- Today’s main news: Ron Suber’s updates on MPL. Amazon’s history points the way for online lending. Best Egg exceeds $3B in personal loans.eOriginal to lead Fannie Mae’s next-gen electric vault. Experian joins MLA. First FinTech fund for inclusion of the underserved raises $141 mil. Trillion Fund up for sale.
- Today’s main analysis: How to join the P2P lending revolution and earn 10+% yields.
- Today’s thought-provoking articles: UK risks losing another generation of property entrepreneurs.
- Amazon’s history points the way for online lending. GP:”Amazon is a lot about costs and ease of usage. And their approach has been about offering everything one needs. For this Lending Club would have to offer retail customers all their financial needs in an easy and very cost effective way. “AT: “Nothing could be more prescient, or true. What the industry needs is slow, steady growth. That will lead to long-term profits for individual platforms and a rising of most ships.”
- eOriginal to lead Fannie Mae’s next-gen electronic vault. GP:”We hope this will continue smoothing the mortgage processing which will allow people to apply and lock in a mortgage much faster then the present 60 days or so.”
- How to join the P2P lending revolution and earn 10+% yields. GP:” Our readers are already aware of this, but a good reminder of the fundamentals at times can’t hurt. We are all here because of the yield vs risk ratios we perceive in this industry.” AT: “Written for investors with a come-on at the end to download a report, but there are some good stats here for all of us to enjoy.”
- Suber updates MPL. AT: “Download Prosper’s president’s LendIt presentation.”
- Experian joins MLA. GP:”Adds credibility to MLA”. AT: “I expect the MLA to become the leading industry association.”
- First FinTech fund for the inclusion of the underserved raises $141 million. AT: “Huge milestone. This is a non-profit, so I’d be curious to see their story in a couple of years. The underserved is a huge market worldwide. Read ‘Financial Inclusion for the Middle Class in the Digital Age‘ for more information.”
- Altisource launches mortgage trading platform. GP:” We are curious how this interesting initiative will thrive.”
- Credit cards, friends and family aren’t helping nonprime Americans. GP:” Interesting data. We wonder which part is due to different social stance on borrowing from friends and family vs actual friends and family not having any money you can borrow.”
- ID Analytics’ online lending network helps members reduce fraud.
- PeerStreet integrates with Betterment via Quovo. GP:” Given PeerStreet’s returns it can only benefit them to be seen in the same report as any other investments one has.”
- Online lending is built to last.
- Best Egg exceeds $3B in personal loans. GP:”A great milestone.”
- AlphaFlow announces new investment platform.
- Fidelity’s new robo ups ante for advisors.
- Euler Hermes, Flowcast partner.
- ILPA, CRBF join forces.
- Trillion Fund up for sale. GP:” Despite the name, it is not a trillion dollar worth of funds. Perhaps the 1st thing the purchaser should do is change the name.”
- UK risks losing another generation of property entrepreneurs.
- Assetz Capital CEO predicst boost for P2P lending in upcoming budget.
- The power of crowdfunding.
- Millennial money matters podcast: Funding Circle.
