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?
Consumers have a reason to be concerned as news of personal data mining, bundling, and selling seems to be accelerating. As a result, the data brokerage industry has grown. Opiria’s white paper indicates the industry has a market value of $250B USD. That’s a quarter of a trillion dollars made off other people’s rightfully-owned data, […]
Consumers have a reason to be concerned as news of personal data mining, bundling, and selling seems to be accelerating. As a result, the data brokerage industry has grown. Opiria’s white paper indicates the industry has a market value of $250B USD. That’s a quarter of a trillion dollars made off other people’s rightfully-owned data, but precious little of it went to the people whose data is in question.
Opiria have an idea that attempts to make both sides of the consumer experience more successful and rewarding. How often have consumers chosen not to do something online because they were concerned about the security of their data? If Opiria’s platform is successful, those concerns could be a thing of the past.
The Opiria Solution
Opiria is an online consumer and usability research platform enabling companies to optimize products and services by understanding what consumers think, experience, see, and feel. Through mobile surveys and mobile diaries distributed directly to consumers’ smartphones, companies can get a better understanding of their target audiences without violating their personal data rights.
Christian Lange, the company’s CEO and founder, sheds light on the Opiria vision. He says the Opiria system is a decentralized marketplace built on the Ethereum blockchain for the secure trading of personal data. Consumers sell their data to companies for compensation, which is measured with the PData (for personal data) token.
Lange started his first company in 2005. Focused on measuring human behavior, that company developed software that was used by automotive companies worldwide offering detailed analysis to measure driver behavior with modifications to the automobile’s navigation system. The solution was limited, however, as companies only received data from one driver at a time.The need for big data was evident. This led Lange to the development of a new idea– something easy to use and makes it easy to collect data with technology available worldwide.
To fill that need, Opiria came up with a smartphone app for companies to get feedback from consumers worldwide, 24/7. They began designing the app in September 2015 and had the first version ready to launch by the close of 2016.
How Opiria Works
Opiria is a market research platform for which companies pay an annual licensing fee. The software allows them to interact with consumers through the Opiria app. The system centers on consumer feedback and opinions, part of it is based on surveys.
Still, those who don’t have the time for surveys, or who are not inclined to take them, still have data to sell. “We generate data through our web browsing and our online shopping,” Lange said. “We give information on our wearables, our smart devices, and pretty much anything that has anything to do with being human in the Internet world.”
Through the Opiria app, the company can sell that data knowing that consumer personal data is completely protected. Consumers share what they want to share and with whom they want to share it. Those who care to receive surveys will only receive those which fit their profiles. Being that the app is built on a blockchain, the data will be securely stored to release to further inquirers going forward.
One featured tool of the app is the Mobile Data Survey, which allows feedback over a longer period of time than the moment of usage. When consumers use a product or service, they can provide feedback in the moment. Then they can document it through videos, photos, and comments. This allows companies to get real-time data within seconds where most market research tools are email- and browser-based, and can take as long as a week to provide a company with the data.
For consumers, not only is the app free, but they can also turn their involvement into profit. The PData tokens can be saved and traded for cash.
Opiria’s Progress to Date
A profitable privately held company, Lange says the company needed no external funding to get off the ground. An ICO was launched on January 8 to raise capital. They set the hard cap at $19M USD.
The market has yet to be fully realized, but Opiria has almost 50 companies and 4,000 to 5,000 consumers signed up. Mercedes Benz, BMW, Audi, Intel, and Proctor and Gamble are among the major players paying for the service. Lange tells us that other customers come from every realm of the bitcoin industry including restaurants, hotels, fitness studios, and retail companies.
Opiria is also planning to use 60% of the funds generated from the ICO to grow the number of consumers to 1 million by the end of the year. “If we have a million customers, companies will flock to us,” Lange said.
One attractive aspect that might help them toward the goal of 1 million consumer participants is that personal information is not shared, only consumer data.
Opiria’s Competition and Future Outlook
While Lange says the company has a lot of competition, Survey Monkey possibly being its biggest competitor, he isnt concerned about it. “What gives us the advantage is that we do it all by app; it’s a faster way to do research and a direct line to the consumer,” he said. “A company can send out a survey and it can be delivered to consumers within seconds.”
The next thing they plan to release is software to capture, in an unobtrusive manner, where someone is looking and the emotions they have when they browse the Internet. Marlene Gagesch, the company’s co-founder and chief technical officer, is overseeing this work in Engostott, Germany.
Opiria is also working with Quicken Loans, a collaboration that hopes to equip Quicken with a mobile app that will do a longitudinal study of how people are tracking interest rates, among other things.
Lange goes on to list some other ways Opiria can be beneficial to online lenders. Understanding what kind of lending products people are interested in, for instance. “We can survey potential customers to understand how much interest they are willing to pay, the duration of loans, how you would like your contract laid out, and more,” he said. “You could perform A/B tests to see how people react emotionally to different offers made.”
