Thursday March 14 2019, Weekly News Digest

GreenSky

News Comments Today’s main news: FTC makes final decision on SoFi. OnDeck extends two revolving credit facilities. LendingPoint sees drop in debt management loans, increase for new purchases. LendInvest to float 500M GBP. Lufax hits $39.4B valuation. Klarna adds GooglePay as payment option. Today’s main analysis: Unemployment rate and GreenSky’s earnings. Today’s thought-provoking articles: Earnest vs. SoFi for student loan […]

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News Summary

United States

Deal Final in FTC’s Action Against Online Lender (Manatt), Rated: AAA

The Federal Trade Commission (FTC) has finalized its deal with SoFi, an online lender that the agency had accused of making false statements about student loan refinancing.

According to the FTC, the California-based personal finance company misrepresented how much money student loan borrowers have saved or could save by refinancing.

Read the FTC complaint here.

Read the FTC decision and order here.

OnDeck Announces Extension of Two Revolving Credit Facilities With Credit Suisse & Deutsche Bank (Crowdfund Insider), Rated: AAA

OnDeck, a small business online lending platform, announced on Wednesday extensions to its existing credit facilities with Credit Suisse and Deutsche Bank on improved terms.  According to OnDeck, the amended facilities provide an aggregate of $360 million of committed funding capacity and are available to finance OnDeck’s term loans and revolving lines of credit. The scheduled maturity dates for the facilities were extended three years to March 2022.

Unemployment Rate Drops to 3.8%; GreenSky’s Strong Earnings (PeerIQ), Rated: AAA

The unemployment rate dropped to a near five decades low of 3.8% even as nonfarm payrolls only rose by 20K. Average hourly earnings rose by 3.4%, above economists’ expectations.

Source: WSJ
Source: Deutsche Bank Research, WSJ

GreenSky’s Strong 4Q2018 Earnings

GreenSky’s 4Q revenue grew by 22% YoY to $109 Mn, although net income fell by nearly 43% YoY to $23 Mn. The stock rose by ~6% post earnings.

  • Transaction volume increased by 23% YoY to $1.3 Bn.
  • Loan servicing portfolio increased by 36% YoY to $7.3 Bn.
  • GSKY had aggregate commitments of $11.8 Bn from its nine bank partners, of which $4.8 Bn were unused.
  • 30+ DQ rates rose slightly YoY from 145 bps to 148 bps.
  • GreenSky now has nearly 12 k home improvement merchant partners and nearly 3 k elective healthcare partners.
Source: GreenSky, PeerIQ

How to Decide Between Earnest and SoFi for Student Loan Refinancing (Credible), Rated: AAA

Earnest and SoFi are two of the best student loan refinancing companiesout there. They both offer fixed as well as variable rate loans, a 0.25% autopay rate discount, and certain unemployment protections to help in the event of involuntary job loss, but they also have their differences.

Here’s a side-by-side comparison of both lenders to help you make an informed decision.

Source: Credible

The rate of borrowers using loans for debt management drops; growing proportion of borrowers use loans for new purchases (LendingPoint), Rated: AAA

It turns out that, over the past two years, the proportion of our borrowers who say they are earmarking their loans for debt consolidation has decreased markedly, from about 60% in 2017 to about 54% in 2018. The percent using loans to pay for new merchandise or services has grown during those two years. Home improvement jumped from 6% to 8%; loans for medical expenses rose from 2% to 7%.

In 2017, the percent of millennial consolidators was about 61%. In 2018, that dropped a full 10%, down to 51%, a bigger decrease than any other age cohort.

Source: LeningPoint

What Do Millennials Want From Banks? Non-Financial Products (Forbes), Rated: AAA

If they haven’t, then why are 56% of Millennials giving megabanks (the four largest US banks) their 

Source: Cornerstone Advisors

The “Millennials hate banks” meme is a myth.

Millennials’ Access to Subscription Services
Percentage of Millennials that…
Don’t have the service but would like to Have the service, and pay for it directly Have the service, but don’t pay for it directly Don’t have or want the service
Identity theft protection 31% 20% 29% 21%
Personal/family data storage 29% 20% 19% 31%
Child identity theft protection 27% 15% 16% 42%
Rx, vision, hearing discounts 26% 31% 25% 18%
Travel/trip insurance 26% 18% 19% 37%
Roadside assistance 19% 40% 26% 15%
Cell phone damage protection 18% 42% 20% 19%
Source: Cornerstone Advisors

Green Dot targets social media influencers in banking-as-service push (American Banker), Rated: A

A new affinity banking service developed by Green Dot proposes to tap one of the most potent — and controversial — sources of distribution in the digital economy: social media influencers.

The digital banking and payments provider is developing what it calls Bank OS, a simpler version of its enterprise banking-as-a-service platform already used by the likes of Intuit, Stash, Uber and Walmart. It would enable partners to develop their own financial products just as those brands do, including offering credit cards, debit cards with loyalty programs or even a mobile app.

How online lenders attract and service the evolving SMB borrower (Tearsheet), Rated: A

But while small businesses still struggle with cash flow, how they shop for loans and their level of financial education about their options are changing. On Tearsheet’s recent webinar with leaders at Kabbage, BlueVine, and Intuit’s QuickBooks Capital, we discussed the changing nature of the SMB borrower and how their firms have evolved to keep up.

Pay Yourself First? Last Is How Small Biz Often Works (Newsmax), Rated: A

Everyone knows the Golden Rule of business is to pay yourself first. But more than half of small business owners are going months without pay – if they are taking any at all.

About a quarter of these entrepreneurs go two to six months without pay, and another quarter have gone more than six months without salary, according to a recent survey from Kabbage (), a cash flow optimization platform.

PAYNET STRATEGIC INSIGHTS MARCH 2019 (PayNet), Rated: A

The PayNet Small Business Lending Index (SBLI) rebounded with a 17.2 point jump to 150.7 in January, climbing to its second-highest level ever. On an annual basis, the SBLI increased 4.9%. The SBLI 3-month moving average also rose in January and currently stands 1.5% above its year-ago level.

Source: PayNet

The PayNet Small Business Delinquency Index (SBDI) 31–90 Days Past Due edged up one basis point to 1.45% in January, and is up six basis points on an annual basis — its 33rd consecutive year-over-year increase. The SBDI 91–180 Days Past Due was unchanged at 0.38% but is three basis points above its year-ago level.

Less Than Zero? This Proposed ETF Would Pay Investors, But There’s A Catch (Benzinga), Rated: A

Salt Financial, which currently offers one ETF, has filed plans with regulators to launch a low volatility that would pay investors, but there’s a catch.

Equifax Deleted Key Data Breach-Related Docs, Senators Say (Law360), Rated: A

Equifax Inc. failed to preserve key internal discussions over its massive 2017 data breach, U.S. senators said Thursday at a hearing where elected officials grilled the credit reporting giant’s CEO and the…

Home Equity Line of Credit Providers Face Growing Threat from Alternative Lenders, J.D. Power Finds (JD Power), Rated: A

Despite record-high levels,[1]new home equity line of credit (HELOC) originations have been steadily declining[2] as a perfect storm of rising interest rates, new tax laws and growing competition from alternative lenders has crimped traditional HELOC growth. According to the J.D. Power 2019 U.S. Home Equity Line of Credit Satisfaction Study, released today, HELOC customers are more likely than ever to shop for alternative sources of funding and HELOC providers are falling short on digital offerings.

This week in Chicagoland real estate: One Chicago Square, Woodlawn and more (Chicago Agent Magazine), Rated: A

New York-based DDG, Chicago-based Marc Realty and Ruttenberg Gordon announced plans for a 13-story hotelwith 250 rooms in Fulton Market. The developers are raising $55 million to fund the project through Prodigy Network, a New York-based real estate crowdfunding platform. The hotel will be located at 1234 West Randolph Street and will be operated by New York-based Standard Hotels. It’s set to be completed within two years.

PeerStreet Expands Executive Leadership with Two Senior Hires in Finance Team (BusinessWire), Rated: B

PeerStreet has announced the hiring of two executives with extensive experience in the financial services and real estate sectors: Ellen Coleman and Bob Brown. Ms. Coleman joins as Executive Vice President of Finance, and Mr. Brown joins as Executive Vice President of Finance & Corporate Development.

CoreLogic : Introduces Verification of Employment and Income Solution to Expedite Borrower Verification Process (MarketScreener), Rated: A

CoreLogic, a global property information, analytics and data-enabled solutions provider, today released an enhanced Verification of Employment and Income(VOE/I) product. The comprehensive new VOE/I product takes time, touch and cost out of traditional employment and income verification through a three-step ‘waterfall workflow’ process, ensuring that every mortgage applicant can be verified.

The enhanced VOE/I product features a three-step ‘waterfall workflow’ that ensures each borrower’s employment and income is verified as efficiently as possible.

  • Step One: Instant verification via a direct integration to The Work Number (TWN)
  • Step Two: Automated verification leveraging dozens of third-party data sources
  • Step Three: Manual verification by a team of dedicated CoreLogic verification experts

CORELOGIC INTEGRATES CONDOSAFE WITH THE ELLIE MAE ENCOMPASS ALL-IN-ONE MORTGAGE MANAGEMENT SOLUTION (CoreLogic), Rated: B

CoreLogic today announced the integration of its CondoSafe product with the Ellie Mae Encompass® all-in-one mortgage management solution. CondoSafeis a one-stop condo project review tool that enables lenders to have a single, consistent, standardized review process, allowing them to determine eligibility earlier in the process, resulting in quicker approvals.

ArborCrowd Announces New Equity Offering in 707-Unit Multifamily Portfolio (AP News), Rated: B

ArborCrowd, the first crowdfunding platform launched by a real estate institution, today announced a new offering that allows investors to acquire equity interests in the Sioux Falls Multifamily Portfolio, a collection of class-B apartment communities located in Sioux Falls, S.D. The properties exhibit strong upside potential due to Sioux Falls’ sound multifamily real estate fundamentals and notable lack of professionally managed workforce housing product.

The investment has a targeted internal rate of return (IRR) of 12 to 14 percent over a three- to five-year hold period. Tzadik has budgeted $5.2 million to perform a comprehensive capital improvement plan that will include upgrades to all renovated units, common areas and public spaces.

LendPro’s Female Leaders Celebrated on International Women’s Day (LendPro Email), Rated: B

As the financial technology (fintech) industry continues to grow, innovators are increasingly looking for leadership and expertise to grow their companies and stand out from competitors. LendPro, a Lending-As-A-Service (LaaS) fintech company, prides itself in hiring strong talent.  Women make up 50% of staffing at LendPro’s Charlottesville corporate office, versus 37% female staffing at most fintech companies.

United Kingdom

Property finance hub Lendinvest plots £500m London float (Sky.com), Rated: AAA

The online property finance hub Lendinvest is plotting a £500m stock market flotation that will provide a fresh test of investors’ faith in a fast-growing but volatile area of the non-bank lending market.

Sky News has learnt that Lendinvest, which was set up in 2008 and has so far lent roughly £2bn to help buy, build or renovate British homes, has appointed Lazard, the investment bank, to advise on its strategic options.

Lending revolution: fintechs vs banks (Raconteur), Rated: AAA

Eight out of ten SME loan applications were approved by banks in the third quarter of 2018, according to the latest figures from trade association UK Finance. While this is a far cry from the days of the global financial crisis, when SME lending all but dried up in part due to regulatory pressures to shore up capital, smaller companies are still citing challenges in securing funding from traditional players, according to Stuart Chalmers, commercial banking lead for Accenture UK.

Alternative lenders understand the hunger for a seamless customer experience and have built credit journeys that align to business expectations

Almost 30,000 companies used non-traditional channels over the year, with peer-to-peer lending and equity-based crowdfunding now established investment vehicles for seed, startup, early-stage and fast-growth companies seeking capital. In fact, CCAF estimates that 29 per cent of all new loans issued in 2017 to small businesses with annual turnovers less than £2 million came from alternative finance.

Source: Raconteur

Burnham residents are the most thrill-seeking in the UK according to new study (Windsor Observer), Rated: A

It may come as somewhat of a surprise, but according to research from Zopa, Burnham has been revealed to be the most thrill-seeking town.

Peer-to-peer firms told to improve wind-down arrangements (Out-Law), Rated: A

In a letter to chief executives (4 page / 352KB PDF) sent last week, the FCA said a recent supervisory review of firms’ current arrangements against current requirements “strongly suggests” some P2P firms were falling short of the standards required by its rules.

Augmentum Capital signs up to Innovate Finance (P2P Finance News), Rated: A

AUGMENTUM Capital has joined Innovate Finance as its first investor member.

It is currently planning to issue extra ordinary shares in its investment trust as it looks to fund around £300m of potential opportunities in the sector.

PEER TO PEER LENDER RELAUNCHES PRODUCTS (Insider Media), Rated: A

A South West-based peer to peer lender is to re-launch its lending products aimed at individuals and businesses.

Folk2Folk is to offers 9 per cent interest rates for investors with a loan to value ratio of up to 60 per cent.

The business has so far brought £275m into rural businesses in Britain over the past six years.

Wonga compensation claims four times higher than expected (TechRound), Rated: A

It has been recently revealed that the number of compensation claims made against the failed payday lender Wonga, which filed for administration in August 2018, has ended up increasing four-fold. The initial figure given by the Financial Ombudsman Service in a Treasury Committee in January this year suggested that there were around 10,500 customers who had open complaints with the short-term credit, high-interest company.

Now, it turns out that the number of redress claims that have been made against Wonga is considerably higher, totalling over 40,000. It is potentially the case that these people will not end up getting their money back after having been mis-sold loans.

The IFISAs you can open for £100 or less (P2P Finance News), Rated: A

According to the most recent HMRC statistics, overall ISA savings fell from £79.8bn in 2015/16 to £61.5bn in 2016/17. Meanwhile, Bank of England statistics found that the amount of money that Brits were saving (both within and outside of the ISA wrapper) fell by £7bn in 2018 alone.

  • Abundance

Minimum investment: £5

  • Assetz Capital

Minimum investment: £1

  • Crowd2Fund

Minimum investment: £10

  • RateSetter

Minimum investment: £10

  • Octopus Choice

Minimum investment: £10

Environmental benefits of ISA investment (The Ecologist), Rated: A

Crowdfunding and peer to peer lending grew out of the banking crisis of 2008. According to the European Central Bank, the availability of bank loans to SMEs declined 23 percent immediately following the crash, causing a devastating impact on the economy.

Over 100 Finastra customers upgraded trade software in time to meet new SWIFT standards (RealWire), Rated: B

Over 100 Finastra customers were upgraded to the latest compliant versions of its transaction banking software, Fusion Trade Innovation, ahead of the new SWIFT standards deadline of 17 November 2018. The new ‘Standards MT Release’ included significant changes to category 7 messaging standards used in trade finance – the most significant set of changes to the SWIFT trade finance messaging interface in over 30 years.

China

China’s Lufax hits huge $ 39.4bn vaulation thanks to Primavera Capital-led Series C (Alt Assets), Rated: AAA

Chinese peer-to-peer lending business Lufax has confirmed it has reached an enormous $39.4bn valuation thanks to a Series C round led by private equity house Primavera Capital.

Chinese fintech unicorn Lufax in no rush to IPO (Technode), Rated: A

Chinese peer-to-peer (P2P) lender Lufax is not in a hurry to list on the stock markets, said an executive of its biggest shareholder, Ping An Insurance, during its earnings call, Chinese media reported (in Chinese) on Wednesday.

Ping An Insurance Group deputy CEO Jessica Tan said after Lufax’s latest round of funding, Ping An still holds approximately 41% of its shares.

European Union

Google Pay Added to Klarna’s Bank of Payment Options (WWD), Rated: AAA

Today, Klarna, the global payments provider “smoothing” out kinks in the checkout process for retailers, announced a partnership with GooglePay. Available for Klarna customers in Sweden, the intention is to make mobile payments “even easier and more secure.”

CreditEase Invests in wefox Group, the European Largest Insurtech Platform (PR Newswire), Rated: AAA

CreditEase, a Beijing-based leading FinTech conglomerate in China, announced today that its direct investment arm, CreditEase FinTech Investment Fund (CEFIF), participated in wefox Group’s $125 million USD Series B, a fast-growing Berlin-based insurtech firm together with Mubadala’s newly created European Ventures Fund. The investment is the largest Series B round for a European insurtech and Goldman Sachs International is acting as the private placement adviser to wefox Group in connection with the transaction.

The investment will help spearhead the company’s expansion into the European broker market. It also paves the way for wefox Group to accelerate growth and create the world’s most innovative product and engineering team applying advanced data analytics to create an all-in-one insurance platform in which all interactions are personalized. The company, which was founded in 2014, has grown its revenue to around $40 million USD, while serving more than 1500 brokers and over 400,000 customers, making it Europe’s number one insurtech platform.

Luna Connect: A new digital disrupter in the lending landscape (Irish Times), Rated: A

Luna Connect is a new digital lending platform primarily aimed at those lending to SMEs. It is designed to fit into the rapidly evolving financial services ecosystem and its founder, Brian D’Arcy, drew the inspiration for his business from the disruption currently underway in the financial services sector.

The company’s target market are lenders offering loans of under €200,000, whose borrowers typically require a fast decision on their application and want a more transparent lending process. The initial focus will be on Ireland and the UK with Europe and the US to follow. Investment in the project to date has been around €120,000 which was self-funded with support from the NDRC and Enterprise Ireland through the competitive start fund.

Australia/New Zealand

New US ambassador warns of China’s ‘payday loan diplomacy’ (The Washington Post), Rated: AAA

The new U.S. ambassador to Australia said Wednesday that he’s concerned about the way China lends money to developing Pacific nations in what he describes as “payday loan diplomacy.”

China categorically rejects accusations that it uses loans, grants and other financial inducements to extend its diplomatic and political reach, saying it is merely acting in the best interests of both sides in such transactions.

New way to borrow takes Australia by storm (Mozo), Rated: A

As distrust of the nation’s big banks and mortgage brokers swells amongst the wreckage of the banking royal commission, online lenders are emerging as real challengers in the home loan, business loan and personal lending markets.

NAB’s UBank launches ‘green’ deposits to chase Millennials’ savings (Financial Review), Rated: A

The CEO of National Australia Bank subsidiary UBank, Lee Hatton, says future retail depositors will want more control over where banks lend their money, prompting it to launch a “green” term deposit targeting environmentally concerned Millennial customers.

How marketplace lending meets investor needs (Cuffelinks), Rated: A

However, it’s also true that today’s investors face a risk environment of unprecedented complexity. In 2018, the S&P/ASX200 declined by 6.8%. Residential property values are falling and bank deposit rates fail to match inflation. In the last year, the Australian media landscape was dominated by the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, with its revelations of duplicitous lending practices, improper fees, and general misconduct that, by the banks’ own admission, fell far short of community expectations.