- United States
- Amazon’s history points the way for online lending: Lending Club CEO (American Banker), Rated: AAA
- eOriginal to Lead Fannie Mae’s Next Generation Electronic Vault (PRWeb), Rated: AAA
- How To Join The P2P Lending Revolution And Earn +10% Yields (Forbes), Rated: AAA
- Prosper President Ron Suber Updates on Marketplace Lending Industry (Crowdfund Insider), Rated: AAA
- Experian joins Marketplace Lending Association (Finextra), Rated: AAA
- First FinTech Fund for Inclusion of the Underserved Raises $ 141 Million (Cryptocoins News), Rated: AAA
- Altisource launches mortgage trading platform (Housingwire), Rated: A
- Credit Cards, Friends and Family and Savings Aren’t Helping Nonprime Americans (BusinessWire), Rated: A
- ID Analytics’ Online Lending Network Helps Members Reduce Fraud (Yahoo! Finance), Rated: A
- PeerStreet Integrates with Betterment via Quovo to Provide More Detailed Investment Overview (Yahoo! Finance), Rated: A
- LendIt keynote: Online lending is an industry built to last (Housingwire), Rated: A
- Best Egg Exceeds $3 Billion in Personal Loans with Focus on Debt Consolidation (BusinessWire), Rated: A
- AlphaFlow Announces New Investment Platform (Crowdfund Insider), Rated: A
- Fidelity’s New Robo Ups Ante for Advisors (Financial Advisor IQ), Rated: A
- EULER HERMES DIGITAL AGENCY, FLOWCAST PARTNER: CREDIT INSURANCE BENEFITS FROM AI (Euler Hermes), Rated: A
- Innovative Lending Platform Association and Coalition for Responsible Business Finance Join Forces (PR Newswire), Rated: B
- United Kingdom
- Trillion Fund P2P & Crowdfunding Platform Up for Sale (Crowdfund Insider), Rated: AAA
- LendInvest: “The UK Risks Losing Another Generation of Property Entrepreneurs” (Crowdfund Insider), Rated: AAA
- Assetz Capital CEO Stuart Law Predicts Boost for P2P Sector in Upcoming Budget (Crowdfund Insider), Rated: A
- Technology: The power of crowdfunding (IPE), Rated: A
- Millennial Money Matters podcast: Episode 3, Funding Circle (AltFi), Rated: A
- Property Investment In Israel Is Evolving To Offer Ample and Flexible Opportunities (Haaretz), Rated: AAA
- Bank Mandiri bets on peer-to-peer lender (Nikkei Asian Review), Rated: AAA
Amazon’s history points the way for online lending: Lending Club CEO (American Banker), Rated: AAA
As the online lending sector seeks to rebound from a wrenching year, it should look to Amazon for inspiration, the CEO of industry bellwether Lending Club said.
In many ways where online lending is in 2017 parallels the early days of online retail, Scott Sanborn said at the LendIt conference in New York on Monday. In that situation, new entrants disrupted an established industry, before going through a period of pain and change themselves during the dot-com bubble.
The original online retailers that survived and thrived after that period reinvented and expanded what they did, Sanborn said, citing Amazon as the prime example.
Much like how Amazon went from selling books to selling cloud services, Sanborn predicted online lenders that succeed well into the future will change how they do business.
eOriginal to Lead Fannie Mae’s Next Generation Electronic Vault (PRWeb), Rated: AAA
eOriginal, Inc., the trusted expert in digital transaction management, has been selected as the technology solution provider for the Fannie Mae next generation electronic vault (eVault). Fannie Mae is committed to enhancing the digital mortgage revolution and removing obstacles to eMortgage adoption through a modern, secure, and scalable platform. eOriginal’s hosted platform enables the secure management of electronically signed assets (eNotes) throughout their post-execution lifecycle.
By utilizing eOriginal’s hosted solution, Fannie Mae will accelerate deployment and greatly reduce costs for ongoing support efforts. The movement to cloud-based/vendor-hosted solutions is an industry best-practice that the lending community is embracing.
How To Join The P2P Lending Revolution And Earn +10% Yields (Forbes), Rated: AAA
In 1999, I was a partner in launching one of the world’s first pure online banks. At the time, the idea was controversial to say the least.
Since launching our online bank, the industry has, in fits and starts, adopted the technologies necessary to provide some form of online banking to their clients.
While earning fees on deposits, overdrawn checks, and so forth are an important component of the typical bank’s revenue statement, the real juice comes from lending.
And that’s where the banks have a real problem.
With the credit freeze locking out many ordinary Americans, the door opened wide for Peer-to-Peer lending platforms. A radical new approach to lending, P2P platforms act as intermediaries between borrowers and investors, bypassing the traditional gatekeepers of credit… the banks.
In 10 short years, P2P lending has facilitated over $35 billion of loans in the US.
Loans made through P2P platforms currently account for just 3% of the total unsecured consumer loans in the US.
Given the positives, the P2P share of unsecured consumer loans is projected to enjoy a compounded annual growth rate of 47%, rising to 8.4% of the market by 2020.
With P2P investing thriving in the sub $250k space, banks are beginning to take note. As a senior banker friend of ours commented, the bankers are now paying very close attention to the rising competition.
