Review of Indian Regulation on P2P market

india p2p lending regulation

Today, there are approximately 60 million small businesses in India looking for funding, out of which only 33 percent are able to access any kind of institutional credit. The situation is similarly dire in the case of individuals. Almost 80% of MSMEs self-finance themselves, 32% rely on their friends and relatives for credit, and an additional 12% […]

india p2p lending regulation

Today, there are approximately 60 million small businesses in India looking for funding, out of which only 33 percent are able to access any kind of institutional credit. The situation is similarly dire in the case of individuals. Almost 80% of MSMEs self-finance themselves, 32% rely on their friends and relatives for credit, and an additional 12% try raising funds from informal banking networks. All these numbers highlight the extent of shortcomings in the Indian lending system and the mega “bottom of the pyramid” opportunity for the young P2P sector.

P2P Market overview

The P2P lending market in India originated around 2012 when Shankar Vaddadi and his team launched the first social peer-to-peer lending platform, i-Lend. Lack of proper regulation governing the P2P ecosystem has proven to be the biggest stumbling block in the growth of this industry, but having said that, it is widely expected that the P2P lending space will grow into a $4-$5 billion industry by 2023.

The Indian P2P lending industry has approximately 63 players including Faircent, Lendbox, LenDen Club, Monexo, LoanBaba, CapZest, i2ifunding, and many more, all of which have been carving their own niche in the lending industry by serving a diversified customer base.

P2P Regulations in India

Rules and regulations in India with respect to lending have always been stringent making it difficult for new players to enter the market. India’s central bank, Reserve Bank of India (RBI), has always prioritized protecting the interests of all the stakeholders involved in the lending process (especially the borrowers). One such act, Usurious Loan Act, allows the judiciary to intervene in case the lending platform or lender is charging an unrealistically high-interest rate. The primary lenders in India, banks, are exempted from the scope of this law, but P2P lenders fall under the ambit of this regulation.

In India, even the states have the right to pass laws on regulating money lending, and 22 states have passed legislation to this effect. One such recent example is Maharashtra Money Lending Act of 2014. As per the guidelines prescribed in the Act, it is mandatory for all lenders to register and acquire a license before they start operating. Furthermore, this act can restrict the operation of money lenders to a specific district and empowers state government to decide the rate of interest to be charged.

In reality, the Indian P2P sector also benefited from a lack of government policies as it allowed them to experiment and launch multiple products without considering any repercussions of the law. This changed in 2016 when RBI released a consultation paper on P2P lending. This paper has been used as a yardstick by RBI to frame regulation to govern the P2P lending market.

The Reason Behind RBI Regulations

Although the P2P market helps in financial inclusion of the economically disenfranchised sections of the society, multi-billion dollar Ponzi schemes like Ezubao in China are too big of a risk to ignore. The main reason cited behind the Ezubao scam was “lack of enforceable regulations.” With the industry starting to spread its wings in the country, RBI stepped up its regulatory efforts in a bid to avoid such a scam in the country.

RBI initiated P2P regulations with the main motive to bring in a new age of economic reform and financial inclusion in India wherein every individual can have access to credit with better terms and transparency without risking the hard earned money of the lender on the platform.

P2P Lending: A Throw Down on RBI Regulations

RBI consultation paper clearly outlined the risk of money laundering attached with P2P lending and will also try to cap the interest rates charged at P2P platforms. The new framework will incorporate the following norms:

  • Recognition as NBFCs – All P2P lending platforms will come under the review of RBI and will be compulsorily registered as a Non-Banking Financial Corporation (NBFC).
  • Permitted Activity – P2P lenders will be permitted to serve only as mediators who would be responsible for matching and originating loan deals between lenders and borrowers. Besides that, all online portals must specify the adequate regulatory framework governing that portal and are further prohibited from giving any assured returns. To reduce the risk of money laundering, the funds must be transferred directly from the lender´s account to the borrower´s account. Under the guidelines of Foreign Exchange Management Act (FEMA), a law has been imposed on P2P lenders that strictly prohibit them from entering into cross-border transactions.
  • Prudential Regulations – RBI has mandated a capital requirement of $312,000 (INR 20 Million) for all P2P lenders. In order to avoid indiscriminate expansion, RBI will prescribe a leverage ratio and also put a limit on the contribution made by a single lender towards a particular loan.
  • Government Regulations – It was reported that RBI has made it mandatory for all P2P lending portals to adopt a company structure. As a result, this notification will render all the services provided by other organizational structures such as sole proprietorship, partnership, or LLP (Limited Liability Partnership) as non-compliant.
  • Business Continuity Plan (BCP) – In order to ensure smooth flow of operations, the platforms are required to integrate efficient risk management systems and proper backup processes. Moreover, to ensure that operations do not cease due to any event, companies should prepare a Business Continuity Plan (BCP).
  • Customer Interface – All P2P platforms must give top most priority in ensuring confidentiality of customer data and to offer complete transparency in its operations. Also, platforms must install a proper grievance handling mechanism to address complaints of lenders and borrowers.
  • Reporting Requirements – All online P2P platforms are required to submit a regular report on their financial position, loan arrangement deals, and summary of complaints, if any, filed by borrowers or lenders with RBI.

Impact of RBI Regulations

Guidelines and regulations proposed by RBI are expected to impact the P2P lending space in the following ways:

  • More at Stake for P2P Lending Platforms – The new $312,000 (approx) capital requirement will lead to small players shutting shop. This will allow serious players to emerge and restrict operations of fly-by-night operators looking to dupe the general public.
  • Opportunities for Growth – RBI guidelines would help minimize the risk of money laundering, and moreover, would help stabilize the industry by introducing streamlined and standard procedures for loan origination. Investors in such platforms would not need to worry if they are compliant with the law.
  • Higher Quality of Credit – RBI has made it compulsory for lenders to maintain a database of loan deals originated and a proper record of borrowers who failed to meet their financial commitments. This database is the first step in controlling fraud. It will also help in reducing loan stacking, a common problem plaguing the P2P industry all over the world.
  • Greater Transparency and Accountability – Platforms would need to report to RBI on a regular basis. Anyone found non-compliant would risk RBI snatching its license or face heavy penalties. This would ensure greater transparency and accountability for the entire ecosystem.

Conclusion

What once used to be a relatively small part of the fintech industry has turned into a viable option for Indian lenders as well as borrowers. The fact that RBI has framed regulations for P2P lending goes to show that the industry is ready to move to the next level of market adoption. Regulations will surely help all the stake holders involved but the biggest winner will be the underserved Indian population who can finally step on the credit ladder.

Author:

Written by Heena Dhir.

Monday July 31 2017, Daily News Digest

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News Comments Today’s main news: RateSetter tops 2B GBP in lending. P2P Global Investments holds steady. P2P Finance Association reports new lending growth. One of China’s largest P2P lenders quits. BNI Europa invests 15M Euro in Creditshelf. Marqeta, Visa partner on global payments. Prospa secures $20M debt facility. Today’s main analysis: Bank and credit card issuer charge-off trends. Today’s thought-provoking articles: […]

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United States

United Kingdom

China

European Union

International

Australia

India

Asia

Middle East

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News Summary

United States

Earnings Season Continues—Bank and Card Issuer Charge-Off Trends (PeerIQ), Rated: AAA

As PeerIQ observed last quarter, we continue to see a “tale of two cities”–a divergence in charge-off rates of card issuers and large money center banks.

Discover reported a 55% increase in loan loss reserves citing re-normalization of credit performance, an increased supply of consumer credit, and an increase in consumer leverage. We also see observe increases in loan loss reserves from Synchrony Financial (30%), American Express (26%), and Capital One (13%).

Source: PeerIQ, Bloomberg

Outlook for Consumer Lending 

The backdrop for consumer lending businesses is strong. Although delinquencies have picked up, originators remain compensated for taking on credit risk. The ROE for Discover and American Express are both over 20% as compared to C, JPM, WFC, and BAC where ROE remains stubbornly low in the 6 to 11% range. Also, consumer loan demand continues to grow (total loan requests on Lending Tree increased 48% year-over-year to 5.4 Mn).

The biggest challenge to the above state-of-play is the latest scale entrant to the retail banking business–Goldman Sachs. GS’s new lending business, Marcus, is on pace to originate $2 Bn in loans this year–the fastest growth rate of any lender that PeerIQ tracks.

Inside seven plans for a faster U.S. payments system (American Banker), Rated: AAA

A task force convened by the Federal Reserve has released its evaluations of 16 proposals to build a faster U.S. payment system. The plans were judged by the task force’s consulting firm, McKinsey & Co., based on how well they satisfied 36 criteria related to speed, security and other attributes.

EastWest ties up with PLDT unit (Inquirer.net), Rated: A

Gotianun-led EastWest Banking Corp. has teamed up with FINTQ, the technology arm of PLDT and Smart’s Voyager Innovations, to offer consumer loans through digital lending platform Lendr.

With this partnership, consumer-focused lender EastWest will make available personal loans and auto loans through Lendr by the fourth quarter of this year. Eventually, the offering will also include EastWest home loans, small and medium enterprise (SME) loans and credit cards.

Providing well-rounded financial advice and servicing through automated technologies (CGI.com), Rated: A

While robo-advice may account for only a fraction of the total assets under management today, it is a technology that is here to stay—but not in the way that has dominated news stories. Rather than supplanting the financial advisor with technology, firms need to leverage new multi-channel automation to empower their advisors to focus on value-added, relationship-building activities. In this paper, we look at how wealth management players can focus on getting to the right combination of human advisors and automated investment advisory solutions in a hybrid model that seamlessly integrates the two.

Read the paper here.

Overstock’s TØ Has Already Built a Platform for Trading Regulated ICOs (Coindesk), Rated: A

US retail giant Overstock.com has been waiting for the US Securities and Exchange Commission (SEC) to tell the world exactly when a crypto token is a security.

Then, earlier this week, tØ got the news it had been waiting for when the SEC finally published the results of a landmark report in which it clearly laid out its rationale for why some tokens are still securities.

Long a detractor of a practice called “naked short selling” – where traders methodically bid down the price of stock by selling shares they haven’t first procured, Byrne set about using blockchain to cut out everyone who stood in the way of buyers and sellers.

BLOCKCHAIN AND INITIAL COIN OFFERINGS: SEC PROVIDES FIRST U.S. SECURITIES LAW GUIDANCE (Pepper Hamilton LLP), Rated: A

For those who hoped that the SEC would allow cryptocurrency and ICO markets to evolve unregulated, their hopes were dashed by the report and the bulletin. The SEC did not outlaw ICOs by any stretch of the imagination, but it did indicate that, depending on the facts and circumstances, an ICO may indeed involve an offering of securities. In that case, organizations that proceed without registering with the SEC or that structure the offering in such a manner so as to qualify for an exemption from registration will violate federal securities laws. The remedies for such a violation include rescission of the offering, cease-and-desist orders, fines and penalties, bans from participating in the securities industry, bans on serving as an officer or director of a public company, and, in the most egregious cases, referral to the local U.S. Attorney for possible criminal prosecution. So, whether an offering involves a “security” is a very important initial determination.

Inside the development of Erica, Bank of America’s AI-powered bot (Tearsheet), Rated: A

However, when Bank of America got a sense of the vision for its AI-enabled “digital assistant,” called erica, it didn’t take the bank long to gather the resources necessary to make her real.However, when Bank of America got a sense of the vision for its AI-enabled “digital assistant,” called erica, it didn’t take the bank long to gather the resources necessary to make her real.

The bot is now in the beta testing phase.

Fintech Apps and Banking Mobile App Development for Startups (Upwork), Rated: A

Paypal is the world leader in processing payment apps today. The app for Android and iOS devices provides the same functionality as the online Paypal.com service.

A good choice for small businesses Due.com lets users benefit from a convenient digital wallet, invoicing service and fast operations handled at low transaction rates.

iZettle also efficiently serves small businesses. What this fintech app does perfectly is that it allows small business owners accept cash and credit card payments from a smartphone or tablet. With additional cash drawers and receipt printers from iZettle one can also provide customers with printed or online receipts.

Another interesting example of a successful fintech app is Mobikwik. Now with the base of 50 million users Mobikwik offers a user-friendly digital wallet, which has become a real substitute of a physical purse for its users worldwide.

In regards to the ways of making personal loans an easier experience for users, LendUp offers just one of them. It’s a web application (also available for mobile) that lets users from selected US states apply for a short-term loan 24/7.

Citi Mobile is one of the leading mobile apps for iOS and Android mobile devices introduced by Citibank. According to Business Insider, the app has significantly grown in popularity mainly due to addition of FICO scorefeature.

Rating the Robo-Advisors (Barrons), Rated: A

By tech start-up standards, robo-advisors are already approaching middle age. Betterment, the pioneering robo-advisor and still the largest of the independent firms, turned seven in May. It now has $9.1 billion in assets under management.

Lawmaker Queries Alt-Lenders With Concerns Over ‘Trapped’ Small Biz Borrowers (PYMNTS), Rated: A

Rep. Emanuel Cleaver II (D-Mo.) has reportedly sent letters to five alternative SMB lending companies with questions regarding borrower protections, anti-discrimination efforts, transparency and other factors.

Cleaver is reportedly seeking details of the companies’ business models and products offered to small businesses, how those products are originated, information on fees and rates and whether these businesses offer borrowers a repayment plan based on future credit card receivables, reports said.

The lawmaker is also seeking information on how these lenders handle transparency and whether they make disclosures to SMBs the same way they do to consumers as required under the Truth in Lending Act. He is also asking about whether these firms pull a consumer credit report for small business lending.

The SEC’s ICO crackdown will help in the long-run. (The Financial Revolutionist Email), Rated: A

But unless your plan was to make a quick billion in ICOs in time to ring in 2018 with Payments deal activity is en fuego.

Also in payments land, 

What is “working capital”? And how can it help my small business? (OnDeck), Rated: A

For many business owners, it makes sense to borrow funds to create a liquid cash cushion to operate their business to the best of their ability. Before you decide to borrow, you need to understand what your working capital needs are and to make sure numbers make sense for you and your business.

3 Reasons Why the Finance Industry Needs VR (UploadVR), Rated: A

The finance industry is one of the most data-driven trades, and by visualizing and analyzing data in VR, early adopters can get a leg up on the competition. Not only can VR improve the way data is viewed, but it can also improve the level of communication through the use of a shared virtual office (SVO). This is immensely important because, in the high stakes world of finance, a mistake or lapse in communication could cost millions of dollars.

The Biggest Trends in Home Mortgage Loans We’ve Seen This Year (Huffington Post), Rated: B

Typical of hot real estate markets, there’s a cycle. Home prices rise, people catch on and want in, and then they decide to sell. Soon, even more people jump in the market and serious sellers make their sale, causing inventory to thin. Buyers get wise to the overheated marketplace and decide to wait until the prices come down. The sellers who are eager to make a buck overprice their houses and when they don’t sell, they become income properties. As a result, the rental markets fill up with income properties, and the inventory continues to thin out.

We are at historic lows for mortgage rates, and they are not going to spike that drastically in the next year that it would preclude you from getting a solid thirty-year fixed rate loan.  The important thing is that you do NOT overpay for a home.

GE Alum Brings Discipline to High-Growth Financial Firm (CFO), Rated: B

After 16 years at General Electric, Chris Capozzi was still a young man. That was because he’d joined the company upon graduating from Boston College, where he earned a degree in finance and management information systems.

Eventually, one of the alumni introduced Capozzi to Stone Point Capital, which had just become a major investor in Freedom Financial Network, a privately held financial services firm. Everything clicked with the company’s co-founders and co-CEOs, Bradford Stroh and Andrew Housser, so Capozzi moved across the country to start work as Freedom’s CFO at the beginning of this year.

What kinds of opportunities are you focused on?

Secondly, we’re in the process of developing a securitization platform to complement our existing sources of capital and further expand our investor base, which will enable the growth on the marketplace lending side. Initially the plan is to securitize unsecured consumer loans, very similar to what other marketplace lenders, like SoFi and Avant, have done.

United Kingdom

Peer-to-peer lender RateSetter passes £2 billion lending milestone (Yahoo! Finance), Rated: AAA

Peer-to-peer lender RateSetter announced on Monday that it has passed £2 billion in loans over its platform, with more than £1 billion of the total made since the beginning of 2016.

