Fintech Sandboxes: A Global Overview

fintech sandboxes

When an industry develops at a breakneck speed, the law can take some time to catch up. Existing regulations usually do not fit new paradigms, and it can stifle innovation. A regulatory sandbox is the perfect solution because it allows for the testing of new innovations in a controlled environment. The term “sandbox” refers to […]

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fintech sandboxes

When an industry develops at a breakneck speed, the law can take some time to catch up. Existing regulations usually do not fit new paradigms, and it can stifle innovation. A regulatory sandbox is the perfect solution because it allows for the testing of new innovations in a controlled environment.

The term “sandbox” refers to the box of sand where small children play in a confined boundary. The term has received a new connotation in a commercial sense and refers to a closed environment used for experimenting and testing projects or new ideas. Regulatory sandboxes help in testing business proposals and prototypes under a regulator’s supervision. These testing grounds have an advantage of not being governed by current rules and, therefore, the business can explicitly experiment the validity of their projects without the danger of getting caught on the wrong side of existing law.

Such regulatory sandboxes are critical for the development of the alternative lending industry. The gist of having regulatory sandboxes in this sector is to comply with the regulatory directives that complement the growth of fintech companies without compromising on users’ safety and protection. The existence of suitable safeguards assists players in executing a live trial in the market without having to worry about the legal consequences.

The Dawn of the Regulatory Sandbox

Financial regulators across the globe understand the challenges and opportunities presented by innovations like digital-only banking, P2P lending, robo-advisors, and other fintech innovations. Some countries have taken the lead in ensuring that an ecosystem is created which helps startups experiment with their products and services without running afoul of current rules.

United Kingdom- The Pioneer

Seeing massive investor interest in this industry, the Financial Conduct Authority (FCA) proposed a regulatory sandbox as a part of its Project Innovate. It started accepting applications in mid-2016.

The UK has completed the successful testing of models from 18 out of 69 firms in the first phase and 24 out of 77 firms in the second phase. The sandbox has accepted 18 out of 61 firms for the third phase, and 29 out of 69 applications received qualified to the testing stage in the fuurth phase.

Participants in the UK sandbox came from sectors like retail banking, general insurance, retail lending, and wholesale lending. Around 35 percent of the participants in the secnd phase were from other countries, including the US and Singapore. The fourth cohort has almost 40 percent of startups experimenting with distributed ledger technology for disrupting traditional finance.

The UK regulatory sandbox includes:

  • A positive reaction from other global regulators.
  • The startup community’s eagerness is evident from each phase being oversubscribed.
  • It has reduced the time to get an idea to market. FCA claims that, during the first year itself, 90 percent of the firms were able to go for a commercial market launch of their product.
  • Also, many of the approved fintech companies were able to attract VC investment for their projects.

Singapore

The second jurisdiction to launch the concept of a regulatory sandbox is Singapore. The Monetary Authority of Singapore (MAS) introduced its sandbox in June 2016. It has launched a range of schemes for interested startups. Till date, the country has the maximum regulatory alliances and has entered into co-operation arrangements with eight countries including UK, Australia, and Japan.

Since its launch, the MAS has guided over 140 applicants from around the globe. About one in five applications has been approved for experimentation.

Startups in crowdfunding, financial advisory, artificial intelligence, cross-border funding, distributed ledgers, and more were able to experiment under the MAS scheme. The sandbox has helped Singapore attract overseas startups to come and do business in the country. And it is contributing positively in making Singapore a Smart Financial Hub by allowing these young startups to form partnerships with traditional financial institutions.

United States

The Consumer Protection Financial Bureau (CPFB) initiated the concept of regulatory sandboxes to ensure global compliance and to stimulate innovation in the fintech industry.

Arizona became the first state to open a fintech sandbox in the US by passing a legislation to create a Regulatory Sandbox Program. This program will enable finetch players to test their financial products without being subjected to the licensing provisions of the state. The move will come under the supervision of the Arizona Attorney General. Another state, Illinois, also on the footsteps of Arizona, has a separate regulatory bill (currently on hold) on the horizon.

Along with the regulatory sandbox, the US has also launched an ‘office of innovation’, which primarily focuses on blockchain and cryptocurrency technologies. The aim is to stimulate competition in the industry and expedite consumer advancement.

The participants included payment start-ups, financial technology companies, credit agencies, and lending companies.

The startups in the Arizona sandbox will be allowed to experiment with their financial products for a period of up to two years. The sandbox has promoted investment and job creation in the state. It will help improve the competitive position of the country in the global fintech industry. The concept has also helped early stage entrepreneurs surpass the legal hurdles with access to a trillion dollar opportunity.

Canada

The Ontario Securities Commission (OSC) launched its sandbox “LaunchPad” in February 2017. The government is said to create a “super sandbox” that will help foster communication between fintech players, financial institutions, regulators, and the government. It is a part of its 2016-2019 Business Plan to understand how technology affects the markets. An agency by the name Ontario Fintech Accelerator Office will also be instituted to provide assistance to start ups. The government plans to develop the retail payment and financial sector framework at the national level.

It has given a push to Canada’s innovation market as earlier, due to the domination of a few financial companies in the industry, innovation was slow. Now, it has allowed Canadian fintech companies to come forward and grow both locally and internationally. The new idea will benefit Canadian SMEs who could not access funding from traditional lenders.

Global Integration

The concept of regulatory sandboxes is currently running in over 20 nations. Apart from the countries mentioned above, Australia, Indonesia, Hong Kong, Malaysia, Denmark, and Thailand have sandboxes running to join the race. To promote interaction among participants at a global level, a GFIN (Global Financial Innovation Network) has been launched, aimed at knowledge sharing and facilitating cross-border testing of ideas. It is a joint effort of FCA and 11 other regulatory authorities. Organizations such as the US CFPB, Hong Kong Monetary Authority, UK FCA, MAS, and others, are a part of this network. The goal is to go past the idea of a sandbox and ensure that regulators are able to support the advancements in the fintech industry.

Authors:

Written by Heena Dhir.

The post Fintech Sandboxes: A Global Overview appeared first on Lending Times.

Tuesday September 4 2018, Daily News Digest

Marketplace lenders have fared substantially worse on the stock market than other fintechs

News Comments Today’s main news: Zuckerberg, Bezos, Gates back Wagestream. Funding Circle plans 300M GBP IPO. P2P lenders take in 300M GBP in second year of IFISA. Hong Kong receives 29 bids for virtual bank licenses. Today’s main analysis: Does fintech has a vicious funding circle? Today’s thought-provoking articles: Samir Desai discusses Funding Circle’s IPO as plan to […]

Marketplace lenders have fared substantially worse on the stock market than other fintechs

News Comments

United States

United Kingdom

China/Hong Kong

Other

News Summary

United States

As Wonga Collapses, Zuckerberg, Bezos & Gates Back A Fairer Alternative To Payday Loans (Forbes), Rated: AAA

Samir Desai On Funding Circle’s $ 2 Billion IPO And His Plan To Conquer America (Forbes) Rated: AAA

Funding Circle has already facilitated over £5 billion ($6.37 billion) in loans since launching in 2010, mostly from its home U.K. market.

Funding Circle facilitated over £1 billion in loans to small businesses during the first six months of 2018 alone.

It’s now on track to become London’s biggest fintech IPO since global payments giant WorldPay’s bumper £4.8 billion ($6.1 billion) listing in 2015.

Source: Funding Circle

In the U.K. just 5% of businesses say Funding Circle when asked where they would go for finance, according to the company’s data, and 95% continue to chose their banks.

The Risk of a Vicious Funding Circle in Fintech (Bloomberg) Rated: AAA

There are fintechs, and then there are fintechs. Cheerleaders point to payments startups like Jack Dorsey’s Square Inc., whose stock has soared 242 percent in a year, as evidence of a Silicon-Valley-style revolution in the making. But there are sob stories, too: loan platforms LendingClub Corp. and On Deck Capital Inc. are still trading well below their IPO prices. Promises of break-neck expansion often crash into the reality of regulated finance.

Source: Bloomberg

Lending Earnings Insights (2018 Q3) (PeerIQ) Rated: AAA

We remain in the late stages of the credit cycle. The US consumer has benefitted from record low unemployment, rising incomes and home prices, and a lower tax rate. The supply of credit and competition to offer loans is increasing. Lenders are optimistic about consumer spending and debt levels, and are reserving for potentially higher losses in the future.

We see divergent credit performance across FinTech asset classes. Enova (Subprime) and OnDeck (Small Biz) are seeing near cycle-low charge-offs, while LendingClub (Prime) is seeing higher delinquencies on newer vintages. LendingClub also increased its charge-off estimates across loan grades by ~40 bps QoQ.

Card issuers are increasing loan loss reserves at a higher rate than loan growth, indicating expectations of higher losses going forward. Loan loss provisions are increasing at roughly twice the rate of loan growth across card issuers, but overall reserve levels are still low.

Scratch Introduces First Loan Servicing Platform To Align Financial Interests of Lenders and Borrowers (Scratch Email) Rated: A

Scratch, a new financial technology company started in 2015 to transform the antiquated business of getting America’s $13 trillion household debt repaid, introduced the first loan servicing platform to align the financial interests of lenders and borrowers.

The Scratch loan servicing platform empowers borrowers with a simple web application for understanding, managing and paying back their loans while providing lenders accurate, real-time portfolio insights. And, by automating the back-office complexities of loan management, Scratch can devote more resources to giving borrowers the attention and guidance they deserve.

Loan Servicing Crisis Persists

U.S. household debt composed of mortgages, student loans, auto loans, credit cards, home equity lines of credit, and other consumer loans, is at an all-time high and growing daily.

Today, household debt is at a high of $13 trillion and 8 out of 10 Americans carry some type of debt, including mortgages, credit cards, student loans, and auto loans. And everyone who has a loan has a loan servicer.

United Kingdom

Funding Circle plans to raise £300m in London IPO (Financial Times), Rated: AA 

Funding Circle has announced plans to become the first of Britain’s new generation of financial technology companies to go public, in a deal expected to raise £300m and value the peer-to-peer lender at more than £1.5bn.

The initial public offering of Britain’s biggest peer-to-peer lender will provide a significant test of investor appetite for the breed of fintechs that have sprung up in the past decade to challenge high-street banks.  Funding Circle has arranged £5bn of loans to small companies in the UK, the US, Germany and the Netherlands since its launch in 2010 by connecting businesses looking to borrow money with retail and institutional investors willing to lend them money. 

However, the company’s prospective value of more than £1.5bn is above the current value of US-listed peers OnDeck and Lending Club, which have both suffered tumbling share prices since their lPOs.

Funding Circle IPO will be open to platform’s existing investors (Peer2Peer Finance) Rated: A

FUNDING Circle has said it expects its existing investors will be able to become shareholders in the company after it goes public.

Funding Circle said that its initial public offering (IPO), if it goes ahead, would aim to raise around £300m, with at least 25 per cent of the company’s issued share capital to be placed on a free float.

In a blog post on its website, also on Monday, the P2P lender said that its customers would have the opportunity to apply to participate in the IPO and become a shareholder in Funding Circle via an intermediaries offer.

Don’t be blinded by the wizardry of tech darling Funding Circle (London Evening Standard) Rated: A

Given that Funding Circle’s flotation comes just days after the collapse of that other trailblazing fintech, Wonga, it’s hard not to compare the two.

Both were launched to fill the gaps in the lending market where traditional banks feared to tread. Both used tech wizardry to check they were lending to the right people at the right price. Both brilliantly deployed digital technology to make their services simple and fast to use.

Hopefully, for future investors, the similarities end there.

Funding Circle to host cryptocurrency event to promote women in fintech (Peer2Peer Finance) Rated: B

FUNDING Circle is to host a panel event focusing on cryptocurrency, described by the organisers as “one of the most interesting but least understood areas of fintech.”

The event is being held in connection with FinTechWomen, a London-based meet-up group, and is sponsored by Funding Circle.

UK sub-prime lenders shrug off political cloud (Nasdaq), Rated: AAA

UK sub-prime investors are shrugging off Wonga’s cloud. Customer complaints and a regulatory clampdown forced the payday lender to stop making loans. The likes of Amigo Holdings and Non-Standard Finance have different models, and regulators’ blessing. Yet, with Wonga out of the picture, they too risk becoming the focus of public ire.

Investors love it. Amigo’s return on equity will be around 40 percent this year, using Thomson Reuters I/B/E/S, while it and Non-Standard Finance should grow revenue on average by more than 20 percent each year up to 2021, analysts reckon. NSF, which has a more diversified business including unguaranteed loans, is valued at over 17 times forward earnings. Amigo’s shares were priced at 12 times forward earnings even after a selloff promoted by disappointing results on Thursday. The consumer finance sector on average trades at less than 11 times forward earnings, according to Eikon.

Hedge fund Kreos Capital is first in line for Wonga payout deal after lending the collapsed payday loan company around £34m (This is Money) Rated: A

A Mayfair hedge fund is at the front of the queue to be paid by collapsed Wonga as fears grow that thousands of its hard-up customers will get nothing.

Kreos Capital lent Wonga about £34million two years ago and is understood to be still owed around £10million by the payday loan company.

Under the arrangement, it is thought to be in line to collect that sum ahead of other creditors.

P2P lenders record £300m intake in second year of the IFISA (P2P Finance News), Rated: AAA

ALMOST £300m was invested across Innovative Finance ISAs (IFISA) in the previous tax year, HMRC data reveals.

The latest ISA statistics from the taxman shows £290m of subscriptions in IFISA for the 2017/2018 tax year across 31,000 accounts.

P2P lenders saved £9,355 on average.

Zopa revealed it received more than £150m in its IFISA during the previous tax year.

The data shows that savers subscribed to 10.8 million Isa accounts during the 2017-18 tax year, down from 11.1 million in the previous tax year. This represents a fall of 10%.

P2P marketing clampdown ‘may restrict IFISA takeup’ (P2P Finance News), Rated: A

Stuart Law, who heads up the business P2P lender, warned that the strong take-up of the IFISA could be hampered by the FCA’s proposed marketing restrictions for the sector.

Under the proposed changes, platforms would be restricted to marketing to those who are certified as sophisticated or high-net-worth investors or those that certify that they will not invest more than 10 per cent of their net portfolio in P2P agreements.

Northern Irish housebuilder secures £250,000 from P2P platform (Development Finance Today), Rated: A

County Down Developments has received a £250,000 facility from Blend Network for the development of four luxury apartments in Bangor, Northern Ireland.

The loan from Blend Network came after the housebuilder was turned down for a loan by Barclays.

Mattress start-up Casper offered credit in UK without permission (Financial Times), Rated: B

A US online mattress start-up backed by rapper 50 Cent has been forced to stop offering credit to UK customers, after it emerged it had been doing so without permission from the regulator.