Lange lays out the process in order to show how Opiria can “perfectly adapt [an] offering to meet potential customer expectations; deploy, get feedback, improve product, repeat.” This process takes weeks or months with classical market research, but with Opiria, it’s done a matter of minutes. “That gives companies a huge competitive advantage,” he said.
Why Opiria, and Can It Do Any Good?
If personal data is already out there for companies to buy—and it’s evident that they are buying it—then who’s to say this is going to work? Lange had an answer for that as well. It seems we’re getting better at guarding our information, and we’ve even gotten to a point where companies find themselves looking for data that just doesn’t exist. That has created this new market for personal data.
Opiria is one of those ideas off the beaten path enough to catch hold. A problem exists–consumer data needs protection–and consumers have to hope that something comes along that pays them for giving up some personal data security. If anyone knows that, it’s Opiria.
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.
“Data is a precious thing and will last longer than the systems themselves.” – Tim Berners-Lee, inventor of the World Wide Web. In today’s world, corporations realize that data is currency and leave no stone unturned to protect it. Companies are spending millions of dollars to protect private customer information from hackers, but hackers have become […]
“Data is a precious thing and will last longer than the systems themselves.” – Tim Berners-Lee, inventor of the World Wide Web.
In today’s world, corporations realize that data is currency and leave no stone unturned to protect it. Companies are spending millions of dollars to protect private customer information from hackers, but hackers have become increasingly sophisticated; hence, the number of data breach cases has surged in recent years.
Statistics show the number of data breach incidents that exposed credit and debit cards have increased by 169% in the last five years. It’s also estimated that fraudsters have stolen over a hundred billion dollars in the last six years from consumers and corporations. This presents a huge opportunity for companies like XOR Data Exchange to grow their data-as-a-service business by assisting organizations fight fraud.
The dark web is that part of the internet that requires special software to access and allows users and website operators anonymity. The identity and geolocation of the user cannot be tracked because of layered encryption systems. Thus, communication and transfer between users are kept confidential, and it’s usually impossible to identify the source of information. This has led to the dark web becoming a den of illegal activities with trade in stolen consumer data at the top of the list.
Lumen and E-commerce Partnership
After tasting considerable success with its last product, Compromised Identity, XOR Data Exchange is ready to roll out its new offering Lumen, specifically developed to “to seek out consumers’ personal information on the internet including non-indexed dark web sites that traffic in stolen data and prevent it from being used to perpetrate identity theft and fraud.” The underlying matrix of Lumen is similar to that of Compromised Identity. Through Lumen, XOR Data Exchange is able to discover stolen data available on the dark web and determine whether the data is being used for any kind of fraud.
When Lumen identifies compromised data, XOR Data Exchange automatically includes it in Compromised Identity Exchange. The two products then cross-leverage each other’s strengths. The insights are used to prevent fraud and identity theft.
XOR Data Exchange is also introducing a free product for e-commerce companies based on the Compromised Identity Exchange model. The solution will help e-retailers identify how many data breaches they’ve had, if data is being used to commit fraud, and if particular data is available for sale on the dark web. This allows the company to build insight into specific customers and identify compromised credentials in order to stop them from committing fraud.
Lumen in Numbers
Since formally launching Lumen in May, the company has collected 1.8 billion records from the dark web.
Acquiring this data is not easy. XOR Data Exchange uses a crawler to pull down the data. During the process of selling the breached data, hackers have to make a sample copy, and that too is pulled down by Lumen. The target zone is emails and login addresses, which are hacked to get into bank accounts.
It charges companies on the basis of the number of transactions. The charges depend on the volume and, usually, the cost varies from 0.50 cents to $2 per record. The company sells this service as an anti-fraud product rather than as a credit product.
Funding and Future Services
XOR Data Exchange wants to develop a product that can help a consumer to know if their information is compromised on the dark web. Products like haveibeenpwned.com, which cater to this problem are not that comprehensive, therefore, founders want to develop a combination of XOR and credit bureau products to provide customers an effective solution to the data breach problem.
XOR has been able to raise funds in all investment climates. More importantly, its business is not especially capital intensive. The company focuses on customized products for clients and doesn’t need prior funding for development efforts. They were able to secure $2 million in an extended Series A round at the beginning of this year. In 2015, they secured $8 million in two rounds of funding ($1.8 million seed and $6.2 million Series A)
XOR Data Exchange in the News
XOR Data Exchange roped in former FICO CEO Larry Rosenberger as an investor and board observer. Rosenberger’s expertise in implementing data and analytical models will help XOR achieve the gold standard in fraud mitigation.
The company has also entered a partnership with Zoot Enterprises for offering its suite of products to Zoot clientele.
Dark web and data breaches are a reality in today’s digital-first world. With consumer personal information being saved by multiple entities from banks to e-retailers, personal data is at perpetual risk.
It is vital how corporations deal with a data breach, both internally and as a peer or associated party. How companies deal with external data breaches is also critical as users tend to have same credentials on multiple platforms. This creates an opportunity for hackers to leverage information to attack multiple websites with the same stolen data set. XOR, with its proprietary technology, understands the risk and is developing the next level data technology and networks to create a potent fraud mitigation mechanism.