Wednesday August 23 2017, Daily News Digest

Delinquency rates

News Comments Today’s main news: Walmart, Affirm discussing loan offerings to retail customers. Funding Circle has created 80K new jobs. Zopa’s revenue jumped 60% last year. Indonesia fintech investment to hit record high. Today’s main analysis: Consumer debt’s new peak. 3 investments to make before the market collapses. Today’s thought-provoking articles: The rumors of P2P’s demise are greatly exaggerated. Why China […]

Delinquency rates

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United States

Walmart in Talks With Finance Startup Affirm to Offer Loans to Customers (TheStreet), Rated: AAA

Walmart Stores Inc (WMT) is in talks with financing startup Affirm Inc to use its services to offer installment loans to customers with limited credit histories, the Wall Street Journal reported.

The upstart is reportedly nearing a deal with Walmart that could have it offering installment loans to Walmart shoppers as early as this fall. The loans would be focused on costlier items such as tires and other purchases over $200, insiders said.

Consumer Debt Reaches New Peak: Will Losses Follow? (Forbes), Rated: AAA

This week, the Federal Reserve Bank of New York released its quarterly Household Debt and Credit Report.

  • Total consumer debt reached a record $12.8 trillion. The prior peak was $12.7 trillion in 2008.
  • Since the financial crisis, auto loans and student loans have soared. Auto loans are now at $1.2 trillion, up 70% since the depths of the recession in 2010. Student loans have reached an incredible $1.3 trillion.
  • Total credit card debt has reached $784 billion, the highest level since the fourth quarter of 2009. Credit card delinquencies have also started increasing from historic lows.
  • Mortgage debt is growing again, having reached $8.7 trillion. However, it remains below the 2008 peak of $9.3 trillion.
Source: Federal Reserve Bank of New York

Student and auto loan data is worrying. The growth rate of both products has been extraordinary. Credit card growth looks nominal (despite the recent press) compared to the continued surge in student and auto loans.

Source: Federal Reserve

These loss rates are driven by poor underwriting in both the student loan and subprime auto markets. But while interest rates on auto loans (especially subprime) are high (and priced for risk), student loan interest rates are typically in the low single digits – not enough to cover the implied loss rate.

Federal Reserve Bank of New York

Tech giants like Amazon and Facebook more disruptive to banks than fintech start-ups (CNBC), Rated: A

Banks are faced with more competitive disruption from tech behemoths than financial technology (fintech) start-ups, according to a report by the World Economic Forum (WEF).

Drawing on interviews with finance and tech industry experts, the report found that banks were significantly lagging behind tech giants in the development of technologies like cloud computing, artificial intelligence and big data analytics.

Lenders have instead been turning to tech corporations to provide these functions, the report said. It singled out AmazonGoogle and Facebook as three companies dominating the market in these areas of innovation.

One example the report referred to was Amazon Web Services, which has lured several financial institutions including Aon, Capital One and Nasdaq to Amazon’s cloud computing business.

WSJ’s Greg Ip: US needs more Amazon disruption from CNBC.

RiverNorth: Executing on Providing Income for Investors in Marketplace Lending Loans (Crowdfund Insider), Rated: A

RiverNorth is out with an encouraging note on its fund that invests in marketplace lending platform loans. As of the end of July 2017, RiverNorth’s portfolio consisted of 10,173 loans, with an average loan size of $10,176. The RiverNorth Marketplace Lending (NASDAQ:RMPLX) is designed to provide a high degree of granularity and diversification, and holds a duration of 1.5 with a weighted average FICO score of 708 on the consumer portion of the portfolio. Consumer loans represent a 76% allocation as of July. The Fund’s “subsidized and unsubsidized SEC” net yield currently stands at 11.02% and 9.27%, respectively.

Cloud Lending Solutions Releases Software for Leasing and Asset Finance (BusinessWire), Rated: A

Cloud Lending Solutions, a leader in cloud-based leasing software, announced major advancements to its end-to-end leasing solution, CL Lease™ for Self-Financed Lessors, Externally Funded Leases and Captives. CL Lease™ is designed as a customer-centric, cloud-based lease servicing application enabling lessors to efficiently service equipment leases.

By automating operations, CL Lease effectively manages and tracks multiple assets in a schedule, and can manage your asset disposition process (repossessions, and returns). Its fully extendible integration platform works with collection agents, repossession agents, equipment resellers, and dealers. CL Lease can automatically apply fees, calculate taxes, and collect payments through ACH and credit cards.

Recent economic research into the Equipment Lease and Financing industry indicate that equipment and lease software investment is projected to grow by 3.6% in 2017. The investment outlook for most equipment verticals continues to improve with 2017 seeing long-term leasing volume increasing in 10 of 12 leasing verticals, and recent momentum in first-half 2017 has accelerated in 8 of 12 verticals.

A short list of advancements are:

  • Criteria Based Scorecards – Scorecard evaluations consisting of multiple parties with different legal entity types. Lessors will be able to assign different scorecards to different Legal Entity Type values and evaluate different scorecards for business versus individuals. Scorecard evaluations consisting of multiple parties with different collateral types. In this scenario, financial institutions will be able to assign different scorecards to different collateral type values.
  • Financial Statement Analysis – Enable lessors to be able to spread financials and store electronically, this includes balance sheets, income statements, and cash flow statements, as well as configure calculations and financial ratios to support financial analysis. CL Lease will enable financial institutions to customize financial statements with custom fields and generate financial statement information, such as cash flow, from configurable statement calculations and allow users to input, generate and analyze financial statements spanning multiple reporting periods.
  • Multi Company, Multi Currency – Support for being able to manage multiple companies in the same CL Lease implementation. Highly useful for companies operating in multiple countries or jurisdictions, CL Lease can support local regional specifications and manage leases across geographical country lines.
  • Credit Exposure Support – Enhanced to enable lessors to calculate direct exposure, direct proposed exposure, indirect exposure and indirect proposed exposure calculations for borrowing relationships, as well as get updates on the exposure for all borrowing relationships on a daily basis. CL Lease will also enable users to update exposure calculations on-demand.
  • Feature Updates – Additional updates include: Contract Restructuring, Debt Schedules, Delinquency Management, Asset Tracking, Financing of multiple equipment, Cash Management, Reporting and Dashboards.