Casper, a five-year-old company that is on a major European expansion drive, was allowing UK customers to buy on credit from Swedish bank Klarna.

China/Hong Kong

China’s Fintech Giants Have The Money And Means To Dominate Despite The Wider Slowdown (Forbes), Rated: AAA

China has experienced a fintech explosion in recent years, with top companies dominating the industry. It’s not an accident that 

HKMA Receives 29 Bids for First Round of Virtual Bank Licences (Regulation Asia) Rated: AAA

Standard Chartered, WeLab, Zhong An Bank and HKT among several banking, technology and telecom firms applying for virtual banking licenses.

Twenty-nine financial and technology firms, including Standard Chartered and WeLab have submitted applications to obtain Hong Kong’s first online-only banking licenses.

Tencent-backed Airwallex to join push for Hong Kong virtual bank license (SCMP) Rated: A

The company shifted its headquarters to Hong Kong from Melbourne earlier this month as it prepares to submit a virtual banking license application, along with partners, ahead of Friday’s deadline.

Airwallex co-founder and chief executive Jack Zhang said the company will team up with a traditional bank and other local partners as part of the application process, although he declined to reveal their identities.

Another reason for the relocation to Hong Kong is proximity to major clients, including Tencent, online travel operator Ctrip, e-commerce JD.com as well as traditional lender Bank of East Asia.

Stable earnings growth expected by mainland banks, but bad-loan worries linger (SCMP), Rated: A

And Beijing’s crackdown on the peer-to-peer lending sector – the shadow banking system that saw rampant illicit and risky behaviour continue in the first half of this year – has helped increase demand for corporate lending levels too.

The country’s big four banks – Industrial and Commercial Bank of ChinaChina Construction BankAgricultural Bank of Chinaand Bank of China – reported profit rises of between 5.2 and 7.9 per cent in the three months ending June.

China’s state banks to boost lending as Beijing fans economy (Nikkei), Rated: A

First-half earnings showed the lenders rallying after several years of low growth. Collective net profit rose 5.7% year on year to 532.1 billion yuan ($77.9 billion), while the lenders’ average ratio of bad debt fell 0.06 percentage point in six months to 1.52% at the end of June.

European Union

INSTANTOR OPENS UP BANK API – PROVIDING UNIQUE ACCESS TO HALF A BILLION PEOPLE (Fintech Finance), Rated: B

Today Instantor, the Swedish fintech company making financial decisions easy, announces, WDSK, The World Domination Starter Kit. The WDSK is an initiative to support start-ups and scale-ups to develop next-generation products by giving them access to Instantor´s Bank API with no associated costs for new Instantor customers. By using Instantors bank API, developers will have access to transactional data from over 300 banks in 25 countries, with the potential to reach half a billion people. Instantor´s bank API has an unrivaled reach, and the WDSK initiative includes access to several markets outside new Open Banking legislation. The authentication and the end user’s interaction with banks are handled by Instantor, and the data can be accessed once the end user has given their consent.

International

Robo-advice not dead: GlobalData (Financial Standard) Rated: A

The analyst suggested robo-adviser may be ahead of their time, given high net-worth demand for robo-advice is on the rise among the next generation of investors.

“While robo-advice is here to stay, it will take time to cement itself. The digitally-savvy next generation will embrace an automated service and big banks should capitalize on this. However, a big brand is not enough to justify much higher fees,” Woldemichael said.

To succeed, incumbents will have to provide a level of service, and prices, that are genuinely competitive with those offered by startups.”

Australia

Collapse of UK payday lender Wonga sounds warning for Aussie fintech vigilance (Australian Financial Review) Rated:AAA

The collapse of Wonga, one of Britain’s most high-profile fintech lenders, provides salient lessons for Australia, which considers the UK a template for financial technology policy and where tighter laws to protect vulnerable customers from payday lenders appear to have stalled.

Wonga, built around a slick app allowing customers to get expensive loans via their mobile phone, was “notorious for its extortionate interest rates and was a toxic symbol of Britain’s household debt crisis”, said The Guardian last week.

The payday lender “failed because it was too greedy and at times crossed the ethical line”, it said, quoting prominent UK financial columnist Martin Lewis, who described Wonga’s loans as “the crack cocaine of debt – unneeded, unwanted, unhelpful, destructive and addictive”.

Micro lender makes big difference (Latrobe Valley Express) Rated: A

Her heartfelt story was told at Good Money’s one-year anniversary last week during what Carol described as a “life-changing event” after borrowing money to buy essential appliances like a new fridge and washing machine.

The low to no-interest lender was set up in July last year in partnership with Good Shepherd Microfinance and the National Australia Bank, following a $2.3 million investment from the state government.

More than 2900 people made enquiries in the hub’s first year, and the store has provided more than 500 no and low-interest loans for household appliances, car-related expenses, household furniture and costs such as medical and education expenses.

India

China’s FinUp, existing investors back digital lending startup SlicePay (VC Circle) Rated: AAA

SlicePay, a digital lending platform which caters to college students and young professionals, has raised an undisclosed amount in an extended Series A round of funding led by Chinese firm FinUp Finance Technology Group.

The company said in a statement that existing investors Blume Ventures, Japan’s Das Capital, and Russia’s Simile Ventures had also participated in the round.

A person close to the development who did not wish to be named pegged the deal at $14.9 million (around Rs 105 crore at current exchange rates).

Asia

Southeast Asia’s startups suffer from Series B funding crunch, says Kredivo’s Gar (Deal Street Asia), Rated: AAA

Having recently raised what is estimated to be the largest Series B funding round for a fintech firm in Southeast Asia, Indonesia-focused lending platform Kredivo says the process was far from smooth sailing.

The company was forced to look beyond the region to raise the majority of its fund, as it found that there were simply very few investors in the region that specialized in doing Series B investments.

MENA

Tel Aviv Climbs on List of Top 10 Undergraduate Programs for Entrepreneurs (CTech) Rated: B

Tel Aviv University is among the top ten global undergraduate programs in terms of producing venture capital-backed entrepreneurs, according to a report published last week by Seattle-based market research company Pitchbook. Pitchbook ranked Tel Aviv in eighth place, up from ninth last year, above Yale, Princeton, and Brown.

Two other Israeli universities made the top 50 list: the Technion-Israel Institute of Technology came in at 14, while the Hebrew University of Jerusalem placed at 35.

Authors:

George Popescu
Allen Taylor

Monday August 13 2018, Daily News Digest

Reasons for Personal Loan Inquiries July 2018

News Comments Today’s main news: OnDeck CEO says online lending is the future of SMB lending. SALT Lending now in 35 states. LendInvest debuts exclusive 5-year fix product through buy-to-let club. Weidai files $100M IPO in New York. Wonga says $3M African loans are unaffected by UK woes. Today’s main analysis: LendingTree Personal Loan Offers Report for July 2018. […]

Reasons for Personal Loan Inquiries July 2018

News Comments

United States

United Kingdom

China

International

Other

News Summary

United States

OnDeck Capital CEO says online lending is the future for small businesses, talks strong earnings (Proactive Investors) Rated: AAA

CEO Noah Breslow tells Proactive Investors the small business lending company has provided over US$9bln to small businesses, crossing the US$10bln mark this fall, saying online lending is the future for small businesses and consumers.

U.S. Cryptocurrency-Backed Lending Platform Now Available in 35 States After Passing Stringent Regulations (Crypto Disrupt) Rated: AAA

The cryptocurrency-backed lending firm, SALT, has released details that it is now operational across 35 states in lieu of passing crypto regulations and will be expanding its network to 20 new locations.

SALT is based in Colorado and is one of the few companies that allows borrowers to leverage their held crypto as collateral for loans. As more people than ever before hold crypto, it is important that cryptocurrency-backed lending firms pass regulatory checks to offer more competition to potential crypto borrowers in the safest possible manner.

SALT is planning to move into 20 new states, which will include North Carolina, Oklahoma, Florida, and Virginia. Crypto users in all but 15 states can now leverage their crypto to receive personal cryptocurrency-backed lending packages.

Tesla and Spotify say public markets have major flaws. Do they have a point? (Quartz) Rated: AAA

According to two prominent executives this week, the stock market isn’t all that it’s cracked up to be. Initial public offerings are broken, according to Spotify CFO Barry McCarthy (paywall). Tesla CEO Elon Musk says stock investors are too focused on the short-term, and his threat to take the company private sent tradersbankersfans, and government watchdogs into a tizzy.

McCarthy and Musk aren’t alone in their worries. The number of IPOs and listed companies in the US is shrinking: There were an average of 310 public offerings annually from 1980 to 2000, according to an analysis by Jay Ritter, a finance professor at the University of Florida. The average has slipped to 108 since then.

A common complaint is that public markets are too demanding. It’s expensive to comply with regulations, and these days there’s ample private money available for companies to tap without all the hassles of dealing with analysts, short sellers, quarterly reporting, and the rest of it.

Source Quartz

LendingTree Personal Loan Offers Report – July 2018 (Lending Tree) Rated: AAA

Offered loan amounts are down about 3.5% for all borrowers, while offered APRs inched up. Rate and loan amount offers varied widely among consumers, depending on factors including, but not limited to, credit score, income, and current debt obligations.

The most common reasons for seeking a personal loan are credit card refinancing and debt consolidation. These two categories comprise 64% of all loan inquiries.

Source Lending Tree

WV ranked 24th in US for student loan debt (Herald Dispatch) Rated: B

West Virginia schools rank 24th in the nation for the amount of debt its students graduate with, with Marshall University coming in sixth out of the schools tallied in a recent LendEDU report.

By licensing data collected from the annual Peterson’s voluntary financial aid survey, LendEDU, an online loan marketplace, completed its annual Student Loan Debt by School by State Report, a comprehensive analysis of student loan debt statistics for over 1,000 colleges and universities throughout the United States.

The total outstanding student loan debt now stands at $1.52 trillion, making it the second largest form of consumer debt behind only mortgages.

Average individual student loan debt up $ 313 in 2017 (UPI) Rated: AAA

The average amount of individual student loan debt owned by U.S. college students increased by more than $300 in 2017, according to a study by LendEDU.

The New Jersey-based online loan marketplace’s annual Student Loan Debt by School by State Report found the average debt per borrower for the class of 2017 was $28,288, up $313 from $27,975 in 2016.

“Student loan debt in the U.S. continues to be an issue of the utmost importance. The total outstanding student loan debt now stands at to $1.52 trillion, making it the second largest form of consumer debt behind only mortgages,” LendEDU said Wednesday.

The annual report uses data from the Peterson’s financial aid survey, which collects responses from 1,080 four-year public and private institutions to determine average individual student loan debt figures and rank states and colleges in terms of debt per borrower.

Who’s Departed, Who’s Left and Who’s Leading Among Robo-Advisors (Think Advisor) Rated: A

The second quarter of 2018 was a busy one for robo-advisors. Hedgeable announced its impending closure, WorthFM became history and LearnVest notified customers it was discontinuing its planning and online investment services.

During the same quarter, US Bank and Fifth Third Bank launched their robo-advisor platforms and SoFi, a fintech lender with a robo product, introduced checking accounts with debit cards, further blurring the lines between banking and digital advice. And U.K.-based Wealth Wizards, an independent digital advisor with AI capabilities, is exploring a talking robo-advisor.

What you need to know on Wall Street today (Business Insider) Rated: A

The crypto bear market has been a blessing for this bitcoin trading firm’s booming new business

Genesis Global Trading, a crypto trading shop based in New York,launched a crypto lending unit, Genesis Capital, earlier this year.That business originated $30 million in crypto loans on Tuesday, its largest amount ever, according to chief executive officer Michael Moro. The company typically lends out around $2 million per day on average.

In a sense, it could be a bearish indicator for the market. Many of the people who are borrowing crypto from the firm are doing so in order to take a short position on a given coin.

What happens when the government stops doing its job? (The Washington Post) Rated: A

It took almost two years for two dozen officials at the Consumer Financial Protection Bureau to pull together a case against Golden Valley Lending. The online lender was making small short-term loans at interest rates as high as 950 percent, violating laws in at least 17 states that cap interest rates.  Last October, the agency finalized a rule to stop “payday debt traps” by requiring lenders to determine whether people can afford to repay their loans.

Yet a few months later, it unceremoniously dropped the case, telling a federal judge in Kansas that it would “continue to investigate the transactions that were at issue.” Golden Valley is still doing business; its Web site says: “Get the money you need. It’s easy!”

Mulvaney has all but halted the enforcement of certain government regulations. He stripped the bureau’s fair-lending unit of enforcement power and redefined it as an advocacy office.

RealtyShares Launches New Brand Identity and Online Learning Center (SC Now) Rated: A

RealtyShares announced today the launch of its new corporate brand identity and online learning center. The brand changes come at a time when the company is continuing its focus on the commercial middle market, commercial transaction values under $50 million.

As part of the rebrand, RealtyShares is launching a new online learning center where investors can learn more about diversifying investments and the role that commercial real estate can play in an investment portfolio. This learning center includes guided learning paths and educational articles created and curated by RealtyShares’ expert professionals. The content is designed to help investors with a range of investing experience better understand the risks and rewards of investing in commercial real estate.

Kirill Bensonoff: 5 ways real estate can be transformed with a blockchain approach (Augusta Free Press) Rated: A

The real estate market has seen steady growth the past few years, and is showing no signs of slowing down. The commercial real estate industry alone is expected to reach $414 billion in commercial transactions next year.

This isn’t the biggest news in the real estate industry though.

According to real estate and cryptocurrency expert, Kirill Bensonoff, the most significant growth for real estate in the next few years will be how blockchain technology is applied to the market.

U.S. Fintech Even Opens New East Coast Headquarters In North Carolina After Securing More Than $ 40 Million in Series B Funding (Crowdfund Insider) Rated: B

Holistic financial health platform Even announced on Friday it has opened its new office in Raleigh, North Carolina. This news follows the company securing $40 million through its Series B funding round. Founded in 2014, Even describes itself as a mission-driven technology company working to help Americans escape the paycheck-to-paycheck cycle.

Even also reported that its mobile apps instantly budget so that users know how much is “okay to spend,” safely address cash flow issues with Instapay (on-demand access to wages), and help employees automatically save money out of their paycheck before it ever hits their bank balance.

Buy The Block: First Black-Owned Real Estate Investment Platform Allows Communities to Fight Gentrification (Digital Journal) Rated: A

Buy the Block founder Lynn P and her team have struck gold in the hills of Colorado for a second time in as many years with the release of their new app now available on Android and iOS platform. This app will expand the already extensive number of BlockVestor enthusiasts that populate the first Black-female owned FINRA and SEC regulated real estate crowd investing platform in the United States. The addition of the new app will rapidly expand a brand that is on the cutting-edge in alternative financing. This unique and innovative platform allows many inner-city residents a never-before available opportunity to invest with their peers and their communities.