About £1.3 billion of the total lent has gone to individuals, with £700 million going to businesses. The company now has 423,000 customers, the majority of whom are borrowers, more than any other UK peer-to-peer lender.

P2P fund holds steady on dividend (AltFi), Rated: AAA

Onerous banking regulations will continue to hamper growth in regulatory capital‐intensive lending asset classes, according to the investment managers of the £821m P2P Global Investments trust.

The fund is moving away from a pure P2P play, instead transitioning more into direct lending and other Alternative Credit niches. Its manager MW Eaglewood is also merging with Pollen Street Capital, which while still on-going, is expected to close later this year subject to regulatory approval. Pollen Street is also the manager of £359m Honeycomb investment trust which invests in direct lending assets.

Source: AltFi Data

P2PFA reports growth in new lending as LendInvest departs (P2P Finance News), Rated: AAA

CUMULATIVE lending among the Peer-to-Peer Finance Association (P2PFA) members in the second quarter of 2017 fell slightly to £8.39bn, due to LendInvest’s departure from the trade body.

However, new lending among the members has still grown significantly year on year, the P2PFA said on Friday.

The number of investors in P2PFA member-platforms has now hit 185,652, the trade body said, while the number of current borrowers has risen to 435,267.

UK P2PFA: Peer to Peer Lending Rises in Q2 (Crowdfund Insider), Rated: A

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Folk2Folk

£139,344,302

£161,408,804

Funding Circle

£1,524,427,000

£1,830,397,245

£2,158,457,107

£2,455,740,443

Landbay

£42,948,000

£43,142,119

£43,975,419

£46,515,723

LendInvest

£776,112,000

£855,354,293

£971,875,952

Lending Works

£33,636,000

£39,368,050

£48,864,686

£58,441,220

MarketInvoice

£754,325,000

£837,793,900

£918,450,994

£1,018,021,696

RateSetter

£1,442,743,000

£1,604,406,564

£1,815,320,079

£1,995,142,453

ThinCats

£196,907,000

£211,446,000

£226,981,000

£242,540,000

Zopa

£1,731,685,000

£1,926,038,724

£2,172,561,894

£2,409,257,844

Total

£6,502,783,000

£7,347,946,895

£8,495,831,433

£8,387,068,183

The LendInvest bond promises to pay investors 5.25% with two payments a year until 2022 (This is Money), Rated: A

Alternative property lender and investment platform LendInvest has launched a five-year bond paying 5.25 per cent a year for investors with a minimum of £2,000.

In an era of one per cent savings rates and where yields ranging beyond 5 per cent are hard to come by in the equity markets, this deal is sure to whet the appetite of many investors – particularly as it comes with twice-yearly payouts.

LendInvest’s Christian Faes On Why Property Investing Is Still Going Strong (Forbes), Rated: A

According to Christian Faes, CEO and co-founder of LendInvest, the retail bond serves a number of purposes – it allows the business to diversify its funding and expand its capacity to lend to property professionals, but also creates a new entry point into property for investors.

He explains:

[The retail bond] is launching at a critical time when demand in the UK’s residential property market continues to outstrip supply. There’s a serious lack of capital available to professional property investors who buy, build, refurbish and renovate homes for UK streets. Our model allows us – and by extension our investors – to support these people and small businesses.

Faes says that it is difficult to pin down what a typical LendInvest investor looks like; the investor base ranges from those looking to build a portfolio of property loans on the firm’s online investment platform all the way up to pension funds, infrastructure funds and banks.

Fintech company DueCourse goes into administration (Manchester Evening News), Rated: A

Manchester fintech company DueCourse has called in administrators.

This comes less than a year after the cloud-based invoice financing service for SMEs was boosted by a £6.25m investment, the largest seen outside of London for a fintech firm.

Bosses said the money will be used to expand and grow its software with plans to raise a further £10-15m to grow its services worldwide.

Abundance Tops £50 Million in P2P Invesment into Renewable Energy Projects (Crowdfund Insider), Rated: A

Abundance Investment, a UK based peer to peer lending platform in the renewable energy sector, has just topped £50 million in investment, according to a company report. Management said the “huge” popularity of its IFISA and three highly popular renewable projects from tidal, geothermal and energy efficiency technologies helped to fuel the recent growth. Abundance says three projects have attracted more than £10 million of new investment in less than 2 months.

  • Atlantis tidal energy debenture has sold out raising £4.3 million,
  • Green Deal bond will close in 4 days’ time and has raised £3.95 million to date
  • United Downs Geothermal project has raised 60% of its £3.8 million target (£2.7m) in less than a week.

New products and milestones for ethical P2P platforms (AltFi), Rated: A

Investors looking for ethical options now have more choices when it comes to peer-to-peer lending.

Lending platform Downing Crowd has launched two regular access crowd bonds, with one for a renewable energy generation and storage company.

Cash management and peer-to-peer lending could boost your balance sheet (Director), Rated: A

With inflation on the rise but interest rates at an all-time low in the UK – and some high-street banks even raising the prospect of charging commercial customers to keep deposits – companies’ savings may actually be losing value in real terms.

If you can’t beat ’em, join ’em

Over the past few years a new way to potentially beat the banks has emerged – one that plays them at their own game. Called property-backed peer-to-peer lending, it gives companies the opportunity to be the lending bank themselves.

One of the fastest-growing products of this type is Choice, offered by Octopus Investments, an experienced investment company that manages more than £6bn of assets.

Working with a growing roster of challenger banks, Octopus can offer a savings product that currently provides an interest rate of more than one per cent.

This week in MoneyWeek: banks are back (MoneyWeek), Rated: A

Banks have been out of favour for the last ten years after they almost brought the global financial system to its knees.

So why would anybody invest in them? Oddly, one reason is “the failure by politicians to enforce a key promise” – that no bank would ever become “too big to fail” again. “In every developed country”, says Jonathan, the big banks have just got bigger. The “never again” promises have been replaced with “complex rules to strengthen bank capital, thus reducing the chances of collapse”. Another reason is that “banking has changed for the better” – governance has improved and customer satisfaction has shot up.

Why Banks Can’t Help But Help Fintechs (Fintech Weekly), Rated: B

It remains to be seen if any bank can ever do what the music industry is in the process of doing – taking back “their” industry by becoming the pre-eminent innovators. Such a thought might be laughable right now. But a word of caution on laughing too soon – if they do realise how to leverage their enormous power, accept that legacy systems must be overhauled and replaced wth the truly innovate, and execute such a strategy well, would you bet against them retaining and entrenching their dominance?

For now and the foreseeable future, most banks prefer to sit back and avoid risk. Really the risk lies in doing nothing and inviting a slow death by a thousand cuts. OK, yes, you can talk about record bank investment in fintech, cooperation between banks and fintechs – again, this is only helping fintechs move in on bank stomping ground.

China

One of China’s biggest P2P lenders quits ahead of clampdown (Financial Times), Rated: AAA

China’s pending regulatory crackdown on the $120bn peer-to-peer lending industry has claimed its first scalp before it has even begun, with one of the biggest players saying it will wind up its business in an industry full of bad loans and no profits.

P2P lending, in which borrowers are matched with investors via online platforms, has mushroomed in the past five years, with China boasting more than 2,100 such platforms, but so too have scandals. Last year was marked by multibillion-dollar scams in China and a governance scandal that rocked New York-listed LendingClub.

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Beijing this month said it would delay regulations that will bar online lenders from guaranteeing principal or interest on loans they facilitate, cap the size of loans at Rmb1m for individuals and Rmb5m for companies, and force lenders to use custodian banks — a requirement only a fraction of the industry has met so far.

Three more Chinese banks join Swift’s global payments innovation (Banking Technology), Rated: A

Three local Chinese commercial banks have joined Swift’s global payments innovation initiative (gpi), bringing the number of Chinese banks involved to 16, the most in the world, according to Xinhua.

The new trio are Yinzhou Bank and Bank of Ningbo in eastern China’s Zhejiang province; and the Bank of Jiangsu, in the eastern Jiangsu province (and just south of Zhejiang).

Embrace the cardless era, CUP launched the electronic account cloud flash, or its Jedi fight back (TMT Post), Rated: A

A few days ago, UnionPay cloud flash together with Apple Pay launched promotional activities; early June, CUP also joined nearly 10 million businesses to create “62 CUP cloud flash to the whole people Sheng Hui.” Looks, CUP is imitating Alipay, WeChat to pay the subsidy routine.

Can you imagine using your Jingdong or US group (the new US big) account, you can pay through the UnionPay POS machine? Do not scan, do not have to swipe, do not open the APP, just need to close the POS machine and verify the fingerprint can be completed to pay.

The point is that you do not need to use the bank card account directly, but through the Jingdong or US group to pay the account, you can use the phone in the UnionPay POS machine to complete the payment.

European Union

BNI Europa invests EUR15 million in Creditshelf (Finextra), Rated: AAA

In Banco BNI Europa (“BNI Europa”), Creditshelf has succeeded in acquiring another strategic partner to help it provide financing to small and medium-sized undertakings (SMEs).

The online marketplace that specialises in SME financing, and the Bank, which operates throughout Europe, have agreed that Banco BNI Europa will invest up to 15 million Euro in the credit platform over the coming months.

Your Banker Is Always In: Sweden Rolls Out the Robots (Bloomberg), Rated: A

Aida is the perfect employee: always courteous, always learning and, as she says, “always at work, 24/7, 365 days a year.”

Aida, of course, is not a person but a virtual customer-service representative that SEB AB, one of Sweden’s biggest banks, is rolling out. The goal is to give the actual humans more time to engage in more complex tasks.

Besides Aida at SEB, there’s Nova, which is a chatbot Nordea Bank AB is introducing at its life and pensions unit in Norway. Swedbank AB is adding to the skills of its virtual assistant, Nina. All three are designed to sound like women, based on research suggesting customers feel more comfortable with female voices.

International

Marqeta & Visa Ink Global Partnership to Power Payments & Loans (Crowdfund Insider), Rated: AAA

Visa (NYSE: V) and Marqeta, a payment card issuing platform that can provide consumers with immediate loans, has announced a global partnership to propel innovations in commercial and consumer payments in lending. Visa has also made a strategic investment in Marqeta and led a $25 million funding round that included the participation of previous Marqeta investors including Commerce Ventures, 83 North, Granite Ventures, IA Capital, and CommerzVentures GmbH, as well as new investor CreditEase in China, one of the world’s largest alternative lender.

15 ‘RegTech’ Investors Every Fintech Startup Needs to Know (Entrepreneur), Rated: A

  1. Octopus Ventures
  2. SeventySix Capital
  3. Summer Capital
  4. Carrick Capital Partners
  5. EQT Ventures
  6. Insight Venture Partners
  7. JMI Equity
  8. Aquiline Capital Partners LLC
  9. Sageview Capital
  10. Accel Partners
  11. Warburg Pincus
  12. HarbourVest
  13. Digital Currency Group
  14. TTV Capital
  15. Balderton Capital
Australia

Online lender secures $ 20m debt facility (Australian Broker), Rated: AAA

Digital online lender Prospa has secured a $20m debt facility from the Australian arm of a US-based commercial finance provider, Partners for Growth (PFG).

Fintechs target millennials with online financial services (The Australian), Rated: A

Millennials are likely to fall into three categories:

• Inheritors: With wealthy parents, they are major consumers while they wait to inherit.

• Strivers: Coming from a more modest background, they are studying, saving and working hard with ambitions for promotion. They will borrow to support their lifestyle, not unlike inheritors.

• Given-ups: They are more likely earning a low salary but continue to consume as much as the other two categories. Buying a house is not on the agenda, so they do not see the point in saving.

And 71 per cent of millennials, according to Viacom’s Millennial Disruption Index, would rather go to the dentist than to the bank.

India

i2ifunding looks to break even by second half of FY20 (DNA India), Rated: AAA

i2ifunding.com, a peer-to-peer (P2P) lending platform, today said it aims to break even by the second half of 2019-20, given its robust growth in the last two years and promising outlook in the next two years.

It has a vision to scale up this disbursement up to Rs 200 crore over the next two years, i2ifunding.com said in a statement.

Fin-tech startup Finomena shuts down after failing to raise funding (The Indian Wire), Rated: A

Finomena, a startup which provided small ticket loans to students and young professionals, has shut down after failing to raise pre-Series A funding round.

The company is now no longer accepting new users on its website.

FinMomenta to introduce new products; targets SMEs (Deccan Herald), Rated: A

After working in a bank for many years, Brahma Mahesh and his friend decided to do something in the burgeoning FinTech space. They zeroed in on lending, as only 5-6% of the population is covered by banks and NBFCs. Mahesh, along with four other co-founders, started FinMomenta last year, and launched its first product ‘Tachyloans’, a peer-to-peer lending platform in May this year.

FreeCharge’s acquisition is proof that the Axis of Indian banking is changing (Quartz), Rated: A

In the next five years, almost 50% of the world’s financial services are planning to acquire fintech startups, according to a report by PricewaterhouseCoopers LLP. Collaborations, too, are expected to increase, with eight out of 10 companies waiting to partner with these new players, the report added.

Some 67% of senior Indian financial sector executives believe their business is at risk following the rise of fintech firms, and 95% of them were willing to explore partnership with them, a separate report by PwC released this April revealed.

On July 27, Axis Bank, the country’s third-largest private sector lender, acquired FreeCharge, a payments application and mobile-wallet company, for Rs385 crore ($60 million). This is the first such deal in the sector, potentially setting off more such transactions in the future, believe experts.

These serial entrepreneurs are offering bank products through an Ola-Uber model (YourStory), Rated: A

Five-month-old fintech startup Cashcow, which provides banking services and products to a customer at his doorstep, has expanded its operations to seven cities including Delhi, Kolkata, Pune, Ahmedabad, Hyderabad and Chennai. 

Joining fintech company Rubique as a chief product officer in 2016 introduced him to Manish Aggarwal, his future co-founder, who was leaving the startup at that point.

According to the founders, Cashcow is a platform providing banking services and products to a customer at his doorstep.

Can Regulatory Sandbox Nurture India’s FinTech Innovation? (CXO Today), Rated: A

The Indian financial services sector is undergoing major changes today. With more than 600 startups in the space of lending, payments, insurance and trading space, Fintech startups are not only spearheading innovation, but are also prompting traditional banks and financial institutions to explore new technologies and investing heavily in digital service delivery channels.

However, fintech startups unlike others face additional challenges of operating in a heavily regulated industry and have stiff competition as their key competitors are well established banking players. To overcome this challenge, experts believe, adopting a “Regulatory Sandbox” based approach where the regulator works closely with emerging Fintech firms make better sense.

Asia

Finca launches Pakistan’s first ever digital wallet (Daily Pakistan), Rated: AAA

FINCA Microfinance Bank, one of the fastest growing microfinance banks in Pakistan, has announced a movement to make digital commerce and payments free in the country.

SimSim, a mobile payment platform, was introduced in partnership with Finja – an internationally funded FinTech startup – at a launch event Thursday night at Mohatta Palace, Karachi. The event was attended by major industry stakeholders, government officials, artists, tech enthusiasts and media figures.

SimSim will give people access to frictionless payment options directed towards a diverse pool of merchants.

Middle East

Bahrain’s FinTech Sector Loses Ground to Dubai (Cryptocoins News), Rated: AAA

Africa

FINTECH Association of Nigeria debuts to support development of the financial technology industry (PR Share), Rated: AAA

Over 25 FinTech companies attended the recent inaugural meeting of FTAN – FinTech Association of Nigeria – which principal objective is to serves as a platform for the development of the financial technology industry in Nigeria and to be a forum for the exchange of ideas and dissemination of information by and between various stakeholders in the industry. 

Authors:

George Popescu
Allen Taylor

Wednesday June 28 2017, Daily News Digest

china big banks

News Comments Yesterday, Lending-Times incorrectly stated that Zopa would charge all borrowers the same rates with its planned bank. In actuality, the plan is to price the book the same between new and existing customers, and not make a difference between new and existing customers as other banks do. Today’s main news: MarketInvoice, Funding Circle, […]

china big banks
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United States

Elevate’s RISE Credit Enters a Sixteenth State, Offering Lines of Credit in Kansas (BusinessWire), Rated: AAA

Elevate Credit, Inc., a tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, announced today that its RISE product, traditionally offering installment loans, will now offer lines of credit. Kansas will be the sixteenth state where RISE’s products are available and the first state in which RISE’s line of credit is available to non-prime consumers.

