Fintech 50 Call For Nominations (Forbes), Rated: B

If you own or work at a fintech firm that you think is worthy — or if you’re a fan of one — please tell us about it. The only stipulations are that it be a venture-backed startup with operations in the United States. That means no publicly traded companies or their subsidiaries and no privately held established firms.

If you are submitting a company for which you’re an owner or employee, please use this form.

If you’re nominating a startup of whose inner workings you have no knowledge, please fill this out.

The deadline for both sets of submissions is Friday, September 15, 2017. If we have more specific questions, we will be in touch.

United Kingdom

Money Dashboard Raises £1.33M in Equity Crowdfunding (Finsmes), Rated: AAA

Money Dashboard, an Edinburgh, UK-based personal finance management app, raised £1.33M in equity crowdfunding.

1708 investors have participated in the campaign via Crowdcube acquiring an equity stake of 9.55% in the company.

The company had a target of £1m at a pre-money valuation of £12.6m.

Half of UK businesses lack confidence in government’s Brexit strategy (Consultancy.uk), Rated: A

Now, a recent survey conducted by peer-to-peer finance platform Market Invoice found that 54% of 3,000 businesses polled said the government had lost its way in talks with Brussels and that Brexit Secretary David Davis lacked preparedness, while only 5% felt he was doing a good job.

Maintaining stability in the sterling was meanwhile considered important by just 7%, reversing a KPMG study of businesses performed earlier in the year. In response to the falling pound however, the UK is projected to lose as many as 40,000 investment banking jobs post-Brexit.

A total of 20% of firms voted against further financial support spent on marketing, and aim to reduce it in the nearby future. A 54% majority of small businesses have not yet witnessed Brexit leaving a negative impact on the hiring plans, as only 2% are predicted to reduce exposure to EU nationals with a further 6% being more reluctant to hire from the bloc.

Startup Accelerator Level39 Launches Cyber39 (LendIt), Rated: B

Level39 has launched Cyber39, a program focused on fighting cyberthreats in London.

China

Chinese Dealmaker Raises Billions From Shadow Banks (Bloomberg), Rated: AAA

A Bloomberg News review of more than 100 investment documents and corporate filings sheds light on how HNA has financed its remarkable run of deal-making, which has included acquiring multi-billion dollar stakes in Deutsche Bank AG and Hilton Worldwide Holdings Inc.

The documents, pieced together from fund prospectuses and disclosures to China’s Administration for Industry and Commerce, show how HNA has employed a network of trusts and asset management products, in addition to more conventional financing, to fund everything from takeovers to day-to-day expenses. Among the key findings: Units of the group have pledged more than $10 billion of unlisted shares to non-bank lenders and, in some cases, have paid interest rates on shadow debt that far exceed China’s benchmark rates for bank loans and bond issuance.

The documents, pieced together from fund prospectuses and disclosures to China’s Administration for Industry and Commerce, show how HNA has employed a network of trusts and asset management products, in addition to more conventional financing, to fund everything from takeovers to day-to-day expenses. Among the key findings: Units of the group have pledged more than $10 billion of unlisted shares to non-bank lenders and, in some cases, have paid interest rates on shadow debt that far exceed China’s benchmark rates for bank loans and bond issuance.

HNA’s parent company said in a response to questions that financing from non-bank institutions makes up a “small” portion of the group’s overall funding and that its credit limit from Chinese banks has increased by more than 100 billion yuan ($15 billion) this year. The company said its debt-to-asset ratio has dropped for the past seven years and added that HNA Group’s profitability and asset quality have been improving.

Source: Bloomberg

Taken together, the documents suggest that HNA’s main units have increased their use of shadow financing in absolute terms over the past two years.

China’s regulators preparing new rules for digital coin offerings (Reuters), Rated: A

Chinese regulators are preparing new regulations on digital coin offerings and may ban them until the rules are in place, the financial magazine Caixin reported on Monday, as interest in the new fundraising channel grows rapidly in a regulatory grey area.

Digital currencies, also called cryptocurrencies, such as bitcoin and a growing stream of alternatives, allow anonymous peer-to-peer transactions without the need for banks or central banks.

China’s top insurers ploughing billions into fintech (SCMP), Rated: A

China Life and Ping An Insurance, the country’s two largest insurers, have both been focusing heavily on investment in technology, and now it appears artificial intelligence (AI) may becoming more important than sales agents across the sector, as premium income continues to soar.

The nation’s largest insurer China Life still has 1.58 million agents, while number two Ping An has over 1.1 million, and both have previously made much of the fact they plan to expand those sales forces in future.

China Life said last Thursday it had teamed up with internet search firm Baidu to form a fund to invest 7 billion yuan (US$1 billion) in AI-related technology companies and internet finance operations. China Life will plough 5.6 billion yuan into the venture, with Baidu covering the rest.

European Union

Mintos Marketplace Adds ID Finance Loans Issued in Georgia (Crowdfund Insider), Rated: AAA

ID Finance, an emerging markets focused Fintech company, is now listing investment opportunities on the Mintos marketplace incorporating prime personal loans issued under its Solva brand in Georgia. Solva is a fully owned ID Finance subsidiary in Georgia that has disbursed 28,000 personal loans worth €12 million since late 2016.

The loan originator will offer a buyback guarantee for loans that are delinquent for more than 60 days. The share of non-performing loans for Solva is said to currently be at approximately 4%. ID Finance will keep at least 10% of each loan available on the Mintos marketplace on its balance sheet so its interests are aligned with investors.

PSD2 – What will happen in January 2018? (AltFi), Rated: A

With the inception of financial digitalization, we’ve seen new firms such as Goldman Sachs adapt their strategy to cover retail and embrace fintech, firms such as Citi and BNY Mellon have ventured into open banking and finance APIs and Vanguard has created a digital behemoth of their robo-advisor.

