Date: November 13, 2019 Location: Cipriani South Street, New York, New York Join the leading institutional conference focused on digital assets and crypto market infrastructure. BlockWorks Group Presents DAS: Markets Speakers include: Adam White, COO, Bakkt Catherine Coley, CEO of BAM Trading Services, Binance.US Michael Sonnenshein, managing director, Grayscale Investments Sunayna Tuteja, head of digital assets and […]
Community Development Financial Institutions (CDFI) are financial institutions focusing on channeling the savings of investors in community development projects including development of women entrepreneurs, affordable housing, helping underserved communities in wealth creation, and small & mid-sized businesses. Funds in such institutions are structured through investment from government, banks, non-banking financial institutions, foundations, and individuals. Though […]
Community Development Financial Institutions (CDFI) are financial institutions focusing on channeling the savings of investors in community development projects including development of women entrepreneurs, affordable housing, helping underserved communities in wealth creation, and small & mid-sized businesses. Funds in such institutions are structured through investment from government, banks, non-banking financial institutions, foundations, and individuals.
Though CDFIs are profitable, they are more focused on the community they serve. So the only aim is not to please shareholders by profit maximization. The four sectors of the CDFI Industry are Community Development Banks, Community Development Credit Unions, Community Development Loan Funds, and Community Development VC Funds. The industry has been a backwater for individual savings due to multiple legal and technical reasons till now. This has led to a gap in the market with no options for individuals looking to invest and generate decent fixed income returns and simultaneously positively impacting local communities with their investments.
CNote is the bridge that is looking to transform the savings space by offering “smart savings technology” and new savings products to earn good savers 40x more.
The company invests in CDFI lenders for fixed yields and offers attractive returns (as compared to a saving account) to its investors. Co-founders Catherine Berman and Yuliya Tarasava launched CNote in 2015 with the aim solving the pain points that individual investors have, and to better serve the community.
Berman is a serial entrepreneur. CNote is her third venture. Her previous startup, Global Brigades, is the largest student development firm in the world. She was also a managing director at Charles Schwab and has experience at marque names like Deloitte.
Yuliya has over a decade of Wall Street experience, and in creating financial products. At Charles Schwab, she oversaw a $30 trillion wealth transfer from baby boomers to the next generation, and saw that financial and saving products have not evolved to serve today’s market. This is what led to her to design CNote.
CNote started as a bootstrapped company and recently raised $60,000 from Pipeline Angels. The company is also in discussions with investors for a future round.
CNote’s Business Model
CNote positions itself as an alternative savings product. It shipped out the first product in 2016 with the aim to reinvent boring financial savings products. It interviewed over 200 persons in its target market to get the right product market fit. They opened to the mass market by getting SEC qualification in 2017. This allowed retail investors to trust the company with its savings products and ensures that all compliance is met to the most stringent level. The company charges no fees but pockets any difference above returns starting at 2.5%.
The savings alternative offered by the company is different from that offered by traditional institutions and banks. Cash locked in traditional savings accounts offer a nominal interest, normally at a rate below 1%. This is not enough to even keep up with inflation. On the other hand, CNote’s savings offer draws interest at an estimated 2.5% (compounded) without the need to incur any upfront cost or minimum account balance. The user-friendly website provides an easy online access for investors helping them to register in just three minutes.
The revenue model and operating cycle of CNote is just like that of a financial lender or a bank. They charge interest for lending out money to community lenders and providing a return in the form of interest to individual investors.
The company’s platform has over $12 million already committed. In addition to earning a competitive return, CNote tracks the usage of funds lent to the community lenders so that it can measure the impact on society at large. According to Berman, the company has helped in creating over 1,000 jobs in the United States.
CNote’s platform attracts both retail and institutional investors. Women under the age of 45 are its typical individual investor whereas institutional customers include wealth management platforms and wealth managers. Investors consider CNotes a cash alternative, impact investment, and/or a competitive fixed income instrument.
The CDFI Opportunity
CDFIs are not new to the market and have a history of over 20 years. They are well established and certified by the US Treasury. Though CDFIs are not federally insured, the last recession saw CDFIs outperforming FDICs (Federal Deposit Insurance Corporation). Still, 99% of Americans have never heard of them.
There are multiple reasons for this lack of awareness. Absence of standardized due diligence techniques for accessing the financial position of lenders is a hurdle faced by many CDFIs. Investors also find it difficult to compare the financial products offered by different institutions. Most of the products offered by these institutions are not geared for non-accredited investors because of a high investment amount threshold.
CNote savings provides access to this high performance asset class services to ordinary Americans. CNote broke all these barriers by introducing scalable products, which are designed specifically according to the needs of individual investors.
CNote has identified a gap in the $100 billion impact investment industry by offering a product that is suitable for retail investors looking to earn positive fixed returns. The upside is that the investment is also doing social good by investing in backward communities, minority and women entrepreneurs, and other underserved markets. The company has no visible peer in the industry that is leveraging CDFIs as a retail investment opportunity. With strategic funding, the company can quickly capture major market share in this multi-billion dollar industry.
The evolving landscape of digital lending is turning traditional bank loans and credit analysis into a distant memory. The rise of big data and technological progress have led to alternatives or augmentations to Fair Isaac Corp.’s proprietary FICO score, the dominant credit score used to vet consumers’ creditworthiness. Now, a bill is making its way […]
The evolving landscape of digital lending is turning traditional bank loans and credit analysis into a distant memory. The rise of big data and technological progress have led to alternatives or augmentations to Fair Isaac Corp.’s proprietary FICO score, the dominant credit score used to vet consumers’ creditworthiness. Now, a bill is making its way through the U.S. legislative process that would require Ginnie Mae and Fannie Mae to consider credit scores beyond FICO. Although these proposals are focused on mortgages, one can infer that alternatives to FICO are welcome across the board, including consumer loans. And we now have the technical means to deliver.
When it comes to consumer lending, lenders have traditionally relied upon a loan applicant’s FICO credit score obtained through a credit bureau such as Experian or Equifax to help determine an applicant’s creditworthiness. These three-digit scores are derived using a proprietary formula that uses data like payment history, credit history length, and credit line amounts. The lower the score, the less likely an applicant is to secure a loan. The exact formula is a trade secret, known only to Fair Isaac Corp. Hence, we are already relying on a proprietary “black box” to make a credit decision. We’ll get back to that point later when we discuss machine learning algorithms. Enter digital lending.
Digital Lending Creates a New Way to Vet Applicants
New credit models are based on the proposition that the old ways of approving applicants based on FICO credit score alone do not paint a complete picture of an applicant’s creditworthiness. The proliferation of new data points about consumers provides a wealth of raw data ready for analysis.
With the use of machine learning algorithms, and more broadly artificial intelligence, new models are looking at hundreds, and thousands of other data points, and not all are related to traditional financial risk. Enhanced use of personal information may include educational history, employment history, and even seemingly non-financial information such as bedtime, website browsing patterns, spelling on loan applications, social media data, and even messaging patterns.
While using big data could muddy the waters by creating more confusion than clarity, artificial intelligence could have a big impact on how alternative lenders perform.
Artificial Intelligence Streamlines Sales and Strategy
Savvy digital lending startups are testing the waters with machine learning to make underwriting decisions and enhance their loans. Machine learning algorithms can help to determine if applicants are telling the truth about income by looking at past employment history and comparing it to similar applicants. However, this technology can also favor the applicant by finding hidden patterns.
This data collection is advantageous for people with insufficient credit history, low incomes, and young borrowers who are typically charged with higher interest rates if they obtain credit at all. These methods may also appeal to mortgage companies looking to automate less risky applicants through a similar process.
Yet several challenges exist with these new credit models:
First is what we’ll call a slow rinse and repeat the cycle. Machine learning algorithms, like humans, learn by doing and repeating while making correctional adjustments along the way. Economic credit cycles can last 5-7 years. Even if we back test a model using historical data, how do we know it will work in the future? A cliche in finance is that “past performance is not indicative of future returns.” It may take a long time to prove that a model is right or wrong because the model itself, like an inexperienced loan officer, hasn’t seen enough credit cycles.
Second, models need to explain their black box to gain trust. FICO gets away with being a “black box,” but artificial intelligence cannot. Even if a model works, humans need to have some kind of explanation to feel comfortable with the output.
Bank regulators need to know what’s going on. Fair credit regulators require that lenders keep records for the reason that credit was denied. The applicant has a right to inquire about why they were rejected. Disclosing the reason for a rejection is easy to do with an old-fashioned credit scorecard, based on a transparent point system. But what would regulators or auditors do with machine learning model outputs? For now, the practical answer is to run a traditional model as a backup whenever a machine learning model rejects an applicant, and hope that they both give the same answer! If so, record the traditional model’s output as the reason for credit denial.
For now, the most beneficial result of machine learning is the ability to detect consumer fraud by analyzing customer behavior with baseline data of ordinary customers and singling out outliers, such as how much time people spend considering application questions, reading contracts, or looking at pricing options. This filter alone leads to more accurate underwriting decisions, which, in turn, reduces defaults for lenders and lowers interest rates for consumers.
Blockchain Changes the Future of Funding
Peer-to-peer lending platforms originated out of one simplistic idea, one peer borrower asks for a loan, and another peer lender will decide to fund the loan. Both parties benefited by “cutting out the middleman” – the borrow paid a rate lower than that of a traditional loan, and the lender received a rate higher than that of a traditional savings account. But the peer-to-peer, or “people helping people” model, changed as large lending companies and institutional investors entered the space to become lenders, and, in institutional parlance, “buy loans” in bulk. Moreover, peers lack the expertise or ability to perform proper credit risk on other peers. Peer-to-peer became institutional-to-peer.
However, what if blockchain or distributed ledger technology could return us to the original concept of peer-to-peer lending? Blockchain-based solutions are currently developing identity and reputation models. With blockchain, an entire loan process can live online. Many parties share a record of transactions and supporting documents eliminating the need for intermediaries and third parties. Once I transfer the ownership to you, it’s done. I no longer have it. Currently, we can transfer ownership, but we need someone to record the transfer.
Eliminating the Need for Third-Party Risk Managers
With distributed ledgers, you can create a smart contract on a public utility blockchain without the need for a third party to execute the contract. This allows you to build a low-cost, high-trust platform that didn’t exist before. A handful of startups are designing platforms offering secured loans on a blockchain for those that are holding digital assets for the long term. Cryptocurrency investors will be able to earn interest on their holdings while the digital lender uses them as collateral for consumer loans.
Others are testing mechanisms for collateralized lending based on the value being stored in a smart contract on a blockchain. Collateral could be a security, a bond, a property, a title, data, or gold. The asset must have been digitized and recorded on a blockchain. For instance, the Perth Mint, Australia’s official bullion mint, announced plans to issue cryptocurrency backed by gold.
Mehul Agarwal is a Customer Success, Business Development and Marketing expert working with both users and creators of technologies to achieve their Engineering & Technology goals.
Mehul has worked with several startups, mid-size and large companies from the Valley and outside especially in the FinTech, Medical Devices, Connected Devices amongst others. He has generated over $45 Mil in revenue in the last couple years building one of the largest customer accounts for one of the companies he has worked with.
He mentors startups from around the world around Sales, Strategy, Growth & Marketing both as part of accelerator programs and independent companies.
On the education front, he has a bachelor’s and master’s degree in Economics from Pune University and also a Master’s in Customer Relationship Management from Symbiosis University.
News Comments Today’s main news: Chime surpasses 1M bank accounts. Top MPLs (SoFi, VPC, more) join Marketplace Lending Association. LendingPoint secures up to $600M credit facility. Today’s main analysis: Survey on Aadhaar, data-driven insights. Today’s thought-provoking articles: Why the credit card boom has peaked. Should banks have ‘flanker’ brands? The Baltics are stars in EU P2P lending. Top personal loans […]
Why the credit card boom may have peaked. AT: “As instant financing becomes more popular, or POS financing if you prefer, I think we’ll see the need for credit cards become obsolete. It’s quite possible we’ll see smartphone credit apps, or some equivalent, that holds encrypted personal data for credit purposes.”
Chime announced it surpassed one million accounts to date last month and has now processed more than $4.5 billion in total transaction volume, solidifying Chime’s position as the clear leader in the U.S. challenger banking segment.
