Thursday July 13 2017, Daily News Digest

alternative lending deal tracker

News Comments Today’s main news: SoFi aims for 12 ABS deals in 2017. Funding Circle’s business boomed after Brexit. Dianrong acquires Quark Finance asset-origination operations. Mambu recognized as European growth excellence leader. Santander invests in three fintechs. Today’s main analysis: Europe’s alt finance market hits $9.1B in Q1. Today’s thought-provoking articles: How non-prime millennials struggle. Top 40 payments trailblazers. United […]

alternative lending deal tracker

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United Kingdom

China

European Union

International

Australia

India

Asia

Canada

News Summary

United States

SoFi preps new deal, aims for 12 in 2017 (Global Capital), Rated: AAA

Online lender SoFi is on track to sell its eighth ABS this month and is said to be looking to bring as many as 12 deals through year end across student loan refinancing and consumer loan platforms.

Money Management by Non-Prime Millennials: How They Struggle and Worry More Than Their Peers (BusinessWire), Rated: AAA

Young people have always struggled with money, but for non-prime Millennials today, managing their personal finances is especially hard, according to the final two studies in a series of Millennial-focused reports by Elevate’s Center for the New Middle Class.

According to the research, 58 percent of non-prime Millennials – those with credit scores below 700 – find themselves living paycheck-to-paycheck and 41 percent run out of money every other month, or more often.

Additional key findings include:

  • 13 percent of non-prime Millennials admit that it is difficult to predict their month-to-month income
  • 13 percent regularly overdraft their savings or checking accounts
  • 64 percent say that they have too much debt right now, twice as likely as prime
  • Only 37 percent of non-prime Millennials express any confidence that they could come up with $1,200 for an emergency expense in a month
  • Non-prime Millennials are 71 percent less likely to turn to credit cards if they needed to come up with $1,200, compared to their prime counterparts
  • Are more likely to experience unexpected car repairs or non-routine medical expenses
  • Are 45 percent less likely than prime Millennials to maintain a monthly budget
  • Are 58 percent less likely than prime Millennials to put aside money for savings

Invesco co-launches robo-advice platform for financial advisers (AltFi), Rated: A

The U.S. platform will provide a digital space for financial advisers to open new accounts.

Investment management giant Invesco is continuing its foray into digital wealth management.

The company is co-launching a U.S.-based platform for financial advisers through its wealth management solution company, Jemsteps. The site is for financial advisors affiliated with Advisor Group, an American network of independent financial advisory firms.

Funding Circle Names New Chief Compliance Officer for US (Corporate Counsel), Rated: A

Funding Circle Ltd. has named Richard Stephenson as its U.S. chief compliance officer. He joins the San Francisco-based small business lending platform after working in financial services for three decades, most recently as the CCO of Silicon Valley Bank.

Stephenson has also held various senior roles with financial institutions and in private practice, including at Bank of America, Union Bank, Washington Mutual Bank and Mechanics Bank.

For a fintech company, particularly one that partakes in lending, Hodges said it has been important to prioritize compliance, given all of the uncertainties in the regulatory space.

Sindeo is back in the mortgage business after acquisition (Inman), Rated: A

“Renren, one of Sindeo’s investors, has acquired Sindeo and all of its assets,” Nick Stamos, one of Sindeo’s co-founders, told Inman in a statement. “We are excited to work closely with the Renren team to execute on our original mission of offering homebuyers a straightforward path to home ownership and refinancing.” He did not disclose the terms or the sum of the acquisition.

Ex-Merrill Lynch FAs with $ 1B in Assets Go Indie (Financial Advisor IQ), Rated: A

A team of Merrill Lynch financial advisors has jumped ship to launch a new independent wealth management practice, according to a press release from Dynasty Financial Partners, with whom the team has partnered.

Celenza, who’s been an advisor for close to 20 years and with Merrill Lynch for six of them, says the decision to go independent was prompted in part by the ability to access “a greatly expanded selection of investment capabilities, lending platforms, sophisticated insurance products, planning resources, capital market solutions, and alternative manager opportunities.”

Treasury quietly looking at revamping CRA (American Banker), Rated: A

The Treasury Department is embarking on an effort to revise the implementation of the Community Reinvestment Act, a law many community groups say is out of step with modern banking practices and that institutions say has devolved into a compliance exercise.

Tucked away in Treasury Department’s regulatory reform report released last month was a nascent effort to reform the way regulators implement the CRA — a law intended to compel banks to offer loans and financial services to low- and moderate-income areas.

Backed by Israeli Bond Funds, Moinian Capital Partners Rides the Nonbank Lending Wave (Commercial Observer), Rated: A

When the Moinian Group tapped Morgan Stanley and UBS alumnus Jonathan Chassin to lead its newly formed real estate lending platform, Moinian Capital Partners, in February, it was a testament to the Joseph Moinian-led firm’s ambitions to become the latest developer to expand its business into the realm of financing.

Thus far, Moinian Capital Partners has sought to focus its energies on “smaller, $50 million to $100 million development deals where we can quote the whole loan,” Chassin said—the sorts of projects that often have greater difficulty securing funds from more established debt lenders.

The operation is also finding success in the market for mezzanine debt, where its flexibility as a nonbank means it can provide “additional terms that other lenders don’t,” Chassin said. “Where banks and traditional mezz funds are doing five-year deals as a rule, we can quote six- or seven-[year terms]. We can do bridge deals because we understand the basis and understand the market.”

Coinsource Launches Five Bitcoin ATMs in Phoenix (Crowdfund Insider), Rated: A

Coinsource, a bitcoin ATM network, announced on Monday it launched five new machines in Phoenix Metropolitan Area, marking its first venture into Arizona. According to the company, the bulk installation caps off a strong first and second quarter, with it installing 50 machines so far this year, now with a portfolio of 116 machines across 10 states. The five new Bitcoin ATMs have been installed in Phoenix, Peoria, and Mesa.

CrediFi enables real time streaming of real estate deal and client data directly into Salesforce (PR Newswire), Rated: A

CrediFi Corp., the market intelligence and deal discovery engine for commercial real estate (CRE) finance, has announced the launch of a new solution that seamlessly streams CrediFi data into the Salesforce® CRM platform with the click of a button.

CrediFi simplifies the work of CRE dealmakers by serving as the one-stop-shop for data and analytics on commercial properties and loans as well as CRE owners and lenders. Now, CrediFi enables users to sync its vast repository of CRE data seamlessly and directly into Salesforce.

The launch of CrediFi for Salesforce® follows the April launch of CredifX, an online marketplace for CRE financing, and CrediFi recently secured $13 million for its Series B funding.  Michael Helpern has joined CrediFi’s team as Head of Strategy, and will oversee further innovation of solutions for this market. Mr. Helpern brings with him over a decade of experience in commercial real estate brokerage, at firms including Marcus & Millichap and CBRE.

Thales provides database encryption solution for Beyond Platform’s peer-to-peer lending service (PR Newswire), Rated: A

Thales announces internet-based financial services technology company Beyond Platform has adopted Vormetric Transparent Encryption from Thales to deliver a secure credit evaluation model for its peer-to-peer (P2P) lending platform.

Beyond Platform wanted to implement a data security system that offered a security level required by the major banks in order to comply with the Personal Information Protection Act (PIPA) in South Korea. In addition, the solution needed to pass a security review by NongHyup Bank (an agricultural and retail bank in South Korea)  with whom Beyond Platform was developing a joint P2P lending service. Beyond Platform adopted Vormetric Transparent Encryption from Thales to encrypt structured and unstructured data in an enterprise system. As a result, it met the database encryption requirements and passed the bank security review, opening the floodgate for developing and launching P2P services. In addition, the company has built a reputation among customers as a reliable and safe P2P provider.

Vormetric Transparent Encryption is a kernel-level encryption solution that encrypts all file types including logs and images as well as database data, so there is no need for enterprises to purchase a separate encryption solution for database encryption and unstructured data encryption.

EPHESOFT SECURES $ 15M SERIES A FUNDING FROM MERCATO PARTNERS (Ephesoft), Rated: A

Ephesoft Inc., the developer of document capture and analytics solutions that extract meaning from unstructured content, today announced that it has completed a $15 million Series A financing round. Mercato Partners, a trusted growth capital partner, is the exclusive investor in this round. The investment will be used to accelerate Ephesoft’s product development while expanding operations, market presence and sales channels. Joe Kaiser of Mercato Partners will join the Ephesoft Board of Directors as part of the investment.

Founded in 2010, Ephesoft has developed advanced machine learning solutions that capture, extract and analyze unstructured content. The company has over 500 customers globally ranging from financial services, Federal government, insurance, mortgage and healthcare sectors.

