Over the last half decade, rates of account takeover have multiplied significantly. According to a PYMNTS.com report, account takeovers jumped 300% in 2017, and have been rising ever since. The trend was particularly pronounced in the lending space. Lenders lost $4 billion from account takeovers last year, according to Javelin Strategy and Research. In order […]
Over the last half decade, rates of account takeover have multiplied significantly. According to a PYMNTS.com report, account takeovers jumped 300% in 2017, and have been rising ever since. The trend was particularly pronounced in the lending space. Lenders lost $4 billion from account takeovers last year, according to Javelin Strategy and Research.
In order to combat this type of fraud with innovative technology, lenders must learn what account takeover entails.
Online Lending Fraud: What Is Account Takeover?
Account takeover is a form of financial identity fraud. It’s when a fraudster uses a victim’s identity and financial accounts to fraudulently secure a loan and then steal the funds. Fraudsters apply for a loan in the victim’s name, transfer the funds into the victim’s account, withdrawal the money, and then disappear.
Account takeover is riskier than other forms of identity fraud, but it comes with several advantages for fraudsters who want instant gratification. The fraudster does not need to build a fake identity or financial infrastructure to commit the fraud. The fraudster is essentially taking over a person’s identity, pre-existing accounts, and credit history to illicitly funnel money into a safe haven.
Account takeover is facilitated like most other kinds of identity fraud. A bad actor obtains sensitive information, such as bank account numbers, usernames and passwords, and other key credentials from personal contacts, malware, phishing, or other violations of a victim’s privacy. The fraudster takes out a loan in the victim’s name, and routes the funds into the victim’s account.
Once the funds are in the victim’s account, the fraudster moves the funds into an intermediary account by circumventing bank security protocols. These circumvention methods include SIM swaps, associating new phone numbers with the bank account, SMS-grabbing malware, cloning phone identifiers, and other methods.
After the money is in the intermediary account, the fraudster cashes out the funds by making ATM withdrawals, purchasing cryptocurrencies, transferring funds to online payment platforms, or buying e-commerce goods, among other methods. The fraudster might try to hide the origin of the money by employing “mules,” or agents who transfer illegally obtained money, either wittingly or unwittingly.
Combating Account Takeover with Technology Solutions
Account takeover poses unique challenges to online lending, but novel technologies can help lenders fight back against this form of fraud.
ThreatMetrix by LexisNexis Risk Solutions provides data that detects suspicious behavior or compromised devices before fraudsters can initiate account takeovers. ThreatMetrix’s Digital Identity Network analyzes millions of transactions across billions of devices for thousands of leading global businesses. This data allows organizations to verify that customers are who they say they are.
RSA Web Threat Protection uses behavioral analytics to separate fraudulent activity from legitimate transactions. The solution tracks a large variety of fraud threats, such as new account fraud, fraudulent money transfers, password guessing, credential harvesting, mobile and web session hijacking, and other behaviors that suggest potential account takeover attempts.
Fraud.net has an award-winning AI-powered suite of enterprise tools to manage risk for clients such as online lenders. Fraud.net’s AI, analytics, and data mining platform can quickly identify common schemes and attack methods, including account takeover. The suite’s ‘early-warning’ monitoring, powered by multi-dimensional risk analytics, helps to uncover account takeover fraud before it happens.
Account Takeover: A Manageable Issue With the Right Technology
Account takeover is one of the most expensive and fastest growing forms of online lending fraud. However, with the right solutions, lenders can combat account takeover and minimize the negative impact it has on profit margins, platform security, public image, and the customer experience.
Kevin Bartley is the content manager at Ocrolus.
Headquartered in NYC, Ocrolus is an intelligent automation platform that analyzes financial documents with over 99% accuracy. By eliminating manual reviews, Ocrolus empowers companies to reinvest human capital and automate processes with industry-leading speed and accuracy. Ocrolus services hundreds of customers in the financial sector and analyzes millions of data points every day. The company has raised over $30 million in venture capital, backed by Oak HC/FT, FinTech Collective, Bullpen Capital, and QED Investors, among others. For more information about Ocrolus, visit www.ocrolus.com.
According to Javelin Strategy & Research, account takeover fraud increased by two million new fraud victims from 2015 to 2016. That represents a 16 percent jump in new fraud cases of that kind in just one year. The problem isn’t getting better. As the alternative lending landscape grows with increased technological advancements, and the number […]
According to Javelin Strategy & Research, account takeover fraud increased by two million new fraud victims from 2015 to 2016. That represents a 16 percent jump in new fraud cases of that kind in just one year. The problem isn’t getting better.
As the alternative lending landscape grows with increased technological advancements, and the number of lenders using alternative credit data and alternative lending practices increases, so too do the number of attempted frauds. Experian’s Clarity Services is an alternative credit data provider with solutions designed to decrease default rates and flag potential fraud before it happens.
Three Distinct Types of Lending Fraud
Online lending fraud can take on any number of different characteristics, many of them quite sophisticated. But there are three general categories of lending fraud that online lenders should concern themselves with.
First-party fraud is when borrowers use some sort of deception to trick a lender into believing they are a good credit risk and get away with money they do not intend to pay back.
Second-party fraud is a type of lending fraud in which the fraudster is a friend or trusted acquaintance of the party whose name is on the application.
Third-party fraud, often called “identity theft” or “identity fraud” is when someone submits a fraudulent loan application in someone else’s name pretending to be that person. However, unlike second-party fraud, the perpetrator is unknown to the victim and probably acquired the victim’s identity illegally or in underhanded ways.
Each type of fraud presents its particular challenges and should be fought in different ways. This article will focus on first- and third-party fraud.
The Threat of First-Party Lending Fraud
First-party fraudsters are difficult to detect because they apply for loans under their own names. In many cases, the clues that they do not intend to pay back a loan are very subtle and easy to miss.
One popular type of first-party fraud is loan stacking. This is when the applicant submits multiple credit applications at different lenders on the same day hoping to be approved for several unsecured loans. They then accept the various loan offers available to them, take the cash, and never intend to pay it back. For online lenders, where credit standards are often lower than at banks and loans are approved much more quickly, it has become a real problem. Javelin Strategy & Research claims it costs lenders $340 million in annual losses.
The good news about first-party fraud is that it can be detected using powerful predictive tools, which allow online lenders easy and quick alerts to inconsistencies, fabrications, and misrepresentations in loan applications.
The Varieties of Third-Party Lending Fraud
Third-party fraud is a little more subtle. In this case, another party is applying for a loan pretending to be someone else. They’re actually using real-life facts about the victim in order to deceive the lender into giving them money. It is really difficult to detect when fraud rings get their hands on stolen identity information that allows them to apply for multiple lines of credit at several lending institutions. Again, alternative finance lenders are often easy targets.
Here are six types of third-party lending scams often perpetrated against alternative lenders:
Identity theft – Identity theft takes place when personal financial information is obtained illegally for the purpose of assuming that person’s identity. Information can be acquired in a number of ways including dumpster diving and sifting through trash bins looking for credit card bills and other account documents, hacking into databases or mobile phone apps where personal identity information is stored, or buying it on the black market.
Account takeover fraud – An individual or fraud ring gains access to digital data, usually by hacking or phishing. Then they use credit information such as credit card numbers, bank accounts, etc. to access the victim’s money in those accounts.
Information fabrication – This type of fraud relies on falsifying information about a party in such a way that it is believable. For instance, falsified pay stubs for a fictional job are often used to prove current employment.
Synthetic identity fraud – This type of identity fraud now accounts for 85 percent of all identity fraud in the U.S. Fraudsters combine real identity information with falsified information about a supposed credit applicant in order to defraud the lender.
Credit piggybacking – This sophisticated scheme involves a fraudster being added as an authorized user on a credit account in good standing in order to instantly increase the fraudster’s credit score and thus, the likelihood of a loan approval.
Loan stacking – As mentioned previously, loan stacking occurs when an individual applies for multiple loans from different lenders. Third parties can wreak havoc on a victim’s credit file and get away with a lot of cash using this fraudulent scheme.
Fraud can be quite sophisticated, targeting alternative lenders and, in many cases, the most unlikely victims. For instance, a loan stacking ring could obtain the credit information of subprime individuals, use credit piggybacking to boost their credit scores, and add some synthetic identity elements to bamboozle a small lender into approving someone who otherwise would never be approved for credit. Often, they get away with such schemes due to lack of detection and fraud prediction tools.