Financial Markets Authority executive steps down over employment matter (NZ Herald), Rated: B

Financial Markets Authority (FMA) executive Garth Stanish left the investment watchdog at the end of last month over an internal employment matter, a spokesman for the authority said.

Stanish was also a director of markets oversight, a group that includes oversight of NZX, crowd-funding/P2P lending platforms and frontline supervisors.

India

P2P startup PaisaDukan raises 1st round of investment from JITO (UNI India), Rated: AAA

Vivriti Capital raises second round of funding of Rs 110 Cr from Creation Investments (YourStory), Rated: A

Vivriti Capital, a Chennai-based lending platform for corporate entities, secured Rs 110 crore worth of equityin an additional round of funding from its existing investor Creation Investments.

This comes just within two months of the Series A funding closure in December 2018, in which the company raised Rs 200 crore from Creation Investments. With the current equity infusion, Vivriti’s overall capital stands at approximately Rs 320 crore.

MSME Lending fuelled by Digitisation (Free Press Journal), Rated: A

MSMEs play a major role in Economic development of India. There are around 63.4 million units and they contribute to 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities and 33.4% of India’s manufacturing output. They have been able to provide employment to around 120 million persons and contribute around 45% of the overall exports from India. The sector grows at a rate faster than the large ones at more than 10% pa.

About 20% of the MSMEs are based out of rural areas.They provide employment to more than 130 million people and contribute to 45% of exports. MSMEs are also the largest employment generator every year. As of Sep18, the total credit in India was Rs 105.5 Lakh crores and MSMEs had borrowed Rs 24.7 cr. Large and Mid Caps borrowed Rs 44.4 cr. Year on Year the growth of overall commercial credit was at 13.5%.

Micro loans which are less than Rs1 cr grew 22.2% year on year and SME loans between Rs1 cr – Rs 2.5 cr grew at 18.3%.The growth was faster than the overall growth. Share of NBFCs in SME credit increased from 13% in Sep 15 to 17% in Sep 18. The number of NBFCs lending more than Rs 100 cr to MSMEs stood at 77 at the end of Sep 18.

Asia

Investment Task Force suspend operation of 168 illegal fintech firms (Antara News), Rated: AAA

The Investment Alert Task Force has suspended the operation of 168 entities allegedly running peer-to-peer lending services without a legal business license from the Financial Service Authority (OJK).
The task force has also suspended the operation of 47 illegal investment entities which has the potential to harm the public.
“Based on the monitoring on website and application in Google Playstore, the Investment Alert Task Force has stopped the operation of 168 entities that have violated OJK regulation no. 77/POJK.01/2016 on fintech peer-to-peer lending services, which has the potential to harm the public,” head of the task force Tongam L Tobing said in a statement here on Wednesday.

Fintech group to help develop P2P lending (The Jakarta Post), Rated: A

A group of financial technology (fintech) lenders wants to help develop a healthier lending industry and protect consumers by setting out a strict code of conduct for its members.The Indonesian Fintech Lenders Association (AFPI) will help stimulate the industry, which only gained government recognition three years ago, by providing risk management certification, public education campaigns and a compulsory code of conduct, which should be uploaded to the AFPI website soon.AFPI chairman Adrian Gunadi said the association had been established to ease the Indonesian Fintech Association’s (AFTECH) workload in dealing with fintech companies that provide lending services, including peer-to-peer (P2P) lending, crowdsourcing and digital credit cards.Such lenders account for 30 percent of all licensed fintech companies, whereas the remaining 70 percent are companies engaged in, among other thing…

Government moves to legalise P2P lending (Vietnam Vet), Rated: A

During a recent meeting with relevant ministries and agencies to discuss P2P lending, Hue instructed that during the pilot operation, P2P lending would be restricted to connecting lenders and borrowers as currently being run by most P2P lending companies in Viet Nam. P2P lending companies would not be allowed to mobilise capital, but act as intermediaries to connect lenders (investors) and borrowers.

The development of P2P lending will also create a new capital supply channel. Research conducted by Transparency Market Research showed that P2P lending would surge by 48.2 per cent annually in the 2016-24 period, while Morgan Stanley forecast the business model would reach a growth rate of 53.5 per cent globally by 2020.

Authors:

George Popescu
Allen Taylor

The post Thursday March 14 2019, Weekly News Digest appeared first on Lending Times.

Monday May 14 2018, Daily News Digest

Kabbage KABB 2017-1

News Comments Today’s main news: LendingTree to acquire Ovation Credit Services. Revolut to enter America. Flender delays UK launch. UK challenger banks test location-based P2P payments. Ant Financial raises $10B led by Carlyle Group. Today’s main analysis: KABB 2017-1 deep dive. Today’s thought-provoking articles: How the FTC knew LendingClub was allegedly hiding fees. Elevate’s Q2 earnings estimates. UK customers trust banks, […]

Kabbage KABB 2017-1

News Comments

United States

United Kingdom

China

European Union

International

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United States

LendingTree, Inc. Announces Agreement to Acquire Ovation Credit Services (PR Newswire) Rated: AAA

LendingTree, Inc. (NASDAQ:  TREE) announced today that it has entered into a definitive agreement to acquire Ovation Credit Services, Inc., a provider of credit services with a strong customer service reputation. Ovation Credit Services utilizes a proprietary software application that facilitates the credit repair process and is integrated directly with certain credit bureaus while educating consumers on credit improvement via ongoing outreach with Ovation case advisors.

Europe’s New Fintech Unicorn, Revolut, Heads to America (Newsday) Rated: AAA

The London-based fintech start-up allows users to buy and trade cryptocurrencies, making it a direct competitor to the U.S.-based Robinhood. Revolut also sees itself as a disruptor of the traditional banking industry, as it offers checking accounts, peer-to-peer payments, and international money transfers, says Chad West, the company’s chief marketing officer.

FTC Doesn’t Hide Action Over LendingClub’s Allegedly Hidden Fees (Lexology) Rated: AAA

The FTC noted that the site did feature a small green dot (known as a tooltip) with a white question mark inside, which appeared next to the term “APR.” If a consumer clicked on the tooltip, a pop-up bubble appeared with a disclosure that read: “APR stands for Annual Percentage Rate and is a measure of the total cost of credit as an annual rate. The APR is comprised of the annual interest you pay at a rate of 6.99%—which is ultimately paid each month to the investors who enable your loan—and a one-time origination fee of 3.5% ($350.00) that is collected out of your loan proceeds.”

The complaint reminds lenders of the continued importance of accuracy and completeness in advertising and other marketing in order to avoid UDAAP claims, including under Section 5 of the FTC Act.

KABB 2017-1 Deep Dive (PeerIQ), Rated: AAA

The battle for transaction fee interchange revenue is heating up. Amazon is now encouraging smaller retailers to use its own payment processing system – Amazon Pay – in lieu of credit cards or PayPal.Amazon is willing to offer the payments at a discounted rate in exchange for growing market share and gain additional data insights from merchants.

FinTech Earnings – LendingClub and OnDeck

The market has responded well to LC’s earnings and the stock price has surged 17% post earnings.

Source: LendingClub

OnDeck’s stock price has enjoyed a 10% rise since earnings.

Source: OnDeck

Deal Deep Dive KABB 2017-1 Additional Notes

Kabbage is issuing $60 Mn in additional notes under the expandable option on its $550 Mn KABB 2017-1 deal. The additional notes classes A to D have balances of $44.4 Mn, $9.5 Mn, $3.2 Mn, and $2.9 Mn respectively. KBRA has rated the tranches A, BBB, BB, and B respectively. Kabbage issued $525 Mn in bonds originally on the KABB 2017-1 deal, and subsequently issued $25 Mn in additional notes.

KABB 2017-1 is passing all its triggers and has a weighted average yield of 42.9% and a 3-month average DQ percentage of 9.7%. The bonds are locked out from receiving principal for 36 months since issuance and the additional cashflow is used to purchase receivables that keep the weighted average receivables yield for the entire pool above 38% and individually yield at least 19%.

Source: PeerIQ, KBRA
Source: PeerIQ, KBRA

Q2 2018 Earnings Estimate for Elevate Credit (NYSE:ELVT) Issued By Jefferies Group (Macon Daily) Rated: AAA

Jefferies Group lifted their Q2 2018 earnings per share estimates for shares of Elevate Credit in a report released on Tuesday, May 1st, according to Zacks Investment Research. Jefferies Group analyst J. Hecht now forecasts that the company will earn $0.19 per share for the quarter, up from their previous estimate of $0.18. Jefferies Group also issued estimates for Elevate Credit’s FY2018 earnings at $0.83 EPS, Q1 2019 earnings at $0.37 EPS and FY2019 earnings at $1.09 EPS.

Source: Macon Daily

Renaud Laplanche: the sailor who revolutionised banking (Money Week) Rated: A

“Soft spoken and unfailingly polite”, as Forbes noted in 2015, Laplanche claimed, with some justification, to be “transforming” the banking industry – bypassing banks to link would-be borrowers with lenders online. He swiftly established his outfit as the market leader, originating some $20bn in loans and winning copious “disruptive innovator” awards. Then came the shipwreck.

He is now focused on “what can I learn from it, what can I do better. Upgrade has been part of that.” Last year, Upgrade raised $60m – “the biggest ever series A funding round for a US fintech start-up”, backed by “many of Lending Club’s original investors”. The market is now more crowded than ever, notes the Lending Times, and “margins have shrunk”. Still, many reckon that if anyone can steer a clear course it’s “the guy credited with creating the industry in the first place”.

 

 

 

PayPal CEO: A Cashless Society Is Possible as Mobile Payments Take Over (The Street) Rated: A

The world is rapidly digitizing. You look at every industry, whether it’s media publishing or entertainment and you are now seeing different value propositions being driven by software and mobile connectivity. Financial services is no different. I think you are going to see more changes in the financial services industry in the next five or 10 years than maybe we have seen in the last 25 or 30 years.

The world is rapidly digitizing. People are writing many less checks than they ever have before. Peer to peer lending, which once involved giving cash to a friend to split a bill at a restaurant, that’s now happening digitally.

The Most Well-Funded Tech Startup In Every US State (CB Insights), Rated: A

In our latest map of the most well-funded American tech startup in each state, some companies with the deepest pockets were found in Florida (Magic Leap, $1.89B), Virginia (OneWeb, $2.2B), Utah (Domo, $698M), and Illinois (Avant, $655M).

Source: CB Insights

Congress Votes to Erase Auto Loan Anti-Discrimination Rule (LendEDU) Rated: A

Under the authority granted by the Congressional Review Act, the House of Representatives passed a measure on May 8 to roll back an Obama-era rule on auto lending practices issued by the Consumer Financial Protection Bureau (CFPB). It should be noted that the rollback pertains to a set of administrative guidelines issued by the CFPB, not a law ratified by Congress.

The House vote was 234-175, reversing a 2013 rule established by the CFPB to stop auto lenders from charging higher fees to borrowers based on their religion, sex, race, or age. The vote follows a Senate vote in April to also repeal this measure. It will now go to President Donald Trump’s desk for his approval.

Virginia Attorney General Files Suit Against Online Lender Alleging Predatory Lending (JD Supra) Rated: B

The complaint alleges that the lender, one of the largest online lenders in Virginia, operated without a Virginia license, and misled borrowers about its licensure status in another state in order to avoid Virginia’s 12% interest rate usury cap.  Virginia Code § 6.2-303.  Specifically, the complaint alleges that the installment loan agreements’ Utah choice-of-law provisions are void, and that Virginia law, including Virginia’s usury cap, applies to the loans.  The VA Attorney General also alleges that the lender attempted to collect on loans from borrowers who were in bankruptcy and entitled to protection from debt collection.

United Kingdom

Ireland’s Flender pushes back UK launch (Peer2Peer Finance) Rated: AAA

IRISH peer-to-peer lending platform Flender has pushed back its UK launch to focus on becoming the “dominant platform” in its home country first.

UK banks are trying out location-based P2P payments (Tearsheet) Rated: AAA

On Friday, Revolut introduced a feature called “Near Me” which lets its customers find other Revolut customers using the same feature and send them money without knowing their contact details. On Monday, Monzo rolled out a capability called “Nearby Friends.”

The use cases for location-based peer-to-peer payments among consumers may not be compelling enough for providers to consider it, said Paygility Advisors partner Deborah Baxley.

Q&A With Simon Taylor, 11:FS Co-Founder (Forbes) Rated: A

However, last month’s announcement that London FinTech Revolut is now a so-called unicorn with a $1.7 billion valuation and TransferWise working with the Bank of England and launching a ‘borderless’ card that drastically slashes transaction costs, the future for the city may be companies such as these.

Another fellow London FinTech 11:FS is also making waves offering a range of FinTech services, not least being able to ‘make a challenger bank in 12 weeks’. Here company Co-Founder Simon Taylor speaks exclusively to Forbes about what these moves and also on Swedish company iZettle’s recent IPO announcement.

 

 

A new study shows UK customers trust banks but don’t engage with them (Business Insider) Rated: AAA

UK banks were trusted by 40% of consumers in 2017, up from 29% in 2015, according to a study from Accenture. This makes banks only 3% less trusted than retailers, and ahead of insurers, independent advisers, and tech companies.

Source: Business Insider

Additionally, customer satisfaction was up 5% from 65% in 2015 to 70% in 2017, suggesting banks have been doing something right in terms of customer experience in the recent years. This also brings banks ahead of life insurers and pension providers, as well as on the same level as motor insurers and home insurers, when it comes to customer satisfaction.

 

P2P lenders benefit as BoE keeps interest rates low (AltFi News) Rated: A

The Bank of England’s decision to keep the interest rates at 0.5 per cent should at least make peer-to-peer lenders smile. People are tempted to look for alternative and riskier ways to increase the value of their savings, as inflation continues to hover above BoE’s target of two per cent and traditional savings accounts offer barely any interest at all.

Mike Allan, the director of operations at LendingCrowd, said that the historically lax monetary policy created an opening for P2P lending to take off.

Why commercial property could be the new buy-to-let and how to invest for better returns (This is Money) Rated: A

Over the past five or six years, investing in property through peer-to-peer and crowdfunding platforms has grown enormously in popularity. There are now lots of platforms to choose from and each offers a slightly different proposition.

Both peer-to-peer and crowdfunding platforms have different approaches, in that some allow you to put money in and spread it across a number of properties, or a portfolio run by them.

 

 

China

Jack Ma’s Ant Snags Carlyle for $ 10 Billion Funding, Sources Say (Bloomberg) Rated: AAA

Ant Financial, the Chinese payments giant controlled by Jack Ma, is expected to close a fundraising of at least $10 billion in the next few days, attracting Carlyle Group and the Canada Pension Plan Investment Board as first-time investors, according to people familiar with the matter.

The Hangzhou-based company is said to be valued at about $150 billion in this round, the people said, requesting not to be named because the matter is private. The funding will be mostly used for overseas expansion, the people said.

PBOC Bans Unauthorized APP to Access Credit Rating System (Crowdfund Insider) Rated: AAA

Recently, the People’s Bank of China (PBOC), China’s central bank, issued a document named, “Notice on Further Strengthening the Management of Credit Information Security” (Yinfa [2018] No. 102) (hereinafter referred to as “Document No. 102”), to further strengthen the management and security of credit information database. According to Document No. 102, credit reporting agencies and access agencies are strictly forbidden to query credit report without authorization, and unauthorized APP accessing to credit reporting systems is strictly prohibited. In addition, it is required to establish a leading group for credit information security work and make clear that the person in charge of the credit management work shall take the primary responsibility for related issue.

China’s online lenders reel from government clampdown (Nikkei Asian Review) Rated: A

Of 66 peer-to-peer lending platforms surveyed by FTCR, 10 said they might close because of difficulties in meeting new compliance standards and in controlling an increase in bad loans. Among the platforms, which match lenders with borrowers online, more than 40% of those in second- and third-tier cities said business had fallen in the first quarter compared with the end of last year.

P2P lending in China had grown rapidly, extending 2.8 trillion yuan ($443.3 billion) in 2017, equivalent to 20.7% of the amount lent by banks.

Antisocial networking (Breaking Views) Rated: A

A Chinese social network is finding new ways to lose friends. Renren has irked investors over plans to sell some of its assets, notably a stake in U.S. online lender SoFi, to a firm partly controlled by its chief executive.

Renren has been irritating shareholders for years. Since its initial public offering in New York in 2011 valuing it at close to $6 billion, the company has failed to live up to the hype of being China’s answer to Facebook. It is now worth just $600 million.

This latest episode also isn’t the first time boss Joe Chen has been accused of trying to enrich himself at the expense of shareholders. A non-binding 2015 bid to take Renren private for $1.4 billion never came to fruition, and the SoFi stake was a topic of dispute then, too.

European Union

Banco BNI Europa invests €15m in auto financing start-up Lendrock (Fintech Futures) Rated: AAA

Portuguese Banco BNI Europa will invest up to €15 million in Spain-based Lendrock’s online financing platform that specialises in near prime consumer auto financing.

The bank says the Iberian partnership begins with the acquisition of part of the existing loan portfolio, offering exposure to Lendrock’s loans and setting the stage for the acquisition of monthly origination volumes.

iZettle: From Swedish Fintech Success To Europe’s Biggest Fintech IPO (Forbes) Rated: AAA

Swedish fintech iZettle announced last week that they intend on selling shares and launching an IPO in order to raise SKr2bn by listing on Nasdaq Stockholm. With plans to increase revenue by 40 per cent a year, iZettle aims to also break even by 2020.

With JPMorgan and Carnegie on their side as joint global co-ordinators, iZettle would like to walk away with at least SKr10bn ($1.1 billion) by the end of this month or June.

 

International

The Top 100 Venture Capitalists (CB Insights), Rated: A

For the third year in a row, CB Insights partnered with The New York Times to provide an algorithmically-driven view into the question of who are the top VCs. Not swayed by narrative or a storied history in venture capital, the NYT-CBI rankings provide a current view into the best venture capitalists in the world at an individual and firm level.

Some of the top movers in 2018 include:

  • Steve Anderson of Baseline Ventures who moved from 10th place to 2nd due in part to a consistent knack for investing early in winners.  His stellar track record saw another success in recently public ecommerce company Stitch Fix.
  • And Rob Hayes of First Round Capital saw the most significant jump going from 85th to 7th for leading investments in Uberand Square.

First-time appearances on the ranking include Shawn Carolan of Menlo Ventures (investor in Roku), Meyer Malka of Ribbit Capital (investor in Credit Karma), and Albert Wenger of Union Square Ventures (investor in MongoDB).

Tech firms will be regulated like banks in future (The Finanser) Rated: A

First, we have become addicted to technology. We live our lives staring at our devices rather than talking to each other or watching where we are going.

Second is privacy. Facebook and other internet giants are abusing our privacy rights in order to generate ad revenues, as demonstrated by Cambridge Analytica, but they’re not the only one.

