Review of Indian Regulation on P2P market

india p2p lending regulation

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

india p2p lending regulation

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

P2P Market overview

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

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

P2P Regulations in India

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

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

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

The Reason Behind RBI Regulations

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

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

P2P Lending: A Throw Down on RBI Regulations

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

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

Impact of RBI Regulations

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

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

Conclusion

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

Author:

Written by Heena Dhir.

Friday June 30 2017, Daily News Digest

global developing markets sme credit demand

News Comments Today’s main news: Ron Suber steps down as Prosper president. Pave stops originations and considers strategic options. Square to start lending money. LendInvest cancels P2P authorization application. LendInvest receives highest rating from European agency. Reserve Bank of India finalizes P2P rules. Alipay to enter African market. Today’s main analysis: Alternative data transforming SME finance. Today’s thought-provoking articles: SoFi to offer […]

global developing markets sme credit demand

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News Summary

United States

Ron Suber, Prosper President and Industry Legend, Stepping Down (Lend Academy), Rated: AAA

After nearly 5 years, Ron has decided it is time to move on from Prosper. He’s been part of two turnaround stories at the company – one in 2013, and more recently as we’ve seen Prosper grow its business following the challenging environment in 2016. It is great to see them back on track, and Ron told me that he is leaving Prosper in the hands of a great CEO and management team.

When Ron recently shared his plans with me he made it clear that he will still be involved with Prosper as a company advisor and “President Emeritus” but he will not be involved in the day-to-day activities.

Over the last several years, Ron has made 21 investments in various fintech companies and he is an advisor to several of these companies.

Personal note from Ron Suber:

This isn’t just another, “I changed jobs” announcement, it’s a next phase of life with eyes wide open called “rewirement” not retirement.

Rewirement will include doing even more of the things I have enjoyed in the past – travel, teaching, learning, coaching/cultivating young entrepreneurs, being the investor/advisor that I enjoyed working with as an entrepreneur, exploring and spending time with you.

Jack Dorsey’s Square Inc. May Soon Loan You Money (WSJ), Rated: AAA

Square Inc., the technology company best known for processing payments for small merchants across the U.S., is now angling to lend to consumers, too.

The initiative, which follows the launch of a consumer-oriented Square prepaid debit card, is part of a broader push from the company to branch out beyond its original products—small, white credit-card readers that merchants plug into a mobile phone or tablet.

Offering consumers financing options for their purchases brings Square into competition with financial-technology companies such as PayPal Holdings Inc., Affirm Inc. and GreenSky LLC, as well as consumer lenders like Synchrony Financial that offer credit cards tied to specific retailers.

It also means Square will be on the hook for consumer defaults, which have recently ticked up at some online lenders and credit-card companies.

Square plans to hold the consumer loans on its balance sheet, but as volume grows it could look to sell loans to outside money managers, as it does with its small-business credits unit.

This Company Is Offering A Month’s Worth of Avocado Toast to Millennials Who Buy a House (Money), Rated: AAA

Inspired by the controversial comments made by an Australian millionaire last month, SoFi, an online personal finance company that targets millennial consumers, will give new home buyers a month’s supply of avocado toast if they purchase a home with SoFi mortgage in July.

For those who qualify, the avocado toast incentive program will be delivered in three shipments right to the recent homebuyers’s doorsteps. There is also an option between regular and gluten-free bread. (Of course, they will still have to toast the bread once it arrives.)

The marketing decision was ultimately in response to a now-viral interview in May that caused global uproar, in which Australian millionaire and property mogul Tim Gurner said millennials should refrain from buying the popular brunch dish if they didn’t want to quash their hopes of owning a home.

Can You Make Payments on Plane Tickets? (Forbes), Rated: AAA

Did you know there are a few ways to make payments on plane tickets if you can’t afford the full price today?

A new startup that offers payment plans for plane tickets is Airfordable.

Airfordable charges a one-time fee of 10%-20% of the ticket price and a down deposit is required. Your credit score isn’t checked, which is a definite plus for several reasons. After that, you make bi-weekly payments. Once the ticket is paid for, your e-ticket and itinerary are released.

CheapAir.com offers monthly payment plans for flights that cost more than $100 by partnering with Affirm. After selecting the flight you want to buy on CheapAir, you will be taken to Affirm’s website to complete the financing request.

Affirm will offer you a 3-month, 6-month, or 12-month payment plan for the plane ticket(s). Your interest rate will range from 10% to 30% depending on your creditworthiness.

Expedia has also teamed up with Affirm to offer payments on plane tickets.

Flightlayaway.com allows you to make payments on plane tickets and cruise tickets.

Flights can only be on layaway from two weeks to twenty weeks. At the end of 20 weeks, all financed flight expenses must be paid to receive your e-ticket and itinerary.

There is a one-time service fee of 15% on domestic flights and 18% on international flights when the flight is booked. And, there is an interest rate of 15% on all flights.

British Airways allows weekly payments on flight + hotel and flight + car packages only.

In America, it’s pretty common to take out a loan to buy a car, or a house, or college tuition. It’s less likely to take out a loan to buy gas for that car, paint for the house, or beer for the college tuition. But what about everything in between? What about $500 drones?

That’s where Affirm, a startup by one of the founders of PayPal, comes in. CEO Max Levchin thinks there’s a financial niche to fill for young people who want expensive things, but don’t have multiple Gs in the bank or on credit to drop on a luxury purchase. Affirm offers small, short-term loans that let customers spread out a big purchase, like a drone or $1,500 couch, over a short period of time. Affirm fronts customers the cash, then collects regular payments in more manageable chunks.

Right now, Affirm is slightly limited to an (albeit wide) selection of online retailers. The stuff you can buy is typical pricey-but-not-luxury products — Casper mattresses, Pottery Barn furniture, Newegg computer parts, clothes from online retailers, as well as drones, phones, and tech you would find in a Sharper Image catalog. In April, the company issued its one millionth loan, meaning that with at least a couple bucks in interest on even the smallest of loans, it’s probably bringing in quite a bit of cash.

Urban Housing Development eFunds (Fundrise), Rated: A

Now, you can invest directly into building new homesfor the next generation of American homeowners.

Funding Circle Strengthens U.S. Leadership Team with Head of Capital Markets & CCO Appointments (PR Newswire), Rated: A

Funding Circle, the world’s leading lending platform focused exclusively on small business, today announced two additions to its U.S. leadership team: Joanna Karger as U.S. Head of Capital Markets, and Richard Stephenson as U.S. Chief Compliance Officer.

Prior to Funding Circle, Stephenson served as chief compliance officer of Silicon Valley Bank. He has more than thirty years’ experience in various senior roles at U.S. financial institutions and law firms, serving as general counsel, chief compliance officer, chief risk officer, head of internal audit and interim chief executive officer at institutions such as Bank of America, Union Bank, Washington Mutual Bank and Mechanics Bank.

Online lender Pave closes to new customers, explores strategic options (American Banker), Rated: A

Pave, an online consumer lender based in New York, has stopped making new loans — a retrenchment that reflects challenges facing the broader sector, according to the company’s CEO.

CEO Oren Bass said in an interview Wednesday that Pave stopped making new loans about two weeks ago.

