Introduction Online lenders are fast becoming the first port of call to avail loans and have been attracting strong funding interest from VCs and PEs. This demand for a digital lending experience has also forced traditional lenders like banks and credit unions to figure out the technology which will allow them to originate loans in […]
Online lenders are fast becoming the first port of call to avail loans and have been attracting strong funding interest from VCs and PEs. This demand for a digital lending experience has also forced traditional lenders like banks and credit unions to figure out the technology which will allow them to originate loans in a flexible yet scaleable way. They have two options: Buy or Build.
The build option can be extremely expensive and time consuming. But the buy option leads to a digital experience that is constrained, as you are dependent the features and functionalities of the vendor. Moreover, there is no way to really differentiate in the eyes of the digital customer. The solution is DigiFi: an open source tech platform which also allows you to customize along with a layer of additional services like hosting, support, platform implementation, etc.
DigiFi was founded by Joshua Jersey and Bradley Vanderstarren in 2014. It started its life as Promise Financial, an online lender, and raised $110 million in credit capital. It built up its own proprietary tech as there was no solution provider in 2014 offering an end-to-end loan origination platform that could automate the entire process. They sold off the tech to a large lending institution in 2017 and pivoted to DigiFi, one of the world’s first open source loan origination systems (LOS) which equips the lenders with flexible and modern tools to create unique platforms and digital experiences.
The company’s ideology is simple: That is to give other incumbent lenders, branches, credit unions, and startup digital lenders a platform where they do not struggle to build core lending capabilities from scratch. The company utilized the year 2017 and early 2018 to build up its platform, and started working with clients in late 2018. The company, with 10 people, has raised $4 million in equity to date and is based in New York.
The Market’s Pain Points and the DigiFi Solution
The ‘build or buy’ question creates a space for a platform that can bring together the qualities that fulfill the core origination requirements of the lending market and yet customize to give the client a competitive edge over other players. DigiFi empowers its clients to control the features and UI/UX so that it suits the specific needs of their unique client base. The existing tech vendors force the lenders into a rigid structure that limits flexibility to differentiate and provides the exact same experience for all sets of clients.
DigiFi gives the best of ‘buy vs. build’. Thus, DigiFi clients do not need to start from scratch and yet have the power to tailor the tech (buy and build, a win-win!). The company’s core platform is open source, and the source code can be accessed on Github. Revenue is generated from acting as a layer that provides hosting, support, platform implementation and customization services.
In crux, the platform of the company has features like complete lending CRM, decision engine for lending decisions, machine learning environment, and open-API architecture, and it can be configured for deployment across a range of lending verticals that include consumer, mortgage, small business, and commercial. DigiFi gives out the open source platform and its documentation for free.
The platform of the company is currently being leveraged by Sprout Mortgage, Mariner Finance, Constant Energy Capital, Greenwave, and Home Point Financial.
The Platform in Detail
The company provides its platform to the lenders for free and charges for additional services of configuration, setup, support, and running. Depending on the requirements of the client, DigiFi offers support plans for a monthly fee. The customization and platform implementation are charged on an hourly basis. The implementation time and cost varies. The implementation might take up to 4-8 weeks at a minimum and can take up to months if the lender needs to build out features from scratch. As compared to years and millions of dollars for building an in–house model, the DigiFi solution is usually in the 5-6 figure range.
As per the CEO of DigiFI, the incumbents are getting better with time as they have a lower cost of capital and existing customer base, positioning them to succeed. Getting the right tech partner on board is thus the critical piece to build a successful moat.
DigiFi offers a platform to lenders looking to tap the online lending market that not only equips them to get the best of the ‘buy vs. build’ system but also ensures full support and customization. It powers the lender with ready-made solutions, fast implementation, support and training, feature controls, unique customizations, flexible hosting options, and a contributor community. It provides the option to integrate all major data sources – Transunion, Equifax, Experian, MicroBilt, LexisNexis, etc. With over 45,000 development hours, DigiFi platform provides it clients a strong barrier to entry with complete configurability with other APIs, true scaleability with AWS, and integrated AI ML solutions.
News Comments Today’s main news: Square makes big move on banking. Folk2Folk CEO to step down. ZhongAn approved for $1B Hong Kong IPO. KBRA and DBRS assigns preliminary ratings to SoFi Consumer Loan Program 2017-5. Assetz Capital to set up in Belfast. ZhongAn approved for $1B Hong Kong IPO. Citi Singapore launches Facebook Messenger banking chatbot. Today’s main analysis: Using digital assets to […]
Square wants to be a bank, sort of. AT: “This story goes into a bit more depth than most, and makes an interesting observation: Square likely will not be the last fintech to apply for a bank license. I hope not.”
Introducing Petal — the no-fee credit card. AT: “Medium appears to be the platform of choice for alternative lenders to make announcements they want the world to know. I wonder why. But on another note, I wonder if a person is disqualified from Petal if they have a stellar credit history.”
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by SoFi Consumer Loan Program 2017-5 (“SCLP 2017-5”). This is a $527.12 million consumer loan ABS transaction.
Preliminary Ratings Assigned: SoFi Consumer Loan Program 2017-5
According to WSJ reports, Square intends to submit an application later today (Sept. 7) to form a wholly owned and operated bank in Utah.
That business unit would be called Square Financial Services Inc. — and it would be designed to offer loans and deposit accounts to small businesses. The bank would be capitalized with around $56 million in cash.
Online lender SoFi made a similar move, as did mobile banking start-up Varo Money Inc. The timing is not quite a surprise — federal regulators have been more open to the idea of new banks recently than they have been at any time since the Great Recession.
Mobile point-of-sale pioneer Square Inc. is applying for an Industrial Loan Company (ILC) charter to support the expansion of its lending business, the volume of which grew 123 percent year-over-year in the second quarter to $189 million.
The news was met with immediate rancor by at least one community banking group, which also lodged complaints about blurring the lines between commerce and banking when online lender SoFI applied for the same charter in June.
Before Square made its move, the Independent Community Bankers of America (ICBA) wrote in an August blog post that it would fight “tooth and nail” against attempts to remove the “historic separation of banking and commerce in federal law and regulation.” It reiterated that sentiment in news reports about Square’s plans on Sept. 7.
For more than a decade, CFSI has been conducting research and bringing various stakeholders—industry, regulators, consumer advocates—together around using technology to increase access to financial services. Its 2016 research estimates the size of the financially underserved market in the U.S. to be $140.7 billion.
The Dodd-Frank Act had placed a moratorium on such charters that ended in 2013, but the FDIC has been “gun-shy” since Walmart’s failed attempt to secure an ILC charter in 2006, Moeser notes.
Affirm was started by PayPal wunderkind Max Levchin – Through a simple online application process, Affirm customers can obtain loan financing with interest rates in the range of 10% to 30% for their desired online purchases. Customers can clearly and easily see what they will owe at the time of checkout online, with no hidden costs or surprises.
Walmart is involved – All indications are that Walmart is aggressively going after scan-and-go/checkout-free shopping in their stores. Scan-and-go quite possibly will be the technology that most impacts physical retail in the next 10-15 years.
Affirm and Walmart are a match made in heaven for budget conscious America – Affirm’s digital financing capabilities and Walmart’s scan-and-go capabilities, when combined, will stretch the bank accounts of all Americans — especially Americans who cannot afford Prime membership fees (uh oh Amazon).
A screen pops up, and what used to be a three-pack of Crest for $5.00 is now suddenly the same three-pack but for $0.83/month for six months, or for $0.42/month for 12 months instead.
Lima One Capital, the premier lender for residential real estate investors, announced today that it has acquired the residential debt origination business of RealtyShares, an online marketplace for real estate investing and financing.
Lima One Capital began partnering with RealtyShares as an institutional investor in early 2017, drawn by the quality of deals listed on the marketplace platform.
A New York start-up aims to use everyday financial information to qualify people with scant or no credit histories for its credit cards.
The company, called Petal, considers an applicant’s standard credit scores, when available. But it also analyzes their digital financial records, like checking accounts or, in some cases, prepaid debit cards, to rapidly assess their income and spending habits.
The company plans to target consumers who are “new to credit,” like young adults, recent immigrants and lower-income consumers, as well as others who may lack traditional credit scores, Mr. Gross said.
The idea is that by sharing information about their personal cash flow, consumers can get a quick decision on a card application and access to a low-cost card, even if they don’t fit the traditional profile of a top-tier credit customer.
The company’s Petal Visa card isn’t widely available yet, but is being tested privately starting this month. Consumers can sign up online to receive an invitation to apply.
You need one to get a credit card, finance a car, purchase a home, or qualify for a small business loan. And, increasingly, you need credit to do things that seem to have little to do with credit, like sign a lease for an apartment, set up a cell phone plan, or even get a job — nearly 50% of employers today are checking credit reports as part of a job application.¹
That access is important. The cost of a poor credit score can be as much as $250,000 in additional interest and fees over the course of your lifetime.²
The number of American adults that lack access to credit because they are new to credit is staggering:
Over 65 million, and growing as a percentage of the total population.³
The 65 million credit invisible, unscorable and thin-file consumers in the U.S. are not a snapshot of America. They are disproportionately likely to be young, black and Hispanic, first- and second-generation immigrant, and/or low- and moderate-income. The same groups that have been historically underserved by the banking system are routinely denied access and opportunity because of how the credit system works.