RISE is a state-licensed online lender offering unsecured installment loans and lines of credit. RISE is designed to meet the needs of the millions of non-prime Americans with less than prime-credit, who do not have access to traditional sources of credit. RISE is a path toward a brighter financial future with features such as fast approval, flexible loan terms, lower rates than other non-prime lenders, rates that can go down over time, credit bureau reporting, free credit score monitoring and financial literacy courses.

Take These 9 Steps Early To Make The Most Of Your Company’s Regulation A+ IPO (Forbes), Rated: AAA

When online peer to peer lending was new, consumers were the first investors to step in while accredited and institutional investors stayed on the sidelines until later – they now dominate the peer to peer lending business, which has grown to be a huge multi-billion dollar market.

1. If you have an enthusiastic following in your industry:

If you have a large enough network, this group might fund your entire capital raise. Take steps to build a working contact list of them. And make sure to establish a regular habit of emailing them so that when you later send out an email suggesting that they consider investing in your Reg A+ offering, your email will be opened and read.

2. Build a large and enthusiastic customer base.

VidAngel emailed their most active 30k customers andraised $10 mill in 5 days live to investors, setting the record for the fastest rate of onlineinvestor capital raise in Reg A+ to date.

3. Establish a direct sales relationship with your customers.

When your customers find it normal that you send them an email message, they are far more likely to respond favorably when you send them an email offering them the opportunity to become an investor and part owner of your company.

4. Add a consumer appealing product or service;

5. Build a large social media fan base;

A fan base of 100k people is a good start.

6. Combine product and investment marketing;

This combination can save marketing expense and also emphasizes the brand building and product sales synergy that can be levered in a Reg A+ offering.

7. Leverage your existing investors;

As an example, a sizable portion of the recent MYONYSE IPO and the ADOMNASDAQ IPO investments were from existing investors and their friends.

8. Prepare consumer investment rewards:

Line up your reward packages ahead of time to ensure that you have long lead time items ready and on hand in quantity when your Reg A+ goes live.

9. Assemble the proof points that you will need;

Gather and build the market size and total available market evidence you will need to make credible claims that your market is large enough to justify the attention of investors.

Larry Raffone is racing to ‘lock up’ the 401(k) market by combining robo with a semi-national RIA (RIABiz), Rated: A

Financial Engines Inc. CEO Larry Raffone is seeking to give his company a second date with destiny by combining the biggest 401(k) robo-advisor and one of the larger national RIAs — and coming out of it with a true national RIA that can take on the accounts of Fortune 500 companies at the retail as well as the pension-plan level.

Raffone plans to open new Financial Engines offices in more populous areas such as Southern California, where Financial Engines is already on-site at corporations where participants use its managed account 401(k) service.

The pricing model is still TBD, but William Blair equity analyst Robert Napoli said in an April 6 report that he expects Personal Advisor to come in at 80 basis points. He notes that compares to 35 basis points for FE’s managed account 401(k) program.

LendingOne Closes Series A Funding, Investors Include Ron Suber, Richard Vague, Sidney Brown, Michael Heller (Latest Share News), Rated: A

LendingOne, one of the nation’s fastest growing online lenders for real estate investors, announced today it closed a Series A financing round.

Investors include Ron Suber, a prominent fintech investor and President of Prosper Marketplace, Richard Vague, co-founder and former CEO of two credit card companies, First USA and Juniper Financial, Sidney Brown, CEO of NFI Industries and former Chairman of Sun National Bank, Michael Heller, CEO of Cozen O’Conner, a national full-service law firm, along with LendingOne founder and CEO, Bill Green.

College Ave Closes First Securitization, SoFi Finalizes Its Fourth (Lendedu), Rated: A

College Avenue Student Loans, an online student loan refinancing and origination company, has closed its first securitization of private student loans, according to Global Capital.

Getting into the asset-backed securities (ABS) business for the first time, College Ave’s securitization is a $160.89 million offering backed by private student loans. Barclays is the only underwriter on the company’s first ABS transaction.

Credit research and ratings company DBRS has assigned provisional ratings for the various classes of notes issued by College Ave. The Class A-1 notes worth $95,320,000 have been given an A rating, while the Class A-2 notes worth $43,470,000 have also been an A rating. The Class B notes worth $10,760,000 have been given a BBB rating, and, finally, the Class C notes worth $11,340,000 have been given a BB rating, according to DBRS.

Disruption Brings Great Opportunities — and Risks — to the Middle Market (PR Newswire), Rated: A

Most executives of middle-market companies not only expect their business to experience disruption in the near future, but welcome it, according to Disruption in the Middle Market, a report released today by Capital One Commercial Bank. However, this optimistic view does not always translate into action; only a small portion of middle market companies have taken a full range of defensive measures to protect against disruption’s potentially destructive consequences.

Capital One surveyed more than 300 senior executives from companies with annual revenues ranging from $100 million to $3 billion to determine their views on disruption—a significant interruption to an existing business arising from innovative technology, a new business model, or political, economic and environmental forces.

The study revealed that attitudes toward disruption correlated to size.  Smaller middle-market companies are more likely than their larger counterparts to be unprepared for disruption. The report also highlighted a series of steps, such as strengthening financial relationships, that smaller companies can take to catch up.

Disruption in the Middle Market provides a detailed picture of the views of middle-market executives about disruption and the steps they are taking to address it. Eighty-eight percent of respondents reported that their companies have already experienced disruption or expect to experience it during the next three years.  However, only one-sixth of those surveyed believe they are prepared to deal with a disruptive event. Despite this lack of preparation, four-fifths of middle-market executives view disruption as an opportunity, not a threat.  Many of these executives believe that disruption threatens their industry—but not their own company.  Forty-three percent said that their industry is vulnerable to disruption, while just 18 percent reported that their own company is vulnerable.

Size proved the key determinant in a company’s preparedness and attitude toward disruption. Companies with revenue between $2 billion and $3 billion are much more likely to see a disruptive event as an opportunity than companies in the $100 million to $499 million range. In addition, larger companies are more likely to have insulated themselves from the effects of a disruptive event and to be pursuing a disruptive strategy of their own that could lead to a competitive advantage.

Financial Preparation Is Critical

The study revealed that a strong relationship with a stable financial institution could play a critical role in helping a middle-market company respond to disruptive forces. Sixty-eight percent of those with an ongoing banking relationship expect to need additional funding in the face of a disruption. These companies will find it easier to arrange than the 32 percent without a strong banking relationship.  Here again, smaller companies are at a disadvantage.  Many lack the holistic banking relationship needed to confront disruption, and instead are willing to consider alternative sources of capital like peer-to-peer lending and even crowdfunding.

Attitude toward disruption varies considerably by industry
Middle market executives in some industries have adopted a much more proactive approach to disruption than those in others.

  • Financial services and insurance companies are archetypical disruptors. Forty-seven percent are quite or extremely prepared for disruption, and 83 percent are pursuing a disruptive strategy. The overall middle-market averages for the survey are 16 percent and 60 percent, respectively.
  • Energy, resources, and chemicals companies tend to be classic delayers. Eighty-three percent are slightly or not at all prepared for a disruptive event (compared to 53 percent for the full survey), and only 37 percent are pursuing a disruptive strategy (compared to 60 percent overall).

Plaid puts out a ‘request for startups’ in nine underserved fintech sectors (TechCrunch), Rated: A

Plaid wants to make it easier for financial services companies to serve consumers and businesses, but it also sees significant holes in the fintech ecosystem. As a result, the company has issued a Y Combinator-like “request for startups” to tackle particular issues where it believes significant innovation is lacking.

Like Yodlee before it, Plaid enables startups and other tech companies to more easily connect with banks, credit card companies and other financial institutions, both to authenticate consumer accounts and access their financial data.

  1. Better bills.
  2. Consumer-centric loan servicing.
  3. Hardware + software for branches.
  4. Tax preparation.
  5. Mobile bank account opening.
  6. Abstractions from the core.
  7. Brokerage-as-a-Service.
  8. “Exotic” insurance.
  9. Compliance-as-a-Service.

Easiest Path to Riches on the Web? An Initial Coin Offering (The New York Times), Rated: A

A new crop of technology entrepreneurs is forgoing the usual routes to raising money. The entrepreneurs are not pitching venture capitalists, selling stock in an initial public offering or using crowdfunding sites like Kickstarter.

Instead, before they even have a working product, they are creating their own digital currencies and selling so-called coins on the web, sometimes raising tens of millions of dollars in a matter of minutes.

Since the beginning of the year, 65 projects have raised $522 million in these offerings, according to Smith & Crown, a research firm focused on the new industry.

Last month, a small team of computer engineers in Lithuania raised $14 million in 45 minutes by selling a coin, known as Mysterium, that is intended to give access to an encrypted online data service that is still being built.

The next day, a group of coders in the Bay Area pulled in $35 million in under 30 seconds of online fund-raising. The coders were offering Basic Attention Tokens, which will one day work on a new kind of ad-free web browser.

Then this week, a team in Switzerland raised around $100 million for a coin that will be used on an online chat program that has not yet been released, known as Status.

Last year, the first blockbuster coin offering, the Decentralized Autonomous Organization, quickly raised more than $150 million. But the project blew up after a hacker manipulated the code and stole more than $50 million worth of digital currency.

Private SLABS upgrades anticipated (Structured Credit Investor), Rated: A

Moody’s has placed on review for possible upgrade the ratings of 41 private student loan ABS bonds – totalling approximately US$2.56bn worth of securities across 19 securitisations – issued by three marketplace lending platforms. At the same time, Fitch has released an exposure draft of criteria for rating US private student loan ABS that could result in multiple-category upgrades for …

Insurance Tech Rising: 135+ Insurance Startups Across P2P, Life, Commercial & More in One Chart (CB Insights), Rated: A

The map focuses on 11 categories, as follows.

  • Life/annuity: Private startups providing distribution of life insurance products including term life and annuities including Abaris and PolicyGenius
  • Auto insurance (split into distribution, usage-based insurance/telematics, and claims): Startups ranging from aggregators including CoverHound and Goji to white label auto claims apps (Snapsheet) to per-mile managing general agents like Metromile.
  • P2P insurance: Private peer-to-peer insurance and mutual-based startups include Lemonade, Guevara, Friendsurance, and others.
  • Small business insurance: Private tech companies serving as commercial insurance brokers and managing general agents to SMBs  include Insureon, Embroker, and Next Insurance.
  • Insurance industry software/analytics/IaaS: Insurance-specific software across the value chain providers range from BI and data-warehousing startup Quantemplate to insurance fraud detection firm Shift Technology to re-insurance SaaS analytics startup Analyze Re to claims inspection startup Spex.
  • Mobile insurance management: Startups focusing on allowing consumers to manage and purchase insurance policies via their mobile device including Knip and GetSafe.
  • Product insurance: Companies insuring or tracking products — i.e. smartphones, laptops — for insurance applications.
  • Renters/homeowners: Startups providing distribution of renter’s insurance and homeowner’s insurance as well as lease default insurance programs.
  • Sharing economy: Startups working on new insurance products in coverage areas including short-term rental marketplaces and for sharing economy 1099 workers.
  • Health insurance: Across new carriers like Oscar as well as healthcare insurance startups targeted at individuals (Stride Health) and employers (Zenefits).
  • Pet insurance: Startups include Embrace Pet Insurance and Figo Pet Insurance.
Source: CB Insights

 

The Fiduciary Rule And Investment Advisers: Why It Matters (AlphaFlow), Rated: A

One of the most hotly contested aspects of the Fiduciary Rule is around the standard of suitability as a determinant for an investment choice made by a registered representative. Today, a registered representative must only ensure that an investment is ‘suitable’ for a client. This suitability is determined by factors including investment risk tolerance, time frame, and goals. However, there is no determination made as to whether the investment is in the client’s best interests.

To illustrate, let’s say the registered representative (RR) has a choice of offering two different mutual funds to a client. Both invest in similar stocks and have relatively similar returns (before fees), but one charges higher fees and also pays the RR’s firm based on the total dollar investments made into that particular fund.  The RR only offers the client the one for which they get compensated, even though the other mutual fund option may be a better option for the client (because it charges lower fees).  The reason the RR can do this is that both mutual funds are considered “suitable”: meaning as long as the recommendation meets the client’s risk profile and investment goals, then they can offer that product to their client.

In contrast, an investment adviser representative (IAR) must act as a fiduciary.  In the same situation, if the IAR wanted to offer the same mutual fund that the RR did, they would need to disclose to the client that they are getting compensated for sales of that fund and that the lower cost option makes more sense for the client.  So, instead of simply offering a suitable choice for the client, the IAR must: 1) disclose conflicts of interest and, 2) act in the best interest of the client rather than in their own best interest.

What The Fiduciary Rule Would Change

Staying with the scenario above, the Fiduciary Rule would require an RR to act like the IAR in when selling any products related to, or be advising on anything related to retirement.

The rule would also apply to anyone dually-registered (meaning they are registered both as an RR and an IAR).  Currently, the dually-registered representative can decide what ‘hat’ they wear (RR or IAR) when suggesting investments for retirement.

A new way to estimate your home equity (Chicago Tribune), Rated: B

LendingTree, the popular mortgage site, which debuted its own valuation model earlier this month, can tell you why: Because none of the other value estimators calculate your home equity or suggest how and when you might want to tap into it.

If you’re not quite ready to move ahead but instead prefer to track your equity, credit and mortgage situation on a regular basis, you can sign up for a more comprehensive “My LendingTree” service, for which there is no charge. It provides you with monthly updates plus periodic alerts on your home equity movement. You get an alert when there’s “an actionable opportunity” for you to tap into your equity on favorable terms, based on “real-time market data,” changes in your credit files and equity levels, according to the website. There’s no requirement that you take any action.

OppLoans Welcomes Daniel Fell as VP of Business Development and Partnerships (Digital Journal), Rated: B

OppLoans, the nation’s leading socially responsible online lender serving non-prime consumers, has announced the appointment of Daniel Fell to the role of Vice President of Business Development. Fell will oversee all strategic business development and partnership objectives at the high-growth, profitable firm.

6 things that will help cut the cost of your business debt (TD Daily), Rated: B

1. Choosing the right product

Debt works really well when you choose the right type of debt for your business. You can reduce what you pay for business debt by making a well-informed choice. For example, peer-to-peer lending may be an option if you’re unable to get a loan or finance from a traditional bank and can be cheaper too.

2. Nurturing your cashflow/credit score

If your business doesn’t have great creditworthiness, or is too new to have any credit history, then a lender will look at the credit score of someone able to guarantee the business’ debts.

3. Shopping around for the best deal

If you need finance consider all the options – the high street bank, the online lender, the peer-to-peer lender and the government-backed lender.

4. Staying on top of the repayments

5. Consolidating debts

6. Pay your debts off more quickly

United Kingdom

MarketInvoice, Funding Circle, Zopa, LendInvest make Fintech 250 (P2P Finance News), Rated: AAA

MARKETINVOICE, Funding Circle, Zopa and LendInvest have made CB Insights’ Fintech 250 list for 2017, which awards the companies worldwide that are leading the transformation in financial services.

The list of 250 emerging private companies from 23 countries, which was chosen out of a longlist of more than 2,000 entrants, was revealed by the research firm’s chief executive and co-founder Anand Sanwal during The Future of Fintech conference in New York on Tuesday.

The Fintech 250 companies (in alphabetical order):

51Xinyongka

Axoni

Canopy Tax

55 Capital

Behalf

Capital Float

Acorns

Beijing LaKala Billing Services

Captable.io

Activehours

Better Mortgage

Chain

Addepar

Betterment

Circle Internet Financial

Adyen 

Billtrust

CircleUp

Affirm

BIMA

Clarity Money

Airwallex

bitFlyer

ClearTax

Algomi

BitPesa

Cloud9 Technologies

AlphaSense

Blend

Clover Health

AngelList

Blockstack Labs

Coinbase

Ant Financial Services Group

Blockstream

Coins.ph

Artivest Holdings

BlueVine

ComplyAdvantage

Assembly Payments

bonify

Credit Benchmark

Atom Bank

Branch International

Credit Karma

AutoGravity

Brave Software

Creditas

Auxmoney

Bright Health

CreditEase Insurance Agency

Avalara

C2FO

CreditMantri

AvidXchange

Cadre

Cross River Bank

Crowdcube

IEX Group

Nongfenqi

CurrencyCloud

Indiegogo

Nubank

CurrencyFair

Indifi Technologies

Numerai

Cyence

iyzico

Nutmeg

Dadao Financial

iZettle

One97 Communications  

Deposit Solutions

JD Finance

Onfido

DianRong

Juvo

OpenFin

Digit

Juzhen Financials

OpenGamma

Digital Asset Holdings

Kabbage

Oportun

Digital Reasoning Systems

Kakao Pay

Orchard Platform

Droit Fintech

Kasisto

Oscar Health Insurance Co.