Cloud Lending Solutions Releases Software for Commercial Bank Lenders (BusinessWire), Rated: A

Cloud Lending Solutions, a leader in cloud-based commercial lending and leasing software, announced upgrades to its end-to-end suite of products for its commercial lending clients using: CL Loan™, CL Lease™, CL Originate™, CL Collections™, and/or CL Marketplace ™ and released a new product in CL Portal™. These advancements to the Cloud Lending solution suite are designed to address fundamental challenges found across Global Banking, Community Banks, Credit Unions, Lending Societies, and Global Financial Institutions.

A partial listing of feature advancements:

  • Underwriting Scorecards: Enables FIs to define rate cards consisting of configurable pricing and terms and assign them to configurable risk ratings. They can also define their scorecards, consisting of evaluation criteria, scores, and weights, which can be executed for a specific loan opportunity based on configurable criteria. Results of the scorecard evaluation, pricing, and terms can then be automatically applied to the loan or presented to the user for selection.
  • Financial Statement Analysis/Financial Spreading: Enables FIs to configure and generate financial statements, financial ratios for business and individual borrowing entities associated with a loan opportunity. Further, lenders can leverage the resulting financial statement data and analysis during the loan underwriting process and configure the layout and format of each financial statement, as well as the calculations and formulas that derive the financial statement values and the resulting financial ratios.
  • Risk Assessment and Exposure Lenders can configure risk assessment templates, generate risk scores/grades for borrowing relationships, define risk assessment criteria in scorecards and the risk rating thresholds, and evaluate risk assessments for borrowing relationships automatically or on-demand.
  • CL Portal™ A configurable front-end portal that provides a differentiated borrowing experience for consumer, commercial and small business loans for borrowers, investors and stakeholders; integrates product workflows and document management to create a personalized and unique experience for loans ranging from fully automated consumer loans to multi-entity, collaborative commercial loans.
  • Loan Committee and Communications: Providing a completely virtual committee experience where members can view, discuss, and vote on loan opportunities via their computer and communicate lending communications between team members online with an audit trail. Improves meeting efficiency by automatically capturing meeting minutes and enforcing loan presentation time limits.
  • Advanced Loan Origination provides FIs an ability define each of the stages of their loan origination process for each loan product and each mandatory task(s) required at each stage. Easily define loan origination tasks driven by additional criteria such as risk rating or loan amount and automatically assign each task to loan team members based on their role. This ensures an efficient process by enforcing due dates for tasks and ensuring policy compliance by enforcing task completion at the applicable stage of the loan origination process.
  • Relationship Dashboard Provides a 360-degree view of the customer relationship allowing financial institutions to obtain a comprehensive view of the entire borrowing relationship. Users get a real-time view into relationship documents and document exceptions; monitor, and evaluate relationship covenants, view financial accounts and loan opportunities in progress, and assess relationship risk using risk assessment templates and credit exposure calculations. This is provided in addition to customer relationship management functionality provided by Salesforce.

Importance of digitally transforming credit risk management (Digital Journal), Rated: A

The analysis suggests that banks urgently need to digitize their credit processes. This comes down to economics since lending continues to be a major source of bank revenue, especially with retail banking. It is the retail banking sector that is facing the greatest threat from new digital services, such as credit lenders. An example of such a lender is Kuliza, which is on-line only and deploys artificial intelligence to assess customer loan requests. A different approach is provided by Fusion Bank which uses ‘crowdlending’ to secure loans. A crowdlending platform brings investors (the crowd) together with borrowers and allows the investors (or lenders) to lend small sums of money directly to hundreds or thousands or borrowers, in anticipated of a return on the loan.

An example of how a major bank can embrace what is happening in the market is provided by Premium Credit, which is a wholly owned subsidiary of Bank of America. To take on the challenge, Premium Credit worked with specialist technology company Arrk Group to create a digital customer acquisition platform. The success of this, for both bank and customer, was to reduce the time taken to process a loan from weeks to a matter of just minutes.

Federal Arbitration Rule Will Harm ‘Little Guys’ (CEI.org), Rated: A

Once again, the Consumer Financial Protection Bureau (CFPB) is putting forth a rule it presents as going after big banks, but will likely have its most devastating effects on small and startup financial institutions.

Other victims of the rule are likely to be credit unions, community banks, and sharing-economy innovations such as peer-to-peer lending.

As online commercial lending grows, some banks still prefer face-to-face meetings (Biz Journals), Rated: A

Many local banks that don’t already offer online commercial loan applications acknowledge that time may come, but for now in-face meetings still offer a lot advantages to potential borrowers.

Here’s a way for you to get a better handle on debt (MarketWatch), Rated: A

People tend to consider using borrowed funds in two contexts and depending on which context they’re in, people’s attitudes about what purchases they’re willing to borrow for drastically change.

Context 1: ‘How to pay’ decisions

One reason people might incur debt is to take advantage of attractive financing.

Context 2: ‘Whether to buy’ decisions

Another far more common reason people may use debt is because they cannot pay for their purchases with other means. Perhaps they are waiting for their next paycheck, or they have designated their savings to other things (expenses, other purchases, investments).

In a dataset from the Bureau of Labor Statistics that includes spending behavior from 30,242 households, we found that people who spent more on experiencesrather than material goods were also more likely to have greater credit card debt and to have paid more in credit card financing charges. We also saw this pattern in people’s likelihood of taking on a peer-to-peer loan. Using a large dataset from one of the biggest U.S. peer-to-peer lending companies, we found that people were more likely to have peer-to-peer loans for experiential purchases (for example, weddings or vacations) as compared to material purchases (such as swimming pools or motorcycles).

The average American household spends $12,800 annually on discretionary purchases and has $7,200 in credit-card debt. Indeed, a recent surveyfound that 74% of Americans have borrowed to pay for a vacation.

American Dream Leadership Series #2: Eric Sager of Online SMB Lender BlueVine (Forbes), Rated: B

What leader in business do you most admire and try to emulate?

