- Today’s main news: A comparison of funding & liquidity sources with lender maturity by PeerIQ. China Rapid Finance sets terms for U.S. IPO. China bank lending falls in March. Perfios raise $6.1M in Series A round. Abu Dhabi ranks as top fintech hub for MENA region.
- Today’s main analysis: Lenders test personalities to determine loan eligibility.
- Today’s thought-provoking articles: Blockchain can save banks tens of billions of dollars each year. Startup finalists to celebrate worldwide fintech innovation. P2P financing kicks off in Malaysia.
- A comparison of funding & liquidity sources. GP:”Very interesting comparison of companies founded in 1912, 2006 and more recent. The funding source diversity and mix in a mature company like OneMain is mostly ABS and OnDeck mostly credit facility while Enova is mostly corporate debt. A must read”
- China Rapid Finance sets terms for U.S. IPO. GP:”Valued at $586mil, raising $105mil. How will this compare to Elevate and Yirendai. A very interesting trend of IPOs in our space lately. I imagine that as long as the IPOs do well enough new ones will take place. “AT: “CRF has the potential to outdo Yirendai. I hope they reach their funding goal.”
- Lenders test personalities to determine loan eligibility. GP:”Lenders, like EFL, have used this a long time. The “AT: “Employers use psychometrics to make hiring decisions. I believe psychometrics will be the future standard for determining credit risk and will eventually replace the outdated FICO score.”
- Fifth Third Bank expands partnership with Accion U.S. Network. GP:”Partnerships continue to be the cheapest customer acquisition channels, I believe.”
- FinTech report card: March 2017. GP:”Good summary, worth a read.” AT: “Some interesting developments. Some new and some old news.”
- U.S. robos move to ‘hybrid’ model. AT: “Not really new, but it’s interesting which robo advisors are going hybrid.”
- Oracle powers lending/leasing-as-a-service product.
- Healthcare lender receives funds from Ares Management.
- Blockchain can save banks tens of billions of dollars per year. GP:”There is a lot of speculatio and the technology is not mature enough yet. There are also still unclear business cases. In the US about 40% of professionals in finance are very familiar with blockchain according to latest surveys so it is not a familiarity problem. On the other side regulation is not there yet and is in fact the largest obstacle to blockchain adoption.” AT: “Blockchain is a technology is a lot of underused potential. It could make the banks competitive again, but it would take years to implement on a global scale to the point where it would be useful and effective in making the financial system of the world transparent, trustworthy, and effective. Getting every bank to adopt it would be a massive undertaking. All it’s going to take is one major bank using it and proving how it can improve banking services to include regaining customer trust. If bank services customers get behind it, the banks will have to.”
- Pariti shows you your debts, offers to save money via P2P lending. AT: “This is a cool, and useful, development.”
- Ex-Barclays CEO says Uber moments are happening in finance.
- China bank lending falls in March, other credit up. AT: “Here’s the question: Are consumers getting their loans from P2P marketplaces instead?”
- Hong Kong’s central bank is trialing digital currency.
- P2P financing kicks off in Malaysia.
- Small countries must cooperate in fintech.
- Bank Negara Malaysia’s FTEG calls participants for ‘Fintech Hacks’ initiative.
- United States
- A Comparison of Funding & Liquidity Sources (PeerIQ), Rated: AAA
- P2P Lender China Rapid Finance Sets Terms for US IPO (Crowdfund Insider), Rated: AAA
- Are you too neurotic? Lenders test personalities to determine loan eligibility (Tearsheet), Rated: AAA
- Fifth Third Bank Expands Partnership With Accion U.S. Network (Crowdfund Insider), Rated: A
- Fintech Report Card: March 2017 (Riskalyze), Rated: A
- US robos move to ‘hybrid’ automated advice models (IFA), Rated: A
- Oracle Powers DecisivEdge’s Lending/Leasing as a Service Product (Monitor Daily), Rated: B
- HEALTHCARE LENDER HCS RECEIVES FUNDS FROM ARES MANAGEMENT (Health Credit Services), Rated: B
- United Kingdom
- Blockchain Can Save Banks Tens of Billions of Dollars a Year (Coin Telegraph), Rated: AAA
- Pariti app shows you your debts, offers to save you money via peer-to-peer lending (9to5Mac), Rated: A
- Ex-Barclays CEO Antony Jenkins: We’re ‘beginning to see some Uber moments’ in finance (Business Insider), Rated: A
- Over 200 Fintech Startup Finalists to Celebrate Worldwide Fintech Innovation at the Benzinga Global Fintech Awards (Yahoo! Finance), Rated: AAA
- China bank lending falls in March; other credit up (Marketwatch), Rated: AAA
- Hong Kong’s Central Bank is Trialing a Digital Currency (CoinDesk), Rated: A
- Indian Fintech Startup Perfios Raises $ 6.1M in Series A (Crowdfund Insider), Rated: AAA
- P2P financing kicks off in Malaysia (The Edge Markets), Rated: AAA
- Small countries like Singapore, Switzerland must cooperate in fintech: Swiss Finance Minister (Channel News Asia), Rated: A
- Bank Negara Malaysia’s FTEG calls participants for ‘Fintech Hacks’ initiative (EconoTimes), Rated: A
- Abu Dhabi ranks as the Top FinTech Hub for MENA Region (Emirates 24/7), Rated: AAA
- Boost for crowdfunded businesses in South Africa (Times Live), Rated: AAA
A Comparison of Funding & Liquidity Sources (PeerIQ), Rated: AAA
The US Fed released their quarterly report covering “Quarterly Trends for Consolidated U.S. Banking Organizations”. The report shows that the ROE for the banking sector remains mired in the 7 to 9% range, below pre-crisis levels and the theoretical cost-of-capital for many banks.
