In 2015, Jonathon Mabelmann moved to Dallas, Texas with one of Melbourne O’Banion’s three existing companies, a housing concern, and the two began to see different problems hampering the insurance business world. O’Banion had started two other companies in that sector and saw problems with the lack of applied technology. Mabelmann saw issues on the […]
In 2015, Jonathon Mabelmann moved to Dallas, Texas with one of Melbourne O’Banion’s three existing companies, a housing concern, and the two began to see different problems hampering the insurance business world. O’Banion had started two other companies in that sector and saw problems with the lack of applied technology. Mabelmann saw issues on the consumer side. So they put their heads together to form Bestow.
The Ideas Behind Bestow
The two men looked at the insurance industry with a focus on where these identified problems existed. What they found was an industry built on antiquated technology, an industry that has always been 95% agent-based but which was seeing its overall sales slip as the number of active agents shrunk. They felt these problems were due to lack of proper distribution methods and technology. In short, they saw how they could make the process easier and more cohesive for customers and providers.
That’s when they were bestowed with an idea. O’Banion now serves as CEO and Mabelmann as President of their joint brainchild.
Realizing they could offer customers a better and simpler process by building the technology themselves, Bestow takes a full stack approach to insurance. They redesigned their life insurance product to optimize it around digital distribution. They then found out how modern advances can smooth out the purchasing process. The goal was to make a better and more cohesive experience for the user.
Starting with $3.1M in self-funding, the company completed a seed round led by New Enterprise Associates that brought an additional $2.5M to help them democratize financial products. Building on models used by Morpheus and Adipar, Mabelmann said the company was fortunate to have thought of company leaders as investors with deep balance sheets.
The Products Bestow Offers
The company has opened a path of using technology to distribute and service both financial and insurance products. Based on two simple questions (What is going to solve the problem, and How do we do that?), the company came up with answers.
On the technology side, the company built its own underwriting technology forming a linear dataset to look at potential customers and their attributes.
What are they looking for?
What are they attracted to?
What are they buying?
How do those things change over time?
Using these questions, they moved the focus away from lifetime value and commissions. Mabelmann said that a sound technology platform can be really helpful in using data in the product development process, a fact that ultimately helps the customer.
On the insurance side, term life is a great place for families without life insurance to start when they are looking to just nail down a solution. Many of the uninsured have remained so because the hurdles to obtaining coverage are too high. Term life is a good place for them to start as it is the simplest and most affordable.
Mabelmann said the company started with a simple product and then rebuilt it to offer a lower acquisition cost with a more efficient process. By partnering with industry leaders and leveraging their experience and wisdom, the company created a product that is simpler and faster to acquire.
Noting an historic problem that the insurance marketplace isn’t a place where you can just go in, make a purchase, and move on, Bestow has partnered with A+ rated providers and integrated to acquire customers, underwrite, and manage the policy without it getting passed back and forth between several people over and over. Noting that more factors than mortality risk and health history influence insurance pricing—there are also things like underwriting cost, marketing costs, and overhead costs to consider—Bestow is banking on the use of the automated streamlining to reduce the cost of policies over time. This, plus a more informed acquisition funnel, can help to reduce a lot of the problems consumers experience and help to bring quality life insurance products to consumers for a very attractive price.
How the Bestow Process Works
Mabelmann said the application process is going to be available to consumers completely online through third party databases. Initially, there will no requirement of medical records as a list of questions about prescription drugs and other medical information will allow the company access to databases that will provide the appropriate insights necessary for risk management.
“We’re the only company to rebuild the product from the ground up,” he said. “To have a more meaningful outcome for people, we make it easier and more accessible for the consumer, instead of forcing them to transact for 30 minutes online and building tech for the sake of tech.”
How Far Have Bestow Come?
Just now putting the finishing touches on the product, the company will launch in January. They offered an early sign-up list and had several thousand people sign up at the end of 2017.
The target demographic includes young families who are busy and have life insurance on the To-Do list but haven’t gotten around to purchasing it. That includes single parents, two-thirds of which don’t have life insurance, and freelancers, an ever-growing block of the population, who don’t have access to traditional corporate benefits.