How to Catch a Fraudster
Experian’s Clarity Services has designed solutions specifically to detect fraud before it happens using predictive variables to look at over 250 fraud-specific attributes. Clear Fraud Insight is designed to lower alternative lender default rates and detect potential fraud before a loan is approved. Some preliminary results have shown a 60 percent increase in acceptances while defaults remained constant, and alternatively, an 11 percent reduction in defaults as acceptance rate remained unchanged.
Different lenders should expect different results. Nevertheless, isn’t it time to upgrade your risk assessment tools?
Trust is the root of all business transactions. For any financial institution to lend money or offer a banking service, being able to identify the counterparty is a must. And though anonymity is a blessing in a lot of situations, business cannot be conducted under the cloak of secrecy. Financial services are a particular focus […]
Trust is the root of all business transactions. For any financial institution to lend money or offer a banking service, being able to identify the counterparty is a must. And though anonymity is a blessing in a lot of situations, business cannot be conducted under the cloak of secrecy.
Financial services are a particular focus area for the highest standards in identification, especially due to the strong regulatory push on money laundering, terrorism financing, and KYC (Know Your Customer). Also, according to the World Bank, around 1.1 billion people worldwide cannot prove their identity. They form a major chunk of the 2.5 billion people who don’t have access to financial services. This highlights that identity is a fundamental part of financial inclusion.
Mitek Systems, a global leader in mobile capture and identity verification software solutions, is in the forefront of this growing niche industry. We had an exclusive chat with the company CTO, Stephen Ritter. He gave his views on the opportunity and developments in the ID verification space and how it will be an underlying pillar for the growth of fintech lending and blockchain-led services.
Mitek’s Business Model and Technology
Mitek started as a software company and has evolved to become the leader in mobile banking and mobile deposit solutions. It enables bank customers to take picture of checks for depositing, rendering the physical deposit process redundant. It has entered the digital ID verification market and has developed artificial intelligence (AI) and machine learning-powered proprietary algorithms. It will verify the ID by having the user take a picture of a government-issued ID and compare it with a selfie. This allows the software to cross verify the selfie face with the picture on the government-issued ID.
Mitek’s solutions specializes in accurately identifying the personal document, and can even recognize and evaluate IDs of multiple countries. It can also extract relevant information from the document. Its advanced forensic algorithms can detect signs of forgery or fake documents. Further, it can distinguish good and bad documents and provide a risk score to determine if the document can be trusted. Its algorithms can also determine if the human face is real or a spoof.
The company’s core competency is computer vision, a specific niche within machine learning. The company has been developing software in the field for the last 15 years and considers itself among the pioneers in the space. With the intense speed of development in the field, the company is actively working with partners for integrating third-party sophisticated technology into their own solutions.
The main solutions provided by Mitek include:
Mobile Fill – A solution which allows personal information to be pre-filled in the forms of the applicants, taking help of the Mobile ID capture solution provided by Mitek.
Mobile Verify – A combination of Mitek’s computer vision technology and auto capture experience, Mobile Verify validates the authenticity of identity documents thereby simplifying the KYC compliance processes.
Mobile Deposit – Mobile deposit is a solution that helps in saving time by allowing the person to deposit checks to the participating banks by uploading the image using the device’s camera.
Mitek’s Competition, and Its Impact on Lending
Mitek has an operating history of over two decades. With more than 6,100 banks and financial institutions as customers, the company has a wide moat compared to startups entering the field. Its direct competitors are few and usually early-stage companies. The more traditional players in the space would be the ones that follow the data bureau approach and are beginning to integrate mobile verify solutions for verification of IDs into their platforms.
Lending will receive a boost across the board as lenders, both traditional and alternative, will be able to onboard customers faster and more securely. Alternative lenders, in particular, should see higher approval rates for prospective borrowers with increased confidence they are not being defrauded. Mitek is currently processing over several million ID documents a month. Both MoneyGram and Kabbage use Mitek’s MobileVerify technology. The company is seeing major traction in the fintech lending industry as players are nimble and the first target for most fraudsters.
Financial Inclusion, Privacy, and Real Life Applications
Ritter believes governments need to step up their efforts in ensuring everyone has access to an identity proof. Financial inclusion is positioned prominently in the United Nation’s 2030 Sustainable Development Goals agenda, and the need for a digital identity goes far beyond the ability to participate in the formal economy. Its impact is multifold and helps to increase overall trade and access to healthcare and government services. Mitek is also focused on data privacy laws, with GDPR the hot topic in Europe. It has taken GDPR as its baseline for information security and is operating with GDPR recommended data security not only in Europe but across the globe.
Kabbage Case Study
Kabbage facilitates easy funding options to small and medium enterprises through its automated technology-backed data platform. With Mitek’s digital identity verification solutions integrated into the Kabbage platform, users are able to automatically populate the loan application form with pre-filled data in less than a second allowing customers to access funding quickly. Mitek’s solution applies advanced algorithms that automatically assess the authenticity of the driver’s license, providing assurance about the identity of the ID’s holder and reducing the likelihood of fraud during the loan application process.
Anonymous Payments Processor Case Study
Customers were facing a lengthy identity verification process, which forced them to leave the platform before completing the transaction. Driven by the need to comply with Anti Money Laundering (AML) and KYC regulations, a leading global payment processor selected Mitek’s Mobile Verify to provide the customers with more efficient ways to reduce the verification process from days to just minutes. Mitek was able to eliminate 92% of the temporary restrictions that the company previously had to place on customer accounts whenever they would reach a certain dollar threshold. By eliminating these temporary restrictions, the company has improved customer experience as well as increased profitability.
Mitek’s Collaboration with Nocks
Mitek’s digital verification identity has enabled blockchain payments platform Nocks to improve their customers’ onboarding by 98%. A cryptocurrency payments platform, Nocks also has to execute AML and KYC compliances. Nocks has now been able to verify the identity of applicants in real-time, dramatically improving new customer conversion rates due Mitek’s Mobile Verify interface.
MoneyGram Case Study
MoneyGram, the money transfer giant, is also using Mobile Verify to validate its customers’ ID. To complete the identity verification step in the money transfer process, MoneyGram customers simply take a picture of their passport or other identity document using their mobile device camera. Mobile Verify then uses advanced machine learning technology to instantly validate the authenticity of the ID.
Mitek is Experimenting With the Blockchain
Mitek is also developing technology to leverage blockchain infrastructure. The public ledger approach in general is interesting as it could allow for generating self-sovereign IDs which are owned and managed by the users themselves. When businesses need their information, people can control their data and allow only limited or conditional access. Moreover, even banking customers are exploring blockchain-based solutions, and Mitek is experimenting to integrate its ID verification systems on a distributed ledger.
Mitek’s Technology Leadership
Mitek was founded in 1985 and is listed on NASDAQ with a market cap of an estimated $250 million. Mitek’s innovative solutions are embedded into the apps of more than 6,100 organizations and used by more than 80 million consumers.
Stephen Ritter is the Chief Technology officer (CTO) of San Diego-based Mitek Systems. He helps in the technological development of the key processes of the company, along with overseeing Mitek Labs. He has more than 22 years of experience bringing new commercial software solutions to market. Ritter worked as tech lead with Emotient (acquired by Apple) before he joined Mitek.
With the increase in regulatory complexities and fraudulent practices, it is critical for businesses to make sure that they are on the right side of the law and yet are simultaneously making their customers’ life easier. Mitek helps them balance this fine line with its suite of sophisticated identification technologies.
News Comments Today’s main news: Ron Suber joins MoneyLion board. Prosper reports full year results. Orca launches P2P investment platform. Santander, Ripple partner on money transfer app. Cash Suvidha raises $1M. China opens payment market to foreign companies. Today’s main analysis: The cost of bankruptcy. Today’s thought-provoking articles: LendingTree studies the cost of bankruptcy. Liwwa creates big impact in MENA. The lowdown […]
The cost of bankruptcy. “Mortgage borrowers with scores between 720 and 739 three years after bankruptcy were offered similar APRs to those without bankruptcy, indicating a strong credit score can counteract the effects of a prior bankruptcy.”