I’m sick of fintech taking credit union business (CUInsight), Rated: A

Credit unions have been playing a game of catch-up with banks for many years, and now the new kid on the block— Fintechs —are here to present even more of a headache. On December 31, 2016, Prosper Funding had approximately $22.3 million in unrestricted cash and cash equivalents and $32.8 million available for sale investments at fair value.  Their marketplace facilitated $2.2 billion in Borrower Loan originations during 2016, and as of December 31, 2016, $8.3 billion in Borrower Loan originations since it first launched in 2006.

Lending Club ended the year with a servicing portfolio of $11.1 billion, up 24 percent from the same period last year, and delivered $1.8 billion of principal and interest payments to investors throughout the 4th quarter of 2016 with cash, cash equivalents, and securities available for sale totaling $803 million, with no outstanding debt. What’s even more worrisome is that Lending Club’s venture into auto lending is still young and has a lot of potential if it gains serious traction.

Both companies sell consumer lending and deposit products to exactly the same prime-rated consumer credit segment that banks and credit unions do.

Credit unions need to up their game by:

  1. Allowing members to send money and receive money like popular online Venmo.
  2. Stay updated across all devices with real-time push-notifications and transactions.
  3. Credit unions will need to offer various software to their members to help them make better decisions and save massive amounts of time through analytics, accounting, budgeting, prediction, and decision- making software.

How Banks Can Attract More Millennials (ValueWalk), Rated: A

When trying to appeal to this younger generation, it is important to keep in mind that millennials have two main financial priorities; paying off their student loans, and saving for the future. On average, they spend 43 percent of their income to pay down their debts and put away 38 percent of their income as savings for the future. Three out of five millennials would like their bank to be a financial partner as opposed to just another business profiting off of their work. At the same time, only 32 percent of this generation feel their bank understands them. This is largely due to the fact that banks and other financial providers still offer solutions to meet the needs of baby boomers. This means tailoring products to meet millennial needs will create a more mutually beneficial relationship and help to attract younger customers.

New OCC Bulletin on Third-Party Oversight Highlights Fintech Relationships (Lexology), Rated: A

FAQ 7: Is a fintech company arrangement considered a critical activity?

In its response to FAQ 7, the OCC clarified that a relationship between a national bank and a fintech may or may not involve a critical activity, depending on the nature of the specific services the bank or the fintech has agreed to perform. In giving this response, the OCC recognized that third-party relationships are not automatically “high risk” merely because a fintech is involved.

FAQ 10: What should a bank consider when entering a marketplace lending arrangement with nonbank entities?

Although some may read the OCC’s response to FAQ 10 as an endorsement of “bank partnership model” lending relationships between national banks and marketplace lenders, the response includes no explicit mention of these relationships. The response references “marketplace lending or servicing arrangements,” and states that “banks should not originate or support marketplace lenders that have inadequate compliance management processes . . .,” but does not speak to the respective obligations of the parties to these arrangements. Thus, it is conceivable that the bulletin only addresses other types of relationships, such as warehouse lines of credit or loan servicing arrangements. At a minimum, however, the response confirms that national banks should not hesitate to enter into relationships with marketplace lenders as long as appropriate oversight mechanisms are in place.

FAQ 11: Does OCC Bulletin 2013-29 apply when a bank engages a third party to provide bank customers the ability to make mobile payments using their bank accounts, including debit and credit cards?

Until now, a national bank could have taken the position that a third party that merely enabled mobile card payments was not subject to OCC Bulletin 2013-29. To this end, the presence of a third party’s mobile payments application has no effect on the underlying card transaction, and the bank’s involvement is likely confined to deciding whether to promote the availability of the application to its customers. In its response to FAQ 11, however, the OCC clarified that these relationships need to be managed “in a manner consistent with OCC Bulletin 2013-29,” and directed banks to “work with mobile payment providers to establish processes for authenticating enrollment of customers’ account information.”

Pantera Capital to Raise $ 100 Million in Investment for ICO Hedge Fund (Coindesk), Rated: A

Announced today, investment firm Pantera Capital is launching a new hedge fund focused on investments solely in tokens that power public blockchain protocols.

Called Pantera ICO Fund LP, the fund intends to raise $100m, with $35m already raised in support from the firm’s existing investor base, undisclosed new investors, and according to the company, unnamed venture capital firms.

Kabbage headquarters building to get major renovation (Biz Journals), Rated: A

Crestlight paid $35.3 million, or about $167 a foot, according to Fulton County records. It announced the acquisition last week, but had not released the price. Lincoln Property Company Southeast won the leasing and management assignments.

Prologis, Inc. (NYSE: PLD) today announced a strategic partnership with Plug and Play, a global startup ecosystem and venture fund specializing in the development of early-to-growth stage technology startups in the Supply Chain and Logistics vertical.Prologis will provide mentorship and space in its logistics real estate properties to a select group of startups in the Plug and Play accelerator program to pilot new technologies. Prologis joins DHL, Maersk, Panasonic, Hitachi, Mann+Hummel, CMA CGA, Daimler, Deutsche Bahn, Swiss Post, BASF, Union Pacific Railroad and Ericsson as partners with Plug and Play.

Funding Circle’s U.S. head talks about growth and hiring secrets (Biz Journals), Rated: A

Sam Hodges, the U.S. managing director of Funding Circle, spoke to the Business Times about hiring techniques, missed opportunities, and what book had a profound influence on him, among other things.

RealtyShares Names Kristina Wallender SVP of Marketing (BusinessWire), Rated: B

RealtyShares, a leading online marketplace for real estate investing, today announced Kristina Wallender has joined the pioneering startup as senior vice president of marketing, focused on helping the company reach more investors and sponsors.

Wallender joins RealtyShares with marketplace and marketing leadership experience spanning large enterprise businesses like Amazon and early stage companies like Ticketfly, where she was the head of marketing for the past four years. Over her tenure, Ticketfly grew from a small startup to a leading live entertainment brand serving over 1,800 venues and promoters across North America. Wallender also played a key role in Pandora’s acquisition of Ticketfly in 2015, earning her a spot on Billboard’s 40 Under 40: Top Young Power Players in music. As part of the RealtyShares team, she will be responsible for growing both sides of the marketplace.

Google and SoFi Alum Named Okta Security Chief (Fortune), Rated: B

Okta, the Silicon Valley firm behind one of the year’s top tech IPOs, has named a new chief security officer.

The maker of identity management software has appointed Yassir Abousselham, a former executive at Google (GOOG, -2.53%) and chief information security officer at financial tech startup SoFi, as head of security. Abousselham began in the role on June 5th.

Vela Boosted Its Fintech Offerings With OptionsCity Acquisition (Benzinga), Rated: B

Vela Trading Technologies LLC, a fintech company specializing in market data technology, recently announced its acquisition of OptionsCity Software, which offers futures and options trading with analytics solutions.

The deal is expected to close at the end of the second quarter.

dv01 is hiring (DV01 email), Rated: B

We believe smart people can succeed at almost anything, so we encourage on-the-job learning (e.g. trying a new programming language) and real ownership over your work. Our fast paced environment necessitates a desire and willingness to grow both personally and professionally. We see value in effort and output, which is why we encourage all of our team members to take measured risks and never back away from a challenge.

