Thursday August 8 2019, Weekly News Digest

LendingClub

News Comments Today’s main news: Funding Circle debuts U.S. ABS platform for small biz loans. LendingClub to pursue national bank charter, reports Q2 losses. SoFi sues unnamed defendants over Consumer Loan Program 2015 Trust. DigiFi launches first open-source loan origination system. BlockFi raises $18.3M for crypto lending. Funding Circle posts higher revenues, bigger pre-tax losses. […]

The post Thursday August 8 2019, Weekly News Digest appeared first on Lending Times.

LendingClub

News Comments

United States

United Kingdom

European Union

International

Other

News Summary

United States

Funding Circle debuts ABS platform for U.S. small-business loans (Asset Securitization Report), Rated: AAA

Funding Circle is securitizing its first pool of U.S.-based small business loans.

According to Kroll Bond Rating Agency, the online business-loan lender is marketing $198.45 million in notes backed by loans made to small- and medium-sized businesses in the U.S. Funding Circle has previously issued notes for asset-backed pools of small-business loans in its native UK.

The transaction consists of four classes of notes, including a $142.8 million Class A tranche with an initial A- rating from Kroll, and benefiting from 32.5% credit enhancement.

LendingClub Discusses National Bank Charter, GreenSky Exploring Sale (Lend Academy), Rated: AAA

A topic that has been coming up more often is the potential of a national bank charter. Last week we learned that small business lender OnDeck was pursuing a charter and LendingClub is doing the same.

Today LendingClub reported their Q2 2019 earnings. Highlights include record loan originations of $3.1 billion, up 11% from the prior year period and record net revenue of $190.8 million, up 8% year over year.

Source: LendingClub and LendAcademy

GreenSky Q2 2019 Earnings

David Zalik, GreenSky Chairman and CEO included this statement in the press release:

Notwithstanding the Company’s solid operating results, in light of the complexity of the Company’s operating model, we do not believe that the Company’s current market value is reflective of the Company’s strong record of cash flow generation and intrinsic value. Accordingly, GreenSky’s Board of Directors, working together with its senior management team and legal and financial advisors, has commenced a process to explore, review and evaluate a range of potential strategic alternatives focused on maximizing stockholder value. In connection with this review, GreenSky has retained FTP Securities LLC (“FT Partners”) and J.P. Morgan Securities LLC as its financial advisors, and Cravath, Swaine & Moore LLP and Troutman Sanders LLP as its legal advisors.

The news sparked Christopher Donat, an analyst Sandler O’Neill to speculate that Square or Goldman Sachs could be potential buyers according to this article in American Banker.

LendingClub envisions a ‘marketplace bank,’ seeks charter (Bank Innovation), Rated: A

Peer-to-peer lending platform LendingClub is exploring the possibility of obtaining a national bank charter as it adjusts its strategy following a $10.6 million loss in the second quarter.

Digital Banking: LendingClub Gets Some Fintech Love as it Pursues National Bank Charter (Crowdfund Insider), Rated: A

Shares in LendingClub (NYSE:LC) are rising during another down market day as the trade war with China has no end in sight and political tempers flare. Shares are currently trading over 10% higher following yesterday’s Q2 earnings report where LendingClub said it expected to finally report a positive net incoming in Q3 following years of losses.

Second, LendingClub has hardened its lending model with years of fine-tuning. Unlike some other digital-only banks, LendingClub has been providing credit to consumers for more than a decade having originated over $50 billion in loans.

LendingClub Logs Lower-Than-Expected Losses (PYMNTS), Rated: A

By the numbers, net loss came in at $10.66 million or $0.12 per share — a lower loss than last year when Lending Club reported a loss of $60.86 million or $0.72 per share. Adjusted loss per share narrowed to $0.01 from $0.08 a year earlier.

Net revenue increased 8 percent from year-ago revenues of $176.98 million in 2018 to $190.8 million in 2019, driven by the higher volume of loan originations Sanborn mentioned.  Loan originations during the quarter were at $3.1 billion, up 11 percent year over year. While the revenue number is an improvement, it came in very, very slightly below analysts’ estimates.

LendingClub posts smaller-than-expected loss on loan originations (Nasdaq), Rated: A

LendingClub said it now expects smaller loss for the year than it had previously forecast. Adjusted net loss is expected to be between $5 million and $20 million, from $9 million to $29 million.

P2P lender LendingClub increases credit access with Select Plus Platform (Verdict), Rated: B

LendingClub, a US-based P2P lending platform, has introduced the Select Plus Platform to offer borrowers access to sophisticated investors.

LendingClub: America Does Not Need Another Credit Card, Apple Card Spells Disaster for Consumers (Crowdfund Insider), Rated: A

Apple Card, a “new kind of credit card” launched by Apple (NASDAQ:AAPL) in partnership with Goldman Sachs (NYSE:GS) is expected to be made available to the public within the next few days. In fact, it has been reported that invitation emails have already gone out to a small group of iPhone owners. More will follow during August.

One detractor is LendingClub.

Anuj Nayar: Americans don’t need another credit card. They need the right tools to help them build their financial futures and pay down debt without the opportunity to accumulate more at high-interest rates. Goldman Sachs tried to pursue building a helpful consumer tool with Marcus but now has slipped back into its old ways, looking to make money by getting consumers hooked on revolving, high-interest debt on Apple’s credit card.

Court activity on July 12: Sofi Lending Corp. vs Jaime Daric (Northern California Record), Rated: AAA

The Superior Court of California for San Francisco County reported the following activity in the suit brought by Sofi Lending Corp. against Jaime Daric and other unnamed defendants on July 12: ‘Declaration Of Non Service (transaction Id # 63543270) Filed By Plaintiff Sofi Lending Corp., As Attorney In Fact For Deutsche Bank National Trust Company, Trustee Of Sofi Consumer Loan Program 2015 Trust’

Rate cuts (PeerIQ), Rated: AAA

This week, we discuss the Fed rate cut to the 2 to 2.5% target range, and provide market color on OnDeck earnings.

Fun fact #1: It has been 3,878 days (10.5+ years) since the FOMC last cut rates.

This is the second longest streak on record behind the 4,115 days that passed between cuts in the discount rate since 1954. Markets are speculating on additional rate cuts before year-end although Fed Chair Powell positioned the rate cut as an “adjustment” rather than a change in trend.

Source: Chicago Fed PeerIQ

DigiFi Launches the World’s First Open-Source Loan Origination System (Markets Insider), Rated: AAA

DigiFi, an enterprise SaaS company building the future of lending technology, announced today the launch of its open-source loan origination system (LOS). The free-to-use platform, which was built over 45,000+ development hours and has been operating in-market with top lenders since late 2018, provides an end-to-end suite of modular capabilities that can be used individually or together to drive digital transformation.

DigiFi’s open source release underscores the lending industry’s dissatisfaction with the closed-loop systems available from existing LOS providers, which force lenders into onerous long-term contracts for inflexible systems.

Bitcoin and Ether Lender BlockFi Raises $ 18.3 Million Series A (CoinDesk), Rated: AAA

Crypto lending startup BlockFi received $18.3 million in a Series A funding round led by Valar Ventures, the company announced Tuesday.

Valar, which was founded in part by PayPal co-founder Peter Thiel, was joined by Winklevoss Capital, Galaxy DigitalConsenSys, Akuna Capital, Susquehanna, CMT Digital, Morgan Creek, Avon Ventures and PJC. Valar’s investment was its first in the cryptocurrency industry following prior investments in other fintech firms like Transferwise, a press release said.

Want to Hire Millennials? Better Help Repay Student Debt (Bloomberg), Rated: AAA

Like millions of her peers, Nicole Read graduated with thousands of dollars of debt. Unlike most of them, she’s getting direct help from her employer to pay it back.

In Read’s case, it’s $100 a month.
Such plans are spreading. They were on offer to staff at about 8% of U.S. employers in 2019, more than double the 2015 level, according to an April survey by the Society for Human Resource Management.

Another study by business adviser Willis Towers Watson found that 32% of firms are considering introducing a similar benefit by 2021.