Prosper today reported full year results for 2017. Loan originations and transaction fee revenue were up 31% and 37% year-over-year to $2.9 billion and $130 million, respectively. Prosper also generated cash from operations for three consecutive quarters, starting in Q2 2017.
Summary of Key 2017 Financial Highlights:
Surpassed $11 billion in cumulative personal loan originations through the platform since inception
Increased loan originations 31% and transaction fee revenue 37% year-over-year
Net loss of $115 million included $89 million of non-cash charges related to warrants to purchase preferred stock that were issued to a consortium of investors and a third party in connection with a settlement agreement
Adjusted EBITDA(1) of $5 million increased $43 million year-over-year
Generated cash from operations for three consecutive quarters, starting in Q2 2017
Closed $50 million Series G funding, ending 2017 with approximately $100 million of liquidity
LendingTree today released the findings of its study on the cost of bankruptcy. The findings show that while a prior bankruptcy can make it more expensive to borrow, it’s certainly not impossible to qualify for credit. If borrowers wait to apply for new loans even just a few years after bankruptcy, they may find rates that aren’t too far off from what other borrowers are being offered.
Forty-three percent of people with a bankruptcy on their credit file have a credit score of 640 or higher within a year of the bankruptcy. Within two years of bankruptcy, 65 percent have a credit score above 640.
A typical $15,000 auto loan incurs an extra $2,171 in borrowing costs for those seeking offers less than a year after bankruptcy, but just $799 for those who wait at least two years after bankruptcy.
Borrowers who have a 3-year-old bankruptcy and apply for a mortgage see an offered APR that is 19 basis points higher than those without a bankruptcy. The higher the APR, the higher borrowing costs will be.
Mortgage borrowers with scores between 720 and 739 three years after bankruptcy were offered similar APRs to those without bankruptcy, indicating a strong credit score can counteract the effects of a prior bankruptcy.
Despite becoming a bank holding company, Goldman’s business remained focused on corporations and the wealthy. That changed a few years ago as it began plotting new strategies, says Omer Ismail, chief commercial officer for Marcus. The Wall Street Journal recently published an in-depth account of the creation of Marcus, including juicy tidbits like conversations over lunch in the Hamptons.
Goldman decided to tackle the unsecured personal loan space first.
Marcus has found its particular angle in making its loans highly customizable. Rather than setting traditional loan terms, like three years or five years, it asks you how much you can afford to pay each month in addition to asking you how much you need to borrow. So, you might end up with a 31-month installment loan, which is not a conventional loan term.
Synthetic identity fraud usually involves creating an entirely new identity composed of information with no ties to a known consumer. This identity is then used to apply for credit and services. Synthetic identities are one of the most difficult fraud threats institutions face today and their prevalence has exploded over the past several years. Synthetic identity fraud is arguably the perfect crime because there is no consumer victim.
Put yourself in the shoes of a fraudster. As you consider your many nefarious options for committing a crime and getting away with it, you decide that the best crime is one where there is no clear victim. Sure, robbing a bank using a synthetic identity victimizes the enterprise, its shareholders, its employees and taxes its customers. However, no one individual is intentionally, directly hurt. Therefore, the non-existent victim does not alert authorities and the fact that a crime has been committed is lost to history. There is a “credit loss” and the debtholder is impossible to locate. The debt is written off, or sold, and the fraud is perpetuated yet again. Like I said, the perfect crime.
The average borrower in Hawaii spends 36.2 percent of their monthly paycheck on credit card, student loan, and housing payments, according to a study by Credible.com, making Hawaii the state with the highest average debt-to-income ratio.
According to the online lender marketplace, the average monthly credit card payment for a Hawaii resident is $238, the average monthly student loan payment is $385, and the average monthly housing payment is $1,091, for a total of $1,714.
With average annual income in Hawaii at $56,889, the state’s average debt-to-income ratio is 43 percent more than residents of Michigan, the state with the lowest debt-to-income ratio.
On average, Michigan residents in the dataset spent 25.3 percent of their monthly income on credit card, student loan and housing payments.
Nationwide, the study found the average American in the dataset paid $207 on credit card debt, $370 on student loans and $906 on housing each month, while taking home an average salary of $60,671.
When fund managers choose experienced service providers, including custodians, auditors, accountants, attorneys and administrators, they can increase transparency in the fund, which can in turn promote investor confidence. Service providers can be much more than just an added expense; they can be valuable partners that can help position the fund for success.
Orca, an independent data, research and analysis provider targeting the the UK peer-to-peer (P2P) lending market, has launched its premier investment platform. The new platform will allow investors to easily diversify across multiple P2P lending platforms from a single P2P investment portfolio.
Orca seeks to provide their new service to the retail investor market.
Total cumulative lending is £13 billion since the asset class was created in 2005. Orca’s secondary service, Orca Analytics, has 2016 to 2017 growth at 18%, with £4 billion lent in 2017 alone. The estimated customer-base stands at approximately 200,000-250,000 retail investors.
The Orca Investment Platform Features include exposure to both consumer, business and property lenders. Investors may expect a return of 5% net of Orca’s cut which is a 0.65% fee.
Khosla said his firm is already in “open conversations” with multiple countries about its global expansion plans, including the U.S., Canada, Spain, Italy, Germany, Singapore, South Africa and Australia. The company has already established offices in some of those countries, he added.
OakNorth is expanding abroad by licensing its technology platform, ACORN, to banks in other countries. The platform uses big data and machine learning to optimize credit for small-to-medium sized enterprises (SMEs).
OakNorth offers loans between £500 and £30 million to SMEs. It was granted a banking license by U.K. regulators in 2015.
‘No firm views’ on IPO
OakNorth is currently valued at $1.4 billion, which puts it in the ranks of the U.K.’s “unicorn” companies — firms valued at $1 billion or more.
IFISAs are also a way for investors to do something interesting with their savings. For example, Oaksmore has recently launched an Isa which allows investors to capitalise on historic renovation.
This particular IFISA, specialising in historical building renovation, offers a tax-free return of up to 7.5 per cent each year.
Another lender trying to do some- thing different is Folk2Folk, a peer-to- peer platform for rural and local businesses. It is offering an IFISA which gives lenders the opportunity to earn 6.5 per cent interest a year, while supporting British businesses within their local area.
Banco BNI Europa launched an online account opening process through videoconference. This new process also introduces an innovative system of documents signature with a qualified digital certificate and is available for Portuguese citizens who want to open an individual current account. The process is simple, fast and intuitive, without the usual bureaucracies associated with account opening.
This product is offered in partnership with DigitalSign, a Portuguese Certifying Entity specialized in the issuance of qualified digital certificates, registered in the National Security Office as an accredited entity. The partnership with Digital Sign allows, in addition to the online account opening, the issue of a digital certificate, with similar strength to a physical signature, which may be used by the client in the context of other contractual relations with the Bank.
Santander is on track to launch an international money transfer app in partnership with fintech startup Ripple in the next few months, the bank’s UK CEO has confirmed.
Nathan Bostock told the International Fintech conference in London on Thursday: “This spring, if not one beats us to it, we will be the first large retail bank to carry out cross-border payments at scale with blockchain technology.”
Peoples Trust Company of Saint Albans has selected Finastra to provide a single, end-to-end lending solution for commercial and consumer lending. Using Finastra’s Total Lending solution, which packages the power of the Fusion LaserPro, Fusion DecisionPro and Fusion CreditQuest products, the bank will be able to manage its lending process from origination through to booking and thus increase efficiency and customer service.
FintruXNetwork is a global P2P lending blockchain-based ecosystem, powered by Ethereum. FintruX Network aims to connect borrowers, lenders, and rated service agencies. FintruX facilitates marketplace lending in a true peer-to-peer network to ease the cash-flow issues of small businesses and startups. The startup announced today it has successfully raised over 22,000 ETH ($25 million) in token sale from contributors around the world. The proceeds of the sale will be used to build an Ethereum-based platform that will fundamentally enhance the P2P loan experience for small businesses and startups.
Delhi-based fintech startup, Cash Suvidha, has raised $1 million in its pre-series A round of investment from Initia Holdings Ltd., Vipin Agarwal, Partner in India Industrial Growth Fund and others. The company plans to use the newly secured funds to increase customer base and to further strengthen its technological infrastructure.
