- Today’s main news: Orchard announces deal to provide OnDeck with institutional reporting product. Fundrise’s $250m eREITs. CommonBond’s A1 rated securitization. LandBay volume drops 95% on London real estate crisis.
- Today’s main analysis : P2P lending in the UK grew again in the third quarter.
- Today’s thought-provoking articles: Claim of evidence it’s time to hedge on short-term debt due to market roll over. FinTech is destined to see more growth.
- Orchard Platform and OnDeck strike a deal. AT: “Small business lending is a big deal and will only get bigger. As banks have tightened their lending, small business owners have sought alternative funding vehicles, and they’ve found it through platforms like OnDeck.”
- Why you should hedge on short-term debt. GP “I don’t think that LC defaults increase is a relevant sign of the overall credit market cycle turning. LC is not correlated with the overall market. Their defaults are more influenced by the sub population of applicants they see which is not a homogenous sample of the overall credit market.”
- Why the FinTech sector will continue to grow. HINT: It’s about P2P lending. AT: “Every day, FinTech–and P2P lending in particular–gets more and more mainstream. This is a sure sign that the sector is growing and will only grow larger. It won’t be long that it will be the main driver of the financial sector.”
- Fundrise’s new eREITs are poised to raise $250 million. AT: “This is an indication that no part of the financial sector can’t be touched by technology.”
- CommonBond secures A1 rating from Moody.
- Peer-to-peer lending grew in the third quarter, with more than 700 million BP of new funding. GP “Brexit seems to have turned the tide. Volumes were on a down trend at the end of Q2, and they seemed to have turned around.”
- Funding Circle talks about new loans available and weekly average gross yield (with charts). GP ” Great data and charts from Funding Circle, a must read.”
- Moody’s says marketplace lenders will increasingly rely on securitization for business funding. AT: “The P2P sector is crying out for more liquidity, and it may very well be destined to obtain it.” GP: ” In the US PeerIQ showed that 50% of the marketplace lending capital comes from securitization.”
- Financial advisers are changing their attitudes toward robo-advice. AT: “As with anything else, technology can be a major game changer with the financial advice sector if for any reason because it allows financial advisors to be less biased and more reliant on objective data.”
- LandBay sees a 95% drop in lending in three months. Ouch! GP :” The CEO is trying to spin it that their 2 year test is over and they are now moving on. Well said. However, reality is probably different as the article points out : Some 50 per cent of Landbay’s loans are reported to be in London where the property market is suffering stagnation or worse; yesterday, Estate Agent Today carried news that Foxton’s sales revenue had slumped by a third in the third quarter of the year. “
- Money launderers are now starting to use P2P lending platforms. A report from BAE Systems details how criminals are diversifying their “portfolios.”
- Zopa co-founder enters the ranks of the Power 50.
- LendingCrowd offers a sign-up bonus to new investors. GP ” We decided to put Scotland in the EU… Just our editorial humor , I hope our readers appreciate.”
- Switzerland is a more attractive location for FinTech startups than London.
- Banks are struggling to compete for talent.
- Berlin-based Bitbond receives BaFin license. AT: “Enter the first blockchain-based financial services provider.”
- The forex market is growing in Latin America because more people are using the Internet and are more aware of alternative investing opportunities. AT: “This is good news for the rest of the world.”
- The biggest potential for robo-advice in Asia, as with everywhere else, lies within the Millennial market.
- Two new startups in Asia promise to connect investors with mid-sized businesses in Asia.
- An startup association for P2P lenders want a fair practice code. GP ” Way to go. I hope they get inspired by the P2PFA in the UK. I am still to find a well working p2p association elsewhere.”