Source: Bloomberg

Verishop Inc. is excited to announce a partnership with financial technology company Affirm Inc., giving customers more choice at checkout to pay for their purchases over time.

To see if they qualify, customers only need to provide five simple pieces of information2 and a credit decision is made within seconds. Monthly payments are shown in real dollars instead of hard-to-calculate percentages so customers will know exactly what they owe with no hidden or late fees. Customers never pay a dollar more than they agree to at checkout. The pay-over-time option is available for purchases ranging from $50 to $17,500 with a 30-day payment deferral available for smaller amounts.

Klarna offers payment installments to Toms, Asos US customers (Retail Dive), Rated: B

  • Klarna, an alternative payment platform, announced Monday that Asos shoppers in the United States will now be able to use its services, according to a press release. The announcement comes after Klarna also publicized its partnership with Toms on Thursday.

Lendio Surpasses $ 1.5 Billion in Small Business Loans Facilitated (Lendio), Rated: A

Lendio today announced it has facilitated more than $1.5 billion in financing to small businesses across the U.S.

According to the Federal Reserve Banks’ 2019 Small Business Credit Survey, “applications to online lenders continued to trend upward” last year, with 32% of applicants turning to online lenders, up from 24% the previous year.

Lendio’s 15-minute online application gives business owners access to multiple lenders with offers suited to meet their capital and business needs.

Behind the growth of PayPal’s SMB lending business (Tearsheet), Rated: A

In just a few years, PayPal’s business financing solutions has serviced over 225,000 small businesses around the world with funding. Between PayPal Working Capital and PayPal Business Loans, the company has recently surpassed $10 billion of capital it’s leant out to SMBs

Online lender backed by Nas says it was hit by security breach (New York Post), Rated: A

Earnin, which is also backed by tech investor Andreesen Horowitz, discovered in February that a third-party security firm had accessed customers’ bank transactions — including all their debit card purchases and payment statements going back for months, the company confirmed to The Post.

Small Business Loan Approvals at Banks Hit Record Highs (GlobeNewswire), Rated: A

Approval rates for small business loan applications rose to another post-recession record (27.7%) at big banks ($10 billion+ in assets), while also climbing above 50% at small banks in July, according to the Biz2Credit Small Business Lending Index released today.

Small bank approvals of small business loan applications inched up one-tenth of a percent to 50.1% from 50% in June.

Small business loan approval rates among alternative lenders dropped three-tenths of a percent to 56.8% from 57.1% in June.

What business does a crowdfunding fintech have with banks? (American Banker), Rated: A

Krista Morgan, the founder and CEO of the crowdfunding fintech P2Binvestor, always understood that funding small-business loans through investors would be challenging. But when the firm launched in 2014, she quickly recognized it wasn’t lining up the investors or capital that was the difficulty.

“Finding capital through our investor platform has been relatively straightforward,” she said. “Finding businesses and winning the business and being competitive in market and building the technology that supports the lending has been the harder side of the marketplace.”

Fox Corp. Buys 67% Stake In Consumer Loan Marketplace Credible Labs (Stock News Press), Rated: A

Citing reports, as per the terms of the deal, the shareholders of Credible Labs will reportedly receive A$ 2.21 in cash per CHESS depository interest (CDI), representing A$55.25 per share of common stock of the company.

Fox says it will commit up to $USD 75 million ($AUD110.8 million) of growth capital to Credible over the next two years.

Cross River — A Regional Bank Providing Specialized BaaS Services (Tearsheet), Rated: A

  • Who we spoke to: Gilles Gade (Founder and CEO) and Phil Goldfeder (SVP and Communications)
  • Establishment year: 2008
  • Bank license: Yes
  • API documentation

Al Goldstein of Avant and Amount (Lend Academy), Rated: A

We last had Al Goldstein, the CEO and Chairman of Avant and Amount, on the show back in 2015. So much has changed since then not just in the personal loan space but in the banking space as well. And Avant has evolved to meet those challenges.

Mall landlords weigh becoming lenders to blunt retail crash (American Banker), Rated: A

Mall landlords accustomed to offering rent reductions to ailing retailers are mulling a new strategy to forestall the industry’s collapse: positioning themselves as lenders to tenants struggling to stay afloat.

The boutique bank PJ Solomon has organized discussions with several mall owners about pursuing such a strategy with the troubled retailer Forever 21, according to people with knowledge of the matter, in what could serve as a model for future transactions within the sector.

This woman paid off ,000 in credit-card debt with a personal loan, but her first attempt landed her in the red again (MarketWatch), Rated: A

Rogers is far from the only person to have used this debt-consolidation strategy with success. At the end of 2018, nearly 11% of adults in the U.S. held a personal loan, according to data from ExperianEXPN, +1.84%.   The number of personal loans has risen 42% since 2015, making them the fastest-growing category of debt in the country.

Around 61% of personal loans are used for debt consolidation, said Ezra Becker, senior vice president of research and consulting at TransUnion.

An update on credit access and the Bureau’s first No-Action Letter (CFPB), Rated: AAA

For some consumers, the use of unconventional sources of information, or “alternative data,” to evaluate creditworthiness may be a way to increase access to credit or decrease the cost of credit. Alternative data includes information not typically found in core credit files of nationwide consumer reporting agencies and may indicate a likelihood of meeting obligations on time that a traditional credit history may not reflect.

The Bureau remains committed to using all of the tools at its disposal under the Dodd-Frank Act to help address these important issues around access to credit.  Toward that goal, the Bureau is currently reviewing comments to its proposed No-Action Letter, Trial Disclosure, and Product Sandbox policies.

Don’t let AI trigger a fair-lending violation (American Banker), Rated: A

The use of artificial intelligence and machine learning poses both opportunities and risks for financial institutions.

While using such predictive techniques may mitigate consumer lending credit risk, financial institutions should be cognizant of the potential impacts of bias and its implications on fairness.

Peer-to-peer crypto lending startup Dharma pauses new deposits and loans (The Block Crypto), Rated: A

Dharma, the San Francisco-based crypto lending startup behind the open-source protocol of the same name, has announced via Twitter that it is “pausing new deposits and loans” on its platform.

I quit my job at 34 with $ 3 million—here are my 5 biggest regrets about early retirement (CNBC), Rated: AAA

And in 2012, I finally retired at 34. By the time I quit my job, I had amassed a net worth of about $3 million that generated roughly $80,000 in investment income per year.

If I worked a few extra years before retiring, I would have had the financial confidence to buy more real estate in 2012, right before prices began to take off. (A rental property in San Francisco that cost $900,000 in 2012 would be worth roughly $1.6 million today.)

Source: Bay Area Market Reports, Compass

I also could have leveraged my interests in real estate and technology to start a real estate crowdfunding company — or, at the very least, join one. I still believe that real estate is one of the most straightforward ways most Americans can build wealth over the long term.

OppLoans Review: Installment Loans for Borrowers with Bad Credit (Money Check), Rated: A

One such lender that is looking to capitalize on this space is OppLoans. The US-based lender offers loans to those with poor credit, ranging from $500 up to $5,000.

Galaxy Digital Makes Its Next Move in Crypto Lending Markets (Bitcoin Magazine), Rated: B

DrawBridge Lending (DBL), a digital asset loaning, borrowing and investing company, has received an investment from merchant bank Galaxy Digital with the aim to greatly expand DBL’s institutional investment and lending capacity.

Minneapolis-based Digital Finance Startup DeFiner.org Wins 2019 Detroit Fintech Challenge (Yahoo! Finance), Rated: B

Less than two years after being conceptualized, Minneapolis-based digital lending & borrowing platform DeFiner.org has beat out 17 other Fintech startups to win one of the industry’s most coveted prizes.

United Kingdom

Funding Circle adds to August ABS supply with first US deal (GlobalCapital), Rated: AAA

UK-based marketplace lender Funding Circle is set to issue its first US securitization, a $198.45m deal backed by loans made to small and medium-sized enterprises (SMEs).

Funding Circle posts higher revenues but pre-tax losses widen (P2P Finance News), Rated: AAA

FUNDING Circle has increased its revenues but widened its pre-tax losses, according to a half-year report which echoed last month’s results preview.