Open Banking is still a new concept and, as new concepts go, it will be refined by trial and error. Some banks are farther along than others, with e.g. BBVA already in commercial use with several APIs. Yet the roll out of new “API Markets”, as they are often called, will see a learning experience from both the bank providers as well as those looking to utilize them.

Swiss fintech launches first-ever mobile app for alternative investments (Opalesque), Rated: A

Opalesque Industry Update – Fundbase has announced immediate availability of Fundbase Mobile, a revolutionary application for qualified investors to source alternative investment products. With Fundbase Mobile, investors will have access to a globally diversified universe of high quality alpha producing alternative investments at their fingertips.

The majority of Fundbase users expect to improve their fund sourcing process with Fundbase Mobile by spending more time logged in, searching funds. Pancho Vanhees, of TFAL Investments, a Luxembourg-based investor, believes the mobile app will improve their systematic processes and quickly identify top performing emerging hedge fund managers while on-the-go.

Why Only Initial? Worldcore Aims to Use ICO to Conquer Blockchain Competitors (Coin Telegraph), Rated: A

In the past week alone, prominent investor Mark Cuban and entrepreneur Kim Dotcom have both signalled their involvement in ICOs.

Worldcore aims to undercut banks, banking disruptors such as TransferWise and FairFX, and soon the technologically innovative operators heavily involved with cryptocurrencies.

Offering both payments and consumer spending options such as a prepaid debit card, the company is already accepting Bitcoin as a funding option, the first step in a Blockchain rollout which will occur incrementally over several years as the technology improves.

Biometric account access in the form of face and voice recognition replaces passwords, while Blockchain offerings themselves will take the form of a payment gateway reminiscent of Ripple.

Worldcore’s fee structure, for example, is noticeably more complex than that of Bitcoin-based prepaid cards from Bitwala, ANX and others.

Fintech Can Contribute to the Quality of Country’s Financial Center (Crowdfund Insider), Rated: B

The Federal Council of Switzerland is out with a note regarding Fintech. Federal Councillor Ueli Maurer is apparently doing a swing through the Swiss Fintech scene to improve awareness and relationships.

Maurer is expected to visit Fintechs in Zurich and Zug – a fact finding mission to garner updates on current tech topics, risks, opportunities and challenges.

The Federal Council believes that a dynamic Fintech ecosystem can contribute significantly to the quality of Switzerland’s financial center – something that is strategically important. It can also boost its competitiveness around the world.

Credissimo – Contender for European FinTech Awards 2017’s Title of ‘European Innovator 2017’ (Digital Journal), Rated: B

Credissimo is the only Bulgarian company featured in the European FinTech Awards 2017 where it is nominated for the “Alternative Finance” category.

This prestigious nomination places Credissimo amongst lead European companies where it will compete with the largest FinTech organizations for 2017’s European Innovator award.

International

Alternative finance market in robust health, despite slight summer downturn (Opalesque), Rated: AAA

Opalesque Industry Update – The world’s first global Crowdfunding and Marketplace Finance Index (CAMFI) shows that the industry exhibited a slight downturn in July, dropping from 94.11 in June to 90.32 in July.

Key points:

  • The global crowdfunding and marketplace finance industry exhibited a slight downturn in July
  • Segment-wise, the Reward Sub-Index was the major cause of the July decline
  • Attribute-wise, the main declining driver was the market Scale measures
  • Industry Scale continued to shrink, most evidently in the Reward segment
  • Industry Efficiency improved significantly, with both Debt and Reward segments demonstrating growth
  • Industry Transparency underwent no noticeable changes
  • Debt has stayed relatively stable, which is expected given it is such a large and diverse market
  • Equity has seen had a significant downturn in trading
  • Rewards has had the biggest downturn, with significantly fewer campaigns, backers and amounts of money raised for each campaign during the July period

Despite the slight downturn demonstrated in June and July, data from TAB shows that the industry is growing rapidly year on year:

  • In 2014, campaigners in the UK raised over $2 billion via crowdfunding platforms. In 2016, they raised over $3.96 billion.
  • China is demonstrating huge growth, with companies raising $134 million via crowdfunding platforms in 2014. In 2016, they raised $2billion.
  • France is also seeing significant growth, with companies raising $70 million in 2014, and $159 million in 2017 to date.
  • In 2014, companies raised $5.4 billion in debt finance globally, increasing to $12.7 billion in 2016.
  • In 2014, companies raised $345 million in equity finance globally, increasing to $766 million in 2017 to date.
  • Rewards finance raised via crowdfunding globally has increased from $680 million in 2014 to $1.1 billion in 2016.
  • The Real Estate industry raised $1.2 billion via crowdfunding in 2014. In 2016, it raised to $3.8 billion.
  • The Capital Goods industry raised $751 million in 2014. This year to date, it has raised $1.4 billion.

Funding & Deals On Pace For A Record Year (CB Insights), Rated: A

Last quarter set a record for funding to VC-backed fintech companies, which raised $5.2B across 251 deals (as highlighted in the CB Insights Q2 2017 Global Fintech report). At the current run rate, deals are on pace to increase 5% this year, while investment dollars are on pace to grow 19%.

The quarter also saw new unicorn births, with 5 companies reaching new valuations of $1B+: online lending site Tuandaiwang (valued at $1.5B at the time of its unicorn round), invoice and payment company AvidXchange ($1.4B), online investment platform Robinhood ($1.3B), health insurance startup  Clover Health ($1.2B), and cloud-based communication platform Symphony Communication Services ($1B).

Source: CB Insights

Funding to global VC-backed fintech companies set a quarterly record in Q2’17, rising 83% to reach $5.2B. Deals experienced less dramatic growth, but still increased 2% from the previous quarter, reaching a five-quarter high of 251.

Source: CB Insights
Australia

Car finance drives P2P growth in Australia (P2P Finance News), Rated: AAA

CAR finance is one of the driving forces behind the growth of P2P lending among brokers in Australia.