Why Chicago is the best city to launch a fintech company (Crain’s Chicago Business), Rated: A

Chicago was recently ranked among the top five global fintech hubs by Deloitte and the Global FinTech Hubs Federation, thanks in part to FinTEx Chicago’s strong advocacy. Further, fintech and financial services companies even account for 14 percent of the 50 fastest-growing companies in the region, according to Crain’s 2017 Fast 50.

And most important, the financial sector is driving real job growth in the city. The U.S. Bureau of Labor Statistics reported that as of March, year-over-year employment in Chicago’s financial sector grew 3.6 percent—more than double gains in the next-highest industry. That also trounces growth of 2.2 percent in the financial sector nationally.

AlphaFlow Launches “Tax Implications of Crowdfunding” eBook (Benzinga), Rated: B

To help investors more effectively evaluate real estate crowdfunding investment opportunities and their potential tax implications, AlphaFlow has released its inaugural eBook: “Tax Implications Of Crowdfunding.” This 23-page eBook, written by AlphaFlow and Sundin & Fish, CPA, closely examines the top tax issues investors must consider as they invest across the real estate crowdfunding industry.

  • A few of the topics discussed in this eBook include:
  • Types of crowdfunding platforms
  • Differences between debt and equity deals
  • Federal and state tax issues
  • Pros and cons of using self-directed IRAs
  • Unrelated Business Taxable Income (UBTI)
  • Tax planning and strategies

Ballard Spahr closes San Diego office (Bloomberg Law), Rated: B

Ballard Spahr, which recently lost two partners to Dinsmore & Shohl, said it has closed its office in San Diego, transferring other lawyers from the city to its Los Angeles office. (Legal Intelligencer)

United Kingdom

Funding Circle CEO Says Business Boomed After Brexit (Bloomberg), Rated: AAA

ThinCats teams up with Alderburn Finance to fund Scottish marine trainer (P2P Finance News), Rated: A

THINCATS has sealed a deal with commercial finance broker Alderburn Finance and Stream Marine Training (SMT) to help the latter step up its cost efficiency and growth plans.

The peer-to-peer lending platform, which channels funds to small- and medium-sized enterprises, will help the Scottish training specialist cut time and overall costs as it plan to boost its consultancy services to the global maritime, oil and gas, renewables and construction sectors.

Edinburgh-based Alderburn Finance acted as a loan sponsor, as it vetted the borrower’s funding application and assisted ThinCats in the origination process.

Navigating a complex market (P2P Finance News), Rated: A

Despite being around for many years, direct lending, which also encompasses peer-to-peer (P2P) lending, has only recently been recognised as a mainstream asset class.

There are several fundamental things to consider if you are thinking about direct lending as an addition to your investment portfolio.

  • Your objectives: Be clear about your objectives and your appetite for risk. Why are you investing?
  • Timing: Investing in direct lending can be more effective if you keep your money invested for at least 12 months.
  • Diversification: Diversification is also an effective tactic.
  • Loan opportunities: A good rule of thumb is to use the RADAR principle: reason, assets, duration, amount, repayment.
  • Investing for Capital Growth or Income: The concept of compounding applies to direct lending in the same way as other investments.
  • Taking control: Finally, it’s good to stay pro-active.

 

China

Dianrong Acquires Asset-Origination Operations of Quark Finance (PR Newswire), Rated: AAA

Dianrong today announced the acquisition of Quark Finance’s asset-origination operations, including the new Credit Studio platform. This transaction will significantly expand and strengthen Dianrong’s existing asset-generation capabilities across China.

Quark Finance operates 71 borrower service centers in 47 Chinese cities. These centers provide comprehensive loan underwriting data collection and servicing. Dianrong already operates 28 technology-enabled borrower service centers in 27 cities in China.

Additionally, Quark Finance owns and operates Credit Studio, a platform that provides data analysis through automated and human interactions to achieve mass-production credit evaluations and processing. Credit Studio leverages Dianrong’s technology to minimize manual activities and lower operational risks, expenses and processing time. Marketplace-lending assets generated by Credit Studio are available to Dianrong and Quark Finance lenders.

By combining Quark Finance’s borrower network with Dianrong’s existing local footprint and fintech capabilities, Dianrong is adding significant scale to its overall asset-generation capabilities. The combination also adds new distribution channels for Dianrong’s borrower lending products and services.

Wang Zhengyu: It will take more time to make profit for China Rapid Finance (Xing Ping She), Rated: A

Recently, China Rapid Finance held a media briefing on IPO issues and Q1 financial report. Just before the meeting, Wang Zhengyu, the CEO of China Rapid Finance, revealed that the company currently is still in the loss. Although, it doesn’t mean a bad management for the company, it’s just a problem of time to make money.

In Q1 2017, China Rapid Finance’s net loss is $149 million, decresed by 46 percent on the basis of the earlier time. The net revenue is $10.5 million, declined by 20 percent compared with the beginning of the year. In fact, China Rapid Finance has been being losed for two consecutive years, the loss amount in 2016 and 2017 were $33.366 million and $3002.6 million respectively. In 2014, the profit was only $131,000.

European Union

MAMBU RECOGNISED AS EUROPEAN GROWTH EXCELLENCE LEADER (Financial IT), Rated: AAA

Mambu, the SaaS banking engine powering innovative loan and deposit products, today announced that they have been named the European Growth Excellence Leader for Native Cloud SaaS Banking and Lending by research and consulting firm Frost & Sullivan.

Frost & Sullivan’s global team of analysts and consultants research a wide range of markets across multiple sectors and geographies identifying companies that maintain consistently high standards for delivering customer value, which translates into growth above the industry average.  The award recognises the company which excelled in driving growth and is best-in-class in three key areas: meeting customer demand, fostering brand loyalty and carving out a unique, sustainable market niche.

Santander Buys Stakes in Three Startups as Botin Pushes Into Fintech (Bloomberg), Rated: AAA

Banco Santander SA, Spain’s biggest lender, bought minority stakes in three financial-technology firms as Chairman Ana Botin makes machine learning a hallmark of her growth plan.

Pixoneye’s algorithms can build a profile of a consumer from photographs stored on his or her smartphone or other device, while Gridspace utilizes artificial intelligence to analyze the sentiments of people on phone calls with customer service representatives.

Europe’s alternative finance market hits $ 9.1 billion in first quarter (Consultancy.uk), Rated: AAA

The alternative finance economy for mid-market players across Europe hit $9.1 billion in closed deals across the first quarter of 2017. Deal activity in the relatively new segment hit more than a 1000 accumulative deals this year, with the UK remaining out ahead in terms of closed deals – at almost 400. Fundraising for buyouts remains the driving force for turning to alternative lending platforms.

In response to demand, marketplace lenders (MPLs) have sprung up – usually as online platforms – which, through a range of new mechanisms, offer an easy means for peer-to-peer lending across a range of segments – with low returns on other forms of assets continuing to entice investors to the market.

Source: Consultancy.uk

In total around 1011 deals were completed in the past 18 quarters across the burgeoning market, with 612 of those in Europe and 399 in the UK – making the UK by far the largest contributor in terms of activity.

In the UK the most deals took place in the technology, media & communications segment, at 19% of all deals, followed by the business, infrastructure & professional services segments, at 18%. Human capital represented 6% of deals in the UK, while financial services firms accounted for 10% of closures.

Source: Consultancy.uk

ECN Reminder to Complete Cross Border Crowdfunding Survey (Crowddfund Insider), Rated: A

The European Crowdfunding Network (ECN) is reminding alternative finance industry types to complete the survey on cross-border crowdfunding and online lending (IE P2P lending, marketplace lending etc.).  The survey deadline is 12 Noon this Friday, July 14th.

The survey focuses only on crowdfunding models that entail a financial return, notably:

  • investment-based crowdfunding (where companies issue equity or debt instruments to crowd-investors through a platform) and
  • lending-based crowdfunding (where companies or individuals seek to obtain funds from the public through platforms in the form of a loan agreement)

Paycock Enters Russian Fintech Market with Its Convenient Mobile Payment Service (MarketWatch), Rated: A

The K-ICT Born2Global Centre, a major Korean government agency under the Ministry of Science, ICT and Future Planning (MSIP), announced that Paycock, one of its member companies, has signed a business MOU with AEB IT, a Russian financial IT corporation. As a result, Paycock will now begin commercializing its mobile payment solution to satisfy the needs of the Russian financial market, which is expected to undergo rapid growth in the near future.

Paycock Check is a mobile payment service that does not require a card-reading device, as the entire payment process is conducted using only a smartphone camera and near field communication (NFC) technology.