- United States
- OnDeck Inks Agreement with Orchard (Investors Hangout), Rated: AAA
- The Second Sign In As Many Days That The Market Is Ready To Roll Over (Seeking Alpha), Rated: AAA
- Here’s Why Fintech Will Continue to See Rapid Growth (Investopedia), Rated: AAA
- Fundrise is “On Track” to Raise $ 250 Million with New eREITs (Crowdfund Insider), Rated: B
- CommonBond Completes $168 MM Securitization, Secures ‘A1’ Moody’s Rating (Press Release), Rated: A
- Latin America
- Retail FX Sector In Latin America (Forex News Now), Rated: B
- United Kingdom
- Peer to peer lending grows for yet another quarter (City A.M.), Rated: AAA
- Telegraph: how can I get 8pc for the least risk? | Weekly Lending Review (Funding Circle), Rated: A
- Fintech lenders to challenge UK banks’ business using securitisation (International Banking Times), Rated: A
- Adviser attitude towards robo-advice changing (FT Advisor), Rated: A
- PropTech: lending collapse for firm partnered with Zoopla (Estate Agent Today), Rated: B
- BAE Systems lifts the lid on how dirty money moves (Finextra), Rated: A
- European Union
- Zopa’s Giles Andrews Named One of Digital Banking Club’s Power 50 (Crowdfund Insider), Rated: B
- Online peer-to-peer platform LendingCrowd offers joining bonus to attract new investors (Herald Scotland), Rated: A
- Fintech: Switzerland Is More Attractive Than London (Finews), Rated: A
- The Banking Scramble for Fintech Talent (universum), Rated: B
- Berlin based FinTech Startup Bitbond receives BaFin Licence (Bitcoin News), Rated: A
- How robots are changing financial advice in Asia (The Asset), Rated: AAA
- Two start-ups aim to help bring together investors and mid-sized Asian businesses seeking growth (Straits Times), Rated: A
- P2P firms to form an association for a fair code ahead of RBI guidelines (The Economic Times, India Times), Rated: AAA
OnDeck Inks Agreement with Orchard (Investors Hangout), Rated: AAA
Orchard Platform, the technology and data provider for online lending, today announced an agreement with OnDeck® (NYSE: ONDK), the leader in online lending for small business to provide OnDeck with an automated and scalable solution to manage reporting for institutional investors purchasing OnDeck loans through OnDeck Marketplace. Orchard’s technology also helps drive operational efficiencies by providing a universal view of standardized data through a suite of analytic and reporting tools.
The agreement also provides OnDeck with access to the entire Orchard for Originators product suite. This proprietary technology comprises dynamic investor dashboards, portfolio benchmarking, automated daily holdings reports, and a custom report builder for internal and third-party analytics.
“OnDeck Marketplace is an important part of our funding model, and we are constantly looking for ways to enhance our reporting and analytics capabilities to better serve our investors,” said OnDeck CFO Howard Katzenberg. “Orchard helps us and our Marketplace investors monitor their loan portfolios by providing access to high-quality data and the tools required to easily understand that data. We considered multiple vendors, as well as building an in-house solution, and we selected Orchard because their technology was the most comprehensive.”
“We’re excited to strengthen our relationship with OnDeck by providing enhanced portfolio reporting and analytics to their marketplace,” said Matt Burton, CEO of Orchard. “This represents an important milestone for Orchard and our technology, as we continue to build world-class products that help originators scale their businesses.”
By working with Orchard, OnDeck can better focus on what it does best — providing small businesses across the United States with access to much-needed financing. Through this agreement, Orchard demonstrates its commitment to developing best-in-class technology for originators and investors alike. Recently, Orchard announced the launch of the
The Second Sign In As Many Days That The Market Is Ready To Roll Over (Seeking Alpha), Rated: AAA
We have been continuously monitoring the market for two signs of what we believe will be the credit cycle turning lower at a quick pace. The first we wrote about yesterday in an article talking about Lending Club’s (NYSE:LC) rising delinquencies. Today, we want to address the other point. In sum, our case for the credit cycle turning looks to be on point and accurate, and we think now is the time to batten down the hatches and hedge your portfolio.Today we wanted to update our ongoing thesis as to why we believe the stock market has peaked and another prime indicator to us that the short term debt cycle has turned over and that we are getting ready for both a downturn in the economy and a correction in equity markets.