The company claims to receive 15,000 loan applications every month and disbursement of loans in another 2 working days. The company has raised a total of $5.2 million and claims to have disbursed over Rs 152 crore.
Further, Cash Suvidha has disbursed loans to over 35,000 borrowers with an average ticket size between Rs 20,000 – Rs 5,00,000.
Reportedly, India’s largest public sector bank, State Bank of India is looking to create a blockchain-based exchange for Non-Performing Assets (NPA’s).
To be launched in association with 30 banks, this platform will assist the banks in data-driven price discovery.
SBI is said to have assets over $460 Bn and offers services in areas such as retail, corporate banking, financing, and insurance. The Indian banks are said to have to battle with NPA’s worth $210 Bn of which $30 Bn resides with SBI alone.
Broadly, there are three types of software systems that enterprises employ. These include:
a)Systems that help in running a business process
b)Those that help companies to grow their businesses
c)Systems that transform businesses
In the year 2013, China reported an eight-fold rise in the total number of borrowers that touched 1,49,300. The growth continued through 2014, with total borrowers reaching 630,000 by the year’s end.
Traditionally, lenders considered credit score as the key parameter in defining a borrower’s creditworthiness. In case of digital lending, a borrower’s risk profile is defined based on aspects such as Aadhaar for identification, salary slips for working professionals, and the applicant’s financial behavioral patterns determined based on information curated from online sources such as social media channels.
Boston Consulting Group estimates that by 2020, 48% of India’s internet users will be rural and of that, 21% will be women.
QARASoft’s now-defunct platform, called “QARA,” connected individual asset managers with funds pooled — or borrowed — from peer-to-peer investors, in part by making use of the venture firm’s artificial intelligence-powered robo adviser.
The “decentralized” platform collected some 100 retail investor loans in the first two weeks. But they were retrieved after the Financial Supervisory Service banned its operation, despite a patent earned the previous year for the pooling scheme of the fund and the platform’s three-year operation of its beta version.
The service will primarily target retail investors in overseas markets in the United States, the United Kingdom and Singapore, and the English version will be launched prior to a Korean version.
SMALL business executives who took part in the AmBank BizRACE gained a new perspective in managing their operations, allowing them to bring the business further.
The top 15 finalists in the programme recently completed two, out of four, executive development programmes at Menara AmBank.
Peoplender Sdn Bhd chief executive officer Kristine Ng, a participant in the programme, said she was inspired with a new structure for her business after the first day itself. Ng recalled one of the trainers talking about constraints that one would face in growing businesses – if it doesn’t fit the business model, then change must occur.
According to the World Bank, 63 per cent of Mena SMEs do not have access to capital.
In Jordan, SMEs represent 97 per cent of companies and create 70 per cent of new jobs in the kingdom, according to Oxford Business Group, Jordan: Finding Financing for SMEs.
Liwwa is a peer-to-peer lending platform in the Mena region that provides SMEs with trade and asset financing. Liwwa’s target audience is divided into borrowers and investors, also referred to as lenders. To date, liwwa has maintained a solid portfolio and delivered annual returns of 10.6 per cent.
The liwwa index delivered 9.45 per cent over the last 12 months, which is attractive.
Liwwa has raised $5.55 million from investors and $6 million in debt to date. Their investors include Silicon Badia, Bank Al Etihad, DASH Ventures and Mena Venture Investments. Their debt partners include Bank Al Etihad, Capital Bank, Arab Bank and the Dutch Good Growth Fund.
News Comments Today’s main news: RateSetter’s IFISA finally arrives. Renaud Laplanche to keynote at LendItFintech USA 2018. LendingClub makes changes to IRA product. Goldman could be buying Clarity. Today’s main analysis: LendingTree January 2018 Personal Loan Offers Report. LendingTree January 2018 Mortgage Offers Report. Today’s thought-provoking articles: Amsterdam gaining ground on London as Europe’s fintech capital. Senmiao Technologies sets terms […]
LendItFintech, the world’s leading event in financial services innovation, today announced that Renaud Laplanche, founder and CEO of Upgrade, Inc., will join the keynote speaker roster for LendItFintech USA 2018. For three days, the world’s most prominent and emerging fintech CEO’s will gather at the Moscone Center to focus on the hot button topics and issues exploring the future of finance.
Laplanche’s keynote speech will focus on his vision for Online Lending 2.0 and in particular how new technology, blockchain, enhanced processes and the combined learnings of the past 10 years have helped make online lending better for consumers and investors alike.
Laplanche will also unveil Upgrade’s next major consumer credit product that industry observers are already touting “the biggest innovation in financial services since the credit card. Also, to illustrate how the Online Lending 2.0 principles help create more value for consumers and enable faster growth while achieving better risk management, compliance and credit performance, Laplanche for the first time, will release metrics about Upgrade exactly one year after its public launch.
Tax rates for 2018 start at 10% and go up to 37% for the highest wage earners. It’s important to understand how this ordinary income affects taxes compared to other asset classes like equities.
Let’s assume you decide to invest through a taxable LendingClub account. In a given tax year, you are only allowed to deduct $3,000 in losses against your ordinary income unless you have capital gains to offset the losses.
If you have a sizable investment in LendingClub and have no capital gains you’ll have to carry forward any losses beyond the $3,000 to future years.
LendingClub Offering a Bonus for IRA Investors
After understanding the benefits of investing through an IRA it’s worth mentioning that LendingClub offers bonuses for new accounts. The bonuses range from $25 all of the way up to $3,000 and are available on Traditional IRAs, Roth IRAs, SEP IRAs or SIMPLE IRAs. Below are the bonus amounts in place for 2018.
TaxSlayer, a leading online and professional tax and financial technology company, today announced a strategic partnership with Kabbage, Inc., a global technology and data platform powering small business lending. The collaboration offers qualified small business customers hassle-free access to lines of credit up to $250,000 from Kabbage, and exclusive tax resources, including tips, promotions and discounts from TaxSlayer.
TaxSlayer customers will have access to:
Lines of credit from Kabbage up to $250,000 for qualified borrowers
Promotions from Kabbage, including a $100 gift card after qualification
Excellent credit (760+ score): Offered APRs to consumers with a credit score of 760+ averaged 7.41% in January.
The average best APR offered to all borrowers with credit scores of 760 or above was 7.41%, a decrease of 13 basis points from the prior month, and 47 basis points from the same period one year ago.
At $24,218, the average loan amounts offered with the best APRs to all borrowers with a score of 760 and above, was down up 17 basis points ($41) from December, but up over 23% ($5,607) from the same period one year ago.
The top 10% of offers, presented to borrowers with the best profiles within this group, had APRs of 4.98% on average, and loan amounts of $34,892. A borrower with this APR and loan amount would save $2,896 by consolidating debt with a 10% APR over a three-year term.
Good credit (680 – 719 score): Offered APRs to consumers with a credit score between 680 and 719 averaged 15.79% in January.
The average best APR for all borrowers with credit scores of 680 – 719 was 15.79%, down 12 basis points from last month, but up almost 200 basis points from a year earlier.
At $15,628, borrowers with scores of 680 – 719 saw the amounts offered with the best APRs increase by 1% ($160) in the last month, but drop by 1.72% ($268) from January 2017.
The top 10% of offers, presented to borrowers with the best profiles within the 680 – 719 credit score range, had an average best APR of 7.19%, offered with an average loan amount of $24,130. A borrower with this APR and loan amount would save $3,215 by consolidating debt from a 15% APR over a three-year term.
January’s best offers for borrowers with the best profiles had an average APR of 3.93% for conforming 30-year fixed purchase loans, up from 3.80% in December. Refinance loan offers were up 5 bps to 3.75%.
For the average borrower, purchase APRs for conforming 30-yr fixed loans offered on LendingTree’s platform were up 13 bps to 4.55%. The loan note rate hit the highest since March 2016 at 4.45% and was also up 13 bps from December.
Consumers with the highest credit scores (760+) saw offered APRs of 4.41% in January, vs 4.70% for consumers with scores of 680-719. The APR spread of 29 bps between these score ranges was 1 bps narrower than in December but still near the widest since this data series began in April 2016. The spread represents nearly $15,000 in additional costs for borrowers with lower credit scores over 30-years for the average purchase loan amount of $238,518.