According to new research from RateSetter’s Australian business, one fifth (20 per cent) of all broker-led loans on the platform are used for car and vehicle finance, with an average loan value of AUS$13,186 (£8,077).

Meanwhile, home improvement loans account for 19 per cent of the platform’s broker-led activity, with an average loan value of $14,299, while 12 per cent of loans are used for debt consolidation, and seven per cent are used for education.

Business borrowing accounts for nine per cent of total broker loans, but has the highest loan values with an average of $28,094 per loan.

CARS AND RENOVATIONS DRIVING GROWTH OF P2P LOANS IN THE BROKER MARKET (LendIt), Rated: A

Peer-to-peer lending is gaining traction amongst Australian brokers, with RateSetter today announcing that it has reached the milestone of 2,000 brokers accredited with the peer-to-peer lending platform. Lending volumes through the broker channel, largely driven by car and home improvement loans, are doubling approximately every six months according to RateSetter.

Vehicle financing is the most popular reason brokers are choosing peer-to-peer loans for their clients, followed closely by funding for home improvements and loans to consolidate high-interest credit card or other bank debt.

The milestone also coincides with RateSetter passing $150 million in loans facilitated since launching in 2014. Across both the broker and direct channels, lending has grown 50% in the last 5 months alone, after passing the $100m milestone in March.

An analysis of RateSetter’s loan data found that brokers are helping their clients finance loans worth an average $16,871, with an average loan term of 44 months at an average interest rate of 8.37% p.a.

Source: LendIt
Asia

Here’s How Chinese Tech Giants Including Tencent And Ant Financial Are Plowing Into Southeast Asia (CB Insights), Rated: AAA

Here’s a summary of the investment and M&A moves of the five Chinese internet giants within Southeast Asia:

Didi Chuxing: Chinese ride-hailing startup Didi Chuxing was the first among the Chinese tech giants to enter Southeast Asia, when it invested in Singaporean ride-hailing startup Grab’s $350M Series E round in 2015. It invested again in Grab in 2017, in its $2B Series B round.

JD.comThe Chinese e-commerce giant made an investment in leading Indonesian travel booking platform Traveloka this past year as part of its ongoing fund-raise, participating in $150M of its ongoing $500M round, along with Sequoia Capital, Hillhouse Capital Group, and East Ventures. Expedia contributed $350M.

TencentTencent recently invested in Indonesia’s Go-Jek, a company most widely known for its on-demand motorbike service. But Go-Jek is strategically similar to Tencent in a notable way: Like Tencent’s WeChat, Go-Jek is also developing a “super app” of sorts, which includes the ability to order food, massages, and other services, in addition to the development of its own mobile payments product called Go-Pay. In 2013, Tencent launched MNC Tencent, a joint venture with Indonesia’s MNC Media (not pictured in timeline). According to media reports, this venture was launched with the intention of pushing Tencent’s WeChat in the country. More recent reports claim that this JV hasn’t seen much traction.

Alibaba: Alibaba’s most recent investment into Southeast Asia was a $1.1B investment into Indonesian consumer-to-consumer e-commerce site Tokopedia in August 2017. This investment comes after months of rumors that JD.com was planning an investment into the company. Alibaba has also invested twice into Tokopedia’s competitor, Singapore-headquartered e-commerce site Lazada. First, in April 2016, it invested $1B in Lazada, valuing it at $1.5B. In June 2017, it upped its existing 51% stake to 83%, giving Lazada a valuation of $3.15B. It announced that this investment would leave its investments into the e-commerce site at a little over $2B.

Ant Financial: Ant Financial, Alibaba’s financial investment arm, operates Alipay and has made its fair share of investments into the region, across different countries and on different terms. In 2015, it invested in Singaporean cross-border trading platform M-DAQ. In 2016, it put money into Thai fintech company Ascend Money to help grow its digital and offline payments and financial services business. 2017 brought an entrance into the Philippines, with an investment into Globe Telecom-owned fintech company Mynt, and into Malaysia, where Ant Financial set up a joint venture with CIMB Group-owned Touch ‘n Go, which operates a smart card that works on transportation payments, like tolls and public transportation. According to reports, the joint venture would allow Ant Financial to build an e-wallet for Malaysia.

Source” CB Insights

Thai proptech startup Seekster raises seed funding from Digital Ventures, 500 Tuk Tuks and dtac Accelerate (e27), Rated: A

Seekster, an alumni from the dtac Accelerate programme batch 5, announced today it has raised an undisclosed seed funding from Digital Ventures, 500 Tuk Tuks and dtac Accelerate.

The startup is a company that connects properties to cleaning and maintenance service providers. While there are many on-demand cleaning companies, Seekster targets the commercial sector and SMEs. The startup says it facilitates about 5,000 to 6,000 jobs per month in Thailand.

Furthermore, the startup also announced it has inked a deal with real estate company Ananda Development to provide maids and technicians for its condos.

Middle East

Robo-advisory: Show me the money (Khaleej Times), Rated: AAA

Robo-advisory services describes a range of algorithm driven models that help sift and select investment options for individuals based on the investors’ requirements and risk appetite. Similar to P2P lending, this technology platform brings the customer closer to the investment. It enriches the information available through graphic rich dashboards and content that allow the investor to see how the portfolio is performing over time as well as versus benchmarks.

Deloitte’s report, The Expansion of Robo-Advisory in Wealth Management suggests that by 2020, the assets-under-management or more simply the amount of money invested via robo-advisors will be somewhere between $2.2 trillion to $3.7 trillion. By 2025, the number is expected to rise to $16 trillion or roughly three times the amount handled by the world’s biggest asset management firm, BlackRock.