Two years later, we’re launching Petal — a simple, no-fee credit card, designed to make life easier for everyone.
Petal makes money from merchants when customers swipe the card, and on interest when customers carry a balance past their due date. And before customers carry a balance, we show them exactly what it will cost — in dollars, not just in interest rates and APRs. It’s our belief that customers should be able to use credit safely and affordably, without falling into costly debt.
Social Finance, Inc., a fintech and student loan refinancing company, announced this week that SoFi Accelerate, the company’s career incubator, will be visiting Chicago this September.
On Sunday, September 24th, SoFi Accelerate will head to the Windy City to offer professionals a chance to hear from a couple of speakers and to develop their own path for career success.
The career incubator will only last one day and is open to SoFi members and non-members as well. There will be two speakers, Adam Foss and Ryan Holiday, that guests will have the chance to listen to.
The event will be held at the Chicago Botanic Garden at 1000 Lake Cook Road in Glencoe, Illinois from 9:30 AM to 6:00 PM central time. For SoFi members, the price of admittance will be $75, while non-members will have to pay $125 upon entry. However, the first 50 non-members will receive a special discount so that they only have to pay $100 to attend.
In some states, buying lottery tickets is an extremely popular pastime that borders on obsession. The U.S. generated $66.78 billion from lottery sales with the exception of seven states who have not legalized lotteries — Alabama, Alaska, Hawaii, Mississippi, Nevada, Utah, and Wyoming — based on an analysis of data conducted by LendEDU, a Hoboken, N.J.-based student loan marketplace, utilizing 2015 data released by the U.S. Census Bureau. Out of the total amount, $42.27 billion was allocated for prizes, $3.18 billion was allocated for administration and $21.35 billion was allocated for proceeds.
For 2016, the Census Bureau projected there were $323 million people living in the U.S. which means the average amount spent on various types of lottery tickets is $206.69 per year, LendEdu said.
Some residents are diehard fans of playing the lottery, and Massachusetts natives spend the most money per capita at $734.85 annually while Rhode Island follows a close second at $513.75 each year. The third highest amount was spent in Delaware at $420.82, New York with $398.77 and West Virginia at $359.78.
The states with the largest amount of people generated the largest revenue – New York’s total was $7.78 billion, followed by California at $5.52 billion, Florida at $5.27 billion, Massachusetts at $5.01 billion and Texas at $4.28 billion.
Together, the three brands are actively working on products that will premiere as part of Bestow’s full stack, digital platform later this fall. Upon launch, the platform will give consumers an entirely new way to research, buy, and manage life insurance with product options that are affordable, simple to understand, and seamless to purchase.
Bestow’s partnership with Munich Re and North American follows the company’s recent announcement of closing $2.5 million in seed funding, led by NEA.
You probably don’t think of relatively small investments and passive income opportunities when talking about commercial real estate. But the new standards for commercial real estate investing are surprisingly simple and potentially profitable. Here’s what Jilliene Helman shared about the industry-disrupting platform.
Platforms like RealtyMogul let you crowdfund multi-million dollar commercial real estate investments with as little as $1,000 to $5,000. Depending on your cash flow, you can make an investment immediately and continue reinvesting the profits.
Anyone who has ever been a landlord knows that dealing with tenants and all the hands-on work that comes with it is cumbersome. But commercial real estate can be a completely passive opportunity that doesn’t require you to do anything. Jilliene agrees that you don’t need to be active in all of your investments.
Jilliene shares that in RealtyMogul’s case, they’ve now gone through 12 months at 8% distribution annualized. While some investors might take that distribution and spend it, others will take that 8% and keep reinvesting it to turn it into a compounding investment. In the second month of a payout, investors will be earning on that original 8% in addition to interest earned each subsequent month of distribution.
“About four to five years ago, I worked for OnDeck Capital in Manhattan,” said Rowe, referring to a non-bank lender to small businesses, where he was a senior business development manager. “Back in 2008, when we had the market correction, banks stopped lending and small-business owners had nowhere to go to get funds. OnDeck, at the time, filled that gap.”
In 2013, Rowe in Southport launched BitX Funding as an online marketplace for small-business owners and aspiring entrepreneurs to seek financing for their endeavors.
BitX Funding works with a borrower in fill out data on the company regarding how much money they want to borrow, the time frame they are working in to receive their funds and how long they have been in business. Rowe reviews the information and contacts the applicant to receive more information about the depth and scope of the requested loan. The BitX founder Rowe, who is now working with 20 banks as his company’s financing outlets, determines which applicants have the best chance of moving forward.
To date, Rowe has secured 100 small-business loans for clients. Applicants do not pay him a fee or a commission for the service, he noted, with his revenue coming from the participating lenders.
“I’m actually pre-underwriting the applications. Because of Dodd-Frank and all of the other regulations and paying an underwriter a $100,000 salary for a $50,000 loan, it’s not really in their (lending banks’) wheelhouse.”
Securrency, a RegTech company with a platform designed to streamline regulatory compliance for token offerings, has just signed an extensive strategic partnership with Humaniq, an Ethereum-based Blockchain ecosystem looking to bring financial inclusion to over 2 billion unbanked people globally.
The partnership included an investment into Securrency by Humaniq as the lead investor of their current investment round. Humaniq will also provide additional technological capabilities which will be used for their collective efforts on a LegalTech platform. This LegalTech platform is designed to efficiently match capital to opportunity in transformational emerging technologies. The platform will provide efficient access to capital for startups, liquidity for frontier markets, and a scalable securitization process for established global industries. By automating certain compliance functions and connecting legacy financial services to the power of the blockchain, the team sees a path to revolutionize technology finance.
Baton Systems (“Baton”, formerly known as Ubixi), the platform for clearing, settling and managing payments between financial institutions, has appointed former Citigroup Vice Chairman Lewis B. Kaden to its Advisory Board.
He joins Arjun Malhotra, Co-Founder of HCL Technologies and Headstrong, as the newest addition to Baton’s Advisory Board.
Kaden was labeled “The Most Powerful Banker You’ve Never Heard of” by Bloomberg Businessweek in 2009. He joined Citigroup in 2005, where he oversaw the bank’s global functions and advised the CEO on numerous strategic and business matters. Kaden has also served as Chairman of the United States Government Overseas Presence Advisory Panel, as well as Chairman of the Industrial Cooperation Council of the State of New York and Governor Mario Cuomo’s Commission on Competitiveness. He holds degrees from both Harvard College and Harvard Law School.
Home Point Financial Corporation (“Home Point”), a national, multi-channel mortgage originator and servicer, today announced that Ross Gloudeman has been named Chief Compliance Officer.
Prior to joining the Home Point team, he was a Principal at AIMD Consulting, LLC, providing advisory and contract risk or compliance expertise to financial services clients. Previously, he was Senior Vice President, Executive Risk and Compliance Officer, at Walter Investment Management Corp.
Peer-to-peer lending platform Folk2Folk has announced the resignation of its chief executive officer Jane Dumeresque (pictured above), who will step down during September.
During her tenure, Folk2Folk opened new regional offices in Yorkshire, Somerset and the Three Counties, built further representation in Cumbria, Dorset, Cheshire and East Anglia and grew the platform’s cumulative loan book from £30m to over £170m.
But in the past year we’ve seen a steady rise in the quality of these bonds, partly because reputable alternative asset managers have moved in with asset-backed propositions (ie, companies that own physical assets, providing a certain amount of security for lenders). Downing, for instance, has its own “crowd bond” business that provides debt capital to businesses, usually within an Innovative Finance Individual Savings Account wrapper. Currently Downing has two projects that allow instant access (ie, no maturity), paying a 3% yield on an energy-backed business. This is a bit on the low side, but Downing also advertises an imminent bond that involves lending to a pub business for 18 months at 5.5%.
Property lender LendInvest raised £50m when it issued the alternative finance sector’s first retail bond, paying 5.25% a year over five years. The bond issue was oversubscribed, and the bonds now trade at £102 (implying a net yield to maturity of just over 5% a year).
In the news…
• Peer-to-peer lender RateSetter has reignited the debate about transparency after it admitted placing loans via rival platforms without telling its customers, reports The Times. It placed around £10m in property development loans on Wellesley, and an unspecified sum via Archover, which lends to small businesses. Both Wellesley and Archover offer investors a higher return than RateSetter. A spokesman for RateSetter said it would not lend via either platform again. RateSetter withdrew from industry body the P2P Finance Association last month after admitting it had “breached the principles of the Association”, but stressed that “no customer has experienced any loss from our actions”.
The UK’s ambitious fintech startups are eyeing success on the public markets with a third of them planning an IPO in the next five years, new figures reveal.
Transferwise, Revolut and World Remit are among the country’s innovative financial technology companies with long-term ambitions of going public, signalling the burgeoning industry’s confidence.
Of the 250 fintechs surveyed in fresh research from EY and Innovate Finance on behalf of HM Treasury measuring the health of the industry, more than half also said they expect revenue to more than double over the next 12 months. Collectively, they expect to raise more than £2.5bn in their next funding rounds, having already raised £3.5bn to date.
Digital challenger bank Revolut told City A.M. it has an ambition to go public “later down the line”, while co-founder of “unicorn” startup Transferwise Taavet Hinrikus said over the summer it was time to think seriously about becoming a public company “in a few years”.