Refinance APRs for conforming 30-yr fixed loans were up 15 bps to 4.46%. The credit score bracket spread widened to 25 from 24 bps, amounting to $13,000 in extra costs over the life of the loan for lower credit score borrowers given an average refinance loan of $244,540.
Average proposed purchase down payments fell for the first time in 8 months to $63,411.
Indicative of this systemic trend is a report this week in WSJ.com saying Apple may be cutting a deal with Marcus – Goldman Sachs’ vision of the future on online lending.
According to the WSJ report, Goldman may provide Apple with point of sale credit at interest rates far lower than the typical credit card.
“By offering a lower-cost loan, Goldman hopes to siphon off some of that business. Goldman charges 12% interest on its average Marcus loans. Credit cards can charge upward of 20% and carry late fees and other charges. Partnerships with big retailers like Apple are key. They can deliver millions of customers that Goldman would struggle to find on its own.”
On Monday, the US stock market witnessed its largest point decline ever. The Dow Jones industrial average dropped as much as 1,600 points during Monday trade before closing down 1,175 points. Still, a spokesperson for Robinhood, the California-based brokerage, told Business Insider its users ramped up deposits on its zero-commission stock trading platform.
The 2018 Identity Fraud Study released by Javelin Strategy & Research, revealed that the number of identity fraud victims increased by 8% (rising to 16.7 million US consumers) in the last year, a record high since Javelin began tracking identity fraud in 2003.
The study found that despite industry efforts to prevent identity fraud, fraudsters successfully adapted to net 1.3 million more victims in 2017, with the amount stolen rising to $16.8 billion.
The 2018Identity Fraud Study found four significant trends:
Record high incidence of identity fraud –In 2017, 6.64% of consumers became victims of identity fraud, an increase of almost 1 million victims from the previous year.
Account takeover grew significantly – Account takeover tripled over the past year, reaching a four-year high. Total ATO losses reached $5.1 billion, a 120% increase from 2016.
Online shopping presents the greatest fraud opportunity – Card Not Present Fraud is now 81% more likely than point of sale fraud, the greatest gap Javelin has observed.
Half of all U.S. small businesses were breached in 2016, according to 2016 State of SMB Cybersecurity Report. Disruption to normal operating expenses costs an average of $955K, which can be devastating to small business owners.
As part of Kabbage’s ongoing effort to help small businesses to be successful, Kabbage recently surveyed more than 800 customers and nearly half (47 percent) plan to invest in cybersecurity products and services in 2018.
Hackers find value in obtaining employee and customer data, bank account information and/or intellectual property, no matter the size of the business. Today, more than 70 percent of attacks are targeted toward small businesses, largely due to the their beliefs that they won’t be hacked (mostly due to their size).
Attorney General Mark R. Herring announced today that more than $2.7 million in relief will be provided to Virginia consumers who took out loans with Internet lender MoneyLion of Virginia LLC-an affiliate of New York based Internet lender MoneyLion, Inc. Attorney General Herring’s settlement with MoneyLion will provide refunds and debt forgiveness to 3,800 consumers as a result of the company’s alleged violations of the Virginia Consumer Protection Act. Since creating a Predatory Lending Unit in his Consumer Protection Section, Attorney General Herring’s Office has recovered more than $25 million in restitution and debt forgiveness for Virginia consumers from online lenders.
The settlement includes the following key terms relating to loans made by MoneyLion during the period in question:
• MoneyLion agrees to provide $359,811.50 in refunds to 1,161 Virginia consumers who paid more than their loan principal plus 12% APR;
• MoneyLion agrees to give up the collection of $2,354,097.05 in illegal interest it charged on loans with 2,639 Virginia consumers;
• A payment to the Commonwealth of $10,000 as a civil penalty for MoneyLion’s alleged violations of the VCPA;
• A payment to the Commonwealth of $20,000 for its costs and fees in investigating MoneyLion’s alleged violations of the VCPA;
• Permanent injunctions preventing MoneyLion from misrepresenting its license status, allowable interest rates, and allowable fees.
A Montana federal judge refused to transfer a CFPB action alleging Think Finance duped borrowers and used sham tribal payday lenders to collect money it was not owed, finding Tuesday the case need not be moved to where the financial technology company’s Texas bankruptcy is.
U.S. District Judge Brian M. Morris said the state of Montana has a “substantial interest” in hearing the Consumer Financial Protection Bureau’s case since Think Finance LLC’s loans were voided under the state’s law.
LBA Ware, a leading provider of automated compensation software and systems integration solutions for mortgage lending and retail banking, announced that South Carolina-based Movement Mortgage has implemented CompenSafe to automatically calculate commissions for its loan originators (LOs) located in 700 branches across 49 states.
Cerberus Capital Management, L.P. today announced that an affiliate has entered into an agreement to acquire Cyanco Holding Corp. from funds managed by Oaktree Capital Management, L.P. (“Oaktree”). Cyanco is the largest global producer of sodium cyanide, a critical input in the gold and silver mining industry. Terms of the transaction, which is subject to customary conditions to closing, were not disclosed.
After a 45-minute meeting on Tuesday (Feb. 6), Comptroller of the Currency Joseph Otting had nothing but praise for acting Consumer Financial Protection Bureau (CFPB) Director Mick Mulvaney.
“Acting Director Mulvaney has helped reduce the burden on the banking system by delaying implementation of his agency’s Home Mortgage Disclosure Act rule, committing to reconsidering its payday lending rule, and deferring action on additional regulations until completing a more thorough review of those matters,” Otting said in the release. “I also applaud him for realigning his agency’s mission to the current needs of the nation, making its processes more transparent and fair.”
Peer-to-peer lending platform RateSetter has shared that is Innovative Finance ISA (IFISA) will launch tomorrow (February 8th). RateSetter said the IFISA will initially be available to existing customers, then to new customers on 1 March and to inward transfers from other ISAs in April.
Crowdstacker’s CEO Karteek Patel reveals why investors have opted for the Innovative Finance ISA over the past two years.
When the first types of ISA launched in 1999 the country was still in the first flush of a much feted Blair Government, the economy was buoyant, and the outlook rosy.
It was the end of a decade that saw average base rates of around 8%. Inflation meanwhile may have started at 9.5% in 1990, but it rapidly fell to a more manageable 1.5% by 1999.
2016-17 average ISA subscriptions were £5,558. Average subscriptions for our Innovative Finance ISA were above £11,000 – probably indicating early adopters of the IFISA are more seasoned investors, who are investing larger sums. Of course, as we know from other innovations such as smartphones and social media, where early adopters lead, the masses will follow, as long as the proposition is attractive.
Monzo asks customers for feedback on product launches and fees, allows them to invest in the company through equity crowdfunding rounds and holds community events across the U.K., either at Monzo offices or customer suggested venues. Its approach is based on the principle that customers will stay loyal and will refer others if they’ve got some kind of stake in it. Banks have traditionally relied on large-scale ad campaigns and promotions to get customers to change their providers. But U.K. customers still aren’t changing their banks in droves; according to U.K. nonprofit Bacs only 4.45 million successful switches have taken place since 2013. Plus, they’ll have less and less motivation to switch bank providers as more non-bank entities begin offering comparable services.
The company’s biggest growth driver is loyalty, with word-of-mouth referrals being the source of 80 percent of new customer growth, according to the company. The remaining 20 percent is based on a limited amount of sponsored ads on Facebook and Twitter. More than 30,000 customers participate in an online feedback forum for new products.
Separately, Monzo holds eight to 12 events per year around the U.K.
Esme Loans, the digital lending platform that allows small and medium sized businesses to quickly obtain unsecured loans of up to £150,000, will join a select group of leading alternative finance firms on NatWest’s Capital Connections panel.
RANGER Direct Lending (RDL) saw its net asset value (NAV) slide 2.95 per cent over 2017 due to its ongoing Princeton legal arbitration.
The investment trust’s December update showed its NAV return was 4.53 per cent in 2017 but the ongoing legal dispute with its Princeton investment over bankrupt lender Argon pushed it into negative territory.
On a monthly basis, RDL’s NAV was actually at a six-month high to 0.48 per cent.
TruFin has published a document announcing its intention to float on the AIM market of the London Stock Exchange in late February.
TruFin has offices in London and Birmingham and currently operates under three separate businesses: Distribution Finance Capital (DFC), Satago and Oxygen Finance.