Lowe’s Ventures backs Moved, a startup that makes moving less stressful (Tech Crunch) Rated: A

Moving can also be expensive, so the company has announced a partnership with Affirm, where Affirm’s financing will allow you to break up the moving costs into monthly payments.

To be clear, Moved isn’t doing the moving itself — instead, it’s basically connecting you to a marketplace of movers and other service providers. Pittenger said the company is “very strict about the suppliers and the vendors” and will remove them if customers aren’t happy with their experience.

Moved is managing all of this through a real, human assistant who can help you figure out what you need, handle the scheduling and serve as a “consumer advocate” who ensures that you’re not getting ripped off.

Take a Crash Course in Student Housing Investments (US News) Rated: A

As the back-to-school season gets under way, you may be shopping around for new investments for your portfolio. Real estate is a solid diversification tool and student housing is an under-the-radar sector to consider this fall.

“The student housing real estate investment market is virtually untapped,” says Jay Morrison, CEO of the Tulsa Real Estate Fund. An aura of exclusivity surrounds student housing investments but it’s a sector that’s far from fully realized, “which means there’s plenty of room for opportunity for new investors in this market.”

As a smaller niche within the commercial real estate market, student housing has long been the domain of institutional investors and people with a high net worth.

United Kingdom

LendInvest Debuts Exclusive Five-Year Fix Product Through Buy to Let Club (Crowdfund Insider) Rated: AAA

Following the recent changes on its marketplace lending platform, UK-based LendInvest announced the launch of an exclusive five-year fix product through the lender’s Buy to Let Club. The lender reported that the product is Designed for landlords who wish to utilize a higher fee, lower interest rate loan, and allows the borrower to leverage their cash flow.

According to LendInvest, the five year fixed rate of 2.75% is available up to 75% LTV through the distributor, with a product fee of 4.99% which can be added to the loan. Affordability is then calculated at an Interest Cover Ratio (ICR) of 140% for higher rate taxpayers; 125% for limited companies and basic rate taxpayers, at an assessment rate of 4.19% against the total gross loan amount. The mortgage is available on loans up to £500,000 for purchase and remortgages, and suitable for standard property types and HMO’s.

Business funding options – what choices do you have? (Estate Agent Today) Rated: A

When you are starting up a new business, it is unlikely that you will already have enough capital to invest. Taking out a business loan is the best option as this will give you the chance to get set up.

But which loan type is best for your business idea?

Peer to Peer Lending

As banks are increasingly wary about giving out business loans, peer to peer lending has become a more popular method for matching people who wish to invest their money and those who need to borrow. Though this method can be quite expensive and may be risky, it is quite easy to raise substantial funds this way.

Crowdfunding

There are two types of crowdfunding: equity-based and reward-based. Equity-based crowdfunding is where people contribute money to receive equity in your business; reward-based crowdfunding is where people contribute money for a reward.

Competition from alternative lenders driving growth in business lending (London School of Business and Finance) Rated: A

Competition from alternative lenders is driving banks to boost lending amounts for businesses, according to Conrad Ford, Chief Executive of SME finance aggregator Funding Options.

Barclays and NatWest/Royal Bank of Scotland are among the banks that are boosting access to finance for SMEs.

Growing competition

Competition from alternative lenders is thought to have been the driving force behind Barclays’ decision to increase its lending amount to £100,000.

Commenting on the trend, Ford stated that there is growing competition in this sector, adding that Barclays is not the only bank that is taking action, with RBS/NatWest launching their Esme loans service, a digital lending platform that enables SMES to access unsecured loans of up to £150,000.

The pros and cons of alternative property investment and crowdfunding (Buy Association) Rated: A

With tax changes and stricter lending rules making it harder for some to finance a property purchase, investors are increasingly looking to navigate the challenges in the buy-to-let sector.

It’s why setting up a limited company through which to buy and operate rental properties is growing in popularity.

Peer to peer lending has exploded in popularity because it offers investors high interest rates paid over relatively short time periods.

There is obviously a level of risk involved – the property is used as security, and if house prices drop suddenly then you risk losing some capital. That’s why it’s important to consider the loan to value ratio (LTV) – for example, if this is 75%, the borrower can borrow three quarters of the value of their property. This means house prices would need to fall 25% before the investor made a loss.

China

How peer-to-peer lending turned middle-class Chinese dreamers into angry protesters (Quartz) Rated: AAA

In recent years, many in China’s middle classes poured their savings into peer-to-peer lending platforms, known as P2P for short, drawn in by promises of high returns. But amid a larger effort to curb financial risk to China’s economy, financial regulators tightened rules for these platforms, leading many of them to collapse without returning investor money. In Li’s case, the main stakeholders of Yonglibao, which he had put his money into, suddenly disappeared in mid-July (link in Chinese), he told the South China Morning Post. By the time its founders abandoned its offices, the platform had amassed a transaction volume of 7.6 billion yuan ($1.1 billion). The other protester told Quartz he had lost the equivalent of $50,000 on a platform called iqianjin.com—its name is Love Money, though it can also be understood as “Get Ahead” or “Money Coming.”

Both hoped a protest in Beijing would compel the government to help people recover their money from the dozens of P2P platforms that stopped allowing fund withdrawals last month. Instead, they were foiled by hundreds of uniformed police who locked down the area, patrolling corners near the offices of the central bank and securities regulators, and checking identity cards. More than 120 buses were brought to the area to take the stealth protesters away, according to a reporter with AFP.

Chinese Peer-to-Peer Lender Weidai Files to Raise Up to 0 Million in New York (Capital Watch) Rated: AAA

Hangzhou-based peer-to-peer lending platform Weidai, which translates as “micro-lending,” filed its preliminary prospectus Friday seeking to raise up to $100 million in an initial public offering in New York.

The proposed IPO size shrinked significantly since the company first announced its plans in April. According to Bloomberg citing sources, Weidai was previously planning to raise nearly $400 million.

Launched in 2011, the online micro-lending platform has attracted multiple high-profile investments, including a $159 million series C funding in 2016 led by Vision Knight Capital. Among other key investors were Chinese billionaire Chen Tianqiao’s Shanda Group and Shenzhen-listed software developer Hakim Unique Internet Co.

HK is running out of runway (The Edge Markets) Rated: AAA

BRACE, brace. Hong Kong’s initial public offering (IPO) take-off is going to come to a screeching halt.

Source: The Edge Markets

Ascletis Pharma Inc, a Hangzhou-based maker of HIV drugs, has slumped 20% since making its entrance at the end of July (1).

Even the online insurer that sparked a revival of Hong Kong’s IPO frenzy is in the red. ZhongAn Online P&C Insurance Co, a company backed by Internet behemoths Tencent Holdings Ltd and Alibaba Group Holding Ltd, surged on its debut in September, but now stands 42% below its price on listing.

Two-thirds of IPOs that raised more than US$1 billion in the two years ended July 2017 were below their offer prices after six months; three-quarters had dropped after a year, data compiled by Bloomberg show. Ironically, the cause of the pain can be traced partly to measures Hong Kong Exchanges & Clearing Ltd has taken to fight back against a US market that was luring away China’s new-economy stars.

Hexindai Further Strengthens Risk Control to Better Protect Investors (Crowdfund Insider) Rated: A

Hexindai (NASDAQ:HX), a China-based peer to peer lender, announced on Friday it has further strengthened its risk control system to better protect investors throughout the entire process of borrower acquisition, risk-based pricing, post-loan management, and default risk coverage through its new comprehensive, stable and efficient asset security system, HX-CORE. Hexindai reported it established the system based on advanced risk control technologies that leverage risk control models and enormous volumes of credit data from cooperating partners and business data accumulated by the online lending platform.

According to Hexindai, the risk-based pricing is conducted by the Company’s proprietary risk control system, called Hurricane, which was developed by the lender and operates in cooperation with a number of credit information organizations and third-party Big Data risk management companies.

Ning Tang, CEO of CreditEase, Shares Insight into P2P Lending in China (Crowdfun Insider) Rated: A

Ning Tang, founder and CEO of CreditEase – a huge Chinese Fintech that started as just a peer to peer lending platform, recently spoke to Bloomberg in Asia. CreditEase is also the majority shareholder of US listed online lender Yirendai (NYSE:YRD)

Tang provided an interesting update on the Chinese P2P sector as it has been going through a transformational process. In July alone, it has been reported that over 100 peer to peer lenders shut down in China as regulatory authorities tighten operational standards to curb rampant fraud. The actions are to ensure a robust and sustainable sector of online lending.

Tang shared that revenues have not been impacted much by the regulatory actions as CreditEase has become more diversified with inclusive finance, alternative asset management, and wealth management.

China reduces risks of peer-to-peer lending (CGTN) Rated: A

Chinese authorities are taking immediate actions to reduce risks in the peer-to-peer (P2P) lending business and better protect the interests of private investors.

The latest moves by Chinese financial regulators include urging leading internet platforms to undergo self-inspection and fix problems. They will also guide unqualified P2P lending platforms in exiting the market and dealing with their assets and debts in a market-oriented way based on legal principles.

European Union

Sweden’s Largest Loan Marketplace (Killer Startups) Rated: A

Thanks to rapid technological development around the world, it’s now possible for consumers to sidestep banks and other unnecessary intermediaries and secure private loans more efficiently.

One nation where this hasn’t been an issue is Sweden.  Look no further than Lendify – the country’s largest peer-to-peer lending platform – for proof.

“Lendify is a marketplace platform that connects borrowers with investors, without the involvement of banks or credit card companies,” said Erik Wikander, the company’s Founder.  “Some of Sweden’s foremost entrepreneurs are a big part of the platform – and we’ve been granted full approval from Finansinspektionen (the government’s financial regulation agency).”

Schwarmfinanzierung: Deloitte Study on “Crowdlending” in Germany says Banks Win (Crowdfund Insider) Rated: A

Deloitte Germany has published research on the crowdfunding sector and when it comes to comparing new forms of online capital formation and old banks – banks win. That is, at least in the eyes of the Deloitte research.

Deloitte states that when it comes to providing finance to medium sized firms, the fabled Mittelstand, these companies have “little interest” in using this new form of finance. Simply put, their relationships with banks is too strong of a bond.

The research published by Deloitte was done in partnership with EFAM (Europäisches Forschungsfeld für Angewandte Mittelstandsforschung) at the University of Bamberg, the document said that the threat to traditional banks by crowdfunding or crowdlending has not panned out. This more recent study follows a similar one back in 2015 which stated that crowdlending was relatively unknown among company executives. Three years later, their survey of 250 medium size German firms appears to indicate little has change.

International

CreditRiskMonitor Announces Licensing Agreement with DBRS (Credit Risk Monitor) Rated: AAA

CreditRiskMonitor (OTCQX: CRMZ) today announced a new licensing agreement with DBRS, an independent, privately-held, globally recognized credit agency. DBRS is the fourth-largest ratings agency globally, with ratings on more than 2,400 issuer families and nearly 50,000 securities worldwide.

CreditRiskMonitor has also invested in cutting-edge technologies to improve the accuracy of its predictive scoring methods. The FRISK® score, a measure of bankruptcy risk in public companies, uses crowdsourced click patterns of risk professionals who subscribe to CreditRiskMonitor’s service. The PAYCE score, used for private company financial risk assessment, is formulated with deep neural network technology, a type of artificial intelligence.

Can Blockchain Revolutionize The Traditional Lending System? (Crypto Coin News) Rated: A

With the introduction of blockchain technology, there have been lots of projects built on blockchain that have attempted to improve the traditional banking system. This brings us back to the question; Can blockchain revolutionize the traditional lending system? The answer is unequivocally YES since there are projects already on the brink of achieving this. Also, the below features of blockchain technology is naturally what is needed to revolutionize the traditional lending system.

Ways blockchain technology edge the traditional lending system:

  • Accessibility
  • Time
  • Removal of intermediaries
  • Reduced risk

Assuring the future of financial services (Network World) Rated: A

The financial services industry is experiencing a period of dramatic change as a result of the growth in digitalization and its effect on customer behavior. In an emerging landscape made up of cryptocurrencies, frictionless trading, and consolidated marketplace lending, traditional banks have found themselves shaken by the introduction of new, disruptive, digitally-native and mobile-first brands.

With a reputation as being somewhat conservative and slow to innovate, many financial service providers are now modernizing and improving their systems, transforming their new business models and technologies in an effort to stay ahead of the more agile challengers snapping at their heels.

However, while this digital transformation brings significant opportunities, implementing these new technologies also presents challenges.

Australia

Blockchain P2P lender secures $ 1.35m to fund growth (Mortgage Business) Rated: A

BLOCKLOAN, a new blockchain-based marketplace lender headquartered in Sydney, has announced that venture capital fund Xplora Capital has purchased $1.35 million in tokens, as it continues its mission to provide “transparent, easy to understand, [and] real-time” access to personal finance on a global scale at more competitive rates than the banks.

The fintech said that by using cryptocurrency-backed loans on a global P2P lending marketplace, it aims to eliminate the “unnecessary” fees associated with traditional lending, while promising end-to-end loan origination, matching and management through the use of pooled smart contracts and an automated KYC and credit risk engine.

India

Are Digital Platforms Transforming Lending Decisions? (Entrepreneur) Rated: AAA

The effects of technology and the disruptions technology make, manifests itself in clearly perceivable ways. This is very evident in many sectors – in a short span (just eighteen months after its release) Google Maps had knocked out GPS navigation device makers and Amazon and Taobao (Alibaba) have disrupted how consumers shop for goods by moving them to online from offline (O2O). Enterprises are worried about being Uber-ed or Airbnb-ed as new age companies are challenging traditional ways of doing business.

Banking and Lending space have also gone through an amazing level of rapid innovation and disruption starting at the turn on the new millennium. Traditional banking monoliths can no longer feel impervious as they were protected by a myriad of government regulations which used to make it hard for fintech start-ups. Fintech start-ups don’t have to deal with the large legacy systems that drag down big banks and are nimbler and more suited to adapt to global trends and changing regulations. Internet only online banks with meagre to no brick and mortar branch presence have come up and have shaken up the large banks by offering better interest rates for deposits and borrowing than traditional banks. As an added benefit with the ubiquity of eKYC systems and adoption by fintech industry, accounts can now be opened in a matter of minutes and can be ready to transact than days and after an insane amount of paperwork that needed to be filled in earlier days.

Africa

Wonga faced collapse in the UK, but says its 3 million loans in South Africa are unaffected (Business Insider) Rated: AAA

An emergency cash injection of R178 million has saved microlender Wonga from collapse – for now.

The UK firm, which has operations in South Africa, is currently facing immense pressure after the British authorities forced it to write off loans worth R4 billion because Wonga failed to properly check whether customers could afford them.

Wonga’s shareholders, two venture capital funds, have pledged the money to prop up Wonga.