Earnings season kicked off last week, with J.P. Morgan leading the trio of banks who released their first quarter earnings. In a positive sign, JPM booked lower loan loss provisions ($1.32 Bn) vs. prior year ($1.82 Bn) for the same quarter. Higher rates improved net interest margin by 11 bps to 2.33%.
Analysis of Funding Mix Across Leading Non-Bank Lenders
P2P Lender China Rapid Finance Sets Terms for US IPO (Crowdfund Insider), Rated: AAA
China Rapid Finance, a peer-to-peer (P2P) lender based in Shanghai, China, announced that it has set the terms for its upcoming US IPO. The company plans to raise $105 million through the offering of 10 million shares priced between $9.50 to $11.50 a share. At $10.50 a share, China Rapid Finance would have a fully diluted market value of $586 million.
Founded in 2001, China Rapid Finance is a consumer lending marketplace that aims to serve China’s emerging middle class. Their target demographic are employed and well-educated Chinese individuals between the ages of 18 and 29, who live in urban cities, and who are avid mobile users. This demographic, known as EMMA (Emerging Middle class Mobile Active), is estimated to include over 500 million individuals.
Are you too neurotic? Lenders test personalities to determine loan eligibility (Tearsheet), Rated: AAA
When no credit history is available, lenders in emerging markets are increasingly looking to personality tests to fill the gap. Psychometric data, or data acquired through personality tests, is now being used to determine if customers qualify for credit in countries like Turkey, Russia, Mexico and India. Some assessors look at traits like conscientiousness, extroversion, agreeableness and neuroticism. For example, if someone ranks high on conscientiousness, they’re likelier to be better at saving, thus more secure financially.
The method has yet to go mainstream in the U.S. in part due to culture, regulations and the range of data already available to American lenders.
Still, psychometric data offers another option to assess consumers for whom insufficient data is available to generate a credit score. It’s a section of the population that’s gained more attention in the U.S., where over 25 million people are considered unscoreable by the Consumer Financial Protection Bureau.
Over 700 characteristics are organized; results are crunched along with repayment data into a number that represents a credit score.
The global unscoreable population is huge, including in India where over 70 percent of the 1.2 billion-strong population fall into this category, McCaffery said.
For the past few months, FICO, working with the Entrepreneurial Finance Lab, has been testing psychometric testing in Turkey, Russia and Mexico. While it’s too early to offer definitive assessments, FICO is optimistic about the model’s ability to deliver results.
Before launching psychometric data in the U.S., Taylor-Shoff said lenders would need to ensure compliance with regulations including those on consumer disclosure (e.g. being able to explain to someone why they were denied credit); fair lending (making sure the method doesn’t disadvantage a particular type of customer) and safety and soundness of the data. Operational considerations, including how lenders would use this method alongside traditional methods , would still need to be resolved too.
“U.S. consumers are not going to submit to a psychometric analysis by their lender,” said Zeydoon Munir, founder and CEO of RevolutionCredit, a startup that uses behavioral data garnered from quizzes and games, in addition to traditional data, to determine if customers qualify for certain credit products. “Who would do that?”
Fifth Third Bank Expands Partnership With Accion U.S. Network (Crowdfund Insider), Rated: A
Fifth Third Bank announced on Thursday an investment and expanded partnership with nonprofit small business lender network, Accion U.S. Network, to support lending to underserved small businesses in Florida, Indiana, Illinois, Michigan, and Ohio.