Ledgermark Ltd develops, markets and issues distributed ledger technology, specifically; various forms and implementations of distributed ledgers that can be used in combination with technologies like Bitcoin.
The company is launching a new digital asset; Meridian (MDN). Meridian represents a fork in the road as it is different from traditional digital assets. Instead of being positioned as a bitcoin alternative, Meridian is being designed to be used in combination with bitcoin. In short, via their Bitcoin Loans Platform, Ledgermark Ltd will be accepting Meridian tokens as collateral for bitcoin loans of higher value.
ZhongAn Online Property and Casualty Insurance Co Ltd, China’s first internet-only insurer, secured Hong Kong stock exchange approval for its planned initial public offering which could raise more than $1 billion, sources with direct knowledge of the deal said on Friday.
The company plans to start gauging investor appetite for the IPO as soon as Monday after receiving the nod from the listing committee of the Hong Kong stock exchange, added the sources. It plans to launch the IPO and take orders from investors on Sept. 18.
The IPO would be the biggest by a financial technology company (fintech) in the city, which wants to lure more new listings of so-called new economy startups. Hong Kong has had $5.73 billion worth of new listings so far in 2017, compared with $21.3 billion in all of 2016, Thomson Reuters data showed.
Chinese fintech solutions firm Sino Fortune Holding Corp has acquired a 4.45 per cent stake in Shenzhen TouZhiJia Financial Information Service Co Ltd (TouZhiJia) for about $2.8 million (RMB19.1 million).
Sino Fortune is making the 4.45 per cent equity interest acquisition through Puhui Equity Investment Co Ltd (Puhui).
Founded in September 2014, TouZhiJia’s main businesses include vertical P2P search engine, private wealth management, and secondary loan exchange services.
TouZhiJia has reportedly accumulated 2.74 million registered users and facilitated 1.98 million transactions with aggregate transaction value of more than $2.30 billion (RMB 15.63 billion). TouZhiJia is an affiliate of Yingcan Group.
The full agenda is on the LendIt website, but here are a few topics I am most excited about:
How to Navigate Open Banking (Imran Gulamhuseinwala, Ernst & Young)
Digitization of Finance How Customer Expectations are Changing (Anne Boden, Starling Bank, Rhydian Lewis, Ratesetter Giovanni Daprà, Moneyfarm)
Implementing AI in Financial Services: Case Study (Francesco Brenna, IBM, Roberto Mancone, Deutsche Bank)
How Big Banks Are Approaching the New Connected World (Gilad Amir, Lloyds Banking Group, Benoit Legrand, ING, Raman Bhatia, HSBC, Gustavo Vinacua, BBVA)
Renaud Laplanche of Upgrade talking about Online Lending 2.0 and the state of the US fintech market.
Summer pricing of £1,295 ends at midnight on September 8th. After that, ticket prices will rise to £1,495. As always Lend Academy readers can receive an additional 15% discount by using the code LENDACADEMYVIP at checkout.
By the way, the alternative funding market in Europe is not just a developed one, but it is often supported by the state in every way. Moreover, crowdlending currently is a major competitor for the conventional banking area. In the future, it will consolidate its position because, due to introducing new Basel lll requirements to banks, including a reduction of risk assets, the requirements to bank lenders will become ever more stringent.
For instance, in 2015, Austria adopted an act that governs and legalizes the operation of companies involved in non-banking lending. But at the same time, in the biggest fintech country in Eastern Europe – Russia – and in several EU countries, there is yet no such document. Germany has a credit rating of companies that protect the investor.
What kinds of non-banking business lending platforms exist?
According to data of KPMG studies, the last 3 years period demonstrated a 131% growth of the share of mutual business lending, with the share of peer-to-peer consumer lending having increased merely by 54%.
Crowdfunding– investments for a remuneration from a company.
Crowdlending– this is mutual business lending assuming a return on investments (Funding Circle).
Crowdinvesting – an investor receives a share in a company with a view to growth of the value of one’s purchased share and, certainly, receiving dividends from company operations (Crowdcube, Seedmatch).
Refinancing receivables or online factoring. A loan is provided on collateral in the form of expected payments or accounts receivable.
Invoice discounting – this is in essence factoring, but with a somewhat other funding structure. Within its framework, funding is not split into deliveries but is paid in full on spot. In case of assignment of claims, the lender will bear the obligations of reimbursing the factor the funds underpaid by the borrower.
Summary of Event: This forum aims to “introduce new forms of financial services” while covering topics including equity-based crowdfunding, social impact bonds, online lenders to small businesses and peer-to-peer lending platforms. The event has support from the European Union and its European Investment Bank Institute.
Experian, an information services group, estimates that the average error rate of bank account data is around 12.7%, indicating that there is a lack of understanding of foreign bank codes and account numbers.
A key problem with cross-border payments today is the fact that transactions are at the mercy of correspondent banking relationships.
Ripple, a global digital payment provider, has designed its XRP digital asset solely the cross-border transfer of value between enterprises.
Aside from Ripple, other companies have started to look at the usage of digital assets for transactions. Visa for instance recently filed a patent with United States Patent and Trade Office (USPTO) on the creation of a digital asset network to eliminate third parties and simply their transaction process.
One popular recent development in the Blockchain community is the creation of multi-crypto/fiat debit cards. These cards allow users to interchange between the given set of currencies in a seamless manner.
Luhaaar notes that fintech companies have consistently delivered better results in individual financial system services. He says that Change Bank wants to bring these companies together to create a global fintech bank of tomorrow.
In an exclusive interaction with CXOToday, Rohan Angrish, CTO, Capital Float, takes us through how they have made it possible with the aid of technology which helped reduce wait times for SMEs, and enabled disbursement of funds in just three days. Last month, the company announced an equity raise of $45 Million (Rs. 293 crores) in Series C funding.
CXOToday: Tell us about your expansion plans across India. Any plans to go global in the near future?
Angrish: Over the past year alone, we have disbursed loans of over Rs. 2,100 crores to 12,000 plus customers across 300 cities. We will continue to identify and serve under-served SME segments. We have also ventured into financing micro-entrepreneurs like taxi drivers, travel agents, and Kirana store owners. Although these are small-ticket loans, the sheer size of these segments indicates immense potential. India will keep us busy for the short term. By the end of the financial year, we expect to have our geographic footprint spread across 500 cities from our current number of 300 cities, without increasing headcount.
CXOToday: Who are your customers?
Angrish: These include SMEs who have traditionally been denied finance due to ineligibility based on credit parameters set by formal financiers, lack of collateral and inability to furnish the required documentation.
CXOToday: Please throw light on your corporate partnerships.
Angrish: The company has partnered with ecosystem leaders across various verticals such as e-commerce (Amazon, Flipkart, Snapdeal, PayTM, Shopclues, eBay, Alibaba, etc.), travel and hospitality (VIA and Yatra), retail (Mswipe, Pine Labs, Bijlipay, ICICI Merchant Services) and taxi aggregators (UBER and Ola) etc. Through these partnerships, we are able to effectively expand our reach to SMEs operating on these platforms.
Fintech startup EarlySalary, which offers instant cash loans and salary advances, has raised debt financing of Rs 5 crore from IFMR Capital. Previously, this past May, the company had raised a Series A round of $4 million (Rs 28 crore) in equity funding from IDG Ventures India and DHFL and plans to leverage its equity multiple times over the next few months.
In an earlier interaction with YourStory, Co-founder and CEO Akshay Mehrotra had said that almost 75 percent of the Rs 28 crore would be utilised for building their lending book. The remaining amount was to go into expanding their team, with a specific focus on machine learning skill sets, and helping grow the customer base.
EarlySalary has already disbursed more than 7,000 loans last month. Currently operating in eight cities including Mumbai, Pune, Chennai, Bengaluru, Hyderabad, New Delhi, Jaipur, and Ahmedabad, it is looking at expanding into other cities as well.
Online lender Capital Float attracted $45 million, while Treebo Hotels took $34 million. Bioinformatics company MedGenome attracted $30 million from investors led by Sequoia India and fitness chain operator Curefit raised $25 million from existing investors including Accel Partners and IDG Ventures.
With seed funding becoming more challenging, early stage investors are asking questions on whether the business is viable and if it can raise follow on capital, which is an indication of the market maturing, he adds.
Citi Singapore today announced the launch of Citi Bot – the bank’s new natural language chatbot on Facebook Messenger. Singapore is the first market for the launch of the chatbot which will be introduced progressively in the Asia Pacific region over the next few months.
This landmark initiative furthers Citi’s open architecture approach to digital banking as the bank taps on its global network to form strategic partnerships and to co-create with leading players in digital ecosystems globally and locally.
Citi Bot will first be made available to some 600 Citi customers and employees who will form Citi Singapore’s Beta Testing Community, referred to as the Citi Beta Community.
The second phase of the Citi Bot will introduce more new features such as card activation, ability to lock and unlock credit cards and transaction alerts for cards among others.
Asia-Pacific now leads the way in the adoption of mobile payments, according to a report by ACI Worldwide (ACI) entitled “Global Consumer Survey and Consumer Trust and Security Perceptions.”
Within the Asia, India and Indonesia saw the biggest growth of mobile wallet use with 56% of Indian and 47% Indonesian participants of saying that they used mobile wallets. This represents a significant increase from 2014 results which saw 47% of Indian and 32% of Indonesian survey participants using mobile wallets.