Unlike traditional banks that charged consumers over $34 billion in fees in 2017, Chime is transforming the consumer banking experience. The company’s unique business model, which doesn’t rely on fees, allows Chime to relentlessly focus on its mission of helping members lead healthy financial lives.
CreditShop LLC, a finance company focused on developing, marketing and servicing consumer-friendly credit products, today announced the introduction of the Mercury Mastercard. Mercury cards will provide cardmembers with complementary access to their FICO score, and account performance will be reported to major credit bureaus. The cards will be issued by First Bank & Trust of Brookings, South Dakota.
There are about 75 million Americans in the “middle market” with FICO scores ranging between 575 and 675, and many are charged high fees by sub-prime credit card issuers.
LendingPoint today announced it has closed an up to $600 million, committed credit facility arranged by Guggenheim Securities, the investment banking and capital markets division of Guggenheim Partners.
With this new deal, LendingPoint has secured up to $1.1 billion of senior credit financing in less than one year. In September 2017, the company announced it had secured an up to $500 million committed credit facility, also arranged by Guggenheim Securities.
Some 58 percent of U.S. homeowners will pay for home improvements this year, roughly the same level of interest in 2017, according to the fifth annual LightStream Home Improvement Survey. LightStream is the national online lending division of SunTrust Banks.
But spending plans tell a different story, one that works in favor of the GreenSky IPO. “The percentage of people intending to use a home improvement loan has grown 29 percent from 2017, with 54 percent more 18- to 34-year-olds planning to fund projects through home improvement financing,” the report said. “While overall, 30 percent of homeowners say they’ll pay for some portion of their 2018 project with a credit card, 16 percent fewer homeowners aged 18 to 34 plan to use them” compared to 2017.
On Tuesday, the company announced the launch of four services, all centered on attracting financial institutions to its platform. The new tools include options like Coinbase Custody, a custodian partnership similar to the custodian offerings typically provided by banks to secure customers’ cash, and Coinbase Prime, a platform centered on research and market data geared toward institutional clients.
After collaborating previously at Exeter Finance and AmeriCredit, auto finance industry veterans Mark Floyd and Kenneth Wardle are teaming up again; this time to leverage what’s happening online when consumers search for financing.
According to a news release sent to SubPrime Auto Finance News this week, Floyd and Wardle have acquired an equity stake in Horizon Digital Financial Holdings, an online auto finance technology firm located in the Dallas-Fort Worth Metroplex. The transaction was effective May 1.
Horizon Digital is the parent company for online consumer loan marketplace participant myAutoloan.com.
Floyd will serve as chairman and chief executive officer of Horizon Digital, and Wardle will serve as chief operating officer.
At well over $400 billon, Envestnet has more than six times the assets of its nearest competitor in its core asset management platform business. Tamarac, the firm’s rebalancing, reporting and practice management software powerhouse, has seen revenue grow approximately eight-fold since Envestnet bought the company six years ago.
The always-opportunistic Envestnet insured itself a pole position in data aggregation and analytics, one of the sexiest tech areas in the business, by acquiring the innovative Silicon Valley firm Yodlee three years ago.
Bitcoin and blockchain startup Circle Internet Financial, Inc. has raised $110 million in new funding as a “strategic investment” while also announcing its intent to launch a new cryptocurrency tied to the U.S. dollar.
The new round announced Tuesday, the first since 2016, was led by Bitmain, with the participation of IDG Capital, Breyer Capital, General Catalyst, Accel, Digital Currency Group, Pantera, Blockchain Capital and Tusk Ventures.
The fintech startup Regalii, which originally built technology to help immigrants pay bills back home, has pivoted. Under a new name, arcus, it is now helping banks reissue credit and debit cards to customers whose cards have been lost, stolen or breached.
Elix is an Ethereum-based platform for payments, loans, and crowdfunding. The team is uniquely taking a mobile-first approach and focusing on usability to attract as large of a user base as possible from the start.
Elix also includes a platform, Boost, to facilitate decentralized crowdfunding campaigns using smart contracts.
Peer-to-Peer (P2P) Lending
With Elix, though, both the lender and the borrower are incentivized to follow the terms of the loan. When setting up a loan, the participants can opt to include a mining period once the loan is complete to gain additional rewards. If enabled, as a lender, you must hold the ELIX in your wallet for a certain amount of time in a system similar to Proof-of-Stake. When that holding period is complete, Elix hands out the rewards in the form of a new token, Token P. This token will most likely have a different name in the future.
If the borrower pays back the loan on time, the reward is split with the lender receiving 65% and the borrower receiving 35%. If the borrower has late payments, though, the lender receives 100% of the reward.
To help, here’s our list of the top five lenders. Interest rates were current as of May 16, 2018. Some rates include a discount for setting up autopay. LightStream rates can vary by loan amount, repayment period, and the purpose of the debt.
However, when you invest in P2P lending, you’re only purchasing notes, not entire loans. The notes represent $25 slivers of individual loans. That means that you can invest in 40 different loans with an investment of $1,000. That will help to minimize your risk.
Compound wants to let you borrow cryptocurrency, or lend it and earn an interest rate. Most cryptocurrency is shoved in a wallet or metaphorically hidden under a mattress, failing to generate interest the way traditionally banked assets do. But Compound wants to create liquid money markets for cryptocurrency by algorithmically setting interest rates, and letting you gamble by borrowing and then short-selling coins you think will sink. It plans to launch its first five for Ether, a stable coin, and a few others, by October.
Today, Compound is announcing some ridiculously powerful allies for that quest. It’s just become the first-ever investment by crypto exchange juggernaut Coinbase’s new venture fund. It’s part of an $8.2 million seed round led by top-tier VC Andreessen Horowitz, crypto hedge fund Polychain Capital and Bain Capital Ventures — the startup arm of the big investment firm. [Update: Compound told us it was Coinbase Ventures’ first investment when it closed its round, though Coinbase notes that it’s done 8 rapid-fire investments over the past two months alongside this funding.]
While there is potential for growth and it’s an exciting opportunity, real estate crowdfunding will remain a relatively small share of the overall market. In our view, on the long-term, banks, agency lenders, life insurance companies will remain the dominant sources of financing into the market.
Former Managing Director of Equity Markets at BOA Merrill Lynch, Rene van Kesteren, joins BlockFi as Chief Risk Officer. BlockFi, based in New York City, serves crypto investors by offering USD loans collateralized by cryptoassets.
Van Kesteren will be responsible for the company’s risk models and product development in addition to general strategic influence as part of the company’s executive team.
Samir Desai, co-founder and chief executive officer of one of the UK’s biggest fintech firms Funding Circle,once suggested Esme was little more than a ‘massive corporate fudge’.
For the uninitiated, Esme is the online lending platform launched by NatWest. It can advance loans of up to £150,000 to small businesses in less than an hour, utilising a wholly online process that is a great deal swifter and simpler than its progenitor, NatWest, can manage.
NatWest is by no means alone in having launched a separate digital banking or lending brand – often called ‘flanker’ brands by innovation specialists.
Chinese start-ups and other established companies like Didi Chuxing, Xiaomi and Meituan Dianping may command high valuations but they are unlikely to dislodge leaders Alibaba and Tencent, says one observer from the Financial Times.
China’s pre-eminent tech duo of Alibaba and Tencent are approaching their 20th birthdays. Still reasonably youthful but old enough to have spawned an entire new generation of internet wunderkinder.
Peer-to-peer lending, for example, offers a graphic illustration of what can happen when multiple players are unleashed.
The Marketplace Lending Association (MLA) today announced the addition of nine new companies to the Association. The new members join as the MLA continues to expand its presence and engage with policymakers in Washington and around the country. The three new lending firms include Social Finance(SoFi), LendingPoint and College Ave. The six new Associate and Investor Council Members of the MLA include Laurel Road, Education Loan Finance (ELFI), Arcadia Funds, Victory Park Capital, PricewaterhouseCoopers, and First Associates. The MLA now has 24 active members.
Ireland-based company Pluma Technologies Ltd together with its Philippine partner Gava Technologies Inc. are raising $4M worth of Ether through a pre-sale for its TraXion tokens.
TraXion.tech Chief Executive Officer Ann Cuisia said that the company’s token sale would pave the way for TraXion to become the go-to crypto-economy for payments, peer-to-peer lending, remittances, savings, insurance, investments, and philanthropy.
The TraXion token pre-sale began last May 1, 2018 and the Initial Coin Offering (ICO) will start on June 1, 2018, respectively. TraXion tokens are currently valued at 0.001 ETH.
IDinsight, a global development analytics firm, today released its State of Aadhaar Report 2017-18 which provides data-driven insights on Aadhaar, the world’s largest biometric system. The report is based on an independent household survey covering 2947 rural households in 21 districts across three Indian states. The survey was conducted between November 2017 and February 2018.
The key highlights of the report are:
Over 96% of respondents value privacy and thought it is important to know what the government will do with their Aadhaar data. At the same time, 87% of respondents approve of mandatory linking of Aadhaar to public welfare programs.
Aadhaar’s coverage is widespread, but the data quality has room for improvement. The report finds a higher uptake of Aadhaar than voter identification cards. In addition, the report finds no evidence of differences in enrollment by gender, caste, religion, or education levels. The report highlights that 8.8% of Aadhaar-holders reported errors on their name, age, address, or other information on their Aadhaar letter. Compared to voter identification cards, the error-rate on Aadhaar was 1.5 times higher.
While exclusion from food subsidy welfare-benefits due to Aadhaar-related factors is significant, it is lower than exclusion explained by factors unrelated to Aadhaar. State capacity has a bearing on the functioning of welfare distribution, with wide variation between certain states. Overall monthly exclusion from welfare benefits ranges from 9.9% to 1.1%. Of this, Aadhaar-related factors contribute 2.2% and 0.8% respectively. Despite this, the report finds that a majority of welfare beneficiaries prefer Aadhaar-based benefits delivery in both states, as they perceive biometric authentication prevents identity fraud.
Peer-to-peer (P2P) lending, which helps people to borrow and lend money without the help of an official financial set up such as a bank as an intermediary, is expected to see huge traction in the country in the near future. It is estimated that the value of P2P lending to be generated in India over next five years will be around $4 billion (which will be 160 times the current lending size).
However, this is sum is small when compared to China where P2P lending book currently is around $100 billion, indicating the potential for exponential growth opportunity available for P2P in India. India currently has around 30 online P2P lending platforms with a current loan book of $ 25 million.
The Indian government’s $1.47 Bn (INR10,000 Cr ) Fund-of-Funds for Start-ups (FFS) , a part of the Start-up India Action Plan aimed at helping startups gather funds, isn’t seeing much action and it isn’t because of lack of trying, The Indian Express reported.
Small Industries Development Bank of India (SIDBI), which manages FFS program, has so far committed $189.3 Mn( INR 1,285 Cr) to 27 local venture capital funds under the FFS scheme, of which $20.8 Mn (INR 141 Cr) —only about 11% — has been disbursed to these funds till April 2018.
Standard Chartered Bank Taiwan Ltd (渣打台灣銀行) yesterday entered into a partnership with peer-to-peer lending operator Robo Web Technology Co (瑞保網路科技) to expand its retail banking clientele from high-net-worth individuals to the general public.
The alliance enables borrowers to open accounts and apply for loans without visiting brick-and-mortar branches and came as competition from non-traditional players gains force.
Standard Chartered would continue to pursue affluent clients, but also aims to take advantage of the fast-growing digital banking business, which was valued at US$64 billion in 2015 and could hit US$1 trillion in 2025, Lin said.
Start-ups in Asia-Pacific have received US$4.8b, or over 60pc of the world’s proptech investments, with Hong Kong and China taking US$3b of that amount.
In Hong Kong, some companies working in property have begun adopting proptech, but by and large, the industry and regulators have been slow in tapping into these advances, which analysts attribute to a few factors.
JLL said in a November report that 179 start-ups in Asia-Pacific have received US$4.8 billion, or over 60 per cent of the world’s proptech investments since 2013, with Hong Kong and mainland China taking US$3 billion of that amount.