Third is that the power of these firms is too much. When six firms – Google (Alphabet), Amazon, Facebook, Tencent, Alibaba and Baidu – have almost all the information on all the citizens of the world held digitally, it creates a backlash and a fear.

 

Bitbond’s Loan Transfers Using Bitcoin Are Becoming More Popular (BTC Manager) Rated: A

Global peer to peer marketplace for small loans, Bitbond, allows clients the option to transfer their loans by using bitcoin. The bitcoin startup has seen its popularity grow, with the startup managing around $1 million in loans per month for 100 clients.

The revelation was made in an interview by Reuters TV with Bitbond’s German founder Radoslav Albrecht. He said the rationale behind the move is that it will help reduce the foreign exchange cost for clients.

The Benzinga Global Fintech Award Finalists For The Best Under-Banked Or Emerging Market Solution (Benzinga) Rated: B

The finalists for the Best Under-banked or Emerging Market Solution category are:

Airfox
Braviant Holdings
CreditStacks
Elevate Credit
Experian MicroAnalytics
Finn.ai
Humaniq
ID Finance
LenddoEFL
MoneyLion
Oakam
Self Lender, Inc.
Teller

Australia/New Zealand

Three disruptive forces driving Aussie neobanks like volt, as fintech startups get serious (Australian Financial Review) Rated: AAA

In a significant milestone for the local fintech scene, the Australian Prudential Regulation Authority said last week volt bank would become the first recipient of a “restricted license” under its new regime, created after the federal government indicated it wants to see more competition in banking.

Here come the robots: First digital financial advice gets green light (NZ Herald) Rated: A

Already under pressure from reputational challenges, New Zealand’s human financial advisor workforce will now have to go head to head with computer-generated advice.

KiwiSaver provider Kiwi Wealth has today received the green light to be the first to offer personalised digital financial advice and will launch the service to its KiwiSaver members next month.

Kiwi Wealth, which is owned by the Government, ACC and the New Zealand Superannuation Fund, and is a sister company to Kiwibank, is the first to gain an exemption from the Financial Markets Authority.

India

Deifying big data (Business Line) Rated: A

The fusion of big data with artificial intelligence is creating this beast called ‘data capitalism’

The world is shifting from finance to data-capitalism. The man with data is the king. Data-rich markets will destroy the existing order, money will no longer be in its pre-eminent position, labour markets will be uprooted and millions of jobs endangered, firms thrown out of business, and so on.

From solving habitual tasks to affordable interior designs – your startup fix to start the week (Your Story) Rated: A

The rules of investment have changed over the years, and peer-to-peer lending is being viewed as an investment avenue that is expected to give returns to the tune of 18-22 percent, according to industry estimates. Bengaluru-based Finzy is trying to tap on to just that. Amit More’s background in finance had him excited about the credit opportunity in India. He teamed up with Abhinanadan Sangam, and the duo chose to set shop in the ripe Indian digital lending market. Finzy was incorporated in October 2016 with Bridge FinTech Solutions Pvt Ltd as the parent company.

Asia

Keeping Loan Sharks Away From Indonesia’s Fintech Archipelago (Bloomberg) Rated: AAA

Indonesia is planning to tighten regulation of its vibrant financial technology sector, imposing new rules on companies which it hopes will stand at the forefront of efforts to extend services to more of the country’s 260 million people.

Peer-to-peer lending jumped 38 percent in the first two months of 2018 from a year earlier, hitting 3.5 trillion rupiah, and OJK director Eko Ariantoro said in March that regulators “don’t want these developing fintechs to become loan shark-like businesses.”

Asia news roundup: Didi responds to passenger killing, Flipkart founder exits, and more (Tech In Asia) Rated: B

Julo raises US$5 million in series A (Indonesia). The peer-to-peer lending startup received the funding in a round led by Skystar Capital and East Ventures. Participating investors included Convergence Ventures, Provident Capital, and Central Capital Ventura, among others.

Authors:

George Popescu
Allen Taylor

Friday May 4 2018, Daily News Digest

Square Q1 2018 results

News Comments Today’s main news: Law firm files class action against Lending Club. KBRA assigns preliminary ratings to Marlette Funding Trust 2018-2. Funding Circle’s securitization priced at tighter spread than expected. Klarna intros new consumer app. Today’s main analysis: Square’s Q1 2018 results. Today’s thought-provoking articles: More light shed on Lending Club’s hidden fees. Fintech funding at $127B. Financial inclusion […]

Square Q1 2018 results

News Comments

United States

United Kingdom

International

Other

News Summary

United States

New Securities Fraud Class Action Against Lending Club (LC) Has Been Filed (Markets Insider) Rated: AAA

Block & Leviton LLP (www.blockesq.com), a securities litigation firm representing investors nationwide, announces that a new class action lawsuit has been filed against Lending Club Corp. (“Lending Club” or the “Company”) (NYSE: LC) and certain of its officers and directors alleging violations of the federal and securities laws. Class members interested in serving as lead plaintiff are reminded of the July 2, 2018 lead plaintiff deadline.

The lawsuit, filed in the United States District Court for the Northern District of California (No. 3:18-cv-02599), alleges that throughout the Class Period, defendants made false and/or misleading statements when they stated that Lending Club customers would receive a loan with “no hidden fees.” On April 25, 2018, the Federal Trade Commission (“FTC”) filed a complaint alleging that Lending Club knowingly charged consumers hidden fees, contrary to their public disclosures.

The FTC Shines the Light on Hidden Fees and Hidden Disclosures: A Cautionary Tale for Advertisers (the National Law Review) Rated: AAA

Lending Club was fully aware that thousands of consumers applied for loans with no knowledge of the obscure origination fee. In fact, Lending Club received “[a]t least tens of thousands”12 of complaints directly from consumers about the hidden fees.  Indeed, Lending Club’s own training materials for customer service representatives listed “I didn’t receive the full loan amount” as one of the two most common complaints that representatives were trained to address.13 Consumers “frequently complained that they only discovered the fee after [Lending Club] disbursed their loan proceeds, when they noticed that the amounts disbursed were smaller than they were expecting.”14 Once consumers became aware of the fee, many elected to cancel their loans, often “preferring a loan from a competitor or no loan at all.”15

KBRA Assigns Preliminary Ratings to Marlette Funding Trust 2018-2 (Business Wire) Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Marlette Funding Trust 2018-2 (MFT 2018-2). This is a $310.1 million consumer loan ABS transaction.

Preliminary Ratings Assigned: Marlette Funding Trust 2018-2

Class Preliminary Rating Class Principal
A AA (sf) $216,125,000
B A (sf) $45,592,000
C BBB- (sf) $48,375,000

Square Announces First Quarter 2018 Results (SquareUp) Rated: AAA

Square, Inc. (NYSE: SQ) has posted its financial results for the first quarter of 2018 on the Financial Information section of its Investor Relations website at square.com/investors.

From the shareholder letter:

We continue to accelerate growth at scale, expanding our ecosystem for sellers and individuals. In the first quarter of 2018, total net revenue was $669 million, up 45% year over year, and Adjusted Revenue was $307 million, up 51% year over year. This is an increase from the fourth quarter of 2017, when total net revenue and Adjusted Revenue grew 36% and 47%, respectively, year over year. Gross Payment Volume (GPV) was $17.8 billion, up 31% year over year. Net loss in the first quarter was $24 million, which is an increase of $9 million from a net loss of $15 million in the first quarter of 2017. Adjusted EBITDA was $36 million in the first quarter of 2018, compared to $27 million in the first quarter of 2017. We achieved an Adjusted EBITDA margin of 12%, which reflects our reinvestment in the business to drive long-term growth.

Source: SquareUp.com

Read the full shareholder letter here.

Goldman CEO pledges caution in consumer lending (Financial Times) Rated: A

Goldman’s Marcus has scaled extraordinarily fast having provided $2.4 billion in consumer loans; some analysts have expressed concerns on the credit quality of the loans Marcus has been making; Blankfein on Wednesday noted that a poor credit environment could bring new risks but he isn’t concerned with their timing into the market; the bank has a long-term view on their consumer focused business and believes they can manage it through the ups and downs.

Trusted Key Solutions Raises $ 3M in Seed Funding (Lend Academy) Rated: A

Trusted Key Solutions Inc., a Seattle, WA-based blockchain-based secure digital identity company, raised $3m as part of a seed funding round.

The round was led by Founders Co-Op, with participation from Pithia, Inc., the venture capital company of The RChain Cooperative.

 

Private Lenders Eye Graduate Loan Market (Inside Higher Ed) Rated: A

Private lenders hold just a fraction of the outstanding student loan debt in the U.S. — about 7.7 percent as of last year. But those companies have plans to grow their student loan holdings.

The PROSPER Act, House Republicans’ opening bid to update the Higher Education Act, would raise undergraduate lending limits and add new annual limits for graduate student borrowing. Those students would have their total annual borrowing capped at $28,500 annually. Currently, graduate students can borrow up to the cost of attendance.

Graduate loans also offer a higher loan volume for private lenders. As Quinlan noted to investors, grad students make up 16 percent of the borrower market but hold 40 percent of student loan debt. So the average borrower holds more debt, they’re older, and they’re better educated, too, making it more likely that they will pay off their loan.

Promise Financial No Longer Offers Personal Loans (Student Loan Hero) Rated: A

The recent end of Promise Financial personal loans leaves brides- and grooms-to-be with one less borrowing option. The company, which focused solely on financing weddings through unsecured personal loans, stopped funding new loans in January 2017, reported Bloomberg.

Group aims to form first new bank in Mass. in decade (American Banker) Rated: A

A group in Springfield, Mass., has applied to form a new bank. The group hopes to raise $25 million to $30 million in initial capital. If it opens, Green Apple would become the first new bank in Massachusetts since 2008, according to the state’s Office of Consumer Affairs and Business Regulation.

The application notes that Green Apple, which aims to open by the end of this year, would focus on small-business banking, commercial real estate lending, personal banking, renewable energy, local agriculture businesses and the food security sector.

Confessions of a former trader: Incentives at banks are misaligned (Tear Sheet) Rated: A

Banks like to call themselves technology companies. And most large ones are currently focused on fighting — and winning — the war for talent against Silicon Valley.

The problem is, they have issues when it comes to incentivizing their many tech employees to create great products.

Big tech firms have a plan…do you? (CU Insights) Rated: A

Credit unions aren’t paving the way.  Nor are they pioneering the ability to serve the underbanked.  Seriously.  Many are doing great things, that’s for sure, yet the fundamental change is originating from tech firms.  And they’re not doing it alone (more on that later).

4 Facts You Need to Know About Personal Loan APRs (Student Loan Hero) Rated: A

Although CreditCards.com lists the national average APR on a credit card at 16.38% as of January 2018, the rates on three-year unsecured loans are only 9.22% for credit unions and 10.09% for banks as of March 2018, according to the National Credit Union Association.

An online lender might provide an even lower personal loan APR, with FreedomPlus offering rates starting at 4.99% and SoFi at 5.37%.

Virginia sues, accusing major online lender of violating consumer protection laws (Daily Press) Rated: A

Virginia alleges one of the nation’s largest online lenders made more than $47 million of illegal, high-interest-rate loans that put Virginians on the hook for tens of millions of dollars in interest and fees.

The state is suing Net Credit, which sells personal loans for up to $10,000 and charges interest rates of as much as 155 percent, for violating the state’s consumer protection laws.

The lawsuit also alleges that Net Credit has lied to Virginians about the legality of its loan terms and that it has continued to automatically debit money from customers’ bank accounts after they’ve filed bankruptcy and won a court-ordered freeze on debt collections.

Online Lending Policy Institute (OLPI) And Benzinga Partner For The 2018 BZ Awards Gala in NYC (Benzinga) Rated: B

The Online Lending Policy Institute (OLPI) today announced that it will partner with Detroit-based financial media outlet Benzinga for the Benzinga Global Fintech Awards Gala (BZ Awards) in NYC on May 15, 2018.

United Kingdom

 

European Investment Fund and KfW back Funding Circle securitisation (Peer2Peer Finance) Rated: AAA

FUNDING Circle’s latest securitisation has been priced at a tighter spread than its first with backers including the European Investment Fund (EIF) and German development bank KfW.

The £207m portfolio is issued by investment trust P2P Global Investments and has been priced at 75 basis points, compared with 220 basis points on the tranches issued in 2016.

NatWest outlines plans to grow digital lending offshoot Esme (Finextra) Rated: A

NatWest has outlined plans to scale and grow its digital lending platform Esme Loans following a successful pilot phase.

Esme Loans was developed by the bank at its innovation unit with fintech firm Ezbob as a direct response to the emergence of specialist direct and P2P lending platforms.

Overfunding: Real Estate Source Platform Infabode Secures £750,000 Funding Target on Seedrs (Crowdfund Insider) Rated: A

Real estate source platform, Infabode, has successfully secured its initial £750,000 funding target on equity crowdfunding platform Seedrs from more than 150 investors. Founded in 2013, Infabode reported that it connects its community of users with industry information from the real estate sector on one customizable online platform. Infabode’s platform has more than 450 content providers and over 17,000 members.

Financial inclusion in the rich world (The Economist) Rated: AAA

The council identifies only 36% of the population as “white British”. Dalston Junction, a now-trendy part of the borough, buzzes with a down-at-heel sort of cosmopolitanism: a Caribbean bakery; the Halal Dixy Chicken shop; the Afro World wig-and-extensions parlour; dozens of outlets for Lycamobile (“call the world for less”) and for money-transfer firms.

Competing with this last group is a branch of Oakam, a British lender set up in 2006. It advertises itself as an “alternative to doorstep lenders”, the traditional financiers for those beneath the bar set by mainstream banks. Originally aimed at recent immigrants, it extended its reach to the rest of those “lacking access to basic financial services”—a group it puts at 12m across Britain. A report published in March 2017 by a House of Lords committee estimated that 1.7m adult British residents have no bank account; 40% of the working-age population have less than £100 ($140) in cash savings; and 31% show signs of financial distress.

Profits jump 86% at City broker Numis on M&A advice boom (Financial Times) Rated: A

Revenues jumped 41 per cent in the six months ending in March to £74.1m compared with £52.4m over the same period of the prior year. Pre-tax profits rose 86 per cent to £19.5m.

Corporate broking and advisory revenues were up 76 per cent year on year to £50.9m, boosted in part by a growth in fees from M&A advisory work, a growing sector for some City brokers. However this compared with a weak comparative period, and fell 10 per cent below a record performance in the second half of last year.

Majority of savers misunderstand benefits of IFISAs (Global Banking and Finance) Rated: A

61% of UK savers acknowledge possibility of higher returns and better interest rates with IFISAs, but majority still don’t understand the service 

Over a third (36%) of UK savers would place their money in an IFISA if they had the money available.

While a large proportion acknowledge the prospect of higher returns (61%) alongside the allure of the tax-free wrapper and greater diversification, the IFISA is still a hard sell, according to research undertaken by P2P lending service ArchOver. In truth, the majority of UK savers (57%) still don’t fully understand the service.

 

European Union

Klarna escalates its war on banks with a new consumer app – and upcoming payment card (Business Insider) Rated: AAA

  • The $2,5 billion e-invoicing company is today launching its first pure consumer app, which gives users an overview of their Klarna transactions in addition to a host of other features.
  • It’s essentially a remake of Klarna’s existing app and serves as a meeting place between merchants and their end customers.
  • The app is first rolled out across the Nordics and continental Europe, with UK and US launches planned for later this year.

Zopa’s Giles Andrews named Kreditech advisory board chairman (Peer2Peer Finance) Rated: A

ZOPA co-founder Giles Andrews OBE has been named as chairman of German alternative consumer lender Kreditech’s advisory board.

The fintech firm provides loans and credit cards for the under-banked and those with poor or little credit history and operates in Mexico, Spain, Czech Republic, Poland and Russia.

International

Fintech funding hits $ 127bn (AltFiNews) Rated: AAA

More than $127bn has been invested in fintech companies globally since 2014, with funding topping $40bn last year, according to data gathered by Fintech Global.

Last year this number declined to just over 1800 but with an increased in the average deal size to $22.4m in 2017.

Source: AltFiNews; Fintech Global

 

RCN launches Ripio engine to bring blockchain and smart contracts to loans (Venture Beat) Rated: A

Ripio Credit Network (RCN) — a global credit network based on cosigned smart contracts — has released an entirely new version of its NanoLoanEngine, the driving mechanism behind its protocol. The upgrade, which is called Basalt, includes significant improvements that will offer lenders and borrowers more flexibility. The company also claims that the new engine lowers costs.

Basalt changes how interest is applied to the network’s loans and eliminates nearly all maintenance fees associated with those transactions.

 

HOLD Platform plans on surpassing SALT as a “Crypto as a Collateral for a Cash Advance” (Tech Newsletter) Rated: A

What HOLD (HOLD) allows you to do is simple, if you don’t want to sell your crypto or you want to “HODL” but at the same time you need cash, then HOLD is the platform for you. By creating an escrow that will lock up your funds as a collateral, HOLD will then send you a credit card of that amount in fiat, which means that you can have liquidity without selling your crypto assets.

How HOLD (HOLD) can have major advantages over SALT

What you might be thinking is that SALT already provides these types of services but the major advantage of HOLD platform is the almost instant credit card that will be issued for you to use in any store making adoption of crypto as payment a closer reality. This is a very important middle step towards businesses accepting crypto as payment.

Hellas Direct and Revolut Join Forces (Coverager) Rated: B

Athens-based digital-first insurer Hellas Direct  has teamed up with banking alternative Revolut  to build “microinsurance, by-the-day products.”

Also, according to the press release, “the partnership will allow Revolut and Hellas Direct to push their offering into new markets and enable them to leapfrog some of the traditional barriers of growth and expansion by using the core competencies of each partner.

Profile Software ports core banking platform to the cloud (Finextra) Rated: B

Profile Software, an international, award-winning banking solutions provider, announced today that FMS.next, its leading Core Digital Banking platform, is now available in the cloud.

 

Australia

Major Bank Loses 12 Million Customers’ Data in the Most Embarrassing Way Possible (Gizmodo) Rated: A

BuzzFeed reports that the Commonwealth Bank lost 12 million customers’ data after magnetic tape backups containing their personal financial history from 2004 to 2014 went missing. It just lost them. They may have literally fallen off a truck. And the bank didn’t even bother telling its customers about the incident.

While said losing-of-data was only publicly revealed this week, it took place back in 2016, when the Commonwealth Bank hired a subcontractor to destroy the backup tapes while decommissioning a data center. After it didn’t get a receipt of the tapes’ destruction, the bank investigated and discovered that the tapes were nowhere to be found.

Cryptocurrency for the rest of us (PHYS.ORG) Rated: B

Enter Bamboo, a West Australian startup whose mission is to make a cryptocurrency investment platform for the rest of us.