Unlike the Boomers, Millennials have no loyalty or connection with banks. That’s why they are twice as likely to switch banks. Over 94% consumers under the age of 35 are active users of online banking.
Already about one-third of 18-to 34-year-olds have used P2P lending, with the average age for Lending Club users just 30.
Prosper President Ron Suber Updates on Marketplace Lending Industry (Crowdfund Insider), Rated: AAA
The previous 12 months have been tough on the online lending sector, funding dried up as institutional money panicked leaving platforms gasping for cash. Platforms were compelled to revisit operating models looking for efficiencies while honing the credit process. Yet the platforms that have survived stand to benefit and grow from the new resilience and confidence created from shared survival.
The key to future success included the following foundational elements: loan performance, data transparency, platform profitability, customer acquisition, and automation.
Experian joins Marketplace Lending Association (Finextra), Rated: AAA
As part of our commitment to driving responsible financial innovation, Experian has joined the Marketplace Lending Association as an associate member.
Now more than ever, the financial industry is seeking new and innovative ways to provide valuable financial services to consumers and businesses. Experian has been at the forefront, and is leading this charge by focusing on combining technology with the power of data to help drive an economy that is continually changing. This is critical, especially in the marketplace lending sector, which has brought many innovations to the market over the last decade.
Experian is already an active partner with many of the nation’s leading marketplace lenders, providing powerful data, analytics and consulting services to consumer and small-business lenders. We are uniquely positioned to help marketplace lenders attract more consumers to our platform, reduce fraud risk and navigate the complex world of regulatory and compliance.
First FinTech Fund for Inclusion of the Underserved Raises $ 141 Million (Cryptocoins News), Rated: AAA
The Accion Frontier Inclusion Fund closed with $141 million in capital contributions. This is a global non-profit dedicated to building a financially inclusive world with economic opportunity for all, by giving people the financial tools they need to improve their lives. It is managed by Quona Capital, which invests in entrepreneurs and growth-oriented businesses seeking to change how financial services are delivered in emerging markets.
Altisource launches mortgage trading platform (Housingwire), Rated: A
Altisource Portfolio Solutions, a provider of real estate, mortgage and technology services, announced the launch of its new mortgage trading platform – noteXchange.
noteXchange is a secondary market trading platform that brings buyers and sellers together. It enables communication, shorter sales cycles and automated processes, according to the company.
The platform creates a uniform, compliant, secure and efficient technology solution in the mortgage trading market. It is designed to replace the current system of transacting through spreadsheets and email.
Credit Cards, Friends and Family and Savings Aren’t Helping Nonprime Americans (BusinessWire), Rated: A
It’s no secret that nonprime (subprime) Americans have limited personal resources to weather unexpected expenses – but new data from Elevate’s Center for the New Middle Class reveals that informal, relationship-based options for emergency loans are largely unavailable as well. According to research released today by the Center, which researches and reports on the realities of being nonprime in America, almost 70 percent of nonprime Americans couldn’t cover an urgent expense of $500 or more with their savings and 64 percent wouldn’t be able to borrow that amount from friends and family. These findings complement the Federal Reserve Board’s 2016 finding that 46 percent of Americans do not have $400 in savings to cover an emergency expense.
This latest study focuses on how nonprime Americans – defined as those having a credit score below 700 – borrow money as they are largely barred from traditional prime products, like personal loans from banks or even loans from new online lending companies that are focused on prime consumers.
Additional key findings include:
- 71 percent would not be able to borrow $2,000 from family or friends if an urgent need arose
- 72 percent of nonprime Americans would not be able to put $500 on a credit card
- 80 percent would not be able to put $2,000 on a credit card
- 59 percent said they “regularly” carry a credit card balance
- Only 1 in 5 nonprime Americans have borrowed from friends or family in the last 12 months
- 7 percent use overdraft protection strategically, using it to cover expenses for which they did not have money
ID Analytics’ Online Lending Network Helps Members Reduce Fraud (Yahoo! Finance), Rated: A
ID Analytics LLC, a leader in consumer risk management, today announced that the company’s Online Lending Network has helped reduce fraud for members. The Online Lending Network is a consortium formed to enhance responsible lending, help protect consumers and businesses, and address credit and fraud risks. Early research shows that 1.5 percent of online loan applicants were seen applying at or seeking offers from other lenders within six hours of submitting their application, and this group was found to be twice as risky as the average online loan applicant.