Hong Kong is also aiming to become a global hub for innovation and technology, earmarking HK$50 billion (US$6.37 billion) this year to boost the tech sector.
Real estate and lending have always been closely associated. What Aperture, a Los Angeles-based real estate technology and investment company, has done is integrate real estate, lending,and cryptocurrencies to create a new model for funding and investing in real estate. The Aperture Business Model Aperture was formed in the year 2016 by three co-founders: Andrew Jewett, Rudy […]
Real estate and lending have always been closely associated. What Aperture, a Los Angeles-based real estate technology and investment company, has done is integrate real estate, lending,and cryptocurrencies to create a new model for funding and investing in real estate.
The Aperture Business Model
Aperture was formed in the year 2016 by three co-founders: Andrew Jewett, Rudy Cortes, and Matt Miles to monetize the opportunity in real estate through creation of a large national fix and flip investor and lender. The company is focused on two things:
Buying residential properties to renovate and resell (“flips”) and
Making loans to other property investors (“investor loans”).
The company bridges the gap for fix-and-flip investors by offering short-term loans for fix and flip, bridge, rehabilitation, or rental purposes. The main focus are homes that do not qualify for traditional lending. The company provides a quick and convenient way to finance property to borrowers with low interest rates and reasonable up-front fees as compared to its competitors. It also helps home owners to sell their houses at best possible prices. Availability of advanced features like ACH payments, interest-only payments, certainty of close, no minimum credit score requirements and a dedicated team of underwriters are some of the core areas of competencies which differentiates Aperture from its competitors.
As a direct buyer, Aperture looks for affordably priced real estate in need of repairs. The aim is to fix it and resell to end users for profit. The company partners with local contractors to determine the scope of repairs and review the work performed.
The Technology Behind It All
The company has developed its fully integrated proprietary loan origination software (LOS) to handle property management services and reporting. The entire workflow of loans is managed through the software.
Borrowers can apply for property loans through the company’s website, which is interactive and intuitive. They are required to register on the company’s web portal and fill the information in terms of basic borrower data, property facts, and amount of loan requested. The loan process is not completely reliant on technology for the assessment of the proposal. The company will also do a manual review to perform the due diligence on a proposed loan. Aperture strives to close each project loan within a period of five to 10 working days.
The company does not focus on saturated states like California, Nevada, Florida, and Arizona. It will instead concentrate on capturing a higher quantum of deals at a higher percentage rates. This reduces its cost of acquisition per client and will also ensure higher margins.
Aperture is one of the only lenders that is also a property investor. This allows the company to provide additional benefits to borrowers by referring profitable deals to them in which the company has skin in the game. The company targets experienced investors, real estate agents, and contractors wishing to build a portfolio of two to 20 investment properties.
Fundraising Through Property Coin
Aperture is actively lending and is targeting to achieve a portfolio of $180 million in the next 12 months. Head of Loan Operations Dan Goldman helped build another originator to $55 million in monthly originations in just 15 months. The company, to date, is self-funded.
Aperture is also looking to raise $50 million through an ICO. Launching a 100% asset backed coin called Property Coin, they provide investors fractional interest in all real estate purchased by Aperture. The company has also filed a Reg D and Reg S for the purpose of fundraising. Half of the profits from the investments and loans will flow to the coin holders. The token is a way to securitize the real estate assets while giving crypto holders an opportunity to diversify into an asset-backed coin.
Trends and Future Goals
According to the founders, availability of financing to property investors has increased in the last three years. The residential investment market was previously dominated by “mom & pop” investors (who usually own less than 10 houses). On the other hand, attractive market returns and higher margins, as compared to traditional lending, are attracting institutional investors to jump into the market. These trends show that the industry is at a pivot point, and Aperture is at the right place and the right time to grab hold of this opportunity.
The company has generated 50 percent unleveraged returns on its investments. That, along with the management’s experience in real estate and loan origination industries, is a big positive. By incorporating the blockchain, the company has created an investment vehicle that will be attractive to multiple sections of the investor base. Property Coin is a safe bet for those taking their first steps into the crypto space. The coin can also be attractive to institutional players looking for a stable crypto asset in their portfolio with strong cash flows and a tangible underlying asset.
The company’s biggest competitor is Lending Home founded in 2013. Finance of America is another player in this segment and was formed in 2017 with the merger of B2R Finance and Jordan Capital Finance offering residential rehab fix-and-flip loans, single rental home loans, and blanket loans. It is also a portfolio company of the private equity giant, Blackstone.
Lima One is another strong contender, offering services to residential real estate investors with a funding period of 15 to 45 days. The company was formed in 2010 and has funded over $200 million with more than 720 residential deals up through 2017.
The Aperture Founding Team
All three founders were part of the senior management team at Wedgewood, one of the largest fix-and-flip investors in the US. Jewett and Miles were co-heads of the capital markets division. Both also worked previously at RBS Securities. Cortes was the head of fix-and-flip operations at Wedgewood and has previous experience at Marcus & Millichap Real Estate Investment Services, Inc.
Aperture combines the best of marketplace lending with traditional real estate and asset-backed cryptocurrency to provide opportunities for investors interested in diversification and building a strong real estate portfolio.
News Comments Today’s main news: SoFi CEO’s top 3 things to focus on. KBRA assigns prelim ratings to Prosper Marketplace Issuance Trust, Series 2018-1. Funding Circle fund dividend in line with target. Assetz Capital secures new funding. Experian acquires ClearScore. Today’s main analysis: Credit analysis and valuation methods for MPL. (A MUST-READ) Today’s thought-provoking articles: Top 5 trends of institutional […]
“First, we have to have the best selection — and not just selection of each product, but variations of those products,” Noto said. “Second, we have to provide unmatched convenience. Anytime, anywhere, on any device, you should be able to access all of your financial information, do any activity that you want across the broad spectrum of products that we’ll launch over time.”
Noto’s third initiative for the company — which helps its “members,” or customers, refinance student and mortgage loans, take out personal loans and even get career advice — had to do with speed.
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by Prosper Marketplace Lending Issuance Trust 2018-1 (“PMIT 2018-1”). This is a $647.5 million consumer loan ABS transaction.
Preliminary Ratings Assigned: Prosper Marketplace Issuance Trust, Series 2018-1
As Marketplace lenders continue to lend at a fast pace, there has been a significant increase in the past several years in non-bank consumer, student and small business lending.
1. What are the most prevalent methods of valuing loan portfolios today?
Discounted cashflow (DCF) methodology at the loan or cohort level is the most prevalent valuation methodology used today to value marketplace loan portfolios and related assets, including tranches in securitizations and servicing rights, regardless of the lending vertical.
2. Are valuation methods standardized? If not, why not? How does this lack of a valuation standard affect investors?
Marketplace lending is a fragmented space, and it is also diverse, with innovative forms of underwriting and funding methods being deployed.
3. How do loan valuation methods differ across lending verticals?
Marketplace lending verticals cover a wide spectrum of product, ranging from $500 installment loans, to $100,000 merchant cash advances (MCAs) made to small businesses, to sub-650 FICO unsecured consumer loans to credit impaired borrowers, to student loans extended to borrowers in medical school with high future earning potential. Thus, any methodology that falls short of incorporating all impactful data to project full cashflows does not do justice to the portfolio. In essence, the assumptions used in the DCF are based on loan characteristics that have the biggest impact on prepayment, default, and recovery behavior. These loan characteristics depend on the asset class but often include underwritten payment schedule (e.g. 36 months amortizing term, 60 months amortizing term, daily pay MCA, etc.) credit metrics (e.g. FICO bands, platform ratings, repeat borrower flags), loan size (e.g. <$5K, $20-$30K, etc.), note rate, and more. These assumptions then feed into the DCF model to project principal and interest cashflows generated from the loan portfolio, incorporating prepayments and defaults, net of recoveries.
7. What about the secondary market? How are deals priced relative to what valuation methods tell us they should be priced? How do valuation analysts obtain information about private sales of loans? In the securitization market is there a valuation standard? How are these deals priced relative to the valuation of the underlying loans?
While many new platforms have started originating in the past few years, several lenders have been originating loans since early 2010s, albeit initially at lower volumes. Data on these loans has been normalized and made available for analysis by firms such as PeerIQ and dv01. More established lenders have returned to securitization markets as issuers with sizeable deals.
The types of institutional investors allocating to the marketplace lending asset class has changed dramatically, from mostly family offices and fund of funds about five years ago to institutional investors such as pensions, endowments and sovereign wealth funds today.
It is a big shift from what the typical fund used to look like just a few years ago, which:
only purchased loans from origination platforms
invested only in consumer loans
invested in loans only from the largest platforms such as Prosper and Lending Club
used a credit model to purchase only select loans from the platforms (active buying versus passively buying)
offered only one fund to allocators
The expansion of institutional investors has ushered in higher investment standards for this asset class which now require a very high level of portfolio management expertise, risk management oversight and robust operational infrastructure before making an allocation.
As a result, these allocators and investors have generally shifted investment activity towards the top five trends:
investing through a combination of loans, securitizations and warehouse lines of credit
investing in multiple sub-asset classes
using both well established and newer origination platforms
investing both actively and passively from platform
Over the last several weeks, two notable cases in federal court challenging certain aspects of the business model of marketplace lending companies headed down separate paths. First, in an action brought against Kabbage, Inc. and Celtic Bank Corporation in the United States District Court for the District of Massachusetts,1 the parties agreed to, and the Court approved, a stipulation staying the proceedings pending an arbitrator’s review of whether the claims in that action are covered by the arbitration provisions in the governing loan agreements. Second, in an action against marketplace lender Avant in the United States District Court for the District of Colorado,2 the Court accepted a magistrate judge’s recommendation to remand the case to state court over Avant’s objection.
According to Fundbox, it takes the average small business 21 days to get paid, 81% of small- business invoices are 30 days past due, and the value of small businesses’ unpaid invoices is $825 billion — which is equivalent to 5% of U.S. GDP.
Fundbox’s underwriting software pulls data from accounting systems, invoicing systems, payments (e.g. screen scraping from PayPal), public records, web interactions, social networks and tax returns. It uses artificial intelligence to assess the creditworthiness of the company and can render a credit decision in minutes based on the business’s incoming and outgoing invoices. Borrowers pay by the week for whatever credit they use.
Using the new Fundbox Pay product, a small business that has provided a product or service (a lawyer, say, or a construction company) puts in a request for payment and gets paid immediately by Fundbox. The seller pays a 2.9% transaction fee, in return for immediate cash flow and not having to worry about the buyer defaulting.
Even Financial, the technology platform powering financial services online, has expanded its strategic partnership with Credit.com, a go-to source for expert information about credit scoring, credit reporting, credit cards and personal finance. Even Financial will now power Credit.com’s personal loans marketplace, as well as its related content tools.
With this expanded partnership, Credit.com will provide its users access with a native, personalized and optimized loan matching experience, powered by Even Financial’s proprietary technology. Even’s technology utilizes machine learning, big data and an extensive network of touchpoints and financial products to provide a personalized experience.
The firm aims to become a one-stop shop that focuses on lending service for micro, small-to-medium sized enterprises (“SMEs”) in China. The company is specifically engaged with micro financing services and financial advisory services, operating through the subsidiary Arki E-Commerce, and VIE, Arki Network.
Digital Assets Data, a NYC-based fintech startup, raised a seed funding round of undisclosed amount.
Vestigo Ventures, an early-stage venture capital firm focused on fintech, made the investment. In conjunction with the funding, Mark Casady, general partner of Vestigo Ventures, will serve on Digital Assets Data’s Advisory Board.
The £311m Funding Circle SME Income fund has revealed its latest dividend of 1.625p per share, in line with its forecast rate.
Its eighth pay-out and seventh at the same level – it’s first was 1p, the latest dividend will be paid on 30 April 2018 to shareholders on the register as at the close of business on 23 March 2018 (the record date) and the corresponding ex-dividend date will be 22 March 2018.
ASSETZ Capital has secured a new line of institutional funding that it says will widen its scope and scale of lending.
The peer-to-peer lender said the unnamed institutional investor was part of a $100bn (£71.5bn) global multi-asset manager and would provide funding dedicated to the residential property bridging, refurbishment and conversion markets.