The FTSE 250-quoted firm posted a 29 per cent jump in revenue to £81.4m but pre-tax losses widened to £30.8m from £27.1m in the first half of 2018.

Adjusted core earnings fell year-on-year to £1.2m from £3.3m.

Tide, Starling Ramp Up Rivalry Over SMB Customers (PYMNTS), Rated: A

The rivalry between U.K. challenger banks Tide and Starling continues to heat up as Tide signs on its 100,000th small business customer.

Reports in The Telegraph on Monday (Aug. 5) said the companies continue to compete for the small business customer base. Tide has on-boarded 100,000 small business customers, described by the firm’s chief executive Oliver Prill as a “very significant milestone.”

Young SMEs and companies that have recently switched banks are prime UK neobank targets (Business Insider), Rated: A

1 in 4 UK robo-advisors shuttered in two years (AltFi), Rated: A

Digital wealth management, or robo advice as it used to be called, has been around for more than a decade and launched into the UK in 2011 with the arrival of Nutmeg. Things started to get really interesting around 2016 and 2017 when a flurry of companies were founded to attack the space dominated by traditional wealth management, an industry looking after £1trn of investors’ assets.

OakNorth strengthening leadership team with appointment of Jackson Hull as CTO and COO (Fintech Finance), Rated: B

OakNorth has today announced the appointment of Jackson Hull as its Chief Technology Officer (CTO) and Chief Operating Officer (COO). With over 15 year’s C-suite experience in London and San Francisco, Jackson is a leading expert in building high-volume eCommerce applications, global SaaS platforms, mobile and IoT platforms, as well as award-winning products and services in finance, fintech, travel, accommodation and retail.

China

Jiayin Closes Cases Against 12,000 Debtors Online (CapitalWatch), Rated: AAA

Jiayin Group Inc. (Nasdaq: JFIN), China’s online lending platform, announced it has solved more than 12,000 cases of overdue payments and attempts to escape debt as of May.

Shanghai-based Jiayin runs a peer-to-peer lending marketplace, known as Niwodai, which connects borrowers and investors. The company has established a tailored legal department for post-loan management to handle online arbitration. As it reported on its website, as of the end of May, it has closed more than 12,000 cases in more than 30 provinces in China.

European Union

Swedish fintech Klarna valued at $ 5.5 billion in funding round (Reuters), Rated: AAA

Online payments firm Klarna, which has attracted a growing following with its “buy now, pay later” service for shoppers, said on Tuesday it had raised $460 million in a funding round that makes it Europe’s most valuable fintech startup.

Investors led by San Francisco-based Dragoneer Investment Group put new money into the Swedish company, giving it a valuation of $5.5 billion and additional financial firepower to expand in the United States.

Video: What’s next for Klarna, the most valuable EU fintech (Yahoo! Finance), Rated: A

Yahoo Finance’s Adam Shapiro, Julie Hyman, Rick Newman, and Scott Gamm join Klarna Co-Founder and CEO Sebastian Siemiatkowski.

Penta, the German business banking startup, raises €8M additional funding (TechCrunch), Rated: A

Penta, the business banking provider for small and medium-sized enterprises (SMEs) that was recently acquired by fintech company builder Finleap, has raised “over” €8 million in new funding.

The startup raised a €7 million Series A round in late 2018, and is thought to have had more than €18 million investment since being founded in 2016.

Two Issues Currently Evolving on P2P Lending Marketplaces (P2P-Banking), Rated: A

This week some investors on the p2p lending marketplaces ViventorGrupeer and Mintos are affected by issues that hinder the normal procedures on these marketplaces.

(Screenshot from Viventor.com)

Update 14:02: Apparently Mintos has now suspended trading of Aforti loans on the secondary market.

EstateGuru, a Marketplace for Short-Term, Property Backed Loans, Launches in Portugal (Crowdfund Insider), Rated: A

EstateGuru, an online marketplace for secured, short term loans, has launched in Portugal, according to a note from the company. EstateGuru is now providing crowdfunding services in six different countries including Estonia, Latvia, Lithuania, Finland, and Spain. EstateGuru said by opening in the Portuguese market the company had achieved its next milestone in its long term strategy.

International

International P2P Lending Volumes July 2019 (P2P-Banking), Rated: AAA

Mintos leads ahead of Zopa and Ratesetter. The total volume for the reported marketplaces in the table adds up to 611 million Euro.

Source: P2P-Banking

Ethereum’s Latest Milestone — 200,000 Smart Contracts (Crypto.IQ), Rated: A

DeFi protocols such as Compound, Dharma, and Uniswap are among the most advanced tools of Ethereum-based P2P lending solutions. Another interesting use case built on Ethereum is the decentralized prediction market platform Augur (REP).

Crowdfunding: alternative ways to find a community of impact investors (Specialist Banking), Rated: B

At the same time, there’s been a remarkable increase in the impact investment market — investments made with the intention to generate positive social and environmental impact alongside a financial return — with the Global Impact Investing Network valuing the global market at $502bn.

Australia/New Zealand

CommBank Invests US$ 100 Million In Fintech Klarna As Digital Transactions Continue To Grow (Which-50), Rated: AAA

Commonwealth Bank has invested in Klarna, a Swedish rival to Afterpay, and will bring the European buy now, pay later provider to Australia. The deal accompanies the bank’s continued investment in its digital capabilities.

CommBank invested US$100 million in the fintech’s US$460 million funding round, announced yesterday, which values the company at $5.5 billion. The bank will also become Klarna’s exclusive partner in Australia and New Zealand.

Prospa Establish NZ Warehouse Facility, Shares Rise on ASX (Crowdfund Insider), Rated: AAA

Online lender Prospa Group Limited (ASX: PGL) has established its first warehouse facility specifically to fund New Zealand small business loans. According to a note from Prospa, the 3-year facility has an initial capacity of NZ $45 million.

Judo bank breaks Aussie record with $ 400m round (Fintech Futures), Rated: A

Australian challenger, Judo Bank, has completed the biggest single funding round in the country’s history by raising $400 million, writes Jane Connolly.

StartupSmart reports that the finance – which is double Judo’s original target for the round – came from new institutional investors, including Bain Capital Credit and Tikehau Capital, along with existing investors.

India

India’s Indifi raises $ 21M to expand its online lending platform (TechCrunch), Rated: AAA

Indifi, a Gurgaon-based startup that offers loans to small and medium-sized businesses and also operates an online lending marketplace, has raised 1,450 million Indian rupees ($21 million) in a new financing round to expand its business in the country.

Indifi, which has raised about $34 million in venture capital to date, has also relied on debt to grow and finance loans on its platform. Currently, it’s in about $21 million in debt, Alok Mittal, co-founder and managing director of Indifi, told TechCrunch in an interview.

A typical loan processed by Indifi is of about $7,000 in size. Overall, the startup offers between $1,400 to  $70,000 in capital to businesses.

Asia

65% of Singapore Customers Interested in Digital Banking (Crowdfund Insider), Rated: AAA

According to a recent survey, in Singapore digital banking has some pent up demand. JD Power has published a brief retail banking satisfaction study and, according to their numbers, 65% of consumers are interested in opening digital bank accounts. This is an increase from the year prior where 52% of surveyed individuals expressed similar digital banking interest.

Authors:

George Popescu
Allen Taylor

The post Thursday August 8 2019, Weekly News Digest appeared first on Lending Times.

Wednesday December 27 2017, Daily News Digest

blockchain artificial intelligence

News Comments Today’s main news: Impact investment performance. The UK home lending market had a watershed year. Opus, Statista predict digital payments to rise in 2018. Crowd Genie opens up blockchain-based lending to Singapore. Fast Invest offers crypto-enabled loan investments across Europe. Today’s main analysis: Where financial institutions will spend money on fintech in 2018. Today’s thought-provoking articles: The […]

blockchain artificial intelligence

News Comments

United States

  • Where money will be spent on fintech in 2018. AT: “American Banker predicts where banks and other financial institutions will put their investments in 2018. A good read with some solid predictive analysis, and good reporting. Top of the list: Blockchain & AI. Big surprise: Bank will get more aggressive with student lending and mortgages.”
  • Performance of impact investing. AT: “Regardless of what you call it, impact investing allows investors to grow portfolios while performing a social good, but how do these investments do over time? Not bad.”
  • The future of financing. AT: “Hint: It’s all about digital currency, or is it?”
  • Why people make bad financial decisions.