United Kingdom

LendInvest cancels application for P2P authorisation (P2P Finance News), Rated: AAA

LENDINVEST has confirmed that it has cancelled its application with the Financial Conduct Authority (FCA) to operate a peer-to-peer lending platform.

The online mortgage lender revealed in its annual report, released this week, that it had shelved several applications with the City watchdog, for permission to operate a P2P platform and for credit broking and consumer credit licences.

Social P2P lender rolls out IFISA offering (AltFi), Rated: A

Flender, a Dublin-based, “friendly” peer-to-peer lending platform, is bringing its newly launched Innovative Finance ISA to the UK. The firm was fully authorised by the FCA in May.

RateSetter’s Paul Marston comments on Brexit (RateSetter email), Rated: A

Given the economic uncertainty created by Brexit, it is easy to understand why some small business owners have postponed important business decisions. However, SMEs have some important advantages which position them well to navigate through this period successfully. They can more easily adapt business models, diversify into new activities and implement new ideas.  It will be the business owners who are forward-thinking and act positively and decisively who are most likely to use uncertainty to their advantage.

For SME businesses that see opportunities to invest for future growth, the good news is that there are now real alternatives to the banks in terms of access to finance that can be provided in a simple and straightforward manner. We stand ready to help these businesses realise their plans.

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

China

China leads as fintech adoption doubles in two years, and here’s why (The Asset), Rated: AAA

Financial technology (fintech) adoption has doubled in the past two years, with China leading fintech adoption globally.

The average percentage of digitally active consumers using fintech services is around 33% across 20 key markets – this represents a doubling over the past two years when fintech penetration was recorded to be around 16%. The findings are noted in the EY Fintech Adoption Index, which surveyed 22,000 people online in 20 countries.

The report further shows that China leads the world with 69% of consumers using some form of fintech service, which is unsurprising given the ubiquitous adoption of payment platforms WeChat Pay and Alipay in China. Alipay and TenPay (WeChat Pay) together make up for 92% of the mobile payment market, and mobile payment transactions increased 381% in 2016 to 58.8 trillion yuan, according to iResearch.

An O2O Education System Provider Closed A Round of financing (Xing Ping She), Rated: A

Nobo Education announced they have closed a new round of financing $6.4M. This round was led by National SME Development Fund (THG Ventures), with participation from The Chinese Education Industrial Fund, which is jointly managed by DT Capital and ChineseAll. Previously, Nobo Education was known to have raised pre-A round of $1.79M in June 2016.

Founded in March 2013, Nobo Education is a Beijing-based international preschool education institution as well as new high-tech enterprise. Their core product—— Nobo Education System, an O2O system solution efficiently in kindergarten management, is the only system of education that has independent intellectual property right in China.

According to Nobo Education, among the total raised funds, ¥10M will continue to be used in pre-school education software R&D and service.

CreditEase Wealth Management Toumi RA Achieved Top Performance in First Year (Cision), Rated: A

Toumi RA, China‘s leading Robo-advisory platform built on 11-year expertise of CreditEase Wealth Management, has achieved outstanding performance since its launch on May 28, 2016, generating 2.55%-11.48% of cumulative return through May 31 2017, successfully bucking global capital market fluctuation, geopolitical risks and black swans.

In the past year, Toumi RA’s platinum/diamond members enjoyed an average cumulative return of nearly 7% for different portfolios, among which the risk-level-eight option produced the highest return of 11.48%. For gold members, Toumi RA boosted the level-eight portfolio’s cumulative return by 9.4% and the lowest-risk option by 4.23%.

An overwhelming majority of investors (99.6%) made profits during the first year, according to Toumi RA’s performance report, while only 0.4% of investors experienced lost either because of unfortunate investment timing during market highs or short-term investment during highly-volatile periods.

China’s nude loans fill female students’ pockets but suck them dry (ASEAN Today), Rated: B

In April this year, Xiong took her own life in a hotel far from her hometown in Xiamen. Incapable of repaying a debt of 570,000 yuan (US$82,722), Xiong’s circumstances worsened as online loan sharks threatened to make her nude photos public. She took her own life a few days after her mother received her nude photos.

“Nude loans” involves offering one’s nude photos to secure credit. Nude loans first gained nationwide attention in December 2016. The China Youth Daily discovered 167 women’s nude photos and obscene videos online. These women, many of them in their early 20s and receiving college education, handed over their nude photos and videos as collateral for loans from peer-to-peer (P2P) lending platforms.

Online lenders’ choice to use nude selfies to enforce repayment reflects the country’s paternal society. Nude selfies are risky enough to prevent female student clients from defaulting because Chinese women are still valued for their chastity.

European Union

LendInvest receives highest rating from European ratings agency (Mortgage Introducer), Rated: AAA

Specialist mortgage lender LendInvest has received the highest possible rating for the quality of its loan servicing from European ratings agency ARC Ratings.

For the third time in as many years the agency has awarded a SQ1 Servicer Quality Rating for LendInvest following a comprehensive annual review of the company, its performance, processes and infrastructure.

Swiss Fintech Loses Big Hitter (Finews), Rated: A

Swiss digital insurance broker Knip has agreed to merge with Komparu, a Dutch technology firm. Together they will operate as Digital Insurance Group (DIG), according to a joint statement.

The founder and CEO of Knip, Dennis Just(pictured below), won’t stay at the company.

Roeland Werring, co-founder of Komparu, will be the Group chief technical officer, while Ruben Troostwijkwill stay on as CEO of Komparu. Ingo Weberwas appointed as CEO of DIG.

Tikehau Capital buys Credit.fr (PE Hub), Rated: A

Tikehau Capital (Paris:TKO) today announced it has completed the acquisition of Credit.fr, the French specialist in crowdlending for small businesses financing, for an amount of €12 million. Incubated since March 2015 by Truffle Capital and under the leadership of Geoffroy Roux de Bézieux, its chairman since November 2015, Credit.fr has rapidly established itself as an essential player in the small and mid-sized companies (SMEs) alternative financing market.

This acquisition enables Tikehau Capital, a leading company active in the corporate lending and private debt market in France, to consolidate and expand its lending platform by bringing its corporate financing solutions to smaller businesses and SMEs. Through Credit.fr, Tikehau Capital will enable its wide network of investors and partners to broaden their investment policy, currently focused on medium-sized and larger companies, to include smaller businesses rigorously selected by Credit.fr teams.