In an update to its first release, Monzo has added a new category to its marketplace beta: investments.
AltFi can now reveal that users on the beta are able to access digital wealth investment accounts from Scalable Capital, Wealthify, Wealthsimple and WiseAlpha, peer-to-peer lending accounts with Zopa, and property-backed investments with Bricklane.com and Octopus Choice.
Challenger banks like OakNorth, Masthaven, Aldermore and Axis Bank are coming out ahead of the game by offering savings rates more than 1 per cent higher than the average offered by high street incumbents.
New research conducted by fellow challenger Gatehouse Bank revealed today that the average one year fixed-term deposit account offered by UK challengers pays 1.82 per cent on average in interest returns, compared to 0.63 per cent by high street competitors.
Likewise, the average 2 year fixed-term deposit account at a challenger bank pays 1.29 per cent more than the high street, coming in at 2.05 per cent on average compared to only 0.76 per cent from incumbents.
Experienced bankers are moving into the alternative finance sector, creating an ideal environment for SMEs seeking finance, according to alternative finance provider ThinCats.
The shift towards digital banking was highlighted in a 2016 study from the Federation of Small Businesses, with 1,500 towns being without bank branches as banks aim to direct their customers towards digital banking.
Whilst more than 90 per cent of small businesses use internet banking, face-to-face services are still valuable to businesses when it comes to making decisions regarding the future of their company and obtaining finance.
The latest SME Finance Monitor, from insight agency BDRC, shows 32 per cent of the 130,000 firms interviewed were aware of P2P lending in the fourth quarter of 2017 .
When combined with crowdfunding, awareness of these forms of finance was 46 per cent. This was up from 36 per cent at the start of 2017.
Larger SMEs tend to be more aware of P2P, the research shows, with 48 per cent of firms with 50 to 249 employees familiar with the sector, compared with just 32 per cent of one-man bands and 31 per cent of those with fewer than 10 members of staff.
P2P lending platform Lendy has grown its investor base to 20,000 in the past year, according to a statement by the firm, representing a more than 50 per cent increase.
The secured property lender has seen strong demand in particular from investors under 40 years of age. It had 13,000 investors in total a year ago, it says. Investors aged below 40 now represent 50 per cent of the property platform’s investor base.
Investors, Lendy adds, have now received more than £37m in interest from Lendy loans since inception in 2012, up from £16m at the end of 2016.
In a speech to the Credit Summit on Thursday, Jonathan Davidson, executive director of supervision – retail and authorisations at the FCA, said there are worrying numbers of households who are too deeply in debt.
He said one in five mortgages today are interest-only mortgages, many of which were made at the height of the credit boom to borrowers with little equity in their homes and not a lot of disposable income. These mortgages will not mature until about 2032.
He said the £14.8m fine paid by rent-to-own firm BrightHouse last year shows how seriously the regulator takes the issue.
On a more positive note, Davidson reassured the industry that consumer debt in the UK has not reached levels that are likely to be harmful to lenders.
He also said there has been progress by the sector in addressing conduct issues and that “by and large you do a good job for us, your customers”.
Backed to the tune of €650m ($800m) Mingo has clearly impressed more than a few crypto-noobs. Its versatility and learning curve should ensure it stays ahead of the crowd heading past St. Pat’s into the 2018 summer.
The company already has dozens of success stories to tell since its 2014 foundation – including itself, which has raised $1.5m to date.
“We’re addressing two markets across two countries with Flender: business lending and consumer lending in the UK and Ireland – an established market currently worth £2.5bn ($3.46bn) per annum,” co-founder and sales director Oli Cavanagh recently told Silicon Republic.
For PayPal CEO Dan Schulman, the main driver of his company’s gains to date has been “the digitization of cash.”
With 227 million subscribers, 65 percent of whom reside outside of North America, PayPal has seized on this “explosion” of digital payments around the world, Schulman said.
In its latest quarter, PayPal added 8.6 million net new active users, a record since Schulman joined the payment processing giant as president and CEO in 2014.
With over 50 percent of its revenues coming from outside North America,PayPal has started to leverage its international ecosystem to benefit small businesses in the United States as well, the CEO said.
“In North America, … only 5 percent of small businesses export internationally. Eighty percent of small businesses on PayPal in the U.S. export internationally,” Schulman said.
About a year after Experianreceived authorization from the U.K.’s FCA, the company has made further inroads into the nation with the acquisition of U.K.-based ClearScore. The deal is anticipated to close for $385 million (£275 million).
Founded in 2014, ClearScore has onboarded 6 million members in the U.K. through its free membership model. The company matches individuals to personal financial products, offers free credit reports, and provides financial education. The company is projected to generate $55 million in revenue in 2018, a 50% increase over what it earned in 2017.
Debitum is a borderless, small business financing network that seeks to revolutionize the alternative finance industry to enable more small to medium businesses to obtain loans in situations that may previously have been difficult, time consuming, or outright impossible.
According to a review by the World Bank, although SMEs’ more than 2/3rds of SMEs do not have access to credit. Over recent years alternative financing via peer-to-peer lending, crowdfunding, balance-sheet lending, invoice trading (loans backed by account receivables) and VAT financing, has served to assist financing for SMEs, however no single solution encompasses all fields of business.
As a result, the global credit gap still stands at a whopping $2 trillion, accounted by the World Bank Organization and the IFC.
The Monetary Authority of Singapore (MAS) and the Bank of Lithuania have agreed to work together to support the development of the FinTech ecosystems and encourage greater financial innovation in the two countries.
The FinTech Co-operation Agreement between the two countries was signed on the sidelines of the Money 20/20 Asia conference in Singapore today.
FMA today published guidance on fair dealing in advertising and communications for licensed crowdfunding services, peer-to-peer lenders and the companies that offer financial products on these platforms.
The fair dealing provisions of the Financial Markets Conduct Act 2013 ban:
misleading and deceptive conduct
false or misleading representations
offers of financial products in the course of unsolicited meetings.
The Securities Commission Malaysia (SC) and Bank Negara Malaysia established Brokerage Industry Digitisation Group (BRIDGe) yesterday, a joint working group between the regulators and industry to accelerate digitisation of the stockbroking industry.
As part of continued efforts to help clients better understand their financial situation, H&R Block (NYSE:HRB) is partnering with LendingTree (NASDAQ:TREE) to provide clients convenient access to their credit score, LendingTree Academy and more. H&R Block clients can now seamlessly enter LendingTree via their MyBlockaccount, which is a private, secure, online portal clients can use year-round to access and add tax documents and personal information.
LendingTree today announced the release of its Mortgage Savings Tracker and Mortgage Rate Competition Index. The LendingTree Mortgage Rate Competition Index is a new measure of the dispersion in mortgage pricing and will be released weekly. Built on top of the Mortgage Rate Competition Index, the Mortgage Savings Tracker will bring a new transparency to mortgage shopping by highlighting the significant savings that are available to potential borrowers for both purchase mortgages and refinancing.
Findings from the inaugural report:
Across all purchase loan requests on LendingTree (we looked at refinance loan requests separately) in 2017, we found an average Mortgage Rate Competition Index of 0.46 — this was the average spread between the lowest and highest APR offered by lenders.
It may not sound like much, but over 30 years translates to $21,000 in additional costs on a $300,000 loan.
The index was wider in the refinance market, averaging 0.55. Potential borrowers there could have saved an average of $26,000 had they shopped around to find the lowest rate.
Ringing in the new year, the index widened to 0.59 for potential purchase borrowers, translating to a potential savings of just over $27,000.
For potential refinance borrowers, again, the index was even higher at 0.63. That could result in a savings of almost $30,000. The savings increased because lenders are reacting differently to the overall uptick in rates.
The most recent data for the week ending 3/11/2018 showed potential savings of $26,780 for purchase and $27,616for refinancing.
See LendingTree white paper on the Mortgage Rate Competition Index here.
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Consumer Loan Underlying Bond (CLUB) Credit Trust 2018-NP1 (“CLUB 2018-NP1”). This is a $301.727 million consumer loan ABS transaction that is expected to close March 21, 2018.
As in the past, LendingClub itself contributed only a small portion (7.55%) of the collateral for the Consumer Loan Underlying Bond (CLUB) Credit Trust 2018-NP1 transaction from loans it held on balance sheet, but this time only three unaffiliated parties were invited to contribute the remainder of the collateral.
CLUB 2018-NP1 will issue three classes of notes totaling $301.727 million. Credit enhancement for the senior $180.7 million tranche of Class A notes is 49.5%, down 30 basis points from the senior tranche of the previous transaction, which carried the same A-rating. However, enhancement for the BBB-rated Class B tranche has risen by 5 basis points to 37.4% and enhancement for the BB-rated Class C tranche has risen by 35 basis points to 15.35%, per Kroll.
In this research report we initially focus on the Value, Size and Momentum factors from Fama-French, which are constructed as dollar-neutral long-short portfolios based on the top and bottom 10% of the US stock market. The data includes companies with small market capitalisations, excludes transaction costs and is available since 1926. We expand the factor set by the Low Volatility, Quality, Growth and Dividend Yield factors based on our own data, which is available since 2000. These are created via long-short beta-neutral portfolios and only include stocks with a market capitalisation of larger than $1 billion. Portfolios are rebalanced monthly and each transaction occurs costs of 10 basis points.
EQUITY FACTORS & REAL GDP GROWTH: 1947 – 2017
The chart below shows the returns of the S&P 500 and three factors (long-short) since 1947 sorted by positive and negative quarters of real GDP growth.
It’s worth highlighting that there were only 7 quarters of negative real GDP growth since 2000, so the results have to be taken with caution.
New Media Investment Group Inc. (“New Media” or the “Company”, NYSE: NEWM), one of the largest publishers of locally based print and online media in the United States as measured by number of publications, announced today that it has entered into an agreement with Kabbage, a pioneering financial services, technology and data platform serving small businesses. This alliance is intended to bring awareness of simple access to working capital through Kabbage’s fully automated online lending platform to more than five million small and medium sized businesses (SMBs) that do business in New Media’s markets.
But a funny thing has happened on the way to what should be an AI-led revolution — banks have been worrying what their regulators would say if they filed fewer suspicious activity reports, especially if their rivals continue to submit far more.
“All the banks are worried that if they use machine learning, the number of SAR filings will go way down and the regulators will say, what happened?” Saleh said. “How come your SAR filings fell by 50%? Maybe there’s money laundering you’re not catching.”
In early March, the Florida state legislature approved revamping regulations for payday loans, voting to allow payday lenders to make larger loans for a longer period of time.
The bill aims to allow alternative lenders to make installment-type loans up to $1,000, with a 60- to 90-day repayment period. The current law caps loans at $500 for a period of seven to 31 days.
The Pew Charitable Trusts’ proposal suggested that small banks could instead provide loans with payments capped at 5 percent of a borrower’s paycheck.
According to The Pew Charitable Trusts’ research, the average payday loan customer borrows $375 over five months and pays $520 in fees, while banks and credit unions could profitably offer the same amount over the same period for less than $100.
Senior leaders at the Federal Reserve, the Office of the Comptroller of the Currency and the Consumer Financial Protection Bureau, who all spoke at a banking conference in Orlando, Fla., said they have been working with examiners to be more understanding of the budding partnerships forming between banks and fintech firms — and how to examine those relationships going forward.
Clinc, a US-based provider of conversational AI technology for financial institutions (FIs),announced the launch of a new self-service platform, Spotlight, that enables FIs to train and deploy sophisticated conversational AI software in-house, independently of vendors.
Spotlight is available in over 80 languages, and can be integrated into any digital channel, including contact centers, mobile apps, and Alexa, Google, and Facebook Messenger, allowing FIs to create a consistent user experience. Spotlight is already being used by USAA and Isbank, one of Turkey’s largest banks.
I interviewed CEO Dee Choubey on the Lend Academy Podcast just over a year ago but they have made some great strides since then. I caught up with him again recently to get an update. Today, over 2.2 million people have downloaded the MoneyLion app and 1.3 million people have connected their bank account.
Behavioral biometrics provider BioCatch today announced it has closed a $30 million financing round led by Maverick Ventures with additional participation from American Express Ventures, NexStar Partners, Kreos Capital, CreditEase, OurCrowd, JANVEST Capital and other existing investors.