I’ll focus on folks I’ve actually worked with. Francoise Brougher, Sarah Friar and Gokul Rajaram at Square are three people I learned a lot from, and there are certain things I try hard to emulate from each of them. Then of course there is Jack Dorsey, cofounder of Twitter and Square, who always impressed me with how thoroughly committed he was to the mission of helping small businesses succeed, and how that commitment influenced every decision I saw him make.

What’s a piece of advice that turned out NOT to be helpful?

To eliminate weaknesses or development opportunities. The truth, which I learned from both sports and business, is that my value to the team is way more about making the most of my strengths, and that any weaknesses, assuming I’m aware of them, can generally be covered very successfully by others on the team.

United Kingdom

Funding Circle has Supported the Creation of 80,000 New Jobs (Crowdfund Insider), Rated: AAA

Last week, Funding Circle celebrated seven years of operation.

Today, Funding Circle has helped to provide financing for more than 32,000 small businesses based in the UK, Germany, the Netherlands and the US. Funding Circle reports that 69,000 individuals and institutions are now lending on their platform. The company estimates that their lending service has supported the creation of around 80,000 new jobs (globally).

Funding Circle is boxing its investors in (The Memo), Rated: A

The vision was that ordinary people could loan their hard-earned cash directly to others, who could borrow at far cheaper rates than from the bank.

But today Funding Circle joined Zopa and Ratesetter in abandoning that vision, instead announcing it will stop people from picking and choosing who to lend their money to, instead automatically pooling these investments across borrowers on the platform.

Some have pointed out that these behaviours and changes now mean that these peer-to-peer platforms are now acting much more like a bank or a fund, becoming middle-men managing the investments they’re facilitating.

Online lender Zopa’s revenue jumped 60% last year (Business Insider), Rated: AAA

Peer-to-peer lender Zopa saw revenues leap 60% higher last year as losses narrowed.

The online lender’s revenue rose from £20.6 million in 2015 to £33.2 million last year, accounts filed with Companies House this week show. At the same time, losses narrowed from £8.8 million to £5.8 million.

Why Rumours of P2P’s Demise Have Been Exaggerated (Forbes), Rated: AAA

Are we really saying that an industry that didn’t exist a decade ago is failing because only one in 20 or so Britons have used it over the past 12 months? In fact, that seems like a pretty impressive adoption rate, particularly in an industry such as financial services, where start-ups face all sorts of issues around trust and credibility.

AltFi Data, one of the most trusted sources of analysis on the alternative finance sector, reckons peer-to-peer lenders have so far made advances of £1bn in the UK this year alone, taking their all-time advances close to £5bn. And those statistics are only for consumer loans; add in business finance and the figures are more like £3bn and £5bn respectively.

Brexit claims another victim: Britain’s venture capitalists (Politico), Rated: A

Since the country gave notice it was leaving the European Union in March, a growing list of British venture capital funds has been told they will not receive financial support from the European Investment Fund, an EU agency that provides almost half of the money for the region’s venture capital industry, according to several fund managers who held discussions with the body.

While little-known outside tech circles, the Luxembourg-based fund remains the largest backer of European venture capital, often providing up to 40 percent of funds’ total investments, equal to billions of euros each year.

In Britain, for instance, the European Investment Fund forked out €2.3 billion between 2011 and 2015 to support 144 local venture and private equity funds, or roughly one-third of overall investment for the sector, according to the latest figures available from the agency.

Zopa scales back higher-risk lending due to UK consumer credit outlook (P2P Finance News), Rated: A

ZOPA has reduced its exposure to higher-risk loans due to the UK’s worsening consumer credit outlook, which has led it to lower its projected returns on some investments.

The peer-to-peer lender also said that it is expecting slightly higher losses on its existing loans and an increase in early repayments from borrowers.

Subprime lender Provident Financial is in crisis (Business Insider), Rated: A

Shares in Provident Financial, a UK-based door-to-door lender, lost more than 74% of their value on Tuesday after the company cut its dividend, issued a profit warning, announced the resignation of its CEO, and announced the regulator is investigating part of its business.

Bradford-based subprime lender Provident warned investors it expects to make a loss of between £80 million and £120 million. Provident told investors in June to expect a reduction in profit of £60 million — but still a profit.

Debt collection rates plummeted from 90% in 2016 to 57% after the company changed from using self-employed agents to full-time “customer experience managers.” Customers are also borrowing £9 million a week less.

Interview with Terry Fisher, Founder at Huddle Capital (P2P-Banking), Rated: A

In an already crowded space, Huddle is differentiating itself by it high quality origination and a focus on educating its lenders to help them make better decisions.

What are the three main advantages for investors?

The main advantage for lenders on Huddle is that we are owned and managed by Access Commercial Finance which is an FCA regulated, balance sheet lender. Our belief is that most fintech businesses in the marketplace are too much ‘tech’ and not enough ‘fin’ so we are looking to correct that balance on Huddle.

What are the three main advantages for borrowers?

The main advantage to borrowers is getting speedy access to funding for strong business cases that have been unable to achieve satisfactory funding elsewhere.

What ROI can investors expect?

Currently we have loans that pay lenders from 8% to 16% per annum, depending on their risk appetite.

What were the main challenges launching your platform in a competitive (crowded?) market?

Once your tech works there are only 2 real challenges in this business – attracting lenders and finding borrowers. Fortunately we have got plenty of borrowers both existing and in the pipeline – so our challenge is getting out there in front of more lenders so they can learn about our platform and the benefits of lending through Huddle.

Which marketing channels do you use to attract investors and borrowers?

We are marketing to investors through the usual channels of PPC & SEO, but the primary channel we use is content led marketing, providing educational led content, empowering potential lenders to understand the lending business better and be in a position to make informed lending decision.

Peer-to-peer lending websites struggle (to attract borrowers (Financial Times), Rated: A

Peer-to-peer lending websites are struggling to attract UK customers who want to borrow money, despite hundreds of millions of pounds of investment in the sector.

Just 7 per cent of 1,100 people said they had used this sort of service to borrow in 2017, according to a survey by consultancy EY. Separate research from Blumberg Capital, a venture capital group, reported only 4 per cent of 1,050 British adults had used alternative lending services in the past 12 months.