International

Alternative Data Transforming SME Finance (SME Finance Forum), Rated: AAA

The report titled “Alternative Data Transforming SME Finance” looked at 800+ innovative digital SME lenders and digital commerce, payments and service providers in more than 60 countries. Here are some of the key findings:

  • Banks have valuable data, but are often not using it: Banks have a highly valuable repository of SME data, including SME owners’ customers’ daily transaction data that provides reliable real-time visibility into SME cash flows and credit capacity. However, most banks lack the ability to create innovative SME lending models from it.
  • Digital SME lenders are developing new relationships with SME customers and their data: In some cases, non-bank digital SME lenders insert themselves between banks and their SME customers, and forge fundamental changes in SME customer expectations.
  • New SME digital data streams are becoming more readily available and accessible: Digital SME lenders leverage vast and expanding stores of data, including from electronically verifiable, real-time sales, bank account money flows and balances, payments, social media, trading, logistics, business accounting, and credit reporting service providers, as well as a wide range of other private and public data sources used in the SME credit assessment process.
  • There are a wide range of digital SME originator lending business models: The new digital SME lending originator business models that take advantage of the expanding universe of SME digital data vary widely. This report highlights these business models, selected players, and the digital SME data they use. It includes marketplace lenders, tech, e-commerce, and payment giants which are extending SME lending into their non-banking digital ecosystems where they are already dominant. It also includes supply chain financing firms, mobile micro-lenders graduating to SME lending, and innovative banks.
  • Digital SME lending is becoming more of a global trend: 
  • Digital SME lender-bank collaboration is also a growing part of the future of SME finance: Banks may have been blind to digital SME lenders at first, and digital SME lenders may have said they would replace banks. However, both parties now have come to a simple conclusion: there are limits to what each player can do on their own and there is strength in collaborating.
  • Access to data is no longer the problem in SME lending: The digital economy has also given rise to an ever-evolving set of value-added cloud-based services to help SMEs with their finances, business planning, productivity, legal issues, data backup and security, file sharing, web conferencing, website builds, online marketing, business training, e-commerce, payments, loyalty programs, business intelligence, and more.
  • However, access to data for SME lending brings new challenges: With the abundance of alternative data, there are new issues of what to use, how to use it, and how to do this responsibly — while also respecting privacy and other important rights of SMEs.

Download the report here.

Singapore and Denmark Regulators Sign Fintech Cooperation agreement (Finance Magnates), Rated: A

Regulators in Singapore and Denmark are building bridges to assist Fintech companies expand abroad. The Singapore’s Monetary Authority of Singapore (MAS) and the Danish Financial Supervisory Authority (Danish FSA) yesterday have entered a cooperation agreement to promote innovation in financial services in their respective markets.

The agreement aims to help FinTech companies in both countries to expand into each other’s markets and also provides facilitated introductions when a fintech firm operating in one jurisdiction wants to better understand the rules in the other.

Advances in digital platforms (The Asset), Rated: A

Midway through the month, on June 14, Misys and D+H merged to form a new company called Finastra.

Shortly after the merger, several institutions announced they were working with the newly formed fintech giant. Rabobank selected Finastra to centralize their cross-border payments; SIA, a European provider of payment infrastructure and services, partnered with Finastra to provide real-time instant payments capabilities; and Mexico’s central bank, Banco de Mexico, also selected Finastra to transform its legacy risk management platform.

Investment Roundup: Visa Buys Stake in Klarna; Revolut, Tango Land Financing (PAYbefore), Rated: A

London-based travel card specialist Revolut is close to landing a £50 million (US$65 million) funding round that will value the company at £300 million (US$390 million), according to a report from Sky News. The round will be led by Index Ventures, which acquired an interest in Revolut last year, the report said. Silicon Valley investor Ribbit Capital is also said to be taking part in the round.

Finally, Seattle-based Tango Card, a provider of digital rewards and incentives to 2,000 corporate enterprise customers, has secured a $10 million investment facility from Silicon Valley’s Western Technology Investment.

Australia

Zagga pitches alternative asset class (Financial Standard), Rated: A

A new marketplace lender is hoping to turn traditional investing on its head with a pitch to wholesale and sophisticated investors.

Backed by an Australian Financial Services Licence and an Australian Credit Licence, Zagga hopes to differentiate itself from other marketplace lenders by providing a lending platform where all loans will be secured by a registered mortgage against real property.

To date, Zagga has helped facilitate a number of loans including a $7.15 million loan which was fully-funded within 17 days by 26 investors, and a $1.15 million loan to a husband and wife investor who wanted to top up their super fund before 30 June, funded in a few hours by six investors.

India

RBI finalises peer-to-peer lending norms (The Hindu), Rated: AAA

The Reserve Bank of India (RBI) has finalised norms for peer-to-peer (P2P) lending platforms and is expected to release final guidelines in 2-3 weeks, a top finance ministry official said.

According to the official, the P2P lending interface will come under the purview of RBI’s regulation by defining these platforms as NBFCs under the RBI Act by issuing a notification in consultation with the government.

Lendingkart to add marketplace, P2P loans and offer SaaS product: Harshvardhan Lunia (VC Circle), Rated: AAA

You had also mentioned about raising Rs 500 crore in debt.

Apart from the first Rs 500-crore debt fundraising exercise, we will also look to raise another Rs 500 crore in debt. We have initiated talks for this, but the process will take some time.

So, eventually will you be looking to raise more funds from banks and less from NBFCs?
Banks offer us lower-cost loans, but the process is more time consuming. They also operate within certain limitations. NBFCs are quicker with their disbursals.

Do you have plans to increase the ticket size of your loans, which is capped at Rs 10 lakh?
About 93% of our loans are less than Rs 10 lakh, and the Rs 50,000-10 lakh range remains our sweet spot. But, sometimes we do disburse loans of Rs15-20 lakh if there is a strong reference or recommendation. Our USP will be to remain a sub-Rs 10-lakh lender.

Tech is a major component of your business operations. How much of your budget allocation goes towards it?
Almost 25-30% of our budget goes towards technology. The tech team accounts for around 35% of our total manpower while two-thirds of our resources work on the lending business.

Most players tend to be asset-light. What was the business logic and strategy behind going asset-heavy?

That experience led to the decision of Lendingkart having an NBFC of its own, which would allow us to design our own products.

Will you continue to operate the same business model?
Two years down, we will diversify as a marketplace model, and may even get into the peer-to-peer lending space.

In fact, we will start a pilot with one or two players within the next six months. However, this year, the lending will predominantly be from our books. These plans will take a larger form in 2018-19 and 2019-20.

When will you start making profits?
The lending arm of our business will turn profitable by March 2018.

Which are your top performing markets?
Bengaluru, Mumbai, Hyderabad, Pune and Surat have been our top five performing markets.When will you start making profits?
The lending arm of our business will turn profitable by March 2018.

Asia

InVent takes stake in fintech Digio (Bangkok Post), Rated: A

InVent, a venture capital arm of SET-listed Intouch Holdings, has invested in a fintech startup, Digio, to boost the fast-growing e-payment market.

Digio is the first fintech company in InVent’s portfolio, which will strengthen Intouch’s offerings in the mobile payment business.

InVent has taken a 10% in stake in Digio but declined to say what it was worth.

Canada

A Canadian venture capital firm is funding entrepreneurs to relocate and become citizens (Business Insider), Rated: AAA

Sharma is the CEO and cofounder of Extreme Venture Partners, a Canadian VC firm that recently assembled a fundfor paying startup founders and their families to relocate to Toronto.

Upon arrival, they’ll receive seed funding, guidance on beginning their new Canadian life, and the opportunity to get on the fast-track for citizenship. Sharma says EVP is prepared to welcome 30 companies over the next three years.

Upon arrival, they’ll receive seed funding, guidance on beginning their new Canadian life, and the opportunity to get on the fast-track for citizenship. Sharma says EVP is prepared to welcome 30 companies over the next three years.