News Comments Today’s main news: dv01 partners with Upgrade. U.S. lawmakers try to stop sale of Chicago Stock Exchange to Chinese buyers. PayPal hires ex-Amazon exec to head lending. LendingClub expands Opportunity Fund partnership. Revolut raises $66M, adds bitcoin. Yirendai lawsuit dismissed. International RegTech Association launches. Today’s main analysis: 5 reasons fintech consolidation is inevitable. Today’s thought-provoking articles: Real estate investing […]
dv01 partners with Upgrade. AT: “dv01 already has similar partnerships with other online lenders. This partnership is a feather in the cap for Renaud Laplanche, who is making a nice comeback with Upgrade after last year’s fall out.”
U.S. lawmakers try to stop Chinese from buying Chicago Stock Exchange. AT: “I’m curious as to whether the Trump Administration will weigh in on this considering that one of the president’s major talking points on the campaign trail was how the Chinese are beating the U.S. on the business front. If the Chinese do succeed in buying the stock exchange, it would be an interesting rebranding effort to see CHX go from Chicago Stock Exchange to Chinese Stock Exchange, not a far-fetched idea considering the plan to list Chinese companies on the exchange.”
Why PayPal could join the payments buying spree. AT: “If PayPal doesn’t start making plays soon, they could be left in the dust. They need to expand and diversify. Buying up Klarna would be a huge feather in the cap and give the company a foothold in Europe and other parts of the world where hardly anyone knows they exist. As big as PayPal is, it’s disheartening that they haven’t expanded very far internationally.”
International RegTech Association launches in Switzerland. AT: “I can’t think of a better place for an international association of any kind to be than in Switzerland. On another note, I’m glad to see an international association for RegTechs. It will be interesting to see which companies, and which nations, support it the most.”
dv01, the reporting and analytics platform that offers institutional investors transparency and insight into lending markets, today announced a partnership with Upgrade, Inc., the new consumer credit platform, whose founding team is led by Renaud Laplanche.
Under this partnership, all Upgrade investors will initially receive complimentary access to Upgrade data through dv01’s reporting and analytics platform, including use of dv01’s Portfolio Management solution. Investors will have a full suite of visualization tools at their disposal, making it simple to gain a high level portfolio overview or gather answers to complex questions involving loan composition, performance metrics, and credit metrics.
dv01 will also act as loan data agent for Upgrade’s securitizations, providing investors access to its Securitization Explorer, which includes loan level performance and composition details of upcoming deals, as well as reporting and analytics tools for use after a deal closes. Upgrade expects to access the securitization market on a quarterly basis.
Eleven members of Congress asked the U.S. Securities and Exchange Commission on Monday to stop the sale of the Chicago Stock Exchange to a group led by China-based investors, saying the regulator lacks the ability to monitor the foreign buyers.
The proposal to sell privately owned CHX for an undisclosed amount to a consortium led by Chongqing Casin Enterprise Group (CCEG) has drawn attention because it would be the first time a U.S. exchange has been bought by Chinese investors. There are also U.S. investors in the group.
Casin Group, a privately held company that invests in real estate development and financial holdings, said its long-term goal is to list Chinese companies in the United States through CHX, which has locations in Chicago and New Jersey.
PayPal Holdings Inc. said Tuesday it has hired Mark Britto, a financial-technology entrepreneur and a former executive at Amazon.com Inc., to lead its lending business.
Mr. Britto, 53, joins PayPal from Boku Inc., a company he founded that lets consumers buy goods and services using their mobile phones and pay for them alongside their usual bill from their telecommunications provider. He replaces Steve Allocca, who left PayPal in May to become the president of online lender LendingClub Corp.
The company currently uses cash to fund the $5.1 billion of consumer loans and around $600 million of small business loans it has on its balance sheet.
The unit has bolstered PayPal’s bottom line in recent years: the consumer-credit portion accounts for around 13% of PayPal’s annual operating profit, or roughly $280 million, according to analysts at J.P. Morgan Chase & Co.
Access to credit has long been a challenge for small businesses, often a chicken and egg scenario where owners need capital to grow, but can’t get the loan they need until they’ve grown. And, while access to capital has a key role in fueling economic mobility, job creation and the health of the middle class, traditional banks aren’t meeting small business’ needs, especially as it relates to minority communities and women entrepreneurs.
To help, we’ve expanded our partnership with Opportunity Fund, combining the best of high-tech and nonprofit lending, to provide underserved small businesses the loans they need to flourish. Now, small business owners living in California, Florida, Georgia, Illinois, Michigan, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Texas, and Washington will have access to affordable credit.
Already this partnership has helped many entrepreneurs access capital and by 2020 Opportunity Fund plans to invest $400 million in over 10,000 small businesses.
The decision to invest in real estate or stocks doesn’t necessarily have to be either-or and there’s good reason to choose both.
Stocks offer advantages as well with higher liquidity and lower transaction costs. It’s difficult to build a diversified portfolio of property types and regions without several hundred thousand dollars in real estate investments. Not so with stocks where you can invest easily across the major sectors for less than $100 in commissions.
Despite the steep drop in property prices when the bubble burst in 2008, real estate has still outperformed stocks over the last 20 years.
Real estate has benefited from historically low interest rates over the past decade, providing cheap money on highly leveraged properties. Stocks have also benefited from lower rates but not to the extent as property investors.
The downside to REIT investing is that you don’t get the control or tax benefits you get in direct property ownership. I still own several rental properties as well as equity ownership in some real estate crowdfunding deals to benefit from the tax shelter of real estate investing.
PayPal has a strong presence in the U.S. and the U.K., but it’s less well-known in the rest of the world, Ellis notes. Given the fast pace of evolution in the digital-payments industry, “the window is closing rapidly on PayPal’s ability to expand organically into new markets,” she tells Barron’s Next. Rather than build up a user base and merchant base from scratch in new areas, which could take years, PayPal might decide to buy a company that has already done the heavy lifting.
Ellis thinks a European acquisition makes the most sense. She points to a number of attractive candidates in Europe, including payment processors Adyen and Wirecard. PayPal could also buy Klarna or outbid Vantiv for Worldpay. On a practical level, PayPal’s cash is mostly sitting in Europe.
And the company has a good deal of cash: it could have about $10 billion by the end of the year once it sells off its credit receivables business, Ellis notes.
DataRobot today announced a new milestone in AI adoption: since January 2015, customers have run more than 200 million predictive analytics models in the DataRobot Cloud. LendingTree, the online loan marketplace that connects consumers with multiple lenders, banks, and credit partners, achieved this milestone for the company.
Using DataRobot, companies quickly deploy machine learning models to uncover hidden opportunities and predict future outcomes from vast amounts of data. Previously deployed by expensive and elusive data scientists, these sophisticated models have the ability to learn without being explicitly programmed, making them fundamental to big data strategies.
What’s true in real estate is true in fintech—location, location, location is everything. Matt Burton, CEO of Orchard Platform, a technology and data analysis provider for online lending platforms, is living proof of that.
Despite his vision of building an electronic market for loan trading, Burton started Orchard without any network in the financial services space, he said in a fireside chat discussion at the 2017 Benzinga Global Fintech Awards.
Orchard has raised $44.7 million to date, Burton said at the event.
Plug and Play presented Munich Re and Mozeika with one of 10 Corporate Innovation Awards to those it calls its “most engaged partners” in various accelerators that in addition to insurtech include fintech, health and wellness, food and beverage, mobility, new materials and packaging, brand and retail, travel and hospitality, and Internet of Things (IoT).
Some of the insurtechs Munich Re has invested in and/or partnered with include Trov, Lemonade, Root, Next, Slice, Bunker, Bought By Many and Helium.
Roostify, a provider of automated mortgage transaction technology, today announced that Financial Resources Federal Credit Union (FRFCU) has implemented Roostify’s mortgage technology platform in order to create a better online experience for its members applying for or refinancing a home loan.
Financial Resources members are now able to complete their entire mortgage application online, including using a mobile device or tablet. They can upload their financial information directly into the platform and communicate with a loan officer during every step of the process. When they are on the go, they can easily upload and sign documents without a trip to the bank, saving precious time in the closing process.
The data just isn’t there, said Phillip Rosen, CEO and co-founder of Even Financial, an ad tech provider for financial marketers.
On Tuesday, the company added a programmatic marketplace offering to its existing supply-side API to help connect app owners and financial institutions with specific targeting needs.
Rather than paying on a cost-per-click basis, Even Financial’s programmatic marketplace operates on a real-time pricing model that rewards publishers at the top of the funnel when offers are served to pre-approved consumers.
Financial technology (fintech) has felt the impact of Brexit, U.S. politics and a perceived direction towards protectionism, Western Union’s partnerships lead has said.
Christina Hamilton, head of partnerships and international expansion at the global payments and transfers company, said that protectionism and a populist surge against globalization was a serious concern for the fintech industry.
She said that her views should not necessarily be regarded as the views of Western Union, but was clear that her business had been affected.
VirtualAdvisors.com announces the launch of its first artificial intelligence (AI) powered market intelligence campaign.
The Newport Beach FinTech startup wants to scrape all the data on the web to put it into a structured format, with the intent to specifically make it useful to the financial service industry for many different business purposes.
The platform offers free access for family offices as well as retail and institutional investors who can use it as an educational and due diligence tool for various asset classes and specific products.