How banks could look into YOUR account to decide if they will give you a mortgage (Express.co.uk), Rated: A

MORTGAGE loans and another types of lending are set to get tougher than ever thanks to a new way banks will measure who is a good candidate – by looking directly into into a bank account to check up on spending.

Alastair Douglas, CEO of TotallyMoney.com, told Express.co.uk he expected the development to become the norm “within one or two years”.

Fintech trade body chief steps down (Financial News), Rated: B

The chief executive of the UK’s fintech trade body is stepping down next week after two and a half years in the role, with a former senior Nasdaq executive standing in until a permanent successor is found.

Innovate Finance, a not-for-profit association founded in 2014 to represent the UK’s global fintech community, said in a statement today that Lawrence Wintermeyer will step down at the end of the month.

Former Lloyds boss Eric Daniels sues to claim unpaid bonuses (Financial Times), Rated: B

Eric Daniels, who ran Lloyds Banking Group when it was rescued by UK taxpayers, is suing the lender with a former colleague to claim £1m of unpaid bonuses linked to its HBOS acquisition, according to a person briefed on the lawsuit.

The former Lloyds chief executive, who left in 2011, filed a claim this month with London’s High Court along with a separate claim filed by Truett Tate, the lender’s former head of wholesale banking.

China

China: Number One Fintech Country In The World? (Coin Telegraph), Rated: AAA

China has not only caught up, but rather leapfrogged major cities such as New York, Silicon Valley and London. Many people are even claimingthat clusters of cities such as the Pearl River Delta in China are becoming the “new Silicon Valley.”

Due to China’s relatively new capital market structure, a lot of legacy systems in place in Western countries just aren’t present yet in China.  On top of that, the major Chinese banks are all state-owned (ICBC, ABC, CCB and BOC). They’ve made a living off lending to other large state owned enterprises (SOEs), which has left a large section of the population, in particular small and medium sized enterprises (SMEs) without the proper access to loans and credit.

Source: Coin Telegraph

China has well over 700 mln Internet users, or more than double the entire population of the US.  Combined with a propensity to use smartphones and mobile payments thanks to WeChat and Alipay, Chinese consumers have spectacular adoption rates of Fintech applications in comparison to other nations. For example, 40 percent of consumers in China use non-traditional payment methods such as Alipay, compared to just four percent in Singapore.

Source: Coin Telegraph

With major e-commerce platforms such as Alibaba’s Taoball and Tmall, and JD.com, there has been a need for quick and easy e-payments, which can be done using Fintech applications such as Alipay. Not only has this created opportunities within the payments vertical of Fintech, but also within lending, insurance, investment and wealth management.

Nation sees highest uptake of fintech (China Daily), Rated: A

China ranks top among 20 world markets in terms of fintech adoption, with 69 percent of surveyed consumer respondents saying they are actively using fintech services, 33 percentage points higher than the global average.

China ranks top among 20 world markets in terms of fintech adoption, with 69 percent of surveyed consumer respondents saying they are actively using fintech services, 33 percentage points higher than the global average.

Around 64 percent of fintech users said they prefer using digital channels to manage “all aspects of their life”. And 13 percent of polled consumers said they are regular users of five or even more fintech services, which include money transfer and fintech, wealth planning, deposit and investment, borrowing and insurance.

China’s first independent network bank gets authorized from CBRC (Xing Ping She), Rated: A

On 21st August, Baixin Bank, the first independent network bank in China, announced that they had been authorized by CBRC (China Banking Regulatory Commission).

According to public information, BaIxin Bank was jointly incorporated by China Citic Bank (shareholding ratio: 70%) and Fujian Baidu Borui Network Technology co. LTD (shareholding ratio: 30%). It takes more than one year for Baixin Bank to get the opening approval since Citic Bank’s Board Meeting passed the Bill on Establishment of a Pure Network Banking Company on November 17, 2015.

Li Qingping, the President of Citic Bank, previously said that the two parent companies would not interfere the marketing operation of Baixin Bank. It will provide a platform of banking for common people, enable them to conveniently enjoy finance service. Meanwhile, the bank will take advantages of both Citi Bank’s risk control capacity and Baidu’s innovative technologies like AI, big data and cloud computing, so as to meet the personalized financial needs of customers.

Credit Quality of Internet Companies Susceptible to Finance Business Actions (Financail Buzz), Rated: A

Moody’s Investor Services has opined that the credit quality of Internet companies could be weakened by Chinese technology companies pushing their way into orthodox businesses like finance and banking.

Lina Choi, senior credit officer, and the vice-president of Moody’s said that Internet companies can suffer from potential capital calls and contingent liabilities as a result of loans made to merchants and consumers. The scenario is also affected by wealth management distribution. Incidentally, these are the two main services offered by these online companies.

The first shareholders meeting held today: 13 directors 7 supervisors list of candidates surfaced (EEO.com.cn), Rated: B

Economic Observer learned that on August 22, the first shareholders meeting of Internet Clearing Co., Ltd. will be held in Beijing, after the meeting, the list of directors and supervisors will be officially released.

Compared to the financier, Jingdong Finance, quick money, one wallet of several directors of the rise, the Alipay director of the candidate Wang Zuojiang for the director level.

Tencent nominated director of the candidates Lai Zhiming in the technical and financial aspects have a very strong background.

Ping An paid the nomination of directors Candidate Zhu Yinjia is the only product of all the nominated directors of the professional background of professional payment.

International

3 Investments You Must Make Before Market Collapses (Newsmax), Rated: AAA

Exactly a year ago, in the wake of Brexit, the US 10-Year Treasury rate fell to an all-time low of 1.36%. At that point, bond yields—which move inversely to their price—had been declining for eight years with no end in sight.

Then Trump won the US election; another unexpected twist. An uptick in inflation and a series of rate hikes followed shortly afterward, and the 10-year yield has risen 67% from its lows.

  • Europe

Just a year ago, Europe looked like the last place you’d want to put your money in.

While everyone was applauding the uptick in US growth after the election, Europe recorded higher growth in 2016.

Despite improving fundamentals and strong performance, EU stocks remain relatively undervalued. For example, the Shiller P/E ratio is 55% lower for EU stocks than for their US counterparts.

Source: Newsmax
  • Peer-to-Peer Lending

P2P investors are currently averaging 7.3% returns on 36-month loans. Even those who took the most conservative approach saw returns of 5%.