The group also owns a 15 per cent stake in technology-led peer-to-peer lender Zopa. The platform was launched in 2005 and has since originated over £2.6bn of unsecured loans, connecting more than 320,000 customers to 70,000 investors.
The central bank is now reining in “social credit” scoring models by companies like Tencent and Alibaba that use consumer data from purchases and social behavior, as of the past weekend. These programs are designed to make up for the lack of institutional records of individuals’ creditworthiness in China’s financial system — something the central bank itself has tried to address with its own solution. Now the government is worried e-commerce-turned-fintech giants could use social scoring as marketing to sell their financial products.
China is a mobile-first nation. Mobile e-commerce took off there because its retail landscape was weaker and less efficient 15 years ago compared to that of the U.S.
Despite Brexit, London has managed to hang onto its status as Europe’s leading fintech hub, at least for now. According to the Nesta 2016 European Digital City Index, “London leads for both start-ups and scale-ups.” However, Stockholm and Amsterdam, which rank second and third respectively out of 60 cities, are leading the pack nipping at London’s heels, according to the index, which looks at how European cities support “digital entrepreneurship.”
Amsterdam has many claims to fame, but one of its lesser-known features is its concentration of 350 fintech companies, more notably in the payments (Adyen, Payvision, GlobalCollect), trading (BinckBank, Flow Traders) and alternative finance (Funding Circle, Spotcap) spaces.
The asset management firm Eiffel Investment Group which manages the €100 million marketplace lending fund “Prêtons Ensemble” (meaning “Let’s Lend Together”) for institutional investors Aviva France, AG2R LA MONDIALE, MAIF, MGEN and Klesia awarded European Digital Lending Awards at a gathering held in Paris on February 1st. The awards recognized SME projects presented on the lending platforms backed by the fund.
Nominated platforms included leaders such as Funding Circle and Lendix. The prizes however went to smaller marketplaces, a good opportunity to put the spotlight on these up-and-coming fintechs:
Green Economy award: Générale du Solaire, a project presented on Lendosphere, France.
Innovation award: Selfstock on ClubFunding, France.
Quality of Life award: All About Healthcare on Linked Finance, Ireland. Linked Finance is Ireland’s largest P2P lending platform with more than 16,000 registered lenders who have lent over €32 million to Irish businesses
Inclusive Economy: Mujeres y CIA on Finanzarel, Spain, and
Nou verd and Nou set on Loanbook, Spain.
According to a 2017 research report by the World Federation of Direct Selling Associations, the global direct selling volume increased by 1.9% in 2016, reaching $183 billion in sales between 107 million direct sellers.
In 2014, 45% of direct selling volume came from the Asia Pacific region and grew to 46% in 2015 – 2016, as the chart below shows:
According to management, ‘there are approximately 40 lending platforms in Sichuan province.’ Major competitive vendors that provide similar services include:
Sichuan Jinding Wealth Information Technology
Koudai Network Services
Chengdu Hongxue Jinxin Business Consulting
Chengdu Zhongke E-Commerce Co
Six months ended Sept 30, 2017: $182,960
FYE March 31, 2017: $73,237
Operating Loss ($)
Six months ended Sept 30, 2017: ($671,729)
FYE March 31, 2017: ($185,535)
Operating Margin (%)
Six months ended Sept 30, 2017: Negative
FYE March 31, 2017: Negative
Cash Flow from Operations ($)
Six months ended Sept 30, 2017: $302,568 cash flow used in operations
FYE March 31, 2017: $1,324,449 cash flow from operations
As of Sept 30, 2017, the company had $76,863 in cash and $736,246 in total liabilities.
FintruX is an established online lending platform that is introducing blockchain into its financial network to better serve both kinds of customers.
Nelson. Thanks for joining us today. Can you tell us more about yourself and FintruX?
I am the founder and CEO of FintruX and also Robocoder. Robocoder provides the technology behind Fintrux.
FintruX is a global peer-to-peer (P2P) lending platform on the Ethereum blockchain network for providing unsecured loans. It connects small businesses who need money for cash flow issues, with lenders who want to earn a better return on their money.
In some ways, tokenized P2P lending platforms is a “killer app” for the blockchain technology. We are pretty sure you would agree, but can you elaborate and in the context of what you are trying to do.
All the current monetary transactions require too many intermediaries to facilitate a simple transaction from end-to-end and the process itself is also inefficient and time-consuming. Furthermore, most of the systems are fragmented, inconsistent and usually require extensive human intervention. Finally, such transactions require numerous touch-points to handle and manage the “trust” between all of the parties involved. Our mission is to make trustless financing a no-brainer for both borrower and lender.
What is the biggest problem within the industry or do you think there is a gap in the market for FintruX to fill?
The biggest problem is that small and startup businesses do not have sufficient credit history or access to capital for their short-term cash flow needs. Furthermore, the traditional systems are inadequate, fragmented, inconsistent, labor intensive and involve lots of intermediaries. There are many P2P lending platforms in existence but they do not talk to each other.
The $14 billion in taxes the federal government receives each year from the banking sector could be eroded by global technology companies including Apple capitalising on policies designed to boost competition in the sector, the chief executive of the Australian Bankers’ Association, Anna Bligh, will warn on Thursday.
Emerging as an alternative to mainstream banking, NBFCs have also been playing an important role in bridging the credit gaps, i.e. in meeting the increasing financial needs of the underserved and unbanked areas in the corporate sector, unorganized sector and also for the local borrowers.
According to the Reserve Bank of India, in January 2017, a total of 28.8 million credit cards were in operation. Credit cards, also known as revolving credit, have been the preferred choice of masses as it enables repetitive use for daily purchases that can be paid back in instalments on a monthly basis.
According to PwC research, over 95% of financial services incumbents seek to explore FinTech partnerships.
Peer-to-Peer Lending: Business funding can also be availed through the peer-to-peer lending network. Loans are easily available and the interest rates are also comparatively lower. There are quite a few advantages of peer-to-peer lending.
In the UAE, we are seeing some significant strides, where one technology-driven real estate crowdfunding platform, Smart Crowd, recently received approval from the Dubai Financial Services Authority to establish the region’s first regulated real estate crowdfunding platform. This will enable any individual to invest and own a piece of UAE property for as little as Dh5,000 and will most likely stimulate sales in the secondary market.
News Comments Today’s main news: Affirm wants to offer financial advice. RateSetter to launch IFISA. SoFi announces Entrepreneur Program 2.0. Prosper tightens guidance on consumer loan ABS. Qudian priced IPO above range. IBM partners with 8 banks on blockchain trade platform. GuiaBolso raises $39M in Brazil. Today’s main analysis: U.S. banks get aggressive on growth. Party on, Chinese consumers. Today’s thought-provoking articles: […]
Affirm wants to offer financial advice. AT: “Alt lenders who reach critical mass will have to find profitable ways to grow and expand. Offering new services is the no-brainer option. Successful alternative lenders will expand into new markets at the right opportunity, offer new services to the right audience, and improve business efficiencies to scale more quickly. Affirm is one of the companies poised to make that happen, and offering financial advice to its customer base while expanding services to newer customers in newer markets seems like a winning strategy. The question here is, will that financial advice product take the form of a robo, human, or hybrid?”
U.S. banks get aggressive on growth. AT: “If they’re to remain competitive and relevant, banks will have to get creative about attracting new customers, and that means getting creative about its products. Goldman Sachs is leading the pack.”
Online lending platform SoFi recently announced the launch of its Entrepreneur Program 2.0. The company reported that original program was launched four years ago and since then has helped four classes of 70 companies founded by the lender’s members to get off the ground with its coaching and resources.
SoFi then revealed some improvements, which would benefit the future classes.
More Eligibility: The program is now open to all members working as a founder or co-founder either full or part-time on an innovative and scalable tech-enabled business.
SoFi Offers Investment: The lender will give equity capital to each of the members of the Class. For this coming Class, this amount will be $25,000 per company.
Community engagement: SoFi will engage our 380,000-plus members in the accelerator process and share the incredible companies their fellow members are working on.
“I’m happy to say our focus has shifted beyond the implementation of regulations . . . to growth,” said Mr Chavez.
No other big US bank put it that bluntly, but the sentiment seemed to be shared. With the notable exception of Wells Fargo, still trying to shake off the damage of its fake-account scandal, executives were making encouraging noises about new businesses and top-line expansion as they presented third-quarter results.