The market intelligence campaigns will be periodically launched and focus on specific alternative investment niches, starting with 1031 exchanges.
Advisor Group has partnered with Invesco Ltd.’s Jemstep to launch an onboarding, advice and data aggregation platform for both financial advisors and retail investors.
The new platform is expected to offer fintech solutions to challenges commonly faced by independent financial advisors, according to Advisor Group.
They include a paperless process for opening new client accounts, and a web portal where clients can monitor their accounts.
The transferring of client assets to brokerage and advisory accounts will be handled using a paperless, e-signature based process, according to the announcement by Advisor Group and Jemstep. The platform is integrated with Pershing for brokerage accounts and Envestnet for advisory solutions.
I applaud the CFP Board for the proposed new standard for delivering all financial advice under a fiduciary standard. This is clearly a move towards establishing more credibility in the eyes of the public, media and practitioners. It’s also a move towards establishing financial planning as a true profession.
Thomas Mayo (adviser)
I mostly like the new CFP rules as explained on the site. The problem is that I now have too many government and professional groups telling me their view of what is best for my clients…. Sorry, but the odd person out may be the CFP Board. The government agencies carry more oomph! No one in the past 20 years has hired me because of my CFP credentials!… If the DOL Rule is enacted in January 2018 as it is, there is a good chance I will cancel my CFP certification.
Genti Cici (adviser)
I don’t believe [the proposed standards] go far enough. They could even backfire and give false hope that now (with the new standards) ALL CFPs are fiduciaries, at ALL TIMES, which is what I first thought. But if we read carefully at part B, we see that while the standards call for a fiduciary duty, the CFP has room NOT to use the standards.… The CFP can still be paid commissions and not be a fiduciary at certain times. Thus clients will still be confused.
Robert Burns (adviser)
I adamantly protest the proposal. When does it get to be too much bureaucracy? We have FINRA, the SEC, the IRS and the Department of Labor all seeing who can out-regulate whom. It is getting ridiculous …. By your heaping more onto us, you end up increasing the cost of our doing business. Because you all want it make it easy for us to be sued, the cost of our insurance will go up. Let the regulators regulate. You stay out of it. …. Ninety-nine percent of us are good people intent on doing the best possible job for our clients. Now get out of our way!
Cross River announced today the appointment of Ben Isaacson as SVP and General Manager of its Payments Division. With 20 years of experience and a sophisticated understanding of the payments industry, Isaacson will be responsible for managing and growing Cross River’s full suite of payments products and clients.
Isaacson joins Cross River after six years at JPMorgan Chase and , most recently as Product Executive within Treasury Services, where he was responsible for the product development, commercialization and industry development for Real Time Payment services. Prior to this role, Isaacson led the Wholesale Payments Strategy team at JPMorgan Chase, and was responsible for long-term growth initiatives, such as business-to-business payments strategy and FinTech engagement. Before JP Morgan Chase, Isaacson spent seven years at MasterCard in the Strategic Planning and MasterCard Advisors’ Payments Strategy group, focusing on growth strategies and opportunities for MasterCard and its bank clients.
Home Point Financial Corporation (“Home Point”), a national, multi-channel mortgage originator and servicer, today announced that Chad Patton has been named Executive Managing Director-Chief Strategy Officer. In this role, he will focus on funding and capital planning, business intelligence and strategic initiatives.
Mr. Patton has over 20 years of experience in the mortgage and financial industry. Prior to joining Home Point, he served as Executive Vice President at Nationstar Mortgage, overseeing production, capital markets and business development activities. Previously, he was Managing Director at Lone Star Funds, where he oversaw financial services private equity investments, including the formation and growth of Caliber Home Loans.
The “global banking alternative” Revolut has raised $66 million in a fund-raising round, the start-up said on Wednesday, in the latest sign that London is so far weathering Brexit to remain a global financial-technology center.
Led by Europe- and San Francisco-based venture capital fund Index Ventures, the fund-raising round was one of the biggest ever Series B rounds in Europe. It should provide some comfort to the British capitol as it jostles to hold onto its reputation as Europe’s leading hub for the nascent fintech sector.
Revolut also announced that it is adding digital currency bitcoin BTC=BTSP to its app in response to high demand from customers. Users will now be able to hold, exchange, spend and transfer bitcoin the same way they use other currencies. Rival cryptocurrencies Ether and Litecoin will soon be added.
Curve, the London fintech startup that offers a platform that lets you consolidate all your bank cards into a single Curve card and manage your money, is on the verge of closing $10 million in Series A funding.
According to sources, the round, which could be announced as soon as this week, is being led by Connect Ventures, with participation from Santander Ventures, the venture arm of Spain-headquartered bank Santander Group.
Investors are banking providers Santander InnoVentures, Investec, Connect Ventures, Speedinvest, Oxford Capital, Breega Capital, and Samos Investments. Individual investors include: Henry Ritchotte (ex Deutsche Bank COO), Gael de Boissard (ex Credit Suisse board member), Alessandro Hatami (The Pacemakers; ex Lloyds, Paypal, GE Capital), Paul Townsend (Vitesse PSP, Barclays, WorldPay), Emilian Popa (Rocket Internet, Naspers, Groupon), Rohan Haldea (Apax Partners)
Darktrace, a cyber security firm backed by Mike Lynch, the Autonomy founder, has received $75m (£58m) in a funding round that values the company at $825m.
Darktrace, created by mathematicians from the University of Cambridge, claims to use artificial intelligence software that mimics the characteristics of the human immune system to detect and counter cyber threats.
Darktrace’s funding round, which brings it close to the $1bn “unicorn” valuation that represents success to many start-ups, was led by Insight Venture Partners, a New York group that has previously backed Twitter and Alibaba. Its biggest shareholder remains Invoke Capital, which was set up by Mr Lynch after Autonomy was sold to HP for $11.7bn in 2011.
In fact, a study in 2016 by Accenture, the management consultancy, found that just 29% of respondents thought banks were trustworthy. But perhaps instead of trusting banks, people might be willing to place their faith in code instead. Blockchain has been around for some time now but it’s only relatively recently that people have started to speak of it as a sort of truth serum for the way transactions are recorded. If things keep progressing as they are, it could seriously disrupt financial services companies – or perhaps even restore people’s confidence in them.
Many of these innovations were inspired by a frustration with the status quo: Nuggets, a service that allows people to make payments or log in without having their data stored, was born out of founder Alastair Johnson’s discomfort with the way personal information was traditionally being handled by brands.
In fact, Santander has estimated that blockchain could save banks up to $20bn each year in administrative costs. However, it could also herald the start of a peer-to-peer lending regime that’s cheaper and more appealing to consumers.
Green energy businesses are “crying out” for investment, according to P2P lending specialists F&P Sponsors, and are increasingly turning to the alternative financing sector to get the money they need.
Recently, the P2P lending specialists secured funding for BioDynamic UK, which owns and operates an AD plant in Colwick, Nottinghamshire. BioDynamic UK had been rejected 25 times in attempts to win funding, before F&P secured them £1.5 million in just two weeks.
Yirendai (NYSE:YRD), a China based peer to peer lender that is a sister company of CreditEase, has shared that a lawsuit filed against it in 2016 has been completely dismissed. The putative class action lawsuit was brought by multiple law firms pertaining to the decline in the share price. Ostensibly, the legal action was taken in part due to actions by the Chinese government and not Yirendai as the government was in the midst of issuing new rules to regulate the exceptionally large P2P lending industry. Yirendai has facilitated approximately RMB 32.3 billion (USD $ 4.75 billion) in loans from March 2012 through December 31, 2016.
Shares in Yirendai have moved higher on the news. The American Depository Shares (ADS) were priced at $10 per share when they went public in 2015. Today they stand at over $27/share.
Recently, Wang Yongli, the CEO of Letv Financial, confirmed that he has resigned from Letv. When it comes to his next stop, Wang only said he would take a break and hasn’t revealed too much. Wang joined Letv Financial in August 2015, acting as the CEO and vice president of financial service sector. Before that, he had worked in Bank of China (BOC) for over 26 years, and playing the role of vice president for about 10 years.
Since the Letv funding crisis broke out from the end of last year, senior executives from different business sectors of Letv ecosystem left in session, now it spread to financial sector. Now, the parent company Letv Holdings is in trouble again. According to a civil decision made by the court, three companies held by Jia Yueting couple and deposit asset amounted to $182.21million have been applied for a freeze by banks. Under the heavy crisis, how long could Letv finance sustain for is remains to be seen.
This model will increasingly make it difficult for any individual challenger bank to achieve significant scale and to compete effectively with large traditional banks. Burnmark’s primary research also showed that challenger banking users are not fully loyal yet – most will stay with the challenger bank until their customer service expectations are met.
2. Traditional Banks Need to Improve Customer Experience
The most interesting strategies from challenger banks involve targeting the banking needs of traditionally under-served, niche segments like students, freelancers, small businesses, refugees and immigrants.
Challenger banks are proving that there is viable and commercial sense in targeting niche segments that were not traditionally profitable for the big banks.
3. Challenger Banks Lack Product Diversity
Roughly half of challenger banks today offer only basic products like savings and checking/current accounts – and this is a gap that can be successfully filled with collaboration within the space.