United Kingdom

China

European Union

International

India

Asia

United States

Where fintech dollars will go in 2018 (American Banker), Rated: AAA

A study released in December found that 82% of U.S. commercial banks plan to increase fintech investment over the next three years; 86% of bank senior managers surveyed said they intend to boost fintech funding imminently. The research was commissioned by the global fintech provider Fraedom.

Here are the fintech markets likely to get some love in the coming year:

Blockchain

Up till now, many blockchain pilots have been about gaining back-office efficiencies, such as in clearing securities, Canaday noted. She said she expects the use of blockchain to shift to ways to make money.

Artificial intelligence

“There was a study done about last quarter’s conference calls where the count of the number of times companies said ‘artificial intelligence’ in their calls was 800, up 25% quarter over quarter,” Steinberg said. “When you’re competing with 800 companies, it’s probably a difficult experience.”

B-to-B payments

While many fintechs focus on serving consumers, “toward the end of this year we started to see more of a shift in investment toward the B-to-B side,” said Grewal. “There’s big money being thrown into the B-to-B space. We’re seeing a lot of new company formation around the B-to-B payment space in a way we haven’t seen before. That’s one trend we’ll see a lot more of next year.”

Banks could “unlock” $11 billion in new revenue streams from small and midsize businesses by 2020, according to an Accenture report.

Consumer apps

Better experiences from fintech apps like Digit and Acorns are turning financial services firms into “ingredients” rather than “destinations,” according to Schwark Satyavolu, general partner at Trinity Ventures.

Grewal also sees a lot of interest in the cross-border commerce space — consumers from China wanting to make purchases in the U.S. and the U.K. and vice versa.

Banktech

Now that the Consumer Financial Protection Bureau has been defanged, so to speak, banks can get back into student lending and mortgages without fear of reprisal, he said.

THE PERFORMANCE OF IMPACT INVESTMENTS (All About Alpha), Rated: AAA

The Global Impact Investing Network has offered its own take on a much discussed question: do “impact investing” and its variants under various names – sustainable investing, socially conscious investing, ESG investing, etc. – work? And, if so, how well? It looks at this question in a very granular way, focusing especially on II through private equity and private debt. Given this focus it engages in a meta-study, or literature review.

The GIIN begins with the observation that private equity is the most commonly employed vehicle for impact investing. It is used by more than 75% of the impact investors.

How did they do? That 2015 study made the following points:

  • Since inception the 71 funds have generated aggregate net returns of 5.8% on average, with 4.6% showing up as the median.
  • The fund level internal rate of return can vary a good deal. The top 5% of funds get 22.1% or higher and the bottom 5% lose 15.4% or more.
  • That range itself is “similar to what is seen in conventional investing and illustrates that fund manager selection is key to strong performance.”

The Future of Financing (Avertising Specialty Institute), Rated: A

According to government statistics, 28.8 million small businesses currently operate in the U.S., employing 57 million people. A study by U.S. Bank notes the major reason these businesses fail is due to cash flow problems. Eighty-two percent of those businesses, in fact, are tanking because of lack of cash.

“You have this compression happening across every stage along the way,” Graham says. “For example, 24-hour turn with orders, better systems allowing a distributor to invoice faster, and easier ways to accept payment up front. It’s enabling everything to move faster. The need for financing is not as great as it used to be as a result of the options available now to be able to turn everything faster.”

There’s also big growth in the online lending space, Graham says, allowing for a lot of flexibility and options to get bank-like financing for business needs. But she thinks the next huge financing shift will surround something completely different.

“I think a lot of the real changes are going to happen around digital currency,” she says.

Lending Requirements

“Document requirements won’t change,” Seagraves says. “To get a loan today, you need to have some vehicle to communicate your plan, and that vehicle should include a set of business projections, like an Excel spreadsheet that talks about your financial requirements for the short term and how long it’ll take to become cash flow-positive. Then the lender is going to want to know your financial position as an individual and if any of your assets can be leveraged to secure a loan. These are all very traditional requirements, and I don’t see them changing any time soon.”

Why do people make bad money decisions (IOL.co.za), Rated: B

Eight out of ten American adults feel anxious about the state of affairs of their personal finance.

In addition to this, neural activity associated with “stressful information processing” was 20% higher among people who made their own money decisions compared to someone who received financial advice.

United Kingdom

Watershed year for equity release in the UK home lending market (Propertywire), Rated: AAA

The membership of the Equity Release Council in the UK has increased annually by 23%, rising to 219 from 178 at the same time last year, boosted by new entrants to the market, the latest official figures show.

Lending in the third quarter of 2017 surpassed £800 million for the first time in any single quarter, with the sector also on course to reach a record-breaking £3 billion in lending for the first time in a single year.

China

THE EASIEST WAY TO LOSE YOUR LIFE SAVINGS IN CHINA (SCMP), Rated: AAA

By any measure, 62-year-old Shan Juzhen was an easy mark. After the shortest of conversations with other investors, Shan put more than US$15,000 – or nearly a year of her pension – into a lending club she had never heard of.

She felt it unnecessary to check the qualifications of the lending club, which serves as an alternative for borrowers who cannot get a loan from a big bank. She also did not ask questions about how her money would be lent. The only thing Shan wanted to know was would the platform give her a high return on her investment.

A report published in December by Chaoyang Court in Beijing found that the number of Chinese senior citizens involved with lending-related disputes surged to more than 4,400 in 2016, a nearly sevenfold increase from a year earlier. And among all lending-related disputes the court handled last year, about 45 per cent involved elderly Chinese.

P2P online lending has now reached US$908 billion in transactions, according to Internet Loan House, a website that tracks the industry.

European Union

Joint Discussion Paper on automation in financial advice (EIPOA), Rated: AAA

Given this assessment, the ESAs are of the view that, even though automation in financial advice is not presently observed equally across all financial sectors and/or EU Member States, the phenomenon has the potential to continue to grow. The ESAs will assess the feedback to this Discussion Paper in order to better understand the phenomenon and to decide which, if any,
regulatory and/or supervisory action is required.

In considering the topic of automation in financial advice, the ESAs have observed the following across the banking, securities and insurance and pensions sectors :

  • In the banking sector:

i. Automation specifically in relation to financial advice does not seem to be very widespread. However, human contact is supported more and more by the use of various automated tools. These include comparison websites that can compare products offered by various financial institutions, and websites providing information on specific products and helping consumers to select between products by using simulators and calculators.

ii. New business models that are based in providing advice through automated advisory tools have nonetheless emerged (e.g. automated tools where the consumer fills in all relevant information and receives an advice on which mortgage to get as a result).

  • In the securities sector:

i. Automation in relation to financial advice is a more mature phenomenon, although the provision of advice that is completely automated appears to feature only in a few EU Member States. In this business model, automated tools are used as a type of financial adviser, often referred to as a ‘robo-adviser’: the automated tool asks prospective investors for information about their specific circumstances and, based on the answers provided, an algorithm is used to recommend transactions in financial instruments that match the customer’s profile.

ii. Different automated tools may be used to support different parts of the advice process, for example the collection of information, risk profiling, portfolio analysis, and order processing or trading.

iii. Some advice services are entirely automated, whereas other services foresee human interaction between the consumer and the advice provider at some stage.

iv. In a greater number of European jurisdictions, other automated tools exist that offer various online functionality to consumers. Such offerings include (but are not limited to): the possibility to open and manage online trading accounts that allow the consumer to trade financial instruments on an execution-only basis; automated portfolio management services; and automated tools that compare the prices of transacting in different financial instruments.

Read the full report here.

Fast Invest – Crypto-enabled Loan Investments Across Europe (ChipIn), Rated: AAA

Peer-to-peer (P2P) lending platforms have disrupted American financing. That is old news. What is more interesting is the impact of such platforms in Europe where big banks have long dominated the entire loan-initiation process as well as the investment chain.