The likes of Goldman Sachs and Morgan Stanley now account for over 70% of new capital.

Source: Newsmax

Fiserv Acquires Dovetail Group To Reinvent Payments Infrastructure Worldwide (PYMNTS), Rated: B

Fiserv, a financial services technology solutions provider, announced the acquisition of Dovetail Group Limited to further enable it to help financial institutions around the world transform their payments infrastructure. The new capabilities would be used to meet the evolving needs of wholesale, commercial and retail customers.

Australia

Amazon a bigger threat to banks than fintech: World Economic Forum (Financial Review), Rated: A

The combination of “open banking” regimes and data migrating to the computer cloud will lure global technology giants to create platforms for distributing financial services, a move that will force incumbent banks to compete head-on to control customer relationships or risk becoming mere suppliers of commoditised financial products.

That’s a view of the future set out by the World Economic Forum in a 194-page report on fintech disruption, released in New York on Tuesday, that warns traditional bank distribution models and economics “are at risk of being deeply disrupted by the drive towards platform models of banking”.

It calls out the arrival of internet behemoth Amazon into financial services. Amazon Lending, quietly launched six years ago, offers credit to merchants selling on its platform and uses their sales data to measure risk. It has made loans worth over $US3 billion and is expanding in the US, Britain and Japan, according to a recent report in the Financial Times.

It also points to Chinese tech giant Tencent’s Webank platform, which allows retail customers to purchase products from multiple competing credit and asset management providers, as a plausible model for financial services distribution in the future.

Asia

Indonesia’s fintech investments set to touch record high in 2017 (Deal Street Asia), Rated: AAA

Investments into Indonesian fintech startups are set to hit a record high in 2017 at the current run rate, according to an analysis by venture intelligence platform CB Insights. It is estimated that there will be a total of about 50 deals this year alone.

A recent study revealed that 80 per cent of the Indonesian population does not have a formal bank account, with 203 million Indonesians earning less than $4.50 a day.

In January this year, private lender Bank Central Asia (BCA) launched its VC arm, Central Capital Ventura, committing Rp 200 billion ($15 million) in investments so far.

In P2P lending, notable deals include Amartha raising $30 million in a round led by MCI in March this year. More recently, UangTeman announced a $12 million Series A round led by K2 Venture Capital with participation from Hong Kong-based STI Financial Group and American firm Draper Associates.

Moka is one of the best funded merchant payment startups in Indonesia, counting Convergence Ventures, East Ventures, Fenox VC, and Wavemaker Partners among its investors. Other active firms in this area are Pawoon, backed by Ideabox and Kejora Ventures, and Cashlez, backed by MCI and Gan Capital.

Middle East

UAE-Based Fintech Start-Up Secures $ 700K Investment to Advance Financial Services Access for Underserved Migrant Workers (Fox34), Rated: AAA

NOW Money has secured an investment of $700,000 from two U.S.-based venture capital investors – Accion Venture Lab, the seed-stage investment initiative of financial inclusion leader Accion, and Newid Capital.

The investment comes a year after NOW Money’s initial seed funding, which allowed the company to expand the team and develop the technology and brand. With the latest investment, also a part of its seed round, the team plans to launch the service across the United Arab Emirates and expand into the other Gulf Cooperation Council (GCC) countries.

Funding squeeze lifts ME non-bank lending (Oman Trubune), Rated: A

Middle East investment companies are ramping up their lending to businesses, providing a lifeline for small and medium-sized firms struggling to secure finance from banks that tightened credit after a suffering rise in bad loans.

Industry participants estimate non-bank lenders in the region could provide around $1 billion over the next three to five years, including secured loans, mezzanine debt, preferred shares and convertible loans and bonds.

Authors:

George Popescu
Allen Taylor

Monday July 10 2017, Daily News Digest

marketplace securitizations PeerIQ

News Comments Today’s main news: LendingClub receives unsolicited offer from IEG for nearly 10% stake. Goldman looks to spin off Simon at $75M valuation. Assetz Capital to expand UK broker network. Stripe integrates with Alipay, WeChat. Australian advisers drop big banks. Today’s main analysis: MPL securitization tracker. Will China Rapid Finance turn the tide for Chinese IPOS in the U.S.? […]

marketplace securitizations PeerIQ

News Comments

United States

United Kingdom

China

European Union

International

Australia

Canada

Middle East

News Summary

United States

LendingClub gets unsolicited offer from IEG for 9.99 pct stake (Business Insider), Rated: AAA

LendingClub Corp said it had received an unsolicited offer from IEG Holdings Corp to buy a 9.99 percent stake in the online lender.

IEG’s proposal offers two shares for each LendingClub share, and is at a 38 percent discount to LendingClub’s Thursday’s close.

The online lender urged its stockholders to ignore the offer, if and when made.

Marketplace Lending Securitization Tracker Q2 2017 (PeerIQ), Rated: AAA

 Some highlights:
  • This quarter we see quarterly issuance of $3.0 Bn, representing 76% growth over 2Q2016.  To date, cumulative issuance equals $21.9 Bn across 92 deals.
  • Multi-seller club deals and self-sponsored deals have emerged at several leading platforms.  All deals were rated in this quarter, including record-sized consumer deals from SoFi, large multi-seller deals from Marlette and Prosper, and the first self-sponsored, near-prime deals from Lending Club and Upstart.
  • Dealer and rating agency participation continues to intensify. Fitch rated its first Consumer MPL, Prosper’s PMIT 2017-1, indicating broadening acceptance across ratings agencies. Goldman Sachs, Morgan Stanley, and Deutsche Bank lead over 47% of MPL ABS transaction volume. Noteworthy is the rising presence of BNP Paribas, which co-managed CLUB 2017-NP1. DBRS leads the rating agency league table, and Kroll dominates the unsecured consumer sub-segment.
  • New issuance spreads continued to tighten and flatten—a credit friendly environment for securitization.  In 2Q2017, we saw spreads tighten in riskier tranches of consumer ABS, indicating strong investor appetite for MPL ABS paper in the market.
  • Delinquency rates have continued to increase across in several verticals—such as subprime auto, student, and personal loans—due to exposure to riskier borrowers, a re-leveraging of consumer balance sheets, “loan stacking,” and shifting payment priority trends.
  • Initial pricing is near record tight levels. Lending Club’s inaugural deal priced at Libor + 110, second only to Marlette’s MFT 2017-1 (L+100) on the Class A bond. Overall, spreads have tightened with greater investor acceptance in an overall “risk on” environment.