At Citigroup, for example, which shed about $500bn of assets in the years after the crisis, CFO John Gerspach talked about growth in credit cards in Mexico and wealth management in Asia. At Bank of America, which added about $90bn of assets over the year, CFO Paul D’Onofrio said he welcomed any “refinement” to rules that “allows us more access and control over our capital [and] liquidity in support of responsible growth”.
At Morgan Stanley, James Gorman said the bank “won’t be shy” about doing deals such as last month’s acquisition of Mesa West Capital, a commercial real estate platform — prompting one analyst to remark on the chief executive’s “more aggressive” tone.
“We’re not looking for any grand splash here, but we’re open for business opportunistically,” said Mr Gorman.
Now the mood has changed in Washington. Few laws have been ripped up, as yet, despite Donald Trump’s early pledge to “do a number” on Dodd-Frank. But new figures in agencies such as Randy Quarles, appointed this month to the most powerful bank regulatory job in the country, should make a real difference. Trade groups say they are expecting him to take a looser grip on the banks than Daniel Tarullo, the previous supervisor-in-chief at the Federal Reserve.
Cybercrime has evolved to exploit gaps in enterprise data security and disrupted identity theft in the process. It has spawned a parallel black market on the Dark Web, where criminals transact in bitcoin to anonymously trade stolen data, minting hundreds of billions in annual and often untraceable proceeds for sellers.
Javelin Strategy & Research’s 2017 Identity Fraud Study said ID theft hit a record high in 2016, victimizing 15.4 million people, or roughly two-million more victims than the previous year. ID theft is generally a precursor to credit card fraud, which attributed to worldwide losses of $21.84 billion in 2016.
Card issuers incurred 72%, of those losses last year, with card fraud expected to syphon a grand total of $88.87 billion out of the global financial system over the next four years.
Understanding the vast supply-and-demand mechanism of the Dark Web economy is integral to KYC strategy for banks. The Center for Strategic and International Studies pegs the worldwide cost of cybercrime at $445 billion a year. According to the 2016 Cost of Cybercrime Study, data breaches, cyber-fraud and related disruptions impact U.S. organizations the hardest, with the average cyberattack generating $17.36 million in costs. Of the 4149 data breaches and 4.2 billion records exposed in 2016, as reported by cybersecurity firm RiskBased Security, the U.S. comprised 47.5% and 68.2% of those numbers, respectively.
Feedzai is announcing a $50 million Series C this morning led by an unnamed VC with additional capital from Sapphire Ventures. The six year old startup builds machine learning tools to help banks and merchants spot payment fraud.
With 60 clients including major financial institutions like Capital One and Citi, Feedzai remains optimistic that allowing savvy customers to build on top of its service is the key to longevity.
A survey of businesses conducted this summer and released Wednesday found that 30 percent of companies owned by women were able to get bank loans during the previous three months, compared to half of all the owners surveyed.
Only 21 percent of the women surveyed said they expected it will be easy to raise debt financing — essentially loans — in the next six months, compared to 44 percent of all companies. Fewer of those owners said they were likely to pursue a bank loan, at 67 percent compared to 75 percent of all owners.
The number of U.S. businesses owned by women grew nearly 27 percent from 2007 to 2012, rising to nearly 10 million from 7.8 million, according to the most recent Census Bureau figures. The total number of businesses grew less than 2 percent.
Bank of America found this year that 11 percent of owners who are women applied for loans the past two years versus 13 percent of owners who are men. Some banks have realized they need to be more aggressive in lending to businesses owned by women; Wells Fargo set a goal of $55 billion in loans by 2020, but surpassed that number in 2013, spokesman Jim Seitz says.
Financial technology platform iCapital Network has partnered with the Chartered Alternative Investment Analyst (CAIA) Association on a sweeping education initiative aimed at increasing knowledge about alternative investing.
As part of the new initiative, iCapital will offer CAIA’s Fundamentals of Alternative Investments program to its member network of more than 1,900 registered investment advisors, broker-dealers, private banks and family offices.
Harvard Partners CEO Bill Verhelle announced his firm is seeking to invest in, or purchase, small innovative U.S.-based commercial finance firms. Interest is not limited to companies already in the equipment leasing and finance industry, though he will be at that industry’s annual convention next week.
Harvard Partners is specifically interested in companies with demonstrated experience and capable management teams employing new business models. Harvard Partners’ first equity investment this year, along with another private equity investor, involved a West Coast business lending and equipment finance firm with advanced financial technology (fintech) capabilities.
Another sovereign wealth fund is opening shop in Silicon Valley. This time it’s Abu Dhabi-based Mubadala Investment Co., which also is launching a $400 million direct VC fund (in partnership with SoftBank) and a $200 million VC fund-of-funds.
“It’s more than just setting up an office — it’s a real committed and genuine intent to be an active member of this community,” Mubadala’s Ibrahim Ajami tells Axios’ Kia Kokalitcheva, who scooped the news.
He adds that the direct fund shouldn’t compete with SoftBank Vision Fund, into which Mubadala has pumped $15 billion, given that it will be looking at earlier-stage deals. Get the full story.
Real estate crowdfunding is one of the fastest growing trends in the investment community. They provide obvious value to investors who would otherwise be priced out of commercial and private equity deals. RealtyShares is one of these crowdfunding platforms, but they have a unique niche.
They work with both institutional investors and “the crowd” of smaller investors to find a wide range of projects.
To invest in RealtyShares, you need to be an accredited investor.
What Types Of Investments Does RealtyShares Offer?
First position liens
Mezzanine Debt (aka Bridge Loan)
JV (Joint Venture) Equity
Your minimum investment is $5000, and you’ll pay a 1% investment fee on equity investments, and up to a 2% interest rate spread on debt.
American Association of Private Lenders (AAPL) has partnered with Private Money Lending Guide (PMLG). The partnership brings together an association that provides education, ethics and networking opportunities for private money lenders and a tool for deal-flow that enables borrowers and lenders to find the appropriate counterpart for their deals.
Ken Rees, Chief Executive Officer at Elevate, a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, will speak on a panel at the Money 20/20 conference in Las Vegas on October 24, 2017. The panel will focus on the future of alternative lending, including fintech’s potential to partner with banks to create better outcomes for both parties. The panel will also tackle the challenges that alternative lenders face now, and how to use innovation and creative solutions to address them.
JUST 1.4 per cent of the adult population are using peer-to-peer lending or crowdfunding but the product has among the proportionally lowest levels of financially vulnerable customers, figures from the Financial Conduct Authority (FCA) suggest.
The data is revealed in the City watchdog’s financial lives survey, a poll of almost 13,000 consumers about the products they hold and their experiences of them.
The research shows just 180 out of 12,865 adults, or 1.4 per cent, surveyed said they have used a crowdfunding or P2P product, which the FCA says works out as 700,000 adults when weighted against the UK population.
Of those who are using P2P, 74 per cent of respondents identified themselves as male and 25 per cent said they were female.
LendingCrowd, the peer-to-peer (P2P) lender, has launched a £50 “refer a friend” promotion as it continues to experience strong demand from borrowers across the UK.
Following a record quarter for new loans and the rising popularity of its tax-free* Innovative ISA (IFISA) accounts, investors on the P2P lending platform will be given a £50 bonus when each friend they refer invests at least £2,000. Each friend will also receive a £50 referral reward.
Online micro-credit provider Qudian Inc’s (QD.N) initial public offering could be priced above the expected range of $19-$22 per American depositary share, sources familiar with the matter told Reuters.
The offering could give the company, backed by Alibaba’s (BABA.N) banking unit Ant Financial, a market capitalization of more than $7 billion and raise over $825 million.
Qudian Inc., operator of a loan platform for consumers and small businesses, jumped 22 percent on its New York trading debut Wednesday. The Beijing-based company raised $900 million in an initial public offering on the eve of China’s 19th party congress, pricing its shares above the high end of its indicative range. It’s the largest U.S. listing by a Chinese company since the $1.4 billion sale by logistics company ZTO Express (Cayman) Inc. in September 2016.