This builds upon the bank’s five-year, $30 billion Community Commitment, which includes $10 billion for small business lending, product innovation and enhanced underwriting and fulfillment. Additionally, the Fifth Third Bank’s commitment includes expanding technical assistance and support for alternative lending channels.
Fintech Report Card: March 2017 (Riskalyze), Rated: A
What happened: eMoney Advisor announced on March 23 the launch of eMoney for Enterprise, a division that will support users in the home offices of banks, large registered investment advisors, broker/dealers, insurance companies and other financial institutions.
What happened: The new product is likely to target individuals with less than $1 million to invest, a significantly larger market than Goldman Sachs’ current private wealth management service that caters to clients with at least $50 million. Their acquisition of Honest Dollar and the launch of a loan platform called Marcus suggest that this robo venture is part of a larger diversification strategy.
What happened: The Office of the Comptroller of the Currency pressed ahead with its plan to offer a specialty license to fintech firms, a move that would allow the industry to enter the federal banking system. Currently, fintech firms must apply for licenses in each state to do business, which can be a costly process. The new federal banking license would allow for one set of rules nationwide.
Why it matters: Thumbs up for allowing fintech firms to focus on innovation rather than paperwork. Removing the handcuffs of redundant licenses will surface relevant technology even faster, and I think we’ll see advisor confidence in fintech platforms continue to rise.
What happened: Morgan Stanley is continuing its technology surge after hiring Charles Schwab’s Naureen Hassan as Chief Digital Officer and appointing Jim Rosenthal to lead the development of the company’s digital services, which includes tentative plans for a self-directed robo platform.
What happened: Merrill Lynch is introducing new features to its website, such as a dashboard to track investments, real-time maps of the markets and interactive charts.
What happened: MIT and TD Bank hosted their first fintech hackathon, an event challenging 26 student teams to develop a fintech platform in under 36 hours. A team from Cornell University and their product called Switch, which they describe as a micro-loan and insurance broker, took home the $5,000 prize.
US robos move to ‘hybrid’ automated advice models (IFA), Rated: A
Adviser Intelligence founder and chief executive Jacqui Henderson said in a blog that some of the biggest US robo advisers are now adding humans to their advice services.
“Last month, the second largest robo in the US, Schwab, also combined its automated investment management technology with human advisers for its clients with at least $25,000 to invest.
“These moves by the biggest robos in the world are a sure admission that we are a long way off from a fully automated model becoming a reality.”
Oracle Powers DecisivEdge’s Lending/Leasing as a Service Product (Monitor Daily), Rated: B
DecisivEdge, a business consulting and technology services company, launched its lending and leasing as a service (LLaaS) product, powered by Oracle.
LLaaS is a simple, flexible, securely featured and cost-effective way for small and medium sized lenders to the leverage the capabilities of a solution.
Oracle Financial Services Lending and Leasing is at the core of DecisivEdge’s offering. It is hosted in a securely featured cloud and bundled with 24/7 monitoring, support and other value added services.
HEALTHCARE LENDER HCS RECEIVES FUNDS FROM ARES MANAGEMENT (Health Credit Services), Rated: B
Health Credit Services (HCS), a healthcare funding company created to bring quality-of-life care to more individuals, announces a new financing relationship with Ares Management, a leading global alternative asset manager.
The HCS team will leverage the Ares Management-provided financing to increase patient access to quality-of-life medical care nationwide. With loan approvals in seconds, budget-friendly installment loans ranging from 12 to 84 months and simple loan management, HCS solutions make healthcare financing easy and affordable.
Due to rising insurance deductibles and premiums, the typical American spends nearly 10 percent of their income on out-of-pocket healthcare expenses.
Blockchain Can Save Banks Tens of Billions of Dollars a Year (Coin Telegraph), Rated: AAA
The Bank of England (BoE), one of the first central banks to form a research group dedicated to the development of Blockchain technology, still believes the Blockchain has the potential to save banks tens of billions of dollars in operating costs.
Researchers at BoE perceive the Blockchain as an immutable, transparent and secure technology which banks and financial institutions can utilize to handle operations in an autonomous ecosystem.
BoE along with other banks including the Reserve Bank of Australia and Bank of Korea envision a Blockchain-based platform wherein many banks can participate as members of the network and settle transactions and assets in a transparent ecosystem. By relying on a shared ledger, banks can easily eliminate any additional intermediaries that are contracted to process complex settlements.