The biggest challenge any large banking operation faces today is costs – finding operational efficiency in its decades’ worth of legacy systems and non-strategic investments in outdated IT systems. The biggest desire for a traditional bank in today’s world of heavy fintech competition is to build digital technology from scratch, focusing on openness, transparency, efficiency, low costs and with the ability to future-proof disruption.
5. The Importance of Digital Banking
Both traditional banks and challenger fintech banks are using digital technology as an important component of their operational strategies. Digital technology is used to acquire and retain customers as well as to find cost efficiencies.
One way or the other, most challenger banking start-ups will be in a better competitive position with larger banks as partners, and vice versa. With the number of partnership announcements made around Money2020 Europe, the industry is clearly turning to maturity and scalability through collaboration.
Shine, a company that provides an administrative and financial management platform for freelance workers, raised €2.8 million from Daphni, Kima Ventures, and several business angels in a recent financing round.
Shine offers freelancers a multitasking solution platform that combines online banking with contract and invoice management, streamlining administrative and financial tasks for those who work independently.
The non-profit International RegTech Association (IRTA), incorporated in Switzerland in May, has launched to provide a united community of individuals and organizations, with a shared vision to innovate, advance, and influence the future of Regulatory Technology (Regtech).
The IRTA’s objectives include:
Operate in key markets and economies, internationally
Support the entire Regtech ecosystem
Represent the interests of Regtech providers and consumers globally – including
technology firms, service providers, professional advisers, and financial institutions
Engage and liaises with the most influential financial regulators and academics
Promote the advancement of the Regtech profession, through Regtech research,
innovation initiatives, and standards development
Support Regtech accelerators, and delivers professional education, and certification
Work in collaboration with existing industry Associations, Agencies and other
On one end of the risk spectrum are the risk-taking fintech startups. These fast technology adopters are disrupting traditional financial services and their delivery. Circumventing regulation is part of their cost advantage, but also their weakness. Lacking strong credit and capital adequacy standards, P2P lenders have loaned to terrorists, money launderers and hundreds of fictitious companies. Without deposit insurance, hacked cryptocurrency exchanges have gone out of business, leaving depositors high and dry. More digital disruptions are being introduced. New lending platform SALT is using cryptocurrencies as collateral for loans.
Over 50 percent of bank customers are now asking for similar low-cost online lending (P2P lending), wire transfer (P2P transfers) and investment management (robo-advisor) services.
A recent default on an Alipay-facilitated investment has highlighted the laxer credit standards. Investors who crowdfunded Chinese mobile phone maker Cosun (via Alipay on their mobile phones) face a loss of $45 million following a bond default. AliPay’s rapid expansion through parent Ant Financial into a suite of digital financial services for its 400 million registered users is the model of the future. But the default has raised concerns as China’s consumer e-finance leader integrates its P2P lending, insurance and investments starting at 1 renminbi with global wire transfer stalwart MoneyGram and its 350,000 agencies worldwide.
Even with digital credit information easily accessible, the increase in competition in fintech – China alone has 5,000 peer-2-peer (P2P) lenders — is pushing financial services firms to relax credit rules to compete for customers. Industry leader the Funding Circle has maintained a default rate under 2% on £2.3 billion in loans originated since 2010, averaging 5% returns, but for the broader P2P loan market, default rates are rising .
As a business model, P2P lending is still at a nascent stage in India. According to Tracxn, there are 63 pure-play companies in this domain such as Faircent, Lendbox, Capital Float, Indifi Technologies and i-Lend.
P2P is a simple concept, but its very nature mandates a robust system for assessing the creditworthiness of borrowers. To make that cut, i2i gathers as much information as possible about people looking for loans (yes, it looks at their social media profiles as well), collects all relevant documents and verifies them. Each profile is then automatically analysed and put under one of the three tabs – Accepted, Rejected and On border. Next, its underwriters manually go through the borderline cases and ask for more information to give them a specific status. They also list the strengths and concerns regarding each ‘Accepted’ borrower, taking into account factors such as incomes, liabilities and CIBIL scores. The company receives an average of 4,000 loan applications every month, out of which only 50-60 per cent people complete the entire application process and out of that, only 60-70 applications get accepted, says Singh.
The start-up has also initiated a ‘One loan, One Interest’ policy for every risk category.
The company currently makes money from the fees paid by its registered users. While investors pay a one-time registration fee of `500, potential borrowers just need to pay `100. Additionally, an investor has to pay a service fee, which is 1 per cent of the total amount invested on the platform. Again, based on the risk profile, a borrower has to make an upfront payment of 3-6 per cent of the loan.
Furthermore, the East Africa region has the largest market share of the African alternative finance market. In 2015, East Africa accounted for 41% of total African market share, while West Africa accounted for 24% and Southern Africa accounted for 19%.
But the news that fixed income manager Kilgour Williams Capital has, after about two years of due diligence, launched a credit fund that will buy high interest consumer loans from U.S. fintech companies funded with capital from Canadian high net worth and institutional investors, is significant for other reasons as well.
And for KiWi Credit Fund — which has nothing to do with fruits or birds — the concept makes enough sense that a well known asset manager has anted up $30 million to become the lead investor.
But to our knowledge we are the first Canadian-managed fund to invest in this space,” said Colin Kilgour, a founder at Kilgour Williams, a firm best known for managing the program put in place after the $30 billion asset-backed commercial paper froze a few years back.
News Comments Today’s main news: PayPal invests in LendUp. KBRA upgrades SoFi Consumer Loan Program 2016-1. Revolut spent 7M GBP on incredible sales growth. Today’s main analysis: VCs may face cash crunch as more tech startups stay private longer. Today’s thought-provoking articles: FSB issues report on fintech. Inside Ping An’s massive expansion. Chinese players pursue $3.4T international digital payments opportunity. Auto manufacturers leverage […]
PayPal invests in LendUp. GP:”An outstanding partner to have for LendUp. With a little luck maybe Paypal and LendUp can also partner on customer acquisition.”AT: “I wonder why PayPal isn’t in the top 25 largest Internet companies. They’ve always had such great potential, but they never make the lists. Perhaps they aren’t diversified enough.”
Venture capitalists may face cash crunch, tech startups stay private longer. GP:”This could also be a hint that the companies private VC-driven valuations are not in line with the general public’s perception of their value”AT: “Not specific to online lending or fintech companies, but there is certainly an application to the alternative lending space. I can’t help but wonder if this is a long-term or shorter-term trend, but it seems to have started in the middle of last year some time.”
Global Debt Registry develops blockchain-based proof of concept for online lending. GP:”Slowly but surely we are starting to see the first blockchain applications that make sense.”AT: “There hasn’t been a single public ledger make a breakout, so these kinds of initiatives make me wonder if developments are based on demand or high hopes. I like this particular one, it’s interesting and innovative, but how many online lenders are asking for it?”
Better Mortgage empowers consumers with a better price guarantee. GP:”I am not sure if this was necessary in order to convince people that a simpler and faster application is needed. In fact I usually advise companies not to price cheapest but to price as expensive as they can get away with as long as they provide real value to the users. Cheap has many issues: low margins, no profits, perceived lack of value, etc.”
Why Square is the ‘Tesla of payments’. GP:”I personally am not convinced that a Tesla car makes sense economically or practically over a gas or hybrid car at this time. There is a lot of hype and fashion into Tesla. I do have to recognize the Tesla cars look great though. I don’t think there is a hype behind Square, as it offers a really easy solution to accept credit card payments. Setting up credit card payments has always been a nightmare for all small businesses for no aparent reason. I am glad Square solved that.”
Revolut spent 7M GBP last year to fuel growth. GP:”What one needs to look at is not how much money was spent but what was gained and built through that. I am happy with a company spending 100mil GBP if they build 200mil GBP in revenue per year. A ration of spending 7mil for a revenue of 2.3mil is not impressive, however lets see the impact of this spent the following year.”AT: “Customer acquisition costs money. Remember, it took Amazon 10 years to make a profit. Now they’re the largest Internet company on the planet. While Revolut’s sales went up more than 500% in one year, they spent over half of their equity capital to do it. I see another funding round on its way.”
Are alt lenders ready to publish APRs? GP:”Many of them already are publishing APRs on their websites. I am not sure why this is a question. While it is not a requirement I think it’s good practice and the serious ones are publishing it.”
Building a bank is not easy. GP:”Nobody ever said building a company , a startup , or a bank was easy. This is why often people with no experience and who don’t know what it takes are better position to take such a project. They are not afraid of what they don’t know and often they even find new solutions and innovate withotu being constrained of the existing established solutions to known problems. Many VCs, because of this reason, invest in inexperienced CEOs seeing it as a strenght. “
PayPal Holdings Inc has invested in LendUp, a San Francisco-based startup that offers loans online to consumers who have been traditionally overlooked by banks because they are considered too risky.
LendUp said it had secured a strategic investment from the payments company on Wednesday. It did not disclose terms of the deal. PayPal confirmed in a statement that it had made an investment.
PayPal has been expanding partnerships and acquiring new services to gain advantage over rivals in a highly competitive digital payments market.
KBRA Upgrades the Ratings on SoFi Consumer Loan Program 2016-1 (KBRA Email), Rated: AAA
Kroll Bond Rating Agency (KBRA) upgrades the rating on the Class A notes issued under the SoFi Consumer Loan Program (SCLP 2016-1), a consumer loan ABS transaction which closed on June 27, 2016. The credit enhancement has built for the Class A notes since closing. While cumulative net losses are slightly above KBRA’s initial loss expectations, the transaction has breakeven loss multiples which are sufficient for an upgrade of the Class A rating.