European P2P initiatives grew 92% in 2015 to 5.4 billion euros. P2P consumer lending is, so far, the biggest and fastest growing market segment, although far from the only one.

Brexit will mean that British banks will lose what is called “passport rights” that enable them to have access to European markets. And P2P lenders are already jumping into the void this is creating, as well as allowing new kinds of services and income investment opportunities.

Introducing Fast Invest

Fast Invest’s mission is to create a cross-European platform where investors can earn returns for investing in loans. At present, the platform offers an 8-15% return based on past performance for short-term investments of as low as 1 euro, US dollar, pound or Polish zloty after ten months.

Today, before the crowdfunding, the company has 8,500 plus daily customers across Europe, 21 certified lenders, 36 client origin countries and over 50 employees on staff.

Investors will be able to choose between investing in cryptocurrency or a crypto-proved loan investment. This will significantly increase yield over regular bank returns which are about 1.25% API at present. These investments include traditional and alternative investments including issued loans, real estate, private equity and other structured finance products.

Investors can invest as little as 1 euro and get that back within one day with the Fast Invest buyback guarantee.

FIT tokens allow investors to participate in a growing P2P market opportunities across Europe and the US.

Cork investors most likely in Ireland to back local firms (Independent.ie), Rated: B

Cork-based loan investors are the most likely to back local firms, according to data from peer-to-peer lending platform Linked Finance.

The numbers are based on business loans made over the Linked Finance platform, which matches investors to their choice of borrowers using the so called peer-to-peer lending model that cuts out banks.

Analysis of the investors using the platform found that just over one in three (34pc) of lenders have incomes in excess of €100,000, 39pc own their homes outright and 40pc are homeowners with a mortgage.

International

Fintech Outlook 2018: Digital Payments to Rise (Investing News), Rated: AAA

2017 was a significant year of growth for digital payments, according to an Opus Consulting report, together with the emergence of alternative payments. Peer-to-peer, wallets and mobile payments reached “high adoption levels” in the mainstream, reaching $3.6 trillion in terms of transactions during 2016-2017. According to the report, that amounted to a 20 percent year-on-year growth–a number that will only continue increasing from here.

In terms of global mobile payment revenue, the report states the number is estimated to reach $930 billion in 2018, representing a 19 percent growth from 2017 with China leading the way in the mobile payments market. Global payments revenue as a whole is poised to reach $2.3 trillion, with 43 percent of that representing banking revenues.

Similarly, data from Statista indicates that transaction values are expected to grow at a compound annual growth rate of 41.9 percent over the next five years to 1.32 trillion, while the number of users in the mobile point of service payments will reach 977 million by 2022.

Fintech outlook 2018: Companies to watch

Glance Technologies, whose flagship product is its mobile app, Glance Pay, decided in 2017 that it would create its own cryptocurrency built on the ethereum platform to use smart contracts to provide rewards, which Green says will be purchases in conjunction with its mobile payment app.

Biometrics as the Catalyst: FinTech Pulls Away From Banks (Let’s Talk Payments), Rated: A

The development of biometrics on mobile devices is set to have an outsized impact on mobile wallets and international money transfer. Advances such as fingerprint login, retinal scan, and facial recognition offer a rare opportunity for remittance companies to both combat fraud and improve the user experience.

Mobile wallet transactions alone are expected to reach nearly $1.4 trillionin 2017, growing 32% compared to 2016, and the number of mobile phone users will top 5 billion.

Biometrics improves the user experience by reducing form fields, eliminating the need to upload a picture of a physical ID, and fully automating the know-your-customer (KYC)/anti-fraud process. Moreover, for the first time, digitally funded transfers will offer better KYC and fraud checks than banks or brick-and-mortar competitors.

With hacked or compromised credentials, attackers can wreak havoc by posing as legitimate users and moving or stealing unauthorized funds. Not only is there a risk of theft, but fraudsters also exploit peer-to-peer (P2P) money transfer services for money laundering and terrorism financing. Considering the fact that P2P payments are expected to be used by nearly129 million adults in the US by 2021, the threat isn’t going away anytime soon.

The number of people living outside of the country in which they were born has surpassed 244 million, representing a 41% increase between 2000 and 2015. Many of these people come from places where the identity infrastructure is weak and disconnected from developed systems in the US and Europe.

About 93% of consumers would rather use biometrics than passwords.

India

The McKinsey Paper on India (All About Alpha), Rated: AAA

Earlier this year, McKinsey & Co. published a paper on impact investing in India. The data base for that study consisted of 48 PE and VC transactions, of which 31 targeted the “financial inclusion” sector: that is, enterprises designed to bring banking and bank-like services to the unbanked.

In this case they varied from a loss of 46% to a gain of 153% with a median gross IRR of 10% and a weighted average of 11%.

 

2017: The year of the customer (livemint), Rated: AAA

Investments in the fintech space in India also witnessed frenzied activity this year, with total value of investments jumping by 388% from $383 million in 2016 to $1,868 million in the first three quarters of 2017, according to industry database CB Insights.

With over 1 billion mobile phones, 325 million broadband connections and 306 million new bank accounts, India became a case study in digital financial inclusion, driven by the Jan Dhan Yojana, Aadhaar and mobile (JAM), as reported by the communications ministry.

More than 225 alternative lending companies were founded in India in 2017 and the segment was the second most funded in India’s fintech space, as per data from an industry database Tracxn.

According to the National Payments Corporation of India (NPCI), eKYC verifications have jumped almost 77% to 84 million in FY18 over FY17, speeding up the on-boarding process and reducing costs significantly.

In 2017, almost 46 strategic partnerships and deals took place between lenders, payments companies and fintech innovators. Some of these were the tie-ups between Paytm and ICICI Bank for short-term interest-free credit lines; Amazon India and Bank of Baroda for unsecured micro loans; Mobikwik and Bajaj FinServ for offering all features and benefits of Bajaj Finserv EMI cards over a digital payments wallet; Fisdom and Lakshmi Vilas Bank for a robo-advisory platform; and between Senseforth and HDFC Bank for chatbots.

Reviewing the 2017 fintech ecosystem and what its startups are looking forward to in 2018 (Plunge Daily), Rated: A

RBI’s recognition of P2P lendingstartups as a new category of non-banking financial companies (NBFCs), was celebrated all-round by the sector.

One of the most celebrated advantages of the fintech boom is that of ‘financial inclusion’ and the potential to service the underserved. However, the sector is hoping that the guidelines placed will initiate control and check on the unorganised side of money lending and the digital push will bring about competitive rates and transparency.

Another announcement the RBI made in October was the introduction of guidelines for digital wallet companies. There were mandates on higher capital requirements for license holders of prepaid payment instruments or digital wallets, KYC or know-your-customer norms and the initiation of interoperability of various digital wallets.

Rohit Lohia, CO-Founder and COO of Cointribe believes 2018 will see scaling up of players in the lending space especially in small business lending.

Experts’ views on what changed in the banking and fintech sector in 2017 (livemint), Rated: A

Upasana Taku, co-founder, MobiKwik

The government’s decision to bear the merchant discount rate (MDR) on digital payments of up to Rs2,000 will bring greater level of acceptability for digital payment systems. Digital payments will become a way of life both for consumers and merchants and bring a cultural shift in digital payments.

Renu Satti, MD and CEO, Paytm Payments Bank

India is currently at the center of the banking world, and is set to emerge as a benchmark in digital and financial inclusion.

Living the sharing economy in the cryptocurrency way (YourStory), Rated: A

The global economic meltdown of 2008 was the catalyst to get people to shift gears, and supplement their income by sharing assets that they owned. Added to this, the increasing internet penetration and the evolving economic system helped companies such as Airbnb and Uber popularise the concept of shared economy, and successfully pave the path for other industries.

However, while these platforms helped millions of people find alternative sources of income, they suffered elementary setbacks. To begin with, the companies have significant amount of transactional overhead, be it monetary or operational. Second, international boundaries restrict cross-border economic sharing. Thus, the peer-to-peer markets are unable to foster collaborative ownership which is crucial to enable true sharing of resources.