Apart from collaborative projects, BoE recently showcased a proof of concept Blockchain platform with PwC, with the intent of demonstrating the potential and applicability of Blockchain technology in the finance industry.
Pariti app shows you your debts, offers to save you money via peer-to-peer lending (9to5Mac), Rated: A
Link Pariti to your bank accounts and credit cards, and it will show you the total costs of your debts. If peer-to-peer lending would offer a better deal, it then offers you the option of consolidating everything into a single loan at a lower rate. The company says that while credit cards typically charge interest rates in the 16-25% range, it can get the APR down to single digits.
Ex-Barclays CEO Antony Jenkins: We’re ‘beginning to see some Uber moments’ in finance (Business Insider), Rated: A
Former Barclays CEO Antony Jenkins believes the global financial system is beginning to undergo the “Uber moments” he predicted in the sector a year and a half ago.
Jenkins, who was CEO of Barclays from 2012 to 2015, forecast a series of Uber-style disruptions in the banking industry in late 2015. He said that advances in technology could shrink headcount at traditional big banks by as much as 50%, while profitability in some areas could collapse by over 60%.
Since being ousted at Barclays, Jenkins has set up his own fintech business: 10X Future Technologies. The startup has developed a new core banking platform, effectively a new operating system for banking to build products and services on top off. It aims to help banks cope with the “Uber” disruption by giving them a modern canvas to build upon.
Over 200 Fintech Startup Finalists to Celebrate Worldwide Fintech Innovation at the Benzinga Global Fintech Awards (Yahoo! Finance), Rated: AAA
The Benzinga Global Fintech Awards is the largest fintech event focusing on the capital markets. In its third year, Benzinga has expanded the event’s purview to the global stage, bringing over 200 companies to New York City from countries including India, Israel, Poland, and Singapore.
The Benzinga Global Fintech Awards finalists, by category:
Best Use of Alternative Investments Platform, Tool, or App
- CFX Markets
- ClearVest Advisers, LLC
- Frictionless Healthcare Finance
- Kettera Strategies
- Mercury Capital Advisors
- SAF Platform
Best Analysis Platform, Tool, or App
- Alpha Hat
- F.A.S.T. Graphs
- Orchard Platform
- Polly Portfolio
- Web Financial Group
Best Digital Mortgage or Real Estate Platform, Tool, or App
- Neat Capital
- Neighborhood Pay Services
- Quicken Loans / Rocket Mortgage
- Unison Home Ownership Investors
Best Education & Personal Finance Platform, Tool, or App
- Clarity Money
- Copper Street
- Dream Forward 401(k)
- FinTech Business School
Best Financial Advisor or Wealth Management Platform, Tool, or App
- Advisor Engine
- Backstop Solutions Group
- CBOE Vest
- Mil Advisor
Best Forex Platform, Tool, or App
- TF Global Markets
Best InsurTech Platform, Tool, or App
- Bought By Many
Best Lending Platform, Tool, or App
- Global Debt Registry
- InterNex Capital
- Think Money
Best Proprietary Technology or APIs
- Alpha Exchange
- Connamara Systems
- Nomad COnnection
- Push Payments
- Redtail Technology
Best RegTech Platform, Tool, or App
Best Research Platform, Tool, or App
- Slingshot Insights
- Street Diligence
- Virtual Cove
Best Robo Advisor
- Gravity Investments
- Polaris Portfolios
- Scalable Capital
- Unicorn Bay
Best Trading Execution or Brokerage Platform
- Lime Brokerage (Wedbush)
- m1 Finance
- Sterling Trading Tech
- T3 Live
- TD Ameritrade (AMTD)
Best Trading Idea Platform, Tool, or App
- Chaikin Analytics
- Stocks For The Week
- Trade Ideas
- Trumid Financial
- Vest Cycle
Best Under-banked or Emerging Market Solution
- Billmo, LLC
- Eastpesa Limited
- Ping Express
Best Use of Blockchain or Bitcoins
- Brave New Coin
- I/O Digital
- SecureKey Technologies
- Visible Alpha
- Bond Price Validation
- Bridge Financial Technology
- Cloud9 Technologies
- Marstone, Inc.
- Opportunity Network
Investing In Millennials
- EZMCOM Inc
- Lean Financial
Leveling the Playing Field
- CALL LEVELS
- Click IPO Securities
- OptaCredit Fintech Private Limited
Solving Problems Through Payments
- Payment Rails
- RenovITe Technologies Inc
- SWITCH Inc
China bank lending falls in March; other credit up (Marketwatch), Rated: AAA
Chinese banks scaled bank lending last month, though other forms of credit outside the traditional banking system rose sharply, official data showed.