Issues in Bringing Canadian Fintech to the International Stage (CIGI Online), Rated: A

The aim of this policy brief is to provide a general description of the fintech industry in Canada, and to describe and draw attention to two complementary aspects of developing a fintech strategy for Canada: first, encouraging domestic fintech innovation — through open data and payment systems — and second, encouraging international expansion — through international agreements among regulators and comprehensive intellectual property strategies.

Get the report here.

FLEXITI FINANCIAL WINS BID TO OFFER POINT-OF-SALE FINANCING TO OVER 800 DEALERS ACROSS CANADA (Flexiti Financial), Rated: A

Flexiti Financial, a provider of point-of-sale (POS) financing and payment technology for retailers, today announced that it has won a competitive bid to be the preferred POS financing partner in Canada for the dealers of outdoor maintenance and equipment manufacturers including Husqvarna, Briggs & Stratton, Ariens, Big Dog Mowers, Hustler, ECHO Power Equipment and ECHO Bear Cat. Flexiti Financial now has access to over 800 dealers that sell lawn and garden tools and outdoor power equipment.

Dealers will now have access to Flexiti Financial’s award-winning POS financing platform, which will allow them to provide instant financing on any device, anywhere, and instant credit approval in three minutes.

Africa

Alipay for the first time to enter the African globalization version of the addition of a piece (01Caijing), Rated: AAA

June 26 evening, Alipay announced that it will launch Alipay in Africa to provide services to Chinese tourists. Since then, from the Alipay global strategy has taken a step further.

Authors:

George Popescu
Allen Taylor

Monday April 17 2017, Daily News Digest

Monday April 17 2017, Daily News Digest

News Comments Today’s main news: Republicans propose drastic overhaul of CFPB.  BOE chief sees no need for tougher FinTech regulation. CBRC assistant chair reported ‘out of contact’. Today’s main analysis: Transparency remains a sticking point for online lenders. The India FinTech Market Map. Today’s thought-provoking articles: How this FinTech CEO plans to prosper. Interview with Scott Sanborn. International regtechs […]

Monday April 17 2017, Daily News Digest

News Comments

United States

  • Republicans propose drastic overhaul of CFPB, Dodd-Frank. GP:” This is just a proposal and it will likely change a lot by the time, if and when, it gets adopted into law. In all cases, the theme here seems to be more control and less power for the agencies.”  AT: “We saw this one coming. I didn’t expect a name change, but I think that’s interesting, especially the use of the word ‘opportunity,’ which puzzles me. Why would a regulatory agency include that word in its name? Another thing I find interesting is the deputy director holding the job at the will of the president, which I expected. However, it makes the agency serve at the whim of the winds of the political climate, like all other executive agencies. What makes that interesting is it goes against the initial conception of the agency, which was intended to be independent of the chief executive. I’m not saying it’s right or wrong, good or bad either way, but we can expect the Democrats to fight this hard.”
  • How this FinTech CEO plans to prosper in 2017. GP:”The key is customer satisfaction, which itself relies on a good product, fair pricing, ease of use whom themselves depend on the cost of financing, employee satisfaction, technology quality and an infinite list of other items.”
  • Transparency remains a sticking point for online lenders. GP:”This is very interesting data. If the online lenders build a reputation of being expensive, regardless if it’s true or not, it will hurt their customer acquisition costs significantly. This has to be fought and this perception is very dangerous. In general consumers, especially opinion leaders, are not stupid. I think a good way to fight for transparency and to fight the high rate and unfavorable terms opinion is by actually releasing actual verifiable data that offers more transparency and demonstrates the rate and term points. ” AT: “It’s important that online lenders not simply claim to be transparent. Most consumers, millennials, in particular, are well aware that technology is not inherently transparent. It can be used to set up walls of opaqueness as easily as see-through curtains, or blinds. If you’re going to call yourself ‘transparent’, you’ve got to be transparent.”
  • Chatting P2P marketplaces with LendingClub’s CEO. GP:” Lending Club is really turning into a large company, run as a large company, on values and brand and letting every department alone to do what they can with controls in place. I am curious how it will defer from a large bank in two or three years.” AT: “Scott Sandborn shares some interesting insights into marketplace lending in general and LendingClub in particular.”

United Kingdom

  • BOE chief sees no need for tougher FinTech regulation. GP:”I am pleasantly surprised, and once again I understand how the UK, despite being a small market, continues to be the point of reference in finance in the entire world and has been for hundreds of years. I am yet to see a single US regulator who says even once: there is no need for more regulation.” AT: “This is a sign of maturity. In the U.S., when legacy institutions sense up-and-coming competitors, the first thing they want to do is use regulation as a protectionist scheme. Competition is good–for the goose and the gander.”
  • Researcher showcases unauthorized NFC payments with cloned Android device. AT: “This is interesting. We must all understand there’s no such thing as fail-safe security in the cyber world. Every device is a potential entry point for bad actors. In fact, every app on every device is a potential entryway for hackers and other bad actors. The key goal for security experts is to stay ahead of them. This hole needs to be plugged quickly.”

European Union

International

China

India

Asia

MENA

Africa

News Summary

United States

Republicans propose drastic overhaul of Dodd-Frank and CFPB (Housingwire), Rated: AAA

According to the summary of bill changes, the original CHOICE Act would restructure the FHFA and OCC as bipartisan commissions. The FDIC would be reorganized as a bipartisan commission with all five commissioners appointed by the president, and both the Comptroller of the Currency and the CFPB director would be removed from the FDIC board. Also, NCUA board of directors would be increased from three members to five.

The new CHOICE Act 2.0 cuts a lot of those proposed changes, and instead, the FHFA director would be removable at will by the president, with no changes to the current law regarding OCC and NCUA. The FDIC structure would stay the same as proposed in CHOICE 1.0.

The original CHOICE Act replaced the director of the CFPB with a Consumer Financial Opportunity Commission, a bipartisan independent Commission serving staggered terms.

Instead, in the newest version, the Consumer Financial Protection Bureau would be changed to the Consumer Financial Opportunity Agency, an executive agency with a sole director removable at will. The deputy director would also be appointed and removed by the president.

While the original CHOICE Act established a CFPB Credit Union Advisory Council, the updated one removed it because the bill eliminates mandatory CFPB advisory committees.

How This FinTech CEO Plans To Prosper In 2017 (Forbes), Rated: AAA

Along with FinTech industry guru Ron Suber, Prosper’s president, Kimball is intent on growing loan volumes, offering lower average rates compared to traditional lenders, delivering higher returns to investors and returning Prosper to profitability.

Prosper, which is the original online peer-to-peer marketplace, has originated over $9 billion in consumer loans over the past decade.

Since being appointed CEO of Prosper Marketplace late last year, Kimball has stepped outside his former financial role as Prosper’s CFO to take on a more operational-driven strategy.

David Kimball: Ultimately, the long-term success of platforms will be dependent on their ability to deliver a great product and a consistent experience. The success of the partnerships will depend on the ability for the two companies to communicate and understand each other (language, transparency, and culture), and it will depend on how well objectives remain compatible.

David Kimball: Last year, the industry did a lot to lay the foundation for a successful 2017, and we’re seeing that work pay off. The [recently announced loan purchase deal] gives us the funding stability we need to continue to grow, while at the same time giving us some great long-term partners that are invested in our business and its success.