PeerStreet Integrates with Betterment via Quovo to Provide More Detailed Investment Overview (Yahoo! Finance), Rated: A
PeerStreet, an award-winning platform for investing in real estate backed loans, has announced an integration with Betterment, the largest independent online investment advisor. Using account aggregation through Quovo, customers of both Betterment and PeerStreet can view their PeerStreet positions within the context of their investment portfolio on the Betterment dashboard.
Customers of both services are increasingly seeking an easy way to see their all of their investments in one place, even across multiple investment platforms. Integrations with Betterment and similar financial services have become one of the top requests from PeerStreet users. Both PeerStreet and Betterment were able to quickly respond to their clients’ needs using Quovo, the industry leader in financial account connectivity, to aggregate and integrate consumer financial data.
This integration is another example of both PeerStreet and Betterment using technology to help provide greater transparency, ease of use and control. It stems from a core philosophy of listening to customers and being responsive to requests that fundamentally improve the user experience, even across multiple platforms.
LendIt keynote: Online lending is an industry built to last (Housingwire), Rated: A
At first look, it seemed to be an unlikely crowd for a conference involving technology-focused disruptors, but perhaps the formality of the event was indicative of the startups in attendance – growing companies beginning to rub shoulders with the establishment.
Prosper and its peers Lending Club and OnDeck are part of the “older guard” of fintech companies, and find themselves at the front lines of conversations with regulators, banks, venture capitalists and private equity firms.
Looking to the future, Mr. Suber is convinced that in order to grow sustainably and in order to be “built to last”, the next evolution of online lenders involves partnering with banks to find long-term capital and achieve profitability. He believes there are five ways for banks to engage with online lending:
- Loan Sales: Banks purchase loans through online lending platforms to diversify asset base and gain access to assets they don’t directly underwrite
- Lenders as a Service: Banks utilize lending platforms created by startups for origination and servicing that can be leveraged in discussions with regulators
- Vendor relationships: Banks can leverage, securitize, custody cash, and serve as trustees for online lenders
- M&A advisory: Banks can help fulfill every entrepreneurs’ dream of an exit
- Greenfield operations: Some banks build their own online platforms while taking advantage of their low cost of capital
Best Egg Exceeds Billion in Personal Loans with Focus on Debt Consolidation (BusinessWire), Rated: A
Best Egg announced today its loan origination has surpassed $3 billion as it reaches its third year in business. With its A+ rating with the Better Business Bureau, Best Egg is a personal loan product that leverages technology to simplify and speed the process for getting a loan.
Online personal loans have surged over the past three years. Consumers were underserved by the options available from the incumbent banks and credit unions, which are many times saddled with slow processes, small loan amounts, and lack of product innovation. TransUnion’s February 2017 Quarterly Industry Insights Report highlights significant growth in personal loan uptake over the last few years.
AlphaFlow Announces New Investment Platform (Crowdfund Insider), Rated: A
On Monday, AlphaFlow announced the launch of its new investment platform, AlphaFlow Managed Portfolios.
Sturm claimed that he, along with co-founder and CTO of AlphaFlow, Bogdan Cirlig, launched the industry’s first multi-platform funds.
The AlphaFlow Managed Portfolios platform will do the following:
- Build, monitor, and automatically rebalance a portfolio of 75-100 real estate loans for investors
- AlphaFlow Advanced Analytics drive every investment decision
- Investors earn 8-10% with the protection of real estate collateral
- Simple 1% AUM fee, with no additional hidden costs
Fidelity’s New Robo Ups Ante for Advisors (Financial Advisor IQ), Rated: A
After launching its robo for retail investors last summer, Fidelity Investments is forging ahead on a revamped technology platform for advisors. By mid-year, the asset manager and financial services custodian expects to offer its 3,000-plus customer base of RIAs and brokerages a whole new set of online tools to manage client portfolios.
But Fidelity isn’t the only industry heavyweight trying to develop robo technologies for advisors, says Sean McDermott, an analyst with Corporate Insight in New York.