Get the full report here.

Source: PeerIQ

Online Lenders Work Wall Street For Capital (ValueWalk), Rated: AAA

Equity financing events dropped to $2.2 billion in deal value across 145 transactions in 2016 down from $5.1 billion across 174 deals in 2015. This pace has continued to trend down in 2017, with 25 deals completed through March, yet SoFi’s $453 million Series G has bumped the total deal value to $754 million.

Instead of an IPO, Prosper has resorted to a major down round to stop the bleeding. The company is raising a $59 million Series E venture round that values the company at $460 million (post-valuation), a steep drop from the $165 million series D raised in 2015 that valued the company at a postval of $1.87 billion.

Goldman Sachs is looking to spinoff one of its tech bets at a $ 75 million valuation (Business Insider), Rated: AAA

Goldman Sachs is looking to sell a stake in one of its fintech bets — an online platform for retail bond investors called Simon — that would value the web app at about $75 million, according to The Wall Street Journal.

The investment bank launched Simon — which stands for Structured Investment Marketplace and Online — a couple years ago to help clients more easily learn about structured investments and execute transactions.

How financial advisers can “bridge the digital” divide (Investment News), Rated: A

Of those surveyed, 55% said that an aggregated view of their key financial accounts would be “extremely useful” or “very useful.” An account reporting dashboard was the second most popular tool, at 50%, followed by customized notifications and alerts (44%) and financial calculators (43%). Each of these tools provides investors with easy access to their own financial information in an easily digestible way. The good news is that advisers agree with investors on what is “extremely” or “very” useful, with financial account aggregators (69%) and account reporting dashboard (67%) being seen as the top tools.

VW Credit, Inc., Invests In AutoGravity Leading Financial Technology For Vehicle Financing (Cision), Rated: A

VW Credit, Inc. (VCI) today announced that it has committed to make an equity investment in AutoGravity, pending customary regulatory approvals. With this strategic investment, VCI is supporting its goal to create a digital experience that enhances the customer financing process. AutoGravity is a FinTech pioneer facilitating car shopping and financing with the power of the smartphone.

In addition to this investment, VW Credit, Inc., has worked with AutoGravity to bring Volkswagen and Audi financing directly to car buyers across the United States. Through this project, VW Credit, Inc., has launched the Volkswagen Creditsmartphone app, powered by proprietary AutoGravity technology and available for iOS and Android. Finance options from Volkswagen Credit are now available on the AutoGravity platform, extending the range of options available to more than 400,000 consumers who have downloaded AutoGravity. Volkswagen dealers now can benefit from a new source of potential car buyers.

How the U.S. compares to others in fintech use (Benefits Pro), Rated: A

Why OCC fintech charter may have life under new leader (American Banker), Rated: A

With legal challenges and uncertainty about the agency’s leadership, the Office of the Comptroller of the Currency’s fintech charter appeared dead in the water just months ago. But industry observers say the OCC’s interim chief is emerging as a potential savior for the controversial initiative.

“We’re seeing an assertive OCC,” said Brian Knight, a senior research fellow at the Mercatus Center.

Podcast 108: Perry Rahbar of dv01 (Lend Academy), Rated: A

In this podcast you will learn:

  • How Perry’s time at Bear Stearns during the financial crisis influenced his thinking on transparency.
  • What problem dv01 is trying to solve.
  • The different ways they work with securitization buyers and whole loan buyers.
  • The details about their reporting partnership with SoFi.
  • How they are able to create data standardization with disparate data from many platforms.
  • How they are using Experian data in their partnership.
  • Why updated credit attributes on loan data is going to be critically important when the credit cycle turns.
  • When and how dv01 is going to expand beyond the online lending space.

SoFi Announces Partnership With Alaska Air (Crowdfund Insider), Rated: A

Online lending platform SoFi announced this week it has teamed up with Alaska Air to help its new members save money on student loans while also earning extra summer travel points.

CreditEase Fintech Fund continues to invest in strong Fintech companies in CB Insights’ Global Fintech 250 (Broadway World), Rated: A

As many as 13 companies backed by investments from CreditEase Fintech Investment Fund (CEFIF) were named today by CB Insights to the prestigious global Fintech 250, a select group of emerging private companies working on groundbreaking financial technology. The list was revealed during The Future of Fintech conference in New York on June 27th.

The winners in relation with CreditEase investments include Addepar, NAV, Tradeshift, Upgrade, Circle, TruMid, WorldCover, TrueAccord, Bocheng (CreditEase Insurance Agency) and others.

Apple Bank here we come (LinkedIn), Rated: B

According to the limited information available, Apple will automatically issue a virtual payment card to all iOS users, allowing them to receive and hold money in Apple Wallet.

This isn’t Venmo. Or even Paypal. We aren’t linking up accounts and plastic cards here. We are issuing cards. Virtual cards. To all iOS users.

How soon will they start to pay interest? What about something like Apple Wealth? The scale and impact really boggle the mind. We are breaking new ground here. Only WeChat and Alipay are operating on this scale, but let’s face it, they are still one trick ponies operating in a single market.

Private bank Brown Brothers Harriman creates fintech position (American Banker), Rated: B

Brown Brothers Harriman promoted Michael McGovern to the newly created position of head of investor services fintech offerings, as custodial banks ramp up digital offerings in the face of competition.

United Kingdom

Assetz Capital to Expand UK Broker Network to Further Scale P2P Business (Crowdfund Insider), Rated: AAA

Assetz Capital is looking to increase its active broker network significantly in the next two years, and has announced a strategy to further support brokers through several methods.  This includes using its network of nationwide Regional Relationship Directors to locally support more brokers, further product and pricing improvements, dedicated staff in the head office and a series of regional broker events which are specifically aimed at educating and supporting brokers.