David Kimball: A successful CFO is one who partners with the business instead of playing the finance sheriff. That requires a willingness to understand the business, to think holistically, to work with peers who jointly own the results. The CFO is the finance subject matter expert, but should be able to consider other disciplines, just as a CTO should be able to understand the financial implications of engineering decisions.

As CEO, I continue to think holistically and I now have an opportunity to flex into other areas of the business.

Transparency remains a sticking point for online lenders (Tearsheet), Rated: AAA

A small business credit survey by the Federal Reserve Bank of New York found 46 percent customer satisfaction at online lenders like Lending Club and OnDeck Capital with a 19 percent rate of dissatisfied customers – compared with large banks’ 61 percent of customers who indicated they were satisfied with their small business loan process and 15 percent of whom expressed dissatisfaction. Almost half of all customers specified that their dissatisfaction came from a “lack of transparency.”

Online lending customers are also dissatisfied with higher interest rates and unfavorable repayment terms, two common issues for the growing industry, which continues to have a higher cost of capital and for customer acquisitions.

Chatting P2P marketplaces with LendingClub CEO, Scott Sanborn (Simple Innovative Change), Rated: AAA

CL: The LendingClub story is a fascinating one and one that I’ve followed from the early days. So how does it feel to sit here and realize that so much of what is here today and the proliferation of all these different lending platforms is really because of this company and this team and what you have been able to build?

SB: I think it is exciting. It’s very gratifying to see how the initial idea has gained traction and how that has spawned new players who are bringing new energy and new ideas to different segments of the market. I think the clearest benefit is looking at how much value we’ve driven to consumers and investors.

For example, the personal loan market was actually shrinking when we first started. It shrank like 57% from 2007 to 2010, and yet we were still able to giveCL: There’s this great photo from the day of the IPO back in 2014 in which you can see just how elated you were. At the time you were the CMO and it was a very happy day, but when you stepped into the CEO role recently it wasn’t necessarily under the happiest of conditions. So, how have you handled the ups and downs of being a part of the Lending Club team, and how are do you lead the team through these challenging periods?

CL: That’s the answer you want to hear, by all means. Since becoming CEO at LendingClub, what have you learned about your own management style and how are you navigating the transition to this role?

SB: So much is swirling and changing in real-time, which means you need to keep everyone in the loop. In those early days after I stepped into the CEO role, I can’t tell you how many times we pulled all 1,500 employees together and marched them across the street to a hotel, to fit them into one room and explain, “Here’s what’s happening. Here’s what we know. Here’s what comes next.” That was certainly critical.

Lastly, we have focused tirelessly on assembling the right team. When a business is growing 80% to 100% a year for so many years it’s hard for the organization to keep up, and this was an opportunity to say, “Okay, new reality. Let’s look at what the right foundation is for the next decade of Lending Club.”

CL: One of the other reasons that I wanted to speak with you is because I often speak with seed and series A Fintech startups that’ll eventually face the challenges of being a larger organization if successful. So, what do you think are the challenges associated with trying to be an innovator while also being a larger organization?

SB: Literally, I left that conversation, and sat down with several team members in a room and said, “Okay, what are our values?” It was remarkably easy, actually, to identify what our values were. We put those down on paper and we revisit them, probably annually, maybe every 18 months or so and say, “Do they still resonate? Are they still right for this stage of the company?” Essentially all of our initial values have remained intact and we’ve added one or two as we’ve grown to reflect the new stage of the company.

Since then we have remained crisp on what our values are, and we have made sure we’re hiring to those values, and that our performance reviews reflect those values as well. That’s how you keep the essence of a company and that integrity of the company as you grow. The reality is, as you get bigger and layers get introduced and processes get introduced maintaining that value system will help the company stay, essentially, intact and stay functioning well.

CL: As we look to the vision of the future loan markets, do you think that startups will increasingly become the sourcing mechanisms of loans with financial institutions acting more as the wholesale banking providers?

SB: I think we’re not done seeing the different types of models that could emerge and how they could participate, and I think that’s part of what’s exciting. Not all of them will be great ideas, and not all of them will work, but some will.

If you look at our model, banks provide between a quarter and 30% of our funding and they have a very low cost of capital. When you combine their low cost of capital with our low operating cost it allows us to give, especially that super-prime customer, an incredible value that they couldn’t get at these institutions directly.

United Kingdom

Bank of England Chief Sees No Need for Tougher Fintech Regulation (Corporate Counsel), Rated: AAA

Fintech could pose a threat to traditional banks in the United Kingdom, according to Bank of England Governor Mark Carney. But that doesn’t mean he thinks they should be subject to tougher regulation.

The Bank of England created a New Bank Start-up Unit last year, which advises companies trying to become new banks. Carney said in his speech that four mobile banks have been authorized as a result of the new division.

Some of the questions that he said need to be answered, moving forward are: “Which fintech activities constitute traditional banking activities by another name and should be regulated as such? How could developments change the safety and soundness of existing regulated firms? How could developments change potential macroeconomic and macrofinancial dynamics including disruptions to systemically important markets? And what could be the implications for the level of cyber and operational risks faced by regulated firms and the financial system as a whole?”

Researcher Showcases Unauthorized NFC Payments With Cloned Android Device (The Merkle), Rated: A

While this concept sounds ridiculous to most people, they should not underestimate the power of root malware on Android devices. By using this type of malicious software, it is possible to abuse the host card emulation protocol. Google introduced this feature in Android 4,4, as it allows for NFC payments by keeping the Android device next to a payment terminal. Unfortunately, it appears this protocol can also be used to make fraudulent purchases.

Thankfully, this exploit has been discovered by a security researcher who notified both Google and all of the applications he successfully “abused” about this vulnerability.

European Union

Aegon Leaves Legacy Behind With Ohpen’s Cloud Finserv Platform (Forbes), Rated: A

Ohpen, a banking technology company based in Amsterdam,has announced that it will partner with Aegon to develop a new platform for Aegon’s Dutch services, from banking to investments. It will also support multiple labels including Aegon’s Knab (bank spelled backwards) an entirely digital bank.

Aegon, a global financial conglomerate whose American holdings include Pimco, will replace multiple individual systems for pensions, savings, current accounts and wealth management with a single Ohpen platform running in the cloud on Amazon Web Services (AWS). Aegon will plug into Ohpen’s platform through a flexible, 100% API-based interface.

Multiple companies under one corporate umbrella do many of the same things and have their own infrastructure and staff. Ohpen lets them merge all those activities onto a single cloud-based back end and then put an API on top so any application or Web site can get to it.

International

Keeping the banks honest: meet the regtech rule-obeyers (Wired UK), Rated: AAA

Under mounting pressure to become more transparent and accountable, banks and financial institutions are turning to regtech: technology that automates regulatory compliance.

London-based FundApps alerts financial institutions when regulations change, and gives them software to help compliance. Launched in 2010, it covers 88 jurisdictions.

Legislation in Europe requires companies to “know your customer” to make sure they’re not money laundering. That’s what Trulioo does.

Qumram records, retains and allows on-demand replays of digital activity across web, social and mobile.

US accounting rules require banks to store historical loan data to predict future repayment. “This is what we help them do,” says Vivek Subramanyam, CEO of Fintellix. Launched in 2006, it recently launched a website targeting US community banks and credit unions that are grappling with accounting regulations.