For the better part of the last year, we have been writing about two things we are watching to prompt us to believe that the short-term debt cycle has ended. The first thing we were watching was attrition in the automobile sector. It has now been widely known that there is a bubble in the United States automobile market and recent exposes about subprime financing and recent commentary from dealerships about heavily discounted and incentivize selling have led us to this conclusion in a relatively straightforward fashion.
We also believe that the first loan default cracks would show in peer-to-peer lending, a riskier and lower credit worthy form of lending that exists in the spot where bankers simply used to not lend. (our emphasis)
It was reported yesterday that Ford was slowing production in the United States due to lack of demand.
This was always a two pronged thesis: peer to peer lending and the auto market. (again, our emphasis) With the second piece now falling into the puzzle, we think this is a great time to reiterate our notion that the market has hit its peak and that we think this is a great time to get hedged. In addition to having about 60% of our portfolio long and about 40% short at this time, we have also added some short-term S&P 500 puts to further hedge our long positions.
Here’s Why Fintech Will Continue to See Rapid Growth (Investopedia), Rated: AAA
Recent growth of the fintech sector results from efficient business models and strategic competition. This is especially true of the peer-to-peer (P2P) lending segment. Fintech companies offer more efficient business models. Plus, their management is more nimble. Executives understand the importance of identifying underserved markets.This allows for innovative financial products at lower costs, which creates new markets instead of competition with banks.
P2P lenders first came on the scene 10-12 years ago.
Now the industry is maturing, which keeps costs lower.
P2P real estate platforms dealt only with commercial properties until a few years ago. Now they are spreading to residential real estate. Fundrise launched loans for single family homes after a trial run in 2014, and others are getting into this market too. Most of these P2P home loans are for larger loans to borrowers with excellent credit.
Fintech firms in the insurance sector are either insurance brokers or carriers. The brokers now reduce costs by pooling policyholders into “affinity groups.” This way, those with fewer claims will earn discounts on their premiums, and P2P firms are now underwriting their own policies.
A wave of P2P insurance brokerage firms have launched across the globe in the last few years, including Guevara, Friendsurance, InsPeer, and Bought By Many. Lemonade is the first US-based firm with a P2P insurance funding model. The firm began the process of becoming a licensed insurance provider in New York State late last year.
Fintech is rapidly becoming a part of the mainstream financial market. P2P firms have many innovative new products. This is both creating new markets and driving prices down in segments where P2Ps compete with banks.
Fundrise is “On Track” to Raise $ 250 Million with New eREITs (Crowdfund Insider), Rated: B
As expected, Fundrise has officially launched three new eREITs described as a “revolutionary direct to investor crowdfunding model.” These new real estate investment vehicles will put Fundrise “on track” to raise a quarter of a billion dollars during the coming year.
Fundrise launched its first eREIT using updated rules under the JOBS Act of 2012 in November of 2015.
Fundrise was the very first company to crowdfund a real estate property in 2012. Fundrise was also the first online real estate marketplace to leverage Reg A+ to launch a REIT-like structure. These non-exchange traded funds are said to deliver higher returns at a lower cost point for investors.
CommonBond Completes 8 MM Securitization, Secures ‘A1’ Moody’s Rating (Press Release), Rated: A
CommonBond, a leading online lender that uses data and technology to lower the cost of student loans, today announced it has completed a $168 million securitization of refinanced student loans, backed by $178 million in collateral. The transaction’s highestrated senior notes received a rating of ‘A1’ from Moody’s and ‘AA (low)’ from DBRS. Barclays and Goldman Sachs served as joint-lead managers and bookrunners on the transaction. Barclays also served as structuring agent, and Deutsche Bank served as co-manager on the deal.
The securitization is the company’s second transaction this year, and third overall. In April 2016, CommonBond completed a $150 million securitization. In June 2015, the company issued its first securitization, and, in the process, became the first inaugural issuer in marketplace lending to receive an investment-grade rating from Moody’s.