Fintech lender strikes partnership with major Italian bank (AltFi), Rated: A

iwoca has announced a strategic partnership with Italy’s Intesa Sanpaolo. The fintech lending platform will now sell its credit products into the Italian banking group’s SME client-base.

Intesa Sanpaolo is one of the biggest banking groups in Europe, with a market capitalisation of €42.7bn. The company boasts over 11.1 million customers in Italy alone, but is also active across Central Europe, Eastern Europe, the Middle East and North Africa.

International

Top 40 Payments Functions Trailblazers (Everest Group), Rated: AAA

Australia

Why a majority of Australians don’t know about peer-to-peer lending (news.com.au), Rated: A

New research by Finder.com.au has found despite the sector growing from one to eight lenders since it launched in Australia in 2012, 65 per cent of consumers don’t know about it and women are less likely than men to understand and use it.

Finder’s research found that only 8 per cent of women would consider using a P2P lender, compared with 20 per cent of men, and three-quarters of women do not know what it is.

Finder’s data shows 63 per cent growth in P2P users in the past six months, while data from some providers shows 195 per cent growth last financial year.

India

Accel-backed Good Methods Global acqui-hires fintech startup Save Your Money (VC Circle), Rated: AAA

Save Your Money (SYM), a fintech startup that offers an automated micro-saving platform, has been acqui-hired by health-tech startup Good Methods Global (GMG), a company statement said.

What is LoanAdda doing to make itself profitable in a crowded market? (Your Story), Rated: A

But all this was far from the mind of Anshuman Mishra (39), when he set up LoanAdda in 2015 to make loans available to large sections of people left out from the purview of the informal and formal banking channels.

As someone who was responsible for managing ICICI Bank’s priority sector lending business, he was acutely aware of the limited access to credit for unbanked customers and poor guidance in facilitating loans.

Today, 78 percent of LoanAdda’s customers are first-time loan takers. Moreover, LoanAdda’s technology algorithm follows its own logic while measuring the eligibility of a certain customer to take loans and throws up the best possible product to the consumer.

Currently, LoanAdda has tie-ups with more than 42 banks to provide home, business, personal, gold and collateral loans on its platform. Through a partnership with India Infoline, an NBFC, the company also gives out its own loans.

Anshuman says that 50-60 percent of LoanAdda’s customers are salaried people with a monthly salary of less than Rs 40,000. The average ticket size is Rs 3.39 lakh for unsecured loans and Rs 34 lakh for secured loans. However, 70-75 percent of all loan takers on the platform get loans of less than Rs 30 lakh.

Why Indians Should Invest in Peer-to-Peer Lending (BW Disrupt), Rated: B

Online peer-to-peer lending as a prospective investment class offers many unique propositions.

  • Net Returns and Interest Yields

While savings accounts or fixed deposits usually yield interest rates of 6% to 8% on average, Mutual funds on the other hand, offer returns averaging at 9% to 13%, with some funds yielding up to 15% p.a. Compare this to online P2P loans, which can generate average net returns of 18% to 22% p.a for lenders.

  • No Lock-in period, enjoy benefits of compounding interest
  • Risk Mitigation

As with any debt-based investment, there is a risk of default in online P2P lending as well. But since the premise on which P2P lending is based is similar to that of debt instruments, the capital risk is lower, and there are ways to mitigate it. One of these is diversification.

Asia

Singapore and Thailand Central Banks Unite in FinTech Deal (Cryptocoins News), Rated: AAA

The Bank of Thailand (BOT) and the Monetary Authority of Singapore (MAS) have entered a FinTech Cooperation Agreement (CA) to further develop and enhance the existing financial ecosystem in the ASEAN region.

The agreement aims to “develop a richer financial ecosystem” in both countries and South-East Asia, an announcement revealed. As per the agreement, both central banks will also share information on new and emerging market trends in an era of micro-financing and digitization as well as their impact on traditional regulatory practices.

Vertex Ventures invests $ 2m in Turnkey Lender (Deal Street Asia), Rated: AAA

Turnkey Lender, a cloud- based loan management system, has raised $2 million venture investment from Vertex Ventures. The venture offers a SaaS solution that employs machine learning and data analysis to understand potential loan applicants, ranging from small scale to large scale loans.

Turnkey Lender has previously received seed funding from SMRK VC Fund. The initial development for the company was done in the Ukraine, where it has its roots. It is currently headquartered in Singapore, where the team believes that can have greater flexibility in approaching the different financial needs of their international clients.

Investment proceeds will be used to engage in expanding business operations across the region, product development and talent acquisition. The company told DEALSTREETASIA that the primary growth markets it if focusing on are Indonesia, Philippines and Thailand.

Bank Mandiri invests in cashless payment startup (Nikkei Asian Review), Rated: A

The venture capital unit of Indonesia’s largest lender by assets, Bank Mandiri, on Wednesday said it is leading a $2 million funding round for local financial technology startup Cashlez, which claims to offer a portable, more user-friendly alternative to electronic data capture machines.

Cashlez’s “mobile point of sales” system runs on a slim card-reader device operated with a smartphone application.

Canada

John D. Orr, Senior Banker and Investor, Joins FutureVault as Chief Executive Officer and a Significant Investor (PR Newswire), Rated: A

FutureVault, a personal and business information management company, has named banking executive, lawyer, entrepreneur and investment professional John D. Orr as Chief Executive Officer. In addition to joining the management team, Mr. Orr has made a significant personal investment in the Company for a material ownership position.

Launched commercially in North America in late 2016 after two years of development, FutureVault has created an advanced cloud-based information management platform with patents pending. In an increasingly digital world, characterized by volume, complexity and risk, FutureVault’s secure platform provides both individuals and businesses with the tools and intelligence to select, retain and optimize all their information. The platform represents a new category: an intelligent, secure, encrypted, auditable repository for all the information in one’s life or business. FutureVault’s product suite and feature set accommodate a broad range of customer information management needs, from a relatively straightforward individual’s requirements to those of a multi-jurisdictional business or a large family office.

Authors:

George Popescu
Allen Taylor

Thursday June 15 2017, Daily News Digest

big bank loan approvals

News Comments Today’s main news: Patch of Land expands debt facility to $30M. Over 3,500 firms give up permission to advise on P2P agreements. Tencent leads $146M in startup called Futu. Old technology costs Australian advice industry. Today’s main analysis: May 2017 loan approval rates drop at banks, alt lenders. Today’s thought-provoking articles: Why banks are going to survive […]

big bank loan approvals

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News Summary

United States

Patch of Land Expands Debt Facility With SF Capital to $ 30 Million (Digital Journal), Rated: AAA

Patch of Land, an online real estate lending marketplace using a technology-rich crowdfunding platform, has expanded its senior warehouse debt facility with SF Capital from $10 million to $30 million. SF Capital, a private investment firm with a flexible, long-term investment focus, began its lending relationship with Patch of Land in 2015.

The expanded debt facility provides Patch of Land greater flexibility in funding loans to support the company’s growing mortgage loan origination volume. It also complements the company’s robust crowdfunding network and enables Patch of Land to expand its pre-funding efforts to continue to meet the unique lending needs of real estate investors. The move is part of company initiatives designed to improve the borrowing experience for real estate entrepreneurs and, at the same time, expand access to residential and commercial real estate investing.

Loan Approval Rates Drop at Banks and Alternative Lenders in May 2017 (Biz2Credit), Rated: AAA

Loan approval rates at big banks ($10 billion-plus in assets), small banks, alternative lenders and credit unions dipped slightly in May 2017, according to the latest Biz2Credit Small Business Lending Index, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com.

Small business loan approval rates at big banks fell two-tenths of a percent from April’s 24.3% figure, a post-recession high, to 24.1% in May 2017. The drop comes after approval rates at big banks climbed for most of the year.

Loan approval rates at small banks also dropped in May to 48.8%, down from April’s 49% figure. Small banks have flirted with the 50% mark, but have not reached it since October 2014.

Institutional lenders loan approval rates in May improved slightly to 63.8%, another new high on Biz2Credit’s index. It marked the fifth time in the past six months that this category of lenders showed an increase in funding approval percentages.

Loan approval rates dropped at alternative lenders by two-tenths of a percent in May, as non-bank lenders granted 57.7% of the funding requests. This marks nearly one year of consecutive decreases for this category of lenders.

Loan approval rates at credit unions dropped one-tenth of a percent in May to 40.5%, another new low for this category of funders on Biz2Credit’s index.

Why Banks Are Going To Survive (Forbes), Rated: AAA

In 2016 alone, global venture investment in fintech grew by 11% to $17.4 billion in 2016, according to data provided by PitchBook.