KYC3 (“Know Your Customer, Counterparty and Competition”) automates due diligence, so companies can screen potential clients.

How the World’s Richest Companies Can Help Its Poorest Citizens (Time), Rated: AAA

From Kenya and Tanzania, to Jordan and Peru, digital technology and simple mobile phones are opening up opportunities for millions of people by helping them to safely save and manage their money.

From Kenya and Tanzania, to Jordan and Peru, digital technology and simple mobile phones are opening up opportunities for millions of people by helping them to safely save and manage their money.

Four of the world’s largest telco system manufacturers — Sweden’s Ericsson, China’s Huawei, Canada’s Telepin and India’s Mahindra Comviva — have put aside their fierce competition and agreed to collaborate, not out of altruism but in order to better compete. Announced at the Innovate Finance Global Summit in partnership with the Bill & Melinda Gates Foundation, who works to bring competitors together to meaningfully address financial inclusion for the poor, these companies are developing a set of “application programming interfaces,” or in plain English, ways of making computers talk to each other. These APIs will create open-source standards for the development of digital financial services that are automatically compatible with each other, lowering costs for providers and increasing the utility of digital financial services for customers overall.

By governing how different digital accounts send and receive money, the APIs can be the basis for a new “internet of payments,” across which individuals, banks, merchants, employers, and governments seamlessly transact. The APIs are still under development, but when they’re complete they will be released as a global public good, available to anyone who wants to invent.

AI In Fintech: 100+ Companies Using AI Algorithms To Improve The Fin Services Industry (CB Insights), Rated: B

Funding to AI startups reached record highs in 2016 and applications for artificial intelligence technologies exist across nearly the entire spectrum of business. Highlighted here are the top 100 AI startups selected by CB Insights operating across numerous industry verticals.

China

Assistant chairman of China Banking Regulatory Commission, Yang Jiacai, reported to be ‘out of contact’ (SCMP), Rated: AAA

Fifty-six-year-old Yang Jiacai, assistant chairman of the China Banking Regulatory Commission (CBRC) was reported to be “out of contact” since Tuesday, April 11, by Chinese media Caixin and Caijing.

Caixin reported Yang had transferred all his responsibilities to his colleague, the commission’s vice-chairman Cao Yu.

Yang made his last public appearance a week ago during a press conference for the CBRC, during which he introduced some heavy-handed regulatory moves planned by the commission.

Podcast 97: Yihan Fang of Yirendai (Lend Academy), Rated: AAA

In this podcast you will learn:

  • The origins of Yirendai and how it was incubated inside CreditEase.
  • When and why Yirendai was spun-off from CreditEase.
  • Some background on all the divisions inside CreditEase.
  • The typical borrower who comes to Yirendai for a loan.
  • How Yirendai has broken new ground in China.
  • The different channels they use to obtain borrowers.
  • The typical size, rate and term of their consumer loans.
  • How these borrowers use their loan proceeds.
  • How Yirendai differentiates themselves from their competitors.
  • Who the typical investors are who participate on their platform.
  • The average amount each of their 200,000 investors deploy on their platform.
  • How their investor product works and details of their risk protection fund.
  • How their business model works as far as revenue.
  • A breakdown of their institutional investor interest.
  • Why they decided to do an IPO in New York rather than Shanghai or Hong Kong.
  • The impact of the new marketplace lending regulations in China.
  • Yihan’s perspective on the fraud that has happened in China.
  • Details of their new Yirendai Enabling Platform that they launched at LendIt.
  • What areas Yirendai will focus on in the coming years.

China is Cracking Down on Unscrupulous Financial Services (Crowdfund Insider), Rated: A

In a series of reports, ChinaNews is pointing to the increasing scrutiny of the Chinese government regarding financial fraud and over-all malpractice.

Now the China Banking Regulatory Commission has published measures to address risks in the financial and banking sectors. According to ChinaNews, CBRC highlighted 10 areas for improving risk control in both traditional and internet finance – which includes peer to peer lending.

All of this is taking place with the back-drop of Xian Junbo, Chairman of China Insurance Regulatory Commission (CIRC), being placed under investigation for “disciplinary violations.” He will be the most senior government financial regulator to be investigated in several years.

WeiyangX Fintech Review (Crowdfund Insider), Rated: A

Big Data Company Wecash raised $ 80 million in series C funding led by China Merchants Capital, Fore Bright Capital and SIG. Two new investors – Dongfang Hongdao Asset Management and Lingfeng Capital joined the existing investors in this round.

On April 10, China Banking Regulatory Commission released “Guidelines on risk prevention and control in banking industry” to make the P2P online lending market standard by perfecting the in-out mechanisms, paying more attention to the supervision and perfecting the governance of online lending companies.

According to the PwC Global FinTech Survey China Summary 2017 released on April 6, the three main areas to be disrupted by FinTech in China over the next five years will be consumer banking, investment & wealth management, and fund transfers & payments. E-retailers, large technology companies and financial institutions will be the biggest sources of disruption.

Compared with developed countries, the market-penetration level of auto finance in China is much lower. However, it also indicates that China has a tremendous room to develop and grow.

US

Australia

China

Market-penetration

80% – 85%

70%

Less than 30%

On April 6, second-hand car online trading platform Souche closed on $180 million in Series D Funding led by Warburg Pincus. Other participants in the round included VMS Investment Group, ClearVue Partners, Haitong International, CreditEase and Morningside Capital. Notably, Souche just finished Series C Funding led by Ant Financial in the last November. In the past five months, Souche has raised a total of $280 million.

 

India

The India Fintech Market Map: 72 Startups Working Across Lending, Payments, Insurance & Banking (CB Insights), Rated: AAA

Looking at Indian fintech specifically, funding to private companies in the sector boomed from about $175M in 2014 to a high of $2B in 2015 (buoyed by mega-rounds to Paytm) and then slid to $530M in 2016. Still, 2016′s total funding was more than 200% higher than total funding in 2014. A host of global corporations and their venture arms have entered the fray, eager to reach India’s mostly unbanked population and profit from the country’s tech-friendly regulatory environment.

‘Free’ credit reports from fintech portals (livemint), Rated: A

Apart from bureaus, online financial marketplaces are also offering free credit scores and reports. These reports are not counted against the free reports you can get from credit bureaus directly.

On the four fintech platforms we went to, it took no more than a few minutes to log on, authorise the fintech to access our credit report, and get it on the screen or in email. And it was also simpler to get a report here than from a bureau’s website.

On Bankbazaar, we got the report on its website and in email. Paisabazaar displays the report on its website. Both sites provided reports from Experian Credit Information Co. of India Pvt. Ltd.

FinTech: To Regulate Or Not To Regulate? Former RBI Deputy Governor R Gandhi Explains (Bloomberg Quint), Rated: A

In lending, peer-to-peer lenders and online SME (small and medium enterprises) lenders are targeting clients considered too risky by banks. They claim to use technologies that can assess credit worthiness in smarter ways than the traditional income statements used by banks. In payments, wallet companies have taken the lead in retail payments forcing banks to up their game.

One gripe that banks have is that these fintech firms are getting away unregulated, which gives them a lot more flexibility in how they do business.