Earnest

Kensho Technologies

Paga

Easynvest

Kickstarter

Parasut

Ebury

Klarna

Paymax

Ellevest

Kreditech

PayNearMe

Embroker

Kyriba

Payoneer

eShares

Ladder

Paystack

Even Respsonsible Finance

Lemonade

Paytm Payment Bank

EverCompliant

LendingHome

PeerIQ

Ezetap Mobile Solutions

Lendingkart

PeerStreet

Factom

LendInvest

Perfios

Fenergo

LendUp

Personal Capital

Fenqile

LevelUp

Ping++

figo

Lu.com

Plaid Technologies

FinanceIt

M-DAQ

Point Digital Finance

FinancialForce.com

Magento Commerce

Polychain Capital

Finrise

MarketInvoice

Ppdai

Flywire

Marqeta

Propel

Folio

Merlon Intelligence

Property Partner

freee

MetroMile

Prospa

Fundbox

MobiKwik

Qapital Insight

Funding Circle

MoMo

QFPay

Funding Societies

MoneyFarm

Qingsongchou

Futu5

Moneytree

Quantopian

GoCardless

Monzo

Qudian

GoFundMe

Mynt

Quovo

GreenSky

N26

Raisin

GuiaBolso

Namely

RealtyShares

Guideline

Nav

Red Dot Payment

Gusto

Neighborly

Reorg Research

Habito

NerdWallet

Revolut

hibob

New York Shipping Exchange  

Ripple Labs

IceKredit

Next Insurance

Riskalyze

Robinhood

THEO

Weidai

Rong360

Tiger Brokers

WeLab

Roofstock

Tink

WorldCover

Roostify

Token

WorldRemit

Seedrs

Tradeshift

Xapo

Shenzhen Kingdee

Trading Ticket

Xiaoyusan Insurance

Suishou Technology

TransferWise 

Xignite

Signifyd

TravelBank

Xishan Information Technology

Silverfin

Trov

YapStone

simplesurance

TrueAccord

Yoco

SirionLabs

Trulioo

YongQianBao

Smava

Trumid

Yuanbaopu

SocietyOne

Tyro Payments

Zeitgold

Socure

Upgrade

ZestFinance

SoFi

VATBox

ZestMoney

solarisBank

Veem

Zhong An Insurance

Stash Invest

Verato

Zoona

Street Contxt

Viva Republica

Zooz

Stripe

Wave Accounting

Zopa

Symphony Communication

Wealthfront

Zuora

Services Holdings

WealthNavi

Tala

Wealthsimple

Tally Technologies

WeCash

Fifty years of the ATM: How long can cash survive in a digital world? (International Business Times), Rated: AAA

Fifty years of using the hole in the wall

  • As of 2015 there were 70,270 cash points in the UK, more than 52,000 of which were free to use.
  • 48 million of us use cash machines and 89% use them at least once a month.
  • In 2015 the amount of average withdrawal was £69.
  • On average each cash machine dispensed £7,576 per day in 2015 – and that figure is on an upward trend.
  • The daily record for cash withdrawals was £730m, which was set on 23 December 2016.
  • 46% of cash machines are in supermarkets, shops and shopping centres, 27% are in banks and 4% in Post Offices.
  • HSBC has the UK’s busiest cash machine by Cambridge Circus in central London.
  • The original cash machine was designed by Scottish inventor John Adrian Shepherd-Barron who came up with the idea of a machine dispensing cash, rather than chocolate bars, while in his bath.
  • ATMs in temples in India let you make religious donations.
  • Vatican City has the only ATM that gives instructions in Latin.

TransferWise CEO talks about Brexit worries for fintech companies (CNBC), Rated: A

 

The Profitability Challenge for Fintech Startups (Finextra), Rated: A

The evidence from a sample of 20 fintech startups in the UK is that there are substantial profitability challenges that still need to be overcome. As of June 2017, the total equity investment in the sample companies I have looked at has been £852m. The total valuation of the sample at the last valuation round for each company was £2.6bn, but none are profitable and cumulative losses have been £211m.

Only one company in the whole sample has reported a single year of profitability, but this has since fallen back into loss.

However, the median losses are: £0.3m in year 1, £1.3m in year 2 and £2.0m in year 3. One company, Atom Bank, is already losing £22.5m in the third year of operation, substantially more than any of the others.

RateSetter exec sees opportunity in Brexit (Bankless Times), Rated: A

While the head of one of the United Kingdom’s largest P2P sites understands why small business owners are hesitant to make big decisions in Brexit’s wake, he cautions them to not miss the opportunities either.

“The door is open for business leaders to redefine Brexit so that it is seen as an opportunity, rather than a threat.”

Increasing options on low-yielding properties (Bridging & Commercial), Rated: A

Property investors have had to deal with a host of government and regulatory changes over the last couple of years.

These new rules have resulted in many buy-to-let lenders requiring much more significant interest rental coverage, often looking for as high as 145%.

For example, in the last LendInvest Buy-to-Let Index we found that Southampton offered an average yield of 4.08% – significantly lower than landlords can enjoy in other areas of the UK. Yet it has seen solid capital price growth at 5.47%,  its excellent transport links into the capital regularly see it named as a future house price hotspot, while the presence of two large universities boosts its appeal to landlords.

FT PARTNERS CONTINUES EXPANSION WITH ESTABLISHMENT OF EMEA PRESENCE IN LONDON (LendIt.com), Rated: B

Financial Technology Partners (FT Partners), the only global investment banking firm focused exclusively on FinTech, is pleased to formally announce its planned expansion into the Europe, the Middle East and Africa (EMEA) markets. This announcement is a direct response to the global demand the Firm is seeing for its highly specialized and deep domain focused advisory capabilities from EMEA clients and further highlights the Firm’s strong activity in cross-border FinTech deals globally. FT Partners’ global team of FinTech focused investment bankers will continue to serve its clients and its EMEA operations will be based out of London in the United Kingdom. The Firm is also announcing the continued expansion of its senior team with the addition of Timm Schipporeit, former FinTech investment banker at Morgan Stanley and FinTech investor at Index Ventures, who joins as Managing Director in our London office

Women In Fintech 2017 Powerlist: Innovate Finance Opens Nominations (Forbes), Rated: B

UK organisation and global fintech representative Innovate Finance has announced today the opening for submissions to its 2017 Women in Fintech Powerlist.

Innovate Finance is calling on both men and women to submit names of female colleagues (CxOs, managers, lawyers and journalists) to be included in the 2017 Powerlist.

China

Fintech No Threat for China’s Big Banks (Bloomberg), Rated: AAA

Concerns that bad-loan levels are worse than lenders are confessing to, combined with fears the country’s fintech giants, including Alibaba Group Holdings Ltd. affiliate Ant Financial, are disrupting operations, have weighed on stocks.

For one, bad-debt figures, if you believe them in the first place, are coming down. And even if you do think nonperforming loans have been understated, what’s undeniable is that the country’s big banks have been shifting into mortgage lending, which has a lower default rate than the state-firm lending that’s long been their bread and butter. The nonperforming loan ratio of a mortgage in China is 0.37 percent, one sixth of a corporate advance, according to CIMB Securities Ltd. analyst Michael Chang.

Of course, fintech companies getting into the lending business is cause for concern. Alipay’s consumer credit site Ant Check Later will lend up to a certain amount without needing to see bank records, while e-commerce outfits like JD.com Inc. allow monthly payment installments that blur the line between bank and retailer.

However, it’s worth noting that lending is a business with thin margins, and figuring out default risk is crucial, especially considering many fintech startups cater to those people the big banks won’t touch.

FinTech Wave Revolutionizes Financial World (SCMP), Rated: A

According to Morgan Stanley, online loan volume in the US market is expected to reach US$120 billion in 2020, up from US$20 billion in 2015.

Among others, one important promise of FinTech is that there will be greater reliance on algorithmically-determined financial decisions in areas such as loan, insurance and stock picking. The advancement of artificial intelligence methods has been the propeller facilitating the transition in such a direction.

The overall implication here is that a machine can replace a human in processing large amounts of text in a much more efficient way. This information extraction procedure also helps us understand more about the interplay between investors and various types of information. Interestingly, we find that investors react more strongly to negative than to positive text, and that analyst report text is more useful when it places more emphasis on non-financial topics, is written more assertively and concisely, and when the perceived validity of other information signals in the same report is low.

One common feature of the above two research studies is that computer algorithms are used to extract and quantify some otherwise fuzzy concepts: analyst sentiment in the first study, and analyst information discovery and interpretation effort in the second one. The computer achieves it by aggregating a huge amount of data which is surely beyond any human’s ability to process. Even though humans can understand intuition through very limited observations, it is hard for them to transfer the intuition or knowledge to other people. The computational limitation and the qualitative nature of the human knowledge are the underlying reasons why computers will eventually outperform humans in more and more settings.

FinTech does not come as a free lunch, however. Algorithm-based decisions are not immune to anomalies and manipulations. On 6 May, 2010, the Dow Jones Industrial Average dropped 998.5 points (about 9%), mostly within minutes. This sudden market crash was later attributed to the algorithm trading systems being manipulated by a trader.

European Union

Visa takes a strategic stake in Klarna, the finance startup out of Sweden (TechCrunch), Rated: AAA

Klarna, the $2 billion+ startup out of Sweden that works with some 70,000 e-commerce sites to enable payments and provide flexible financing to make purchases, is adding one more key investor to help take its next steps into a wider range of services. Today it announced that credit card giant Visa is making an equity investment in the company, and as part of it, the two are forging a strategic partnership to roll out new products.

Visa and Klarna are not disclosing the size of the stake — following the same pattern Visa took when it invested some years ago in two other fast-growing financial startups, Square and Stripe — and Klarna is not specifying what form the strategic partnership will take.

Brexit upheaval prompts French entrepreneurs to dream of home (Financial Times), Rated: A

In 2014, I moved to London to launch an asset management firm investing in loans originated by marketplace lending platforms.

Starting the business in London made sense. The UK boasted a business environment in which risk-taking was encouraged and entrepreneurial success valued and rewarded. Simple rules such as entrepreneurs’ relief, which reduces capital gains tax on the sale of a business, are very attractive for budding entrepreneurs.

However, the vote in last year’s referendum for Britain to leave the EU has caused me to reconsider my decision to live in and operate my business from London.

Gaël de Boissard joins the winner of last year’s Money20/20 Europe Startup Competition (deBanked), Rated: A

Exactly one year after winning Money20/20 Europe Startup Competition, James (a FinTech in Credit Risk, formerly known as CrowdProcess) returns to Copenhagen after closing an oversubscribed investment round led by Ex-Credit Suisse Board Member Gaël de Boissard. This round also included ex-Deutsche Bank COO, Henry Ritchotte, and BiG Start Ventures, a VC focused on FinTech and InsurTech. As a result of this deal, Mr. de Boissard has now joined James’s Board of Directors, after having previously been at the board of Credit Suisse.

Blockchain technology is moving into the financial mainstream with IBM and seven European banks (CNBC), Rated: B

IBM is building blockchain technology that will be used by seven of Europe’s largest banks, including HSBC and Rabobank, to facilitate international trade for small and medium-size enterprises, the company said on Tuesday.

International

Kiva.org Reaches $ 1 Billion Milestone in Crowd-Funding Loans Disbursed Globally (BusinessWire), Rated: AAA

Today Kiva.org, the world’s first and largest crowdfunding platform for social good, announced that it surpassed $1 billion USD in loans supporting borrowers around the world. More than 2.4 million entrepreneurs, farmers and students globally have been able to launch and expand viable businesses or pursue an education thanks to loan support from 1.6 million people, lending just $25 dollars at a time.

Recently on World Refugee Day (celebrated globally on June 20), Kiva launched a new World Refugee Fund, a $250K matching fund to be followed by a rotating fund of up to $9M in loan capital to provide support to refugees and host communities in countries including Lebanon, Jordan, and Turkey.

The World Refugee Fund seeks to fill this lending gap and is being developed by Kiva and the Alight Fund, along with founding partners the Tent Foundation and USA for UNHCR. To date, Kiva has crowdfunded $4.3 million in loans to 4,544 refugee borrowers globally.

Can Cash be Crushed? Multi-Country FinTech Survey Finds Many Adults Still Rely on Paper Money (IT News Online), Rated: AAA

According to KPMG’s 2016 global Pulse of Financial Technology (FinTech) Report (source), Venture Capital (VC) investment in the FinTech sector reached an all time high with a total of $13.6 billion across 840 financings in 2016. While FinTech investment proved to be “hot” in 2016, has this massive investment translated into consumer adoption? Today, at Money 20/20 Europe, early-stage venture capital firm Blumberg Capital released the results of its recent survey conducted online by Harris Poll in France, Germany, Israel, United Kingdom (U.K.), and the United States (U.S.), which found that FinTech appears to be gaining traction with Israel emerging as a leader in early-adoption. Despite investment and adoption progress, cash still remains king for most of these countries such as Germany, where 75 percent of adults still use paper currency and coins to make purchases at least once a week. Can cash ever be crushed? To see the full findings, please visit globalfintech.blumbergcapital.com.

Israel Embraces FinTech Early but Cash is Still König in Germany
The findings indicate Israel as a leader in early FinTech adoption as this country is more likely than other countries surveyed to use mobile banking apps and mobile wallets to make a purchase at least once per month. Additionally, nearly one in 10 Israeli adults say they have used alternative financing/lending services within the last 12 months. While many may believe cash to be an antiquated form of payment, the survey revealed paper money is still regularly in use.

  • Israeli adults are most likely to use a mobile banking app at least once a month (e.g., to check account balances, transfer funds, make a mobile deposit) (50 percent vs. 38 percent in U.S., 37 percent in U.K., 35 percent in France, 28 percent in Germany).
  • Israeli adults are more likely than French, British, and American adults to use mobile wallet apps to purchase goods/services at least once a month (27 percent of Israeli adults vs. 21 percent of French adults, 18 percent of American adults, and 17 percent of British adults).
  • Seven percent of Israeli adults have used alternative financing/lending services (e.g., peer-to-peer lending, online lender, lease-to-own) within the last 12 months.
  • German adults are most likely to use cash to make purchases at least once a week (75 percent vs. 64 percent of British adults, 58 percent of American adults, 48 percent of French adults, 47 percent of Israeli adults).

What is Fraud Anyway?
As cybersecurity continues to dominate the headlines, there was a surprisingly low level of concern among most countries surveyed given the current risk landscape. In Blumberg Capital’s 2017 State of Cybersecurity Report, findings revealed a gross overconfidence in cybersecurity knowledge and safety despite $15 billion being stolen from 13.1 million American consumers in 2015 in the U.S. alone (source). This disregard for fraud risk could indicate that consumers generally have confidence in the products and services they choose, suggesting that FinTech companies have the opportunity to educate new users on the security measures they have in place and why they are important.

  • British, American and Israeli adults are more likely than French and German adults to worry about being defrauded (e.g., getting scammed, having identity stolen, having accounts hacked) when they make financial transactions online (43 percent, 39 percent, and 38 percent vs. 31 percent and 23 percent, respectively).

Nationalism vs. Globalization: Are transactions crossing borders?
The survey also looked at how often people make online cross border purchases at least once a month. Again, Israeli adults lead the charge in cross-border transactions which could reflect on the narrower range of product choice available locally in Israel compared to other countries or Israel’s acceptance and wider adoption of FinTech and international eCommerce. Additionally, people were polled regarding the costs related to cross-border transactions, which revealed a budding anticipation of increased costs for these types of purchases in the future, especially in  the U.K. This belief in the U.K could be related to Brexit.  Findings include:

  • Israeli adults are most likely to make online purchases outside of the country they live in at least once a month (44 percent vs. 17 percent of French adults, 14 percent of German adults, 13 percent of British adults, and 9 percent of American adults).
  • 21 percent of British adults believe making online purchases outside of the country they reside will become more expensive (i.e., goods/ services will cost more and/or there will be additional fees) in the future. (Vs. 16 percent of American adults, 14 percent of German adults, 11 percent of French adults, 9 percent of Israeli adults).