“CommonBond has built a sterling reputation in the capital markets due to our meticulous, data-driven underwriting,” said Morgan Edwards, Chief Financial Officer of CommonBond. “As with our previous deals, this securitization was oversubscribed among name-brand investors, and the A1/AA (low) ratings from Moody’s and DBRS are a further testament to the quality of CommonBond’s portfolio. We continue to be excited to see new investors participate with each transaction we bring to the market and expect to see the diversity of investors increase with subsequent deals.”
This securitization follows a period of strong growth for CommonBond. In July 2016, the company announced more than $300 million in new funding across equity and lending capital, including an equity round led by Neuberger Berman Private Equity. This brought CommonBond’s total funding to date across equity and lending capital to more than $1 billion. Also in July, CommonBond announced the acquisition of Gradible, a personal finance platform that provides users with unbiased, personalized recommendations on how to better manage and repay their student loans. With the Gradible acquisition, CommonBond now offers employers a full suite of student loan repayment products for their employees, including student loan assessment, student loan refinancing and direct contribution to employee’s student loan payments (a “401(k) platform for student loans”).
Retail FX Sector In Latin America (Forex News Now), Rated: B
Once shunned by major forex firms for its political instability and a lack of net worth among its people, Latin America is now seeing a surge in interest from forex firms seeking to invest in the region. A rapidly expanding middle class economy and growing awareness of alternative investing opportunities are among the factors fueling the growth of forex industry in Latin America countries such as Brazil, Chile, Argentina, and Colombia.
But the Latin American forex market is still sparsely served as forex brokers are only beginning to pitch tent in the market. With the ongoing regulatory purge in the forex operator market, analysts say brokers with a reputation will make it big in Latin America, partly because of limited competition in the early stages.
The other factor that is making Latin American region attractive for forex firms that wouldn’t give the region a thought in the past is the deep penetration of Internet. Nearly 70% of Latin American’s households now have Internet connection and that is exposing them to more opportunities such as online forex trading.
However, some of the forex firms making a foray into Latin America, especially those with a long-term view of the market, are combining online and offline trading platforms.
Peer to peer lending grows for yet another quarter (City A.M.), Rated: AAA
In the last quarter alone, peer to peer lenders have provided £700m of new funding according to the figures, which are prepared by the Peer to Peer Finance Association (P2PFA).
The number of borrowers and lenders have both increased, with businesses accessing the majority of funding.
Telegraph: how can I get 8pc for the least risk? | Weekly Lending Review (Funding Circle), Rated: A
The total value of new loans listed on the Funding Circle marketplace was £23,743,340, averaging at £82,398 per loan. The largest loan value was £500,000 and the smallest loan value was £5,000.
Fintech lenders to challenge UK banks’ business using securitisation (International Banking Times), Rated: A
Fintech or Market Place Lenders (MPLs) will increasingly turn to securitisation, to fund their businesses as they tough it out with UK banks in the sphere of consumer loans, according to Moody’s.
Moody’s said the temporary financing that institutional lenders provide to MPLs could be converted to a “securitisation structure once the facilities expire, offering a supply of potential structures to securitise.”
Moody’s said British demand for MPL consumer loans has been strong, as annual lending volumes surged by 85% between 2015 and 2014.
Year-on-year growth of amounts outstanding of UK consumer lending is now solidly positive, at 6.56% in June 2016, from wallowing in negative territory, at -1.05% in June 2013, the ratings agency added.
While unsecured consumer loans currently account for less than 10% of total UK bank lending, it’s an attractive segment of the lending market, as lenders can earn high margins.
Adviser attitude towards robo-advice changing (FT Advisor), Rated: A
Financial advisers see robo-advice as a tool which could help them, according to global research.
The Financial Planning Standards Board has published a report into robo-advice which it will use to establish how the profession should address the issue.
To put together the report it carried out a consultation with advisers around the globe, from New Zealand to Canada, including the UK.
“A year later, financial planners are less concerned about the disruptive potential of fully automated advice, and are talking about fintech more as a complement to their businesses: automated advice and fintech tools enable financial planners and financial advisers to increase practice efficiencies or cost-effectiveness; serve clients who are younger, lower-income and with fewer investable assets; and free financial planners to devote more time to activities that bring added value to clients.”