Blockchain — the key to global sharing

The peer-to-peer network in the sharing economy, allows individuals to organise themselves without the involvement of any third party. As the intermediaries are based on the algorithms, the technology builds trust, making it a versatile technology that can be match specific user requirements.

According to a PwC report, the peer-to-peer-lending global market is pegged to touch $335 billion by 2025. As the sharing economy continues to grow, the idea of private ownership is being replaced by the revival of collaborative and shared consumption and adoption of blockchain can guarantee safe and secure transactions.

Asia

Exclusive Interview with Crowd Genie CEO Akshay Mehra (ChipIn), Rated: AAA

Crowd Genie is a peer-to-peer lending platform based in Singapore. It connects small to medium businesses seeking loans with capital via a blockchain-based cryptocurrency system.

Lenders can expect to make at least 14% return with all funds held in escrow. This peer to peer lending activities will be tokenized using smart contracts to enable lending without borders more efficient, cheaper and safer. Ultimately, the team has a vision to build an Asset Trading Exchange on Blockchain that will democratize trading and allow investment in infrastructure, stocks, cryptocurrency, and bonds across Asia, which would be prohibitively expensive, and potentially unfeasible due to issues of transparency and trust without Blockchain.

Hi, Akshay. Thanks for joining us today. Can you tell us more about yourself and Crowd Genie?

Crowdfunding is popular in the West, but the idea is relatively new in Singapore and other Asia countries. Observing how lenders getting low returns from the banks because of the overhead costs and how established SMEs unable to receive full funding desired and become under-banked, I would like to match this two parties together to solve the problem and that’s what Crowd Genie has been doing.

Why did you decide to use blockchain in building Crowd Genie?

Although our existing P2P digital loan business is incredibly innovative in the Singapore financial sector, it would have been impossible to scale to enable lending without borders and offer Asia-wide asset trading before blockchain technology was introduced.

To build and scale an asset exchange with pre-blockchain technologies would be prohibitively expensive, and potentially unfeasible due to issues of transparency and trust.

In the whitepaper, you talk about creating “Asian Passport” rights or identities. Tell us how you came up with the idea and how you think you will implement this regionally. Is this based on the idea of European passport banking rights?

To build an end-to-end Asset Exchange, a Digital Passport is essential for us to identify who are the lenders and borrowers, are they associated with negative news, illegal activities or politically exposed. We will continue with our existing due diligence process where we ask for proof of identity and bank statement and check it against a world-wide recognized database. Thereafter we set up a digital passport and store in on blockchain.

Please explain the notion of “fractionalized assets,” and how it is redefining how P2P lending is occurring.

P2P lending is an illiquid investment. Imagine that you have invested in a 12 months tenure loan, but would like to get some money back before it matures, say 2 months later. You can do so by selling it on Crowd Genie Asset Exchange by indicating the fraction of your assets that you would like to sell.

 

Authors:

George Popescu
Allen Taylor

Enabling Banks to Deploy Investor Capital to SMBs

small growing businesses (SGB)

Enclude, an advisory firm providing integrated capacity building and capital services in developing countries, rolled out a solution that will enable Small Growing Businesses in development countries to secure funding and grow on one side and allow local banks and international investors to participate in their growth by proving capital and other banking services. Why […]

small growing businesses (SGB)

Enclude, an advisory firm providing integrated capacity building and capital services in developing countries, rolled out a solution that will enable Small Growing Businesses in development countries to secure funding and grow on one side and allow local banks and international investors to participate in their growth by proving capital and other banking services.

Why Enclude?

The firm believes that capacity building and finance have to work hand-in-hand, especially for the SME segment. All of Enclude’s projects incorporate this philosophy. They are also focused on SGB development and helping lenders understand the difference between SGB and SMB.

An SMB is primarily a lifestyle business with the typical aim of creating a job for the owner and his family. It is usually destined to remain small in size throughout its lifecycle. An SGB (Small and Growing Business) is an SMB focused on growth and scale. As they are growing aggressively, SGBs are usually asset light, and cash flows are irregular. Also, they don’t usually qualify for VC funding because they are not in hot sectors like technology or consumer internet.

Enclude wants to create a platform that is able to identify SGBs, help them grow with continued education and mentoring, and help local banks tie up with impact investors to take on the risk of providing such enterprises with much-needed financing. Enclude also wants to replicate this model in multiple developing countries.

Opened doors for Impact Investors

Enclude has paved the way for impact investors who were looking to make stable returns but also trying to create a positive impact in the world either socially or economically through their investments. Third-party impact investors participate in the loans through local banks and Enclude acts as the project manager. The firm deals with impact investors, business development service providers, the local bank, and any other relevant player in the ecosystem.

This is a huge win for impact investors, as well, because investing in developing countries’ SME loans on an individual basis is an expensive affair mainly because of multiple layers of due diligence; therefore, making the investment on the back of partnerships with local banks is a much more secure and profitable avenue for them.

Pilot Project in Nicaragua

Although the groundwork for the project has been completed in Nicaragua, and the project was initiated in November 2015, it is still in the nascent stage. More importantly, initial vitals of the project are positive and based on that the firm is planning to launch in other countries of Central America and the Caribbean in Phase 2, then later in South America and other countries.

So far, the project has been able to originate loans worth $300,000-$400,000 with an average loan size in the $20,000 – $22,000 range. The project is funded by USAID Pace, an initiative that acts as a bridge between the private sector and promising new businesses.

Under this project, the loan is given out for a maximum period of five years, payments are variable, and the borrower has to pay a fixed percentage of its business revenue to repay the loan. As per the credit model, a business that is doing well will be able to pay off the loan in 3.5 to 4 years. APR and other terms of the loans vary from country to country. A benchmark reference rate would be around 16%-18% for these markets.

Assistance to SGBs

By integrating the synergies with Agora Partnerships, a pioneering BDS, Enclude endeavors to provide assistance to SGBs by offering them a platform for capacity building so as to reach the desired level of growth. Moreover, it gives proper training and mentoring, which helps in reducing default rates and skills the entrepreneur in necessary business skills like accounting, marketing, etc. It is a two-year mandatory course for all the borrowers, and Enclude follows up to ensure that the SGB is getting the maximum benefit from the course.

Expansion Plan

With the success of its pilot project in Nicaragua and its expansion phase well underway, Enclude hopes to touch the elusive $1 million mark in loan origination before the end of 2017 and hit $7-$8 million by next year.

Company History

Triodos Facet, a consulting company specializing in micro-finance (Zeist, NL), and Shore Bank International, a consulting company formed by Shore Bank (Washington, DC), came together in 1988 and gave birth to a new consulting firm in 2013 known as Enclude. Headquartered in Washington D.C., Enclude has registered offices in Sub-Saharan Africa, Asia, Latin America, the Caribbean, Europe, and Central Asia. It continues to be affiliated with Triodos Bank of the Netherlands.

The company is not motivated by profits but wants to ensure that it at least breaks even on an operating level.

Conclusion

Enclude is not doing anything new. Its innovation efforts combine financing for SGBs along with helping them to grow. This is a win-win for all involved as it helps SGBs grow, reduces bank default rates, and impact investors are able to help small businesses in developing countries while achieving a small profit in return.

Author:

Written by Heena Dhir.

Friday March 17 2017, Daily News Digest

orchard originations

News Comments Today’s main news: CreditEase Fintech Investment Fund announces new global investments. Money360 loan portfolio exceeds $200M. Funding Circle launches C shares offer for the fund. Today’s main analysis: Signs of a turnaround in volumes? Today’s thought-provoking articles: Groundfloor launches tax-deferred real estate investing. China’s yield-strapped investors spark P2P explosion. United States CreditEase Fintech Investment Fund announces new investments […]

orchard originations

News Comments

United States

United Kingdom

China

India

Asia

Africa

News Summary

 

United States

CreditEase Fintech Investment Fund Announces New Investments in Global Growth-Stage Fintech Companies (PR Newswire), Rated: AAA

CreditEase Fintech Investment Fund (“CEFIF”), a venture fund investing in growth-stage fintech companies in China and globally, announced at the 2017 LendIt USA Conference in New York that it recently participated in investment transactions in three new fintech companies. LendIt annual conferences are recognized as one of the largest global fintech industry events dedicated to connecting the global fintech and lending communities.