That’s true for now, said R Gandhi, former deputy governor of the Reserve Bank of India (RBI) who retired after a 37-year stint at the central bank earlier this month. The dilemma for the regulator is to decide when to regulate and how to regulate so as to ensure that innovative business models get a fair chance, Gandhi explained in an interview with BloombergQuint on Tuesday.

Is India ready for Peer-to-Peer lending industry? (Faircent), Rated: A

What we are trying to do is to create a P2P (Peer to peer) lending industry. Fundamentally we are providing an alternative to banking and other financial institutions.

Karun: Investors whom we call lenders can get returns up to 18% to 20% per annum which is much better than other options today. As a borrower you can avail unsecured loans at much cheaper interest rates. What we feel is that the banks make huge margins in terms of the rates that they offering customers on their savings and the rates they are lending it out to people at, in the form of loans. By reducing the margin, with Faircent as the match maker, we are able to pass value to both sides of the table, to borrowers as well as lenders.

Karun: We are purely a digital entity.   We are trying to use technology so that there is minimal offline intervention.

We’ve done a lot of marketing technology interventions, like we have a CRM which is built on top of our platform, which is a custom made CRM. We have integrated it with our lead gen channels. We have an email marketing platform using which we nurture our customers and also do promotional activities with potential customers. We have done a lot of work in trying to become Omni-channel. Three main channels which we use are email, SMS and Voice.

Karun: We are using a lot of the off- the- shelf products. But the challenge for us is really how do we integrate them with our platform. So hence we have to be much more careful about which option we choose. We are using Octane and Amazon for email. Octane is basically a mix of email and SMS which we are predominantly using for marketing.

Karun: Yes, we have a mobile app which is available on the Android and iOS platform. Right now, our focus has been more to enable our customers to access our platform on the mobile device. So for example if there is an investor who wants to invest in loans on the fly he can do it using our app. At present we’re not really focused on the app to acquire more borrowers or acquire more investors and lenders.

Razorpay plans overseas foray (The Hindu Business Line), Rated: B

Razorpay, a payment gateway solution provider focused on online merchants, plans to go international. It is looking to enter South East Asia and West Asia markets in 2018-19, Harshil Mathur, co-founder, has said.

The fintech startup, which started its journey in mid-2014, is in talks with local and global (banking) players in these markets, Mathur said.

Razorpay, which had raised Series A funding of $11.5 million, is not worried about funding for the next two years, according to Mathur.

Asia

ORIX Launches New Online Lending Business for Japanese Small Businesses (Orix), Rated: AAA

ORIX Corporation (“ORIX”) and Yayoi Co., Ltd. (“Yayoi”), an ORIX Group company, announced today that they are launching a new online lending business, a new FinTech service utilizing accounting big data and proprietary Artificial Intelligence (AI) based credit model.

The business will provide Internet-based lending to small businesses in Japan. A new credit model is under development, utilizing ORIX’s credit expertise, Yayoi’s accounting big data, and cutting edge AI technology by ORIX’s partner company, d.a.t. Inc. Most existing credit models in the market to date relied solely on static data such as financial reports; by utilizing dynamic data, such as day-to-day journal data and other transactional data, the new credit model is expected to offer much better predictive power than before.

ALT plans to start offering lending services on a trial basis to the approximately 600,000 companies, who are existing users of Yayoi’s online services1 in October 2017. Customers will be able to apply online, during which process they grant permission to access their accounting data.

According to a survey of 7,609 Yayoi customers, 85.0% of small corporations have a need for short-term financing, but 36.5% of those have been shying away from obtaining traditional loans, due in part to the excessive amount of time and efforts required for approval of short-term financing. With respect to sole proprietors, just 16.4% of them have obtained short-term traditional loans. Utilizing online lending can reduce complex administrative procedures, including the need to submit financial reports and other paperwork and to visit financial institutions in person, and can also shorten the time needed to obtain much needed cash, making simpler, more flexible financing possible.

AN INDONESIAN peer to peer (P2P) lending startup, KoinWorks is supporting small and medium enterprises (SME) and education by launching an art exhibition, ARTificial Intelligence which will run from April 13 to April 30 at Pacific Place, Jakarta.

Benedicto also says that KoinWorks mainly focuses on SMEs that conduct their sales and marketing activities online. He also believes that by connecting SMEs to lenders, it will bring benefits to both sides.

Benefits for lenders are through net gained interest from their investment which can be up to 19.8% annually depending on the risk level. The service also fulfils social needs by helping businesses to grow.

Users may invest in KoinWorks with a minimum deposit of US$7.50 (100,000 rupiah). The funding will be deposited in real-time at a virtual bank account. Users only need to scan and upload information from their identity card, fill in the form, and deposit the money.

LendIt China Event, Lang Di Fintech, Updates on PitchIt Competition (Crowdfund Insider), Rated: A

LendIt, the global lending and Fintech conference, has announced the official launch of the Asian edition of their Fintech startup competition, PitchIt, in association with JadeValue, a Shanghai-based Fintech incubator. The competition is for all early stage Fintech startups in Asia-Pacific.

PitchIt will take place at the Lang Di Fintech conference, China’s largest global Fintech conference in Shanghai in July.

The 8 Finalists Will Receive:

  • Opportunity to secure investment and partners by meeting investors
  • Have your pitch heard by the international fintech community in front of an audience of international and local attendees across APAC.
  • Gain valuable exposure through global PR
  • Up to $1,000 for travel to Lang Di Fintech
  • Year-round exposure through press and brand visibility and the chance to gain mentorship from Global VCs on pitching and product positioning prior to the event.

The Winner Will Receive:

  • Mentorship, co-working space for 6 months and guaranteed investment of $150,000 from JadeValue
  • 2 free passes to LendIt USA 2018, roundtrip airfare and accommodations
  • Curated meetings for investment purposes in the US during LendIt USA 2018 (April, 2018, San Francisco)
  • Complimentary sponsorship at LendIt USA 2018
MENA

The future of digital money (Gulf News), Rated: A

At a time when the consumer relationship with cash is more virtualiser and abstract, and where use of physical cash continues to decline in many markets, the next phase of digital money offers undiscovered potential for a new period of expansive growth in transactions, beyond the limits of national borders.

The region’s e-commerce marketplace is thriving too, but it depends more on cash on delivery than on electronic payments. At the same time, a relatively low share of adults have bank accounts, while mobile money accounts have had limited success. That could be about to change. New Fintech entrants are playing their part in helping drive payment digitisation.

Furthermore, developments in payments technology are making it easier for us all to transact. Egypt’s Payfort recently has successfully helped smaller merchants accept electronic payments, and offers instalment payment options to help merchants improve sales. We’re also seeing global providers such as Apple Pay, Google Pay becoming more active in the region after a slow start and more global players are coming, for example Samsung, with Samsung Pay about to deploy payment services that are promising to be easier, faster and more secure using your Samsung smart phone.

Africa

VoguePay Wins Best Fintech Startup Award (This Day Live), Rated: B

VoguePay.com, a secure payment gateway has won the “Best Fintech Startup” at the 6th edition of the Cashless Africa Awards 2017, organised by Mobile Money Africa in Lagos recently.

Authors:

George Popescu
Allen Taylor