Platformification is the bundling together of multiple services onto one online platform, and provides an efficient, automated and integrated customer experience.

Why does platformification matter now?

However, 59% of banks (according to an Accenture study) are creating full-stack platforms.

Banks must effectively bundle multiple online products together and monitor how customers interact with those products to deliver a differentiated and compelling customer experience, ultimately affecting their bottom line. According to Gartner, we are just at the beginning of this trend, as it predicts that by the end of 2019, 25% of retail banks will use startup providers to replace legacy online and mobile banking systems.

LendKey is leading the movement

LendKey pioneered the “lending as a service” model back in 2009 and already works with nearly 300 banks and credit unions nationwide to create custom, white-labeled online lending platforms.

Among the hundreds of credit unions and banks using LendKey’s tailor-made platformification service are Navy Federal, WSFS Bank and McGraw-Hill Federal Credit Union. When a student decides to take out a loan on Navy Federal’s website, the customer experiences platformification without knowing it in the form of a lending portal from LendKey, an ID portal from IDology and a signing portal from DocuSign, yet all three are delivered via a seamless process.

How the industry applied platformification

Aside from LendKey, Wells Fargo has distinguished itself in the industry as being particularly open to platformification.

Now, through platformification and customer demand, SigFig allows Wells Fargo customers to build, implement and rebalance tailored portfolios online, based on responses to investing questionnaires.

Because of platformification, banking has essentially been reinvented. Banks and financial service providers are no longer constrained by slow and inconvenient systems.

Avant, for instance, successfully launched their first bank partnership in September 2016 with Birmingham-based Regions Bank, a top 20 bank with over $136 billion in assets under management.

Online lenders haven’t been verifying income and employment on their loans(Business Insider), Rated: A

Prosper Marketplace and Lending Club, two of the largest players in the online personal loan business, don’t always verify key borrower information like income and employment, according to a report from Bloomberg’s Matt Scully.

Prosper told Bloomberg that it verifies identities and bank accounts for all of its loans, and that it has “developed some of the industry’s leading risk-mitigation controls.”

A Lending Club representative told Bloomberg that the company uses “machine learning and other techniques to build robust models that segment which borrower applications need verification and which do not.”

As Much as They Try, Non-Prime Millennials Struggle to Make Financial Progress (BusinessWire), Rated: A

According to the research, 44 percent of non-prime Millennials conducted personal research about how to manage their own finances, compared with 47 percent of prime Millennials. Despite these nearly equal efforts, non-prime Millennials – those with credit scores below 700 – are twice as likely to experience significant stress due to their finances and are about half as likely to feel satisfied with their financial situations.

The root of these challenges may come from how non-prime Millennials were taught about personal finance early in their lives. The study also found that non-prime Millennials:

  • Didn’t benefit as widely as their prime counterparts from seeing how their parents managed their finances, with only 49 percent stating they learned from their parents’ example, as opposed to 61 percent for primes
  • Were less likely to be actively taught financial management skills from their parents, with 1 in 5 receiving this parental education, compared to one in three of their prime counterparts who received instruction at home
  • Are more likely to learn financial skills via trial and error (72 percent, compared with 41 percent of prime), which may explain how some Millennials became non-prime – learning by trial and error means non-prime Millennials likely made more mistakes that damaged their credit, as opposed to prime Millennials who may have avoided those mistakes altogether

New Lending Club ABS deal structure a draw for investors (Global Capital), Rated: A

All loans securitized in the transaction are whole loans purchased through a pro-rata allocation of the ‘near-prime’ loans originated on the platform by seven third parties unaffiliated with Lending Club, according to a Kroll presale report.

ABS investors told&nbsp;<i>GlobalCapital </i>they were receptive to the online platform’s decision to do ….

LendingTree unveils its own Zestimate-style home valuation tool (Housingwire), Rated: A

The new valuation tool is from LendingTree, which announced Wednesday that it is rolling out a new home valuation feature within its financial intelligence platform, My LendingTree.

According to details from the company, any of My LendingTree’s 5 million current users (or anyone else who signs up for the service) will now have the ability to get a valuation of their home within LendingTree’s system.

The company says that its home valuation tool “leverages a proprietary home valuation model that estimates home value by accessing third party data and tracking it to visualize the user’s home value data trends over time.”

According to details from the company, My LendingTree users that have a mortgage have an average home value of $310,000 and an average mortgage balance of roughly $178,000, which translates into roughly $132,000 of “untapped home equity” on average.

And the company wants to help its users “tap into” that home equity.

As seen in the image below, users are then shown the total equity they have in their home and encouraged to get a home equity loan, if they are interested.

According to LendingTree, the company “has facilitated more than 65 million loan requests” since its inception, and the company’s network currently includes more than 500 lenders offering home loans, personal loans, credit cards, student loans, business loans, home equity loans/lines of credit, auto loans and more.”

IBM intros first suite of tools from Watson Financial Services (ZDNet), Rated: A

IBM has since leveraged the industry expertise of Promontory’s workforce — made up of ex-regulators and banking executives — to teach Watson all about regulation, risk, and compliance. The first batch cognitive tools covers three areas: Regulatory requirements, financial crime insights, and financial risk modeling. The Watson-powered software is available today via the IBM Cloud.

How a Betterment GM made her way out of banking and into startupland (Built in NYC), Rated: A

Loh was hired to launch Betterment for Business just over a year ago, and now, Betterment for Business’s management team is completely women-run. They work with over 400 companies and are growing at a fast clip.

What made you decide to make a career switch into fintech?

I spent a decade in asset management and I was considering a couple of different factors. I took a hard look at the trends going on in the industry and saw how technology was affecting finance. Then, I looked at my own experience to make sure I had utility for the next 30 years of my working career. That’s when I made the move into the tech sector.

What advice would you give to people thinking of making the switch from traditional financial services into tech?

For me, it was all about looking at the financial services industry. I would recommend reading Reid Hoffman’s ‘The Start-up of You,’ which asks you to look at your life like a startup. It makes you question things like what skills you need to acquire and where do you need to raise capital. Something I always hear from candidates is that they’re not ready to take that risk. My advice to make sure you’re thinking of risk in the right way. Staying at a big bank in the short term is secure, but in the long term, will you have a skill set that anyone wants to hire?

5 Tips for Real Estate Crowdfunding (U.S. News), Rated: A

To invest in real estate, you can do it the old-fashioned way, buying a property with a loan or cash, then collecting rent or fixing it up to sell. Or you could invest in a real estate investment trust, a kind of fund that buys residential, commercial or industrial properties.

Or you could do it the 21st century way, with a real estate crowdfunding company, which pools investors’ funds to make loans to home flippers or to buy residential and commercial properties. Interest and rent earned on those deals is passed back to those who supplied the money.

Most platforms have been limited to “accredited investors” – people with at least $1 million in liquid assets or annual income of at least $200,000. But rules are changing fast, so stay tuned if you don’t qualify now. Realty Mogul and Fundrise allow non-accredited investors.

One of the industry’s big names, RealtyShares, currently offers a number of opportunities with handsome projected returns if all goes as planned, such as 9.5 percent on a Church’s Chicken restaurant in Huntsville, Alabama, 11 percent on a single-family home in Jacksonville, Florida, and 14 percent on a home being built in Los Altos Hills, California.

  1. Know the rules. Most experts urge investors to consider real estate crowdfunding to be a long-term investment, since real estate holdings and debt are not as liquid as stocks, bonds or mutual funds. Equity real estate investments are considered long-term holdings, while debt investments may produce returns more quickly, but pay less in the long run.
  2. Watch for risk.
  3. Don’t overdo it. This is a new industry and sure to experience growing pains, so don’t bet the farm.
  4. Don’t get greedy. As with other investments, higher returns generally come with greater risks. The real estate market could sour, rising interest rates could undermine property values, the borrower may turn out to be less competent than your site thought, especially if the project involves a fix and flip.
  5. Know your partners. Obviously, it’s important to research the platforms you use, but also dig for information on the other investors.

Cetera Financial Institutions introduces insurance-focused portal for bank and credit union-based financial advisors and clients (CUInsight), Rated: A

Cetera Financial Group® (“Cetera”)*, a network of independent firms supporting the delivery of professional financial advice through trusted financial advisors and financial institutions, and Cetera Financial Institutions (“CFI”) today announced the launch of a new portal designed for CFI-affiliated advisors and clients to streamline and simplify the process of identifying and purchasing insurance solutions. Cetera Financial Institutions is the Cetera firm specifically focused on serving the wealth management programs of banks and credit unions.

The portal was developed in coordination with Covr Financial Technologies, an innovative technology firm that provides consumers with access, education and the ability to purchase insurance policies in conjunction with financial advisors.