The three investment transactions include Series C financing round in Trumid, an electronic trading platform for the bond market, Series B financing round in WeConvene, an online corporate access management ERP provider for capital markets, and Seed Round financing round in WorldCover, an innovative peer-to-peer insurance network.

Money360 Doubles Loan Portfolio, Exceeds $ 200 Million Mark (Yahoo! Finance), Rated: AAA

Money360 has doubled its portfolio in record time, having surpassed the $200 million mark this month in closed commercial real estate loans, the company announced today.

It took Money360 more than a year and a half to hit the $100 million mark, but less than six months to increase to $200 million, and by year-end, it expects to exceed $500 million in transactions.

The $200 million milestone came on the heels of four recent loan closings totaling nearly $38 million. All of these loans represent a loan-to-value ratio of not more than 75 percent and include:

  • A $16.2 million bridge loan for a single-tenant, 71,132-square-foot office property constructed in 2006 located in Rosemont, Illinois.
  • A $12.3 million bridge loan for a single-tenant suburban office property in Auburn Hills, Michigan.
  • A $7.5 million bridge loan for two industrial buildings in Irvine, California.
  • A $1.9 million permanent loan for an unanchored, 100-percent-leased retail property in Smyrna, Georgia.

Signs of a Turnaround? A Closer Look at Orchard’s 2016 Q4 Report (Orchard Platform), Rated: AAA

Origination numbers fell consistently over the course of 2016, and we have been waiting to see whether that was going to continue or whether we would eventually see an uptick. In Q4, we finally saw an uptick.

Not a huge one. It’s about a 10% increase over Q3 numbers. And that’s still down significantly from the peak last year, about 46% from what we recorded in Q4, 2015.

Charge-off Rate Vintage Curves

Back in 2010, the size of the industry and the volume of loans originated were pretty small. There were also fewer lenders focused on subprime lending. Additionally, a larger percentage of 2010 loans had a term of 36-months. 60-month loans have grown more in later years. 36-month loans have shown a tendency to charge-off at slightly lower rates.

This introduction of new loan products for lower credit quality borrowers in later vintages—i.e. lower lending standards and longer duration loans—means that the 2010 vintage includes not only fewer loans, but the loans tended to be of a higher credit quality. Given those factors, charge-offs are bound to be lower in the 2010 vintage.

More recent years all stack together pretty tightly, within 1-2% of each other in cumulative charge-offs. However, 2014 and 2015 vintages seem to be charging off at a slightly faster rate, at least, as of this latest report.

Borrower Interest Rates

Since Q2 of 2016 we’ve seen borrower rates fall in both Q3, and Q4 by around 1.2%.

Subprime rates are significantly higher. They’re in the 25-40% range. Whereas the prime lenders are going to be in the 8% to maybe 15-20% range. We end up with a weighted average of ~16%.

GROUNDFLOOR Launches Tax Deferred Real-Estate Investing (Press Release Rocket), Rated: AAA

GROUNDFLOOR, the first and only U. S. real estate lending platform open to non-accredited investors and IRA Services Trust Company, the leading innovator of hi-tech Self-Directed Individual Retirement Account (SDIRA) solutions, today announced an initiative to maximize the benefits of tax-deferred investing for retail investors. As a result of the collaborative effort, GROUNDFLOOR will immediately begin inviting investors on their platform to fund their accounts directly through their 401(k)s and IRAs.

GROUNDFLOOR offers real estate investments with different grades that have a range of risk/reward profiles, offering returns ranging from 5% to over 20% so investors can build a diversified portfolio. In 2016 GROUNDFLOOR delivered loans with an average annualized return of 14.16%.* Compared to 2015, in 2016 loan origination volume in dollars grew by 621%, and the dollar value of principal repaid grew by 588%. Only one of the 108 loans repaid to date has returned less than 100% of the principal due back to GROUNDFLOOR’S investors.

At a time when private markets continue to deliver superior returns compared to public markets, most Americans currently saving for retirement can no longer rely solely on traditional stocks, bonds, and mutual funds for growth and yield. At the same time, many investors have been hesitant to participate in SDIRAs because of the expense, burden, and paperwork traditionally associated with the self-directed investment of tax-deferred funds.

GROUNDFLOOR and IRA Services are working together to address these issues head on: IRA Services’ real-time, cloud-based, API-driven retirement investment solution for the P2P industry – the first of its kind – streamlines the once difficult process of investing tax-deferred funds in P2P marketplaces. Meanwhile, GROUNDFLOOR is the only P2P marketplace where both accredited and non-accredited investors can directly invest in private real estate projects on terms they control, rather than turning their money over to a fund.

How Whitepages Turned Their Data into an Identity Verification Tool for Online Lenders (deBanked), Rated: A

Whitepages might be a 20-year old company but the data they’ve amassed over time can add significant value to online lenders, the company claims. Whitepages Pro, which offers identify verification, allows lenders to gauge if an individual is real.

A simple query of an individual’s name, phone number, email, address or business name will return results not easily accessible elsewhere, like how long that person’s email address has been in their system or the likelihood that the email address was generated by a bot, not a real person. A match is good, no match might not be good, they say. Their system can also do things like identify the carrier the phone number belongs to and whether or not that carrier, if it’s VOIP or something, might have a higher propensity for fraud.

Machine Learning is the Future of Marketplace Lending (Due), Rated: A

At LendIt USA, CEO Scott Sanborn shared that his team at Lending Club uses a manual process to dynamically price loans. Unsurprisingly, some loans are more sought after than others, but matching the pricing with demand is a labor-intensive process. With AI and machine learning, Lending Club and other online lenders may be able to rapidly update loan pricing automatically to maximize investor yield and industry profits while ensuring virtually every loan gets funded.

Lending Club, the dominant player in the peer-to-peer lending industry, grades loans from A to G, corresponding to interest rates from 5.32% to 30.99%. While this model is widely accepted and similar systems are used for virtually all bank and private lending, there are flaws in the model.

Airlines use complex algorithms to determine seat prices, but machine learning, commonly called artificial intelligence or AI, to better understand how people are interacting and purchasing. Rather than just increasing prices as the flight date gets closer, a computer could look for purchase trends and dynamically adjust prices on its own rather than leaning on a pre-determined schedule based on a series of inputs.

If this same logic were applied to a lending marketplace like Lending Club, it could look at trends, loan availability across multiple platforms, risk factors, and current interest rates across multiple lending marketplaces to best price loans. This ensures the best results for lenders and borrowers, as every loan would be funded and yields would be optimally set.

Small Biz Lending Approval Rates Surge at Big Banks, Institutional Investors: Biz2Credit Small Business Lending Index (Biz2Credit), Rated: A

Loan approval rates at big banks ($10 billion+ in assets) improved to new post-recession highs in February 2017, according to the latest Biz2Credit Small Business Lending IndexTM, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com.

Small business loan approval rates at big banks improved to 24.1% in February 2017, marking the seventh consecutive month of increases and the 11th time in a calendar year that approval percentages have increased. Further, loan approval rates at big banks in a year-to-year comparison are up more than one full percentage point, as they slowly creep towards the one-quarter mark.

For the first time in the last six months, loan approval rates at small banks dropped by one-tenth of a percent to 48.8% in February 2017 from 48.9% in January.

Institutional lenders’ loan approval rates improved to 63.5%, reaching a new Index high.

Loan approval rates dropped at alternative lenders in February, as they approved 58.4% of the loan requests they received, down one-tenth of a percent from 58.5% in January.

CFTC Chief Pick Says Commission Should Embrace Fintech (WSJ), Rated: A

J. Christopher Giancarlo, who Mr. Trump tapped Tuesday as the permanent head of the Commodity Futures Trading Commission, said in a speech here Wednesday he has instructed staff to examine the role the agency can play in promoting fintech in the multi-trillion-dollar derivatives markets it oversees.

Mr. Giancarlo has long argued the CFTC should do more to embrace financial technology, which he says has the potential to transform finance, in part by significantly boosting the quality of swaps data that regulators collect from the industry. He has tapped a top CFTC staffer, Jeffrey Bandman, to head the agency’s fintech efforts, according to people familiar with the matter.