Mobile banking inevitable but ATM card will remain useful (The New Times) Rated: A

During a wide-ranging interview with The New Times at a recent GSMA M360 Africa Series in Kigali, Mr Akinwale Goodluck, Head of the Global Mobile Operators’ organisation in sub-Saharan, sought to dispel the myth that mobile money would cannibalise banks.

He pointed to the fintech synergy between telcos and banks, noting how the significant numbers of people across the region are using “phones to do proper mobile banking.”

This is true, and perhaps more pronounced in East Africa. The sub-region has the largest mobile money market on the continent, accounting for 56.4 per cent of total users in sub-Saharan Africa, according to GSMA.

East Africa is, however, only leading the way, but not for long.

Asia

Indonesian startups Akseleran, Pomona confirm recent funding (Deal Street Asia) Rated: AAA

Two Indonesian startups have confirmed raising a funding round earlier this year.

P2P lending startup Akseleran said it raised a pre-Series A funding round of $1.85 million, while adtech startup Pomona said it secured an undisclosed Series A funding round.

P2P lending startup Akseleran raises $1.85 pre-Series A funding Peer-to-peer lending startup Akseleran has confirmed raising a $1.85-million pre-Series A funding round backed by a New York-based family office, the parent company of PT Bintraco Dharma Tbk and several angel investors.

According to a press release, the startup plans to use the fresh funding for expansion by recruiting representatives in a number of cities in Java such as Yogyakarta, Solo, Surabaya and Semarang. It also plans to step up its marketing campaigns through various advertisements.

Authors:

George Popescu
Allen Taylor

Thursday April 26 2018, Daily News Digest

Hong Kong IPO

News Comments Today’s main news: FTC says LendingClub misled customers on fees. Credit Karma expands ID theft monitoring to include dark web data. Two startup robos were top performers in Q1. Shanlin Finance leaders charged with operating Ponzi scheme. TransferWise launches borderless accounts in European nations. Today’s main analysis: Small-dollar loans. Today’s thought-provoking articles: Elevate’s safe credit. Hong Kong makes […]

Hong Kong IPO

News Comments

United States

United Kingdom

China

European Union

International

Other

News Summary

United States

Lending Club misled customers about hidden fees, regulators say (CNN Money) Rated: AAA

The Federal Trade Commission said the company, which connects borrowers to investors without banks in the middle, “lures” customers with the promise of no hidden fees.

Instead, Lending Club deducts money up front — hundreds and sometimes thousands of dollars, the FTC said.

The FTC also accused Lending Club (LC) of falsely leading customers to believe they have been approved for a loan.

The FTC further accused Lending Club of withdrawing double payments from the accounts of its customers and charging customers who had canceled auto-payments or already paid off their loans.

LendingClub (LC) Said FTC Allegations are Unwarranted (Street Insider) Rated: A

Following an inquiry that began in May 2016, the U.S. Federal Trade Commission (FTC) brought an action against LendingClub(NYSE: LC) earlier today in the Northern District of California alleging that certain LendingClub practices do not, or in the past did not, comply with the requirements of the FTC and Gramm-Leach-Bliley Acts.

LendingClub believes that the allegations in the FTC’s complaint are legally and factually unwarranted. The company is disappointed that it was not possible to resolve this matter constructively with the agency’s current leadership and intends to oppose the claims and work towards an early resolution of the matter in Federal Court. Additional information about the complaint and LendingClub’s response are on its blog.

Why LendingClub Corp Stock Plunged Today (Motley Fool) Rated: B

Shares of peer-to-peer (P2P) lending company LendingClub Corp (NYSE:LC) are down by about 15% as of 3:30 p.m. EDT after the Federal Trade Commission charged the company with deceiving customers.

Elevate Provides Safe Credit To People Banks Can’t Serve With FICO (Forbes) Rated: AAA

Providing credit to 160 million Americans who are being ignored by banks sounds like a great business. And indeed, Elevate, which does just that, has been growing faster than Lending Club, SoFi, or OnDeck and is more profitable than any of them, said Ken Rees, the company’s CEO .

“Forty percent of Americans show monthly income swings of 30%. The majority of Americans need access to emergency credit but the banks have pulled back. Credit is particularly important because they have very low savings.”

Credit Karma expands its identity theft monitoring tool to include dark web data (Tech Crunch) Rated: AAA

After introducing a free identity monitoring tool for its users late last year, Credit Karma is widening the scope of its fraud-fighting scans to include data from the dark web.

Credit Karma’s  existing ID-monitoring tool searches 4.5 billion public breaches for a user’s personal data, but the improved service will scour additional breaches culled from the dark web. Added up, the tool will now search through 13 billion data breaches.

The company estimates that 65 percent of its users have experienced a data breach, whether they know it or not, so Credit Karma is well-positioned to issue a wake-up call about protecting identifying information online.

2 New Robo-Advisors Among the Top Performers in Q1 (ThinkAdvisor) Rated: AAA

Two relative newcomers to the robo-advisor space are among the industry’s top three performers in the first quarter, according to the latest Robo Report from BackEnd Benchmarking.

SoFi Wealth Management, which launched in May 2017 as an offshoot from the SoFi online lending platform, took first place; TIAA SRI, the socially responsible investment portfolio of its TIAA Personal Portfolio robo, placed third; and sandwiched between the two was Schwab Intelligent Portfolios.

All three robos lost money in the first quarter in their taxable, balanced portfolios, split roughly 60/40 between stocks and bonds, but they performed better than other digital advisors and the overall stock market, which was down 0.76%, for the S&P 500. Their losses ranged from 0.14% for SoFi and 0.45% for TIAA SRI.

Schwab Intelligent Portfolios excelled largely because of its fixed income allocation, which included high-yield bonds and international debt, according to the Robo Report. It placed first for fixed income performance not only for the first quarter of 2018 but for the one-year and two-year trailing periods.

Source: Think Advisor

Small-dollar loans (Lexology) Rated: AAA

The Trump Administration has also taken notable steps to ease the burden placed on the payday lending industry. These include terminating the Obama-era “Operation Choke Point,” which was designed to discourage banks from doing business with payday lenders,11 as well as removing payday-bank partnership restrictions for at least one payday lender.12 This signals a significant departure from regulatory constraints put in place a decade ago prohibiting affiliations between national banks and payday lenders that sought to circumvent state interest rate caps.13

In addition to established market participants targeting borrowers with high credit scores, new internet-based startups are offering small-dollar loans to non-prime borrowers, directly targeting the payday lenders’ customer base. Fintechs aim to compete with traditional payday lenders by marketing a more customer-centric approach, as well as flexible terms and lower fees. These new market entrants generally rely on the use of AI-driven scoring products and non-traditional data analytics to assess a borrower’s creditworthiness. In addition to fair lending considerations, these new online startups generally rely on mobile devices and related technology to host their software and undertake lending decisions, thereby raising privacy and cybersecurity concerns.

Source: Lexology

Navient reports higher earnings in first quarter (Delaware Business Now) Rated: A

Wilmington-based Navient reported higher earnings in the first quarter as the company expanded its segment reporting to reflect a broader array of businesses.

Results that included the origination of $500 million of private education refinance loans, a 43 percent decrease in private education loan charge-offs and a 32 percent increase in business processing fee revenue from the year-ago quarter.

For the first-quarter 2018, GAAP (Generally Accepted Accounting Principles) net income was $126 million compared with $88 million ($0.30 diluted earnings per share) for the year-ago quarter.

California merchant accuses lender of ‘rent-a-bank’ scheme (Rueters) Rated: A

Utah-based Celtic Bank and Georgia-based lender Kabbage Inc have been hit with a proposed class action accusing them of creating a “rent-a-bank” arrangement to issue high-interest loans to small businesses in California and evade the state’s usury laws.

The case was removed by Celtic Bank to federal court in Los Angeles on Tuesday after being filed last month in Los Angeles County Superior Court.

How employees build and shape the rock-solid cultures at 5 local tech companies (Built In Chicago) Rated: A

What is the foundation of Enova’s culture?

If I may grossly generalize and speak for the majority of the millennial workforce, workplace culture is a big job-hunting factor. Of course, we want to make decent salaries and have access to good health insurance. We also want to be spending those 40 or more hours per week with people we enjoy working with, tackling independent and collaborative work, constantly learning new things, and developing our skills — all of which Enova does a great job of cultivating.

What is the foundation of Avant’s culture?

Avant’s culture is based a lot around letting the best idea win. No matter what part of the business someone is in, if they have an idea that really shines through and will resolve the issue at hand, they are heard. In my experience, even if you’re not in your domain, people will listen to you as long as you come in with a clear spec. If you ask for something and have a good explanation as to why it’s needed, you can get it.

 

 

CEO of student loan marketplace LendEDU admits the name of the founder of a partner site is fake (CNBC) Rated: A

A spokesman cited in publications, including a CNBC story in March about students using their financial aid money to invest in cryptocurrencies, is a fake, the CEO of a partner website has admitted.

Nate Matherson, CEO of student loan refinancing company, LendEDU, said he started The Student Loan Report — studentloans.net — in 2016.

 

Where to Get a Loan of $ 5,000 or Less (Student Loan Hero) Rated: A

Many online lenders have personal loans that offer more flexibility. Some lenders set borrowing minimums as low as $1,000.

Pros: Some online lenders offer flexible repayment plans. For example, Avant allows you to make changes to your upcoming payments online, including the amount and date of your current or future payments. The company says it’s willing to work with you if you’re unable to make a payment, making it easier to repay your loan.

Kirsten Gillibrand Unveils A Public Option For Banking (Huffington Post) Rated: A

Sen. Kirsten Gillibrand (D-N.Y.) is introducing legislation Wednesday that would require every U.S. post office to provide basic banking services, an ambitious step aimed at improving the lives of Americans with limited financial resources.

The postal system’s 30,000 locations touch every community. A majority ― 59 percent ― are in so-called banking deserts, or zip codes that have either no bank branches or just one.

Upgrade Personal Loans Review: Low Rates and Free Credit Monitoring (Student Loan Hero) Rated: A

Upgrade is an online lender that primarily offers unsecured personal loans between $1,000 and $50,000. You can use these loans for a variety of purposes, including home improvement, debt consolidation, or a big purchase.

As unsecured loans, these personal loans don’t require any collateral.

Source: Student Loan Hero

How to Cope With the High Costs of Infertility (US News) Rated: A

According to the National Survey of Family Growth by the Centers for Disease Control and Prevention, one in eight couples have trouble getting pregnant or sustaining a pregnancy and more than 85,000 women in the U.S. undergo in vitro fertilization each year.

According to a 2015 study about the sentiment, costs and financial impact of fertility treatments in the U.S. by Prosper Marketplace, a peer-to-peer lending marketplace, nearly half of those polled said that prices impacted the level of treatment they sought. Almost 34 percent of those women surveyed had to stop treatment due to the financial burden. Meanwhile, 70 percent of participants reported acquiring some degree of debt in their quest to conceive with more than 26 percent taking on over $30,000 of debt. The cost of treatments was also the single largest factor for those respondents who initially decided to delay fertility treatment at nearly 82 percent.

Washington Wants to Weaken Bank Rules. Not Every Regulator Agrees. (The New York Times) Rated: A

In recent weeks, federal banking regulators have proposed softening a requirement that puts a hard limit on how much the largest banks can borrow. The rule, known as the supplementary leverage ratio, requires that banks prepare for a disaster by maintaining a certain level of capital on their balance sheets based on their total size.

Banks have long complained that the rule is too restrictive and makes it harder for them to do business, including lending, in important markets. They have asserted that the ratio is too blunt of an instrument and often the strictest of the various capital requirements that were put in place after the crisis.

Which Is Best: REITs or Real Estate Crowdfunding? (US News) Rated: A

Who can invest in REITs and real estate crowdfunding? The best investors for REITs and real estate crowdfunding might not be the same. Joseph Hogue, chartered financial analyst and owner of Crowd 101, a crowdfunding website, says that although real estate crowdfunding is less work than direct investment in properties, it still involves more due diligence than REIT investing.

What are the advantages and disadvantages of REITs and real estate crowdfunding? For hands-on investors, who want to customize their real estate investing, crowdfunding fits the bill, says Javier Benson, senior vice president of strategy and implementation at crowdfunding site RealtyShares. RealtyShares specializes in funding commercial real estate projects valued at more than $50 million, certainly not a market for the individual investor.

Benson summarizes the benefits of real estate crowdfunding: “lower fee loads, increased transparency and the opportunity to select individual projects.”

Lenders reject 9% of CT loan applications (Hartford Business) Rated: A

Mortgage lenders rejected 9 percent of loan applications in recent years from Greater Hartford borrowers, which is the nation’s 10th worst denial rate, according to a recent study.

The study by national lending exchange marketplace Lending Tree said lenders denied mortgage shoppers in Hartford, West Hartford and East Hartford at a high rate mainly due to insufficient debt-to-income ratios and collateral.

Hartford’s would-be borrowers ranked second in the nation for cities where collateral issues resulted in their mortgage denial, which amounts to 24 percent of its denials.

LendingTree and COMPLY2018 Announce the Kraken Innovation Award (PR Newswire) Rated: B

COMPLY2018 announces that LendingTree, the nation’s leading online loan marketplace, will award one company as The Most Innovative Company during the annual RegTech and Compliance Conference May 16-17 in New York City.

United Kingdom

Growth Street Celebrates Full FCA Authorization & New GrowthLine Lending Product: Need to Borrow £2M? (Crowdfund Insider) Rated: AAA

UK alternative finance firm Growth Street has been granted full FCA authorization,  a significant milestone for Growth Street, which had been operating as an Appointed Representative of Resolution Compliance Limited since 2016.

Growth Street has simultaneously rolled out an update to its flagship business lending product, GrowthLine. The firm is now accepting applications from businesses looking to borrow up to £2M, a substantial increase from the previous maximum limit of £1M.

Borrowers unaware of how to check loan providers as scams increase (Peer2Peer Finance) Rated: A

A THIRD of personal loan applicants have admitted they weren’t confident about how to check if their provider was legitimate, the Financial Conduct Authority (FCA) has revealed.

Research by the City watchdog found 36 per cent of those who took out a loan product in the past three years didn’t do any checks to ensure the legitimacy of their loan provider.

The FCA has revealed that more than £3.5m has been lost to loan fee fraud and said reports to its consumer helpline on this issue had increased by 44 per cent.

China

Eight charged in China over ‘Ponzi scheme posing as P2P lender’ that took US$ 9 billion (China Morning Post) Rated: AAA

Eight ringleaders of the Shanghai-based Shanlin Finance have been charged with illegally obtaining deposits and taken into custody, according to local public prosecutor the Shanghai Pudong district People’s Procuratorate, the official Xinhua News Agency reported on Tuesday.

The scheme was disguised as a peer-to-peer lending platform, police said. Shanlin’s online lending platforms and mobile apps have been suspended from service.