Chinese financial institutions issued 1.02 trillion yuan ($148 billion) of new yuan loans in March, down from CNY1.17 trillion yuan in February, the People’s Bank of China said Friday.
Total social financing, a measure that includes nonbank credit such as trust products, stood at CNY2.12 trillion in March, up sharply from CNY1.15 trillion in February
Hong Kong’s Central Bank is Trialing a Digital Currency (CoinDesk), Rated: A
Hong Kong’s de facto central bank is developing a prototype digital currency.
The disclosure came in a Hong Kong legislative document published by the Legislative Council Panel on Financial Affair this week and dated 18th April.
Indian Fintech Startup Perfios Raises $ 6.1M in Series A (Crowdfund Insider), Rated: AAA
Last week, Perfios, a fintech startup based in Bangalore (Bengaluru), India, announced it had raised approximately US $6.2 Million (400 Million INR) in its Series A round of funding. The funding is a sign of how much the fintech market has been steadily growing in India the last few years.
The report estimates that the fintech market in India will rise to over USD 2.4 billion by 2020.
The Series A was funded by Bessemer Venture Partners, a venture capital firmed based in New York.
P2P financing kicks off in Malaysia (The Edge Markets), Rated: AAA
The peer-to-peer (P2P) lending industry is off to an encouraging start. Funding Societies Malaysia, the first platform to launch, successfully raised RM320,000 for two term loan financing programmes within three weeks in March.
The loans will be used to fund the working capital of two companies – an electronics business and an automobile parts distribution business. Meanwhile, the platform aims to provide investors with an effective return of 22% and 24.91% respectively over a year.
Wong says the platform aims to seal another 80 to 100 deals in the next 12 months and raise RM10 million to RM20 million. This means investors can expect more deal flows, which will allow them to invest in a variety of companies.
Small countries like Singapore, Switzerland must cooperate in fintech: Swiss Finance Minister (Channel News Asia), Rated: A
Singapore and Switzerland are not competitors when it comes to the development of financial technology (fintech) and with both countries being small financial hubs, it is important to cooperate, said Swiss Finance Minister Ueli Maurer.
The minister also noted that Singapore’s fintech sector benefits from its close proximity to a big Asian market, and can act as a stepping stone into Asia for Swiss fintech start-ups. For Singapore firms looking to expand into Europe, Switzerland can similarly do the same.
Lattice80 is one of the organisations that the Swiss delegation is visiting during their time in Singapore. Launched in November 2016, more than 80 foreign and local fintech firms have taken up spaces at Lattice80, which is dubbed the world’s largest fintech hub by Singapore-based private investment group Marvelstone.
Bank Negara Malaysia’s FTEG calls participants for ‘Fintech Hacks’ initiative (EconoTimes), Rated: A
The Financial Technology Enabler Group (FTEG) that was established by Bank Negara Malaysia in June 2016, has launched an initiative ‘Fintech Hacks’ that identifies pain points in the delivery as well as consumption of financial services.
The Malaysian central bank has sought ideas from the public regarding the improvements to financial services sector by adopting innovation and technology.
Abu Dhabi ranks as the Top FinTech Hub for MENA Region (Emirates 24/7), Rated: AAA
Abu Dhabi with the Abu Dhabi Global Market, ADGM, has been ranked as the top FinTech Hub for the MENA region in the latest Global FinTech Hubs Review, “A Tale of 44 Cities”, by Deloitte in partnership with the Global FinTech Hubs Federation.
From the 44 cities, Abu Dhabi is ranked top FinTech hub in the MENA region. The Deloitte report reiterated that the launch of ADGM’s Regulatory Laboratory, RegLab, for FinTech startups, the only “live” Fintech regulatory regime in the MENA region with 11 Fintech players in its first batch of applications, as a “milestone success for Abu Dhabi and marked the openness and support by regulators and government towards innovation.”
Boost for crowdfunded businesses in South Africa (Times Live), Rated: AAA
In an alternative funding benchmarking report by the Cambridge Centre for Alternative Finance‚ published last month‚ South Africa was identified as the potential leader in the growth of online and peer-to-peer lending models in Africa.
In 2015 South Africa represented 18% of the total African online alternative finance market‚ raising over $15-million. Kenya was the only African country ahead of it with $16.7-million raised.
The report also found that in Africa 90% of online alternative finance was originated from platforms headquartered outside of the continent.