Source: Khaleej Times

What I Know about the right time to crowdinvest: Eureeca’s Chris Thomas (Wamda), Rated: A

Unlike other crowdfunding platforms, Eureeca specializes in equity investment. If crowdfunding is the umbrella term for debt funding or reward funding, crowdinvesting describes the equity side of crowdfunding. At Eureeca, entrepreneurs and investors are put through a stringent vetting process before it is determined who can join the platform. For its first class of companies, Eureeca chose 60 businesses out of 3,000 applicants. With more than 14,000 active investors, the average investment amount is $5,800.

As the first company to obtain a crowdfunding license from the Dubai International Finance Centre, Eureeca – in the person of Thomas – laid out for Wamda everything from the right time for entrepreneurs to crowdinvest to what they should expect from the process.

Crowdfunding should not be your second or third choice. It should be the first place you go to try and fix your funding requirement. In the Middle East, the concept is still being socialized. Crowdfunding is essentially the online mechanism for raising money. If you are raising $100,000 or $10 billion, join a platform to see what they can do and you’ll be surprised at the support. By bringing the fundraising online, you reduce the amount of time and effort you put in and increase your reach to potential investors, including access to crossborder investments.

It works best for businesses with a consumer-facing element. People need to have an emotional connection with your business. It’s not going to work for a steel factory in Ras al Khaimah [an outlying emirate in the UAE]. If you have a product that’s already being distributed and there are people who know and love your product, they are the ones that can be converted from lovers of your business to investors in your business.

Regular fundraising prep applies. Be sure that you have a strong network and that you are constantly building your contact list.

Authors:

George Popescu
Allen Taylor

The 2017 wave of Lending Fintechs: Alt Lending 3.0

PitchIt 2017 finalists

The PitchIt startup awards is one of the best and most exciting parts of the LendIt conference. This year, there were eight finalist competitors who met in front of hundreds of investors to pitch. Four judges picked the ultimate winner, Nova. Below are the profiles of Nova and the seven other PitchIt finalists. Nova – […]

PitchIt 2017 finalists

The PitchIt startup awards is one of the best and most exciting parts of the LendIt conference. This year, there were eight finalist competitors who met in front of hundreds of investors to pitch. Four judges picked the ultimate winner, Nova. Below are the profiles of Nova and the seven other PitchIt finalists.

Nova – Credit History for Immigrants

Nova is the world’s first cross-border credit agency. Many immigrants come to the United States with no credit history. They may come from a place where credit is not an option. In many countries of the world, banks do not issue credit cards. There may not even be many, if any at all, banks. Merchants do not offer purchases on credit, so when these immigrants land on U.S. soil, their ability to interact with the economy is limited by the options they had in their native countries. Nova solves that problem.

It started as a research project at Stanford University. U.S. property managers run credit and background checks on applicants to screen for potential risks when leasing or renting housing units. Those checks typically do not include overseas credit checks. With Nova, property managers have that ability. Not only can U.S. landlords check overseas credit, but they can also report negative actions so that the credit report is affected in the applicant’s home country.

Lenders can use Nova to check the credit history of applicants that come from non-U.S. countries. While many countries around the world do not have FICO scores and credit bureaus, that does not mean citizens of those countries do not have credit histories. Nova gains access to those histories.

Aella Credit – Instant Credit for Africans

Aella Credit’s focus is on Africa where employed workers may or may not have access to credit. Through Aella, employees can access alternative credit solutions through their employers.

Companies register on the Aella Credit platform and give the company access to employee records. Through an API call, Aella Credit can loan money to employees who access the platfom through their mobile phones. In most cases, they can have access to much-needed cash at low interest rates in a couple of minutes. They pay back the loans in payroll deductions authorized during the application process. Over time, their credit improves as Aella Credit reports their payment history to the credit bureaus.

Investors make loans and are almost guaranteed payment due to the payroll deduction process. Also, the default rate is low for the same reason. Everyone wins.

Alloy – Verifying Identities

Identity verification has been a major issue for many people and companies in recent history. As the world grows more and more digitized, identity verification will become an even bigger concern. Alloy makes the process seamless.

Through an API call, Alloy verifies identity by checking multiple sources of information. Using financial technology for financial service companies that want to fight fraud, they are able to verify identities quickly and accurately to prevent loss due to fraud and dissatisfaction.

Float – Providing Access to Credit Quickly and Easily

Float‘s mission is very simple and straightforward. It’s a mobile app that allows people to apply for a line of credit and be approved in just a few minutes—as in, under five. The money being loaned is sent directly to the app and the borrower can use that money from the app. In other words, it’s digital currency.

Instead of using FICO scores, the company bases the amount of credit on what they believe the applicant can afford. Credit lines begin at $50 and go up to $1,000, amounts that no bank would touch. Another anomaly is the payback plan. Whatever applicants borrow must be paid back by the 21st of the following month. Therefore, it’s more like a payday loan than a traditional line of credit, but instead of standing in line in a seedy part of town, applicants can borrow money while sitting in their living rooms.

Qwil – Unlocking Contractor Earnings

As a freelance writer, I’ve experienced times when a slow payment made it difficult to get through the month. It’s an experience that every contractor in any kind of business has experienced. With Qwil, contractors can get through those difficult months without stress. Think of it as a cash flow plan based on the quality of your invoices.

When you invoice your clients—whether it be Net 30, Net 60, or Net 90—this is reflected in your Qwil account. Contractors simply cash out on future invoice earnings and go on about their business.

RealAtom – Helping Commercial Real Estate Borrowers Find The Right Lender

There is a lot of innovation going on in real estate lending right now. Commercial real estate is one area where could be a lot more improvement. RealAtom is here to fill in some of that gap. Their niche is helping borrowers find the right lender.

True the marketplace lending format, both borrowers and lenders sign up on the platform. Borrowers post their loan details and documents for review while lenders specify their applicant criteria. RealAtom makes the connection through the platform, matching lenders with borrower requests and borrowers with lender criteria. They deal in loan amounts from $100,000 to $100 million providing access to bridge, mezzanine, and long-term permanent loans. They’ll even work with loan brokers.