Another established player in U.S. wealth management is FutureAdvisor, McDermott adds. FutureAdvisor is owned by asset manager BlackRock.
EULER HERMES DIGITAL AGENCY, FLOWCAST PARTNER: CREDIT INSURANCE BENEFITS FROM AI (Euler Hermes), Rated: A
Euler Hermes, the world’s leading trade credit insurer, today announced a pioneering partnership between its Digital Agency and Flowcast, a fintech company focused on revolutionizing trade and supply chain finance with artificial intelligence (AI). The announcement was made as the partners attended LendIt USA, a major lending and fintech conference in New York this week.
Euler Hermes provides trade credit insurance solutions to protect companies against non-payment of accounts receivables by customers. Its Digital Agency recently launched its first breakthrough product – Single Invoice Cover – which protects B2B companies from non-payment, transaction by transaction, while optimizing end-to-end supply chains by extending the optimal credit terms to buyers. Based on a proprietary API (application program interface), it creates a seamless process for businesses, while facilitating a comprehensive and granular management of credit exposure.
Flowcast will use its strength in analyzing transaction data to significantly evolve the concept by developing smart algorithms to create the foundation of an innovative underwriting solution within Single Invoice Cover. Benefits include improved working capital and financing along the supply chain.
Based on invoice-level data, Flowcast has developed smart algorithms that predict a range of risk parameters, such as the probabilities of default or expected timing of invoice payment – critical factors for business. The process applies sophisticated machine learning techniques that significantly outperform more traditional models. EHDA and Flowcast are working together to extend the scope and the performance of these models to “reinvent” trade credit insurance and risk management offerings, particularly at the transaction and Single Invoice Cover levels.
Innovative Lending Platform Association and Coalition for Responsible Business Finance Join Forces (PR Newswire), Rated: B
The Innovative Lending Platform Association (ILPA) and the Coalition for Responsible Business Finance (CRBF) today announced they are joining forces and will now operate as the ILPA – the leading trade organization representing a diverse group of online lending and service companies serving small businesses. Joining ILPA’s existing members, OnDeck® (NYSE: ONDK), Kabbage® and CAN Capital, are CRBF member companies Breakout Capital, Enova International’s The Business Backer™, PayNet and Orion First Financial. United by a shared commitment to the health and success of small businesses in America, the newly expanded ILPA is dedicated to advancing best practices and standards that support responsible innovation and access to capital for small businesses.
In addition, leading national small business organizations that formerly served as the CRBF Advisory Board will now represent small business customers as formal advisors to the ILPA. The Advisory Board includes individuals from the National Federation of Independent Business (NFIB), the National Small Business Association (NSBA), the Small Business & Entrepreneurship Council (SBE Council), the U.S. Chamber of Commerce, and new representatives from the Association for Enterprise Opportunity (AEO). These small business organizations have provided key input into the collective group’s best practices and standards initiatives over the past year, ensuring that the needs of their small business constituents are addressed.
Trillion Fund P2P & Crowdfunding Platform Up for Sale (Crowdfund Insider), Rated: AAA
Trillion Fund, a peer to peer lending and crowdfunding platform that also offers white label services is up for sale. The company announced today that it was putting all assets on the auction block. Trillion Fund initially launched as a renewable energy investment platform but struggled to gain traction as the market for renewable energy projects shifted in the UK – in part due to changes in governmental support. Trillion Fund is now inviting offers from businesses looking to enter the P2P lending sector.
Burton expects the purchase opportunity to be of interest to firms considering an entry into the P2P sector as the platform is fully operational and approved by the UK government.
LendInvest: “The UK Risks Losing Another Generation of Property Entrepreneurs” (Crowdfund Insider), Rated: AAA
LendInvest, an online property finance marketplace, is demanding the government to revise its treatment of small and medium-sized property investment and development companies. Noting that four in five SMEhouse builders have disappeared since last housebuilding boom, LendInvest is calling on the government to recognize the positive contribution they can make to resolving the UK’s deep-rooted housing crisis.
In a new report entitled Starting Small To Build More Homes: a blueprint for better policymaking for property SME market LendInvest shares industry evidence to examine the root cause – and subsequent impact – of challenges faced by property SMEs such as constrained access to finance and distorted policy around regulation, taxation and access to land.