Big Bang Means Buyer Beware in Hong Kong IPOs (Bloomberg) Rated: AAA

Hong Kong Exchanges & Clearing Ltd. will allow innovative companies that use shares with weighted voting rights to apply for IPOs starting April 30, and will also admit unprofitable biotech firms. That’s a landmark departure from the exchange’s longstanding adherence to the one-share-one-vote principle and the requirement for a three-year profit track record.

China has also opened the door for companies listed on its National Equities Exchange and Quotations market – an over-the-counter trading venue that’s developed something of a reputation as a casino – to sell H shares in Hong Kong.

Looser entry rules will create a vastly different market.

The Fall of Peer-to-Peer Lending in China (Caixin Global) Rated: A

P2P lending, which was designed to bypass traditional lending by matching individual borrowers and lenders, began to flourish on the Chinese mainland in 2011 as the government encouraged the wider use of technology to expand financial services to small businesses and individuals. At P2P lending’s peak in late 2015, there were more than 3,300 platforms operating, according to Wandaizhijia, a portal site that tracks the sector.

However, due to the absence of unified regulations, a great proportion of P2P lenders began collecting cash from investors, offering high returns. A market worth more than 1 trillion yuan ($158 billion) quickly developed.

China’s online lenders reel from industry shake-out (Financial Times) Rated: A

A survey by FT Confidential Research shows the online lending industry in China continues to consolidate from new regulations; the days of significant growth and platform expansion have ended as the government looks to weed out the smaller players; since 2016 the government has capped borrowing limits, shut down secondary markets and forced platforms to file with local regulators

European Union

Fintech unicorn Transferwise launches a ‘borderless’ account in Sweden, Finland and Denmark (Business Insider Nordic) Rated: AAA

Transferwise is today rolling out a “borderless” consumer account and linked debit card, which will let people hold money in multiple currencies.

The service, which Transferwise says is the first one of its kind, has been openly trialed among a few thousand customers since January, and goes live globally including in Sweden, Denmark and Finland. Norway will follow later on.

This means that people will be able to transfer and spend money abroad, with little or no exchange or mark-up fees. They will also be able to make withdrawals through a Mastercard debit card. The debit card will me made available for larger businesses later in 2018.

RBS plans to move 1m users to new challenger bank, says report (AltFi News) Rated: A

According to an insider at the Royal Bank of Scotland, the bank has set an internal target of switching more than 1m users from Natwest to its latest project, a “next generation mobile-only bank”, in time for its debut in the third quarter of 2018.

In another interesting move, the insider has said that RBS’ mobile-only bank will be pursuing a marketplace business model, aiming to forge third-party partnerships as its primary source of revenue over lending. This is a model that is now well-known in the digital banking sector, hailed by dominant players like Monzo and Starling Bank as the future of next generation banking.

GDPR and financial advice: Processing data on children (Professional Adviser) Rated: A

The General Data Protection Regulation (GDPR) makes special mention of children and, for the purposes of the regulation, consent cannot be granted without parental approval by anyone under the age of 13. Upon their 13thbirthday, data subjects can freely consent to how their data is processed – in other words, they can sign up to newsletters and appropriate alerts.

Unlikely as it may be that a 13-year-old will be signing up for newsletters from financial advisers, advice firms will still be processing large amounts of data on under-13s. Taking Intelligent Office as an example, there are currently more than 75,000 records of people under the age of 13 and so it is important that appropriate checks are in place and that parental consent has been granted at the beginning of the process.

Deposit Solutions shows potential of open banking (Euromoney) Rated: A

However, don’t tell that to Deposit Solutions. The Hamburg-based provider of an open-banking platform that lets deposit-rich banks offer their account holders insured savings products from other banks is growing fast. It launched its own business-to-consumer marketplace Zinspilot in September 2015 and by the end of 2016 had transmitted $1 billion in deposits.

Deposit Solutions also has 50 banks in 16 European countries on its B2B platform. These include Deutsche Bank, FFB – the German subsidiary of Fidelity – and MünchenerHyp in Germany, and Atom Bank and Close Brothers in the UK.

So-called product banks, such as Atom, that are seeking funding, but don’t want to invest in a traditional deposit-gathering infrastructure, can offer terms to so-called client banks, such as Deutsche, with lots of customers, but already an excess of deposits.

International

Inside Santander’s plans to digitize money (Tearsheet) Rated: AAA

The Spanish banking giant’s U.K. arm recently launched One Pay FX, a mobile payments service for its U.K. debit card holders that want to send payments to people in Euro Zone countries and the U.S. It’s the first market-ready product built on blockchain technology, Ripple’s xCurrent protocol, for retail customers. It had been running as a pilot for employees for the last 18 months.

Santander, one of the founding members of R3 CEV, a prominent consortium of banks investing in the company’s blockchain technology for financial applications, soon became one of the first members to exit the group as it concentrated on other payments-focused group work like the Utility Settlement Coin — “a tokenized version of central bank money,” in Faura’s words — and the Global Payments Steering Group.

Source: Tearsheet

This MBA Loan Provider Is Helping International Students Start New Careers Abroad (Business Because) Rated: A

According to BusinessBecause data, 90% of MBA applicants would consider studying abroad. At the same time, over 60% say they wouldn’t be able to pursue an MBA without financial aid.

Prodigy Finance has lent more than $505 million in loans to over 10,300 students globally. Those loans have enabled international students such as Alex Brack, originally from Brazil and a recent MBA graduate for The F.W. Olin Graduate School of Business at Babson College, to thrive.

ZPER Secures Crypto Mobile Wallet with Trustonic (Global Banking and Finance Review) Rated: B

Following an increase in incidents such as the January 2018 theft of $425 million from Coincheck Inc, ZPER, the decentralised peer-to-peer (P2P) financial ecosystem, is launching the most secure cryptocurrency wallet available. ZPER is achieving this by embedding advanced security solutions from app and device security leader, Trustonic, to provide best-in-class protection. This move is in response to growing concerns about the vulnerability of cryptocurrencies when stored in exchanges.

Australia

 

Instant cash loan machines may target most vulnerable with quick dollars, financial counsellor says (Australian Broadcasting Corporation) Rated: A

The emergence of instant cash loan machines across parts of New South Wales has sparked fears about low-income families being potentially caught in a debt trap.

The machines, which look like ATMs, only require identification and bank details before users are approved for cash loans almost immediately.

Financial counsellors have expressed concern about the devices, which they say appear to be popping up in low socio-economic areas.

India

 

RentoMojo is using machine learning to create credit profiles of users (Tech Circle) Rated: AAA

It raised $10 million (Rs 64.3 crore) in a Series B round of funding led by Bain Capital Ventures and Renaud Laplanche, a French-American entrepreneur. The company had earlier raised $2 million in a pre-Series A round from Accel Partners and IDG Ventures India in November 2016.

Asia

Emerging Asian leaders in Blockchain and Cryptocurrency to watch out (Finextra) Rated: A

Crowd-Genie, an Asia-wide cross-border lending platform, concluded its ICO on March 1, raising over $5.5 million. Under the stewardship of CEO and Co-Founder,Akshay Mehra, Genie is aiming to build a private capital hub using smart contracts to make borrowing safer, cheaper and more efficient. Mehra is certified in CMFAS by the MAS and has over 15 years industry experience. His goal of creating a tokenized lending platform puts him at the forefront of blockchain and cryptocurrency technology in Asia.

Under Mehra’s leadership, Crowd Genie’s goal is to develop a Business Loans Asset Exchange on which lenders can enhance their liquidity by transferring asset ownership. Crowd Genie Financial Services Pte. Ltd. is one of a handful of licensed platforms in Singapore to hold a ‘Dealing in Securities’ license by MAS and GenieICO’s token – CGC – was listed on the Cobinhood exchange on March 19.

Latin America

Brazilian bank IPO tests disruption potential of fintech firms (Reuters) Rated: AAA

The first initial public offering (IPO) by a Brazilian retail bank in nearly a decade, set to price on Thursday, will test if investors expect new technologies to give smaller lenders a fighting chance against Brazil’s dominant big four banks.

Banco Inter SA, a tiny mortgage lender that has reinvented itself as a purely online bank, is the first in a wave of feisty digital challengers planning to go public – and looking to trade at higher multiples than many of Brazil’s largest lenders.

Authors:

George Popescu
Allen Taylor

Tuesday December 12 2017, Daily News Digest

P2P investors

News Comments Today’s main news: Affirm raises $200M at almost $2B valuation. Elastic Line of Credit surpasses $1B in funding. Klarna signs 500 online retailers in U.S. Zopa makes changes to Isa. Mintos adds first Russian loan originator. Flexiti offers online financing for e-tailers in Canada. Today’s main analysis: UK alternative finance is still healthy. Today’s thought-provoking articles: Cross River […]

P2P investors

News Comments

United States

United Kingdom

China

International

Asia

Russia

Africa

Canada

News Summary

United States

Max Levchin’s Affirm raises $ 200 million at a nearly $ 2 billion valuation (TechCrunch), Rated: AAA

The San Francisco-based company confirmed that it’s raising $200 million, led by GIC, a Singaporean sovereign wealth fund. Existing investors Khosla Ventures and Spark Capital are also participating.

Affirm’s valuation is estimated to be between $1.5 billion and $2 billion, as first reported by The Wall Street Journal. Investors are betting on Max Levchin, the PayPal co-founder who runs Affirm.

Elastic Line of Credit Surpasses $ 1 Billion in Total Funding (Morningstar), Rated: AAA

Elevate Credit, Inc., a tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, today announced the Elastic product has originated more than $1 billion, and has served over 200,000 customers since 2013.

Elastic, a bank-issued line of credit offered by Republic Bank & Trust Company (“Republic Bank”), currently has more than $260 million in total principal outstandings across over 150,000 open accounts.

Klarna North America Sees Surge In U.S. Merchant And Consumer Adoption Of Its ‘Smoooth’ Financing Solution (Business Insider), Rated: AAA

Since Klarna introduced its financing solution in the U.S. in October 2016, 500 online retailers have already enrolled in the simple and ‘smoooth’ credit solution that is fully integrated into the online checkout process. Available in 10 countries via a single API, retailers include powerhouse global brands like Microsoft, TaylorMade, Overstock and Lenovo.

Why Cross River Bank and Mastercard are collaborating on cardless ATM access (Tearsheet), Rated: AAA

Cross River Bank, the bank of fintech startups, is working with Mastercard to give consumers cardless access to ATMs through an offering called Mastercard Cash Pick-Up. It allows businesses or individuals to send cash payments by logging in to the Cash Pick-Up platform via their bank’s website or mobile app and entering the necessary transaction and recipient. When they’ve done that, recipients receive a text message with the order number, PIN and a link that helps them locate a participating ATM nearby.

The offering highlights the role of mobile phones in banking’s new normal — mobile is more than just a channel, it’s the thing that’s guiding both financial incumbents and consumers alike through  the shift from physical to digital banking, which still hasn’t been fully realized.

For now, Mastercard Cash Pick-Up is only available at enabled ATMs in the U.S., where the postal service plays far too big a role in payments, particularly low dollar disbursements, Isaacson said.

 

Once Shunned, Regulated Industries Now a Lure for Some Investors (Xconomy), Rated: AAA

Niehenke theorized that consumers whose trust in traditional banks had eroded might become a willing customer base for financial technology startups. But it was a bumpy time for tech companies entering the highly regulated financial sector.

Among those startups was Prosper, a peer-to-peer lending startup that had been temporarily shut down in 2008 by the Securities and Exchange Commission. The SEC maintained that the company was, in effect, selling securities rather than merely functioning as a marketplace connecting lenders and borrowers, TechCrunch reported.

CAN Capital Makes Three Strategic Hires to Strengthen Sales and Technology Teams (PR Newswire), Rated: A

CAN Capital, a small business specialty finance company, today announced three strategic hires as the company continues to invest in its technology and growth strategies. Mike Dodson, Vice President, Technology, Michael O’Brien, Director, Business Development, and Liping Deng, Director, Modeling & Analytics, have joined CAN Capital to focus on accelerating the company’s expansion.

China’s JD partners with accelerator program Plug and Play to reach US startups (TechCrunch), Rated: A

E-commerce giant JD.com, the closest rival to Alibaba in China, is broadening its presence in Silicon Valley after it announced a collaboration with accelerator firm Plug and Play to seek out and work with promising U.S. startups.

Robo-advisors hit lull in everything but VC backing as reality fragments their identity (RIABiz), Rated: A

Last summer, Sallie Krawcheck took a seat before 18 venture capitalists to raise capital for Ellevest Inc., her New York-based robo-advisor for women. See: Sallie Krawcheck astonishes industry observers by raising another $32.5 million for her robo-advisor — perhaps on strength of ‘unit economics’.

The role reversal reflects broader changes occurring across automated advice. BlackRock Inc. originally bought San Francisco-based FutureAdvisor as a retail product, then made it into a B-to-B offering. See: Why FutureAdvisor orphaned its B2C book of business, how post-Invesco Jemstep is doing and other learnings at CFA Society’s robo-panel in San Francisco

News out of Betterment has slowed to a crawl.

Wealthfront Inc.‘s Andy Rachleff leaned into the irony of robo-advisors moving away from digital-only in a September blog post.

Yet, in an autumn largely devoid of news from robo-advisors, Acorns had a blistering announcement of a much deeper integration with one of its VC backers, PayPal, which has 218 million users. See: As Acorns grapples with monetizing 1.1 million micro-accounts, the laid-back LA robo-advisor brings Wealthfront’s former chief exec onto its board.

In the case of Irvine, Calif.-based Acorns, the nudging took the form of A/B-style testing of giving investors choices of how much to invest.

Robo-adviser launches using chatbot technology (FT Adviser), Rated: A

Nuvo has launched what it describes as an “artificially intelligent digital broker powered by chatbot technology”.

The launch of the robo-adviser, which uses AI to learn about customers to pick prices for mortgages and protection products tailored to them in less than a minute, comes just days after a US company claimed to be the first in the world offering financial advice with artificial intelligence.

US Banks Look to Silicon Valley as Fintech Booms (PaymentsJournal), Rated: A

More than eight out of ten (82%) US commercial banks have pledged to increase fintech investment over the next three years as the sector continues to expand, with 86% of senior managers planning an imminent rise in investment.

The in-depth research commissioned by global Fintech provider Fraedom, polled decision-makers in commercial banks including shareholders, middle managers and senior managers.

The study also found that more than seven out of ten (71%) respondents believe that the rise of technology within commercial banking threatens traditional one to one bank and customer relationships. This disruptive impact was felt greatest by shareholders (95%) as opposed to 67% of middle managers.

Need a Shot of Capital for Business Growth? Here’s How to Find a Working Capital Loan This Year (AllBusiness.com), Rated: A

Startup founders know to look for grants, crowdfunding, and angel investors, and established small business owners understand the ins and outs of bank loans. However, another form of financing for established small businesses—working capital loans—is a little less familiar to many owners, yet working capital loans can be the ideal financial tool to handle opportunities (or problems) that present themselves in the shorter term.