PropTech: lending collapse for firm partnered with Zoopla (Estate Agent Today), Rated: B
A business publication says figures from a PropTech peer-to-peer lending firm which markets its products through Zoopla show a 95 per cent drop in lending in just three months.
Business Insider says figures from the P2PFA, the industry association for online lenders, show that Landbay saw a huge drop in lending in the third quarter of this year – it lent just £283,000 in that period compared to £5.3m in the second quarter and £16.7m lent in the first quarter of 2016.
“Over this time we successfully launched our strategic partnership with Zoopla, which together with the recent base rate cut, has led to record investor inflows. Combine this with the launch of our updated technology platform last week and we’re in a strong position to rapidly scale our lending through 2017.”
Some 50 per cent of Landbay’s loans are reported to be in London where the property market is suffering stagnation or worse; yesterday, Estate Agent Today carried news that Foxton’s sales revenue had slumped by a third in the third quarter of the year.
BAE Systems lifts the lid on how dirty money moves (Finextra), Rated: A
Money laundering funds criminal activity and is growing and evolving at a faster pace than many organisations can detect and prevent.
The report, titled How Dirty Money Moves: What you can do to fight the latest evolution of money laundering, serves to provide an analysis and benchmark of the current critical situation. It also proposes remedies and suggests how all those involved in the fight against money laundering can work together towards a positive outcome.
“Criminals are diversifying their tactics through peer-to-peer lending, casino gambling, real estate, fake invoicing – the list goes on. In doing so they can spread their risk and avoid the area under most scrutiny: banks. It’s time for the other ‘gatekeepers’ to the financial industry to start to combat these fraudsters too.”
Zopa’s Giles Andrews Named One of Digital Banking Club’s Power 50 (Crowdfund Insider), Rated: B
Peer-to-peer lending platform Zopa recently announced its co-founder Giles Andrew was named one of Digital Banking Club’s Power 50. The list notably features the most innovative and influential people in European digital financial services.
Zopa revealed that the list was selected by members of the Digital Banking Club along with subscribers of the Retail Banker International and a panel of judges, which included business journalist/author Chris Skinner, RBS Global Mobile creator Roy Vella, and Fujitsu Digital’s director Mike Stewart.
Online peer-to-peer platform LendingCrowd offers joining bonus to attract new investors (Herald Scotland), Rated: A
PEER-to-peer platform LendingCrowd is offering new investors a 2.5 per cent joining bonus as it seeks to increase the pot of cash it has available to lend to small and medium sized enterprises.
The Edinburgh-based firm, which matches investors with small businesses seeking finance, will pay the bonus to anyone investing £5,000 via its site by the end of November.
LendingCrowd lends money mainly to SMEs, with loans tending to be in the £250,000 and below bracket.
Fintech: Switzerland Is More Attractive Than London (Finews), Rated: A
The IFZ financial services institute based in Zug, Switzerland, published a report today saying that Switzerland offered a better ecosystem for fintech than London
The conditions have been divided up into sub-dimensions (politics, economy, society, technology, environment and legal system), which in turn were awarded different indicators.
Based on these conditions, IFZ compared the regions and concluded that the Swiss fintech environment convinced by the right balance.
The Banking Scramble for Fintech Talent (universum), Rated: B
STEM students looking to break into the financial industry have very different aspirations and goals compared to those who will venture into other industries. Therefore, rather than developing recruitment programs for the current pool of students as a short-term fix, a more insightful and measured adaptation is needed to secure the digital talent for the years to come.
The banking industry is now, more than ever, experiencing a high turnover of young professionals who seem to be leaving their positions well before the two year mark.
Also, bear in mind that with Britain’s decision to leave the EU, the number of financial service industry workers based in the UK are now searching for jobs in other European locations, most notably Berlin, a flourishing city within the Fintech scene.