Bamboo brings together two new ideas. One complicated (cryptocurrency) and one a bit more simple (microinvesting). As platform Raiz (previously Acorns Australia) describes on their site, microinvesting works by transferring “spare change automatically from everyday purchases into a diversified portfolio”. For example, if you were to buy a coffee for $4.80, Raiz would round the sale up to $5.00 and then invest the $0.20 for you.

India

OYE! Loans Receives $ 2.25 Mn in Funding from UK’s GAIN Credit (Indian Web 2) Rated: AAA

Noida-based OYE Fintech, which operates a consumer-focused lending platform called OYE! Loans, has raised $2.25 million (about ₹15 crore) from GAIN Credit, Inc. OYE! Loans currently serves new-to-credit and new-to-workforce consumers with simple, timely and affordable One Year EMI loans (hence the brand OYE!), with ticket-sizes ranging between 10K and 1L INR.

The company leverages alternative data to assess risk on customers who have thin or non-existent footprints on the credit bureau. The loan application to disbursal process is largely online, enabling for quick turn-around times of less than 2 business days – an attribute that has strengthened its growing reputation as a lender-of-choice within its target markets.

Bigger Gains (Business Today) Rated: A

Interest rates on bank deposits are at a decade low, and those on small savings schemes are close to a 40-year low. This has forced people to look for alternatives, one of which is peer-to-peer, or P2P, lending.

 

 

Authors:

George Popescu
Allen Taylor

Monday April 30 2018, Daily News Digest

LendingClub

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

LendingClub

News Comments

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United States

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

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

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

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

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

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

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

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

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

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

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

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

 

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

The IRS does allow 

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

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

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

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

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

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

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

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

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

In this podcast you will learn:

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

 

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

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

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

Mastercard Meets Elevate

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

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

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

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

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

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

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

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

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

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

 

 

United Kingdom

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

China

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

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

Ant Financial Invests in Bangladesh-based Fintech Startup bKash

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

NIFA Establishes e-Contract Standards for Online Lending

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

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

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

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

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

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

European Union

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

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

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

International

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

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

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

Dueling Unicorns

Source: PeerIQ, Company Websites, Crunchbase

FTC vs LendingClub

On Wednesday, the FTC charged LendingClub with deceiving borrowers.

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

Source: LendingClub

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

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

In just three years, Germany’s 

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

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

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

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

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

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

Australia

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

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

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

 

India

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

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

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

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

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

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

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

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

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

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

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

 

Latin American

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

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

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

Authors:

George Popescu
Allen Taylor

Wednesday February 15 2017, Daily News Digest

sme trump president

News Comments Today’s main news: Lending Club originations up 1% in Q4 from Q3 2016, down by 23% against Q4 2015. Today’s main analysis: Lendio survey says SMBs split on the perception of Trump presidency. Today’s thought-provoking articles: Former FICO chief joins XOR Data Exchange. FCA says the distinction between advice and guidance is ‘grayer’. China outpaces […]

sme trump president

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United States

Lending Club Reports Fourth Quarter and Full Year 2016 Results (PR Newswire), Rated: AAA

Lending Club (NYSE: LC), the world’s largest online marketplace connecting borrowers and investors, today announced financial results for the fourth quarter and full year ended December 31, 2016, and provided guidance for the first quarter and full year 2017.

Key accomplishments in the fourth quarter across the Lending Club platform include:

  • Achieved targeted originations of nearly $2 billion, up 1% compared to third quarter 2016
  • Continued the company’s lead as the largest personal loan provider in the U.S. with a borrower base of over 1.8 million individuals
  • Lending Club has now facilitated nearly $25 billion in loans since inception

Other developments

  • Ended the year with a servicing portfolio of $11.1 billion, up 24% from the same period last year and delivering $1.8 billion of principal and interest payments to investors throughout the quarter
  • Ended 2016 with cash, cash equivalents and securities available for sale totaling $803 million, with no outstanding debt

Originations – Loan originations in the fourth quarter of 2016 were $1.99 billion, up 1% compared to the $1.97 billion we reported in the third quarter of 2016 and down 23% compared to $2.58 billion in the same quarter last year.

New Lendio Survey: Perception of Trump Presidency Split Among Small Businesses (Benzinga), Rated: AAA

Lendio, the nation’s leading marketplace for small business loans, today announced the results of a new survey showing that small business owners’ perception of a Trump presidency is split, with 56 percent of small business owners believing the economy will be worse or the same at the close of Trump’s first term.

The survey of over 330 U.S. small businesses with under 250 employees found that only 27 percent approve of Trump’s performance so far. More specifically, small business owners believe Trump’s recent executive order on business regulations requiring federal agencies to cut two existing regulations for every new one will help their business. According to the survey, 41 percent believe it will help, 28 percent believe it won’t help and 31 percent were neutral.

Despite the majority having a negative economic outlook, small business owners are still optimistic about the state of their own businesses. Forty percent of small business owners believe the Trump presidency will have a positive impact on their business, 33 percent believe it will have a negative impact, and 27 percent are neutral.

To view the full survey results, visit

Source:

Former FICO chief joins XOR Data Exchange as investor and board strategist (XOR), Rated: A

Larry Rosenberger, former CEO of Fair Isaac Corporation (FICO) and current research fellow, has joined Austin-based Data as a Service (DaaS) provider XOR Data Exchange as an investor and board observer. Rosenberger’s experience and expertise in implementing data and analytical models for the financial services industry is expected to help the FinTech startup continue rapid growth, development and adoption of fraud risk models to protect consumers and businesses from identity theft and data misuse.

The addition comes as part of XOR’s latest funding round, a $2 million extension of its Series A investment, which closed at the start of February. In a press statement, XOR Founder and CEO Mike Cook stated the funding will be used to expand XOR’s fraud and credit risk models nationally.

Rosenberger is well known across the FinTech and financial services industries for his leadership of FICO between 1991 and 1999, during which time FICO credit scores were made available to all three major U.S. credit reporting agencies and adopted as standards by Fannie Mae and Freddie Mac for mortgage lending evaluation. Those scores remain the gold standard in credit risk used by banks, lenders and service providers nationally and abroad. Since his tenure as CEO, Rosenberger led FICO’s research and development efforts for another eight-year stint before taking on his current role as research fellow.

Fundrise’s Low-Fee Crowdfunding ‘iPO’ (Investopedia), Rated: A

Last week Rise Companies Corporation, the owner of the popular real estate crowdfunding platform Fundrise, successfully raised over $14 million in an online equity offering to investors that they are referring to as an Internet Public Offering or “iPO.” The offering, which was exclusively offered to current Fundrise investors, became oversubscribed by as much as 146% within 24 hours of becoming available.

According to Crowdfind Insider, Fundrise’s online offering is the largest one that the internet has seen to date. Previously, the record was held by a British crowdfunding platform by the name of Crowdcube. Last year, Crowdcube raised over £8 million (USD$10 million).

On Deck Capital says unit amended its existing asset-backed revolving debt facility (Reuters), Rated: A

* On Deck Capital – the facility amendment provides for an increase in lenders’ revolving commitment from an aggregate amount of $100 million to $150 million

FTC sends 2016 ECOA report to CFPB (JDSupra), Rated: A

The FTC has sent its annual letter to the CFPB reporting on the FTC’s activities related to compliance with the Equal Credit Opportunity Act and Regulation B.

The FTC has authority to enforce the ECOA and Reg B as to nonbank providers within its jurisdiction.

With respect to research and policy development, the letter discusses the following initiatives:

  • Auto survey.  In December 2015, the FTC published a notice in the Federal Register seeking comments on its plans to conduct a survey of consumers regarding their experiences in buying and financing automobiles at dealerships.
  • Big data report.  In January 2016, the FTC issued a report warning that certain uses of big data consisting of consumer information may implicate various federal consumer protection laws.  The report focused on big data’s impact on low-income and underserved populations and protected groups and discussed the potential applicability of various laws, including the ECOA, to big data practices and provided a list of ”questions for legal compliance” for companies to consider in light of these laws.
  • Fintech forum.  In June 2016, the FTC launched a series of forums exploring emerging financial technology and its implications for consumers.  The first forum focused on marketplace lending and examined how marketplace lending operates, potential consumer benefits, consumer protection issues, and the potential applicability of various consumer protection laws.
  • Report on fraud in African American and Latino communities.
  • Interagency fair lending task force. 

PeerStreet: Enabling Real Estate Investors To Reach Previously Inaccessible Asset Classes (Benzinga), Rated: B

PeerStreet is a true marketplace, and the company serves several customer bases. At a high-level, there are investors and lenders; PeerStreet investors participate in pieces of loans made available on the platform. They typically include individual accredited investors, RIAs and funds.

There are also institutional investors interested in purchasing loans from PeerStreet. Lenders are PeerStreet’s supply source and this group consists of private lenders across the country financing single-family residential fix-and-flip, buy-to-rent and commercial properties.

Altisource Continues to Expand Client Base and Enhance Product Lines to Meet the Needs of Servicers (Altisource), Rated: B

Altisource Portfolio Solutions S.A. (“Altisource”) (NASDAQ: ASPS), a leading provider of real estate, mortgage and technology services, today announced a specialized Federal Housing Authority (FHA) offering, taking advantage of its end-to-end product suite to assist in improving controls and mitigating risk throughout the lifecycle of servicing an FHA asset.

FHA loans represent a growing share of many Servicers’ portfolios and require specialized processes to comply with complex servicing guidance. The Altisource FHA offering provides servicers the ability to help reduce timelines and increase efficiencies with transparency through a customizable approach. From integrated field services, title services and property repairs to Claims Without Conveyance of Title (CWCOT) Auction Services, the complete suite of products is backed by the power of proprietary data and analytics to help further reduce risk and cost for Servicers.

United Kingdom

FCA: distinction between advice and guidance becoming ‘greyer’ (Citywire), Rated: AAA

New technology means it is becoming harder to set a distinction between advice and guidance, according to Financial Conduct Authority (FCA) chairman John Griffith-Jones.

Speaking at a conference in Cambridge, Griffith-Jones (pictured) said the regulator needed to consider its definitions to keep pace with changes in the market.

‘Rules that were designed for the paperwork era do not work necessarily for the online one. The distinction between advice and guidance, once reasonably clear, has become much greyer with the advent of platforms and the potential of robo-advice,’ he said.

China

China FinTech Booms as Mobile Payments Outpace US by 50x (Cryptocoins News), Rated: AAA

New research has shown that Chinese mobile payments were around 50 times greater than those within the U.S. in 2016, thus illustrating that China’s FinTech market is a strong contender in the market.

Research from iResearch in China has found that Chinese third-party mobile payments more than tripled in 2016 to $5.5 trillion. WeChat Pay and Alipay, operated by Ant Financial, dominated the market. Recent research found that Alipay received the biggest investment in 2016 at $4.5 billion as FinTech funding increased in China.

Whereas, in the U.S., mobile payments increased by 39 percent to $112 billion, according to Forrester Research.

The FinTech market in China is reportedly dominated by two major markets: payments/remittances and insurance. In a December report, it stated that 40 percent of banking services customers rely on FinTech platforms and applications to settle domestic and international payments. A further 35 percent of bank customers are reported to employ smart artificial intelligence FinTech services to handle insurance needs.

The growth of Chinese mobile payments has increased due to the rise in online shopping as the improvement of online financial services.

Asia

Thailand’s Largest Bank to Launch New FinTech Platform (Cryptocoins News), Rated: AAA

Thailand’s largest bank by revenue, Kasikornbank Pcl, has unveiled that it is planning to introduce a new FinTech platform by the end of the year as it attempts to prevent fee income from its rival banks.

According to information from the Bank of Thailand, Thai mobile and Internet banking transactions increased by 26 percent between April and September in 2016.

At the end of last month, a new report came out that illustrated that there will be a sweeping adoption of blockchain technology in a number of areas including finance within Thailand by 2018.

In the past, Thailand has been averse to the adoption of bitcoin. So much so, that the Bank of Thailand has issued several statements as to their feelings on the digital currency.

Yet, while the bank has certainly taken a cautionary view of the currency in the past, it seems that the country is keen to embrace its underlying distributed ledger, the blockchain.

OJK Disseminates Regulations on Fintech and Pawnshop (Tempo.co), Rated: B

The Financial Services Authority (OJK) disseminated two regulations on financial technology lending services and on pawnshops on Tuesday, February 14, 2017.

OJK deputy commissioner for non-banking supervision Dumoly F. Pardede, said that the OJK supports the development of financial technology (Fintech) lending services in Indonesia.

OJK hoped that Fintech peer-to-peer (P2P) lending providers would harmonize and accelerate distribution of funds to micro, small and medium enterprises (UMKM) across the country. The P2P lending is a Fintech product that connects micro business owners with investors.

Middle East

Arab Financial Services to Host First Annual Middle East & Africa Fintech Forum (Crowdfund Insider), Rated: AAA

Payment processing company Arab Financial Services is set to host the first annual Middle East and Africa Fintech Forum. This year’s theme is “Fintech Disruption in the Financial Industry.”

According to Trade Arabia, the event is being sponsored by Bank ABC and Bahrain Economic Development Board (EDB). It will feature various topics, including latest fintech trends and discuss the challenges and opportunities in the fintech sector. The event’s participants will include government officials, regulators, professions and industry experts.

Authors:

George Popescu
Allen Taylor

Friday October 28 2016, Daily News Digest

lending club auto refinancing

News Comments Today’s main news: The FTC explores the future of FinTech, P2P payments. Today’s main analysis : Can P2P lending be saved by auto refinancing? Why investment trusts are back into fashion. Today’s thought-provoking articles: What happens when Millennials are denied credit. Chinese shadow lending takes over the economy. Worldwide, corporate treasurers are increasing FinTech investments. United […]

lending club auto refinancing

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United States

FTC Forum Explores the Future of FinTech, Peer-to-Peer Payments (InsideARM), Rated: AAA

Yesterday the Federal Trade Commission (FTC) hosted a forum – the second in its FinTech series – on peer-to-peer payment systems.

The forum panel discussion was labeled: Peer-to-Peer Payments – Their Emergence and Path Ahead. Participating in the panel were the following individuals: Jo Ann Barefoot, Matt Van Buskirk, Beth Chun, Patrick Eagan-Van Meter, Brian Peters, Duane Pozza, and Christina Tetreault. Their bios and backgrounds can be found on the FTC website for the forum.

Though the event was produced by the FTC, not the Consumer Financial Protection Bureau (CFPB), it has become abundantly clear through rulemaking proposals to date (both at the CFPB and state and levels) that technology advancements are going to be essential to the success of those organizations that engage in debt collection (whether creditor, agency, law firm, or debt buyer). Those who run sophisticated companies need to engage in regular research and education about current developments in FinTech.

After initial introductions the panel discussed the benefits of peer-to-peer payment systems to the consumer. The benefits identified included:

  1. Affordability
  2. Accessibility
  3. Speed of transactions
  4. Security

Members of the panel all agreed that the consumer’s cost to use these payment systems was a significant benefit. They discussed how historically, it was very expensive for a consumer to use services such as Western Union or MoneyGram or to use some expedited mail or delivery service to send funds quickly.  Several panel members highlighted how speed of a transaction was critical to the underserved or underbanked segment of the population. These products can process a transaction in seconds.

The panel members also discussed who was currently using these products. To the surprise of nobody, Millennials are currently the largest market segment.

The discussion then moved to how the products were being utilized. Currently 3 types of use were the most predominant; gifts, bill payments, and entertainment. These 3 categories were well over 90% of total usage.

The group then moved onto a discussion of legal issues surrounding the products. The most obvious concern, money laundering, actually had only a token mention from the group.

The biggest legal issue facing the developers of these products was –  to no surprise, the various state and federal consumer protection statutes, with particular emphasis on state Deceptive Trade Practices.

The reason consumer protection statutes were of such concern was a simple statement made during the discussion: “The consumers that use these products may be very tech savvy, but they also tend to be very unsophisticated.”

The panel next turned its attention to some of the risks in this market.  The risk of fraud exists on three fronts. First, international criminal and sophisticated hackers have and are likely to continue targeting companies in this space. That creates exposure. Second, as many of these products are utilized on a handheld device (i.e. a smartphone) the risk of fraud exists if that device is not secure and is lost or stolen. Third, old scams that have existed forever have simply moved their scam to this new platform. A scam that previously involved a stolen checkbook and forged signature has just moved from paper to the digital world.

Could This .2 Trillion Industry Save LendingClub? (The Motley Fool), Rated: AAA

Top peer-to-peer lender LendingClub (NYSE:LC) hasn’t exactly delivered great performance to its stockholders in its short history as a publicly traded company. In an effort to grow the company’s customer base, LendingClub recently announced that it intends to get into a booming $1.2 trillion industry: auto lending.

Since going public in Dec. 2014 for $15 per share, LendingClub’s stock has lost more than two-thirds of its value. The main reason for the decline is a lending scandal that led to CEO Renaud Leplanche’s departure, but there have been questions about the long-term viability of the peer-to-peer lending business for some time now.

In order to refinance through LendingClub, applicants will need to meet the following qualifications:

  • FICO credit score of at least 640.
  • At least three consecutive on-time payments must have been made on the current loan.
  • Vehicle must be less than seven years old and have less than 80,000 miles.

Loans will come with interest rates ranging from 2.49% to 19.99%, depending on the borrower’s qualifications. It’s fair to assume that a borderline applicant (credit score just over 640, a few late vehicle payments, and a vehicle that barely meets the standards) would fall on the upper end of the range. However, since the average car loan has an interest rate between 4% and 5% depending on the terms, I’m assuming that the majority of refinancers will be toward the lower end, if LendingClub’s savings claim is accurate.

There is approximately $1.2 trillion in outstanding auto debt in the United States, and only about $40 billion of that, or 3.3%, is refinanced every year, so there’s clearly a large market to be addressed. In fact, LendingClub believes that the refinancing volume could double if the process were a little easier. In other words, there is an immediately addressable market for an easy-to-use auto loan refinancing platform.

Eve Picker, Founder of Real Estate Platform Small Change, Shares Insight into Reg CF Approval (Crowdfund Insider), Rated: A

Pittsburgh-based Small Change was approved as a Reg CF funding portal by FINRA, an approval the platform believes to be a first for a real estate funding portal.  Small Change is a real estate crowdfunding platform launched by urban evangelist Eve Picker targeting “transformational” real estate projects by connecting developers with investors.

Pittsburgh-based Small Change was approved as a Reg CF funding portal by FINRA, an approval the platform believes to be a first for a real estate funding portal.  Small Change is a real estate crowdfunding platform launched by urban evangelist Eve Picker targeting “transformational” real estate projects by connecting developers with investors.

Picker has developed dozens of buildings in blighted neighborhoods around the city (through companies no wall productions and we do property management), founded a non-profit called cityLAB, built Pittsburgh’s first tiny house, organized a speaker series and a creative school, launched a Pittsburgh e-zine called Pop City, and established downtown Pittsburgh’s first co-working space.