Methodology
This survey was conducted online by Harris Poll on behalf of Blumberg Capital from May 16-22, 2017 among 2,166 American adults ages 18+, 1,046 German adults ages 18+, 1,048 French adults ages 18+, 1,050 British adults ages 18+, and 550 Israeli adults ages 18+. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For additional information about the survey results and methodology please contact: blumberg@sparkpr.com

What’s Next For Fintech After 50 Years Of The Cash Machine (Forbes), Rated: A

For the 50th anniversary of the first ATM, YouGov has conducted a global poll of 8000 consumers on behalf of ACI Worldwide to survey the usage of automated teller machines.

The survey found that only 42% of British consumers use ATMs just as much as they always have, while 48% in Germany, 47% in Spain and 40% in France believe the same, perhaps because of the widespread availability of alternative digital payments. 29% of UK consumers, 31% of French, 38% of Spanish and 43% of Italian would prefer this as well as a more secure way of payment authentication.

Zurawski does not see an ATM retirement any time soon as many still prefer using hard cash because it is a deliberate way of controlling spending.

The survey presented that customers want mini-statements, alerts for upcoming payments or overdraft fees plus the ability to dispense a new credit or debit card.

G20 watchdog says fintech doesn’t pose threat to financial stability (Reuters), Rated: A

The rise of fintech does not pose any compelling risks to financial stability, according to a review by global regulators, but this may change as the sector grows.

While financial technology is changing how financial services and information are being delivered, there is no evidence that services like crowdfunding, “robo” advice and cloud computing will fundamentally change underlying activities such as lending, the Financial Stability Board (FSB) said in a report published on Tuesday.

Australia

While money transfers and payments services still lead the fintech charge with an adoption rate of 50 per cent in 2017, insurance has come in a surprise second with a 24 per cent global adoption rate.

The adoption level for insurance fintech services in Australia stands at four per cent higher than the global average (29 per cent), linked to the upswing of personalised wearables with in-built abilities which allow for prediction of claim probability and lifestyle trends by insurance firms.

India

i2iFunding emerges as first P2P lending player (Outlook India), Rated: AAA

While many players try to attract investors by offering high-interest rates and leave them in the lurch in the case of default, i2iFunding has walked the talk by making the first payment from the Principal Protection Fund, and reiterated its commitment to shore up investors’ confidence.

Deteriorating asset quality has become an inevitable problem of the banking sector these days. Bad loans skyrocketed 135 percent over the last two years, and now, they constitute close to 11 percent of the advances of Public Sector Banks (PSBs).

The P2P lending industry is no immune to this trend.

i2iFunding has become the first P2P lending platform in India to compensate investors for the loss of outstanding principal amount incurred on the defaulted accounts.

Principal Protection programme will also be strengthened further, and many new features will be included. As of now, the level of principal protection depends on the category of the loan. Default in the category “A” qualifies for 100% protection of outstanding principal. This falls by 10% for the every next category and default in the “F” category offers you 50% protection. The functioning of the Principal Protection Fund will be further rationalised and smoothened. i2ifunding will primarily provide 50% and 100% principal protection options in each category from ‘A’ to ‘F’. There will also be the third option of ‘zero’ protection. Depending on the option selected by the investor, he/she will have to settle in for lower EMIS. The fee for offering principal protection service would be deducted through EMIs, but won’t be collected upfront. It’s noteworthy that, this may proportionately reduce the returns earned on lending projects but would make lending at i2iFunding safer and more secure.

Rubique breaks the language barrier; goes local to create earning opportunities for all (Outlook India), Rated: A

Always ahead of the innovation curve, Rubique has yet again demonstrated its focus on making financial solutions accessible to as many users as possible. The one-stop online marketplace providing technology enabled end-to-end solutions to financing needs of individuals and SMEs has just localised its Rubique Associate app.

The interactive app now live in Hindi, Marathi and Bengali language will now enable more number of potential Business Associates to register with Rubique and earn a commission for every reference search for loans or credit cards.

Authors:

George Popescu
Allen Taylor

Tuesday May 16 2017, Daily News Digest

corporate bond credit spreads

News Comments Today’s main news: KBRA rates Prosper’s Series 2017-1. SoFi’s bid to become bank pulls FDIC into fintech fray. LendInvest joins Home Builders Federation. Monzo puts API dev on back burner. PBOC sets up new China fintech committee. N26 launches savings accounts with Raisin. Today’s main analysis: Asset volatility diminishing and approaching new lows. Today’s thought-provoking articles: The future […]

corporate bond credit spreads

News Comments

United States

United Kingdom

China

European Union

International

India

Asia

Canada

South America

News Summary

United States

KBRA Rates Prosper Marketplace Issuance Trust, Series 2017-1 (KBRA Email), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Prosper Marketplace Lending Issuance Trust 2017-1 (“PMIT 2017-1”). This is a $450.5 million consumer loan ABS transaction that is expected to close on May 24, 2017.

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

Get the full report.

Volatility in the asset markets has been steadily declining and is nearing new lows. One factor helping to suppress volatility is the lack of many surprises in the first-quarter earnings season, which passed with results generally within the range of expectations. From an economic point of view, while GDP was weak in the first quarter, it is expected to rebound in the second quarter.

Following the French presidential election and the general lessening of international tensions, corporate credit spreads have tightened and asset volatility has declined toward its lowest levels.

Source: Morningstar

The average corporate credit spread of the Morningstar Corporate Bond Index (our proxy for the investment-grade bond market) tightened 3 basis points last week to +117, a new low for the year. The last time the index was at this level was September 2014. From a longer-term perspective, the average spread of the Morningstar Corporate Bond Index has been lower less than one fourth of the time since the end of 1999. In the high-yield market, the Bank of America Merrill Lynch High Yield Master Index tightened 5 basis points to +377. The tightening was led by the energy sector, which declined 10 basis points as oil prices continued to rise. Since the end of 1999, the average spread of the high-yield index has been tighter only 17% of the time.

Source: Morningstar

The Future of Lending is Now with Latest TransUnion Prama Offerings (NASDAQ), Rated: AAA

As TransUnion (NYSE:TRU) data from the end of March 2017 suggest, the consumer credit market is as complex as ever. Mortgage delinquency rates: continuing to drop. Auto loan delinquency rates: rising. Personal loan market: growing, but slowing. Access to credit cards: highest since 2005.

Maneuvering through this ever-changing credit landscape is difficult for lenders of all sizes, ranging from credit unions to regional banks to the largest financial institutions. To help navigate through this complex maze, TransUnion today introduced the newest modules in its PramaSMenvironmentBenchmarking and Data Extract.

Prama Benchmarking provides advanced data analytics and visualization capabilities specific to the auto loan, credit card, mortgage and personal loan markets—to deliver relevant insights for each line of business. Lenders will now be able to measure their performance across numerous metrics and filters, and compare it to the industry and their peers.  This information can be used to improve how financial services companies segment, target, acquire, cross-sell and retain customers. The Data Extract module provides self-service access to query against 100 percent of TransUnion depersonalized archive credit data, allowing customers to receive faster delivery of data to support their own analytics—in their own environment with their preferred tools.

Measuring Business Performance Against Peers

Benchmarking provides performance data on metrics such as delinquencies, charge-offs, bankruptcy, average balance and utilization. It offers views of market share in terms of number of accounts, total limit or total balance. The module also lets lenders analyze depersonalized data using dimensions such as APR, origination vintage, credit tier, state or MSA region, account status and consumer credit age.

For instance, a regional bank in Western Pennsylvania interested in growing its credit card portfolio is now able to observe five years of its own data versus other similar banks in their region.

Extracting Data Faster – From a Month or More to Hours

A traditional archive request process – from customer order to product delivery – typically takes 30 days or more. This includes time spent defining and iterating on the customer’s data requirements. “With Data Extract, the process will take less than 24 hours – an enormous time savings,” said Gomez.

With Data Extract, customers gain the following advantages:

  • Self-service – On-demand, point-and-click access to query TU depersonalized archive credit data.
  • Speed – Secure overnight delivery of the dataset.
  • Confidence – Quick access to depersonalized data to support a customer’s own analytics, so they can make faster decisions with more confidence.
  • Control – Create queries according to their data requirements, avoiding the back and forth that is often typical of an archive request process.
  • Flexibility – Quickly obtain depersonalized data for use within their own analytics environment and processes.

SoFi’s bid to become an industrial bank pulls FDIC into fintech fray (American Banker), Rated: AAA

The Federal Deposit Insurance Corp. has so far managed to stay out of the growing battle over how the U.S. fintech sector should be regulated, but that appears likely to end as one of the nation’s largest online lenders announced plans to apply for a specialty banking charter soon.

Social Finance Inc., the San Francisco-based consumer lender known as SoFi, hopes to secure an industrial bank charter. That state-issued charter used to be a popular way to organize a bank, and was commonly used by companies that are not primarily in the financial services industry.

SoFi COO: We have measures in place, extra authentication for our consumers (MSN), Rated: AAA

Joanne Bradford, SoFi COO, weighs in on how companies are protecting themselves on the heels of a worldwide cyberattack, mortgages, student loans and refinancing.

Watch the video segment here.

SoFi: We Will be the First Unbank – Bank (Crowdfund Insider), Rated: AAA

SoFi Chief Operating Officer Joanne Bradford was back visiting with CNBC today. Bradford addressed several topics including the recent cyber attack that has public and private entities running for cover around the world. SoFi has not been impacted by the digital attack and Bradford was quite confident that SoFi is better prepared for any malicious attempts to infiltrate SoFi due to their single point of access (unlike traditional banks).

Asked if the Fintech industry is more, or less, vulnerable than traditional types, Bradford explained;

“We are less vulnerable. You only come to SoFi at SoFi.com. We don’t have branches which helps make it more efficient. Less points of vulnerability…but for the consumer it is more about speed and ease of use. Getting things done quickly on your mobile device.”

How to Predict If a Borrower Will Pay You Back (NY Mag), Rated: AAA

Recently, three economists—Oded Netzer and Alain Lemaire, both of Columbia, and Michal Herzenstein of the University of Delaware—looked for ways to predict the likelihood of whether a borrower would pay back a loan. The scholars used data from Prosper, a peer-to-peer lending site. Potential borrowers write a brief description of why they need a loan and why they are likely to make good on it, and potential lenders decide whether to provide them the money. Overall, about 13 percent of borrowers defaulted on their loan.

It turns out the language that potential borrowers use is a strong predictor of their probability of paying back. And it is an important indicator even if you control for other relevant information lenders were able to obtain about those potential borrowers, including credit ratings and income.

Listed below are ten phrases the researchers found that are commonly used when applying for a loan. Five of them positively correlate with paying back the loan. Five of them negatively correlate with paying back the loan. In other words, five tend to be used by people you can trust, five by people you cannot.

Here are the phrases used in loan applications by people most likely to pay them back: debt-free, lower interest rate, after-tax, minimum payment, graduate.

And here are the phrases used by those least likely to pay back their loans: God, promise, will pay, thank you, hospital.

Now, let’s consider language that suggests someone is unlikely to pay their loans. Generally, if someone tells you he will pay you back, he will not pay you back. The more assertive the promise, the more likely he will break it. If someone writes “I promise I will pay back, so help me God,” he is among the least likely to pay you back. Appealing to your mercy—explaining that he needs the money because he has a relative in the “hospital”—also means he is unlikely to pay you back. In fact, mentioning any family member—a husband, wife, son, daughter, mother or father—is a sign someone will not be paying back. Another word that indicates default is “explain,” meaning if people are trying to explain why they are going to be able to pay back a loan, they likely won’t.

Misys rolls AI strategy into trade monitoring software (Misys), Rated: A

Misys has stepped up to the artificial intelligence (AI) plate, today unveiling Misys FusionCapital Detect. The component helps financial institutions spot booking errors, anomalies and unusual activity, accelerating trade validations and reducing exceptions with machine learning.

FusionCapital Detect behaves as a smart personal assistant for validation teams, red flagging probable mistakes that are otherwise time consuming to identify. Users can catch errors that existing tools on the market let through, reducing operational risk and preventing manual mistakes that lead to decisions being made on the wrong profit and loss information and incorrect end-of-day reports.

Being able to validate transactions at T+0 has become crucial in today’s pressurised regulatory environment, including under:

  • The European Market Infrastructure Regulation (EMIR): which makes it necessary to identify errors as soon as possible in order to confirm trades within 24 to 48 hours.
  • The Fundamental Review of the Trading Book (FRTB): which requires daily risk reports – unidentified trade errors will invalidate these reports, breaching compliance.

OpenInvest Secures $ 3.25 Million in Seed Funding Led by Andreessen Horowitz (PR Newswire), Rated: A

OpenInvest (www.openinvest.co), a social impact investing platform for retail investors, announced today that it raised $3.25 million in seed funding. The round was led by Andreessen Horowitz with participation from Abstract Ventures, Wireframe Ventures and SV2. OpenInvest is an accessible online financial advisor that empowers investors to fully align their investments with their values, and then take action to more meaningfully engage companies and drive social change.

According to a recent Morgan Stanley survey, 84 percent of millennials want the companies they invest in to align with their values. OpenInvest meets this opportunity with an innovative platform that allows consumers to invest with their hearts, without having to compromise financial returns. The company’s investment screens include climate change, fossil fuels, weapons manufacturers, gender equality, LGBTQ workplace treatment, deforestation, tobacco, companies funding the Dakota Access Pipeline, and companies supporting President Trump, which can be freely mixed and matched to construct a personalized portfolio. Investors can further customize by including or excluding individual companies, while their portfolio auto-rebalances to maintain diversification and broad tracking of the market.

Lemonade sweetens U.S. insurance rollout plans with California license (Reuters), Rated: A

Lemonade Inc, a tech-driven insurance startup that promises renters and homeowners insurance in as little as 90 seconds and payment of claims in 3 minutes, has won approval from California regulators to sell policies in the state, the company said.

The insurer’s foray into California, the most populous U.S. state, comes amid the company’s push to become licensed nationwide, less than a year after launching in New York. Last month, Lemonade, which sells policies directly to consumers through its website and smartphone app, expanded into Illinois.

Green Dot Hits, OnDeck Misses, And First Data Looks Ahead (PYMNTS), Rated: A

First Data’s New Friends

First Data CEO, Frank Bisignano, noted in the wake of First Data’s earnings release this week that the company remains on track to meet its guidance for 2017 and that he is “confident that the current weakness is transitory.”

First Data will be instrumental in helping drive Alipay expansion into the U.S. market, focusing on firms that use First Data’s Clover platform.

By the numbers, First Data reported adjusted earnings per share of $0.28 and revenue of $1.7 billion.

Credit and retail processing in North America were up 1 percent, and the business, globally, gained 2 percent. Accounts on file, again for North America, grew by 7 percent.

The deal will give Alipay scale roughly equivalent to Apple Pay’s in terms of presence, at around 4.5 million U.S. sites.

OnDeck’s Falling Figures

Reflecting the changes, the company lowered its full-year net revenue outlook to a range of $342 million to $352 million. It previously had forecast $377 million to $387 million.

Annual costs are also slated for a big cut — by around $25 million. Those cuts will be achieved by lowering headcount. About 27 percent of the staff will be cut back from levels at the end of 2016.

By the numbers, losses clocked in at $0.11 per share, slightly more than the $0.10 loss analysts were looking for. Gross revenue rose 48.4 percent to $92.89 million on higher net interest income, beating analysts’ estimates of $90.38 million.

Green Dot Beats the Streets (In a Big Way)

The company posted adjusted earnings per share of $1, which was $0.16 better than analysts were forecasting. Revenue clocked in at $253 million, was up 11 percent year over year and was higher than the roughly $234 million that had been forecasted.

Guidance for the full year was also ticking up — just about in line with the magnitude of the beat, with revenue to range from $830 million to $845 million (both ends of the range were taken up by $15 million). Earnings per share are slated to come in between $1.89 and $1.94, which compares with the consensus of $1.92 as of Wednesday morning.

Green Dot is making pre-paid cards look easy, OnDeck is demonstrating how marketplace lending (or marketplace anything) is really, really hard — and First Data is greatly looking forward to next quarter, when it can report smoother sailing.