A data scientist at Orchard Platform, Michael Toth, who has also worked with BlackRock as portfolio analyst has evaluated Buffett’s shareholder letters annually at Berkshire Hathaway for personal growth as a sole investor. Using statistical computing, Toth quantified and highlighted Buffett’s positivity penchant for many years according to CBNC.
And results from the analysis revealed that Buffett has the ability to balance both realism and optimism. The dataset also taught Toth about the reasons why Buffett is a legendary investor and as well as an influential leader.
Only five of the forty shareholder letters analyzed showed a negative score of sentiment, and most interestingly, they all correspond perfectly to five periods of downturn in the economy.
Since its 2014 launch, the San Francisco-based startup has emerged as one of the leaders in the so-called neobank space. Earlier this year, it announced it has 750,000 accounts opened to date, and is now adding new accounts at a rate of 100,000 a month.
Those solutions benefit business owners, ranging from freelancers, to founders of startups, to leaders of burgeoning small businesses and other enterprises.
Lending is one of the most critical areas where fintech has filled a gap for small businesses. As smaller businesses often don’t need a considerable amount of money when they seek loans, they’ve struggled to get any financial assistance. That’s because banks and other lending institutions often don’t see any profit in providing loans of less than $100,000.
Non-Standard Finance bought the guarantor loan provider last August for £53.5m, which included a minority stake owned by RateSetter.
The London-listed firm said on Tuesday that the acquisition has “transformed” its guarantor loans business, helping that division’s loan book to grow by 35 per cent. It said the acquisition contributed to the group’s overall operating profit rising 497 per cent to £2.7m in its latest annual results.
Digital bank Tandem has agreed to buy fellow British fintech group Pariti, as it looks to head off rising competition from established lenders taking advantage of new legislation that gives them greater access to customer data.
New rules that came into force in January allow companies such as Tandem and Pariti to access customer data from other lenders if the individuals give consent.
The 5th Annual London Summit is scheduled to take place on March 26th during a time of significant change in the UK. Brexit jitters along with dramatic regulatory changes such as Open Banking and PSD2 has created a varied and dynamic environment. Yet alternative finance continues to grow with AltFi estimating that UK loan origination volumes increased by 41.9% to £14.1 billion in 2017. During 2018, this number is predicted to jump by £7 billion.
Speakers already confirmed include Samir Desai, CEO and co-founder of Funding Circle, Ricky Knox, CEO and co-founder of Tandem and Anne Boden, CEO and founder of Starling Bank.
From the start of 2017 until this month, Ant’s consumer lending has doubled via its Huabei and Jiebei units even as the government reduces quotas for new asset-backed securities that can underpin such loans, one of the people said, asking not to be named as the matter is private. The loans can incur annual interest rates as high as 15 percent, although they are normally less than that, another person said.
Controlled by Alibaba Chairman Jack Ma, Ant has become a financial giant that was said to be valued at $60 billion and currently has more outstanding consumer loans than China’s second-biggest bank.
The past few weeks have been deluged with important events in Asia, but we don’t want the data to be washed away in the flood. In particular, note that China’s liquidity conditions continue to tighten, pointing to a further slowdown in nominal GDP growth over the next two years. Granted, M2 growth bounced back in February, and should edge higher in coming months, due to favourable base effects. But it remains historically low. Moreover, growth in our broader gauge of liquidity likely will continue to slow.
Mobile payments is another area where Tencent is thriving. WeChat Pay, a mobile payment system integrated into the app, holds 40% of China’s whopping US$12.77 trillion mobile payment market. Kickstarted by China’s virtual red packets exchange that supplanted the tradition of giving monetary gifts during Chinese New Year, WeChat Pay has seen impressive growth since its launch in 2013. Its monthly offline commercial transactions jumped 280% year over year in 2017 while social payment transactions grew 23%. Along with Alibaba’s Alipay, the service is making cash and plastic obsolete in China.
These proposals – which are part of the European Commission’s fintech action plan – will enable crowdfunding platforms to offer their services EU-wide and improve access to this form of finance for start-ups and SMEs.
At present, it is difficult for many crowdfunding platforms to expand into other EU countries, but once these proposals have been adopted by the European Parliament and the Council, the proposed regulation will allow platforms to apply for an EU label based on a single set of rules.
In the height of the global financial crisis, Bondora was officially founded on 11.03.2008. While it may have seemed counter-intuitive to most to create a new financial platform at this time, there was a clear need to serve customers who had been failed by the banks and disrupt the wider financial ecosystem.
According to a new study, marketplace lending is here to stay. That’s among the major findings of the Greenwich Marketplace Lending research study, conducted August to October 2017. It is based on the fact that 52 per cent of institutions currently investing in the asset class believe that marketplace lending will be a significant part of the financial system in the next 10 years.
Greenwich Associates interviewed 74 investors from pension planners to asset managers to compile its results. These investors control more than $3.5 trillion in assets between them. When the research was conducted, 21 of the firms were investors in marketplace loans, while 53 were not.
Of those investing in the asset class, 67 per cent cited higher yield as their primary reason for investing. Diversification and low correlation (48 per cent), access to consumer or small business credit (43 per cent) and low volatility (33 per cent) were also cited as important drivers.
Everything is online these days – including some of the best value home loans around. In fact, Mozo has taken a look at our database, and found that 1 in 2 home loans with a rate under 4% are offered by online lenders.
And when we crunched the numbers, we found that by switching from the average big four bank variable rate to the best deal around from an online lender, a typical borrower with a $300,000 home loan could save as much as $2,596** every year!
Paul Bassat’s venture capital outfit Square Peg Capital is said to be looking to raise more than $200 million as it seeks to add more investments to its portfolio interests in graphic design group Canva and online lender Prospa. Melbourne-based Square Peg, which was backed in its early days by billionaire James Packer, invests across Australia, Israel and South-East Asia.
P2P lending major, Faircent.com on Wednesday said it is strengthening its leadership team with industry veterans Vikas Prasad and Mayank Bishnoi coming on board. Prasad has joined the company as Head – Planning, Processes & Control, while Bishnoi has taken over as Head – Customer Experience.
“As the largest player in the rapidly-growing P2P lending industry, Faircent.com is currently at a critical juncture of its growth journey. More and more Indians from across multiple geographies are associating with our platform, both as lenders and as borrowers,” said Rajat Gandhi, Founder & CEO – Faicent.com in a statement.
FinTech small business lending is currently developing with promising potential to complement and emerge as a healthy alternative to brick and mortar banking. The number of small businesses turning to FinTechs or non-traditional lenders has exploded over the past couple of years with many economies reporting a sharp increase in the number of small businesses turning to marketplace lenders in 2017. Marketplace lending accounts for 0.08% of the $96 trillion global corporate and household outstanding debt. Growing at an average 123% a year since 2010, Morgan Stanley forecasts that it will reach $290 billion by 2020.
FinTech lenders are forced to pay a commission to introducers or brokers which goes up to 4% of the loan amount which is normally passed on to clients.
Grab will now offer loans and insurance with its new fintech platform – Grab Financial – the ride-hailing company announced on Tuesday (March 13).
This new platform will encompass all of Grab’s fintech offerings, including payment services, rewards and loyalty services, and financial services, among others.
To provide loans to consumers, micro-entrepreneurs and small businessess across South-east Asia, Grab has embarked on a joint venture (JV) agreement with Credit Saison Co, one of Japan’s largest consumer financing companies.
Initial offerings include accident, hospitalisation and other critical insurance coverage to Grab’s 2.6 million drivers, accessible through the Grab driver app.
Basically, FintruX is building a truly global peer-to-peer lending platform, and it’s secure, it’s fast, it’s easy. Lenders and borrowers don’t have to worry because the platform does all the work for them. They basically set their criteria and then they don’t have to think about it. They don’t have to auction and they don’t, you know, it’s not a cumbersome process. So that’s why we think it’s a new way of doing business.
And obviously, there’s a lot of regulation in this area. So how scalable is it? Are you going to run into lots of different regulatory issues with, issues lending loans between countries?
Yeah, so we’ve taken great care to make sure that we’re within regulation. We have four lawyers on board and advisers and all that, and we’re very cognisant of what’s required. As a first stage, we’re not going to be doing cross-border lending. So let’s say, for example, we’re going to launch in Singapore and Canada, so it would be a loan that’s in Canada from a lender and a borrower in Canada.
Indonesia’s financial regulator said it was considering setting a cap on interest rates and the size of loans offered by fintech firms, in a move aimed at minimizing the risk of defaults.
The emergence of these peer-to-peer (P2P) lending platforms, offering loans ranging from as little as a few hundred dollars to several thousands, has so far been welcomed by Indonesia, Southeast Asia’s biggest economy where tens of millions of people have little or no access to bank credit.
More than 300,000 people have borrowed from these firms, with total loan distribution reaching 3 trillion rupiah ($218 million) as of January, versus 247 billion in December 2016, according to data from the Financial Services Authority (OJK).
In 2017, venture financing (VF) investments in the software segment constituted 46% of the total deal value in the Japanese enterprise market, according to GlobalData, a leading data and analytics company. On the other hand, 38% of the total number of VF deals in the country was in the software segment.
VF investments in the IT service segment constitute 38% of the total deal value in 2017. The IT service segment investments are primarily focused on consumer facing enterprises, such as online lending, social networking, online media publishing, e-commerce, and online dating, among others. As Japanese technological advancements are on the forefront of global market, VF companies are investing in Japanese technology enterprises in order to expand their operations and achieve business growth.
FinTech companies are making significant progress in promoting financial inclusion through innovative business models, products and increased use of emerging technologies such as digital identity, Internet of Things (IoT), Artificial Intelligence (AI) and machine learning, says a new report co-authored by CreditEase, IFC, a sister organization of the World Bank and member of the World Bank Group, and Stanford Graduate School of Business. The report, “Financial Inclusion in the Digital Age,” was launched today during Money20/20 Asia in Singapore.
Over two billion unbanked adults in the world, representing 38 percent of all adults globally, do not have access to basic financial services and another 57 percent have basic accounts but do not have access to a full range of services that include diversified savings and investments, low-cost payments systems, insurance, or credit.
Tima claims to be the first P2P lending startup in Vietnam. Launched in 2015, the platform has seen cumulative money from its lender partners reach over $900 million. In 2016, Tima closed a seven-digit US dollar Series A funding from an undisclosed Singapore fund to accelerate its growth in the local market.
Investors looking to add private debt and private equity to their portfolios may feel overwhelmed by all the choices. From peer-to-peer lending to crowdfunding, there are countless industry players across a wide range of alternative lending and financing models, serving everyone from individual borrowers to small and medium-sized businesses. Any funding model ultimately comes down […]
Investors looking to add private debt and private equity to their portfolios may feel overwhelmed by all the choices. From peer-to-peer lending to crowdfunding, there are countless industry players across a wide range of alternative lending and financing models, serving everyone from individual borrowers to small and medium-sized businesses.
Any funding model ultimately comes down to matching the needs of those who want capital with those who can supply capital. Typically, banks or other large financial institutions would act as the intermediary between investors and borrowers or entrepreneurs. But with many banks pulling back after the financial crisis, and the internet making it easier than ever to play matchmaker, the alternative finance universe is attracting more and more capital.
However, there is still broad-based confusion among both institutional and retail investors about the differences between the various alternative funding models. This confusion is exacerbated by how often the terminology is used interchangeably in the media and the larger financial community. The truth is that each funding model has distinct nuances, rewards and challenges, and it’s important for investors and their financial advisors to understand the differences before incorporating alternative lending or financing into an investment portfolio.
In general, these models can be broken down as either debt or equity investments, with a similar risk-reward profile as any other debt or equity investment.
DEBT (lower risk, lower reward)
In a peer-to-peer (P2P) lending model, an individual or business borrows from an outside source or sources – a “peer” – rather than a bank. This process is facilitated through a third party, such as an online platform, which makes it easier to aggregate enough peers to fund the loan. These loans typically come with fixed terms and set repayment schedules. Many loans will also include details about the borrower—such as their income, credit score, occupation, and risk level—to help the “peers” (or lenders) determine whether to fund the loan and at what amount. Examples of peer-to-peer loans include consumer loans, student loans, small business loans, and fix and flip loans on single family homes.