CFI’s new insurance portal is designed to increase application processing speed and improve case management efficiency for advisors, among other functions.  It also creates a more simplified and straightforward experience for both advisors and clients in identifying and purchasing life, long-term care, disability and other forms of insurance. The CFI-branded portal functions as an integrated offering within Cetera’s existing SmartWorks® advisor workstation, and has been custom-built to serve the needs of the full Cetera Financial Institutions insurance team — from sales to operations to case management. Cetera anticipates incorporating the insurance portal into its MoneyGuidePro® financial planning solution within the next month.

Schwab Sees FAs Adding Services Without Upping Fees (Financial Advisor IQ), Rated: A

Moreover, 79% of advisors believe there will be more opportunities than challenges in the next 10 years, the survey found.

But 44% of advisors say they’re providing additional services to their clients without charging them, while 40% say they’ve been spending more time on each client but haven’t raised their fees, according to Schwab.

In addition, 24% of advisors believe that investing in technology to build scale isn’t offsetting the expense, the survey found. Nonetheless, most advisors are still confident technology will help them: 76% think technological advances will let their companies stay ahead of the competition, according to Schwab.

Treasury Report Seeks to Deliver Regulatory Relief to Banks & Credit Unions (Crowdfund Insider), Rated: A

Treasury’s recommendations relating to the reform of the banking sector regulatory framework may be summarized as follows:

  • Improving regulatory efficiency and effectiveness by critically evaluating mandates and regulatory fragmentation, overlap, and duplication across regulatory agencies;
  • Aligning the financial system to help support the U.S. economy;
  • Reducing regulatory burden by decreasing unnecessary complexity;
  • Tailoring the regulatory approach based on size and complexity of regulated firms and requiring greater regulatory cooperation and coordination among financial regulators; and
  • Aligning regulations to support market liquidity, investment, and lending in the U.S. economy.

Global Debt Registry Announces Expansion in New York and Leadership Hire (Global Debt Registry), Rated: B

Global Debt Registry (GDR), the asset certainty company known for its loan validation expertise, today announced it is moving its headquarters to New York City as part of its overarching strategic growth initiative to be closer to the investor community. The Company also announced the addition of structured finance veteran, Michael Koenitzer, as Director of Business Development.

InstaLend: Online Real Estate Investing Made Simple (Real Estate Tech News), Rated: B

For as little as $5,000, InstaLend connects accredited investors to borrowers seeking to fund short-term residential real estate investments.

Qualified borrowers, such as property flippers use InstaLend to apply for flexible loan products including hybrid loans and Sub-630 FICO lending programs. All deals go through a vetting process when InstaLend underwrites the loan.

United States P2P Lending Market 2017 : Lending Club, Borrower, P2P Credit, Prosper, Funding Circle (OpenPR), Rated: B

The report studies the industry for P2P Lending across the globe taking the existing industry chain, the import and export statistics in P2P Lending market & dynamics of demand and supply of P2P Lending into consideration. The ‘ P2P Lending ‘ research study covers each and every aspect of the P2P Lending market United Statesly, which starts from the definition of the P2P Lending industry and develops towards P2P Lending market segmentations. Further, every segment of the P2P Lending market is classified and analysed on the basis of product types, application, and the end-use industries of the P2P Lending market. The geographical segmentation of the P2P Lending industry has also been covered at length in this report.

Top Manufacturers Analysis Of This Research Report

1. Lending Club
2. Borrower
3. P2P Credit
4. Prosper
5. Funding Circle
6. Upstart
7. Kiva
8. Zopa
9. Lendkey
10. LendingHome

Get Free Sample Copy of Report Here : www.marketsnresearch.com/request-for-sample.html?repid=11043

United Kingdom

Over 3,500 firms give up permission to advise on P2P agreements (Bridging&Commercial), Rated: AAA

A total of 3,555 firms have voluntarily given up the permission to advise on peer-to-peer agreements by cancellation or variation of permissions since April 2016.

The FCA informed B&C that around 15,000 firms were originally authorised to advise on peer-to-peer agreements.

Firms that have cancelled their permission for advising on peer-to-peer agreements include two distinct groups:

•    Those which were formerly authorised to carry out the activity, but then ceased to be regulated entities by cancelling their permissions
•    Firms which were formerly authorised to advise on peer-to-peer agreements, but removed the activity by varying their permissions while remaining to be authorised by the FCA for other activities.

Stephen felt there were a couple of key reasons why advisers may be slower to advise on the peer-to-peer space:

  • It’s a growing and complex industry with lots of operating models and different lending opportunities and risks
  • It’s not clear that existing professional indemnity insurance would cover advising on peer-to-peer lending, so this needs to be clarified ahead of an adviser undertaking these activities.

Peer-to-peer lender Relendex raises money at £6m valuation (AltFi), Rated: A

Relendex, a P2P lender focused on commercial real estate loans, has concurrently closed a rights issue and a round of financing from new investors.

The exact amount that has been raised has not been disclosed. But we do learn that this latest investment gives the company a post-money valuation of £6m, on a fully diluted basis.

Relendex intends to use the money to invest in new technology and services.

Why crowd-based capitalism has changed the economy (City A.M.), Rated: A

Unlike 19th and early 20th century evolutions, today’s technological shifts are steering us away from managerial capitalism and towards what many see as a more crowd-based iteration, Sundararajan said. Traditional hierarchical organisations and large, well-staffed companies that create goods and services are in decline. An alternative model is ascendant, one in which products are distributed not by a firm, but by a heterogeneous crowd. This economic structure blurs the lines between the personal and professional and between casual labour and full-time work.

Take Funding Circle, for example. Funding Circle provides small business loans through crowdfunded capital. Often as many as 200 people fund one loan, with some parties offering as little as £20 in exchange for a return.

Based on his research into these questions, Sundararajan believes “when we understand the evolution of trust we understand the evolution of business.” Rather than conventional handshakes and signatures, Sundararajan says that today trust develops from ‘digital cues’ — online information about individuals and organisations that we process and interpret to determine with whom to associate. Sundararajan identifies several digital cues that help us gather enough online information to inform our decisions on who to trust. These include government, third-party, or brand certification; reviews of Facebook and LinkedIn profiles; and digital peer feedback through sites like Yelp, among others.

FCA says banks won’t fill advice gap (FT Adviser), Rated: A

Banks are not a panacea to the problems facing the financial advice market, David Geale has said.

The report also recommended a number of measures for the Financial Conduct Authority to take forward, aimed at giving firms the confidence to deliver streamlined advisory services focusing on specific consumer needs.

The review also highlighted the increasing role that technology can play in creating a more engaging, cost-effective advice market.

Mr Geale added that later this month the FCA would be publishing it’s baseline measures for judging whether the Financial Advice Market Review process had been a success over the next few years.

Insurex Announces Crowdsale for Blockchain-based Marketplace for Insurance Products (The Merkle), Rated: A

Insurance blockchain startup InsureX has announced that it will open its crowd sale on 11 July at 14:00 UTC. InsureX is building the first blockchain-based marketplace to be used for the trade and management of insurance products.

‘Blockchain technology presents an exciting opportunity to disrupt the industry. Preliminary estimates are that gross written premiums generated by insurers contribute11 July at 14:00 UTC. Contributors in ETH will be eligible for IXT tokens with bonuses of up to 36% for early birds.

InsureX will operate as a Software as a Service (SaaS) platform that runs on the Ethereum blockchain.

China

Tencent Leads $ 146M Round In Chinese Online Brokerage Firm Futu (China Money Network), Rated: AAA

Chinese Internet giant Tencent Holdings Ltd. has led a US$145.5 million C round financing in Futu Securities, an online brokerage platform serving Chinese investors trading U.S. and Hong Kong-listed stocks.

If Li’s statement is correct, Futu Securities would become the latest addition to China Money Network’s China Unicorn Ranking, which includes 102 such companies worth a total of US$435 billion when the ranking was released in May 2017. Futu Securities would also become the first Hong Kong company to officially join the unicorn club.

Established in 2012, Futu provides an online stock trading platform enabling Chinese individual investors to trade U.S. and Hong Kong-listed stocks. Since its founding, the company has cumulatively served over 3.4 million customers who have completed over RMB500 billion (US$73 billion) worth of transactions. Annual transaction value reaching nearly RMB300 billion (US$44 billion) in 2016 alone.

How Chinese P2P lending institutional investors measure a platform (Xing Ping She Email), Rated: AAA

In China, P2P lending institutional investors usually conduct due diligence before they invest a platform. The following short report is a due diligence report of Caifuzhihui Inc. wrote by Xeenho, which briefly illustrates the procedures of the measuring method.