US Government Awards $ 2.25 Million to Blockchain Research Projects (Coindesk), Rated: A

The US government has awarded research contracts to three startups working with blockchain worth a total of about $2.25m.

The Department of Homeland Security (DHS) quietly revealed the grants last week as part of its Small Business Innovation Research initiative.

Who got funded: DHS said that it parceled out a total of $9.7m between 12 companies, three of which are working with the tech. According to a release, each firm got about $750,000 to fund their research.

Here are the companies that got funds for their blockchain-related initiatives:

  • BlockCypher: The startup has been awarded a grant for its “blockchain platform for multiple blockchains, applications and analytics. BlockCypher was the recipient of a $600,000 DHS grant last summer.
  • Digital Bazaar: According to DHS, the company is working on a “verifiable claims project” that utilizes “fit-for-purpose distributed ledgers”. Like BlockCypher, Digital Bazaar was given a DHS grant in 2016.
  • Evernym: This Utah-based business will use the funds to support its research into “decentralized key management using blockchain”, according to DHS.

Lendio is Now Offering Small Business Loans Within Minutes (Military-Technologies), Rated: A

The team at Lendio is pleased to announce that they are now offering small business loans within minutes.

In addition to providing small business owners loans as quickly as possible, Lendio also features a business loan marketplace that lets people find the financing tools they need to help run their business.

Oportun, Inc. (SEC), Rated: A

Opportun has filed for ABS with the SEC.

My Experience Refinancing Student Loans from Pharmacy School (Pharmacy Times), Rated: A

In 2015, I graduated with over $150,000 in student loans from pharmacy school. At the time, it felt like an insurmountable amount of money to pay back, especially considering I took a substantial pay cut to complete a 1-year residency after graduating. The monthly payments were extremely high and to make matters more confusing, I had multiple loan providers between my private and federal loans, with some in my name and some in my parent’s name. The interest rates on these loans varied from 6.5% to 8%.

After finishing my residency, I knew I had to take a close look at my financial situation and make a plan to aggressively start paying off these loans. After extensive research, I decided to refinance my student loans through Social Finance, Inc (SoFI), an institution that offers a number of different loan types through a “nontraditional” approach.

Refinancing through SoFI will save me over $15,000 in cumulative payments over a 10-year term by lowering my interest rate to 5%.

If you’re refinancing with a longer repayment period (10 to 20 years) and prefer stability, a fixed rate may be the better option. Personally, I chose a variable rate loan because the interest rate was significantly lower than the fixed rate loan, and I plan to pay off my student loans long before the end of my 10-year term.

RealtyShares Names Industry Vet to BOD (Commercial Property Executive), Rated: A

Edward Forst, the former president & CEO of Cushman & Wakefield, has become the newest member of RealtyShares’ board of directors.

With Cushman & Wakefield, Forst oversaw 16,000 real estate professionals in 60 countries.

How Can I Pay for Fertility Treatment? (LendingClub), Rated: B

To begin, you’ll want to determine how you’re going to pay for fertility treatment and related care such as medications, genetic testing and egg freezing services.

The good news is that fertility financing is available so that cost does not have to be a barrier to treatment and your dream of becoming a parent.

The flexible payment plans include:

  • One loan for comprehensive fertility care for up to three services: IVF treatment, medication, genetic testing or egg freezing
  • No upfront payments
  • Fixed rates starting as low as 3.99% APR*
  • Manageable monthly payments for a range of budgets
  • Payment sent directly to your providers in one to three business days, so you can start treatment without delay or pressure to distribute funds correctly

How to Invest in Debt (Michael Pellegrino Email), Rated: B

Get a free sample chapter. Password: debt-investor.

United Kingdom

LendInvest joins the Home Builders Federation (Property Reporter), Rated: AAA

Specialist mortgage lender, LendInvest, has announced that it has joined the Home Builders Federation, in a move aimed at supporting property developers to build more homes of every type.

The Home Builders Federation is the representative body of the private sector home building industry in England and Wales and its members are responsible for 80% of housing output each year. The organisation currently supports the LendInvest Property Development Academy, a non-profit, two-day course delivered in five key cities across the UK and intended to create a new generation of property entrepreneurs.

Monzo puts API development on the back burner (Finextra), Rated: AAA

Digital bank Monzo is putting its API developer plans on ice as it faces up to the challenge of launching current accounts for its 190,000 customers.

The news will be a blow to the 2000 people on the bank’s developer Slack channel who have invested time in building integration to the Monzo API.
In the two years since it launched its first hackathon encouraging developers to build products using the API, the bank now counts some 100 personal projects integrating with the toolkit. Despite these efforts, Monzo will not allow developers to publish their current applications.

Peer-to-peer lending rises as Moneywise users seek higher returns (Moneywise), Rated: A

Nearly half (48%) of Moneywise.co.uk readers use peer-to-peer (P2P) lending in a bid to earn higher returns on savings, our latest poll results reveal.

This is an increase from 39% of Moneywise users who said they used P2P lending in August 2016, and 33% who said the same when we asked in February 2016.

The number of Moneywise users aware of P2P has also risen. Just 4% said they’d never heard of P2P lending in our most recent poll, compared to 6% who hadn’t heard of it last August, and 9% who hadn’t heard of it last February.

Seedrs: Andy Murray Invests in Three UK Entrepreneurs, Den, Morpher & Landbay (Crowdfund Insider), Rated: A

Tennis star and Seedrs advisor Andy Murray has invested in three early-stage UK businesses. The Seedrs listed companies include Den, Morpher and Landbay. Murray’s Seedrs originated portfolio now stands at over 20 companies, according to the platform.

Landbay is back on Seedrs once again. The property rental crowdfunding platform has crowdfunded successfully multiple times on Seedrs.  Landbay was one of the very first peer-to-peer platforms to be granted full authorisation by the FCA at the end of 2016. Landbay has raised £2.3 million overfunding to 157% in the round.

Robo Advice – 5 Key Factors to Success (EValue), Rated: A

1 – Engaging the consumer

Currently, a real need exists to increase consumers’ engagement with their financial life and enable easy access to robust financial advice for all. However, for many consumers, the breadth of choice available, when it comes to making financial planning decisions, only serves to create confusion and adds to the complexity often resulting in no decisions being made at all.

2 – Realistic expectation of range and level of returns

This means that not only should the overall forecasts be realistic but each individual scenario, which makes up the forecast, should also be sensible and capable of occurring. Suggesting a potential outcome which, in reality, is impossible is obviously not particularly helpful to consumers when it comes to making investment decisions.

3 – Risk Suitability Assessment

In the UK, it is clear that robo advice needs to meet the same suitability standard as traditional advice. Therefore, any risk suitability tool must be rigorous and robust in order to ensure an accurate measurement of a consumer’s tolerance to risk and capacity for loss.

4 – Personal Advice Given

As everybody’s situation is different, in order for a robo advice proposition to be successful it must be able to provide appropriate personal advice which not only reflects a consumer’s individuality and specific objectives but is also not detrimental to their other financial needs.

5 – Fully automated with appropriate compliance reviews

By automating the advice process so that it can be delivered remotely and driven by the consumer, costs will be cut sharply as a result. At the same time, consistent quality and thorough documentation generated by the process will provide a full and reliable digital paper trail to ensure regulatory compliance.

Robo Advice market eyes pensions, insurance and mortgages (AltFi), Rated: B

The automated financial advice market is set for a decade of strong growth, according to a new report by consultancy Deloitte, which suggests the underlying disruptive technology will spread into more niches than its current wealth management segment.

To date, automated advice has been most prevalent in wealth management – called robo advice – but this is just the tip of the iceberg. In its latest research into the space, entitled The next frontier: The future of automated financial advice in the UK, Deloitte says the UK offers a rich opportunity for automated advice with up to 15 million consumers willing to pay for it.

China

PBOC sets up new committee to oversee China’s burgeoning fintech industry (SCMP), Rated: AAA

China’s central bank said on Monday it has set up a committee to oversee financial technology, reflecting an attempt to bring regulation up to speed with a fast-growing industry that could bring cross-sector financial risks.

The People’s Bank of China said on its website it will gauge the impact of fintech on monetary policy, financial markets, financial stability, payment and clearing.

It will also beef up the use of new technology, such as big data, artificial intelligence, and cloud computing to enhance its capabilities in protecting against and resolving cross-market financial risks, it said in the statement.

P2P Industry News (Xing Ping She Email), Rated: A

People’s Bank of China is going to set up FinTech Committee
Recently, People’s Bank of China (PBC) announced to set up FinTech Committee, aiming at reinforcing the planning and coordination of fintech. PBC is going to do deep research on the influence of fintech on monetary policies, financial market, finance stability, payment and settlement etc. And it also encourages finance sector to use high-tech, such as big data, AI and cloud computing, as regulatory method to improve the ability for identifying, preventing and solving financial risks.

BNP Paribas Group Investigates for Financial Innovation in Asia
On May 5th, executives from security services department of BNP Paribas visited JadeValue, China’s first fintech incubator, to investigate for financial innovation in Asian market. Xeenho Wallet, as one of the incubated enterprise of JadeValue, and a typical example of Chinese modern fintech company, communicated with the European professional financial survey team, and achieved initial intent of cooperation on exchange of P2P industry news.
Xeenho is one of the first P2P funds platforms in China. Based on big data and robo-advice, Xeenho’s risk-control management keeps the Zero Bad Debt in the industry.

European Union

N26 launches savings accounts with Raisin (TechCrunch), Rated: AAA

N26 is launching yet another feature to build a modern retail bank for European customers. This time, the company is partnering with Raisin, a German startup also known as WeltSparen. In just a few taps, you’ll be able to open a savings account for money you don’t need.

All your deposits are guaranteed up to €100,000 per bank by the National Deposit Guarantee Scheme as part of the European Union.

N26 is only launching this feature in Germany for now, but Raisin accepts customers from other countries. So you can expect to see this feature in other countries later this year. Similarly, if you don’t want to have your money stuck on a savings account, N26 will launch overnight savings later this year.

Raisin has built an API in order to facilitate the N26 integration.

Rabobank enters digital identity market (Finextra), Rated: A

Rabobank has partnered with Norway’s Signicat to provide a digital identity hub for businesses looking to onboard new customers and sign legally-binding contracts online.

The joint Digital Identity Service Provider (DISP) offers a range of online login, identity, signature and data archiving services under the banner of Rabo eBusiness. Rabobank says it will initially market the programme to energy, telecom and insurance companies, healthcare institutions and financial services providers.
International

Top 10 FinTech Companies Disrupting Banking (Disruptor Daily), Rated: A

Banking and payment financial technology have grown exponentially in just the past few years thanks to tech like blockchain, artificial intelligence, and big data. These crossovers are making for faster, safer processes and lower prices for individuals and businesses alike.

Wyre boasts transfer speeds under 6 hours internationally, significantly faster than the traditional SWIFT or bank wire transfer networks.

Xendit is a payment processing infrastructure provider that covers the southeastern Asia region. Among the services offered through Xendit are bank transfers, card processing, and escrow services.

Xero offers accounting professionals and small-to-medium businesses (SMBs) with more than 600,000 customers a cloud-based accounting software.

N26 allows UK customers to open accounts in minutes, perform withdrawals at any ATM, and pay with the N26 MasterCard.

Beyond making in-person and mobile payments more secure, Circle is also working to reduce the cost of in-person and international payments as well as the time intensity of global payments.

Simple unifies accounts under one card and splits the net interest margin from lending across all of the partner banks in its network to help simplify the customer experience.

Earnest is using data science, design, and software automation to allow their clients to manage their existing finances and debts while opening up new opportunities for well-behaved clients to see better interest rates and more options.

Featurespace has developed and deployed artificial intelligence and machine learning solutions for financial service providers in more than 180 countries.

InstaMed has changed the healthcare payments industry through the use of their easily-integrated, private cloud computing network.

India

i2iFunding plans to increase loans disbursal to Rs 200 Cr in 2 yrs (India Times), Rated: AAA

Peer to Peer (P2P) lending platform i2iFunding said today that it planned to increase the loans disbursed on its platform to Rs 200 crore over the next two years. It currently disburses loans worth Rs 60-70 lakhs a month.

Having strengthened its risk processes, the company is now keen to expand operations, he said. The company also expects business to pick up the RBI issues regulatory guidelines for the sector.

Five Points to Keep in Mind When Investing in P2P Lending (BW Disrupt), Rated: A

But while there has been a major change in the appetite for risk among Indians, P2P lending requires an investor to be thoroughly aware and educated on how to make informed choices when opting for P2P lending. P2P lending is globally growing at a CAGR of 48%. In India, the industry is expected to touch $5 billion by 2020-2021. It’s here to stay and the faster a smart investor understands, learns, and makes the most of it, higher the returns.

  1. Build a Diversified Portfolio
  2. Small Ticket-size, More Loans – One of the biggest advantage of P2P lending is that the average ticket size can be as low as Rs. 1000/-. So invest small amounts in large numbers. And by that we don’t mean putting Rs. 2,50,000/- across 10 loans of Rs. 25,000/- each but to aim for 50 loans of Rs. 5,000/- each.
  3. Compounding Benefit – P2P lending is the only, unique asset class in which investors begin to receive returns – principal as well as interest – through EMI from the very next month of making the investment.
  4. Realistic Expectations, Long-term horizon – Before investing in P2P lending, it is advisable to choose a lending platform after considering the track record of the leadership and their risk management team.
  5. Informed Choices – Before investing in P2P lending, it is advisable to choose a lending platform after considering the track record of the leadership and their risk management team.
Asia

Fintech start-up 4xLabs raises US$ 1.5m in new funding (Straits Times), Rated: AAA

Singapore fintech start-up 4xLabs has raised US$1.5 million (S$2.1 million) in its latest funding round.

The round saw follow-up investment from Dymon Asia Ventures, as well as participation from new investors such as Malaysia-based OSK Ventures International.

4xLabs aims to increase transparency in the market for travellers and money changers with its cloud-based services.

The firm, set up in 2011, offers two platforms: Get4x, a currency exchange-rate aggregator platform for travellers, and Biz4x, a platform that helps money changers better manage their businesses.

Canada

Toronto Financial Services Alliance Says Strengthening Fintech Ecosystem Must Be a Priority (Crowdfund Insider), Rated: AAA

The Toronto Financial Services Alliance (TFSA) says Canada’s financial service relevance is at risk unless the Fintech ecosystem is improved.

TFSA has published a report specifically on this subject. Entitled, “Seizing the Opportunity: Building the Toronto Region into a Global Fintech Leader,” the report states that the Toronto/Kitchener-Waterloo corridor today benefits from a strong core of financial institutions, top-tier research facilities, a strong talent base and relatively low business operating costs compared with other global Fintech ecosystems.

The report sets out six key areas to target:

  • Collaboration: Closer and more frequent engagement among Fintech startups, well-established financial institutions and the venture capital community.
  • Capital: Improved access to sophisticated seed-level and local later-stage capital for Canadian Fintechs.
  • Regulation: Reduced regulatory burden on emerging Fintech companies, and modernized regulatory frameworks to attract foreign investment and further reflect changing business models, technologies and priorities.
  • Research: Encouraged commercialization of research for financial services to further establish the region as a global leader.
  • Talent: Creation of opportunities and conditions that will attract top talent with experience growing and scaling fintech companies.
  • Awareness: Raising of the region’s profile on the global stage as a Fintech hub.

Power Financial invests C$ 50 million in ‘robo-adviser’ Wealthsimple (Reuters), Rated: A

Power Financial Corp has invested C$50 million ($37 million) in “robo-adviser” Wealthsimple, bringing its total investment in the 2-year-old financial technology company to C$100 million, they said on Thursday.

Toronto-based Wealthsimple provides automated investment advice to consumers and helps manage personalized portfolios based on responses to an online questionnaire about investment goals. It entered the U.S. market at the end of January.

The company said it now has more than 30,000 clients in Canada and the United States, up from 20,000 in late January, investing more than C$1 billion in exchange-traded funds.

South America

Goldman Sachs Sees Big Potential for Fintech in Brazil (NYT), Rated: AAA

Brazil is experiencing a wave of growth in financial technology that will most likely eat into the market share of the country’s huge and long untouchable banks, a new report from Goldman Sachs says.

Entitled “Fintech Brazil’s Moment,” the 45-page research report estimates that the more than 200 financial technology companies in Brazil should generate a potential revenue pool of about $24 billion over the next 10 years. Payments, lending and personal finance are three promising segments, as is insurance, the report found.