Here are some of the highlights:

  • You don’t need to lay out a detailed plan of what you want to do with the money. Paperwork is minimal.
  • If your credit score is at least 500, you’ll need to show an annual profit of $50,000; if your credit score is at least 600, that gets cut in half to $25,000. If you’ve been denied a bank loan, your chances may still be good for a working capital loan.
  • You have the flexibility of choosing the type of working capital loan that best meets your needs: a term loan, cash advance, invoice factoring, revolving line of credit, or purchase order advance.

Today In Data: Consumer Spend, Venture Capital And Bitcoin Reach Record Highs (PYMNTS), Rated: A

$682 billion | Amount that consumers are expected to spend on presents and other holiday preparations this holiday shoppingseason, with retailers going the extra mile to meet them where they are in a simpler and faster way. That means upping mobile and online shopping experiences, offering a buy online pick up in-store model and launching services like curbside pickup and better shipping options.

Broker-Dealer Firms Raise Alarms That SEC’s CAT Database Isn’t Secure (Financial Advisor), Rated: A

Broker-dealer firms aren’t confident the SEC’s consolidated audit trail (CAT) – a single, comprehensive database expected to store an unprecedented amount of sensitive trade data and personal identifiable information (PII) – is secure, according to testimony delivered before the U.S. House of Representatives.

National securities exchanges, Finra, alternative trading systems and broker-dealer firms have been required to submit information on trading activities – including customer information and prices – to the CAT daily since November 15 of this year. Large broker-dealers will be required to start submitting information to the CAT by November 15, 2018, while small broker-dealers are expected to do so by November 15, 2019.

The CAT is expected to take in 58 billion records daily – including orders, cancellations, modifications, executions and quotes for the equities and options markets – and maintain data for more than 100 million customer accounts and their unique customer information, according to parties involved in the CAT.

.46 Billion in Extra Credit Card Charges Due to Upcoming Fed Rate Hike (WalletHub Email), Rated: A

Forecasts call for a 99%+ chance of a Federal Reserve rate hike on Wednesday, which would make three for 2017. The move couldn’t come at a worse time for consumers, according to WalletHub’s 

Use your 2017 budget before you lose it (LendIt), Rated: B

Having an exhibitor booth or sponsoring this event is your best chance to do business with companies shaping the fintech industry. 100+ companies have picked their spot. Download the sponsorship brochure today now and our team will help you seal the deal before your budget runs out.

Take advantage of the current ticket price and save $1,200 vs. the standard ticket.

Angie Herbers Launches Online FA Education Platform (Financial Advisor), Rated: B

Financial advisor consultancy founder Angie Herbers has launched an online training platform aimed at helping advisors grow their firms.

Beyond U offers advisor education via videos, online seminars and assessments, covering such topics as operations, management, sales and marketing, client services, compensation and more, according to a press release from the firm.

United Kingdom

Zopa announces changes to its Isa (Bridging&Commercial), Rated: AAA

Zopa investors can now redirect their repayments into an Isa, allowing investors to gradually transfer their funds into an Isa without having to sell loans or pay fees throughout the process.

The UK alternative finance market is still healthy (Business Insider), Rated: AAA

The UK’s alternative finance market — including marketplace lending, crowdfunding, and invoice trading — grew 43% year-over-year (YoY) in 2016, from £3.2 billion ($4.3 billion) to £4.58 billion ($6.17 billion), according to a recently released study from the 

Source: Business Insider

UK positioned to win in fintech, despite Brexit uncertainty (AltFi), Rated: AAA

Just this week the 

Small Businesses Drive 43 Percent Growth In UK Alternative Finance (PYMNTS), Rated: A

Researchers said about 72 percent of market volume in 2016 can be traced back to demand for lending options among startups and small businesses, up from 50 percent the year before. That amounts to more than $4.4 billion driven by startups and SMBs in 2016.

Peer-to-peer businesses lending was 2016’s largest alternative finance market segment, which saw 36 percent year-over-year growth.

Squirrel Extends Crowdcube Campaign After Achieving £400,000 Funding Target (Crowdfund Insider), Rated: A

Squirrel, a personal finance app designed to help users have more control over their money, has successfully secured its initial £400,000 funding target from 450 investors through its equity crowdfunding campaign on Crowdcube.

Downing enters property development space with Funding Circle hires (P2P Finance News), Rated: A

DOWNING has hired two real estate experts from Funding Circle’s property division as it enters the property development space through its crowd bonds platform.

Investors on Downing’s crowd bonds platform are being offered returns of five per cent for one year or six per cent for two years by investing in Downing Development Finance (DDF) through the DDF Property Bond.

 

Investors put trust in Scotland’s canniness (The Scotsman), Rated: B

Edinburgh Worldwide is another Baillie Gifford managed trust, though rather obscured by the group’s better known trusts. Notable performers (not a Scottish name among them) were Alnylam Pharmaceuticals, a gene silencing company, LendingTree, an online loan marketplace, and IPG Photonics, a manufacturer of fibre-lasers used in metal processing.

China

 

How asset managers like FinEx Asia are using AI to disrupt traditional bank lending (SCMP), Rated: AAA

Banking disintermediation – essentially, taking out the middle man – has taken a new twist. While in recent years peer-to-peer (P2P) lending has become the poster-child for threatening banks’ lending business, a new type of hybrid disrupter is apparently starting to emerge: asset managers backed by financial technology.

One such firm attempting to cut banks out of the consumer-lending equation is FinEx Asia. The newly-licensed asset manager connects Asian investors with American consumer-credit assets, using artificial intelligence to select the loans based on risk appetite.

Founder and chief executive Maggie Ng said the company’s three funds now have US$100 million under management. They are backed by a portfolio of more than 10,000 US-based borrowers who have obtained loans from multiple online lending platforms, she said without specifying which ones.

Thomson Reuters platform to help further develop Hong Kong’s fintech offerings (SCMP), Rated: A

Thomson Reuters, the news and market data giant, is partnering with a Hong Kong government-backed body to help the city’s banks and fintech firms develop new technology, cut costs and create new products.

Celebrating its 150th anniversary in Hong Kong next year, the new arrangement will see Thomson Reuters offer its platform to financial firms to distribute their products as well as use its technology, tools and data to create products, for free.

International

Growth of Investor Numbers on P2P Lending Platforms (P2P-Banking), Rated: AAA

Today I take a look at how investor numbers are developing at several platforms.

Source: P2P-Banking

FinTech Startup Nanopay Is For Banks, Not Against Them (PYMNTS), Rated: A

Whether bank customers are consumers or businesses, chances are good that they do at least some of their banking online. This month, startup nanopay is announcing a partnership with Canadian nonprofit interbank network Interac to help businesses manage the complexity of working across borders.

The partnership creates access for any bank account holder in the country to send funds to or receive funds from any other bank account served by nanopay. So far, that’s a short list including just India. But, according to nanopay CEO Laurence Cooke, coverage will be supported in the U.S. and China as well in Q1 of 2018.

The First Social P2P Cryptobank Datarius to Launch a Pre-Sale on December 12 (Coinspeaker), Rated: B

The Datarius main characteristics are the use of blockchain, artificial intelligence, cryptocurrency operations and a special designer of the customer-adapted tariffs.

P2P lending is another characteristic of Datarius. It provides millions of people around the world with the possibility to receive and make loans using a Personal Account in the browser or through a smartphone application. It is a fast, reliable and easy way to get a loan wherever a person is. This is an opportunity to earn without involving brokers.

The pre-ITO round starts on December 12 on the official website of the Datarius Cryptobank and will last till December 31. 1 DTRC token = $ 1, but during the Pre-sale every buyer receives a 35% bonus. Soft Cap: $ 125,000.

Asia

ANNOUNCING THE LAUNCH OF THE iFX EXPO ASIA 2018 (NewsBTC), Rated: B

CONVERSION PROS, a marketing agency within the retail finance sector and founding company behind the iFX EXPO series of financial B2B events, has announced their next event, the iFX EXPO Asia 2018, which will take place in Hong Kong from the 23rd to the 25th January 2018 at the HKCEC (Hong Kong Convention & Exhibition Centre).

This event holds special significance, according to Gal Ron, CEO of CONVERSION PROS:

“This will be our 12th show to date and we expect to showcase this steady growth as we present an expanded floor plan with more exhibitor and sponsor areas tailored to the needs of our attendees. We are also placing special focus on Crypto as well as Peer to Peer lending as we are sure that this is part of the future of the online trading industry.”

Russia

Mintos, an Online Marketplace for Loans, Adds First Russian Loan Originator to Platform. (Crowdfund Insider), Rated: AAA

The Mintos marketplace for loans has added its first Russia based loan originator: EcoFinance. The online lender offers investments in unsecured personal loans issued in Russia under its CreditPlus brand. Mintos reports that EcoFinance loans on its marketplace will initially be listed in Euros with investors able to earn up to 11% annually.

Africa

Kiakia — get real-time capital as a business owner or working class (Techpoint), Rated: AAA

It’s no longer news that many individuals and SMEs in Nigeria have limited access to finance, especially from commercial banks.

Kiakia, an AI and machine learning powered alternative credit scoring, customer service, direct and a P2P lending platform has launched a virtual agent called “Mr K” to help working adults and SMEs access credit.

According to the Co-founder, Olajide Abiola (who also doubles as the Chief Data Scientist), millions of naira in loans have been successfully granted to and repaid by hundreds of borrowers across 22 States in Nigeria. This comes with a loss/default/NPL ratio of below 2.3%, which is consistently maintained over a 12-month period, all thanks to Kiakia’s algorithm.

Canada

FLEXITI FINANCIAL ANNOUNCES ONLINE FINANCING TO GROW E-COMMERCE SALES FOR CANADIAN RETAILERS (Flexiti Financial), Rated: AAA

Flexiti Financial, a provider of Point-Of-Sale (POS) financing and payment technology, announced today that its award-winning POS consumer lending platform is now available for online transactions. Retailers across Canada now have access to a powerful, online financing platform that easily integrates into any e-commerce engine, offering a low-cost solution. This is a critical new offering for Canadian retailers as it overcomes two key hurdles – speed of implementation and cost – as e-commerce continues to grow as a critical sales channel.

Flexiti Financial’s POS lending platform offers low rates for retailers who want to offer their customers flexible payment options, such as 0% interest financing. Customers do not require an existing credit card to apply.

Authors:

George Popescu
Allen Taylor

Wednesday October 18 2017, Daily News Digest

personal loans

News Comments Today’s main news: LendingHome surpasses $100M in monthly loan volume, secures $57M in Series C-2. KBRA assigns preliminary ratings to Prosper Marketplace Issuance Trust, Series 2017-3. RateSetter says FCA authorization merely a milestone. Qudian raises $900M in biggest listing by Chinese fintech firm. BBVA focuses on U.S.-Mexico remittances with money-transfer app. New Zealand paves path for robos. SoftBank considering second […]

personal loans

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Middle East

Canada

News Summary

United States

LendingHome Surpasses $ 100 Million Mark in Monthly Loan Volume & Secures $ 57 Million During Series C-2 Funding Round (Crowdfund Insider), Rated: AAA

Less than a week after announcing its new office in Pittsburgh, real estate marketplace lending platform LendingHome announced it has surpassed $100 million in monthly loan volume and secured $57 million during its Series C-2 funding round, which included participation from Sberbank and Noah Holdings Limited.

The online lender also revealed the closing of the LendingHome Opportunity Fund II, which was managed by LH Capital Management, with $100 million in commitments from more than 40 investors including asset managers, international funds, family offices, and high net worth individuals. An additional credit facility of up to $300 million brings the fund’s total potential assets to $400 million.

2017 shaping up to be the year of the venture capital ‘mega-round’ (Biz Journals), Rated: AAA

Georgia companies scored the most venture dollars in the third quarter, since first quarter 2000. Fintech Kabbage and access management technology firm Core Security raised a combined $450 million, or about 60 percent of total venture capital invested in Atlanta companies in the third quarter.

Goldman Attacks Lending Club & Prosper, Courts Main Street (CB Insights), Rated: AAA

As its bond trading revenue plummets, Goldman has undergone a major strategic shift, looking to grow the revenue opportunity from its consumer digital finance operation.

Goldman Sachs has changed a lot through its 148-year history. But as technology continues to roll through the financial services industry, Goldman is one of the few bulge bracket banks today that is staking its reputation and future on new strategic bets in digital finance.

When Goldman announced it would be entering the online lending business in 2015, Lending Club‘s then-COO Scott Sanborn quipped, “We are looking forward to competing with Goldman Sachs on customer experience.” More recently, when Goldman bought $2.8B worth of bonds held by Venezuela’s struggling central bank at a 70% discount to market price, Ribbit Capital founder Micky Malka tweeted, “This is why @GoldmanSachs won’t become a consumer first brand.”

  • 46% of Goldman Sachs job postings are in technology.
  • Goldman Sachs’ online lending arm Marcus lent $1 billion in the first 8 months of operation. Now it is taking its digital finance brands global.
  • Goldman Sachs is one of the top two most active US bulge bracket banks investing in fintech startups.
  • Goldman has pushed investments into Brazil.
  • Goldman made its first fintech acquisition in 2016 and is looking for more.
  • Goldman’s cryptocurrency patent made headlines, but most of its patents have focused on improving its systems.

BACKGROUND ON CORE GOLDMAN SACHS

Goldman Sachs makes money in five primary areas: investment banking, equities, investment management, investing & lending, and FICC client execution.

Source: CB Insights

Digital finance initiatives

Notably, Goldman seems to believe that its digital consumer lending and deposit platform has as large of a net revenue growth opportunity as its FICC trading unit. This is a remarkable shift in strategy that only materialized in the last three years, and the strategy is still in the extremely early innings of its growth potential for Goldman.

Another advantage Marcus has over other bank incumbents looking to launch a competing initiative is its non-legacy IT architecture and the fact that Goldman does not have an existing consumer credit card business for Marcus to cannibalize.

Marcus reportedly passed $1B in loan origination in its first 8 months and is expected to originate $2B by the end of 2017. While data on number of loans doled out is hard to find, Goldman reached its first billion in consumer loans significantly faster than competing online personal loan companies (Lending Club launched in 2007). At the CB Insights Future of Fintech conference, Talwar noted that Marcus’s average loan size was “around $14,000.”

Source: CB Insights

KBRA Assigns Preliminary Ratings to Prosper Marketplace Issuance Trust, Series 2017-3 (BusinessWire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Prosper Marketplace Lending Issuance Trust 2017-3 (“PMIT 2017-3”). This is a $501.05 million consumer loan ABS transaction.