Eve: We don’t believe we can make Reg Crowdfunding work, we KNOW we can make it work. Real estate has proven itself to be a frontrunner when it comes to crowdfunding investment opportunities.  We are certain that this will play out for Regulation Crowdfunding as well. Funding portals are going to provide a very necessary, and highly desirable financing tool for the right sort of projects.  And everyday investors are going to be excited to invest both locally and nationally in projects they are interested in. That’s a perfect match.

Eve: We’ve nearly 8000 followers across the country, growing at 20% per quarter through all of our communications channels, and out of those, we’ve heard from a quite a few real estate developers looking at this as a tool to catalyze projects – and we anticipate hearing from many more. Developers are attracted to our mission of making cities better and offering people the opportunity to directly participate.

Eve: Regulation CF is a thoughtful first foray into the world of securities for everyone – it is altogether groundbreaking. While there may be some shortcomings, there is plenty to work with immediately and that is evidenced by the funding portals that already have a plethora of offerings available.

Eve: We’ve heard the complaints loud and clear, but there is plenty to work with today. We think Reg CF is a great start.  The SEC intended for the first three years to be a trial run so we are going to use the time for that – a trial run!  We’re going to take it slow and steady, and inch into bigger raises.  There is plenty to understand and plenty to get efficient at before we want or need to offer a $5M raise.  Today, we can already let everyone over the age of 18  participate in a completely new way of investing. And we can help developers tap into a completely new pool of investor funds.

Fintech Apptrade’s ‘Stockmarket Of Apps’ Lures Crowdfund Investors (Forbes), Rated: A

Apptrade, a US start-up based in California, has revealed to potential investors attending the CoinAgenda bitcoin and cryptocurrency conference in Las Vegas that is creating and cooking up what the fledgling fintech describes as the ‘Stockmarket of Apps’, complete with “regulatory tools and compliance” mechanisms.

The aim of Apptrade is to create what is touted as a ‘Stockmarket of Apps’, whereby developers can raise money with “regulation-compliant” blockchain tokens. Investors will be able to trade these assets, backed by app revenue streams, on the ecosystem of OpenLedger, a decentralized conglomerate(DC).

The start-up will offer its own token for their ICO, which entitles investors to 10% of the net market value and revenue of the Apptrade portfolio ecosystem.

FTC Hears From Company Leaders as Crowdfunding Grows (Corporate Counsel), Rated: A

Investors poured $22.3 billion into fintech startups around the world in 2015, up 75 percent from the year before, according to the Information Technology & Innovation Foundation.The industry has been hailed for its potential to help communities that are underserved by traditional lending institutions.

But fintech has also attracted scam artists interested in a new mode to prey on consumers. And it’s raised questions about where to—and who should—draw the line between a self-stated developer who clearly never intended to spend donated funds on a promised project and a dreamer whose plans just never panned out. Industry oversight remains a fuzzy area for regulators, with states’ attorneys general, the IRS, the U.S. Securities and Exchange Commission and the FTC having roles in various areas. The FTC is holding a series of public panels on the topic, including Wednesday’s meeting in Washington, D.C.

The industry has urged regulators to take a targeted and light touch with any new rules.

Debunking Millennial Myths (ID Analytics), Rated: A

ID Analytics’ research shows that the most common consequence for an enterprise declining a millennial applicant is that the consumer walks away for at least a year—both from the enterprise and from credit/ service seeking altogether.

Over 6 out of 10 declined millennials are not seen applying again within the ID Network that year—for anything. Of the millennials who continue to apply, only 2 out of 10 continue to seek the same service, with 8 of 10 seeking an entirely different product or service.

While the impact of declining credit to millennial consumers is harmful to the longterm success of entire industries, common questions are, “How often are they actually being declined?”, and “is the issue confined to young millennials”? To answer these questions, ID Analytics segmented millennials into three age groups and measured how often they were declined for credit in a given year.

The recommended path forward is safe engagement of this burgeoning demographic—an approach which requires thoughtful strategies and an expanded view of applicant credit risk which goes beyond traditional credit bureaus. One way to accomplish this is leveraging alternative credit data solutions like ID Analytics’ Credit Optics, which captures fundamental millennial credit behaviors that are missing from most credit scores. It offers risk managers a way to identify “low score” and “no score” consumers of acceptable risk, and break through the myths dragging down the competition.

United Kingdom

Investment trusts come back into fashion (Financial Times), Rated: AAA

It is no coincidence that as part of his fightback against the asset management “system”, Daniel Godfrey — the ousted chief executive of the UK’s asset management trade body — will launch an investment trust.

Years of quantitative easing and the prospect of rising inflation have boosted the appeal of infrastructure and property, and investment trusts have provided a liquid wrapper for these sectors. Numis, the broker, estimates that 80 per cent of investment trust share issuances in the three years have been in alternative asset classes — including property, private equity, infrastructure, asset-backed leasing and peer-to-peer lending.

Although questions about the quality of the underlying credit-writing remain, the asset class has so far delivered good returns to those investing directly in the loans, — its total return over 3 years has been of 15.86 per cent, according to the Liberum Altfi Index. For investors who are prepared to stomach the risks, the remaining catch is the illiquidity — but this is where investment trusts have stepped in. While no asset manager has invested in peer-to-peer loans directly, plenty have bought shares in the investment trusts. Asset managers including BlackRock, Invesco Perpetual, BNY Mellon and Baillie Gifford have all bought shares in the handful of investment trusts buying peer-to-peer loans.

Another criticism of peer-to-peer lenders is that — for the most part — they do not actually do any lending. Some argue that without so-called “skin in the game”, the lenders are not incentivised to make sure the loan is good.

Is Fintech Being Wooed Away from the UK? (Tech UK), Rated: A

It is no secret that various European governments have seen the UK’s decision to opt for Brexit as an opportunity to lure businesses away from London and to the continent. Bespoke marketing campaigns with offers of tailored assistance directed at UK firms could well accelerate the flight of capital, talent and business following the vote.

The sweeteners on offer could be highly tempting for financial services firms and fintechs, which fear the loss of their ‘passporting’ rights. Current rules mean that any company which is given a licence to conduct regulated activities by UK authorities can, ipso facto, conduct such activity anywhere in the EU without the need for further regulatory authority and without having to establish a base elsewhere. The loss of these rights could significantly damage the UK’s status as a gateway to Europe for big international financial service firms.

Despite the uncertainty surrounding the UK’s financial passporting status and the need in future to reconcile competing data regimes, the UK Government remains steadfast in its optimistic outlook for the UK’s burgeoning fintech industry and related sectors.

P2P lender secures multi-million-pound investment (Bridging & Commercial), Rated: B

Peer-to-peer (P2P) platform LendingCrowd has secured a £2.75m investment from the Scottish Investment Bank (SIB).

The investment is the SIB’s first venture into the alternative finance market and is expected to stimulate loans of up to £35m to Scottish small- and medium-sized enterprises (SMEs).

Borrowers will apply for loans of between £5,000 and £250,000 over terms ranging from six months to five years.

Zopa Announces Zopathon16 Challenge (Crowdfund Insider), Rated: B

Earlier this week, peer-to-peer lender Zopa announced it will be hosting Zopathon16, which is described as a 24-hour opportunity to developers, product people, and designers to present their fintech ideas.

The event will be held on November 18th-19th on the first floor of the Cottons Center in London. The 18th’s schedule is:

  • 5-6pm: Introduction and Inspiration (APIs etc) 
  • 6-7pm:  Meet your team, brainstorming and dinner
  • 7-8pm: Pitching ideas 
  • 8pm onwards: All hands on deck

On the 19th presentations and prizes will happen from 5 to 7pm. To register for the event, click here

European Union

Swedish fintech startup: Norwegian banks are blocking us (Business Insider Nordic), Rated: A

A fintech revolution is sweeping across Scandinavia. People are downloading apps to send money, pay without credit cards and to structure their finance management.

The Swedish fintech company Trustly, founded in 2008, is offering payments online without the use of a credit card. According to the Swedish news paper Dagens Industri Trustly has been partially blocked in Norway by some elements in the banking sector.

Trustly’s troubles in Norway started already in 2014, when they launched in the country. According to the CEO of Trustly, an important certficate for verification, Bank-id, was revoked for those who used Trustly.

Things have gotten so bad that Trustly has fielded a complaint with the Norwegian competition authority.

Fintech: Blockchain And Artificial Intelligence Startups Are Flocking To HEC Paris — Here’s Why (Business Because), Rated: A

Few topics get business schoolers’ pulses racing like financial technology — from blockchain and cryptocurrencies to artificial intelligence, the fintech revolution has already made its way into a suite of MBA degrees.

And according to one top French business school, fintech start-ups like TransferWise or GoCardless now vie with investment banks and traditional financial services companies for digitally skilled, entrepreneurial recruits.

Spreadsheet-savvy MBAs may not seem like the type for fast-paced tech firms, but their growing appetite for MBAs was on full display at HEC Paris’ second annual Fintech Talent Fair this month. From start-ups like Blockchain and PayinTech to larger financial institutions such as Bloomberg and BNP Paribas, companies representing the full fintech spectrum were out in force.

Why should business students consider a career in fintech?

For a lot of reasons actually. First, fintech is probably one of the hottest and most dynamic sectors in tech today. It’s attracting a lot of interest and funding. Second, working in fintech gives you the opportunity to have a real impact on the day to day life of a very large number of people. Lastly, fintech start-ups deal with a fairly complex environment and designing simple products in that environment is a real challenge, and therefore intellectually stimulating. It requires knowledge of a broad array of topics — perfect for business students.

Canada

Uberization of Mortgages Seen Withing 5 Years (Advisor.ca), Rated: A

Advisors may have the ability to offer clients direct online investing in mortgages within five years.

That’s the hope of Lending Loop chief executive Cato Pastoll, who expects peer-to-peer lending in Canada to expand quickly into consumer lending like mortgages after such an evolution of the sector in the U.K. and U.S.

In what’s been called the “Uberization” of lending, California’s Lending Club, the world’s biggest peer-to-peer lender, has plans to move into auto loans and mortgages after American online lender SoFi started offering residential mortgages about a year ago. U.K. peer-to-peer platform Landbay also allows retail and institutional investors to get into the country’s buy-to-let mortgage market.

CIBC partners with fintech innovator Borrowell to deliver “one-click” online loans (Newswire), Rated: A

In a move that changes the traditional process for applying for a loan, CIBC (TSX: CM) (NYSE: CM) announced today it is partnering with Borrowell to offer “one-click” online lending for clients. A first in Canada, the new partnership allows CIBC to leverage the fintech’s unique technology and underwriting approach to adjudicate loans for existing clients online in real time, with funds typically issued the next business day directly into a client’s CIBC account.

The technology allows clients to apply for a loan of up to $35K using a simplified application process, with the ability to securely upload documents online for verification. Future plans to extend the borrowing platform to a wider client base will be based on client experience feedback and input from this first phase.

Australia

Australian FinTech Firms Recognized as World Leaders in FinTech (Cryptocoins News), Rated: B

The annual FinTech 100 list has listed nine Australian FinTech companies among the world’s leaders in the sector, according to a report by StartupSmart, an Australian publication for the startup community.

Compiled by H2 Ventures and KPMG FinTech, it listed Prospa, Tyro, and Society One within the top 50 established leaders category, and HashChing, Afterpay, Brighte, Data Republic, Identitii, and Spriggy within the top 50 emerging firms.

China

China’s shadow bank lending balloons to 58trn yuan, as focus shifts to risks from fintech platforms (South China Morning Post), Rated: AAA

China’s shadow bank lending has grown to more than 80 per cent of the economy, fuelled partly by off-balance-sheet lending originating from lightly-regulated fintech platforms, prompting warnings from analysts of potential risks arising from insufficient supervision.

Moody’s research released on Thursday showed that lending via the shadow banking system grew by 19 per cent annualised in the first half to reach 58 trillion yuan (HK$66.37 trillion), or a 82 per cent of GDP.

Leverage continues to increase throughout the Chinese economy. Total social financing (TSF), a measure of broad credit, has risen to an estimated 220 per cent of GDP at the end of the third quarter, up from 206 per cent of GDP at the start of year, Moody’s said.

Chinese financial website Caixin reported on Tuesday that some financial insiders believe the People’s Bank of China may soon require commercial banks to incorporate off-balance-sheet wealth-management products into the Macro Prudential Assessment (MPA) system, as a way to improve oversight of shadow lending.

India

India Quotient to raise million as part of third fund in 2017 (Economic Times, India Times), Rated: A

Early stage fund India Quotient as a part of its third fund, plans to raise $60 million by January/February 2017. The firm aims to spend 30% of the funds on fintech players within lending, insurance and investment sectors. The remaining portion of the funds will be spent on gaming, media, health and education.

Within fintech the fund is interested in the peer-to-peer lending model as well as online NBFC’s similar to the likes of Capital Float and Lendingkart. India Quotient recently invested $500,000 in CreditMate, a lending startup that focuses on lending to individuals looking to purchase used two wheelers.

Asia

Bitcoin startup Coins raises US million for Asia expansion (The Asset), Rated: A

Digital payments and blockchain startup Coins announced that it has raised a new US$5 million round of funding to further its mission of expanding access to basic financial services to unbanked individuals in the Philippines and throughout Southeast Asia.

The Series A funding round was led by the Accion Frontier Inclusion Fund, managed by Quona Capital, and also includes a number of notable investors such as: Eric Schmidt’s Innovation Endeavors, Pantera Capital, Digital Currency Group, Wavemaker Labs, Global Brain, BeeNext, and Rebright Partners. Amongst the company’s investors are also Kickstart Ventures and Ideaspace Foundation, the investment arms of Globe Telecom and Smart Communications, respectively, the Philippines’ biggest telecommunications companies.

Founded in early 2014, Coins is a mobile-first, branchless, blockchain-based platform that provides consumers with direct access to basic financial services such as remittances, bill payments, and mobile airtime. To provide these services, Coins has partnered with a multitude of banks, financial institutions and last-mile retail outlets, spanning a network of over 22,000 cash disbursement and collection locations in the Philippines alone.

More than 60% of Southeast Asia’s population of 600 million remains unbanked, and less than 5% have a credit card. At the same time, mobile internet penetration is rapidly increasing and bringing millions of people online every month. Coins has been able to capitalize on this technological shift by delivering everyday financial services through its mobile platform. To date, the company has signed up over 500,000 users.

Leveraging the blockchain has enabled Coins to connect its services to partners with a presence in over 40 countries.

International

Corporate treasurers are upping their fintech investments globally (Finder.com), Rated: AAA

Business research firm East & Partners has found corporate treasurers in the UK, Asia and Australia are ramping up their fintech investments. The results came from the Treasury Fintech Index, developed by East & Partners and Contentive Media, and is based on direct interviews with corporate treasurers in eight key global markets.

In the UK, treasurers are forecasting a 14.5% increase in their fintech spend for the coming year, while Australia and Singapore are following closely behind with a planned 12.2% increase.

The Index also found that corporate treasurers are reporting that their companies are directly investing in fintech, with Asia leading in these numbers. Nearly one-third of treasurers in China report their company has already invested in fintech, while over 40% are exploring fintech investment opportunities.

In Australia, 17.6% of corporate treasurers have directly invested in fintechs, while 24.2% are looking at opportunities for investment in the fintech space.

How fintech can help create 1 bln new jobs in Asia and Africa (ING), Rated: A

In a quiet neighborhood in the Turkish city of Trabzon, local residents buy most of their daily necessities at Ergan’s, a family-run supermarket established in 1987 that employs six people. But for a long time, there was one item they couldn’t get: meat.

That changed when the owner, Mehmet Turan Ergan, learned he could apply for a loan from ING using his smartphone. He wanted to create a new butcher section and needed 30,000 Turkish lira (around EUR 9,000) to bMultiplying that kind of job creation using the latest financial technology, or fintech, has great potential to reduce extreme poverty in the developing world, according to ING’s latest ‘A Billion to Gain’ report.uy a glass counter to display the different meat cuts, an extra refrigerator, and a machine to make ground beef.

Within minutes of sending an SMS with his tax number, he received a positive answer. Today his customers have more choice. But more importantly, he created a new job.

Multiplying that kind of job creation using the latest financial technology, or fintech, has great potential to reduce extreme poverty in the developing world, according to ING’s latest ‘A Billion to Gain’ report.

To finance the growth of 1 billion new jobs for the poorest in Asia and Africa, ING estimates that the number of micro, small and medium-sized companies (MSME) must grow by a third (from currently 400 million enterprises to 530 million) and the loan portfolio to this segment by 80% (around USD 5.5 trillion). Traditional banking won’t be able to close this huge credit gap because it’s too costly to maintain a wide branch network, especially in rural areas.

Regulatory Sandboxes: The Road to Fintech Redemption? (Finance Magnates), Rated: A

A race is under way. Spurred by the initiatives of the UK’s Financial Conduct Authority, countries are embarking on missions to establish themselves as the preeminent jurisdiction for all things fintech.

In recent months, countries such Abu Dhabi, Australia, Hong Kong and Singapore have all announced intentions to launch one. Though specifics vary, the programs share a common theme of promoting the growth of fintech within their borders.

The allure of the sandbox is clear. From a global perspective, program adopters demonstrate their commitment to innovation and developing a local fintech ecosystem. Similarly, participants have the opportunity to test and fine tune their ideas in forgiving environments.

This may also encourage them to push the boundaries of innovation. Consumers ultimately benefit through new financial products offering greater choice and competition between incumbents and startups.

The proliferation of these programs presents challenges and opportunities. Firstly, a degree of cooperation among regulators is advisable in order to avoid jurisdictional arbitrage. For instance, a startup refused entry into one sandbox may attempt to participate in another by taking advantage of differing admission requirements.

Small Biz Cash Management Struggles Across The Globe (PYMNTS), Rated: A

Between the rise of blockchain technology, the market debuts of faster payments initiatives and the advancements in virtual card capabilities, small businesses have more choice and power when it comes to their payments needs. But B2B payment habits continue to stifle suppliers’ growth plans across the globe, found the latest Working Capital Outlook Survey released by C2FO this month.

In the U.S., there is evidence that B2B payment practices are improving. Just 14 percent of U.S. SMEs told C2FO that their corporate payers are paying late, down from 20 percent last year. But the U.S. experience is not universal: In the U.K., for instance, 20 percent of suppliers reported having to deal with late payments, up from 11 percent last year.

Italy has the highest rate of late B2B payments, with 50 percent of small businesses there reporting that they have been paid late. France also has a higher rate of late payments at 27 percent, while Germany came in at 18 percent.

Globally, three-quarters of small businesses surveyed said supplier-friendly payment options that support faster payments are important to them. Again, the importance of faster supplier payment options has also increased in the U.S., from 56 percent reporting demand last year to 77 percent this year.