The Goldman Sachs economists cited what they called “an oligopolistic market structure” in Brazil where the top five banks, excluding development banks, hold 84 percent of total loans. In retail branch banking, the top five banks have 90 percent of branches. That is up from 71 percent in 2007, the report said, observing that “the market has become more concentrated since the financial crisis” of 2008.

By contrast, in the United States, the top five banks hold just about 20 percent of all branches. In India, that figure is slightly over 30 percent, and in Turkey it is just under 30 percent.

Authors:

George Popescu
Allen Taylor

Thursday December 29 2016, Daily News Digest

FinTech 2017

News Comments Today’s main news: 42% of Belfast residents will start year off short due to lending to family and friends. Today’s main analysis: Three reasons for small business optimism for 2017. Today’s thought-provoking articles: Bloomberg Intelligence (video). Chinese tech trends. i2ifunding is a leading P2P platform. United States Three reasons small business owners are optimistic about […]

FinTech 2017

News Comments

United States

  • Three reasons small business owners are optimistic about 2017. AT: “What’s interesting about the sudden surge in bank loans isn’t so much the optimism it represents about the economy. Rather, it makes me wonder what the short-term effect on marketplace and alternative lending will be. There may be optimism about the economy in general, but I’m hearing a lot of pessimism coming from industry ranks, in part due to the rough year in 2016. Whether you are optimistic or pessimistic about the industry, one thing is clear: 2017 will be a pivotal year. I remain optimistic over the long-term.”
  • Bloomberg FinTech predictions for 2017. AT: There are lots of reasons to believe China’s FinTech sector will outpace the U.S.’s next year. For one thing, China has a lot of consumers, and their consumers are much more into mobile than our consumers, who are much more consumed with privacy and security concerns.”

United Kingdom

European Union

Canada

China

India

United States

Three Reasons for Small Business Optimism About the Economy in 2017 (Forbes), Rated: AAA

Indeed there are reasons for continued optimism for small business owners in the new year:

  1. Although rates went up, the increase was small, which is good news for borrowers seeking capital. Lenders are showing signs of opening up the purse strings. Big banks and institutional lenders are approving higher percentages of loan applications, and smaller banks are granting about half of the requests.
  2. While the Fed signaled it would raise rates in 2017, the amounts will likely again be small.
  3. Inflation remains low, despite an interest rate hike and strong consumer spending this holiday season.

Meanwhile, loan approval rates at big banks ($10 billion+ in assets) improved to a new all-time post-recession high in November 2016, according to the latest Biz2Credit Small Business Lending Index, a monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. In addition, it marked the eighth time in the last nine months that lending approval rates improved at big banks.

Small banks also experienced an uptick in loan approval rates last month, granting 48.8% of funding requests from borrowers.

Institutional lenders, which have emerged as major players in the marketplace lending industry are approving an all-time Index high 63.3% of funding requests from entrepreneurs after an increase of two-tenths of a percent in a month-by-month comparison.

Institutional lenders, which have emerged as major players in the marketplace lending industry are approving an all-time Index high 63.3% of funding requests from entrepreneurs after an increase of two-tenths of a percent in a month-by-month comparison. Credit unions, which are currently approving 41.1% of loan requests, have experienced steady declines in their loan approval rates over the last 18 months. While loan approval rates at alternative lenders (59.2%) have dropped for five straight months.

Bloomberg Intelligence: FinTech in 2017 (Bloomberg), Rated: A

United Kingdom

5 ways to make your money work harder for you in 2017 (The Motley Fool), Rated: A

Funding Circle focuses primarily on small business lending, which can offer higher returns but is also riskier. Landbay organises peer-to-peer mortgages offering an expected return of 3.75% secured against property. Meanwhile, RateSetter offers unsecured lending to everyday customers. Peer-to-peer lending does come with a certain degree of risk and isn’t a substitute for savings accounts, so it may not be suitable for all investors.

Herefordshire Council withdraws from crowdfunding initiative (Hereford Times), Rated: A

THE COUNCIL will no longer lend funds to small businesses through a crowdfunding initiative.

Since 2015 Herefordshire Council has been in a partnership with crowdfunding group Funding Circle to help boost lending in the county.

The council has contributed to seven business loans since January 2015, lending a total initial principle of £15,560, towards loans with a total value of £ 29,500.

European Union

Nearly half of Belfast people to start New Year £100 out of pocket due to friends and family owing money (BelfastLive), Rated: AAA

According to latest research 42% of Belfast residents are already £100 out of pocket, on top of their own Christmas debt, due to friends not repaying loans.

New findings also show that half of us have lent up to £500 and nearly one in 20 (4%) have lent more than £5,000.

Canada

How Small Businesses Can Use Fintech Companies (Intuit QuickBooks), Rated: A

Between 2000 and 2016, approximately 100 startup businesses in Canada raised more than $1 billion in funding. Fintech companies attract enthusiastic investors, from the casual speculators at crowdfunding sites to seasoned venture capitalists.

Several Canadian fintech companies offer payment processing services, allowing consumers to utilize a smartphone as a credit card or as an e–wallet.

Toronto-based Lendified utilizes a proprietary algorithm to assess the reputation and potential of a small business to make a lending decision. Lendified’s platform allows the small business owner to apply online and get approved for a loan of up to $50,000 within five minutes.

Lending Loop is Canada’s first and only regulated crowdfundng platform focused on small business.

Canadian Fintech Firm MOBI724 Completes Third Equity Private Placement (Crowdfund Insider), Rated: A

MOBI724 Global Solutions Inc., (CSE: MOS), a Candian fintech startup that offers an all-in-one fully integrated EMV payment, card link couponing, and digital marketing system, announced on Tuesday it closed a third tranche equity private placement in the aggregate amount of $167,500 by issuing 3,350,000 common shares at $0.05. For each common share received, the subscribers were issued one common share purchase warrant at an exercise price of $0.15 exercisable on or before August 31st.

China

Tech Trends 2017: China’s WeChat, Musical.ly and Alipay Surpasses Outdated Western Technology (University Herald), Rated: A

China sets tech trends for 2017 with WeChat, Musical.ly and Alipay, surpassing outdated Western Technology and skipping phases in technological progression while catering to middle-class consumers.

Alipay, Alibaba’s payment system, enables users to pay using their mobile devices, one of the top tech trends for 2017 that could see less of credit cards since a good 40 percent of Chinese consumers now use the new payment scheme, Forbes reported.

Peer-to-peer lending is now gaining popularity among those who do not have the credit score to apply for loans with traditional banks. China Rapid Finance is now the largest consumer lending company facilitating access to loans of its more than 1 million borrowers.

India

YEAR-RBI 3 LAST (DCM24)  (India Today), Rated: AAA

The era of differentiated banking finally became a reality during the year, with the first of the small finance banks and payments banks getting operational. RBI also started discussions on starting peer-to-peer lending.

i2ifunding is a Leading Peer to Peer Lending Platform in India (BWDisrupt), Rated: A

i2iFunding is much more than P2P marketplace. Apart from providing end to end loan servicing, i2i diligently evaluates the credit risk of each of the loan projects, post which it assigns risk category and recommends an iWe raised Rs. 2 crore from individual angel investors in May 2016 and we are in discussion with various VC firms to raise $4-5 million in next few months.nterest rate for that project (a borrower can borrow at an interest rate which is higher than or equal to this rate). This helps the borrowers as well as the investors to have a benchmark interest rate. In the process, the investors get an opportunity to earn higher ‘risk adjusted returns’ while the borrowers get an opportunity to get funded at the lowest cost possible as per their risk profile and market based demand. We also provide legal and recovery support to investors in case of default by any borrower along with Principal Protection to ensure downside is limited for investors in case of default.

We raised Rs. 2 crore from individual angel investors in May 2016 and we are in discussion with various VC firms to raise $4-5 million in next few months.

In next couple of years, we would like to disburse at least 20-30 cr rupees every month.

P2P market size in India:
Following table is Based on a NSSO, Census of India report:

In 2011

Target Income class

3.9 – 9.75 Lakhs

Urban Households in this income range

579 Lakhs

Average Debt per household

INR 1.25 Lakhs

Total Debt Market

INR 7.2 Lakh Crores

Share of Non-Institutional Debt

14.60%

Non Institutional Debt

INR 1 Lakh Crores

Authors:

George Popescu
Allen Taylor

India’s unserved 1.1 billion potential borrowers

India’s unserved 1.1 billion potential borrowers

Financial inclusion is an extremely important eco-political topic in India. Account penetration has just inched past 53% according to news reports. A Bill and Melinda Gates foundations study threw up the following figures: Many reports confirm that only 8-10% of Indians have a formal loan. With a population size of almost 1.25 Billion, the market […]

India’s unserved 1.1 billion potential borrowers

Financial inclusion is an extremely important eco-political topic in India. Account penetration has just inched past 53% according to news reports. A Bill and Melinda Gates foundations study threw up the following figures:

Many reports confirm that only 8-10% of Indians have a formal loan. With a population size of almost 1.25 Billion, the market is not serving over 1.1 billion people.

Online P2P was born in America to precisely take advantage of this gap in the market. The 2008 financial crisis had left the US banks bleeding and they were in no position to extend retail and SME credit. P2P lenders like Prosper, Lending Club, OnDeck etc filled the space with innovative online-first credit models coupled with a hassle free onboarding experience. The same P2P revolution has now hit Indian shores with over a dozen originators fighting it out in one of the world’s biggest untapped market. i2iFunding is one of the pioneers in the market and has been growing strongly in this relatively unknown industry in India.

i2iFunding

i2iFunding was launched in late 2015 and is headquartered in Noida, India. It raised $300,000 at a $4 million valuation in an angel investment round. The team plans to raise another $3-$4 million in the next round of funding so that it can comply with any minimum capital requirement regulations set by the Indian Central Bank (RBI) in the coming months. Its founders come from various educational and working backgrounds, ranging from a nautical science engineer to a chartered accountant.

Vaibhav Kumar Pandey, MBA from IIM Ahmedabad comes with 10 plus years of experience in setting up large scale operations from scratch. Raghavendra Pratap Singh is an IIM Calcutta pass out and ex-merchant marine. He has over 10 years of experience in product development, e-commerce, and operations. Neha Aggarwal has an MBA degree from XIM- Bhubaneswar and has product development experience ranging from FMCG to finance sector. Abhinav Johary is also an MBA and has over 7 years of experience in business operations and setting up new processes. Manisha Bansal is a Chartered Accountant and has over 8 years of experience working on both domestic and overseas assignments.

Friends and families

Market penetration by established financial institutions is extremely low. Most Indians have to depend on friends and relatives or private money lenders who charge a very high rate of interest. In general, loan underwriting norms in India are stringent in comparison to most countries in the world and financial institutions indirectly discriminate on the basis of geographic location, no prior credit history, self-employment etc. Banks use out of date parameters to decide whether to approve the loan or not, which takes out the majority of the population even though they are credit worthy. And lucky few, whose loan application does pass all these arbitrary levels, have to wait patiently as application and documentation process takes over a month.

After witnessing the rapid growth of P2P industry, Reserve Bank of India (RBI) recently came out with a consultation paper to regulate the sector. The Reserve Bank of India wants P2P sector to bridge the gap between population and their access to different borrowing options. In their efforts to avoid the repeat of what happened in the Chinese market, RBI wants to regulate the market when it is still in a nascent phase and the number of players is less. Unregulated sector leaves the possibility open for unhealthy practices by one or more players which can have a detrimental effect on the market on whole.

Business model

i2iFunding business model is really simple; it acts as a connecting point between the verified borrower who is looking for unsecured personal loan and investor having an annual income of more than INR 1 million(around $15,000) who is looking for a higher rate of return than the normal savings instruments. The startup goes beyond CIBIL(Indian FICO) report and has developed its own proprietary credit score model which assesses the individual’s profile on 40 plus different parameters. So only the qualified borrower goes on the portal along with recommended rate of interest and risk category. The rate of interest is directly proportional with the risk category, higher the risk category higher will be the rate of interest. This gives the investor an opportunity to earn higher “risk adjusted return” and borrowers have the chance to get the funds according to their risk profile.

Security approach

The P2P lender has added another layer of security by executing physical verification to make sure the authenticity of the application and also to facilitate legal documentation between the borrower and the investor. To make sure default rates remain as low as possible, extra precaution is taken. Along with the loan agreement signed on a stamp paper, 3 post dated cheques are collected from each borrower. Apart from the documents provided by the borrower, it collects data from other external sources and verifies it independently. If the borrower doesn’t pay the EMI then the cheque is deposited in the bank and if the cheque bounces then legal proceedings are initiated against the borrower.

i2i earns revenue by charging one-time registration fees- Borrowers – INR100 and for Investors – INR500. After the registration, an investor can invest up to INR50, 000. Depending upon the risk category- A to F, processing fees for the borrower’s ranges from 3% to 6% and 1% is charged from an investor, for managing their investment. Ever since its inception it has got an overwhelming response, in its first full year of operation, it had more than 3500 registrations. So far 150 loan deals have been closed and 500 investors with an investment commitment of over INR 50 million have joined the i2i platform. Before it got its first round of funding, it was doing INR 0.5-1 million loans/ month and it has gone up to INR 3-5 million loans/month at a healthy monthly growth rate of 20%-25%.

Indian Fintech

All the players in the Indian fintech sector are start-ups and have been in operations for not more than 2 years. Its major competitors are Faircent, Lendbox, and I-Lend. i2i believes in the long run, the credit quality of its loans is what will set it apart from rest of its competition. It is the only P2P lender that offers principal protection to its investors, which shows how confident it is in its approval process. Principal protection is a major competitive advantage which can be leveraged to draw investors who still might not be comfortable with a sector in its infancy. It offers it investors’ returns of over 20% which is a massive 12% spread over bank deposits and a 10% spread over AA rated Indian corporate bonds.

India has all the makings of becoming one of the biggest marketplace lending markets in the world. There are about 350 million people in India who use the internet and the number is expected to rise to 1 billion by 2020-23. As more and more people get connected, the role of online lending is expected to grow manifold. With the majority of the population without credit access and the investing class wanting to earn a higher return on their investments, the potential is immense for i2i to become the first p2p unicorn in India.

Authors : Heena Dhir and George Popescu

George Popescu

August 5th 2016, Daily News Digest

August 5th 2016, Daily News Digest

News Comments Brexit gave a 500% boost to CrowdLending’s volumes. I would have expected it will give a boost to the lending capital interest, but it boosted the borrower interest, perhaps because borrowers believe that the Bank of England rate reduction was passed through to them and it made borrowing cheaper. I would love to […]

August 5th 2016, Daily News Digest

News Comments

  • Brexit gave a 500% boost to CrowdLending’s volumes. I would have expected it will give a boost to the lending capital interest, but it boosted the borrower interest, perhaps because borrowers believe that the Bank of England rate reduction was passed through to them and it made borrowing cheaper. I would love to see actual survey data of the borrower’s reasons for the increase in interest.
  • In the US the P2P spring is in full bloom: Prosper and Lending Club are in promising talks to put in place financing for $10bil in loans. Glad the winter is over.

United States

United Kingdom

India

Australia

Singapore

News Summary

 

United States

 Online Lender Prosper in Talks on Billion Loan-Buying Deal, (Wall Street Journal), Rated: AAA

Online lender Prosper Marketplace Inc. is in advanced talks with a group of investment firms to sell them roughly $5 billion worth of loans over the next two years, people familiar with the matter said.

The buyers in the talks include Fortress Investment Group LLC or an affiliate, Soros Fund Management LLC and Third Point LLC, along with investment bank Jefferies LLC, the people said.

The loans would be bought at face value, but the firms are also in discussions to receive equity warrants in Prosper as they make the purchases, the people added. The potential buyers are also talking to banks about borrowing money to support their loan purchases, and a deal could wrap up in the coming weeks, they said.

In addition to the deal with the four investment firms, Prosper has also started selling loans to BBVA Compass, the U.S. regional-banking unit of Spanish lender Banco Bilbao Vizcaya Argentaria, according to a bank spokeswoman. BBVA’s venture-capital arm took an equity stake in Prosper last year.

Now, Prosper’s deal to sell loans at face value would provide a measure of validation of investors’ confidence in its underwriting ability. It also may give it a leg up on bigger rival LendingClub.