This transaction represents the eighth securitization collateralized by unsecured consumer loans originated through the online marketplace lending platform operated by Prosper Funding LLC (“Prosper” or the “Company”).

Preliminary Ratings Assigned: Prosper Marketplace Issuance Trust, Series 2017-3

Class Preliminary Rating Expected Initial Class Principal
A A (sf) $313,500,000
B BBB (sf) $77,000,000
C B+ (sf) $110,550,000

Quicken Loans and eOriginal Partner on Next Phase of the Digital Mortgage Revolution (PR Web), Rated: A

eOriginal, Inc. and Quicken Loans today announced a partnership to complete the final steps of the online mortgage process – to digitally create an electronic note, and securely store it as an authoritative copy with delivery to both custodians and the secondary market. This advancement accelerates the time between origination and replenishment of capital.

Quicken Loans, the country’s largest online mortgage lender, closed more than $7 billion in mortgage volume through Rocket Mortgage, the nation’s first fully online mortgage process, in 2016 – its first full year in market. The rapid growth of Rocket Mortgage comes from its appeal to a new generation of homebuyers. In fact, two-thirds of Rocket Mortgage clients used the online process to finance a home purchase, and 80 percent of those consumers were first-time home buyers.

eOriginal’s platform delivers a fully digital mortgage and supports every type of digital closing strategy. 

Modo Emerges From Reverse Stealth With New Service For Payment Event Data (Business Insider), Rated: A

Modo, the payments fintech working with Bank of America Merrill Lynch, Alliance Data, FIS, Verifone, and Klarna, today announced they’re ready to break their self-imposed silence and discuss the work they have been doing to deliver innovative payment solutions for their clients in Q4 2017.

Modo has already announced support for three payment event types, in diverse areas of payments with Klarna, Verifone and FIS, and Bank of America Merrill Lynch (respectively):

  • Payout Events: Enable your corporate and commercial customers to send money globally using the ever growing number of digital wallets to accelerate the last mile of disbursements.
  • Checkout Events: Checkout anywhere, using any method of payment. Whether you are a merchant or a payment provider, offer consumers any way to pay.
  • Loyalty Events: Earn and burn loyalty in entirely new ways in entirely new experiences. Combine multiple rewards and loyalty programs to make a purchase or send a gift.

J.P. Morgan to buy payments firm WePay in first major fintech acquisition (Fox Business), Rated: A

J.P. Morgan Chase & Co. (JPM) said that it agreed to buy payments company WePay Inc. in the bank’s first sizable acquisition of a financial-technology startup.

The banking giant plans to roll out WePay’s technology to J.P. Morgan’s four million small-business customers, said Matt Kane, CEO of Chase Merchant Services. WePay, which has roughly 200 employees, helps online marketplaces and crowdfunding websites like GoFundMe process payments.

The two companies didn’t disclose terms of the deal. But a person familiar with the matter said the price was above the roughly $220 million valuation that Redwood City, Calif.-based WePay achieved in a 2015 fundraising.

Bank of America processed $ 4 billion in Zelle payments this quarter (Tearsheet), Rated: A

Bank of America processed $4 billion in Zelle transactions in the third quarter of 2017 alone, CEO Brian Moynihan reported on the bank’s earnings call Friday morning. Digital payments volume increased nine percent to $324 million. Within that, person-to-person payments growth was about 67 percent with the addition of Zelle this summer, reporting 13.6 million transactions and $4 billion in volume. The bank recently processed half a billion dollars in a single week, Moynihan said.

The bank’s digital users grew 5.2 percent to 34.5 million on a year-over-year basis. Mobile banking users grew 10.8 percent to 23.6 million.

Over at Wells Fargo, CEO Tim Sloan said during that earning call that third-quarter peer-to-peer payments increased 46 percent, but didn’t provide a Zelle-specific number.

Source: Tearsheet

Digital growth stands out for Bank of America and Wells Fargo (Business Insider), Rated: A

Although the imminent death of the bank branch is being drastically overstated, if the Q3 earnings of Wells Fargo

  • Active digital customers, which include both online and mobile users, grew 2% YoY to reach 27.8 million.
  • Active digital customers, which include both online and mobile users, grew 2% YoY to reach 27.8 million.
Source: Business Insider

Crowdfunding comes to Arizona real estate (Biz Journals), Rated: A

Crowdfunding ventures raise $34 billion annually in the U.S.

Is There Anything New About New Lenders? (Seeking Alpha), Rated: A

At many times in history there have been finance companies that made loans that banks chose not to make. Such finance companies have thrived in good economic times and tended to fail in major recessions. I predict the same will be true of the newer editions.

But second, let us ask why are the banks not making these loans? The answer is simple. The combination of the costs of marketing and administration and the credit risk is too great to make money on a consistent basis. Therefore the banks are funding a large part of the loans by lending to the lenders and taking a senior position, cushioned by the equity of other investors and shielded from the marketing and loan acquisition costs (as well, perhaps, as some of the consumer regulatory risks). Smart banking, it seems to me. The banks have a lower cost of funds than the new lenders, so they can make money at a lower effective interest rate on the money they lend, so long as it is safer.

I have been shocked at the levels of expenses being incurred by some of the new lenders.

P2P mortgage lending could be a game changer for Millennials (The Mortgage Reports), Rated: A

Not finding a mortgage lender you like? Try borrowing from a friend – or several of them – instead. According to reports, a new platform called Celsius could make P2P mortgage lending a viable option.

Using blockchain technology, Celsius is in the process of building a peer-to-peer lending network specifically aimed at the Millennial market. According to Alex Mashinsky, founder of the company, the platform will allow younger buyers to secure funding using their social circle, rather than big banks and financial institutions.

So how will it work? To start, each user creates a digital profile. They’ll need to upload FICO scores, online transaction histories and other non-traditional financial data. Then, Celsius will assign each profile a credit score that’s unique to the site.

To protect lenders, Celsius will offer insurance that covers a percentage of the principal loan amount in case of default.

$ 40 Million: Digital Asset Holdings Closes Series B Fundraising (Coindesk), Rated: A

Digital Asset Holdings LLC has raised $40 million in a Series B round, bringing the enterprise blockchain startup’s total funding so far to $110 million.

AlphaPoint Utilizes Intel Security Technology to Deliver Enterprise-Ready Blockchain Platform (AlphaPoint Email), Rated: A

Today, AlphaPoint announces the AlphaPoint Asset Digitization solution making illiquid assets liquid by facilitating the digitization of assets and launching new markets. AlphaPoint also announces the release of the AlphaPoint TrustedVM, a trusted virtual machine enabled by Intel Software Guard Extensions (Intel SGX) technology which allows smart contracts and blockchain services to run securely.

The latest release of the AlphaPoint Asset Digitization solution with AlphaPoint TrustedVM adds additional enterprise-class capabilities by securing access to information from intermediaries and network participants, thereby enhancing privacy and security to the AlphaPoint Distributed Ledger Platform. AlphaPoint has been working with some of the largest Fortune 100 financial institutions since 2013 to launch markets on blockchain technologies.

Enterprise-ready Blockchain Platform
In collaboration with Intel, the AlphaPoint Asset Digitization solution as designed at its core to help enterprises efficiently deploy blockchain solutions that implement business initiatives with world-class privacy and security. This solution was architected to create Trusted Virtual Machine, or TrustedVM, that leverages the trusted execution environment (TEE) that Intel SGX enables. AlphaPoint’s solution utilizes the security and privacy capabilities of Intel SGX, thereby allowing customers to benefit from several key technology and business advantages:

  • Faster time to market – Quickly develop and deploy blockchain applications with proven technology.
  • Hardwareenforced privacy and secure consensus – Execution and validation inside the TrustedVM, ensuring data is not visible to any unwanted parties.
  • Lower and predictable costs – With linear scalability, this technology improves total cost of ownership (TCO) and operational efficiencies.
  • Simplified development – Smart contracts and applications may be written in TypeScript and JavaScript, instead of highly specialized languages.

IBM is using the technology behind bitcoin to help businesses in countries with weak banking systems (Business Insider), Rated: B

IBM is using the technology behind bitcoin to help farmers and other small businesses in underdeveloped countries participate in global trade.

The companies will use IBM’s blockchain technology to process financial transactions across borders and currencies — a process which is often prohibitively slow and costly for small business owners, especially when they are in developing regions with smaller banking infrastructures.

The project is focused on what Stellar calls “underdeveloped payment corridors” — countries like Samoa and Fiji, where monetary policies, currencies, and economic instability make it difficult for businesses to move money internationally.

Are fintechs charging minorities more for business loans? (American Banker), Rated: A

Minorities are more likely to turn to a financial technology firm when seeking a business loan, but they may pay higher interest rates, according to the preliminary results of a congressional investigation released Monday.

Retiree robo shuns app, still lands $ 8M funding (FinancialPlanning), Rated: A

A fintech startup with no mobile app does a fundraising round. It secures $8 million. How is that even possible?

True Link, a retiree-focused hybrid advice platform, had a simple pitch to investors: elderly clients like the convenience of digital advice, but want to talk on the phone. The firm claims it received 1.6 million client calls last year.

Silicon Valley Vs. Wall Street: Can the New Long-Term Stock Exchange Disrupt Capitalism? (WSJ), Rated: A

Now they are actually doing something about it, by launching a new framework for corporate governance, investing and trading called the Long-Term Stock Exchange. Backed by top Valley figures such as venture capitalist Marc Andreessen and LinkedIn co-founder Reid Hoffman, the LTSE says it plans to seek regulatory approval by the end of this year to become the newest U.S. stock exchange.

Its key feature: a system in which the voting power of shares increases the longer investors own them.

Source: The Wall Street Journal

Block brands (CB Insights Email), Rated: A

Source: CB Insights

Lending Club Sweetens the United Airlines Frequent Flier Promotion (Lend Academy), Rated: B

A year ago Lending Club launched a deal for new investors with United Airlines. New investors could earn 1 MileagePlus frequent flier mile for every $2 invested in a new Lending Club account.

Well last week Lending Club sweetened the deal. They basically doubled the amount of miles you can receive. So, instead of 1 mile for every $2 invested it is now 1 mile for every $1 invested. This deal is only valid until January 9, 2018 whereas the last deal had a three year expiration date.

whoa: blockchain, blockchain, blockchain (CB Insights Email), Rated: B

First, we’ve teamed up with Fortune Magazine for a joint review of Blockchain Trends & Opportunities. Robert Hackett of Fortune will be joined by CBI Intelligence Analyst, Arieh Levi.

United Kingdom

Peer-to-peer lender RateSetter gets stamp of approval from UK financial watchdog (Business Insider), Rated: AAA

RateSetter applied for full authorisation in October 2015 and cofounder and CEO Rhydian Lewis said in a statement the process has been “a long but positive journey during which we have learnt a lot, improved our infrastructure and implemented important changes, notably making the business more transparent.”

RateSetter has increased the amount of market data it makes public and earlier this month announced plans to simplify early access for investors to their money.

“Authorisation is a milestone but not an end in itself and we look forward to working with the regulator and all stakeholders to continue to deliver good customer outcomes and to grow RateSetter.”

The Growth of P2P Lending: Is It Sustainable? (The Market Mogul), Rated: AAA

According to data gathered by AltFi lending volumes through P2P platforms achieved a staggering compounded annual growth rate of 110% between 2011 and 2016 and shows little sign of letting up this year.

However, there are some indications this honeymoon period for the industry may be over as the UK’s inflation rate hit 3.0% last month piling pressure on the Bank of England to raise interest rates. This is an understandable worry for the industry, as much of the lending it facilitates is higher risk than that of the traditional banking sector.

Furthermore, there are several emerging industry trends, which are likely to boost its resilience to deteriorating economic circumstances.

  1. Consolidation- While nearly 100 platforms are operating in the UK a resilient oligopoly is emerging. This is made up of the markets four largest lenders: Zopa; Funding Circle; LendInvest and Rate Setter who cumulatively facilitate over 70% of lending volume.
  2. Securitisation – Previously, P2P platforms lacked the scale to make securitisation economic and this new trend will likely provide a further edge to the industries established participants.
  3. Diversification

Zopa: more risk, same reward (FT Alphaville), Rated: AAA

Zopa, the world’s oldest “peer-to-peer” lender, has long focused on low-risk borrowers. The weighted average interest rate the 12-year-old company charges its British customers has never gone higher than 10 per cent and was as low as 5.6 per cent in 2013. While startups like Wonga focussed on the high returns available from borrowers who are under-served by financial institutions, Zopa has largely competed at the “prime” end of the spectrum with high street banks. The returns are lower, but so too are the risks, including to its reputation.

In recent years, Zopa has added riskier borrowers to help drive growth. (It’s worth saying that it is still miles from Wonga territory.) The weighted average interest rate across its portfolio has grown from 5.8 per cent in 2014 to almost 8.8 per cent in 2017:

Source: Financial Times

Zopa has been taking on more risk to achieve pretty much the same returns as when it made fewer risky loans.

Source: Financial Times

Starting small: what support do small scale housebuilders need? (Prospect Magazine), Rated: A

Britain has seen its population of small housebuilders shrink by 80% in a single generation as market dominance has passed to an entrenched group of major players – among the top 10 UK housebuilders, none was founded after 1990. The disappearance of small and medium-sized housebuilders from the UK – defined as companies that complete between one and 100 units a year – has seen their numbers fall from more than 12,000 in the mid-1980s to about 2,400 today, according to research by the non-bank mortgage lender LendInvest.

China

Qudian raises $ 900 mln in biggest U.S. listing by a Chinese fintech firm (Fidelity), Rated: AAA

Chinese online micro-credit provider Qudian Inc said it raised about $900 million in an IPO that priced above expectations, underscoring robust U.S. investor demand for fast-growing Chinese companies.

The offering from Qudian represents the biggest-ever U.S. listing by a Chinese financial technology firm. It is also the most high-profile company to take part in a resurgence of U.S. listings by Asian firms this year.

Qudian IPO feeds debt-hungry Chinese millennials (The Star), Rated: AAA

Qudian , an online microlender backed by e-commerce giant Alibaba’s financial unit, priced its U.S. listing above its expected range on Tuesday, says Reuters.

It offers fast growth, low default rates and, unlike many tech startups, is already profitable. At $24 per share, the final price represents a 2018 PE of 13.8, compared to 13.0 for smaller U.S.-listed online lender Yirendai.

China’s household debt relative to income is still low, and consumer credit is underpenetrated at 7 percent of gross domestic product, versus 20 percent in the United States, says Goldman Sachs.

Backed by Alibaba’s Ant Financial, Qudian lends cash to young Chinese consumers such as white collar workers, and advances credit so they can buy goods online and pay for them in monthly installments. The company provided $5.6 billion to 7 million active borrowers in the first half of 2017.

The sale of 37.5 million shares in Qudian has already raised about $900 million, making it the biggest U.S.-listing by a Chinese company this year, the report said. The offering values Qudian at as much as $7.9 billion, the report added.