StackSource – Commercial Real Estate Lending

Another marketplace lending platform specializing in the commercial real estate lending space, StackSource allows project managers and real estate developers a way to access funding for their projects by giving them a place to upload their project details and find lenders willing to fund those projects. The basic service is free, but there is an upgrade option that allows developers to pitch their projects to more lenders for a fee. It’s only .3% of gross loan value, which is due at closing. That still beats those hefty broker fees.

WeTrust Platform – Providing a Trusted Lending Circle

WeTrust is an online ROSCA, which stands for Rotating Savings and Credit Association. It’s a simple idea that has caught on in several countries under different names, but it allows a group of people to pool their money together for a common purpose and reap the benefits together.

ROSCAs are peer-to-peer instruments that allow the members to use their pooled money to gain access to credit, make a purchase, fund a business, or whatever they agree upon. They contain all the benefits of insurance as well as credit instruments. Members earn interest on their pooled money, but members rotate the benefits so that not all of them gain access to the money in the pool at the same time. In other words, they rotate the shared benefits to distribute them fairly and evenly so that the entire membership wins.

WeTrust operates in India, Latin America, China, and the U.S. with plans to expand to other countries soon.

Author:

Allen Taylor

Thursday February 16 2017, Daily News Digest

Lending Club investors

News Comments Today’s main news:  Lending Club Q4 results: the banks are back. NatWest and  Royal Bank of Scotland set to launch digital lending platform. Auswide Banks takes control of MoneyPlace. Indonesia allows on-balance-sheet lending for FinTech startups. Today’s main analysis: Lending Club Grows Auto Refinance. Lend Academy proud to have banks back at LC. Today’s thought-provoking articles: BondMason responds to […]

Lending Club investors

News Comments

United States

  • LC Q4 earnings review — the banks are back. GP:” Lending Club’s banks being back on the platform are a great sign of trust and comfort. I think everybody can now claim the Lending Club crisis was over. So now that the crisis was over, it wasn’t that bad, wasn’t it? If this is the types of crisis our industry will face I would be comfortable saying that it is safe to invest in our industry.” AT: “Lending Club has made a nice comeback. 2017 looks very promising, as Lend Academy points out.”
  • How the CFP Board is court next generation of planners. AT: “Since Millennials are the largest living generation and have very different attitudes about saving and investing than previous generations, it only makes sense to encourage more of them to enter into the financial planning field.”
  • How investors can cash in on soaring student debt. AT: “Not a whole lot new here, this article is geared toward investors not familiar with student loan investing.”
  • Why lending startups like Float want to ditch FICO. GP:” The only reason not to look at FICO in my eyes is cost. Otherwise why not use an indicator that is correlated? Perhaps once can use more then FICO but ignoring it completely all the time seems unwise.” AT: “As the article points out, not all alternative lenders are ditching FICO, but those that are do so for practical reasons.”
  • Lending Club grows auto refinance gradually. GP: “We continue to look for ways for Lending Club to resume growth. Auto Lending was their best bet until the crisis hit. I hope this turns into a valid channel and it allows them to diversify beyond credit card debt refinancing. As we learned with the capital sources it’s not healthy to be concentrated in one market segment.”

United Kingdom

European Union

Australia

Asia

News Summary

United States

Lending Club Q4 Earnings Results Review – The Banks Are Back (Lend Academy), Rated: AAA

Lending Club has released their Q4 2016 and 2016 year-end results. The company originated $1.987 billion in loans, up 1% from Q3 2016 of $1.972 billion. The most significant news of the earnings release was that bank participation totaled 31% of the platform in Q4 2016, up 18% from the previous quarter which shows that the banks are back. In the Q & A section of the earnings call, CEO Scott Sanborn stated, “We’ve got back on a bank by bank level all of the people we were hoping to have back.” This also happened quicker than Scott had expected. Also worth noting is that the company achieved this goal without investor incentives in Q4 unlike in Q2 and Q3 2016 where loans were offered to investors at a discount.

What you’ll also notice looking at the chart below is that the Other Institutional category dropped 5% sequentially, from 18% to 13%. This category of investor includes investment banks, hedge funds and fund managers who typically seek higher yields. Lending Club has tightened credit and adjusted pricing which has had an effect on these investors.

Now the question is whether they can spur some growth in 2017 on the borrower side of the equation. The company also provided guidance for the first time in several quarters which should give investors some idea of what to expect going into 2017.

How the CFP Board is courting the next generation of planners (On Wall Street), Rated: AAA

Amid growing worries that there are not enough new advisers to replace those who are retiring, the CFP Board’s Center for Financial Planning is rolling out a host of new initiatives aimed at expanding and diversifying the workforce.

In the coming weeks, the center will launch an internship program aiming to place workforce re-entrants at planning firms, and a social media campaign geared for students highlighting the diversity of the profession.

The center is also looking expand and solidify financial planning as an academic discipline.

How Investors Can Cash In On Soaring Student Debt (Forbes), Rated: A

In Q4 2016, total outstanding student loans topped $1.4 trillion—that’s more than auto loans or credit card debt. The student loan debt market is now only second to the mortgage market in terms of size.

While the consumer price index climbed 44% since 2000, tuition has soared 151%. Students now graduate with an average of $33,000 in student loan debt.

SoFi and CommonBond, the two-main P2P platforms that service students, have issued $8.5 billion in loans. Around $6 billion of that has been securitized by the likes of Goldman Sachs and Morgan Stanley.

It’s worth noting that the total potential refinance market for P2P student loans is really about $480 billion. The headline $1.4 trillion is reduced because around 40% of loans are too small, and 42% have rates that are too low to be refinanced using P2P.

Students who refinance with SoFi save an average of $288 per month and $22,359 in total. Variable rates range from 2.35%–6.28% and fixed rates from 3.37%–6.74%.