Investors can get into the peer-to-peer lending market by purchasing the whole loan, a fractional interest in a loan or building a portfolio of fractional and/or whole loans. Investors then collect the proceeds of each loan payment, with the peer-to-peer lender taking a fee to cover the costs of running the platform. While even the most creditworthy borrowers may default on their loans, investors can mitigate this risk by building a diversified portfolio that includes multiple loans across different risk spectrums. Investors should also consider if the P2P loans they are investing in are unsecured or have some form of collateral securing the loan. Consumer and student loans tend to be unsecured, while small business and fix and flip loans tend to be secured.
Marketplace lending is another term used to further describe peer-to-peer lending. While the two terms are used interchangeably, an important differentiator is the source of capital. Whereas P2P lending platforms tend to rely on a group of small retail investors or large institutional investors to fund loans, marketplace lenders prefer to first pre-fund loans and then offer them to investors.
The marketplace lending model, therefore, offers qualified borrowers a guarantee that their loan will be funded within a specific timeframe, which may be an important consideration for some borrowers. For example, while a consumer borrower may be willing to wait until his loan is assessed and funded by multiple peers, a borrower looking to finance a real estate transaction has a closing date that must be met otherwise he will lose his down payment.
Direct lending/balance sheet business lending
In contrast to marketplace or peer-to-peer lending models, a direct lender will rely on its own balance sheet or proprietary access to funds as its primary source of capital. Instead of having to find enough retail and institutional investor capital to match the needs of borrowers, a direct lender can look to its unrestricted access of funds before making a lending decision.
The advantage of this approach is that the direct lender is better positioned to survive a potential downturn since each of the loans on its balance sheet represents a piece of collateral that can be used to offset any potential losses. Investors in these loans will therefore have a better opportunity to allocate capital in all market cycles. Many direct lenders may also manage a fund for accredited investors that consists of a portfolio of some, but not all, of the loans made by the lender.
EQUITY (higher risk, higher reward)
In the crowdfunding model, investors are given the opportunity to provide seed capital in up-and-coming products and businesses. Capital is provided in several forms including equity, preferred equity, mezzanine debt and senior debt . While equity stakes are typically small—often less than 1%—even a modest upfront investment can generate a large eventual payoff if the company is successful. This is particularly true of technology start-ups, which can grow quickly if their product or service is well received among customers.
This model is also popular in the arts and entertainment industries. For example, people might choose to fund an independently produced movie, music album or play in exchange for a small piece of revenues and/or additional perks like attending rehearsals and premiere parties, meeting the artist, or receiving a memento from the set. In real estate, crowdfunding is most typically used by developers seeking to raise money to fund development or redevelopment projects.
Investors should find out if the crowdfunder is providing equity and debt on the same project. This is critical should a recovery plan need to be put in place if the project does not go as expected. Typically, equity investors want to hold on and wait for an increase in value , while debt investors want to liquidate immediately in hopes of recovering their investment. A crowdfunder that is representing both equity and debt investors in the same project will have a conflict of interest. In addition, these investments also tend to be fairly illiquid, so investors should tread carefully. While these early stage equity investments could potentially pay off handsomely, there’s always the risk that the company or project is a flop.
Initial coin offerings
An initial coin offering, or ICO, is a brand-new type of funding model that is attracting many of the same types of companies that previously relied on crowdfunding. However, instead of acquiring an equity stake in the company, investors in ICOs receive cryptocurrency coins, like Bitcoin or Ether, which are redeemable for cash on certain exchanges. The idea is that as the company grows and becomes more valuable, the coins will also become more valuable.
Since ICOs are still loosely regulated, investors should take extra precautions when evaluating a crypto-related investment opportunity. While a business idea may sound great on paper, investors should look for growth signs like recurring revenues and a large potential market.
These five models only scrape the surface of the full universe of funding options for individuals and businesses. A company or a funding model doesn’t always fit neatly into a box either, and investors should take care to understand how each funding platform generates revenue and where its capital comes from.
When choosing which segment of the market to pursue, investors and advisors should also consider their risk tolerance, which will help determine whether a debt or equity investment is most appropriate, and at what scale.
News Comments Today’s main news: Citigroup may open a national digital bank. Marcus to open in UK, Goldman recruiting engineers. Robo.Cash posts 2017 results. Tera Funding to hedge P2P project finance risk. Today’s main analysis: Preparing taxes for LendingClub, Prosper investments. Today’s thought-provoking articles: Why institutional investors turn to marketplace loans. Branches are still disappearing despite Chase’s investment. Credit card […]
Is Citigroup planning a national digital bank? AT: “It would be a welcome addition to the online banking ecosystem. I suspect Americans won’t get into online banking, especially mobile banking, until they see their current bank adopting robust technology akin to fintechs and European challenger banks. When the Big 5 banks all take online banking seriously, regional and local community banks will follow, as will consumers.”
Robinhood and Cadre both have ‘superstore’ ambitions. AT: “I believe there will be, eventually, an online financial services superstore. It may be either Robinhood or Cadre, or neither. Possibly, it could be both, and maybe a few other contenders. It remains to be seen who will become the ‘Amazon’ of financial services. It could even be Amazon.”
Goldman to open Marcus branch in London. AT: “I wonder what advantage this affords an online lender. Is it simply to access tech talent in an area known for its innovation, or it is to tap into Brexit concerns?”
Citigroup Inc is laying the foundation, through a growing network of mobile banking tools, to support the launch of a national digital consumer bank sometime within the next three years, its chief financial officer said on Tuesday.
Citigroup, the fourth-biggest U.S. bank by assets, had fewer than 700 U.S. branches at year-end compared with more than 4,000 at the three biggest banks, JPMorgan Chase & Co, Bank of America Corp and Wells Fargo & Co.
Four financial companies including CitigroupInc.C -0.48% and online lender Kabbage Inc. said Tuesday they have formed a consortium to address fintech firms’ cybersecurity risks, a sign of the industry’s growing links to traditional banks and insurers.
Greenwich Associates, an unaffiliated research company, conducted a study to better understand how marketplace lending is perceived and the current state of adoption within the institutional investing community.
Study Finding #1: Higher yields drive investment.
Sixty-seven percent of institutional investors cited the higher yield that marketplace loans tend to offer as their primary reason for investing.
Study Finding #2: Different investors use the asset for different things.
Because marketplace loans can be used for many different reasons, one of the first questions that investors may face when considering marketplace loans is how to categorize them. For over two-thirds of surveyed institutional investors currently invested in MPL (see chart below), they fall in the category of structured products, putting them alongside ABS and collateralized loan obligations (CLOs). Almost half of current investors reported viewing them as short-duration instruments and one-third as high-yield bonds.
Almost 40% of institutional investors who are not yet invested in marketplace loans said they didn’t know how to characterize them.
Study Finding #3: The path to institutional adoption will be driven by a few key catalysts.
Since mid-2017, however, each new issuance was rated by at least one rating agency, removing this obstacle and further broadening exposure to the asset class.
Investors deeply value data and analytics, which are key to understanding the credit profile of borrowers on marketplace lending platforms.
While the secondary market for marketplace loans is illiquid, there is a more active secondary market for the securitized offerings.
Study Finding #4: Marketplace lending is here to stay.
A majority of current investors, 52%, believe that marketplace lending will be a significant player in the financial system in the next 10 years. This is another meaningful vote of confidence in the industry.
Among the investors participating in a new Greenwich Associates study, 30% of institutions not currently investing in marketplace loans (MPL) are watching the space or conducting research and due diligence on the asset class—a level of interest that suggests future institutional involvement is on the horizon.
The first marketplace loans were securitised in September 2013, and the trend has accelerated rapidly since then. Cumulative issuance now stands at $28.2 billion, with $4.4 billion issued in Q4 2017.
Note that investors who invest through a retirement account do not have to worry about tax reporting. Here at Lend Academy we believe there is a strong case for investing in marketplace lending through a product like an IRA.
Copied below is how LendingClub summarizes the tax treatment of investing in loans on the platform:
Generally, gains and losses from recoveries, sales or charge-offs related to LendingClub Notes are reported for tax purposes as capital gains or losses, rather than ordinary gains or losses. Generally, LendingClub Notes are considered capital assets because they are owned for the purposes of investment (similar to a stock or a bond). Generally, realized capital losses are first offset against realized capital gains. For individuals, any excess capital losses can be deducted against ordinary income up to $3,000 ($1,500 if married filing separately). Capital losses in excess of this limit may be carried forward to later years to reduce capital gains or ordinary income until the capital losses are fully utilized.
I had $12.21 in proceeds (recoveries) from loans that were charged off which is offset by the cost basis of charged off loans, $204.33. This resulted in a net loss of $192.12. On my 1099-B outlining long-term transactions I had proceeds of $109.64 with a cost basis of charged off loans of $1,469.02 resulting in a net loss of $1,359.39. The short and long-term transactions roll up on the 1099-B summary shared above (middle box). Ignoring taxes, I earned a profit of about $500 on my LendingClub account for the year.
Filing Taxes for a Prosper Account
Below is my 1099-OID which includes the net interest of $840.62 I received for the year.
My losses totaled $834.71 which means I earned a net return of around $100 for the year.
The negotiations between Amazon and big banks like JPMorgan Chase and Capital One to offer a checking-account-like product pose significant questions for regulators about the e-commerce giant pushing further into the banking space.
Who owns the customer?
If the bank “owns the customer,” then “the rules governing banks protect the consumer,” said Karen Shaw Petrou, managing partner of Washington-based financial services consultant, Federal Financial Analytics. “If the bank doesn’t own the customer, then the rules — not just the consumer protection rules but the safety and soundness rules — are both different.”
What is Amazon’s role in the accounts?
If JPMorgan is “contracting with Amazon to do the marketing and customer intake, in that case, Amazon is subject to the regulation for those activities,” similar to other bank partnerships, said Brian Knight, director of the program on financial regulation and a senior research fellow at the Mercatus Center at George Mason University.
Who, if anyone, would regulate Amazon?
Another tricky question is which agency would regulate the partnership depending on how it is structured. For example, if Amazon were to act as a vendor to the bank, the e-commerce company would fall under a wide range of bank regulations involving partnerships and data security. However, if JPMorgan were to be a vendor to Amazon, those regulators would have limited influence over the deal.
Earlier this year JPMorgan Chase announced it’s investing $20 billion in 400 new branches and last week at the company’s Investor Day CFO Marianne Lake said 75 percent of its deposit growth comes from customers that visit its branches. Research published last month by Novantas shows 60 percent of Americans would still prefer opening a checking account at a branch than on digital channels and a September report by Deloitte similarly found 56 percent of people prefer to open bank accounts in branches (based on a survey of 3,000 consumers who had opened a deposit wealth management or consumer loan between January 2016 and May 2017).
JPMorgan Chase may be opening hundreds of new branches, but that hardly suggests every bank will follow.
Legacy vendors have been losing revenue
Global financial services and ATM producer NCR has been watching revenue fall over the past year where ATM sales and software licenses are concerned as revenue from services and cloud has shown a slight uptick. Diebold Nixdorf, another manufacturer of connected commerce and self-service products in the banking and retail industries, reported a 9.6 percent decline in revenue from banking sector services to $3.4 billion from 2016 to 2017.
“If you think about Amazon, they took the book model, built brand equity, trust, credibility and now they are a superstore for any retail product,” Cadre’s co-founder and CEO Ryan Williams told attendees at an industry event in San Francisco last week. “We’re doing the same for the investments world.”
Robinhood’s co-founder and CEO, Vlad Tenev, speaking at the same event later in the evening, had much the same messaging. “Five years from now,” Tenev told the crowd, Robinhood will be a “full service financial institution” with every product one can find at a “local bank branch and more.”
A new TransUnion (NYSE:TRU) analysis found that the growth in outstanding balances of suspected synthetic fraud in the credit card market is slowing in large part due to recently focused efforts by issuers to prevent such instances of fraud.