The collateral in the SCLP 2016-1 deal currently includes $382.3 million of loans, as of May 31, 2017. The collateral in the transaction has amortized from the initial pool balance of $506.4 million at closing. The current credit enhancement levels are 31.66% for the Class A notes. Credit enhancement consists of overcollateralization, cash reserves, and excess spread.
Please click on the link below to access the report:
Private equity research firm Pitchbook reports startup exits—sales or mergers of companies delivering returns to shareholders—has fallen in recent years. The number and value of startup exits were down about 70% last year from their 2014 peak. Despite big IPOs of companies such as Snap, 2017 has yet to yield a bumper crop of new exits as companies stay private longer.
It’s not a new problem, says Scott Jordon, managing director at Glynn Capital, but it’s now more acute. The time it takes for technology firms time to IPO has stretched (pdf) from around five to eight years in 2000 to about 11 years today. Pitchbook’s Nizar Tarhuni says they’re seeing venture firms extend funds or negotiate longer periods than the standard 10 years to return money to their limited partners such as pension funds.
A resurgence in IPOs is still possible. Public investors extended a (mostly) warm welcome to the 11 or so tech companies that have gone public so far this year, including Appian, Carvana, Cloudera, Elevate Credit, Netshoes, Okta, Veritone, and Yext.
Loan data specialist Global Debt Registry has completed a proof-of-concept that utilizes the blockchain to provide investors with an immutable audit trail and a single source of core loan data.
The firm’s inaugural blockchain proof-of-concept (POC) lays the groundwork for providing investors and senior lenders in the online lending space with a safe and secure way to confirm loan ownership and collateral interests across companies within the ecosystem, GDR said.
In developing the blockchain POC, GDR worked with three leading blockchain platforms – Hyperledger, Ethereum and Chain.
The rising popularity of robo-advisors is bringing increased scrutiny by regulators. At the same time, industry lawyers say they don’t foresee any substantive changes coming in the form of new rules.
This year for the first time, the SEC put online advice-giving on its list of examination priorities, raising concerns about “heightened risk to investors and/or the integrity of the U.S. capital markets.”
A key issue securities lawyers like Fein raises is that if the SEC insists its current rules adequately apply to robos – yet there seem to be shortcomings in how some robos execute their fiduciary duty – then any perceived enforcement gap will only widen.
But MacKillop, whose startup indie RIA manages about $50 million, scoffs at notions that computer-based investing can live up to the same sort of “best interest” standards for individual clients as brick-and-mortar advisors.
Better Mortgage officially rolled out the Better Price Guarantee — a promise to all of its borrowers that it will beat any competitor’s loan estimate by $1,000. If not, Better will actually give the borrower $1,000.
Better’s mission is to embolden consumers to confidently shop around while also de-risking one of the largest financial transactions they’ll ever make. According to a report published by Oliver Wyman, 71% of customers only get a loan estimate from one lender, which could mean that many home buyers aren’t actually getting the best price on their mortgage.
How the Better Price Guarantee works:
If the customer thinks another lender has a more competitive price, they can send Better the competitor’s Loan Estimate(LE) within three business days from the date on the loan estimate. If Better can’t beat the competitor’s LE by at least $1,000, Better will give the borrower $1,000 in cash when they fund with the other lender.
An LE is a standard form that all lenders are required to provide a consumer.
Better Mortgage may extend this guarantee to non-standard rate sheets.
What do you call a financial-technology company whose stock is up 75% this year as investors bank on its ability to bring a disruptive product into the mainstream? The “ Tesla of Payments,” apparently.
That’s the way to describe Square, according to Mizuho analyst Thomas McCrohan, who began covering the company on Tuesday. The key question for Square is whether it can scale its business up to serve larger customers, and McCrohan is optimistic about the payment processor’s ability to do so while still making money.
Tesla happens to be up 74% this year. Tesla and Square are the top two performers in the Barron’s Next 50 index.
London-based Revolut, which offers a pre-paid international currency card, made a pre-tax loss of £7.1 million in 2016, its first full year of operations. Revenue was £2.3 million in the year to December 31, accounts filed with Companies House show.
The loss was largely down to “card scheme costs, acquiring costs, and user acquisition costs,” the company’s directors write in the accounts. In plain English, that means the cost of processing payments done on its cards, and the cost of getting people to sign up for the cards in the first place. The cost of sales jumped from £1.5 million to £7.8 million.
Staff numbers jumped from 7 in 2015 to 32, with staffing costs climbing from just under £300,000 to £1.5 million.
The startup has raised £12.1 million in equity capital to date.
The Financial Stability Board (FSB) has weighed in on the burgeoning Fintech sector of finance. The FSB has been analyzing “financial stability implications” potentially created by Fintech innovation. The FSB says it is specifically seeking to identify “supervisory and regulatory issues that merit authorities’ attention”.
The FSB stated there are currently no compelling financial stability risks from emerging Fintech innovations.
According to the FSB, ten areas of interest have been identified of which the following three are seen as priorities for international collaboration. These three priorities are viewed as “essential” to supporting financial stability “while fostering more inclusive and sustainable finance.” The three priorities are:
The need to manage operational risk from third-party service providers;
Mitigating cyber risks; and
Monitoring macro financial risks that could emerge as Fintech activities increase.
The other areas that merit attention include:
Cross-border legal issues and regulatory arrangements.
Governance and disclosure frameworks for big data analytics.
Assessing the regulatory perimeter and updating it on a timely basis.
Shared learning with a diverse set of private sector parties.
Further developing open lines of communication across relevant authorities.
Building staff capacity in new areas of required expertise.
Studying alternative configurations of digital currencies.
In May of last year, the Competition & Markets Authority (CMA) published its rather hefty “Retail banking market investigation” report. Buried among its “proposed remedies” was a provisional decision to require lenders specialising in unsecured loans and overdrafts of up to £25k for SMEs to use annual percentage rates (APRs) to show the cost of these products. The proposed measure is set to become a reality in August, according to multiple sources. But are the UK’s alternative lenders ready?
The impending APR directive will not affect merchant cash advance firms, such as Liberis, because merchant cash advance is not technically considered lending. Nor will it affect asset-backed finance firms like MarketInvoice.
GrowthStreet is another business lending platform that would be affected by the directive, had it not taken the decision some time ago to publish APRs of its own accord.
But building a bank is not easy. Sophisticated and diverse product offerings, consumer trust, and security are three vital components. And in this regard, the incumbents often have a head start.
In our portfolio, we have seen AukaPay partnering with Sparebank1 in Norway to provide a white label payments app, MarketInvoice joining forces with BNI Europa to enable SMEs to access more working capital on its platform, Crosslend working with institutions to provide investment opportunities in consumer loans, and iZettle in successful partnership with Santander.
And when talking challenger banks, we can’t forget to mention BBVA’s acquisition of Holvi last year.
While P2P lending still represents a small proportion of total lending volumes, in the UK, origination grew 36% year on year in 2016.
Zopa is approaching bank building from a different base to the other challenger banks, and a case in point of collaboration with the incumbents.
Hargreaves Lansdown has dropped its plans to set up a peer-to-peer lending platform.
The company, which was expected to launch both a P2P lending platform and a cash management service to clients this year, has now decided it will solely focus on the cash management service.
Hargreaves Lansdown chief executive Chris Hill tells Money Marketing that despite P2P being “interesting”, the firm would rather focus on the new savings proposition because it is “a much bigger market”.
P2P lending seems to be a novel and definitely, profitable investment opportunity. It is becoming more and more popular and so there is a constant boost in the number of lenders who are getting profitable returns from this investment option. Here are a few essential steps for making money from the P2P investment.
Step No.1: P2P investment should be treated as an extra element in the overall financial portfolio
You must do ample research, deliberate and then come to a decision about what all should be included in your financial portfolio. You must possess a diversified and comprehensive financial portfolio. P2P lending seems to be a wonderful addition to this portfolio.
Step No. 2: Set a target and attain it
A profit of 2 percent over a 12-month deposit seems to be realistic. The two percent would be paying for the risk factors including investment in time.
Step No.3: Fortify your financial foundation
In order to make an impressive profit in your P2P investment, you must have a fantastic and truly solid financial foundation. This is certainly not a getting rich fast scheme but eventually, you could expect good returns.
Step No.4: Create a comprehensive system
Create a comprehensive system for investing in borrowers that is based on important information which is available, and is relating to the borrower.
Almost 30 years after founding Ping An, Ma is ambitiously broadening his supermarket of financial products, much like U.S. financier Sandy Weill did as chief executive officer of Citigroup from 1998 to 2003.
Ma founded Ping An in 1988 in Shenzhen, the financial hub of southern China, which lies just north of Hong Kong’s border with the mainland. Over the past five years, the company has climbed onto the list of the world’s ten largest insurers, now ranking No. 4 behind France’s AXA, Germany’s Allianz, and U.S.-based MetLife in terms of assets, according to Relbanks.com. Though Ping An’s insurance assets rose 17 percent in 2016, to $802 billion, the company’s double-digit profit growth is benefiting in part from a diverse group of revenue streams, including banking, securities, asset management, wealth management, private equity, and, more recently, China’s booming arena of Internet finance.