What all of this means, C2FO concluded, is that small businesses need to get creative — and diverse — when it comes to accessing working capital.

Authors:

George Popescu
Allen Taylor

August 22nd 2016, Daily News Digest

August 22nd 2016, Daily News Digest

News Comments Today’s most interesting news are about banks and their paradoxical branches;  how real estate listings could come with financing included; how Bondora proves a 16.7% return to investors; China is putting in place P2P loans and individual caps ; last but not least the pros and cons of regulatory sandboxes. United States Goldman […]

August 22nd 2016, Daily News Digest

News Comments

United States

United Kingdom

  • 9-months-old online real estate auction house partners with LendInvest. “On the information page for each pre-qualified lot, summary funding details will be presented alongside other key property information.” Imagine if in the US when you go to an open house you can receive guidelines on what financial parameters will automatically qualify you for the house !

European Union

New Zealand

China

India

  • An article advocating for a regulatory sandbox for P2P lenders. For example, P2P lenders should receive the right to operate with “1,000 customers in one city, for three months”. This approach has worked tremendously well in China since the 1980s where the government provided capitalistic sandboxes in Shanghai and Shenzhen/Guangzhou at first. Then the government re-used this sandbox idea for any new initiative. A proven approach at a Chinese scale. If it worked in China perhaps it will work elsewhere.

 

United States

Meet Marcus, Goldman Sachs’s Online Lender for the Masses, (New York Times), Rated: AAA

After much internal discussion, the Wall Street firm has decided to call the retail banking operation Marcus — the first name of the company’s founder, Marcus Goldman.

Marcus is expected to be officially unveiled when the bank is ready to roll out the offering, most likely in October, according to people who were briefed on the plans.

Initially, Marcus will offer relatively small consumer loans, a business that Goldman has traditionally avoided.

One potential benefit of the retail banking operation is that it could help temper the reputational problems that Goldman suffered after the financial crisis, when Rolling Stone magazine called it “a great vampire squid wrapped around the face of humanity.”

The big question is whether Goldman will learn to successfully serve retail customers, something it has not done.

The Marcus business was referred to internally as Mosaic and has been operating with a staff of around 100 people.

Greater Scrutiny Looms for ‘Rent-a-Charter’ Deals, (Wall Street Journal), Rated: AAA

The startups’ regulatory advantage may be fleeting. Last month, the Federal Deposit Insurance Corp. proposed guidelines, including one that banks that partner with third-party firms to make loans “will generally receive increased supervisory attention.”

Though the FDIC has had guidelines for relationships between banks and outside vendors, the new proposal focuses specifically on lending partners, including proposing yearly examinations rather than every 18 months. It also recommends that banks should set “performance standards for third parties” and “require access to data.”

Fewer than 50 U.S. banks work closely with online lenders, estimates Brian Korn, a partner at Manatt, Phelps & Phillips LLP. “The FDIC wants to make sure these banks are doing their homework and aren’t just puppets,” he said. He added that in his experience such banks were “very focused on safety and soundness, even more so than other banks of their size.”

Among the most active banks working with online lenders are WebBank, a unit of conglomerate Steel Partners Holdings LP, and Cross River Bank in New Jersey.

The banks declined to comment on the FDIC guidelines. The FDIC is seeking comment on the proposal.

Some experts argue rent-a-charter arrangements reduce risk. Taxpayers aren’t in danger of being on the hook if a loan fails, while borrowers are given wider access to credit even if banks don’t want to take risks.

Online lenders that partner with banks, such as Elevate Credit Inc., have already been subject to some FDIC examinations, according to its chief executive, Ken Rees, because under a decadesold law, a bank’s primary federal regulator has the authority to examine certain service providers and vendors.

Meanwhile, court decisions in Maryland and West Virginia over the past two years defended state regulatory actions to stop an online lender from making loans at interest rates higher than the states permit, though the lender was working with a partner bank.

In July, Colorado authorities sent letters to Avant and Marlette Funding LLC saying state law would apply to loans made by them, although banks originated the loans, according to reports by Kroll Bond Rating Agency Inc. Avant and Marlette subsequently removed certain loans made to Colorado borrowers from bond offerings , Kroll added.

A revised Connecticut law that took effect in July requires companies that sell leads to lenders for people who want small loans, even if they don’t ultimately originate them, to obtain licenses as lenders.

Peer IQ analyzes Loan Purchase Agreements, (PeerIQ Email), Rated: AAA

Prosper announced Source: PeerIQ

Anatomy of a Loan Purchase Agreement
Purchasing raw whole loans involves substantial legal and administrative investment.  Originating platforms (“Sellers”) and whole loan investors (“Buyers”) enter into multiple negotiated contracts to purchase loans. These include the Loan Purchase Agreement, Loan Servicing Agreement, Loan Representation and Indemnity Agreement.
An LPA sets forth the economic terms, obligations, and representations for both the seller and buyer of loans. A

Developing a global financial architecture, (Tech Crunch), Rated: AAA

In their Insights article A World Awash in Money, Bain & Company define trust architecture as strong property rights protections, reliable legal systems and institutional depth. What this really boils down to is safety and transparency: People want to see that the money they send across borders is going where it is supposed to. Though the examples Bain uses detail larger foreign direct investments, these architecture problems persist even at the peer-to-peer level.

So what obstacles does technology need to overcome to create a reliable infrastructure to move money to emerging economies?

In his insightful article, When Bitcoin Grows Up, British journalist John Lanchester dives into why, historically, banks came about in the first place. When we spend money or get paid or give a loan, what we’re really doing is making an entry on a register. That entry says “this thing of value is being transferred.” Before the invention of common currencies, people would barter goods directly, or keep informal “IOUs” to log debts. The creation of banks allowed people to log their transactions in a centralized, authoritative ledger — the banker’s.

Though it’s difficult to paint heterogeneous markets in such broad strokes, the trend is clear — poorer people have less access to banks. This makes it hard to store and transact money.

One solution, which Lanchester evaluates thoroughly, is that of digital currencies based on technology such as blockchain.

Another problem for the developing world is the failure of many countries’ trust architecture to provide reliable personal identification and credit underwriting.

To solve this problem, the Indian government has famously rolled out an initiative to give a digital identity to its 1 billion+ residents using biometric identification. Now, following its critical success, Russia, Morocco, Algeria and Tunisia are all exploring similar programs.

Another novel approach to creating credit files comes from Kenya, home to the wildly successful Safaricom startup M-Pesa. In 2013, 43 percent of Kenya’s GDP flowed through M-Pesa. The tech is built on a radically simple idea: If you have access to someone’s cell phone account, you have a way to identify them individually and a history of payments to tell if they’re creditworthy.

Innovative technology firms, well-versed in the challenges of the developing world’s financial trust architecture, stand to revolutionize the way money is sent and lent globally. These solutions could also “trickle up” from the personal level to larger-scale investments, as transfer risks are smoothed across geographies. The inertial build-up of capital pools in the developed world creates an almost limitless opportunity for those platforms that can overcome the hurdles damming it.

U.S. banks want to cut branches, but customers keep coming, (Reuters), Rated: AAA

Despite banks’ nudging toward online tools, many U.S. customers are not ready to give up regular visits to their nearest branch, complicating the industry’s efforts to slim down.

U.S. banks have trimmed the number of branches by 6 percent since it peaked in 2009, according to Federal Deposit Insurance Corp data. The 93,283 branches open at the end of last year was the lowest level in a decade.

Yet analysts who have examined the data say banks should have done more to offset the pressure on revenue from low interest rates and regulatory demands.

The number of FDIC-insured banks has fallen by more than 25 percent over that time.

Bankers across the industry say that online banking complements traditional services for U.S. customers, but few have gone fully digital. While other factors are at play, one difference is that U.S. customers still routinely use checks and need branches to process them, said Rick Spitler, managing director at consulting firm Novantas.

The traditional branch costs roughly $2-4 million to set up and $200,000-400,000 per year to operate, according to Ed O’Brien, an analyst at Mercator Advisory Group.

Executives at JPMorgan Chase & Co JPM.N, the country’s largest bank, say each branch earns about $1 million in annual profit, but takes a decade to reach its full potential.

John Elmore, vice chairman of community banking and branch delivery at U.S. Bancorp, says branches are especially important for small businesses that need to deposit cash frequently, prefer to negotiate loans in person, or want strategic advice.

They have reduced the number of tellers and moved them to the back. Their ATMs can perform more sophisticated tasks and banks have developed nifty mobile apps for routine banking needs. They are even experimenting with digital loan underwriting.

Yet customers still expect contact with bank staff and JPMorgan recently had to hire more tellers after customer complaints.

Bank of America Corp BAC.N, which has closed a quarter of its branches since 2009, could eventually serve as a test case.

 

Kickfurther Buyers Crowdfinance $ 10.2 Million of Inventory, (PR Web), Rated: A

Kickfurther Consignments are not loans. Buyers provide inventory, marketing, and sales support for businesses, and they earn Co-Op profits when Consignment Inventory sells. In this way, the interests of the businesses are directly aligned with the interests of their Buyers.

Kickfurther is an inventory crowd­funding marketplace that connects companies with individuals. The Kickfurther marketplace enables consumer product companies seeking capital to grow by sharing sales opportunities with individuals interested in participating in micro-retail.

Businesses post Consignment Opportunities by choosing the amount of inventory they want, the consignment profit Buyers will earn as inventory is sold, and the estimated duration of time it will take to sell the inventory based on prior sales history. Since its 2015 launch, Kickfurther has funded $10.2 million of inventory in 339 Consignment Opportunities by 288 product companies. Kickfurther users have earned, on average, more than 2% consignment profit per month on completed Co-Ops.

OnDeck Soars to #16 on Selling Power’s “50 Best Companies to Sell For” List, (PR Newswire), Rated: A

OnDeck® today announced it has been named to the Selling Power 50 Best Companies to Sell For list for the fourth consecutive year, rising to #16 on the list, ahead of sales giants ADP (#18), Google and Microsoft (tied at #37) and IBM (#50).

“OnDeck’s top twenty ranking on the Selling Power 50 Best Companies to Sell For list is a clear indication of our relentless commitment to fostering a top-notch workplace environment where employees feel both supported and challenged,” says Paul Rosen, Chief Sales Officer at OnDeck.

OnDeck’s robust compensation packages include medical, dental, vision and life benefits, up to four months of paid parental leave, lunch on OnDeck plus a fully-stocked kitchen, 401(k) matches, compensation for education, student loan refinancing and more.

Nova Credit launching from Y Combinator to give immigrants access to U.S. credit, (Tech Crunch), Rated: A

For millions of immigrants (roughly 15 million) landing on U.S. shores — even ones who had successful jobs abroad — there’s no way to access credit.

Collecting credit information and credit proxies (like cell phone billing receipts and records) into a single report it calls the “Nova Credit Passport”, Nova Credit passes the report onto the lender so that they can make a more informed determination on whether to accept or reject a credit application.

Both the UN and the World Bank have identified financial inclusion and the ability to access global credit as one of the keys to development and poverty alleviation globally.

Nova makes its money by charging lenders for access to their reports, in the same way Experian and Equifax do.

So far, the company is concentrating on two markets, India and Mexico, which account for roughly 21 million immigrants to the U.S. every year. As the company expands it intends to add countries in the UK, the European Union, Brazil, Russia and China.

Launching at Y-Combinator’s demo day this weekend, Nova Credit is already generating buzz among financial services companies. It has also partnered with organizations immigrant organizations like fwd.us and Partnership For A New American Economy.

“We’re partnering with credit unions and fintech lenders,” said Goulimis. “Credit unions are committed to financial inclusion and trying to move away from taking shots in the dark [and] on the other hand we’ve been working with bigger fintech lenders [who] are trying to underwrite people who are unbanked.”

Message from Realty Mogul CEO, Jilliene Helman, (Email from Realty Mogul), Rated: A

What [Realty Mogul is] here for: to give more people on both sides of the marketplace (real estate companies and real estate investors) better access to real estate investing through innovation (in technology, products, regulations, or any other way).

Until now, RealtyMogul.com was only open to accredited investors. To date, over 80,000 people have expressed interest in what we do by joining our investor network, but only the 25,000 accredited investors within that group could invest through our platform.

So we did just that – starting this week, investing on RealtyMogul.com is finally available to nearly all investors*.

MogulREIT I Basics

Thanks to recent changes under The JOBS Act (more specifically, Title IV of the JOBS Act known as Regulation A+) we are now able to offer non-accredited investors the opportunity to invest in a diversified pool of commercial real estate investments through a single investment, MogulREIT I, a real estate investment trust (or “REIT”).

A “REIT” is a company that owns or finances real estate. REITs give their investors the opportunity to participate in large-scale real estate transactions by purchasing shares of the company that owns or finances them. REITs typically do not pay tax at the company level, and so they avoid the double-taxation problems that many corporations face.

Our first REIT, MogulREIT I, is a public non-traded REIT. That means that it is registered with the Securities and Exchange Commission, but is not traded on a stock exchange.

MogulREIT I investors can enjoy regular income, potential capital appreciation, and diversification across geographies, property types, and investment types.

We designed MogulREIT I to be accessible through our online platform, RealtyMogul.com. By offering it directly to investors instead of through other third-party distribution channels, we are able to eliminate the high expense loads that result from traditional, commission-based sales.

Investors in MogulREIT I will not be charged any sales commissions and the organization and offering expenses are anticipated to be approximately 3% of the target total raise of amount. Traditional non-traded REITs typically charge an average sales commission of 7% and organization and offering expenses of up to 15%**. That’s 400% more than what we charge.

Next FTC Fintech Forum to Discuss Crowdfunding, P2P Payments, (Crowdfund Insider), Rated: A

The Federal Trade Commission (FTC) recently announced their next Fintech Forum.  The next event will take place on October 26th at the FTC HQ in Washington, DC.

At the first Fintech forum, the FTC managed to bring together a respectable group of industry representatives. As we understand it, FTC staff is reaching out to potential panelists now.

The half-day forum will examine the various models of crowdfunding and peer-to-peer payments used by companies, the potential benefits to consumers, and possible consumer protection concerns. In addition, the forum will look at how the FTC Act and other existing consumer protection laws might apply to companies participating in these areas.

United Kingdom

Online auction house launches pioneering partnership with lender, (Estate Agent Today), Rated: A

LOT11, an online auction house, is teaming up with short-term lender LendInvest in the first alliance of its kind. On the information page for each pre-qualified lot, summary funding details will be presented alongside other key property information, such as floor plans and legal documents, reflecting the imperative of arranging auction finance in advance of a bid for prospective bidders.

LOT11, which is only nine months old, attracted participants from more than 120 countries to its most recent online auction.

European Union

Bondora Publishes Annual Report for 2015, (Crowdfund Insider), Rated: A

The reports can be found here.

Bondora, a European peer to peer lender based in Estonia, has been on a big push to bring greater clarity and transparency to their lending platform. The initiative is not a requirement but a strategic decision to drive investor confidence and utilization.

Earlier this month, Bondora published an audited annual report from last year. As a private company there is no mandated need to do this but Bondora has published it regardless.

Bondora raised equity in the amount of €4.5 million during 2015 and thus strengthened the balance sheet substantially.

Bondora may be a smaller platform but they have big ambitions.  The P2P lender claims some of the highest returns in the industry and hosts a secondary platform for investor liquidity.  The current annualized net return on investment stands at 16.7% and the highest grade loans are generating about 12 % today.  Most loans are small distributed across three countries: Estonia, Finland and Spain. Anyone may invest in Europe. US investors must be accredited.

New Zealand

P2P lender Squirrel Money is the first to launch secondary market for investors in NZ, (SMN Weekly), Rated: A

Peer-to-peer lender Squirrel Money announced on Thursday it is launching secondary market next week, which will allow loans to be on-sold to other investors. The Squirrel offer will be the first P2P secondary market available in New Zealand.

Squirrel Money expects that the launch of the secondary market will encourage more people to make long-term investments.

Keep in mind, however, that Investments being sold through the Secondary Market are subject to an administration fee of 1% (up to a maximum of $50) per investment sold.

Squirrel Money has so far lent $225,899 in loans. Earlier this year, the company raised $3,424,400 through its crowdfunding campaign on Snowball Effect – NZ’s leading equity crowdfunding platform.

China

P2P platforms face lending caps, (Global Times), Rated: AAA

Chinese authorities will roll out rules governing the country’s peer-to-peer (P2P) platforms, which are expected to set borrowing limits for the sector, a move experts said on Sunday highlights the regulatory emphasis on inclusive finance.

The China Banking Regulatory Commission (CBRC), together with several other departments, will set specific borrowing limits in the Interim Measures for the Administration of Business Activities of Online Lending Information Intermediaries, which are expected to be issued around February 2017, domestic news portal thepaper.cn reported on Saturday, citing anonymous sources close to the matter.

Specifically, the report said an individual would be able to borrow no more than 200,000 yuan ($30,211) from a single P2P platform and no more than 1 million yuan in total from various platforms.

As for companies or other organizations, the amount should not exceed 1 million yuan from one platform or 5 million yuan from several platforms.

According to a draft version the CBRC released in December 2015 for public comment, P2P platforms should focus on small-scale lending and, with adequate risk management capabilities, should keep close control of borrowers’ total balances from all P2P platforms.

“At present, some P2P platforms may see ‘big orders’ for money, lending tens or even hundreds of millions of yuan to some real estate enterprises or other capital-intensive sectors, instead of supporting individuals and small and micro-sized enterprises,” Luo told the Global Times on Sunday.

“They will need to adjust their business once the borrowing caps become official,” Luo said, noting that tighter controls are inevitable.

India

Creating space for financial services, ( LiveMint), Rated: A

It is widely acknowledged that financial inclusion, and financial services more broadly, are at an inflection point in India. The so-called JAM trinity (Jan Dhan-Aadhaar-Mobile) and recent regulatory innovations (like the introduction of differentiated banking licences) have set the stage for a transformation.

As Nandan Nilekani eloquently put it, India has reached its “WhatsApp moment” in financial services.

Notably, there is a chicken-and-egg problem of innovation. Regulators desire to fully understand the potential risks of new technologies and approaches before making a decision.

So, how does one overcome this chicken-and-egg problem? One big idea that is taking shape is that of a “regulatory sandbox”.

A sandbox is a mechanism through which the regulator permits realistic simulations and limited-scale experiments of financial innovations in controlled environments (often ‘relaxing’ some regulatory norms). It studies the results of these experiments, and then makes final regulatory decisions. The sandbox functions as a safe space to try out innovations, and understand their associated risks, before allowing full-scale roll-out.

Here’s where a sandbox approach could help—by permitting an experiment where P2P lending platforms can be given some regulatory leeway such as being allowed to access centralized credit score and KYC databases, and hold funds in centralized accounts. Such an experiment could be run as a pilot with a limited set of customers—for instance, 1,000 customers in one city, for three months. If the regulator is satisfied that there were no major regulatory issues, the regulatory leeway could be formalized into the regulations.