Basic Information
Caifuzhihui.cn is a P2P lending platform based in Xuzhou, Jiangsu province. The company mainly operates for car pledge, truck and real estate mortgages. Xeenho rated “BBBB” for Caifuzhihui.cn. The information of the platform is open and transparent, ready to accept due diligence from investors. The online interest rates of their loans are in high level, but there are relatively too much remaining funds in the platform.

Here are the points of Xeenho’s rating report on Caifuzhihui.cn.

Operations
Regional resource advantages and fewer counterparts in the area.
New business of truck mortgage is logic and reasonable, good security in use of funds an source of repayment.
Lack of local professional talents.

Risk Control
Transparent and open, ready for assault investigation.
Owing to policy support, getting better assets at lower cost.
Lack of strict verification to the mortgage of some pledged cars.

Financial Capacity
The platform has been profitable, while their qualification inspecting of partners needs to be improved, the investors cannot accurately judge the strength of them.

Interest rates
High level of interest rates in the industry and shorter-maturity give the platform certain investment value. However, there are too much remaining funds in the platform, investors should take into full account the idle loss.

Click here to get the full report.

China’s P2P lenders dodge regulations (China Economic Review), Rated: A

Following years of explosive yet unchecked growth of P2P lending in China, the central government in August announced sweeping regulations to rope in the nascent sector.  But Caixin reporters found that while some P2P lenders have been trying to follow the new requirements, others have managed to skirt the new rules.

In 2016, a total 2 trillion yuan in loans were made through P2P lending firms.

Here is the Presentation that Explains How Ant Financial, Part of Alibaba, Will Dominate Finance (Crowdfund Insider), Rated: A

One area that Alibaba wants to dominate is finance for both consumers and SMEs and they are well on their way.  Ant Financial, their financial services subsidiary, is executing on this vision and last week Eric Jing, CEO of Ant Financial, delivered a presentation explaining their approach.

Jing shared some hard numbers:

  • Alipay, their payment platform, has 520 million annual active users
  • Wealth management, Ant Fortune, has 330 million cumulative users with 17% year over year growth
  • Ant Credit Pay and Ant Cash Now have 100 million active users
  • Ant Insurance has 392 million users and is growing premiums at 43% year over year
  • Zhima Credit has 257 users and 95% year over year growth

PayPal only has 203 million active accounts. Charles Schwab has just 10.2 million accounts.

As for future growth, Ant Financial points to the fact that 30% of the adult worldwide population is underbanked, 80% of the worlds SMEs have no access to formal financial systems and 90% of the adult population in developing countries do not have a credit card.

View Jing’s full presentation here.

European Union

Where Top European Banks Are Investing In Fintech In One Graphic (CB Insights), Rated: AAA

In Q1’17, investments to European VC-backed fintech companies spiked to 73 investments worth $667M. At the current pace, total funding dollars to fintech companies based in Europe are on pace to surpass $2.6B and deals could surpass 2016’s total by 57%.

International

The U. of Cambridge Launches 2016-17 European, Africa & Middle East Alternative Finance Industry Surveys (Crowdfund Insider), Rated: AAA

The Cambridge Centre for Alternative Finance (CCAF) at the University of Cambridge Judge Business School has launched its third European benchmarking survey and the second survey for Africa and the Middle East. The two separate research initiatives will review the emerging alternative finance markets in each of theses regions.

The CCAF defines alternative finance as innovative financial instruments and distributive channels that have emerged outside of the traditional financial system. This includes crowdfunding and peer-to-peer (P2P) lending activities.

The forthcoming surveys on Europe and Africa & the Middle East build upon their multi-year research agenda to provide the best available source of industry data on a country-by-country basis.

The survey data will be collected directly from over 350 alternative finance platforms across 90+ countries in Europe and Africa & the Middle East with the aim to capture over 90% of visible online alternative finance market.

The results of the survey will be made freely available for all in the two industry reports and are expected to be published in the third quarter of 2017.

Misys boss to lead fintech giant after merger with DH (The Telegraph), Rated: B

The boss of banking software firm Misys is to take the helm of a new £1.7bn company called Finastra that has been formed from the British company’s merger with Canadian rival DH Corp.

Nadeem Syed has been named chief executive of the giant fintech business, which is owned by Vista Equity Partners and is the world’s third biggest financial software provider behind competitors FIS and Fiserv.

Australia

Old technology costing advice industry (Financial Standard), Rated: AAA

The majority financial advice firms are still choosing to rely on Microsoft Excel as their primary source of administrative software despite a range of financial software products coming to market, YTML said.

According to the financial technology provider’s anecdotal evidence, eight out of 10 practices are still using Microsoft Excel as a dependency in the advice process.

YTML co-founder and chief operating officer Piew Yap said this software gap is preventing advisers from taking advantage of the time and cost saving measures which updated and tailored technology solutions can provide.

One of the main barriers to taking up new technology, according to YTML director Terri Ho, is the reality that many software providers prefer to operate in silos – or “don’t talk to each other”. According to Ho, advisers are operating a number of different technology platforms to service client needs but are still having to manually enter details across all.

India

Lending API-fied : Start of P2P Lending Revolution (Finextra), Rated: A

National Payments Corporation of India (NPCI) has revolutionised Indian Payment Industry and has removed friction. Newer payments platforms like IMPS, UPI, BBPS etc have solved payment and collection problems of all customer segments. NPCI has change the market by standardising and securing APIs across banks. UPI is classical API use case, which is simplifying mobile payments for P2P as well as Merchant Payments.

On the lines of payments, there is urgent need to revolutionize Lending in the country through technology intervention by an organisation similar to  NPCI. I am calling the entity as National Lending Corporation of India (NLCI) for now.

High level flow of Lending Process (and the APIs) is given below:

  • Loan Request API (sent by Retail Borrower): Standard API for request for loans from a specific person (like VPA of the lender in UPI parlance) or for generic listing of loan requests. This would include the amount of loan, expected duration (range), type of loan (EMI based).
  • Data enrichment of Loan Request API (by NLCI) : Aggregation of critical customer credit data from CIBIL and key alternate sources for sharing with lender.
  • Loan Inquiry API (Retail or Institutional Lender): This entity would be able to run inquiry for a loan based on key inputs like expected Credit Score, Amount, Type of Customer etc. Incase, the loan request is sent specifically in their name (i.e. VPA), the loan request would be available in their queue for acceptance or rejection (similar to UPI collect request).
  • Loan Confirmation API (Retail or Institutional Lender): Lender would be able to approve the loan or reject the loan.
  • Loan accounts would be maintained to NLCI platform for accounting and processing.
Canada

BlueRock Wealth Management Partners with FutureVault (Benzinga), Rated: A

BlueRock Wealth Management Inc., a wealth management firm that provides personalized financial advice and services, has announced that it is offering FutureVault’s Digital Collaborative Vault – called the BlueRock Vault – as an exclusive service to its executive and high-net-worth clients.

The new service will allow BlueRock clients to securely deposit, store and manage important financial, legal and personal documents. FutureVault’s patent-pending Trusted Advisors feature will enhance the sharing and fiduciary tracking of vital documents between BlueRock clients and staff in addition to a client’s external network of Trusted Advisors (i.e. lawyers, accountants, insurance brokers, etc.) providing complete transparency and new levels of trust.

Authors:

George Popescu
Allen Taylor

Friday September 8th 2016, Daily News Digest

Friday September 8th 2016, Daily News Digest

News Comments Today is by far the busiest and most interesting day of this past week: News: SoFi expects to make a $80mil profit in 2016, is raising $500mil eyeing entering the EU, and much more info here with numbers and strategy discussion. Klarna launching online lending to thousands of online retailers. Great data on […]

Friday September 8th 2016, Daily News Digest

News Comments

United States

United Kingdom

China

European Union

New Zealand

News Summary

 

United States

Online Retailers Are Proof of Marketplace Lending’s Sustainability, (American Banker), Rated: AAA

Recent news and commentary have been anything but optimistic on the future of marketplace lending. But are the negative projections simply drummed up by traditional banks or is there a real reason to be concerned?

According to Morgan Stanley, global marketplace lending grew at a compounded annual growth rate of 123% from 2010 to 2014 and is expected to grow at a CAGR of 51% from 2014 to 2020. Given that real global economic growth is closer to 3%, what explains marketplace lending’s more pronounced growth?

When pondering this subject, I find it interesting to see how other industries have fared as technology and investment have brought the end user greater value and transparency. The sector of the economy which has seen the most visible change has been that of retail where the consumer is shopping less at stores and malls while spending more online.