Funding Options founder sees limit to P2P growth (P2P Finance News), Rated: A

THERE is a limit to how much peer-to peer lending platforms can grow, according to Funding Options’ founder Conrad Ford.

The head of the online small- and medium-sized enterprise (SME) finance aggregator told Peer2Peer Finance News that there are lots of “smallish, niche opportunities” for P2P firms but that they would not be able to graduate to originating larger facilities.

Authorised P2P property lender clinches seed funding (AltFi), Rated: A

LandlordInvest, a property-focused peer-to-peer lender, has clinched a round of seed funding from Alan Gabbay, director of O&H Properties, a London-based privately owned investment firm with assets valued at around £1bn. Further details of the investment have not been disclosed. The platform is also backed by LNK Capital, and angel investors Reece Chowdhry and Lee Josephs.

FCA applications have cost the P2P sector up to £2m (P2P Finance News), Rated: A

THE FINANCIAL Conduct Authority (FCA) has pocketed up to £2m from full authorisation of the peer-to-peer lending sector, figures suggest.

A freedom of information request by Peer2Peer Finance News shows that the City watchdog has considered 146 applications for full permission from P2P platforms since 2014 – when the FCA took over regulating the sector – with firms paying application fees of £600 to £15,000 depending on their income at the time.

This reveals that the regulator has raised up to £2.1m if all firms paid £15,000, or a minimum of £87,600 if all firms paid the lowest fee of £600.

Happy Birthday, Landbay!: P2P Platform Celebrates Three Years of Online Lending (Crowdfund Insider), Rated: A

On Friday, UK-based peer-to-peer lending platform Landbay celebrated its third birthday. The online lender revealed that in the past three years, it has lent a total of £47.31 million, which is funding buy-to-let mortgages throughout the UK.

New P2P business lender launches as Appointed Representative (AltFi), Rated: A

Huddle Capital is the UK’s newest peer-to-peer business lender, but its route to market is somewhat different to those that went before it. Huddle launched too late to operate under the FCA’s interim permissions regime, and achieving full authorisation – as even the biggest peer-to-peer lenders have discovered – takes time.

Huddle has come to market as an Authorised Representative of fully authorised peer-to-peer firm rebuildingsociety.com.

British venture capital investing trends in the tech sector (RealBusiness), Rated: A

Peer-to-peer lender Funding Circle and mobile banking service Atom Bank secured the biggest amounts of British venture capital investing, raising £83m apiece. In fact, the five largest deals accounted for a third of overall British capital investing.

Indeed, 27 fintech companies secured £262m from 49 investors.

People are raising hundreds of millions selling digital coins online (Business Insider), Rated: B

Over half a billion dollars has been raised through so-called “Initial Coin Offerings” (ICOs) since the start of the year, according to Richard Kastelein, a partner at the Cryptoassets Design Group, a company that helps launch ICOs.

Gnosis, a prediction market for digital currency Ethereum, raised $12 million in just 10 minutes in April. Brave, a new web browser startup set up by the founder of Mozilla, made that look pedestrian, raising $35 million in less than 30 seconds selling “Basic Attention Tokens” last month.

To raise money through an ICO, a company issues a new digital currency that can either be spent within its ecosystem, a bit like Disneyland dollars, or used to power part of the business, like the fuel you put in your car.

China

Bitcoin-Friendly Stripe Strikes Major FinTech Deal with China’s Alipay, WeChat (Cryptocoins News), Rated: AAA

The integration will now enable all Stripe merchants in over 25 countries make money from Chinese consumers. Alipay, the payments platform of Ant Financial – the financial arm of e-commerce giant Alibaba has over 500 million users on its platform. WeChat Pay, the digital payments platform of WeChat – China’s most popular messaging app – has over 600 million users. The two firms were responsible for handling near $3 trillion in 2016, according to a UN report.

The integration coincides with the payments processor’s official launch in Hong Kong.

Alibaba-Backed Company Could Turn The Tide For Chinese IPOs in US After String of Busts (Frontera News), Rated: AAA

The pipeline of Chinese (FXI) IPOs planning to list on the New York Stock Exchange (SPY)(NYSE) (NDAQ)could make 2017 the biggest year for the country’s stocks since 2014 when Alibaba (BABA) listed its shares.

2016 saw new listings worth $119.4 billion on the New York Stock Exchange with Chinese logistics company ZTO Express (ZTO) being the largest with an IPO worth $1.4 billion. So far in 2017, 137 IPOs worth $27.2 billion have been announced in the United states, 6.6% higher year over year.

Shares of Alibaba(BABA) are up 42% while shares of JD.com have surged 94.9% since their IPOs in2014. Shares of Baidu are currently trading 19 times of its IPO price.

China: WeiyangX Fintech Review (Crowdfund Insider), Rated: A

On June 27th, The Alibaba Group financial affiliate rolled out an artificial intelligence-driven, image-recognition system to aid vehicle insurance claims adjusters in operating faster and more efficiently.

Yu’E Bao, one of China’s most popular internet-based funds, had amassed CNY 1.43 trillion of assets under management by the end of June, which has already exceeded the size of individual deposits at some of China’s largest banks.

The development of the Shenzhen Municipal Government Financial Services Office, the local banking regulator in Shenzhen, has released guidelines to prompt large and medium-sized banks to set up inclusive finance divisions, a move to increase loans for money-starved small firms, which is the latest native government’s effort to improve links in economy.

European Union

Visa’s Long-Term View On Klarna (PYMNTS), Rated: A

Though the actual terms of the Klarna investment, such as dollar size and the magnitude of the equity ownership stake, remain under wraps, the intent was more clearly shaped in an interview between Karen Webster and Bill Gajda, SVP of Innovation and Strategic Investments at Visa following the announcement.

This is Visa, after all, so … think credit — but transactional credit extended at the online point of sale. Think payments, but not just card-based payments, since Klarna today is a pay-by-bank account model. Think cards, but digital ones, accounts issued digitally by the Bank of Klarna.

That comes against a backdrop where Klarna’s transactions grew more than 50 percent over 2015 and volume was up 44 percent in Europe, driven by mobile commerce.

International

Fintech VC Funding on the Decline: What Next? (TechBullion), Rated: AAA

According to a call co-hosted by Lawrence Wintermeyerof Forbes and Peter Rentonof LendIt, fintech venture funding has declined both in the U.S and the U.K.