LendingClub had previously held talks for billions in loan-buying commitments with some of the same funds, including Soros and Third Point, but didn’t finalize a deal, the Journal earlier reported.

Prosper and LendingClub have raised rates they charge to new borrowers over the past few months. Loans sold in June by Prosper were expected to yield 7.4% on an annualized basis and taking into account expected losses, according to the company. That is short of 8.5% on such loan portfolios in 2013, but is still chunky when compared with U.S. Treasurys and other fixed-income asset yields at or near record lows.

Although new buyers would be a sign of confidence in Prosper, the equity warrants being discussed may lead to dilution of existing investors, including those who bought in the fundraising round valuing Prosper at $1.9 billion last year. Prosper hasn’t raised money since, while shares of publicly traded LendingClub have fallen 76% in that time.

Prosper lending in the second quarter is expected to dip sharply again from $972 million in the first quarter, which was down from $1.1 billion in the fourth quarter of 2015, according to people familiar with the company. Earlier this year Prosper cut back on marketing to new borrowers, as did other platforms, the Journal reported.

LendingClub Said in Talks With Western Asset on Loan Buying, (Bloomberg), Rated: AAA

LendingClub Corp., looking to bolster demand for the consumer debts it arranges online, is in talks with Western Asset Management Co. to set up a fund that would purchase as much as $1.5 billion of loans over time, people with knowledge of the matter said.  Western, a subsidiary of money manager Legg Mason Inc., would commit to purchasing a certain amount of the lending platform’s loans each month, said one person, who asked not to be identified because the information is private. A deal may be announced in coming weeks, the person said. The agreement isn’t final, so the terms could change and talks may not result in a transaction.

“The real question is, what does Lending Club have to give up in exchange for that firm commitment?”

Western, which specializes in fixed-income assets, had about $460 billion of assets under management as of June 30, according to its website.

Lending Club’s Q2 Earnings: A Preview, (Seeking Alpha), Rated: A

Comment: This article is trying to predict what the earnings will look like and mean.

Summary

Lending Club will break $20B in originations.

Total operating revenue is likely to be between $110M-$125M, a decrease of $27-$42M from the first quarter 2016.

The company is likely to report a second quarter loss of between $90-$120 million, or $0.23-$0.31 per share.

Data suggests that retail investors are returning to the platform.

 

What is impressive is that within two months, Lending Club reacted by reducing headcount by 179 positions (11.5% of its workforce), tightening underwriting policies, and increasing oversight.

 

Despite these quick changes, the company has made no secret that this quarter’s results will be drastically lower than previous quarters. Total operating revenue is likely to be between $110M-$125M, a decrease of $27-$42M from the first quarter 2016.

This decrease in revenue, combined with several large one-time write-downs, means that the company is likely to report a second quarter loss of between $90-$120 million, or $0.23-$0.31 per share.

The company’s cash will be decreased by a further $40 million, as the company was obliged to fund approximately 2% of loan originations from its balance sheet. From a historical perspective, this will represent the largest percentage of loans funded from Lending Club’s balance sheet since December 2011. To add perspective, in Q1’16 the company funded just under $1M from its balance sheet, or 0.05% of originations.

Though diminished, the company’s cash should remain significant at approximately $420M. This cash reserve allows the company some flexibility moving forward.

Lending Club’s credit policy has evolved since its founding in 2007. Since December 2010, most of the evolution has been in the form of loosening credit restrictions for high-risk borrowers. Loosening restrictions widened Lending Club’s target borrower market and fueled faster growth.

Investor appetite for notes is returning

While Lending Club has not yet released data files pertaining to loans released in Q2’16, a look at the retail loan inventory on their website offers an insight on investor sentiment.

 

Since July 10th note releases have returned to 90% of their former levels and inventory levels have returned to historical levels, both of which suggest that retail note investors are returning to the platform.

Stock buy-back imminent?

As a reminder, in February 2016, the board authorized $150 million to repurchase shares in the open market.

Fintech Companies Prepare for Same-Day ACH, (Bank Innovation), Rated: A

On Sept. 23 a major milestone in the journey toward faster payments will be reached: New rules will go into effect that will enable the same-day processing of ACH payments. Vendors are working to make sure banks are ready to take advantage. Adam Anderson, CTO of Q2, a provider of cloud-based banking software, said that his company will have same-day ACH capability ready to go as soon as the new functionality is turned on. The most common uses of ACH for Q2 users are payroll, person-to-person and billpay transactions, Anderson said.

“Standard ACH comes with no web hooks, no API wrapper, no KYC-AML,” said Jordan Lampe, director of communication and policy affairs for Dwolla. Standard ACH has no procedures for handling rejects and no way to help users keep their compliance updated, for example. “But it is affordable and reliable. We’re extending that business value to other areas of the company.”

“The bulk of demand for ACH is from SMBs, commercial uses, as a replacement for wire uses”

BofA Sees Digital Payments Cutting Billion Cash-Handling Cost, (Think Advisor), Rated: AAA

Bank of America Corp., which spends about $1 billion a year handling cash, will save money and require fewer employees as more customers make payments electronically, Chief Executive Officer Brian Moynihan said.

FinTech Boom Slows, But Not Over, (Financial Advisors), Rated: AAA

“Funding is down year over year, too, but there are pockets of growth and an incredible amount of innovation going on,” says Aaron Schwartz, DeNovo head of research. “When we bifurcate fintech into subsectors or trends, we see some areas that are slowing down in the later stages in the investment spectrum, and other areas that are in the early stages that show very healthy growth.”

A significant portion of Americans underserved by the financial industry are young adults, says Schwartz.

Robo-advisors might not be the wave of the future, says Schwartz.

“Robos have attracted a lot of money, but now the incumbents are stepping into the market,” Schwartz says. “We’re starting to see more activities around different types of enabling technology.”

Kickfurther in Showcase for Start Up Day Across America, (Press Release), Rated: B

Mattermark rankings recently placed Kickfurther as the 4th fastest growing company in Boulder. The Kickfurther marketplace enables consumer product companies seeking capital to grow by sharing retail opportunities with individuals interested in entrepreneurship and consumer products.

Kickfurther is a leading inventory crowd­funding marketplace that connects companies with individuals.  Since its 2015 launch, Kickfurther has funded $9.6 million of inventory in 325 Consignment Opportunities by more than 270 companies. Kickfurther users have earned, on average, more than 2% consignment profit per month on completed Co-Ops.

Money360 Hits $ 100 M in Closed Commercial Real Estate Loans, (Crowdfund Insider), Rated: A

Money360, a commercial real estate online marketplace lending platform, announced on Thursday it has officially surpassed the $100 million in closed commercial real estate loans with the completion of $15.25 million in recently closed loans.

The company also reported it has seen a 100% increase in borrower applications being rejected by banks and CMBS institutions due to the increased regulations.

The online marketplace’s recent transactions does include a bridge loan for the acquisition of a multifamily property in Tucson, Arizona; a bridge loan for the renovation of a full-service boutique hotel in Aurora, Ohio; cash-out permanent financing for a single-tenant retail building in Dayton, Ohio; and a bridge loan for the refinance of an anchored shopping center containing 206,257 square feet of rentable area in Jacksonville, Illinois.

United Kingdom

P2P lending dip blamed on economic uncertainty and authorisation process, ( Bridging and Commercial), Rated: AAA

The Peer to Peer Finance Association (P2PFA) revealed that new lending fell to £658m in Q2 compared to £715m.

New lending to businesses fell to £406m from £445m, while new lending to individuals dropped to £252m from £270m.

Rhydian Lewis, CEO and co-founder at RateSetter, put the dip down to the authorisation process adding: “In recent months there’s been a levelling off in general borrower demand as people defer large purchases, perhaps reflecting economic uncertainty.

“The main story behind these latest figures on peer-to-peer lending is the continued expansion in the number of investors and borrowers – with more than 150,376 lenders and 332,107 borrowers currently using P2PFA platforms.

Landbay recorded a £5m increase in lending compared to Q1 and John Goodall, CEO and co-founder of Landbay, felt the P2PFA’s figures showed that peer-to-peer lending was still becoming an increasingly attractive option to investors and borrowers.

Crowd lending venture records surge in interest following Brexit vote, (Herald Scotland), Rated: AAA

THE LendingCrowd funding operation has enjoyed a surge in business following the Brexit vote, which it said reflected expectations the Bank of England would cut interest rates to boost the economy.

The company said applications for loans increased by over 500 per cent in July, compared with the same month last year although many fear the June vote in favour of the UK leaving the European Union will result in a sharp slowdown in growth in the UK economy. LendingCrowd said the total value of applications rose by over 600 per cent annually in July.

The increase in activity at LendingCrowd contrasts with reports that the Brexit vote has prompted some firms to put mergers and acquisitions activity on hold until the outlook is clearer. Founded by Mr Lunn with serial technology entrepreneur Bill Dobbie, LendingCrowd made 34 loans worth a total of £1.75 million in its first year of operations, to 30 September. It signed up 1100 investors.

Funding Circle portfolio on track, (Stock Market Wire), Rated: A

Funding Circle SME Income Fund’s board notes recent market commentary on Funding Circle loan performance and reiterates guidance that the company’s portfolio of credit assets, randomly allocated to it through each of the Funding Circle marketplaces, continues to perform in line with expectations.

The company’s US credit assets are projected to return in excess of 8% per annum on a net unlevered basis – consistent with historic performance observed on the Funding Circle US marketplace.

The company’s UK credit assets are projected to return in excess of 7% per annum on a net unlevered basis – consistent with historic performance observed on the Funding Circle UK marketplace.

The company is on track to deliver its dividend target of 6-7 pence per share per annum and total NAV return target of 8-9% per annum once fully deployed and levered.

Zopa Relocates: Moves Into New London Bridge Digs, (Crowdfund Insider), Rated: B

Last week, the team at Zopa announced they have officially moved from their Chancery Lane office to the peer-to-peer lending platform’s new location in London Bridge.

Zopa recently announced the appointment of its new Chief Technology Officer (CTO), Ronen Benchetrit.

Tyrie raises concerns about gov’t P2P tax incentives, (FT Adviser), Rated: AAA

On 1 June, Andrew Tyrie wrote to the Financial Conduct Authority calling for closer scrutiny of the peer-to-peer lending and crowdfunding market.

Answering Mr Tyrie’s questions in a letter published today (4 August), Ms McDermott said the regulator has been watching the crowdfunding sector closely and acknowledged the sector poses risks to consumer protection.

She made it clear that crowdfunding investors are not protected if they lose their money simply because the underlying investment fails, but that Financial Services Compensation Scheme protection will apply if the P2P platform fails to meet its obligations.

Ms McDermott said the FCA considers crowdfunding a high-risk investment activity, pointing to rules which mean this type of investment cannot be promoted to investors who have not received financial advice.

The regulator has been assessing both P2P and investment-based crowdfunding firms on whether they are making the risks clear to consumers, with Ms McDermott stating that since 2014, nine out of 10 crowdfunding promotions were withdrawn or amended.

By comparison, 12 out of 27 P2P promotions have been amended or withdrawn over the same period.

She also said the financial watchdog “remains cautious” about the risks posed to consumers by P2P firms and said the sector will continue to be supervised – particularly when it comes to promotions – as it moves further into the mainstream.

Bank of England Cuts Rates: Alternative Finance Leaders Respond, (Crowdfund Insider), Rated: A

Gonçalo de Vasconcelos, CEO and co-founder of SyndicateRoom, stated investors would seek out alternative investments.

Kevin Caley, founder and Chairman of P2P lenderThinCats reflected on the interest rate announcement saying it would help business.

Angus Dent, CEO of business “crowdlender” ArchOver, called the move an act of “no confidence”.

Peter Behrens, Chief Commercial Officer and co-founder at P2P lending platform RateSetter, called the act almost inconceivable:

“Only a  few months ago, a further cut to the base rate was almost inconceivable, but here we are. This cut will further reduce returns on savings accounts which already pay very close to zero. Given this, it’s not surprising that peer to peer lending is increasing in popularity, as investors look for better returns in exchange for taking on some risk: we’ve had a hundred thousand new visits to our website in July alone.”

Frazer Fearnhead, CEO of The House Crowd, added his voice that P2P lenders stand to gain from the rate cut.

Treasury urged to clarify law to allow P2P in Sipps, (FT Adviser), Rated: AAA

Peer-to-peer lending platform RateSetter is calling on HM Treasury to clarify the law to allow such investments within a self-invested personal pension.

The Financial Conduct Authority recently expressed concern that letting savers use their pension money to invest in peer-to-peer might shift the customer base towards investors who are less experienced or knowledgeable and might not fully appreciate the risks involved.

Speaking to FTAdviser, P2P platform RateSetter’s head of investor operations Ceri Williams questioned why P2P is not available through a mainstream Sipp wrapper, when it has already been approved for Isas.

RateSetter is working with four Sipp trustees who Mr Williams said recognised this collusion issue was not a problem. It already has 50 active Sipps open on the platform, amounting to around £3m in assets, all of which have been set up over the past year.

So far it has been smaller Sipp schemes that are comfortable with the concept, with Mr Williams adding larger schemes are nervous about the “remote possibility of collusion coming to light”.

“Within a standard Sipp wrapper, many of the assets are earning next-to-nothing.

India

Peer-to-Peer Lending Platform i2ifunding Announces protection fund, (India Today), Rated: A

i2ifunding.com investors will now have protection against loan defaults by borrowers in a first-of-its-kind [Comment: many other platforms have protection funds, it is unclear what makes this fund unique at this time] investor protection fund, which will allow its investors to enjoy up to 100% protection against loan defaults.

The participation in the Principal Protection Fund is available by default to all investors who lend through the platform. There are no extra charges for the same. i2ifunding.com will set aside 5% of the disbursed loans towards the Principal Protection Fund. The company has already created an initial corpus to set up the Investor Protection Fund.

Australia

Reckon Shares Details On Its Aussie Alt-Lending Entrance, (PYMNTS), Rated: A

One of the latest entrants into Australia’s alt-fin sector is Reckon. Primarily, Reckon provides small and medium-sized enterprises with cloud accounting solutions, but now, it’s utilizing the data it has about small businesses to its advantage by partnering with alternative lending company Prospa to underwrite loans to its SME users.

Reckon’s ability to use its small businesses’ financial data to underwrite loans issued via Prospa provides lenders with a potentially more robust way of being protected. That’s because bank underwriting processes are outdated, Rabie said.

According to MarketInvoice — another alternative lender based in the U.K. — Australian businesses wait an average of 26.4 days past-due to get paid, worse than any other market analyzed. The data, researchers pointed out, corresponds with research recently released by Dun & Bradstreetthat found that $19 billion is stuck in outstanding bills to businesses in Australia every year thanks to companies taking longer than the traditional 30 days to settle their invoices.

Singapore

Silver Bullion reports first-year results for gold & silver secured P2P loans, (Press Release), Rated: A

Launched on 5th August 2015, Silver Bullion’s P2P loan platform is unique in two key ways. Firstly, it is a P2P loan platform that allows borrowers to obtain a loan using physical gold and silver bullion as collateral. This gives lenders, seeking a good rate of return, confidence that their investments are safe. Secondly, it is the only secured P2P loan platform to allow its customers to set the rate of return which they lend or borrow.

It is a secure lending platform since the loans have physical bullion as collateral. Borrowers can only borrow up to 50% of the value of the bullion they store with us. Should a borrower is unable to pay back the loan, the collaterized bullion would be liquidated and the lender receives the full principle plus interest.

Today is the first anniversary of our P2P loan platform and we are releasing the results today. We are delighted to have seen good borrowing activity this past year.

More importantly, there were zero borrower defaults and lenders received the funds due to them on time. We aim to continue making the platform secure for our lenders. This is unique and important because the most common caution against investing on a P2P lending platform is the risk of default.

Due to the safety that Silver Bullion’s loan platform gives to lenders, 72% of the matched loans were initiated by borrowers. The company has seen more than 30 loans matched consistently each month since March 2016 – a rate of more than 1 matched loan per day. Interest rates across all loan tenures currently hovers between 2.5% and 4.5% per annum. Unlike unsecured P2P lending platforms, loans matched by Silver Bullion’s lending platform are fully backed by physical gold and silver. Loans with tenures longer than 6 months begin with a collateral-to-loan value of 200%. The exceptions are loans with the 1 month tenure which have a lower collateral-to-loan value of 160%.

Author:

George Popescu