Author:

George Popescu

August 8th 2016, Daily News Digest

August 8th 2016, Daily News Digest

News Comments Today’s news pour some cold water on P2P SME lending : SME securitizations and SME yield performance seem to be less than expected. See 1st article in US section and 1st article in UK section. Finova raised $52.5 mil , Mosaic $220 mil. And today’s the day : Lending Club and OnDeck release […]

August 8th 2016, Daily News Digest

News Comments

United States

United Kingdom

Australia

News Summary

United States

Funding Circle, and other online lenders, falter in America, (Financial Times), Rated: AAA

“Our portfolio of Funding Circle US loans has continued to substantially underperform our expectations, a trend which continued during the quarter and created a drag on the overall portfolio. We stopped purchasing new Funding Circle US loans late in 2015 so the portfolio continues to amortize down.” [ Comment: see the complete VPC Q2 2016 letter in the UK section below].

That’s from VPC Specialty Lending (VSL) Investments’ second quarter letter, released earlier this week (mea culpa, we didn’t spot it at first).

VSL’s disclosure forced Funding Circle’s listed fund to issue its own filing to the market yesterday, sort of but not outright rejecting the suggestion that loans were underperforming:

The Company’s US Credit Assets are projected to return in excess of 8% per annum on a net unlevered basis – consistent with historic performance observed on the Funding Circle US marketplace.

But that might be downplaying the historic performance a little. When Funding Circle floated its fund last year, this is the US loan performance it revealed in its November prospectus (note the numbers didn’t include expected future losses and showed the to-date performance at that time):

Sachin Patel, Funding Circle’s global co-head of capital markets, said that loans originated in the first half of 2015 had underperformed and are expected to return 7.25 per cent to its large, accredited investors, rather than the 8 per cent or more that it targets.

Funding Circle launched in the US in late 2013 and is run out of San Francisco by Sam Hodges. According to the 2015 prospectus for Funding Circle’s fund, US loans originated in early 2014 also “experienced higher than expected annualised loss rates”.

Similar missteps were seen in Funding Circle’s first years of operation in the UK too:

But Funding Circle isn’t the only online lender to small businesses in the US that is disappointing investors. According to a Morgan Stanley note last month, a second securitisation of loans originated by OnDeck, which is listed, breached its loss trigger in June:

MPLT 2015-OD3 from OnDeck breached triggers in June, joining the 3 deals we had previously highlighted – MPLT 2015- CB1 (Circleback), MPLT 2015-OD1 (OnDeck) and GLCII 2014-A (Lending Club).

That makes four online lending securitisation deals that have hit their loss trigger, meaning that cashflows are diverted to senior bondholders at the expense of the lower tranche investors. Three of those four deals, as far as we can tell, were arranged by Jefferies.

It’s also worth keeping an eye on securitisations of loans from Avant, a US consumer lender that also gets a dishonourable mention in VSL’s letter (note that Victory Park is an equity investor in Avant):

We also saw a reduction in the value of three residual interests in securitizations of Avant loans that are held at fair market value. These markdowns, which flow through capital, reflect loss curves coming in slightly higher than in the first quarter. While the capital markets have recently begun to re-open for marketplace lending loans, we have no current plans to pursue additional securitizations.

FTC Announces FinTech Forum on Crowdfunding, Peer-to-Peer Payments, (JD Supra Business Advisor), Rated: AAA

The FTC announced it will be hosting the next event in the FinTech Forum series on October 26, 2016.

BNY Mellon sees possible rise of P2P collateral lending, (Global Custodian), Rated: A

Peer-to-peer lending among buy-siders could emerge due to a challenging regulatory environment for sourcing and optimising collateral, according to BNY Mellon.

In the report, BNY Mellon states that institutional investors may also find further opportunities in a peer-to-peer relationship, where buy-side firms are both the collateral provider and receiver.

The report can be found here.

 Income: any Fintech to fill-in the supply shortage?, ( Daily Fintech), Rated: AAA

The world still needs current [Comment: I believe most people use the word fixed instead of current] income for a variety of reasons: wage stagnation, tax overburdening, and the usual cash flows needs that are not at all well managed.

Source: Pension Partners

Challenger banks in the UK have been offering bonds (3yrs or less) to entice customers to sign up on their platforms.

Source: Daily Finance

There are two Alternative finance options that can generate income, much like high yield bonds or publicly traded REITS have been doing in normal conditions.

Investors in the UK can invest in the LE listed

Finova Financial Raises $ 52.5 M First Round For Car Equity Loans, (Wall Street Journal), Rated: A

Finova Financial has raised $52.5 million in its first institutional funding—much of it in the form of debt—for its consumer lending service that provides car owners with a line of credit.

The funding was led by MHS Capital, with participation from Refactor Capital; CoVenture; Metamorphic Ventures; 500 Startups; Funding Circle co-founder Sam Hodges; NerdWallet co-founder Jake Gibson; and Al Hamra Group, a company owned by a ruling family in the United Arab Emirates.

A “large percentage” of the round was the credit facility, the company said, but declined to give specifics.

Founded in January 2015, Finova provides loans in exchange for liens on consumers’ cars, which the company calls a “car-equity line of credit,” which resembles a home equity credit line. Its loans are typically $1,500 to $1,700.

Finova charges about 70% less than the industry average, according to Mr. Keough said.

In contrast to typical paper applications, with Finova people can apply on a website or mobile device by providing information about their cars and driver’s licenses and receive decisions quickly, Mr. Keough said. About 65% of customers apply via phones.

The car equity loan is Finova’s first product, and the company intends to launch other products for “unbanked” consumers, as the company describes its target market.

“My investment thesis is: financial services for the rest of us,” said Sheel Mohnot, the partner at 500 Startups who leads the firm’s fintech investments. “There could not be a better fit (than Finova) for working with a population who is unbanked.”

Warburg Pincus Leads $ 220 Million Round for Solar Lender Mosaic, ( Wall Street Journal), Rated : A

Private-equity firm Warburg Pincus is leading a $220 million equity investment in energy-financing startup Solar Mosaic Inc., according to two people familiar with the situation. The company, known as Mosaic, provides loans for solar installations for homeowners. It is starting to finance other energy-efficiency upgrades that are meant to reduce utility bills.

Warburg Pincus will have a slight majority control of Mosaic through its $200 million investment, one person said. Other investors in the round include financial technology venture firm Core Innovation Capital and Obvious Ventures, a firm, co-founded by Ev Williams, that seeks to invest in startups that offer a positive social impact. Andrew Beebe, managing director at Obvious Ventures, has had a long career in solar energy.

Mosaic has said that it plans to originate about $1 billion in residential-solar loans in the coming 12 months. It secured $200 million in credit from DZ Bank as the lead lender earlier this year. NY Green Bank also participated.

The company’s business model is built around allowing people to own their own solar systems. That contrasts against the predominant model of financing residential solar under lease programs in which homeowners rent the solar power their properties generate.

Privately held GreenSky LLC and Spruce Finance Inc., backed by Kleiner Perkins Caufield & Byers, also operate in the category. Earlier Mosaic investors include Spring Ventures, Serious Change, Blue Haven Initiative and Bronze Investments.

Colorado Inquiry Prompts Avant to Rejig Bonds, Kroll Says, (PeerIQ), Rated: AAA

Avant Inc., the online lending marketplace, removed unsecured consumer loans made to Colorado residents from a securitization deal after a state regulator sought information about its lending policies, according to Kroll Bond Rating Agency. Colorado concluded that loans mad to its residents must comply with its lending statutes, even if the debts originate through partner banks in another state, as Avant does in Utah, Kroll said in an Aug. 2 report. Such statutes include usury laws and restrictions on late fees and other charges, Kroll said in its evaluation of an upcoming $200 million securitization to be sold by Avant. “In light of the letters from the Colorado regulator, Avant has removed all loans made to Colorado residents,” Kroll said. Carolyn Blackman Gasbarra, a spokeswoman for Chicago-based Avant, declined via e-mail to comment while the deal is pending. Kroll said Avant is “proactively addressing any regulator concerns.” Sheila Bair, the former head of the Federal Deposit Insurance Corp. and a frequent proponent of tougher regulation, was added to the company’s board earlier this year.

Inside CommonBond’s 401(k) platform for student loan debt, (Tradestreaming), Rated: AAA

In July 2016, student loan platform CommonBond acquired online loan repayment advisor Gradible. The acquisition of Gradible, which uses an algorithm to recommend what the best repayment options are for student loan borrowers, has enabled CommonBond to roll out a new platform that it’s calling the 401(k) for student loans.

The 401(k) platform will enable employers to contribute to their employees student loans just as they contribute to their employees’ retirement. “What the acquisition of Gradible allows us to do is to marry up certain technologies that they’ve built with technologies that we’ve already built to accelerate the platform,” said David Klein, co-founder and CEO of CommonBond.

Gradible’s merger with CommonBond was two years in the works. A personal connection lead CommonBond to partner with the software company, becoming one of the refinance options Gradible offered on its platform. Eventually, CommonBond’s desire to expand its reach together with Gradible’s intention to accelerate its vision led to the merger.

Klein believes that bringing Gradible in-house will enable CommonBond to reach and meaningfully impact every one of the over 40 million Americans saddled with student debt, and to a certain extent this is true. As a student loan reassessment tool, Gradible can help students discover alternative ways to manage their debt, such as income-based repayment and public service loan forgiveness.

But the 401(k) will ultimately serve the “top talent”, who are the most likely to make it out of student debt in the first place.

CommonBond had one company ask it to implement the platform for them, and Klein has also piloted the 401(k) at CommonBond itself – much to its employees’ delight.

While the CommonBond-Gradible marriage can’t fix what’s broken with the student loan industry at large, its 401(k) product is opening up the traditional closed lender-borrower relationship to employers. So far, this threesome has benefited the entire loan ecosystem: lenders are getting repaid faster, employees are happier, and employers are meaningfully participating in their employees’ financial lives.

Online Lenders Have a Tough Job Ahead, (Wall Street Journal), Rated: AAA

LendingClub Corp. and OnDeck Capital Inc. have suffered through growing pains this year.

They each report second-quarter results Monday [Comment: today].

Jefferies closes Lending Club bonds sale, (Financial Times), Rated: A

Comment: our readers are familiar with this information from last week’s Monday Lending Times. I believe a reminder is a good idea though.

Jefferies has closed a private sale of bonds backed by personal loans originated by Lending Club, marking a step in the rehabilitation of the scandal-hit online lender ahead of its second-quarter earnings. Meanwhile, the Jefferies-led deal is “very positive” for the online-lending industry, said James Gutierrez, chief executive of Insikt, a platform that has sold bundles of Lending Club and Prosper loans to wealthy individuals.

Three months on, Jefferies has sold $105m of bonds backed by Lending Club loans, offering yields of 3.75 to 6.5 per cent.

Offers of unsecured personal loans sent out in the mail dropped 19 per cent in the second quarter from the first quarter, to 507m, according to Mintel Comperemedia, a market intelligence agency. All told, the industry has sent out 4.44bn loan offers to consumers over the past two years, peaking at 749m in the fourth quarter last year.

Goldman Sachs, which had been preparing a securitisation of prime loans from Lending Club before the scandal blew up in May, is prepared to bide its time, according to a person briefed on the bank’s plans.

MPOWER Brings on SoFi and Student-Lending Veteran Renee Suryan as Director of University Relations, (PR Web), Rated: A

Comment: Please see the Lending Times article on MPOWER here.

MPOWER Financing is pleased to formally announce the addition of Renee Suryan to its team. With more than 20 years of experience in student lending, including 10 years as a financial aid administrator, she joins MPOWER as Director of University Relations. Currently growing at a rate of 40 percent month-over-month in loan volume, MPOWER projects it will have more than 200 school partnerships and 21 state licenses by the end of 2016.

MPOWER Partners with FUTR to Support Domestic and International Student Loans, (PR Web), Rated: B

MPOWER Financing today announced that it is partnering with FUTR Corporation to provide superior loan servicing and support to MPOWER borrowers.

FUTR is a privately held and venture-backed higher education finance provider headquartered in San Francisco, with an operational hub in Bryan, Texas. FUTR is focused on bringing together modern technology and quality service to provide new levels of transparency and insight that borrowers need to optimally manage their financial future.

The Time To Start Thinking About Repaying Student Loans Is When You Take Them Out, (Forbes), Rated: B

Comment: article written for borrowers. Probably not useful to our readers.

Credible.com is a multi-lender student loan marketplace. One issue that’s underappreciated is that the time to start thinking about repaying your student loans is not when you graduate, but when you take them out.

The 27 fintech unicorns from around the world, ranked by value, (Business Insider), Rated: AAA

Comment: Article would have deserved to be in an international section. However it is only marginally relevant to our readers and we prefer not focus our newsletter on this article. Hence we located it at the end of our US section.

An interesting list. Many of our own industry participants are present. However I had not heard of a few of them. Worth a read.

United Kingdom

VPC Specialty Lending Investments PLC, (VPC Specialty Lending), Rated: AAA

Comment: There is a disclaimer the readers must read and agree to before accessing this article.

In the second quarter of 2016, VPC Speciality Lending Investments PLC (“VSL” or the “Company”) delivered a net return of 0.33%. Although the return wasbelow expectations, it does not reflect what we believe will be the level of long-term returns for our shareholders given our existing portfolio and pipeline. There are several reasons for the decline in short-term performance, which are outlined below along with the steps we are taking to mitigate these factors in the near term.

The decision by U.K. voters to leave the European Union (“EU”) and the subsequent depreciation of the GBP had a negative impact on the Company’s performance as we had to maintain an outsized cash balance related to our currency hedge. Leading up to the EU Referendum, we took a conservative approach to our cash management and credit allocations. A substantial portion of our assets are held in USD and other currencies, which are hedged to GBP via forward currency swaps. The hedging program was put in place when the investments were made following the Company’s March 2015 IPO and September 2015 C share offering. Since then, due to the substantial depreciation of GBP against USD, the Company has had to deposit in cash up to 11.5% of the Company’s NAV. While the direct effect of the currency swings on our income has been limited because our non-GBP exposure is largely hedged, the obligation to settle the hedges upon expiration and the need to maintain additional liquidity in the event the GBP depreciates further has limited our ability to be largely fully invested, as we strive to be. The outlook for the GBP continues to be uncertain – several economists have set target prices for USD/GBP at $1.20 or below with a one-year time horizon – leaving us to remain conservative. We are reviewing all available options to reduce the cash drag related to the margin requirement, including a revolving credit facility for the Company.

The majority of our whole loan portfolio performed in line with our expectations, although certain positions did experience higher than expected losses.

Accordingly, we believe we are now in the period of peak losses for our portfolios (assuming static economic conditions), leading to muted NAV returns in the near term but we expect the returns to even out over the life of the investments.

As previously announced, our portfolio of Funding Circle US loans has continued to substantially underperform our expectations, a trend which continued during the quarter and created a drag on the overall portfolio. We stopped purchasing new Funding Circle US loans late in 2015 so the portfolio continues to amortize down.

We also saw a reduction in the value of three residual interests in securitizations of Avant loans that are held at fair market value.

On a more positive note, our balance sheet loan portfolio continued to show excellent performance with no impairments and coupons ranging from 12% to 16%.

  • On 26 May 2016, the Company made initial investments in West Creek Financial, Inc., a provider of point-of-sale lease-to-own financing to underserved customers enabling purchases of durable goods such as furniture, mattresses, and appliances.
  • On 30 June 2016, the Company made initial investments in Fundbox Ltd., a provider of short-term working capital advances to small and medium-sized businesses in the U.S. and the Company funded a new tranche of senior secured debt to Elevate Credit, Inc. Elevate is a provider of cash advances and installment loans to U.S. consumers.

While cash drag as a result of the currency hedge and the performance of certain whole loan investments were disappointing, we are encouraged by the performance of our existing balance sheet investments as well as the attractive terms of newer deals. In order to further demonstrate our commitment to the Company and our confidence in achieving returns of 8% or greater, we have agreed with the Company’s Board of Directors to modify our management agreement such that we will apply 20% of our monthly management fee to purchase shares of the Company at the prevailing market price on an ongoing basis, whilst the shares are trading at a discount to net asset value.

Understanding of risk remains a central issue for P2P industry, (Alt Fi), Rated: A

Andrew Tyrie, Chairman of the Treasury Select Committee, has written to the outgoing and incoming heads of the FCA – Tracey McDermott and Andrew Bailey respectively.

“Government policies to promote the crowdfunding sector may have the right intention – to increase competition in the small to medium enterprise lending market – but government tax incentives, in effect government subsidies, may be encouraging some consumers into the use of inappropriate products.”

The problem of a perceived lack of understanding of risk by investing consumers has been a common sector theme of late.

Analysis from AltFi Data illustrates that, to date, the lending performance of the largest UK platforms has delivered consistently positive net returns. Zopa, Funding Circle, Ratesetter and MarketInvoice together make up over 65% of the sector’s origination volume and lead the way when it comes to disclosure of their lending track record. 10 years of data representing that track record demonstrates that net returns have remained positive in a range of 5-6.5%. Bad debt performance has also been impressive, coming in at 5% for the worst ever annual cohort i.e. less than 1.7% annualized, and at no worse than 1.66%, i.e. less than 0.55% annualized, over the past 5 years.

Liberum Alt Fi Index. Source: AltFi.com

Assetz Capital Reports: Peer-to-Peer Lending Expected to Thrive As Bank of England Slashes Interest Rates, (Crowdfunding Insider), Rated: A

On Thursday, Assetz Capital one of the UK’s largest peer-to-peer lenders, announced it is predicting that both savers and borrowers will continue to turn to alternative finance companies in increasing numbers as Bank of England slashes interest rates from 0.5% to 0.25%.

Assetz Capital revealed, since launching in 2013, around £130 million has flown through its platform to credit-worthy borrowers, earning investors a total gross interest of more than £12 million to date and this lending is predicted to continue to rise rapidly.

Assetz Capital also predicted the number of business borrowers will also rise as a result of the cut interest rate.

Australia

Fintech B2B small business lending marketplace Bigstone raises million, (Financial Review), Rated: A

Fintech start-up Bigstone has raised $3 million from a range of investors, including ASX-listed diversified investments and venture capital firm CVC, to grow its small business lending marketplace and offer an alternative to the big banks.

Other major investors in the round were the founders of Bangkok-based fund Lighthouse Venture Partners Paniti Junhasavasdikul and Narith Phadungchai, in addition to private investors.

By the end of the year, Bigstone is hoping to have financed $10 million worth of loans to more than 200 small businesses.

A University of Sydney and KPMG study released earlier this year found that Australia’s online alternative finance market grew by 320 per cent in 2015 to $460 million, making it the third largest market in the Asia Pacific behind China and Japan.