Key findings from the report include:
- Four in five housebuilders have gone out of business since the last housebuilding boom
By returning to the same level of market plurality as in 2007, we could build 25,000 more homes every year
- Small housebuilders were responsible for 3 in 8 of the UK’s new homes before 1990, today they only deliver 1 in 8
- The British Business Bank has yet to allocate funding for property firms
- The Homes & Communities Agency must lend a weighty £56m a month to achieve its target to supply £3 billion of housebuilding finance by March 2021
Assetz Capital CEO Stuart Law Predicts Boost for P2P Sector in Upcoming Budget (Crowdfund Insider), Rated: A
Stuart Law, CEO and co-founder of P2P lender Assetz Capital, expects a boost for the peer to peer lending sector in the upcoming budget. Specifically, Law believes a small business tax rise and IFISA rule change could boost the online lending sector.
Law said that businesses and investors remain in limbo since the Brexit vote.
Technology: The power of crowdfunding (IPE), Rated: A
BrickVest has deals worth £250m (€294m) in its platform at the moment, and estimates that figure will increase by £50m-70m at the end of the first quarter of this year.
Institutional investment through credit lines and co-investments is underpinning the industry, making up 73% of the market, according to O’Roarty. In the UK, retail investors account for 75% of the funds raised – although regulatory concerns about the suitability of retail investors could change the landscape in the future.
PropertyCrowd is finalising its first deal, a gross loan of £1.28m, with participation through PropertyCrowd standing at £432,000 (the firm will take on a maximum 50% debt participation).
Its first non-exchange-traded e-REIT, offered to both accredited and non-accredited investors, was oversubscribed by 403% in four hours when it launched in December 2015. In February, Rise Companies Corporation, which owns Fundrise, raised more than $14m in equity online, offering investors the ability to own a share in the platform itself.
As with all new markets, crowdfunding real estate platforms will inevitably experience their share of growing pains. They will also have to get larger. In 2015, the sector totalled only $600m – the total commercial real estate market stands at $704bn.
Millennial Money Matters podcast: Episode 3, Funding Circle (AltFi), Rated: A
In episode 3 of Millennial Money Matters, we look at Funding Circle, one of the leading lights of financial technology in the UK.
Property Investment In Israel Is Evolving To Offer Ample and Flexible Opportunities (Haaretz), Rated: AAA
There are several conditions in Israel’s economy that are driving an interest in investment properties. The most obvious is the increasingly high sale prices. The average price of owner-occupied residencies in Israel rose by 4.01% during the year to Q1 2016, to ILS1,423,000 (US$369,107), from annual price rises of 6% in Q4 2015, 5.2% to Q3, and 7.3% to Q2, and 7.6% to Q1, according to the Central Bureau of Statistics (CBS). The main reason for the continued rise in house prices is the supply shortage, due to low construction volumes.
One of the more innovative programs to enter the property investment market is the crowd-funding method that a number of leading companies are taking ownership of. Crowdfunding, adopted by high-tech startups as an alternative means to raise funds, was limited in Israel by Israel’s Securities Law until 2016. Section 15 of the law dictated that any offer or sale of shares to the public (i.e. to more than 35 potential investors) requires the issuance of a prospectus approved by the Securities Authority; a timely and costly endeavor, formerly rendering crowdfunding prohibitive in Israel.
Although Crowdfunding for real estate is a relatively new space, crowdfunding for real estate platforms were responsible for raising over $100 million in 2015 alone for hundreds of real estate properties across the U.S. Real Estate crowdfunding platforms in Israel offer an opportunity for virtually any pocket and the way it works is very simple.
Bank Mandiri bets on peer-to-peer lender (Nikkei Asian Review), Rated: AAA
The venture capital arm of Bank Mandiri, Indonesia’s largest state-owned bank by assets, on Tuesday said it has acquired a stake in peer-to-peer lending startup Amartha Mikro Fintek.
Amartha Mikro develops credit-scoring technology that evaluates small businesses that conventional banks have deemed too risky to lend to. It then connects them with individual lenders over a website.