Ping An saw 11.7 percent revenue growth, with gross earnings reaching a record high of 774 billion yuan ($112 billion), and a 15 percent growth in profits; net earnings rose to 62 billion yuan. About 56 percent of the group’s profits were derived from insurance, down from more than 80 percent a decade ago. The rest came from banking (20.6 percent), asset management (15.5 percent), and Internet finance (8.3 percent).
Among the company’s most touted technology successes is the 2011 founding of peer-to-peer lender Shanghai Lujiazui International Financial Asset Exchange Co. Lufax, as the company is known, has become an e-commerce giant for finance in China, the world’s second-largest economy. It’s the country’s biggest online marketplace for wealth management products: Last year more than 7.4 million individual and corporate investors used Lufax to purchase 6 trillion yuan worth of investment products from Ping An and thousands of other Chinese financial institutions.
A new study from Juniper Research highlights the increasing dominance of Chinese companies in digital payments, with players such as Alibaba, Tencent and UnionPay seeking to bolster their revenues through international expansion.
The research includes the latest Juniper Leaderboards, highlighting best-in-class players in key payments arenas, including PayPal (for eWallets), Worldpay (for payment service providers) and Vodafone (for telco payments in emerging markets).
Hong Kong’s role as a global financial hub may be under threat unless the city can embrace technology and adapt quickly to the tectonic changes that have taken place in the financial landscape in the two decade since its return to Chinese rule, experts say.
Hong Kong’s greatest moment of innovation was in 1997 with the Octopus card, a smart-card payment system that is now a ubiquitous part of daily life. Two decades since, the city has not made further progress and has lagged mainland China in exploring new forms of electronic payment such as Tencent Holdings’ WePay or Alibaba Group Holding’s Alipay.
Hong Kong’s existing banking model would change dramatically with the rise of fintech, similar to how Amazon.com revolutionised America’s retail industry, he said.
For Hong Kong to succeed as a fintech hub, regulators should license more companies to handle clients’ money to accelerate innovations in fintech and wealthtech, or the use of technology for wealth management and investing, he said.
“More than 70 of the world’s largest 100 banks are in Hong Kong, and this gives the city a big advantage because in fintech, the majority of the customers are going to be banks,” he said.
As many as 82 per cent of incumbent banks and financial institutions plan to increase partnerships with fintech companies in the next three to five years, according to a fintech survey in Hong Kong by PwC this year.
The People’s Bank of China (PBoC) is releasing new details about a forthcoming five-year development plan focused on its strategy for advancing technology use in the country’s domestic financial industry.
According to the announcement by the central bank, the PBoC intends to actively push forward the development of new technologies such as blockchain and AI. It also plans to strengthen its research on applications of fintech in regulation, cloud computing and big data.
In fact, the FinTech Association of Hong Kong (FTAHK) had its official launch on June 28, underscoring the point that financial IT innovation is no longer restricted to New York City and its concrete canyons or Silicon Valley in Northern California.
There will be committees taking on key sectors such as:
The thinning margins in the automotive industry are making a strong case for vehicle original equipment manufacturers (OEMs) to explore revenue streams beyond sales and periodic maintenance. As customers become accustomed to digital transactions, OEMs will look to tap the hitherto underutilised fintechservices segment to generate additional revenues. Active partnerships with fintech companies will enable OEMs to offer multiple use cases that enrich in-vehicle experience, which will ultimately influence customers’ purchase decisions.
Fintech in the Global Automotive Industry, Forecast to 2025 is part of Frost & Sullivan’s Automotive & TransportationGrowth Partnership Subscription. The study examines key application areas of fintech in the automotive industry: leasing and finance, insurance, digital retailing, digital payments, and automotive services. Europe, followed by North America, is anticipated to lead in digitising finance, and North America, followed by Europe, in automotive service investments. The average investment in fintech is estimated to grow from $16 million in 2016 to $230 million by 2025with the emergence of digital car retailing and new business models in insurance.
The synergies between automakers and technology companies will power next-generation financial service infrastructure. Even though fintech partnerships with big banks slow down transactions, it is important to note that banks manage almost 32% all new vehicle financing in North America. Besides:
The competition for market share between banks and captives finance companies is expected to digitise new car sales and result in a $1 trillion auto financing market; and
Fintech will monetise services based on subscription models and on-demand vehicle features.
The LHoFT, Luxembourg House of Financial Technology, and LATTICE80, the world’s largest Fintech Hub located in Singapore, are excited to have signed a Memorandum of Understanding (“MOU”) at Money 2020 Europe, setting a foundation for collaboration between the two centres.
This Memorandum of Understanding provides a framework to intensify the cooperation between two leading financial centres with a specific focus on Fintech and driving digital transformation in financial services.
Splendit is a Swiss fintech firm dedicated to broker loans to students paid for by financiers.
The company has decided to link up with Blockchain-fintech Lykke, Splendit said in a statement today.
Thanks to the deal with Lykke, Splendit henceforth will be able to finance foreign students by sending them their loans via the Lykke Wallet. Florian Kuebler, the co-founder of Splendit, says that this will save transaction costs and enable crowdlending across the globe.
Willis Towers Watson (WTW) and Workinvoice have signed a collaboration agreement exclusively with the aim of bringing more and more Italian companies on the commercial credit market run by the Italian Fintech company.
The Workinvoice activities enable companies ‘ access to a particular market to obtain immediate liquidity, and to protect themselves from payment risks through the sale of its trade receivables to Italian and international institutional investors “ .
MPOWER Financing (), an innovative fintech company and provider of educational loans to high-potential, international students, recently appointed Rohan Tibrawalla to the position of Country Director-India to oversee the company’s operations in the region from its soon-to-be-opened office in Bangalore.
In his new position, Tibrawalla is responsible for expanding and executing MPOWER Financing’s operations, marketing and business development strategies as well as for managing the loan portfolio and debt and equity capital sourcing.
MPOWER Financing is a public benefit corporation whose mission is to remove the financial barriers to higher education in the U.S. by providing loans and other resources necessary for students to complete their undergraduate or graduate studies.
Nadeem Syed, who heads mega fintech firm Finastra, believes regulators worldwide will need to evolve guidelines for the emerging sector (fintech) but the challenge for many financial services firms would be to navigate the new environment and also scale services.
What are your plans in Asia Pacific in terms of expansion and growth after the merger and how has the journey been in Asia so far in terms of revenues and capturing markets?
We have long been committed to Asia Pacific and continue to see great opportunity across the region with double-digit growth rates. Developed and growth markets of Asia Pacific are successfully riding the digital wave especially with the tremendous opportunities that lie ahead of us in Indonesia, Myanmar, Thailand and China to name a few.
Misys has over 400 customers that cut across from Japan to Australia and we see tremendous opportunity to leverage our strength in the region to bring the D+H products to market, especially payments and cash.
Over the years, how have you seen Asia’s competitiveness in fintech being transformed? Has that been affected by the rivalry between region’s financial centres – Singapore and Hong Kong?
The financial services landscape, not just in Asia but globally, has seen a lot of regulators becoming more and more receptive to new technologies – distributed ledger technology, artificial intelligence, P2P lending and so on.
The challenge for all financial services companies is to navigate each jurisdiction’s new or upcoming regulations on fintech while translating their various innovations into services that can be scaled up and rolled out in a safe and reliable manner.
What kind of competition do you see from the internet giants like Baidu or Alibaba are fast emerging as fintech players worth noticing. What future do you see for Chinese fintech industry?
China’s internet giants are increasingly looking at fintech as it is a complementary sector that helps create a tighter online ecosystem for their customers. They are mostly focused on personal banking and payments solutions, which means traditional banks need to concentrate on evolving their own digital and online presence.
As the fastest growing region, do you see Asia emerging as a digital champion anytime soon. If yes, what will help to bring it and where are the major challenges?
Many countries in Asia are seeing exponential growth in the number of Internet and mobile device users – this has a direct correlation to the boom in digital or online banking, as well as other services being carried out online. Digital platforms mean that rural populations now have easy access to services previously unavailable to them, but the challenge is always how to ensure these platforms are safe and secure as cyber criminals get more sophisticated.
Fujitsu today announced it is commencing sales in Japan of cloud-based solutions for lending and leasing businesses. Developed by US-based Cloud Lending Solutions and known as the CL Series, the solutions will be deployed and operated as Software as a Service (SaaS) with the support and operations services of Fujitsu technicians with expertise in financial systems. This is the first time services from Cloud Lending Solutions will be available in Japan.
ALT Corporation, a subsidiary of Yayoi Co., Ltd., Japan’s largest accounting software company, has decided to become the first Japanese customer for these solutions. ALT is using these solutions to set up a unique online lending business, with plans to begin trial lending in October 2017.
With the goal of offering solutions to transform business using Fintech to customers at financial institutions around the world, on July 12, 2016, Fujitsu signed a Memorandum of Understanding (MOU) with Cloud Lending Solutions for a strategic partnership.
The CL Series is a set of cutting-edge cloud services offered as SaaS, which digitize a suite of business processes for lending and leasing businesses, from applications to reviews, contracts and collections.
The list also includes Vancouver-based Trulioo, which produces ID verification software for compliance and to fraud risk mitigation; Toronto-based Financeit, a cloud-based point-of-sale platform; and Toronto-based Street Contxt, which raised a fresh round of funding from 8VC, Point72 Ventures, Palm Drive Capital, and Portag3 Ventures in April.