Author:

George Popescu

August 8th 2016, Daily News Digest

August 8th 2016, Daily News Digest

News Comments Today’s news pour some cold water on P2P SME lending : SME securitizations and SME yield performance seem to be less than expected. See 1st article in US section and 1st article in UK section. Finova raised $52.5 mil , Mosaic $220 mil. And today’s the day : Lending Club and OnDeck release […]

August 8th 2016, Daily News Digest

News Comments

United States

United Kingdom

Australia

News Summary

United States

Funding Circle, and other online lenders, falter in America, (Financial Times), Rated: AAA

“Our portfolio of Funding Circle US loans has continued to substantially underperform our expectations, a trend which continued during the quarter and created a drag on the overall portfolio. We stopped purchasing new Funding Circle US loans late in 2015 so the portfolio continues to amortize down.” [ Comment: see the complete VPC Q2 2016 letter in the UK section below].

That’s from VPC Specialty Lending (VSL) Investments’ second quarter letter, released earlier this week (mea culpa, we didn’t spot it at first).

VSL’s disclosure forced Funding Circle’s listed fund to issue its own filing to the market yesterday, sort of but not outright rejecting the suggestion that loans were underperforming:

The Company’s US Credit Assets are projected to return in excess of 8% per annum on a net unlevered basis – consistent with historic performance observed on the Funding Circle US marketplace.

But that might be downplaying the historic performance a little. When Funding Circle floated its fund last year, this is the US loan performance it revealed in its November prospectus (note the numbers didn’t include expected future losses and showed the to-date performance at that time):

Sachin Patel, Funding Circle’s global co-head of capital markets, said that loans originated in the first half of 2015 had underperformed and are expected to return 7.25 per cent to its large, accredited investors, rather than the 8 per cent or more that it targets.

Funding Circle launched in the US in late 2013 and is run out of San Francisco by Sam Hodges. According to the 2015 prospectus for Funding Circle’s fund, US loans originated in early 2014 also “experienced higher than expected annualised loss rates”.

Similar missteps were seen in Funding Circle’s first years of operation in the UK too:

But Funding Circle isn’t the only online lender to small businesses in the US that is disappointing investors. According to a Morgan Stanley note last month, a second securitisation of loans originated by OnDeck, which is listed, breached its loss trigger in June:

MPLT 2015-OD3 from OnDeck breached triggers in June, joining the 3 deals we had previously highlighted – MPLT 2015- CB1 (Circleback), MPLT 2015-OD1 (OnDeck) and GLCII 2014-A (Lending Club).

That makes four online lending securitisation deals that have hit their loss trigger, meaning that cashflows are diverted to senior bondholders at the expense of the lower tranche investors. Three of those four deals, as far as we can tell, were arranged by Jefferies.

It’s also worth keeping an eye on securitisations of loans from Avant, a US consumer lender that also gets a dishonourable mention in VSL’s letter (note that Victory Park is an equity investor in Avant):

We also saw a reduction in the value of three residual interests in securitizations of Avant loans that are held at fair market value. These markdowns, which flow through capital, reflect loss curves coming in slightly higher than in the first quarter. While the capital markets have recently begun to re-open for marketplace lending loans, we have no current plans to pursue additional securitizations.

FTC Announces FinTech Forum on Crowdfunding, Peer-to-Peer Payments, (JD Supra Business Advisor), Rated: AAA

The FTC announced it will be hosting the next event in the FinTech Forum series on October 26, 2016.

BNY Mellon sees possible rise of P2P collateral lending, (Global Custodian), Rated: A

Peer-to-peer lending among buy-siders could emerge due to a challenging regulatory environment for sourcing and optimising collateral, according to BNY Mellon.

In the report, BNY Mellon states that institutional investors may also find further opportunities in a peer-to-peer relationship, where buy-side firms are both the collateral provider and receiver.

The report can be found here.

 Income: any Fintech to fill-in the supply shortage?, ( Daily Fintech), Rated: AAA

The world still needs current [Comment: I believe most people use the word fixed instead of current] income for a variety of reasons: wage stagnation, tax overburdening, and the usual cash flows needs that are not at all well managed.

Source: Pension Partners

Challenger banks in the UK have been offering bonds (3yrs or less) to entice customers to sign up on their platforms.

Source: Daily Finance

There are two Alternative finance options that can generate income, much like high yield bonds or publicly traded REITS have been doing in normal conditions.

Investors in the UK can invest in the LE listed

Finova Financial Raises $ 52.5 M First Round For Car Equity Loans, (Wall Street Journal), Rated: A

Finova Financial has raised $52.5 million in its first institutional funding—much of it in the form of debt—for its consumer lending service that provides car owners with a line of credit.

The funding was led by MHS Capital, with participation from Refactor Capital; CoVenture; Metamorphic Ventures; 500 Startups; Funding Circle co-founder Sam Hodges; NerdWallet co-founder Jake Gibson; and Al Hamra Group, a company owned by a ruling family in the United Arab Emirates.

A “large percentage” of the round was the credit facility, the company said, but declined to give specifics.

Founded in January 2015, Finova provides loans in exchange for liens on consumers’ cars, which the company calls a “car-equity line of credit,” which resembles a home equity credit line. Its loans are typically $1,500 to $1,700.

Finova charges about 70% less than the industry average, according to Mr. Keough said.

In contrast to typical paper applications, with Finova people can apply on a website or mobile device by providing information about their cars and driver’s licenses and receive decisions quickly, Mr. Keough said. About 65% of customers apply via phones.

The car equity loan is Finova’s first product, and the company intends to launch other products for “unbanked” consumers, as the company describes its target market.

“My investment thesis is: financial services for the rest of us,” said Sheel Mohnot, the partner at 500 Startups who leads the firm’s fintech investments. “There could not be a better fit (than Finova) for working with a population who is unbanked.”

Warburg Pincus Leads $ 220 Million Round for Solar Lender Mosaic, ( Wall Street Journal), Rated : A

Private-equity firm Warburg Pincus is leading a $220 million equity investment in energy-financing startup Solar Mosaic Inc., according to two people familiar with the situation. The company, known as Mosaic, provides loans for solar installations for homeowners. It is starting to finance other energy-efficiency upgrades that are meant to reduce utility bills.

Warburg Pincus will have a slight majority control of Mosaic through its $200 million investment, one person said. Other investors in the round include financial technology venture firm Core Innovation Capital and Obvious Ventures, a firm, co-founded by Ev Williams, that seeks to invest in startups that offer a positive social impact. Andrew Beebe, managing director at Obvious Ventures, has had a long career in solar energy.

Mosaic has said that it plans to originate about $1 billion in residential-solar loans in the coming 12 months. It secured $200 million in credit from DZ Bank as the lead lender earlier this year. NY Green Bank also participated.

The company’s business model is built around allowing people to own their own solar systems. That contrasts against the predominant model of financing residential solar under lease programs in which homeowners rent the solar power their properties generate.

Privately held GreenSky LLC and Spruce Finance Inc., backed by Kleiner Perkins Caufield & Byers, also operate in the category. Earlier Mosaic investors include Spring Ventures, Serious Change, Blue Haven Initiative and Bronze Investments.

Colorado Inquiry Prompts Avant to Rejig Bonds, Kroll Says, (PeerIQ), Rated: AAA

Avant Inc., the online lending marketplace, removed unsecured consumer loans made to Colorado residents from a securitization deal after a state regulator sought information about its lending policies, according to Kroll Bond Rating Agency. Colorado concluded that loans mad to its residents must comply with its lending statutes, even if the debts originate through partner banks in another state, as Avant does in Utah, Kroll said in an Aug. 2 report. Such statutes include usury laws and restrictions on late fees and other charges, Kroll said in its evaluation of an upcoming $200 million securitization to be sold by Avant. “In light of the letters from the Colorado regulator, Avant has removed all loans made to Colorado residents,” Kroll said. Carolyn Blackman Gasbarra, a spokeswoman for Chicago-based Avant, declined via e-mail to comment while the deal is pending. Kroll said Avant is “proactively addressing any regulator concerns.” Sheila Bair, the former head of the Federal Deposit Insurance Corp. and a frequent proponent of tougher regulation, was added to the company’s board earlier this year.

Inside CommonBond’s 401(k) platform for student loan debt, (Tradestreaming), Rated: AAA

In July 2016, student loan platform CommonBond acquired online loan repayment advisor Gradible. The acquisition of Gradible, which uses an algorithm to recommend what the best repayment options are for student loan borrowers, has enabled CommonBond to roll out a new platform that it’s calling the 401(k) for student loans.

The 401(k) platform will enable employers to contribute to their employees student loans just as they contribute to their employees’ retirement. “What the acquisition of Gradible allows us to do is to marry up certain technologies that they’ve built with technologies that we’ve already built to accelerate the platform,” said David Klein, co-founder and CEO of CommonBond.

Gradible’s merger with CommonBond was two years in the works. A personal connection lead CommonBond to partner with the software company, becoming one of the refinance options Gradible offered on its platform. Eventually, CommonBond’s desire to expand its reach together with Gradible’s intention to accelerate its vision led to the merger.

Klein believes that bringing Gradible in-house will enable CommonBond to reach and meaningfully impact every one of the over 40 million Americans saddled with student debt, and to a certain extent this is true. As a student loan reassessment tool, Gradible can help students discover alternative ways to manage their debt, such as income-based repayment and public service loan forgiveness.

But the 401(k) will ultimately serve the “top talent”, who are the most likely to make it out of student debt in the first place.

CommonBond had one company ask it to implement the platform for them, and Klein has also piloted the 401(k) at CommonBond itself – much to its employees’ delight.

While the CommonBond-Gradible marriage can’t fix what’s broken with the student loan industry at large, its 401(k) product is opening up the traditional closed lender-borrower relationship to employers. So far, this threesome has benefited the entire loan ecosystem: lenders are getting repaid faster, employees are happier, and employers are meaningfully participating in their employees’ financial lives.

Online Lenders Have a Tough Job Ahead, (Wall Street Journal), Rated: AAA

LendingClub Corp. and OnDeck Capital Inc. have suffered through growing pains this year.

They each report second-quarter results Monday [Comment: today].

Jefferies closes Lending Club bonds sale, (Financial Times), Rated: A

Comment: our readers are familiar with this information from last week’s Monday Lending Times. I believe a reminder is a good idea though.

Jefferies has closed a private sale of bonds backed by personal loans originated by Lending Club, marking a step in the rehabilitation of the scandal-hit online lender ahead of its second-quarter earnings. Meanwhile, the Jefferies-led deal is “very positive” for the online-lending industry, said James Gutierrez, chief executive of Insikt, a platform that has sold bundles of Lending Club and Prosper loans to wealthy individuals.

Three months on, Jefferies has sold $105m of bonds backed by Lending Club loans, offering yields of 3.75 to 6.5 per cent.

Offers of unsecured personal loans sent out in the mail dropped 19 per cent in the second quarter from the first quarter, to 507m, according to Mintel Comperemedia, a market intelligence agency. All told, the industry has sent out 4.44bn loan offers to consumers over the past two years, peaking at 749m in the fourth quarter last year.

Goldman Sachs, which had been preparing a securitisation of prime loans from Lending Club before the scandal blew up in May, is prepared to bide its time, according to a person briefed on the bank’s plans.

MPOWER Brings on SoFi and Student-Lending Veteran Renee Suryan as Director of University Relations, (PR Web), Rated: A

Comment: Please see the Lending Times article on MPOWER here.

MPOWER Financing is pleased to formally announce the addition of Renee Suryan to its team. With more than 20 years of experience in student lending, including 10 years as a financial aid administrator, she joins MPOWER as Director of University Relations. Currently growing at a rate of 40 percent month-over-month in loan volume, MPOWER projects it will have more than 200 school partnerships and 21 state licenses by the end of 2016.

MPOWER Partners with FUTR to Support Domestic and International Student Loans, (PR Web), Rated: B

MPOWER Financing today announced that it is partnering with FUTR Corporation to provide superior loan servicing and support to MPOWER borrowers.

FUTR is a privately held and venture-backed higher education finance provider headquartered in San Francisco, with an operational hub in Bryan, Texas. FUTR is focused on bringing together modern technology and quality service to provide new levels of transparency and insight that borrowers need to optimally manage their financial future.

The Time To Start Thinking About Repaying Student Loans Is When You Take Them Out, (Forbes), Rated: B

Comment: article written for borrowers. Probably not useful to our readers.

Credible.com is a multi-lender student loan marketplace. One issue that’s underappreciated is that the time to start thinking about repaying your student loans is not when you graduate, but when you take them out.

The 27 fintech unicorns from around the world, ranked by value, (Business Insider), Rated: AAA

Comment: Article would have deserved to be in an international section. However it is only marginally relevant to our readers and we prefer not focus our newsletter on this article. Hence we located it at the end of our US section.

An interesting list. Many of our own industry participants are present. However I had not heard of a few of them. Worth a read.

United Kingdom

VPC Specialty Lending Investments PLC, (VPC Specialty Lending), Rated: AAA

Comment: There is a disclaimer the readers must read and agree to before accessing this article.

In the second quarter of 2016, VPC Speciality Lending Investments PLC (“VSL” or the “Company”) delivered a net return of 0.33%. Although the return wasbelow expectations, it does not reflect what we believe will be the level of long-term returns for our shareholders given our existing portfolio and pipeline. There are several reasons for the decline in short-term performance, which are outlined below along with the steps we are taking to mitigate these factors in the near term.

The decision by U.K. voters to leave the European Union (“EU”) and the subsequent depreciation of the GBP had a negative impact on the Company’s performance as we had to maintain an outsized cash balance related to our currency hedge. Leading up to the EU Referendum, we took a conservative approach to our cash management and credit allocations. A substantial portion of our assets are held in USD and other currencies, which are hedged to GBP via forward currency swaps. The hedging program was put in place when the investments were made following the Company’s March 2015 IPO and September 2015 C share offering. Since then, due to the substantial depreciation of GBP against USD, the Company has had to deposit in cash up to 11.5% of the Company’s NAV. While the direct effect of the currency swings on our income has been limited because our non-GBP exposure is largely hedged, the obligation to settle the hedges upon expiration and the need to maintain additional liquidity in the event the GBP depreciates further has limited our ability to be largely fully invested, as we strive to be. The outlook for the GBP continues to be uncertain – several economists have set target prices for USD/GBP at $1.20 or below with a one-year time horizon – leaving us to remain conservative. We are reviewing all available options to reduce the cash drag related to the margin requirement, including a revolving credit facility for the Company.

The majority of our whole loan portfolio performed in line with our expectations, although certain positions did experience higher than expected losses.

Accordingly, we believe we are now in the period of peak losses for our portfolios (assuming static economic conditions), leading to muted NAV returns in the near term but we expect the returns to even out over the life of the investments.

As previously announced, our portfolio of Funding Circle US loans has continued to substantially underperform our expectations, a trend which continued during the quarter and created a drag on the overall portfolio. We stopped purchasing new Funding Circle US loans late in 2015 so the portfolio continues to amortize down.

We also saw a reduction in the value of three residual interests in securitizations of Avant loans that are held at fair market value.

On a more positive note, our balance sheet loan portfolio continued to show excellent performance with no impairments and coupons ranging from 12% to 16%.

  • On 26 May 2016, the Company made initial investments in West Creek Financial, Inc., a provider of point-of-sale lease-to-own financing to underserved customers enabling purchases of durable goods such as furniture, mattresses, and appliances.
  • On 30 June 2016, the Company made initial investments in Fundbox Ltd., a provider of short-term working capital advances to small and medium-sized businesses in the U.S. and the Company funded a new tranche of senior secured debt to Elevate Credit, Inc. Elevate is a provider of cash advances and installment loans to U.S. consumers.

While cash drag as a result of the currency hedge and the performance of certain whole loan investments were disappointing, we are encouraged by the performance of our existing balance sheet investments as well as the attractive terms of newer deals. In order to further demonstrate our commitment to the Company and our confidence in achieving returns of 8% or greater, we have agreed with the Company’s Board of Directors to modify our management agreement such that we will apply 20% of our monthly management fee to purchase shares of the Company at the prevailing market price on an ongoing basis, whilst the shares are trading at a discount to net asset value.

Understanding of risk remains a central issue for P2P industry, (Alt Fi), Rated: A

Andrew Tyrie, Chairman of the Treasury Select Committee, has written to the outgoing and incoming heads of the FCA – Tracey McDermott and Andrew Bailey respectively.

“Government policies to promote the crowdfunding sector may have the right intention – to increase competition in the small to medium enterprise lending market – but government tax incentives, in effect government subsidies, may be encouraging some consumers into the use of inappropriate products.”

The problem of a perceived lack of understanding of risk by investing consumers has been a common sector theme of late.

Analysis from AltFi Data illustrates that, to date, the lending performance of the largest UK platforms has delivered consistently positive net returns. Zopa, Funding Circle, Ratesetter and MarketInvoice together make up over 65% of the sector’s origination volume and lead the way when it comes to disclosure of their lending track record. 10 years of data representing that track record demonstrates that net returns have remained positive in a range of 5-6.5%. Bad debt performance has also been impressive, coming in at 5% for the worst ever annual cohort i.e. less than 1.7% annualized, and at no worse than 1.66%, i.e. less than 0.55% annualized, over the past 5 years.

Liberum Alt Fi Index. Source: AltFi.com

Assetz Capital Reports: Peer-to-Peer Lending Expected to Thrive As Bank of England Slashes Interest Rates, (Crowdfunding Insider), Rated: A

On Thursday, Assetz Capital one of the UK’s largest peer-to-peer lenders, announced it is predicting that both savers and borrowers will continue to turn to alternative finance companies in increasing numbers as Bank of England slashes interest rates from 0.5% to 0.25%.

Assetz Capital revealed, since launching in 2013, around £130 million has flown through its platform to credit-worthy borrowers, earning investors a total gross interest of more than £12 million to date and this lending is predicted to continue to rise rapidly.

Assetz Capital also predicted the number of business borrowers will also rise as a result of the cut interest rate.

Australia

Fintech B2B small business lending marketplace Bigstone raises million, (Financial Review), Rated: A

Fintech start-up Bigstone has raised $3 million from a range of investors, including ASX-listed diversified investments and venture capital firm CVC, to grow its small business lending marketplace and offer an alternative to the big banks.

Other major investors in the round were the founders of Bangkok-based fund Lighthouse Venture Partners Paniti Junhasavasdikul and Narith Phadungchai, in addition to private investors.

By the end of the year, Bigstone is hoping to have financed $10 million worth of loans to more than 200 small businesses.

A University of Sydney and KPMG study released earlier this year found that Australia’s online alternative finance market grew by 320 per cent in 2015 to $460 million, making it the third largest market in the Asia Pacific behind China and Japan.

Author:

George Popescu