The trend is rapidly affecting many of the largest retail chains and malls around the country. The change in consumer behavior is all too clear to retailers like Macy’s, which recently announced the closure of 15% (100 of 668) of its stores. The bottom line is that technology combined with forward-thinking investment by some of the larger online sellers has significantly changed consumer behavior.

According to a Gallup poll last year, customers using bank branches dropped by 50% between 2011 and 2014. One function that kept many customers going into bank branches was to deposit checks. Since 2014, many banks have rolled out mobile deposit apps, further accentuating the fall in foot traffic to branches. And how does this impact lending? Traditionally, lending was one of the banking roles always done in person, whether it was a personal line of credit or a mortgage.

There are reasons for marketplace lending investors to still be encouraged. Investor returns on the main platforms have been strong, with historical yields between 5.20% and 8.37%, depending on the grade of the loan. With U.S. interest rates at or close to zero, we have seen investors searching for alternatives to equities that offer both yield and diversification and for many, they are finding this in marketplace loans.

Additionally, assuming that online lenders stay clear of overly leveraged securitization, which we saw accentuate the financial crisis, marketplace lending has the potential to reduce systemic risk by spreading exposure across many investors rather than having it sit with a small number of big banks.

What’s Next if Payday Loans Go Away?, (Morning consult), Rated: AAA

Stronger regulation of payday lending could increase the use of financial technology such as online marketplace lending, said William Michael Cunningham, founder of Creative Investment Research, which studies trends in banking in black communities.

As the Consumer Financial Protection Bureau prepares to finalize proposed rules cracking down on payday lenders, critics and proponents alike are speculating on what would fill the need for short-term, small-dollar loans.

Payday lending has garnered criticism from progressive Democrats, such as Sens. Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio, who argue that the practice preys on the poor, trapping low-income borrowers in a cycle of deepening debt.

If payday lending were to become less profitable because of the rules, it could result in increased use of installment loans, advocates say.

The proposed CFPB regulation — with a comment period ending in October — would require lenders to confirm that borrowers are able to repay a loan, aiming to prevent borrowers from being stifled by high-interest rates and monthly payments.

Payday loans have become a major source of credit in low-income African-American communities as black-owned banks and other, more highly regulated depository institutions, have slumped, Cunningham said in an interview.

“For a lot of black people in a lot of communities, they don’t have a good alternative to the high-cost payday lending,” he said.

“A lot of free-market guys say, ‘This is just a legal product, and if people want to use it, then they should be able to use it,’,” Cunningham said. “To me, that’s crazy talk.”

“One could make the case that CFPB should take some of that fine money that they’re getting from these financial institutions and create a fund to create responsible depository institutions serving some of these communities,” he said.

“I think it’s the question of whether they’re regulating the product or intending to eliminate the product,” said Dennis Shaul, chief executive of the Community Financial Services Association of America, a trade group for short-term lenders.

A Pew Charitable Trusts report in August said that installment lending can still be harmful.

Shaul’s group took aim Tuesday at the CFPB, saying it “buried and ignored” a slate of positive testimonials about payday loans. CFPB did not provide a comment on the allegations. The portion of borrowers overwhelmed by payday loans — who have borrowed for an excessively long period and are mired in a cycle of renewing them — is arguably small, at 15 percent to 20 percent, Shaul said.

Klarna launches its first credit product with new U.S. partnerships,(TechCrunch), Rated: AAA

Now Bigcommerce, Shopify, Magento, Demandware, OpenCart, and Cybersource (that together account for over thousands of online merchants) will be offering credit lines through Klarna. For the European fintech unicorn (currently valued at $2.25 billion and already profitable), it’s a big deal.

Klarna already provides “try before you buy” services that allow shoppers to pay after delivery (rather than paying upfront with a card or bank account), but this is actually the first time that the company can extend a line of credit online.

The company already has a banking license in Europe and is currently working with WebBankon lending in the U.S., however, it’s also considering making a bigger splash in the States by buying its own bank.

SoFi Looks to Raise $ 500 Million in Latest Test for Fintech, (Wall Street Journal), Rated: AAA

Privately held SoFi hopes to raise about $500 million in equity to fund new growth initiatives among mass-market borrowers and international markets, according to the people and a presentation reviewed by The Wall Street Journal.

To manage through the tougher environment, online lenders including LendingClub, Prosper Marketplace Inc., and Avant Inc. eliminated hundreds of jobs, started charging their customers more to borrow and mothballed projects to expand into new products or countries.

Now, SoFi is looking to branch out from its main student-lending business into the territory from which many of those lenders are backtracking. While it has historically focused on borrowers with pristine credit histories—the company refers to them as Henrys, or “high earners not rich yet”—SoFi is considering lending to prime borrowers with slightly lower but still good credit scores.

“Between Brexit impacting U.K. student loans to the insatiable demand for [euro]-denominated assets, the macro tailwinds support European expansion,” according to the presentation, referring to Britain’s vote in June to leave the European Union.

Unlike many fintech startups, SoFi expects to be profitable this year. Adjusted earnings before interest, taxes, depreciation and amortization, or Ebitda, are expected to be $81.3 million in 2016 and $262.5 million in 2017, compared with a loss of $2.8 million in 2015, according to the presentation.

The company expects to take in $357.4 million in revenue in 2016 and $638.1 million in 2017, up from $114.7 million in 2015, according to the presentation. SoFi soon could pass LendingClub in revenue if current projections hold. LendingClub’s revenue is expected to be $469.7 million in 2016 and $569 million in 2017, according to consensus estimates of analysts polled by Thomson Reuters.

Longer term, SoFi has said it wants to compete against the largest financial players by expanding into credit cards, deposit accounts, insurance, and wealth management. SoFi projects that it will extend about $10.5 billion in student, mortgage, and personal loans this year and about $17.5 billion next year, up from $5.2 billion last year. LendingClub’s 2015 loan volume was $8.4 billion.

A fundraising of a half-billion dollars wouldn’t be SoFi’s largest. Last year, SoFi raised more than $1.2 billion in new equity from investors, including Japanese internet giant SoftBank Group Corp. and hedge fund Third Point LLC. The SoftBank investment valued the company at around $4 billion, The Wall Street Journal previously reported.

RiverNorth Gets Approval From SEC for Marketplace Lending 40-Act Fund, (Lend Academy), Rated: AAA

Comment: we covered the launching of RiverNorth. What we missed was that it was a public fund, aka a 40-act fund.

The fund will be listed under the ticker RMPLX and will be available through several major fund platforms over the next few months. They can raise up to a billion dollars with the new fund although the initial investment will be lower with new investors coming in over time.

The fund structure is setup as an interval fund and there will be a NAV that is priced each day. Investing is similar to that of an open-ended fund as investors can purchase at the NAV price on any day, but the liquidity is similar to that of a private fund. Liquidity is offered quarterly and the total redemption amount will vary from 5% – 25% of the fund as determined by the board of directors based on market conditions, liquidity of the fund’s assets and shareholder servicing considerations

The fund also intends to use leverage.

From the filing:

The Fund currently intends to use leverage for investment and other purposes, such as for satisfying repurchase requests or to otherwise provide the Fund with liquidity.  Under the 1940 Act, the Fund may utilize leverage through the issuance of preferred stock in an amount up to 50% of its total assets and/or through borrowings and/or the issuance of notes or debt securities (collectively, “Borrowings”) in an aggregate amount of up to 33-1/3% of its total assets.

The other two important factors for investors are eligibility and expenses. There is a $1 million minimum investment which will apply at the individual investor level if the investor does not have an existing relationship with a RIA. If the investor does have a relationship with an advisor, the minimum would apply to the advisor which could lower the minimum investment per individual. As is noted in the prospectus:

 The Fund expects that the Shares will be initially offered primarily to clients of registered investment advisers and other institutional investors.

Fees for management expenses are 125 bps, although it is waived to 95 bps for the first two years of the fund.

It’s great to finally see the 40-Act funds get off the ground and open up investing in marketplace lending to more investors here in the US. It will be interesting to see how well the RiverNorth fund is received

 

Orchard Platform Is Disrupting Financial Services From The Inside Out, (Forbes), Rated: A

Since its appearance on Forbes’ first annual Next Billion Dollar Startups list last year, the New York-based Orchard Platform has grown its team by at least 200%, partnered with over 20 new loan originators, and continued expanding internationally. But beyond that, Orchard has been working to develop exactly what marketplace lending needs to transition from this year’s growing pains into adulthood: a secondary market.

Orchard’s general mission is simple—become a turn-key solution to both sides of the marketplace lending table. But to fully accomplish that is a much more difficult task involving close collaboration with the same entities that are anathema to many startups: regulatory bodies and financial institutions.