Berlin based FinTech Startup Bitbond receives BaFin Licence (Bitcoin News), Rated: A
Bitbond received its own licence by German financial regulator BaFin as the first blockchain based financial services provider. The Startup from Berlin connects small business owners who need a loan with investors and uses the bitcoin blockchain for payment processing.
Bitbond enables individual and institutional investors to invest in various interest rate regions. The BaFin licence enables Bitbond to be active independently of banks and by that the company is also geographically independent.
Investors finance small business loans via Bitbond and by that get access to attractive interest rates. Bitbond has users from over 120 countries and originated over 1,400 loans to date. Most of the platform’s borrowers are online sellers who run a shop on sites like eBay or Amazon. Bitbond conducts a credit check based on the revenue data of the merchants. The borrowers use the funds for inventory and working capital financing.
Thereby Germany is one of the few countries where there is a clear regulatory framework for blockchain based services.
How robots are changing financial advice in Asia (The Asset), Rated: AAA
The robo-advice service in particular has a chance to flourish with millennials (persons aged 18-34) who tend to be more tech savvy and are aware of the advantages planning ahead financially. “Robo-advisers are mainly targeting millennials who are people that were born into technology and the internet,” says Keir Veskiväli founder & CEO of Singapore-based robo-advisor Smartly. “They [millennials] use technology a lot more differently than generation X.”
While the US has led the charge in robo-advisory space for companies such as Wealthfront and Betterment, Asia has stood out as another prime location for robo-advice due to the growing prominence of the region’s millennial segment. Already millennials make up half of the population in India and just under a quarter of China’s population.
On a wider level, robo-advice also allows for greater investor participation into capital markets.
Despite the industry enthusiasm around robo-advice, Asian financial regulators still need to clarify AML (anti-money laundering) and KYC (know-your-customer) rules before most retail investors become comfortable to regularly use this service. However, that’s not to say regulators are ignoring this emerging trend, this March for example Singapore’s MAS (Monetary Authority Singapore) announced the central bank’s plans to use API (application programming interface) processes, a procedure that makes it easier for third party entities (such as robo-advisers) to connect with government systems.
Two start-ups aim to help bring together investors and mid-sized Asian businesses seeking growth (Straits Times), Rated: A
It is no secret that Asia is where the growth is. And investors who are truly savvy also know that some of the best growth opportunities lie among mid-sized Asian firms.
The problem, however, is that it is tough for an investor to get to know such firms, many of which are family-run and tend to keep a low profile. Conversely, it is also difficult for many mid-sized Asian companies to find investors within their limited networks.
Technology is about to change all that. Two start-ups, Finquest and Opportunity Network, recently set up operations in Singapore, seeking to create a more efficient marketplace for businesses and investors to meet and strike deals.
Finquest’s platform connects three groups – institutional investors, corporate advisers and mid- sized Asian firms.
Opportunity Network, meanwhile, began when its founder Brian Pallas was still getting his MBA at Columbia Business School.
His solution was to create a monthly newsletter where members of the club could anonymously list the business transactions they were interested in.
The newsletter quickly grew to include members of similar clubs from other top global MBA programmes such as the London Business School, Insead and Harvard Business School , and soon Mr Pallas was looking at turning his idea into a global business.
Opportunity Network is building business development teams in Singapore and eight other countries across the region and is starting conversations with top banks in each of these countries, he added.
P2P firms to form an association for a fair code ahead of RBI guidelines (The Economic Times, India Times), Rated: AAA
Ahead of the final RBI guidelines to regulate peer-to-peer lending startups, which is expected to be released by the end of this month, P2P companies are in the process of forming an association with an aim to create a fair practice code within the industry players and grapple with ethical issues together.
Tentatively named as the Alternate Finance and P2P Lenders Association, the members of the association plan to register it in Chennai and finalise the formalities by the end of this month, according to Shankar Vaddadi, founder of Hyderabad-based i-lend.
Experts think that while this is a positive sign that the players will now have a collective voice and a platform to share their learnings, it is too early to tell if this step would foster the growth of this sector.