CommonBond offers variable rates from 2.35%–6.27% and fixed rates from 3.37%–7.74%. Borrowers enjoy average savings of $15,114 when they refinance loans through the platform.

In comparison, the interest rate on Federal Direct Loans for undergraduates is currently at 3.76%. Borrowers also pay an additional 1.069% on each disbursement they receive. While this rate is below those offered by P2P lenders, the majority of student loans were made when interest rates were higher, with many students paying up to 8.25%.

Why Lending Startups Like Float Want To Ditch The FICO Score (Fast Company), Rated: A

Last year Social Finance, or SoFi, started using its own proprietary underwriting score in place of FICO when evaluating applications for its student loan, personal loan, and mortgage products.

And now they’re joined by Float, a Los Angeles-based lending startup, whose founders also say they have no plans to use FICO. The platform is launching today, and a look at its business model reveals why it thinks it can survive without it. Float is an app designed for lending small amounts of cash to customers in a pinch. If you’re facing the possibility of an overdraft, for example, a Float credit line, ranging from $50 to $1,000, can help you stay in the black. As with a classic American Express charge card, repayment is due in full the following month. Float also levies a flat 5% transfer fee.

Instead of pulling a FICO score, Float looks at two years’ worth of transaction history in an applicant’s bank account.

It’s also cheaper: Pulling credit reports adds enormous expense to the underwriting process.

Float has also noticed that customers who arrive via Instagram are better borrowers than those who arrive via Facebook.

Lending Club Grows Auto Refinance Gradually (Auto Finance News), Rated: A

Lending Club continues to grow its newly-launched auto refinance product and is investing $5 to $10 million in its expansion, Chief Financial Officer Tom Casey said during the company’s fourth quarter earnings call yesterday.

Early customer feedback has been positive, and refinancing is saving consumers an average of 2.5% off of their rate, or $1,200 in savings over the life of the loan, Sanborn added.

United Kingdom

NatWest unveils online lending platform for SMEs (Finextra), Rated: AAA

UK bank NatWest has launched a digital platform that lets small and medium sized businesses quickly apply for and obtain unsecured loans of up to £150,000.

The platform, dubbed Esme Loans, has been developed by the bank at is innovation unit with fintech firm Ezbob as a direct response to the emergence of specialist direct and P2P lending platforms, says NatWest.

LendInvest completes its first official auction finance loan in five days (Bridging&Commercial), Rated: AAA

It is the first loan that has been completed since the online mortgage lender launched its auction finance proposition in December last year after a significant proportion of the deals that brokers brought to LendInvest were for purchases agreed at auction.

LendInvest’s loan is based on 75% gross LTV and lasts for nine months with an interest rate of 0.94% per month.

Five Steps To Manage Business Borrowing (Minute Hack), Rated: B

Our advice at Hudson Weir is:

  1. Releasing equity – Selling a stake in your business is an effective, yet often overlooked, method of raising cash.
  2. Alternative methods of finance – Asset-based lending or invoice factoring can be helpful ways to release funds and gain a cash injection. Peer-to-peer lending has also gained momentum and popularity and gives business owners a way of raising funds on their own terms. Platforms like Funding Circle also allow SMEs access to loans and funding from a marketplace of investors – and the process is quick and simple.
  3. Talking to your suppliers – Even if the price your supplier charges looks competitive, never be afraid to ask if they can do better.
  4. Looking into your lease – Do not be afraid to negotiate with your landlord as they’re unlikely to want a vacant property – they may accept a reduced offer on the rent.
  5. Keeping on top of your payments – As obvious as it sounds, this is the difference between successfully financing your business in order to see it grow and becoming entrenched in a level of borrowing you can no longer afford to honour. Once you have found ways to keep your outgoings to a minimum during lean times, you must make sure that your monthly repayments are a priority.
European Union

RBS offers fast lending (Herald Scotland), Rated: AAA

ROYAL Bank of Scotland is set to launch a digital platform that it said would allow small and medium sized businesses to quickly obtain unsecured loans of up to £150,000.

Market response to RBS direct lending launch (BondMason), Rated: AAA

by Stephen Findlay, BondMason CEO

It is encouraging to see that banks are rolling out direct lending services to their customers, whether it be via an in-house offering or through a collaboration with an established P2P platform. This is especially good news for borrowers, particularly SMEs as it enables them to access much-needed investment more easily.

We’ve seen the direct lending market grow in leaps and bounds since its inception, as volatile stock markets and declining returns on ‘go-to’ investment products has led to an influx of investors looking for the middle ground between high risk and low returns.

Banks are responding to this investor demand and evolving their traditional models so they can take advantage of the direct lending space. We see this as the continuation of a trend towards the blurring of boundaries across the direct lending landscape – encompassing both traditional financial companies and more recent start-ups.

At BondMason, we don’t view this as negative competition to the P2P platforms already in this space, or vice versa. Rather, we think these different offerings will complement the industry and encourage improved standards and better self-regulation as more participants enter the market – a ‘flight to quality’ which we certainly welcome.

The move by the banks also supports the growth of what is becoming a mainstream asset class, demonstrating that P2P lending is now recognised and being embraced by the traditional banking and finance sector.

As this move by the banks comes some 10 years after the commencement of P2P lending, it is a great example of how innovation in established industries, such as banking, is often best done by smaller, new entrants. This further supports the requirement of the regulator to ensure, through its programmes such as the Innovation Hub and Regulatory sandbox, that SMEs and innovative companies are supported and fostered, and that barriers to entry are kept low for new, emerging business models.

Interview with Frédéric Dujeux, Co-Founder of Mozzeno (P2P-Banking), Rated: A

mozzeno is a Belgian fintech founded in December 2015. We have just launched the first digital platform to enable private individuals to participate indirectly in the funding of loans to other private individuals. Loans are granted by mozzeno, acting as a regulated lender. mozzeno then finances or refinances these loans thanks to the issuance of Notes (financial instruments).