China’s Qudian is about to go public and it could be the largest Chinese listing in the US this year (CNBC), Rated: A

Online micro-lending company Qudian is about to go public at the New York Stock Exchange on Wednesday, and it’s set to be one of the largest U.S.-listed floats by a Chinese company this year.

In its prospectus, Qudian said it was offering 37.5 million American Depository Shares with a float price range of $19-$22 per share. The company said it could offer up to 43.1 million shares if underwriters exercised an option.

LCQ22: Promoting equity crowdfunding activities in Hong Kong (7th Space), Rated: A

Question:

In recent years, raising funds through crowdfunding activities is becoming increasingly popular among enterprises worldwide, and the governments of quite a number of countries have introduced legislation to regulate raising funds through crowdfunding activities. On the other hand, the Financial Services Development Council (FSDC) released on March 18 last year a report entitled Introducing a Regulatory Framework for Equity Crowdfunding in Hong Kong, which explored options for establishing a framework and a regulatory regime to promote and, at the same time, regulate equity crowdfunding activities in Hong Kong. So far, however, the Government has not yet announced any specific measures to promote equity crowdfunding activities.

Reply:

(1) We note that crowdfunding activities might come in different forms, including equity crowdfunding (ECF) and peer-to-peer (P2P) lending. The regulatory approaches towards these activities vary globally across jurisdictions in view of the nascent nature of the business. While some economies have developed dedicated new regimes, others leverage existing rules to regulate such activities.

(2) At present, parties engaging in crowdfunding activities in Hong Kong (e.g. where the activity involves an offer to the public to purchase securities, including shares, debentures or interests in collective investment schemes, or where the platform offers its own funds to borrowers) may be subject to the provisions of the Securities and Futures Ordinance (Cap. 571), the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) and the Money Lenders Ordinance (Cap. 163), depending on the specific structure and features of the relevant arrangement.

European Union

Citi fosters Israeli fintech to meet changing needs of financial sector (The Times of Israel), Rated: AAA

Israeli startup Innovative Assessments (IA) says financial lenders like banks are missing out on huge numbers of potential clients because their criteria for handing out credit are too stringent and do not take the full picture of the client into account.

As a result, banks are effectively cutting themselves off from lending out money to large segments of the population, and many borrowers are denied access to affordable credit.

IA wants to help solve this problem. Banks should not only look at financial information to assess creditworthiness, IA says, but also at personal character, which is a whole new dimension of data that is missing from today’s credit scores. So, IA has come up with an idea to help lenders do this.

IA has developed patent-pending software that uses advanced psychometrics for credit scoring.

“Our algorithms look at people’s preferences towards certain financial behaviors,” added Fine. “And while there are no right or wrong answers, we can also identify people who may be responding insincerely.”

SeerGate, a real-time payments firm, was acquired by MyCheck in May 2015 while Ramat Gan-based Sling, whose platform allows micro-merchants to accept electronic payments from consumers via smartphones, was snapped up by Avante in July last year.

NSKnox has created a Digital Notary based on cooperative software that allows a secure transaction approval for banks and organizations, the company says. The software, which uses algorithms, allows two or more blind witnesses — who are actually financial or other kind of organizations — to help independently authenticate, authorize and detect fraud while verifying business transactions.

A total of 68 startups, including nine in the latest brew, have taken part in Citi’s Israel Accelerator program since it was set up in November 2013 in Tel Aviv.

Citi provides the entrepreneurs access to experts within the company globally to bounce ideas off of and the opportunity to use the bank’s huge infrastructure as beta sites. The banking giant does its mentoring and fostering pro bono, without taking any stakes in the companies it fosters.

The graduates of Citi’s program, which include startups like Paykey, Paybox and Vatbox, have raised a total of $300 million to date, according to data provided by Citi, and there have been two exits, with Sling and SeerGate having been acquired.

International

Spanish bank launches money-transfer app focused initially on US-Mexico remittances (TechCrunch), Rated: AAA

BBVA, Spain’s second-largest bank that snatched up mobile banking startup Simple for $117 million back in 2014, is now entering the mobile money transfer business with today’s launch of a new app called Tuyyo. The app, which is available on both iOS and Android, is focused on the $73 billion annual market for remittances to Latin America and the Caribbean from the U.S.

However, the service is initially launching with money transfers from the U.S. to Mexico, where the average amount sent by U.S. workers is about $1,900 per year, says BBVA. It also notes that the U.S. to Mexico corridor sees over $27 billion flowing between the countries annually, making it one of the world’s largest.

Ripple & the Gates Foundation Team Up to Level the Economic Playing Field for the Poor (Ripple), Rated: A

Many of the world’s poor in developing countries — nearly 2 billion, according to the World Bank — struggle to lift themselves out of poverty simply because they don’t have a bank account or financial services.

However, a new collaboration supported by the Bill & Melinda Gates Foundation will change that. Ripple, in partnership with Dwolla, ModusBox, Software Groupand Crosslake Technologies, with funding and support from the Gates Foundation, developed a new open-source software called Mojaloop for creating a real-time, interoperable payments platform on a national scale to reach the world’s poor with essential financial tools.

Leveraging the power of the Interledger Protocol (ILP), Mojaloop offers a way for financial providers, governments and mobile network operators to simplify and reduce the cost of developing inclusive payments platforms.

Securities markets: standing at the crossroads (Banking Technology), Rated: A

Financial technology has the potential to radically transform the securities industry. The fast pace of change could lead to disintermediation, according to an Iosco study.

Key trends identified in the report include:

  • Greater availability of data
  • Exponential growth in computing power allowing the analysis of ever larger data sets
  • Broader access to and the decreasing cost of goods and services
  • Increasing disintermediation and re-intermediation
  • Demographic and generational changes

Innovative fintech business models are disintermediating and re-intermediating certain regulated activities. For example, online equity crowdfunding platforms intermediate share placements and disintermediate stock exchanges and underwriters; peer to peer lending platforms intermediate or sell loans and disintermediate banks and lenders, and robo-advisers provide automated investment advice and thereby disintermediate traditional advisors.

Beginning with bitcoin in 2009, cryptocurrencies have also seen their prominence rise due to some of the qualities that they share with gold, the most prominent of which is their scarcity.

With the emergence of today’s digital age, a startup called GoldMint is seeking to alter this trend with a new means of exchange for physical gold, with transactions occurring over a blockchain-based platform.

GoldMint’s platform will leverage the private and individual gold trading market, including potentially the management of larger physical stocks such as those in central banks. It will also deliver an electronic payment solution tethered to physical gold, as well as a gold-backed peer-to-peer lending system.

There are two options for trading GOLD for fiat or cryptocurrencies. First, there is a method for seeking a GoldMint-guaranteed buyback. And second, a loan can be requested. For either option, the process is as follows:

  • Through the use of a special app which is not yet available, GOLD can be transferred as collateral to a designated GoldMint account.
  • GoldMint utilizes the current price of gold, as set by the LBMA, to fix the rate of a loan.
  • GoldMint requires the customer to undergo its know-your-customer (KYC) process as well as consent to GoldMint’s loan terms to receive the loan. Various repayment options for the loan amount and the means of repaying it are then offered.
  • If a customer defaults on repayment, their GOLD cryptoassets are transferred to GoldMint.

GoldMint also has a process for converting gold into GOLD tokens and reconverting these tokens into gold for cross-border passages.

Australia/New Zealand

‘Robo’ financial advice on the way (Radio NZ), Rated: AAA

The Financial Markets Authority has decided to allow financial services companies to provide so-called “robo-advice” to individuals.

Such methods are widespread around the world, but New Zealand law requires any financial advice to be given by a human adviser, and law changes to allow advice to be given by a computer programmes are not expected to be passed until 2019.

Companies wanting to offer robo-advice will have to apply to the FMA for an exemption.

FMA fast-tracks personalised robo-advice with exemption (NZ Herald), Rated: A

The Financial Markets Authority will let Kiwis access personalised automated financial advice, known as robo-advice, with an exemption kicking in before a legislative overhaul of the sector.

The market watchdog sought feedback on the proposal in June and today decided to expand the range of products robo-advice can cover to include mortgages and personal insurance, it said in a statement. Providers wanting to offer the service will need FMA approval on the good character of directors and officers and satisfy the regulator of their capability and competence. Another round of consultation is needed to finalise the exemption and the FMA is aiming to start the process early next year.

Banks readying their roboadvisers (Stuff), Rated: A

Big banks are planning roboadvice services, but only BNZ has revealed how far advanced it is.

Westpac and BNZ have both told the Financial Markets Authority (FMA) they expect to launch roboadvice services, which could close the “advice gap” by using artificial intelligence (AI) systems to give customers advice on things like KiwiSaver, insurance and mortgages.

The banks’ intentions were revealed in submissions on whether the FMA should use its “exemption” powers to allow roboadvice services to operate despite current law only allowing personalised advice to be given by a human being.

ANZ and Kiwibank’s intentions were blacked out in their submissions, released by the FMA.

FMA allows personalised robo-advice; applications open early 2018 (FMA), Rated: B

Submissions to the consultation focused on a number of themes:

  • Strong support for an exemption from the current laws preventing personalised robo-advice.
  • Opposition to financial limits and product exclusions.
  • Robo-advice should meet the same standards as those that apply to authorised financial advisers (AFAs).
  • Exemption applicants should be pre-approved or licensed.
  • Exemption conditions should be aligned with new advice regime requirements.

The FMA has decided not to impose financial limits on personalised robo-advice and the eligible product list has been expanded to include mortgages and personal insurance products.

Companies seeking to offer personalised robo-advice will have to provide the FMA with good character declarations for directors and senior managers as well as information showing they have the capability and competence to provide the robo-advice service. The exemption conditions will also be designed so that the robo-advice service is provided in a manner that is consistent with AFA requirements.

A summary of the submissions can be found here. 49 submissions were received by the FMA. 47 are being published.

India

P2P lending platform Lenden Club gets Rs 3.5 cr in equity investment (India Times), Rated: AAA

Mumbai-based peer-to-peer lending platform Lenden Club has raised $500,000 almost Rs 3.5 crore in equity investment from three major investors Venture Catalyst, Anirudh Damani and an Indian venture capital fund. Venture Catalyst and Anirudh Damani had put in seed investment of Rs 1.5 crore in the company as well in May last year.

Whither P2P lending by NBFC’s (Bar and Bench), Rated: A

The Reserve Bank of India’s notification on peer to peer (P2P) lending issued on October 4 this year (“Regulations”) seems to have only added an element of ambiguity in the minds of stakeholders. Eighteen months since the RBI issued the consultation paper and it is not certain how and whether stakeholder comments have been internalised in the paper.

The definition of a “peer to peer lending platform” as an intermediary providing the services of loan facilitation, may unintentionally bring into the purview, a wide variety of operators. As a literal construct, this does not seem to take into cognizance the various types of business operations in the industry simply because it doesn’t clarify whether this excludes a model that doesn’t provide syndication. Theoretically even an internet search engine, business correspondents and lead generators could fall under this definition.

This must be the first category of Non-Banking Financial Company (NBFC) to not function in the manner in which it has been typically designed. The new Regulations set a precedent to regulate entities as NBFC’s that undertake neither lending nor credit enhancement.

The new Regulations also seem to bring into its ambit, an “off-line” P2P: the very essence for P2P start-ups has been low transaction costs thereby resorting to the online medium for such lending.

Asia

SoftBank in talks to raise second, possibly larger than $ 100b, fund (Deal Street Asia), Rated: AAA

Japanese Internet conglomerate SoftBank is in early discussions to launch another fund that can possibly be larger than its existing $100 billion Vision Fund, Recode reported, citing anonymous sources.

The Information, in its report, noted that SoftBank got the right to prevent online lender Kabbage, in which it led a $250-million investment in August, from selling parts of itself, buying other companies, selling stock below a certain price or borrowing money beyond a certain level.

Middle East

S&P says fintech revolution unlikely to hurt GCC bank profitability (The National), Rated: AAA

The fintech revolution sweeping finance will lessen the profitability of banks in the GCC when it comes to parts of consumer banking – such as money transfers and foreign exchange – but overall it is unlikely to hurt the ability of regional lenders to make money.

The rating agency noted that the GCC banks that it assigns ratings to get about a quarter of their revenues from fees and commissions and foreign exchange gains and, while a big portion that is generated from lending and advisory activities, some of that money comes from transfers and currency exchange.

Investments in technology and digitisation are also timely for UAE banks as profitability has been on the wane in the wake of the biggest oil price slump since the 2008 financial crash. Lenders are fortunate that this country has one of the highest smartphone penetration rates in the world.

Fintech threatens Gulf bank jobs (Arab News), Rated: A

The rising influence of financial technology (fintech) firms in the Gulf could eventually threaten jobs and profitability at the region’s banks, warned ratings agency S&P Global.

“This would push some banks to adjust their operations through increased digitalization, branch network reduction, and staff rationalization,” said Mohamed Damak, S&P Global Ratings credit analyst in the report.

Already, the region’s banks are starting to rethink their business model.

In early October, Mashreq launched one of the region’s first full service digital branchless bank — Mashreq Neo — as well as a new new digital mobile wallet service called Mashreq Pay — that can be used to make purchases around the world.

The Dubai-based bank has also started to use robotics in the third quarter to manage open account trade payments, according to the bank’s Q3 statement.

Canada

Lending Loop invests in Canadian board game cafe chain (P2P Finance News), Rated: AAA

LENDING Loop, a Canadian peer-to-peer lending platform, has agreed to finance Snakes & Lattes, a cafe chain where people can play and buy board games.

Amfil Technologies, which owns Snakes & Lattes, said on Tuesday that the financing will be used to fuel the expansion of the brand across North America.

Amfil Technologies Inc. Provides Update on Audit Completion, Uplisting / Dividend, Franchising and General Company Operations (Marketwired), Rated: A

Snakes & Lattes has entered into an EXCLUSIVE partnership with Lending Loop, Canada’s first fully regulated peer-to-peer lending platform focused on small businesses. This partnership will fuel and facilitate the mass expansion of the Snakes and Lattes brand across North America, while simultaneously preserving shareholder value. This is the first time in history that Lending Loop has made a direct partnership to finance a growing company, and they will be conducting a mass marketing/advertising campaign to promote both Lending Loop and Snakes & Lattes.

In contrast, Amfil is collaborating with financial innovator, Lending Loop, to fuel the subsidiary’s growth at a fair market rate with flexible cash repayment terms.

Web’s creator to fintech players: Beware the blockchain Frankenstein (American Banker), Rated: A

Internet pioneer Sir Tim Berners-Lee looks at the fintech landscape today and sees something familiar — a creative ferment that reminds him of the early web. He also sees some mistakes in danger of being repeated.

Authors:

George Popescu
Allen Taylor