Outstanding suspected synthetic fraud balances rose 5.2% between Q4 2016 ($276.01 million) and Q4 2017 ($290.37 million). This was a far smaller percentage rise than what was observed the previous year when such balances rose 68.5% between Q4 2015 ($163.77 million) and Q4 2016. Despite the slowing of fraud balance growth in the credit card space, TransUnion found that the incidence of such fraud on credit applications remains similar to last year, moving from 0.59% at the end of 2016 to 0.60% in 2017.
While the growth of synthetic fraud in the credit card market is slowing due to proactive measures being taken by issuers, outstanding balances of suspected synthetic fraud identities increased 6.6% to $885.42 million in Q4 2017, up from $830.25 million in Q4 2016 for auto loans, credit cards, personal loans and retail cards combined.
TransUnion today introduced 25 new IDVision Alerts and data enhancements to its current collection of alerts, including new alerts for possible synthetic fraud, new or recently created identities and social security numbers that may be compromised. In total, TransUnion IDVision Alerts now provide more than 65 notifications to businesses about high risk, suspicious identities and other potentially fraudulent activities.
Varo Money Helps Americans With High-Yield Savings Accounts & SMS Alerts (Varo Email), Rated: A
A recent survey of more than 1,000 U.S. adults age 18+, conducted by Propeller Insights on behalf of Varo Money, determined that 85 percent of American adults sometimes feel stressed out about money, and a full 30 percent feel stressed out about money constantly.
About 1 in 5 Americans (19 percent) are living paycheck to paycheck
More than two-thirds of Americans (69 percent) report having had to dip into their savings to make it to the next payday at least once in the past two years
55 percent of millennials have dipped into their savings in the past few months
About a third (31 percent) of millennials understand what their finances will look like from month to month only “somewhat” or “not at all”
1.25% APY High-Yield Savings Account: All Varo customers can easily open an online savings account with a few taps through the Varo app and receive a rate of 1.25% APY. Customers can access funds 24/7 and easily transfer money from their checking into savings. There are no fees or minimum balances required.
SMS Alerts: Customers can receivenotifications based on aggregated financial activity across all linked accounts that let them know how they’re doing on income, saving, and if they are at risk of overspending so they can stay on top of their money effortlessly. Standard text messaging and/or data rates from the wireless service provider may apply.
According to a Harvard University housing report, over 110 million Americans, or about 36 percent of households, now live in rental units — an increase of 9 million renters over the past decade — the largest 10-year gain on record.
Unfortunately, other records are being smashed too: the number of cost-burdened renters — that is, households paying more than 30% of their income on housing — jumped to 21.3 million. And a record 11.4 million Americans are spending more than half their income on rent. The news is even worse for New Yorkers, who last year spent 65.2%, or two-thirds of their total income, on rent2.
With upfront rental deposits and fees at move-in costing over $3,000 (more if you live in New York City, where comparable costs typically top $20,000); there has never been a greater need for finance options for renters.
Beginning today, New York City-based startup Rentlender is partnering with Upstart to provide modern financing solutions for renters.
Renters must meet a minimum set of requirements to qualify for a loan including having a minimum credit score of 620 and a maximum debt-to-income ratio of 45%. All loans are originated by Cross River Bank, an FDIC insured New Jersey state chartered commercial bank, and lending terms and fees are as follows:
Loan amounts: $1,000 to $50,0003
Loan duration: 3 or 5 years
Annual percentage rate: 7.436.25% to 29.99%4
Origination fee: 0% – 8% of loan amount
No prepayment fee
Renters can use these loans to ease the burden of renting in a number of ways:
Upfront costs – Pay first month, last month, security deposit and broker fees
Individual Months of Rent – Finance one or two months rent
A Full Year’s Rent – Finance a full year’s rent in addition to up-front costs
The loan application process is Powered by Upstart and provides renters with a fast, easy and paperless application process:
Check Your Rate – With a quick form, renters can see the loan options for which they qualify.
Submit an Application – Complete the application online and indicate the bank account where funds should be sent.
Accept Your Loan – Upon approval, log in and digitally sign loan documents. Funds can be available as quickly as the next business day.
These two problems are big hurdles for investors, but StraightUp is offering a solution to these woes. Crowdfund Insider notes that it is a new real estate crowdfunding platform that provides backers and investors an “unbeatable opportunity” on properties in New York City.
Credible, the consumer finance marketplace that helps consumers save money and make smarter financial decisions, today announced that it has appointed Jobe Danganan as general counsel and corporate secretary, effective immediately.
GDS Link, a global provider of credit risk management solutions and consulting for multiple verticals within the financial services industry including marketplace lending for both consumer and small business, point of sale retail finance, alternative financial services, credit card, auto and leasing, will be attending LendIt Fintech USA 2018, April 9-11 at the Moscone West in San Francisco.
Upgrade, Inc. (), a consumer credit platform that combines personal loans with tools that help consumers understand and monitor their credit, announced that it has been named a ‘Best Place to Work in the Bay Area’ finalist in the small company category by the San Francisco Business Times and Silicon Valley Business Journal.
The Financial Conduct Authority (FCA) has, as of this month, given credit card providers six months to adhere to the new rules that tackle the issues surrounding persistent debt*.
From September 2018, credit card providers must review the last 18-month history of a borrower’s repayment records, if they are in persistent debt, and assess whether they are subject to the new rules.
ASSETZ Capital has had almost 3,000 investors start the process of setting up an Innovative Finance ISA (IFISA), with those who have already started investing putting an average of nearly £12,000 into the product.
SMEs are the backbone of the Scottish economy, making up 99% of the business population and accounting for more than half of all private sector employment.
The unemployment rate in Scotland rose to 4.5% in the final three months of last year, slightly higher than the rate of 4.4% for the UK as a whole, but there are grounds for optimism. Independent forecasts suggest that growth in the Scottish economy will be slightly higher than last year.
According to research from the British Business Bank , published on 20 February, net bank lending remained “relatively flat” in 2017, while P2P business lending volumes rose by 51% to almost £1.8 billion.
Small businesses, which account for more than 99% of private businesses in the UK and in aggregate contribute more than half of turnover and employment, are particularly poorly served by big banks.
The big five high street lenders are built for serving either retail customers or medium-size and larger companies with collateral to back three-year and longer term loans that the banks like to hawk to companies that do not really need them as a way to sell associated risk management.
Small businesses want short-term, flexible working capital with no punishing fees for low usage or early repayment. This is expensive for banks to underwrite – especially for new startups and sole traders lacking several years’ worth of financial history – and to administer. Few small businesses want the interest-rate hedging and FX facilities that banks like to bundle up with term loans for medium-size and larger corporate customers.
The market is at last now producing non-bank competitors looking to provide the right kinds of services and products for small businesses – ones that give these challengers a shot at the £2 billion of annual revenue the British Bankers Association suggests SMEs now pay for financial services.
Industry watchers foresee a 25% to 30% increase in the the number of Chinese IPOs in the U.S. in 2018, versus 2017. That’s a significant gain given that the number of Chinese IPOs in the U.S. in 2017 was more than double the number in 2016.
Peer-to-peer lending company Qudian Inc. raised more than a billion dollars when it went public on the New York Stock Exchange in last October. Today the stock is down just over 50%, according to data from Dealogic, a loss of more than US$500 million for investors.
The average PE ratio for profitable Chinese companies listing in the U.S. reportedly rose to 50 in 2017, versus 31 a year earlier, driven in part by the marketing efforts of the three banks behinds most of the IPOs, Morgan Stanley, Credit Suisse AG, and Goldman Sachs Group Inc.
Robo.cash outlined the results of its first year in operation on the European P2P lending market: 2,000 investors from the EU and Switzerland invested over €3M in the issue of 330,000 short-term PDL-loans in Kazakhstan and Spain. The average inflow of investments is €240,000 with 150 new investors joining the platform monthly.Robo.Cash views the results and platform dynamics as proving the growing demand for complex automated solutions in the global alternative fintech.
The European P2P-platform Robo.cash was launched in Latvia on February 21, 2017. It has achieved to attract over €3 million and 2.000 investors from 29 European countries (the EU and Switzerland) in one year. The average inflow of investments is €240 000 with 150 new investors joining the platform monthly.
Credit-constrained industries grow faster in countries with well-anchored inflation expectations, based on an IMF analysis of data covering 22 manufacturing industries for 36 advanced and emerging-market economies between 1990 and 2014. It seems to be the anchoring – not the level – that matters for growth. So while most advanced economies angle for 2 percent, there’s nothing magical about that number.
The share of global zombie firms – low-productivity companies that struggle to meet their interest payments – has more than tripled in the past two decades, climbing to 2 percent of companies in 2016 from 0.6 percent in 1996. Early, incomplete data for 2017 indicate that the may finally be disappearing, suggesting that climbing interest rates are making it harder for the laggard firms to hang on.
They have more than 100,000 happy borrowers and investors. The peer to peer Bitcoin borrowing community has offered loans to more than 2500 borrowers. The loan application process is simple, and the loans can be received within one hour. Investors receive up to 13% interest on the loans they give, with some investors having a history of loaning to more than 100 borrowers. The duration of the loans, which are generally to help finance small businesses, range from 6 months to 3 years. Bitbond has users from more than 120 countries, and has an investment volume above $1million.
With a large user base above 20,000, from more than 60 countries, Btcpop holds a volume above $1million.
BTCjam has more than 100,000 users from more than 200 countries. The website supports peer to peer lending and has a volume of more than $13 Million BTC in their holding.
For many Australians hearing the words ‘credit history’ may well elicit a shudder down their spine – especially if they’re looking at taking out a finance option such as a personal loan, credit card or home loan. But in just under four months that could well change, with the impending implementation of mandatory Comprehensive Credit Reporting (CCR).
From July 1, the big four banks will be required to have at least 50% of their credit data – both positive and negative – available to be shared, which Daniel Foggo, Australian CEO of peer-to-peer lender RateSetter, suggests will help Australia catch up to the rest of the world.
The inaugural chairman of the Australian Prudential Regulation Authority says it will take “massive investment” before regulators let banks use artificial intelligence to meet their multimillion-dollar compliance obligations.
More and more women are taking charge of their financial decisions and moving beyond the usual investment routes and looking at P2P lending, mutual funds as options.
Rajat Gandhi, Founder and CEO, Faircent, believes that gone are the days when women investors looked only at traditional tools of investments as part of their financial planning. “These ambitious go-getters are increasingly ditching the traditional tools of savings and investments and exploring the relatively new and more lucrative forms of investments,” said Gandhi.
At Faircent, 14% of the lenders registered are women and they account for 21% of the total amount disbursed through the platform.
“Female lenders on our platform are earning an average NAR of approx. 20% p.a proving that women tend to invest wisely; know how to take calculated risks, can meticulously diversify their investment portfolio across different borrowers and hence, end up enjoying better returns,” asserted Gandhi.
Meanwhile, Keerti Kumar Jain, founder and CEO, of Anytime Loan, shared the following statistics from their platform regarding female lenders.
Let us imagine a new kind of enterprise that is designed to create value through a self-regulating method that is both decentralised and auto-incentivising. This is in direct contrast to the conventional top-down hierarchical, command and control enterprise.
We will do this in a two-step process.
First, we set up an initial monetary policy (“the white paper”) in the form of a finite number of digital tokens that represents the overall value of the enterprise. This also creates the requisite economic scarcity to start with that is essential to this approach.
Second, we set up clear encodable rules for how the participants who generate value in the enterprise will “earn” in tokens. This incentivises the participants to “do the right thing” to generate value for the enterprise, which in turn increases the value of the tokens.
One basic requirement for setting up such an enterprise, is the use of a transparent immutable Distributed Ledger to establish trust between all participants of the enterprise.
Examples of the new kind of enterprise
A Distributed P2P Lending Network in which Lenders and Borrowers are joined by a network of Verifiers, Hosting providers and Developers, all incentivised to build, maintain and use the distributed lending platform that is hosted on a blockchain technology.
The high return — often at above 10 percent — that the instrument promises to the lenders, triggered a rush into the sector, and roughly a third of loans on P2P platforms went into project financing as of September.
As such, the default rate of the average local project financing P2P platform operators is relatively higher at 1.7 percent, over threefold that of other P2P platforms, according to an estimate by the Financial Services Commission.