The company has been initially founded and funded by my partner, Xavier Laoureux, and me.

Some fintech business angels and W.IN.G (a Belgian seed fund) have taken part to a seed round in Q2 2016. A further funding round should take place in the course of 2017.

Well, actually p2p lending as such is forbidden by law in Belgium. On one hand, the European prospectus law has been adapted locally very strictly, preventing individuals to raise funds publicly, even through an intermediary platform. This means that a borrower candidate cannot invite other people publicly to lend him money. On the other hand, one needs to be a regulated lender to grant loans and to get access to the Central Individual Credit Register. There is a new regulation as from November 2015, this regulated lender status now being supervised by FSMA.

Our regulatory model is then two-sided. We were the first Belgian regulated lender approved by the FSMA as per the new regulation, and this allows us to grant loans for Belgian residents. We also published a base prospectus, also approved by the regulator, allowing us to issue Notes on a continuous basis. These Notes are the financial instruments subscribed by the investors, similar to bonds, and mimicking the repayment behaviour of the underlying loan.

Crowdlending, a trend among large companies (Impulsando Pymes Digital), Rated: A

The profile of companies that rely on crowdlending to obtain financing has been changing considerably since this alternative financing method landed in Spain in 2013. The companies financed by Arboribus are solvent companies that could be financed with other banking entities, on average have about 20 years of life and most have experienced sales growth in recent years. We are talking about the segment of audited companies that resort to crowdlending to finance and that has grown 160% in 2016.

Not only is the profile of companies looking for financing alternatives changing, but there is also a growth in the volume of companies financed and their volume of loans requested. This is indicated by data provided by Arboribus, a crowdlending platform pioneering companies in Spain, which has financed 90 companies with more than 130 loans in 2016, reaching a total of 5.8 million euros funded in a year, 65% More than in 2015.

However, the most relevant data linked to these figures is the increase in audited companies with invoices in excess of 10 million euros, a figure that reaches 15 percentage points of the total portfolio of the platform, including some invoicing more than 20 Million and have a team of more than 200 workers.

Australia

Auswide Bank Takes Over Controlling Majority of P2P Lending Service MoneyPlace in Australia (P2P-Banking), Rated: AAA

Auswide Bank Ltd (ASX:ABA) is increasing its equity stake in peer-to-peer lender MoneyPlace Holdings Pty Ltd (MoneyPlace). Auswide Bank will have a controlling interest of at least 51% in MoneyPlace with the prospect of increasing that interest up to 75% dependent on the final take up of other MoneyPlace shareholders in a capital raising initiative being undertaken by MoneyPlace.

Business lender narrows in on brokers (TheAdviser), Rated: A

The appointment of Michael Burke as national sales manager this week coincides with OnDeck announcing a partnership with the Commercial Asset Finance Brokers Association of Australia (CAFBA).

Mr Burke joins OnDeck with over 20 years of sales and leadership experience in the banking and financial services industry. Most recently, he held the position of general manager – consumer and commercial finance at Flexigroup.

Asia

Indonesia authority to allow on-balance-sheet lending for fintech startups (e27), Rated: AAA

Senior officials at the Indonesian financial services authority (OJK) announced on Tuesday that the agency is preparing a regulation that would allow local fintech companies to lend money directly to their customers, a practice known as on-balance-sheet model.

Fintech companies offering on-balance-sheet model are required by regulation to convert into the P2P lending scheme.

M360 Advisors Registers Fund with South Korea Financial-Industry Regulator (Benzinga), Rated: AAA

A commercial real estate debt fund managed by Money360-affiliate, M360 Advisors, successfully registered with the South Korea Financial Supervisory Service (FSS), Money360 announced today.

FSS registration allows South Korean hedge funds, corporations, pension funds, insurance companies and other institutional investors to participate in the fund. Since becoming registered, the fund has received more than $65 million to date from one of South Korea’s oldest and largest financial institutions, and M360 anticipates receiving more than $250 million in aggregate throughout the first half of 2017.

“FSS registration opens M360 Advisors to an entirely new country of institutional investors, which will allow us to substantially increase our assets under management,” said Evan Gentry, M360 Advisors CEO. “This gives us a considerable competitive advantage that has been heightened significantly with an anticipated $250 million investment in our fund from one of South Korea’s most reputable financial institutions.”

M360 Advisors currently works with foreign investors from South Korea, China, Singapore, South Africa, Europe, Canada, the Netherlands and Kuwait, with further expansion underway.

South Korea is the latest in the company’s strategic business plan to bolster its global reach, with an intensified push into South Africa and China planned in the near future.

The fund provides investors with a short-duration, high-yield fixed-income alternative to traditional fixed-income investments. The fund invests in bridge loans collateralized by U.S. commercial real estate property secured with a first-priority lien at conservative loan-to-value ratios.

Gentry said the level of scrutiny going into the application process for FSS registration is high, and Money360 is one of the only marketplace lending platforms with an affiliated private debt fund to be sanctioned by the FSS.

“The registration of the fund with the FSS speaks to its institutional caliber,” Gentry added.

“The fund was designed for universal appeal to various types of investors throughout the world with significant consideration given to international tax efficiency,” added Money360 COO and M360 Advisors President Dan Vetter.

Vetter cited the extended period of low interest rates throughout the world caused by unprecedented central bank intervention as an impetus for launching the fund.

“Equity markets are overvalued and traditional fixed income investments offer minimal yield, making this type of private debt fund attractive relative to more traditional asset classes,” he added.

P2P LENDING: PEAKS TO PITFALLS (BFM), Rated: A

P2P lending has emerged as a new source of financing and may soon emerge as its own asset class. We speak to Kristine Ng, CEO of Fundaztic, about the pitfalls of the P2P system and how Securities Commission-approved lenders could help you enhance your short-term returns.