In 2016, venture funding for fintech in the US fell by 13% to $6.2 billion. Much of this decline is attributable to poor performance by lending platforms coupled with a contraction of investment as venture capital firms went slow on investments to figure out what would be the most profitable fintech investment in future.

The situation in the UK was not any better as there was even a greater decline in VC fintech investment during the same year, 2016. The sector attracted only $834 million worth of investment, translating to a 38% decline.

Despite the general decline in fintech VC funding, some sectors are still thriving. For instance, the payments subsector has witnessed sustained growth. Similarly, Insurtech is flourishing especially as far as seed investment is concerned.

Fintech enterprise solutions have increased with innovations around machine learning, distributed ledger, big data and cloud heralding the entry of global tech giants into the fintech sector.

How the FinTech revolution is changing the regulatory approach (Fintastico), Rated: A

Some national authorities have chosen to regulate fintech companies through preexisting frameworks. This mean using the same set of rules previously applied to all financial and banking institutions. Other authorities have preferred introducing specific and tailored regulations for fintech companies with the aim of adapting the system to the particular needs of the sector and of stimulating the growth of these companies.

Continental Europe

For instance, Germany does not have specific regulations for fintech credit platforms. In other words, a fintech credit company must be granted a banking license to pursue a credit activity; however, it must ascertain what type of service the business is providing to verify if the business offer might qualify as a regulated activity under general German financial regulatory laws.

As in Germany, the Netherlands does not have specific regulations for fintech companies. In the Netherlands, a fintech credit platform must obtain a regular license for credit activity from the Dutch Central Bank (“DNB”) and the Netherlands Authority for the Financial Markets (“AFM”) before providing credit to customers.

Several authorities have created specific and tailored regulations for fintech companies by introducing new licenses for fintech platforms. For instance, one of the most customized and effective one is in Switzerland. The national policymakers have introduced a new licensing category for fintech companies. This regulation would give the Swiss Financial Market Supervisory Authority (“FINMA”) the chance to analyze the fintech platforms individually and to tailor the appropriate regulation according to the activity they pursue.

China

The core of the regulatory framework is represented by the Guiding Opinions on Promoting the Sound Development of Internet Finance and the Provisional Rules for the Administration of the Business Activities of Online Lending Information Intermediary Institutions, respectively were amended by the People’s Bank of China and the China Banking Regulatory Commission (CBRC) with the assistnace of other authorities. However, there is something unusual characterizing the Chinese approach in the way it conceives fintech credit platforms as being essentially information intermediaries rather than credit intermediaries.

English-speaking countries

Some jurisdictions, such as United Kingdom, Australia and Singapore have introduced a different kind of approach to regulate fintech service providers. Using the innovative approach dubbed “regulatory sandbox”, fintech providers offer their products or services to a limited group of customers to minimize the risks, allowing them to test the market without any risk or regulatory sanctions.

United States 

Fintech providers in the United States are not subject to a fintech-specific regulatory framework. However, fintech providers are subjected to numerous and fragmented federal and state licensing or registration requirements depending on the activities of the company, and are also subject to laws and regulations at both the federal and state levels. Such complexity has appeared as an obstacle to the expansion and growth of the entire sector because it may subject fintech companies, looking to expand their business across the U.S., to regulation and supervision by the laws and regulations of different regulators.

FinTech players are taking away the remittance business from banks (Moneymail), Rated: A

Commercial banks remain the most expensive channel for sending money, pricing their services at 11.12%, while a post office is the least expensive channel (5.88%). As for money transfer operators, they were able to decrease the price of sending money to 6.24%.

Non-bank providers charge an average of 0.9% on £10,000, which is 4 times less than the average for banks.

 

Australia

Advisers quit big banks, AMP as watchdog intensifies scrutiny (The Australian), Rated: AAA

Financial advisers are deserting the major lenders, voting with their feet as the corporate watchdog heightens its scrutiny of the controversial cross-selling of wealth products in the “vertically integrated” lenders.

The big four banks and AMP, which control nearly half of all financial advisers in Australia, have bled more than 400 advisers in the last six months, according to Bell Potter analyst Lafitani Sotiriou.

Mr Sotiriou believes the rush for the exit has been caused by major banks limiting the freedom of their advisers to recommend products offered by rivals.

In the past six months, Commonwealth Bank, Westpac, ANZ, NAB and AMP have lost nearly 2 per cent of their market share in the country’s advisers.

SocietyOne’s lending tops $ 300 million, bucking personal credit weakness (The Sydney Morning Herald), Rated: A

SocietyOne will on Monday report its total loans arranged since it launched in 2012 have exceeded $300 million, with new lending in the first half of 2017 up 67 per cent on a year ago.

Rival P2P lender RateSetter has also funded about $130 million of loans since its inception in late 2014, according to its website, a figure that has roughly doubled since December.

Canada

Power Corp. venture capital fund plays the long game (Montreal Gazette), Rated: A

Faced with a changing market, one of Montreal’s largest companies is using an in-house venture capital fund to give it access to new technologies and new ideas.

Power Corp. of Canada (TSX: POW) runs some of the largest insurance and financial services companies in the country, it’s a market where new, technologically-enabled computers are emerging.

Last October, through three of its subsidiaries, Power launched Portag3, a venture capital fund that invests in fintech startups.

Last October, through three of its subsidiaries, Power launched Portag3, a venture capital fund that invests in fintech startups.

Middle East

FinTech comes to the fore in the GCC (Gulf Business), Rated: AAA

It’s an industry that is blossoming in earnest across the world, with investments worth $7.7bn taking place in China last year, $6.2bn in the US, and $1.5bn in the UK. It’s an industry that was valued at a staggering $867bn in 2016.

To date, the Middle East has accounted for only a small proportion of this, with regional FinTech companies expected to raise $50m in 2017, according to a report by Wamda Research Lab and Payfort – a marked improvement on last year’s $18m. In total, the report shows that only $100m has been raised in the past 10 years, while a 2016 report by FinTech Week said less than 0.1 per cent of global FinTech investments originated in the Middle East.

Authors:

George Popescu
Allen Taylor