For the past two years, Burton and Orchard have worked closely with the SEC to clarify regulations surrounding marketplace lending and launch what would become the first-ever secondary market in the space. Burton and his team applied for Orchard’s broker-dealer registration, clearly articulated their objectives, and have since moved in lock-step with FINRA to educate them on the industry, all while building out their relationships with policy leaders in D.C.

In a whitepaper on marketplace lending published this past spring, the U.S. Treasury Department made clear that there is a need for a secondary market.

While Burton argues that the LendingClub faulty loans were an isolated incident, and investors have continued to show confidence in its products, the incident exposed the danger of allowing the hype of a still-growing asset class to get ahead of its reality.

September 12, 2016.

This transaction represents SoFi Lending Corp’s. (“SoFi” or the “Company”) third rated securitization collateralized by a portfolio of unsecured consumer loans. SoFi currently originates personal loans through its state licenses or complies with certain requirements where a state lending license is not required. There was one prior unrated securitization, in which SoFi or SoFi’s institutional investors were the sponsors and the collateral was unsecured consumer loans.

The Golden Ratio of P2P, (NSR Invest Email), Rated: B

P2p is a non-volatile, uncorrelated asset with one main risk: the risk that unemployment goes up.

In finance, we call this a “sensitivity.” The good news, my friends, is that a p2p portfolio’s sensitivity to unemployment is a manageable risk. But how? By keeping the default rate in your portfolio as low as possible, of course!

Comment: An article that started well but was very disappointing afterward.  I think that by saying  ” by keeping the defaults” low is like saying “by waving a magic wand”. What you probably want to talk about is how default to unemployment correlation curves vary by loan grade. So you need to take into account that curve to predict default in rising unemployment markets and buy today consequently. 

Promise Financial Launches Digital Cosigner Loans, (PR Newswire), Rated: AAA

Promise Financial, the marketplace lending platform focused on life event financing, announced today that it has launched a digital cosigner loan product. In addition to the company’s individual loans, which primarily serve prime-credit consumers, cosigner loans allow Promise Financial to serve a wide range of non-prime consumers.

“Cosigner loans are a terrific option for consumers who have limited credit experience or have had credit difficulties in the past, but need and deserve access to borrower-friendly financing.”

FutureVault Launches the Most Sophisticated Digital Filing Cabinet and Safety Deposit Box Ever Built at Finovate in New York City, (Email), Rated: B

Comment: The most outrageous title and claim for the week, maybe even for the month. Perhaps a little bit of modesty would help. I would recommend avoiding phrases like “ever built” unless you can clearly prove it is the case. It is difficult to prove that nobody else has ever built this product in-house or commercialized it, ever.

 United Kingdom

FCA circles on P2P platforms with September ‘business model’ inspections, (Alt Fi Credit), Rated: AAA

The Financial Conduct Authority (FCA) will spend the next month in site visits to the larger p2p and crowdfunding platforms with the goal of better understanding their business models , according to two people familiar with the matter.

“The authorisation department has asked us lots of questions like ‘do you have disaster recovery’…and on the other hand they are coming and asking ‘how does your business work’,” said another top industry figure also requesting anonymity.

It is broadly accepted that the FCA is more skeptical of the nascent industry than the UK Treasury which is seen as being very enthusiastic for P2P and fintech as a whole, particularly during the past six years under George Osborne’s former chancellorship.

The FCA has also said that it might take steps to mandate the disclosure of performance data: “Based on the outcome of the review, to help potential investors better understand the risks, we could consider whether to mandate additional disclosures, for example setting out how many businesses that raised funds have since failed and how many have had successful pay-outs,” it said in the review.

China

Tse and Meller — Chinese companies lead the way in fintech innovation, (Nikkei), Rated: A

Financial technologies companies backed by Chinese venture capital raised $2.4 billion in the first quarter of 2016, according to accounting firm KPMG. This represented a 49% share of global fintech investment in the period, bigger than that of North America and Europe combined.

Ant Financial Services Group, Alibaba Group Holding‘s fintech affiliate, itself raised $4.5 billion in April, making it the largest round of funding for a fintech company in the world.

Four out of the five largest fintech companies in the world by valuation are now in China, according to Jason Jones, chief executive of lending industry events group LendIt: Ant Financial; Shanghai Lujiazui International Financial Asset Exchange, or Lufax, which operates as Lu.com; Zhong An Online Property and Casualty Insurance and JD.com‘s JD Finance.

According to the Mintai Institute of Finance, nearly 80% of small- and medium-sized enterprises in China are not adequately served by banks.

Ant Financial developed Sesame Rating, China’s first credit scoring system.

Chinese entrepreneurs’ willingness to experiment means products and services hit the market quickly and evolve quickly. Initially, AliPay, Ant Financial’s payment service, was used only as a payment method for Alibaba’s e-commerce platform. Now, AliPay can be used at brick-and-mortar stores, for utility bills and even for overseas shopping.

China has become fertile ground for fintech solutions. Online wealth management has gained traction among young middle-class consumers. As more risk-tolerant investors, they tend to favor equities and mutual funds over traditional savings accounts. At $66.9 billion in 2015, China’s peer-to-peer lending market is now the world’s largest and more than four times the size of its U.S. counterpart.

China’s internet giants have some of the most sophisticated fintech ecosystems.

Tencent founded WeBank, China’s first online-only bank, in 2014. WeBank offers the consumer, corporate and international banking services. By May 2015, it had launched a personal credit line service to select users without guarantee or collateral through Tencent’s QQ and WeChat messaging platforms. Unlike Ant Financial, WeBank acts as a platform connecting borrowers and lenders directly rather than from its own balance sheet, allowing it to avoid credit risk.

Chinese fintech companies are now starting to expand overseas. In September 2015, Ant Financial acquired a majority stake in Paytm, India’s biggest online payment company, to gain access to a massive population just beginning to embrace mobile payments.

Most Online Lending Platforms Do Business Without License, (Caixin Online), Rated: A

There were 2,235 peer-to-peer (P2P) financing sites in China by the end of August, but only 242 of them had obtained an Internet Content Provider (ICP) license from local telecom regulators, according to data compiled by Yingcan Zixun, which tracks the industry.

Draft rules by China’s banking regulators in August said online lenders should get an ICP license from their local telecom regulatory authority after registering with the government finance office. It’s a requirement that reinforces an internet regulation issued in 2000 that demands a license for all for-profit Internet information service providers.

ut, in practice, few online financing platforms follow the rules.

European Union

The European alternative finance industry is lagging far behind the US and the UK, (Business Insider), Rated: A

Comment: we saw the Cambridge report for Alternative Finance report yesterday. This is just a reminder for our readers with a pop title from Business Insider.

The European alt finance industry’s market volume was €1 billion ($1.1 billion) in 2015, up 72% from €594 million ($668 million) the year before. In comparison, the UK industry’s market volume was €4 billion ($4.5 billion) in 2015, up 84% YoY, while the market volume in the US was €34 billion ($38 billion), up 213% from 2014.

New Zealand

Xero teams up to get into finance game, (Stuff), Rated: AAA

Wellington startup Fuelled has teamed up with accounting software provider Xero to launch a new lending service.

Fuelled will advance Xero customers up to 90 per cent of the money they are owed on invoices, for up to 90 days, at annual interest rates of between 9 and 15 per cent.

Fulcher said the partnership with Xero was important because it enabled Fuelled – with borrowers’ permission – to look at customers’ accounts and see their financial position, including their bank statements.

Xero rival MYOB has also moved into the financing industry, which MYOB chief executive Tim Reed said was a natural extension for its business. Earlier this year it took a minority stake in the Australian arm of United States small business financier OnDeck, which has lent US$5 billion to businesses in North America and Australia since it was founded in 2007.

MYOB customers that applied for loans through OnDeck had to provide much less information than they would when applying for a bank loan, because of the information MYOB already had on their businesses, he said.

New Zealand Online Lender Harmoney Tops 0 Million in Less than 2 Years, (Crowdfund Insider), Rated: A

Harmoney, a New Zealand based peer to peer lending platform, has surpassed $300 million in lending just shy of their 2 year anniversary of consumer lending.

Interest rates start at 9.99% today. Lenders have averaged a realized return of  approximately 13% (net of fees and losses) since platform launch. Harmoney is the largest “Australasian” peer to peer lending marketplace providing loans from $1,000 and $35,000. The company is gearing up for growth in Australia.  Harmoney was launched with NZ $100 million of lending capital from institutions including Blue Elephant Capital Management & Heartland Bank. Heartland Bank is a shareholder in Harmoney.

As of March 2016, Harmoney reported a loss of $14.2 million before tax on revenues of $8.6 million.

Author:

George Popescu