Qudian’s experience stands in sharp contrast to that of China Rapid Finance Ltd., a peer-to-peer consumer lender. In April, China Rapid Finance managed to raise only $60 million, having priced at the bottom end of its range. Since then, though, the shares have soared more than 90 percent, with most of the gain coming this month. Similarly, the October rally has brought the advance for Beijing-based consumer finance company Yirendai Ltd. to 150 percent this year.
Looking at Qudian’s financials, one can’t help the bullish feeling that China’s consumer credit market is only in its early stages. Qudian’s rate of loan delinquencies, defined as those over 30 days past due, is only 0.5 percent or less this year, according to the company, which relies on Alibaba Group Holding Ltd.’s Ant Financial affiliate for new borrowers and credit rating services.
Betting on China’s next generation of borrowers just got easier. Qudian, an online microlender backed by e-commerce giant Alibaba’s financial unit, priced its U.S. listing above its expected range on Tuesday, says Reuters. It offers fast growth, low default rates and, unlike many tech startups, is already profitable. At $24 per share, the final price represents a 2018 PE of 13.8, compared to 13.0 for smaller U.S.-listed online lender Yirendai.
China’s household debt relative to income is still low, and consumer credit is underpenetrated at 7 percent of gross domestic product, versus 20 percent in the United States, says Goldman Sachs. The investment bank expects outstanding consumer credit excluding mortgages to more than double to $1.9 trillion by 2020.
Qudian focuses on the younger segment of this market, providing small, short-term loans for ordinary purchases.
A key theme in the new book is financial inclusion and, to those ends, I made a visit to Hangzhou, China, to meet the executive team of Ant Financial.
As Americans struggle with the pains of Chip & PIN and Europeans embrace contactless payments, China has leap-frogged us all. In 2016, Chinese consumers spent $5.5 trillion through their mobile apps. That’s more than any other economy and many predict that China will be first major economy to be completely cashless. The chosen mobile payment system for most Chinese citizens is Alipay, and the company has recently started to expand its footprint globally.
Many of you may have heard of Alipay, but it is not the Chinese version of PayPal, as many think. In fact, it bears no relationship or resemblance to anything we see in Europe or America. It is distinctly Chinese and, having been born out of a need to trade, is now moving towards global dominance.
How far things have changed, in that today’s Alipay monitors every transaction from its 450 million users, in real-time with artificial intelligence monitors constantly searching for potentially fraudulent transactions. That is a far cry from where they started, but then the company has refreshed its systems architecture four times in the last twelve years and has just embarked in another refresh. They moved from basic escrow services to real-time payments to cloud to microservices, and are now working on their new machine learning and super intelligent structure. A structure that can process 250,000 transactions per second today, and is architecting systems that will scale to over 100 billion transactions per day. To put that in perspective, Visa and MasterCard handle just over 60 billion transactions per year combined, and average near 2,000 transactions per second.
The number of P2P companies has been reduced through attrition and government regulation, and a few strong players are emerging:
Caixinreports (paywall) that P2P platform PPDAI Group has announced plans “to raise up to $350 million through a New York initial public offering (IPO).
In September, online-only insurer ZhongAn Online P&C Insurance raised $1.5 billion in an IPO on the Hong Kong Stock Exchange.
The South China Morning Postreports that shares of Qudian, a leading online consumer credit provider, “surged nearly 46 percent to US$35 on its debut trading on the New York Stock Exchange on Wednesday morning.” Aside from fierce competition in the sector, the SCMP says that “Qudian has one other worry — potential competition with its principal shareholder Ant Financial,” which is, like the SCMP itself, an Alibaba affiliate.
Two major players announced cross-border payment networks built on blockchain technologies Monday, and more financial services will follow soon, despite opinions about Bitcoin.
The distributed ledger technology that underpins cryptocurrency like Bitcoin is rapidly going mainstream. Blockchain is building a tremendous amount of buzz as technology and financial industry heavyweights and startups race to apply the technology in innovative new applications for the banking sector. Their efforts are starting to bear fruit in the area of cross-border payments, as three separate announcements from IBM, J.P. Morgan, and Bank of Canada highlighted this week.
The ultimate goal is to provide a secure, speedy and transparent financial platform between global markets that may have found it difficult to do business with one another due to the bureaucratic pitfalls of legacy international payment networks.
The developments this week underline that banking executives are increasingly seeing the upside of combining distributed ledgers with solid cryptographic applications for new means of facilitating payments, trades, contracts, and transactions of all stripes.
Mint Money spoke to Rajat Gandhi, founder and chief executive officer of Faircent, a P2P marketplace which has been in operations since 2014, on his vision for the nascent industry in India.
Now that the RBI has given NBFC status to P2P platforms and has also come out with guidelines for the sector, what is the way ahead?
Most of the guidelines also are in line with the industry expectations, just that there are a few grey areas where we would need some more clarifications. The way I see it, the RBI document is a framework, rather than hard guidelines.
In the short term, we all have to file our applications and get certifications in place.
The P2P lending process was legitimate; the RBI framework has just validated it further. An important development is that the framework has created a redressal system— both for the borrower and the lender. While a lot of obligations will be on the platforms, there is also a lot of clarity now on our roles and responsibilities.
How do the RBI guidelines help a consumer, borrower or lender?
The guidelines basically tell the lender particularly what they are getting into, including the fact that the principal is not protected. We as companies should also keep telling them. Because the moment an investor hears interest rate, the immediate thought is assured returns.
Secondly, the guidelines have unlocked the supply side. Borrowing till now was restricted to banks and NBFCs, which have stringent guidelines. Whereas out here, this is an exchange model and the P2P platforms cannot lend from their own balance sheet, so the platform’s returns become interest rate agnostic. Their role is only to rate and price the borrowers, and as a platform, we do not directly benefit from this rating and pricing.
If a P2P platform is interest rate agnostic, what is your business model and how does your business make money?
Basically, we charge 1% from the lender and 2-4% from the borrower, of the loan disbursed.
The guidelines also talk about P2P platforms giving services to lenders for recovery of loans. How does that work?
We have a panel of lawyers who will take up the matter on behalf of the lenders. This is charged as this is a separate service.
What is the size of P2P lending industry in India at present?
The size right now will be roughly around (RS) 50-60 crores on an annualised basis.
After a successful growth stint in the past six months, LenDenClub, a P2P lending platform is looking to meet the capital requirement set by the Reserve Bank of India (RBI) regulations, banking on the newly secured capital which is being used to enhance the product platform and improve tech automation.
Earlier this month, the firm closed a USD 500,000 pre-series A round from a fund based out of Mumbai.
Private sector lender Kotak Mahindra Bank today said its credit and debit card holders will be able to tap and pay using smartphones at merchant establishments.
The city-based lender has tied up with Samsung, under which its cardholders will be able to tap and pay using smartphones of the Korean electronics major having the Samsung Pay acceptance machines, a bank statement said.
Financial transaction company PayPal has long been a supporter of innovation in India, having set up an incubator programme there to support local start-ups. And now, the company is evolving its partnerships with the start-ups that join the incubator, taking equity in participating firms.
The catalyst for ecommerce and other internet businesses to flourish in China, India, and Southeast Asia is digital payments. This in turn has a multiplier effect on economic growth.
That’s why today’s announcement of US$1.5 million series A funding for Pakistani fintech startup Finja is notable. More so, because Swedish investment company Vostok led the round – the Pakistan startup ecosystem rarely hits headlines for attracting international investment. Dubai-headquartered Gray Mackenzie Engineering Services also participated in the round.
Finja is giving a push to digital payments in Pakistan with its SimSim wallet.
Finja claims SimSim has been doubling its mobile wallets every month to notch up 80,000 accounts since it went live a few months ago. It has clocked transactions worth a total of US$14 million so far.
Abu Dhabi’s international financial center has entered a collaboration with payments giant Mastercard to develop and accelerate FinTech solutions in the region.
The Abu Dhabi Global Market (ADGM), an international financial center established by a UAE Federal Decree to develop and strengthen financial services in Dubai as a global center for business and finance, is partnering Mastercard to develop FinTech activities in UAE’s capital and the wider MENA (The Middle East North Africa) region.
The new round was led by Vostok Emerging Finance, a publicly traded Swedish fund with its roots in big Russian private equity. Additional investors include Ribbit Capital, the International Finance Corp. and QED Investors, while impact investment firms Endeavor Catalyst and the Omidyar Network also participated.