‘Sick and tired of no one innovating’: Confessions of a financial tech entrepreneur (Tradestreaming), Rated: A

For the latest in our Confessions series, we spoke to a startup entrepreneur with considerable experience in the banking sector.

So banks are making more money off of high-income customers, and are pushing the startups to take the lower income ones they don’t want?
They would much rather get their tax breaks and give to charity and say they’re doing good for the country than get their hands dirty with a bunch of very subprime demographics. The fintech guys have to go to high risk. If you’re a bank, you can cherry-pick all the rich people and not have as many defaults in a downturn.

What about accelerators and incubator programs where the banks mentor startups. Doesn’t that show their goodwill?
They just steal your ideas. They’re not doing it for the good of their soul. They’re doing it to take a chunk and or steal the idea as you build it and do it themselves.

If it’s so hard to get your product to market, what’s the objective of a startup entrepreneur? Is it just to cash in when you’re acquired by a bank?
If you’re looking to make a little bit of money quick, it’s probably not a bad play, but if you’re actually looking for any kind of change in the world, and you believe in that, it’s not a good move. That’s the reason why people go into this, and I believe I’m one of them. I am bored and sick and tired of no one innovating in the space.

FinTech: Some Limits on Smart Contracts (The National Law Review), Rated: B

Milos Dunjic argues that the Capabilities of Smart Contracts are Overblown because most people misunderstand the fundamental properties of smart contracts and propose ideas that are not implementable on a practical level.

As for scalability, smart contract code must produce the identical outcome in every node that executes it. Dunjic questions whether a large number of distributed nodes all hitting a “funds transfer” API at the same time might look like a self-inflicted DDOS attack on the API. Would each call to the API receive exactly the same response from the API? Reliability must be absolute in a smart contract.

Fintech And Digital Wallets: Innovative Approach vs. Security Concerns (ValueWalk), Rated: B

In CES 2017, Samsung has declared that its Gear 2 will be outfitted with Samsung Pay, the digital wallet application of the organization. In the coming era, we can see more gadget producers integrate advanced wallet services.

Mobile payment procedures including bank transfers and cards are more secure now with the assurance of biometric validation. The unique mark scanner or face identification programming on a few handsets and platforms permit the users to enlist his biometric data with the gadget and from that point utilize them for any transaction when it needs confirmation. On account of biometric validation security vulnerabilities with mobile payment could be limited as it were. In future, we can expect the expansion of such computerized transactions with biometric confirmation constraining the security dangers and ruptures to a base.

Impact Investing Growing Among Alternative Managers (Private Wealth), Rated: B

Impact investing is growing in importance among the alternative investing community, according to a new survey by the Chartered Alternative Investment Analyst (CAIA) Association.

Assets under management in impact investments have grown 18 percent year-over-year for the past three years, according to the Global Impact Investing Network (GIIN). Total industry assets under management in traditional private equity impact investments are estimated to be around $80 billion.

United Kingdom

Funding Circle SME Income Fund launches C shares offer (AltFi), Rated: AAA

THE FUNDING Circle SME Income Fund has launched its first conversion (C) share fundraising as part of plans to raise additional capital over the next 12 months.

The placing is open until 6 April at a price of 100p per C share and the new class will list on the London Stock Exchange on 11 April.

The London-listed investment trust, which invests in loans on the Funding Circle platform, issued a new prospectus in February as it looks to issue up to 500 million new shares over the next 12 months.

China

Yirendai Appoints Chief Credit Officer (PR Newswire), Rated: AAA

Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading online consumer finance marketplace in China, today announced the appointment of Dr. Yichuan Pei as its Chief Credit Officer.

Dr. Pei will be responsible for the overall management of Yirendai’s Credit Department to ensure that the credit risk of loan portfolio on the Company’s platform is within the Company’s guidelines. He will also work closely with the Company’s Chief Risk Officer, Ms. Yiting Pan, to manage the Risk Management Department. Ms. Yiting Pan is expected to transit from her current position as Yirendai’s Chief Risk Officer into a new role with CreditEase and relocate to the U.S. in the middle of 2017 due to personal reasons. Dr. Pei will take over the full responsibilities of risk management and assume the Chief Risk Officer position at end of the transition period.

China’s yield-strapped investors spark peer-to-peer explosion (Nikkei Asian Review), Rated: AAA

Peer-to-peer lending is surging in China as conventional financial products lose their appeal — creating new opportunities and substantial risks for yield-hungry retail investors.

Outstanding peer-to-peer loans — funds lent by one individual to another through the internet — stood at 885.7 billion yuan ($128 billion) in China at the end of February. That is eight times the level of barely two years ago.

Companies are getting into the game, borrowing hundreds of thousands of yuan in operating capital. Lending services are now offering to choose investments for customers. For funding riskier borrowers, lenders can expect yields on the order of 8-12%. These loans turn over quickly in many cases, often in less than a year.

China’s peer-to-peer lending balance stood at just 103.6 billion yuan at the end of 2014, according Yingcanzixun.com, a site tracking the peer-to-peer industry run by Shanghai Ying Can Investment Management Consulting. Within a year, that surged to 406.1 billion yuan. Lending could top 1.3 trillion yuan by the end of 2017, an executive with Yingcanzixun predicted.

India

V Balakrishnan’s startup Billionloans looking to raise mn shortly (India Times), Rated: AAA

Billionloans, the online lending platform founded by former Infosys CFO V Balakrishnan, is looking at raising $1 million in funding within the next few weeks as it focuses on building a Rs 1000-crore loan book in two-three years.

Because the Billionloans platform functions as a marketplace, it does not take the risk of loan defaults itself. The lending is also done by institutional lenders who have the ability to make collections in case of defaults.

Balakrishnan’s platform will use a potential borrower’s social media behaviour, device information, banking transaction history and the results of a psychometric test to determine intention to repay to issue a score to gauge credit worthiness. The platform uses Micrograam’s underlying technology to issue the score, Balakrishnan said.

 

Asia

Singapore P2P Lender Silver Bullion Hits 1000 Loan Milestone, Over SM Lent (Crowdfund Insider), Rated: AAA

Launched only 19 months ago, Silver Bullion Pte Ltd‘s bullion has secured P2P loan platform has matched 1000 loans. While it took roughly 13 months to match its first500 loans, it took only another 6 months for Silver Bullion to reach 1000 loans.

Silver Bullion’s bullion secured P2P loan platform has now matched more than S$27M in loans. In Q1 2017, the U.S dollar denominated 12-month loans were matched with an average interest rate of 4.0% p.a while the Singapore dollar denominated 12-month loans had an average interest rate of 4.2% p.a.

Africa

Crowdfunding the solution for SMEs? (Moneyweb), Rated: A

Traditional financial institutions are generally reluctant to serve SMEs due to the high costs associated when assessing these businesses, their volatile balance sheets and the inherent high risks involved with start-up companies. This lack of financing for SMEs has exposed a gap in the South African lending and borrowing market, and has encouraged development in the sphere of social lending, also known as crowdfunding.

Online marketplace lending in South Africa is becoming an increasingly popular alternative to traditional financial institutions, which for years dominated the lending and borrowing market with high interest rates, rigorous red tape, excessive bank charges and inflexible attitudes. Social lending is revolutionising the manner in which SMEs and conventional corporate citizens access funding and it is disrupting traditional understanding of how money is lent and borrowed. Crowdfunding eliminates the need for traditional financial institutions in the context of SMEs and provides consumers with a convenient and flexible online funding platform that offers competitive interest rates, low fees and charges, and advantageous terms and conditions.

Launched in 2012 as the first online marketplace lending platform in South Africa, Rainfin Proprietary Limited (RainFin) has experienced rapid growth and popularity due to its ability to match borrowers directly with lenders.

However, despite the popularity and growth of these crowdfunding platforms in South Africa, they are not free of burdens and restrictions. The National Credit Act 34 of 2005 (NCA) previously allowed an individual to lend up to R500 000 to another individual without being registered as a credit provider.

Authors:

George Popescu
Allen Taylor