 

Cambridge Centre for Alternative Finance, Monash Business School & Tsinghua University Partner On Asia Pacific Alt Finance Study (Crowdfund Insider), Rated: B

The Cambridge Centre for Alternative Finance at University of Cambridge Judge Business School, Australian Centre for Financial Studies at Monash University and Tsinghua University Graduate School at Shenzhen have teamed up to launch the 2016-2017 Asia-Pacific Region Alternative Finance Industry Survey.  The consortium has gained the support of more than 20 major industry organizations across the region. The Cambridge Centre for Alternative Finance (CCAF) says this is the largest regional study to date focused on crowdfunding, peer-to-peer lending & other forms of alternative finance.

This benchmarking survey, opening today (February 15, 2017) aims to capture the key trends including the development, size, transaction volume and growth of alternative finance. The study will also gauge the impact of changing regulations on innovative finance in markets across Asia in 2016 – building on last year’s inaugural study.

The research will be made publicly available in Q2 of this year.

Authors:

George Popescu
Allen Taylor

Turn a debit card into a credit card in 180 seconds, no FICO needed

Turn a debit card into a credit card in 180 seconds, no FICO needed

In 180 seconds on your phone Float offers a mobile-first financial service that enables consumers instant access to a line of credit that they can use with their existing debit card. Float acts as an overdraft killer.  The start-up services the 63% of millennials who are living without a credit card with a solution that is simple, […]

Turn a debit card into a credit card in 180 seconds, no FICO needed

In 180 seconds on your phone Float offers a mobile-first financial service that enables consumers instant access to a line of credit that they can use with their existing debit card. Float acts as an overdraft killer.  The start-up services the 63% of millennials who are living without a credit card with a solution that is simple, accessible, and consumer-friendly.

$17.5 billion in overdraft fees

Most of us probably know what it feels like to overdraw a checking account. There’s a particular sinking feeling everyone gets when they see that minus sign in front of their available balance. According to research reports, every year $17.5 billion is paid as overdraft fees by Americans.  Float wants to empower people to employ alternative solutions as compared to the normally usurious overdraft facilities of their bank. Their mobile-first consumer financial technology gives users an instant and easy way to access a line of credit without a traditional credit report.

Company history

Float is aiming to revolutionize the credit experience for the modern, mobile consumer. It was established in September 2015 with their head office in Los Angeles, California. They were able to raise seed capital of over $1.5 million from 4 investors (500 startups, Camp One ventures, Funders Club and Plug and Play) and will be raising another $1.5 million in the next 3 months. Total seed money will be in the range of $3-3.5 million. Andy Burke is the CTO of the company. Kevin Bass is the President and Max Klein is the CEO of the company (also the founder of Cachet LA -website on premium lifestyle in Los Angeles). Presently, they have over 15 employees in their company. According to Max, Float was born with a simple mission of creating better experiences between consumers and their finances.

How it works

Float’s vision is to change the way users’ access, manage and spend money on a daily basis and simultaneously help them build a strong credit file. Data security is taken very seriously, they protect sensitive information with full encryption and safeguards that meet industry best practices. This feature is necessary, ensuring the customer feels secure while using Float and linking it to their bank account. Its target market is in the age of 18-30 and it is lending them $50 to $1000 on an average.

Float is committed with a simple and straightforward process of belief in clear, upfront pricing.

–     Charge 5% for transfers to your bank account for $50 or more. For transfers under $50, they charge $2.50 flat.

–    Each billing cycle is about 30 days, just like a typical credit card.

– If the dues are not cleared within the cycle, the user will be charged a $20 penalty.

–    There is an auto pay option to avoid late fees.

–    No other fees, interest, or APR to access your line of credit

The company claims that the process from downloading the Float app to applying and being able to spend the money takes only 180 seconds. The convenience of getting credit in such a short time period can disrupt not only the overdraft segment of the banks but also the payday loan industry. You have to be 18 years or older and must have a bank account with Float associated banks.  Within seconds of connecting a bank account, a line of credit is offered between $50 and $1000 and is available for immediate use with any existing debit card. Since their target market is millennials, they use social media as the main channel for advertising. They create huge awareness at the college campuses with an exclusive brand ambassador program targeting influential and affluent students, enabling them with the tools to help promote Float among their friends.

No-FICO

Float believes in eliminating fear and hesitation out of the on-boarding process, that’s why they don’t use traditional FICO scores before giving credit. Instead, they do cash flow analysis when the user connects their current bank account, and they layer alternative list scores from several other providers to produce an internal score for a personalized line of credit payable every 30 days. In case, someone does not have a debit or credit card, funds will arrive in 1-3 days via an ACH transfer in the connected bank account. There is an option to pay back the loan early as well before every billing cycle and it has to be paid in full to avoid any late fees. There is an auto pay option as well, to ensure the borrower never misses a payment or incurs a late fee. Another feature being added is a set up for direct transfer, which means whenever the balance goes below $50, Float will send $100, and thus ensuring there is no overdraft and the exorbitant overdraft fees. Float’s credit product is currently in early access mode and will be available to select customers from December of this year.

Next steps

Float is launching in Utah the next month and plans to initially lend from its own balance sheet. After the proof of concept, it plans to tie-up with third party providers for the capital needs of it users.  It also secured second place out of 850 applicants in Plug and Play, a 12-week accelerator program that partners with Citi Ventures, Deutsche Bank, Capital One, Intuit, JCB, and USAA to help bring to market the next disruptive financial solution for the growing worldwide economy. Recognition from Plug and Play, a pioneer in fintech sector is particularly noteworthy.

The ability to get add-on credit within seconds will lead to a change in how consumers interact with their finances especially overdraft. The key success factor for the company will be analyzing which user to lend and how to manage prospective delinquents.

Author: Heena Dhir and George Popescu

George Popescu