The returns are roughly estimated 8-15 percent of investment per a year, without tax deducted, depending on the level of risk.
Indonesia’s financial technology (fintech) players were in shock when they found out that their main regulator, the Financial Services Authority (OJK), had some disconcerting views about their businesses despite having a relatively close relationship.
Executives of peer-to-peer (P2P) lending fintech firms on Tuesday voiced their concerns about a controversial statement from OJK chairman W…
Online lender Finova Capital secures US$6 million Sequoia Capital backing (India). The startup provides loans to small businesses in India’s tier-2 cities and rural areas. Finova will use the funding for technology development and hiring talent. Sequoia India made its investment in two tranches, the first taking place late last year.
Paytm Mall in talks with SoftBank to raise US$600 million (India).
Canadian fintech Katipult announced last week it has been nominated, alongside Polymath Inc., for the Most Promising Partnership Award at the second annual Lendit Fintech Industry awards in April. According to Katipult, the partnership will be competing against some of the world’s finance and fintech giants including partnerships involving Goldman Sachs, Macquarie Group, Swedbank, and Lending Club.
News Comments Today’s main news: How Funding Circle wants to fix the financial system. VPC Specialty Lending, Ranger Direct see dividends move up. Klarna triples net profit, mainly in Nordic countries. Today’s main analysis: International P2P lending volumes. Today’s thought-provoking articles: Can Seed solve banks’ digital onboarding issues? How banking institutions can decentralize (The best read of the day). Institutional […]
Seed wants to solve banks’ digital onboarding issues. AT: “I doubt that Seed, or any neobank, can save brick-and-mortar banks. This is an issue that traditional banks have to solve for themselves. Of course, the solution may be to partner with a tech company like Seed that can provide for banks what they can’t provide for themselves.”
International P2P lending volumes for February 2018. AT: “The big growth this month came to Landbay, Lendix, Mintos, Toborrow (229% and 245% vs. previous month and last year’s month, respectively), and MytripleA. Big losers include ArchOver, Loanbook Capital, MoneyThing, ThinCats, and Proplend (100% and 100%).”
Since 2014 the neobank Seed has been reimagining one of the sleepier areas of banking: deposit accounts for small businesses.
Rather than walk into a branch — Seed, of course, has none — yoga instructors, food truck owners and other would-be customers can apply for accounts in less than five minutes on the startup’s web or mobile app. If approved, they receive a business debit card in the mail.
Now Seed, led by veterans of the fintech Simple, is selling banks software to help them solve one of their most pressing problems: finding a way to open accounts online as branch transactions continue to decline.
Since its launch in January 2016, Sacramento-based startup Magilla Loans says it’s originated more than $5 billion in loans and is changing the way lenders connect with borrowers. The platform can shrink into a few days what can often be a weeks- or months-long process of loan applications, data submissions and waiting just to get a loan term sheet.
Validus Specialty Underwriting Services, Inc. (Validus Specialty) announced on Thursday a comprehensive package policy specifically designed for private U.S. fintech companies. According to the company, the solution is designed to address Fintech’s complex risk management needs, which are traditionally underserved by incompatible and inadequate policy forms.
Last year, marketplace lenders learned that maintaining diverse sources of funding is just as important as managing the credit risk in their loans.
LendingClub, Marlette Funding and others developed their own securitization platforms, rather than relying on whole-loan sales to large investors. They also invited some of these investors to contribute seasoned loans to collateral pools for these in-house deals.
Geopolitical events are the most worrisome prospect on the minds of the decision makers at institutions looking ahead to 2018. The percentage of respondents who believe such events will have a negative impact this year is at 74%. The second most worrisome? Asset bubbles (65%).
More than three fifths (63%) of those surveyed said that the growth of passive investing has increased systemic valuation risk: 59% believe that flows into passive strategies artificially suppress volatility.
In 2015, Natixis found that 64% of institutions said they were upping their investments with active managers. In 2016, that number rose to 67%. In the latest survey it rose again, to 68%.
But Square Pie had sold bonds on the Crowdcube platform, offering lenders 8% a year. It illustrates why so many people are suspicious of mini-bonds (debt issued by small, retail-orientated firms). Anyone thinking of lending to just the one relatively new business has to be aware of the risks – and then ask: is 8% enough?
A more diversified option
The latest offering in this category comes from a platform called Goji, which aggregates a variety of direct-lending and peer-to-peer (P2P) platforms. It has just brought out a Renewables Lending Bond, which pays out anything from 5.5% for a three-year term (with regular income) to 7.6% over five years, where the interest is rolled up at repayment. The underlying assets are provided by a direct lender called Prestige Group, which lends to clean-energy projects.
The book of loans – around 39 – has an average duration of four years, with a typical loan-to-value ratio of between 70% and 80%.
More than half (58 percent) of homeowners are planning to spend money on home improvement projects in 2018, according to the fifth annual LightStream Home Improvement Survey. LightStream is the national online lending division of SunTrust Banks, Inc. (NYSE: STI). Budgets for renovations are on the rise: among homeowners planning renovations, 45 percent will spend $5,000 or more — an all-time survey high. Those planning to spend $35,000 or more doubled from 2017.
The survey shows robust enthusiasm for renovation, as well as a thoughtful desire to balance a home’s needs and the homeowners’ budget, so they have the financial confidence to move forward. Specifically, the survey revealed the following trends:
Home “Sweat” Home The majority of homeowners plan to invest sweat equity, as 65 percent say they’ll do at least some of the work themselves. The 18-34 group is particularly fond of do-it-yourself projects, with 70 percent planning to work on at least a portion of their renovation.
Staying — and Aging — in Place Only seven percent of homeowners are renovating to prepare their homes to be sold, the lowest percentage since 2015. Instead, 14 percent of homeowners across all age groups — not just baby boomers — are citing “aging in place” as a reason for making a home improvement. Even respondents aged 18 to 34 (11 percent) and 35 to 44 (10 percent) say they’re renovating “to prepare my home so I can stay in it as I get older.”
Tax Reform Boosting Budgets With recent passage of tax reform, homeowners have already begun calculating how the changes might affect what they spend on home improvements. One in four homeowners who have set a budget for renovation projects stated that tax reform has had an impact, with 18 percent increasing their budget and seven percent decreasing it.
Paying for Projects
The majority of homeowners (62 percent) plan to pay for projects, at least in part, by using savings. Additional payment strategies were further revealed. Intent to fund through home equity lines of credit (HELOC) jumped from 10 to 13 percent. “U.S. economic growth and limited housing inventory have contributed to healthy home equity gains,” said Ellen Koebler, SunTrust head of consumer solutions. “HELOCs can offer a financial solution for many homeowners, as accrued value may be available to tap for renovations.”
At the same time, the percentage of people intending to use a home improvement loan has grown 29 percent from 2017 with 54 percent more 18- to 34-year-olds planning to fund projects through home improvement financing.
To help identify FinTech products that may improve the financial health of underserved populations in the U.S., the Financial Solutions Lab (FinLab) launched its fourth annual $3 million challenge. The lab focuses on products that meet the financial needs of overlooked populations, JPMorgan Chase said in an announcement.
Kwittken signs up Laurel Road, online lender of student loans, personal loans and mortgages. Aaron Kwittken’s firm will be responsible for raising awareness of the company’s products through content marketing, brand activations, thought leadership and traditional media relations. Laurel Road, which is part of Darien Rowayton Bank, recently surpassed $3 billion in student loan originations.
“When we think about the people we hire, it’s all about energy,” says Funding Circle co-founder James Meekings. “We want staff to share their excitement about what they do with others in the office – even if they’re talking about tax.”
“Even though we now have 800 employees, we still feel like a small business. We still push for opportunity and for people to be creative.”
Innovative finance Isas (IF Isas) offer the promise of a good return, sheltered from tax, to investors willing to take on the higher risks of the peer to peer (P2P) finance market.
The market has taken longer than expected to ignite, however, as providers struggle to match growing demand with limited supply. Many new investors will find the door shut, at least for now.
Growing consumer indebtedness in the UK combined with the prospect of rising interest rates could push up default rates on loans, sharpening the dangers for those invested in the highest-risk P2P products.
For the tax year 2017-18, the maximum amount you can pay into one – or a combination – of Isas held in your name, is £20,000.
Once the new tax year for 2018-19 begins on 6 April, your allowance resets – once again to £20,000.
There are five main types of Isas. The current annual limits are as follows:
Help to Buy Isa: Money can only be used to buy your first home, and savings receive a government bonus of 25%. You can save £1,200 in the first month, then £200 per month thereafter. Therefore, in the first year you will have a limit of £3,400. In the following years the limit will be £2,400.
Lifetime Isa: Expressly for first-time buyers or to be used in retirement once the account holder has reached the age of 60. There’s a 25% government bonus on savings up until the account holder is 50 years old. You can pay in up to £4,000 per year.
Cash Isa: A traditional savings account – money you pay in grows with the provider’s interest rate. You can pay in up to £20,000.
Stocks & shares Isa: Money you deposit is invested in stocks & shares by the provider. Returns can be higher, but so is the risk that you may end up with less money than you paid in. There will also usually be fees involved for managing your investments. You can pay in up to £20,000.
Innovative finance Isa: Money paid in is invested in Peer-to-Peer (P2P) lending platforms, and you receive the interest when this loan is repaid. There is also some risk involved. You can pay in up to £20,000.
The Swedish group posted a 27 per cent increase in revenues to SKr4.53bn ($546m) while net profit more than tripled to SKr346m. Klarna processed about €18bn in online transactions last year, an increase of 42 per cent.
As a result, 89,000 retailers globally now use Klarna products, this represents a 20% growth compared to the previous year. Available in 14 countries, retailers are increasingly adopting Klarna solutions which makes the payment processes as smooth as possible for consumers. As a result of the surge in retailer adoption, Klarna now handles 10% of all online payments in Northern Europe.
Decentralized banking is a term that has been construed in the wake of the cryptocurrency boom.
Cryptobanks are decentralized platforms that provide the usual services that centralized banks provide, primarily lending services and credit scoring, but essentially cuts out all of the middlemen that a centralized bank uses. The people needed in a bank to approve loans and structure financial data are replaced in a crypto banking ecosystem by smart contracts and p2p, peer-to-peer, services.
What kind of technologies do crypto banks use?
P2P, Blockchain, cryptocurrencies, Machine Learning, Big Data and smart contracts are used in crypto banking.
Machine Learning Big Data.These technologies help to automate the lending process and cut through bureaucracy. AI can work 24/7 and match lenders with borrowers.
Do crypto banks have their own native currency?
Yes. Native cryptocurrencies help make the bank global.
Datarius, the first social p2p crypto bank, for instance, uses their own native token DTRC for all transactions. This helps create a standard for a global payment system within the p2p lending process.
What is social lending?
Thanks to Big Data and AI, crypto banks can see beyond a borrower’s credit score to identify their level of trust. Listings can include Trust Limit, Trust Management and User Ratings which helps AI decide if the participant is justified in borrowing from a specific lender.
The entrepreneur’s strategy for achieving this can be summarized in three stages. The first consisted of bypassing the banking monopoly on his platform using “cash vouchers,” a tool dating from 1937 that had long been forgotten. They allow personal loans to be made without a bank as intermediary. Secondly, by collaborating with future competitors, the public authorities and the sector’s regulators(2), the entrepreneur contributed to the development of a long-term crowdlending regulation in France. This collaboration relies on the creation of a meta-organization(3) called “Financement Participatif France” (FPF), which worked to define the status of “Intermédiaire en Financement Participatif” (IFP, equivalent to “crowdlending financing intermediary” in English), which regulates this new market.
Smartag International, Inc. entered into a joint venture agreement with PT. Supratama Makmur Sejahtera (“PTSMS”), an Indonesian Fintech company to form a Joint Venture Indonesian PMA company in which Smartag will own 51% equity and PTSMS will own 49%. This follows an earlier MOU signed on October 12, 2017 between PTSMS and PT Rijan Dinamis Selaras (“RDS”) representing Pondok Pesantren Riyadhul Jannah Pacer Mojokerjo, founder of Consultative Assembly of Indonesian Boarding Schools which has a network of 28,000 boarding schools to undertake a Fintech project (the “Indonesian Project”).