The company will set a rising trend of automation, but it will not completely eliminate the need to understand the all-around risk management, including the health and condition of the applicant.
Mabelmann said the industry is at the intersection of many decades in which it could do whatever it wanted and maintain, sacrificing the growth in the number of customers to the growth of the value to the customer. At Bestow, he said, they believe that to see a re-emergence of Americans getting life insurance, there has to be low hurdles to acquiring it. Customer preferences, technology, liquidity of data, and payment preferences are all changing, and they have found that if it’s too hard to make the decision, then the consumer simply won’t make it. All of those preferences are factored in at Bestow in order to make the decision an easier one to make.
Starting with a simple term-life policy helps customers prepare for a better financial future, and to do this a company needs to help the consumer make good decisions on coverage. As the customer’s needs change with the growth of wealth, Bestow plans to stay right there beside them, continuing to offer better suited products, making the journey with the customer, as life insurance isn’t just a simple purchase but a long-term relationship.
The company sees awareness as a simple foundation to grow on. “Letting people know is a great solution…. When we talk to people, they’re shocked that what we’re bringing to the market is possible,” Mabelmann said. They are also relying on a “massive market,” and getting the word out to people that life insurance is more accessible.
Partnering with the company are the American Division of Munich Reed, the world’s largest re-insurer, and the Sammonds Financial Group, trusted companies that work with consumers the way the consumers want. Given the product as Mabelmann has described it, it seems that having partners such as these can only be beneficial.
The Future Awaits
The thought processes behind Bestow seem solid enough, but there are so many unknowns to be able to predict whether or not the company will succeed in what it’s attempting to do. Still, this ground being broken, if they don’t, you have to know that someone will, and the average American family should benefit from the advances that Bestow is making.
News Comments Today’s main news: 400K UK consumers may have been affected by Equifax breach. Independent Community Bankers of America letter opposing ILCs. RateSetter launches consumer hire-purchase product. Klarna partners with Wacom. Google enters digital payments in India. Payday type loans come to e-tailers in India. Today’s main analysis: Analysis of SoFi deal SCLP 2017-5 and Lending Club deal CLUB 2017-P1. […]
Did lending just change permanently? AT: “A must-read. This really gets to the heart of what the CFPB no-action letter means for alternative lending. An interesting question for me is, how could this impact the ILC discussion. Long-term, if this analysis is correct, the prospects could be good for online lenders to own banks.”
As you may be aware, ICBA recently filed a comment letter with the FDIC objecting to the deposit insurance application of SoFi Bank, an industrial loan corporation to be chartered by the state of Utah. In our letter, we urged FDIC, for safety and soundness reasons and to maintain the separation of banking and commerce, to not only deny SoFi Bank’s application but also impose a moratorium on ILC deposit insurance applications. Furthermore, we said that Congress should close the ILC loophole because it not only threatens the financial system but creates an uneven playing field for community banks.
The news that Square also intends to apply to the FDIC for deposit insurance as an industrial loan corporation has significantly increased our concerns and made it even more urgent that the FDIC immediately impose a moratorium on approving deposit insurance applications for ILCs. As we noted in our SoFi Bank letter, the ILC charter is nothing more than a loophole in the law to circumvent the legal prohibitions and restrictions under the Bank Holding Company Act.
SoFi Bank and Square are applying as ILCs and not as commercial banks because their parent companies and their affiliates do not want to be subject to the legal restrictions and supervision attendant to the BHCA. Square, for instance, already owns a point-of-sale hardware appliance business and a food delivery service and therefore could not own a commercial bank without divesting its commercial activities. For safety and soundness 2 reasons and to maintain the separation of banking and commerce, the FDIC should deny SoFi Bank’s application and impose a moratorium for at least two years on future ILC deposit insurance applications, including any application by Square.
Bank lending regulations have rarely been thought of as dynamic or exciting but last night’s ruling by the Consumer Financial Protection Bureau (CFPB) to allow a lender to begin using alternative data in their underwriting could herald the beginning of a new era in lending and how banks work.
Why is this significant?
US banks have traditionally been guided by three key pieces of legislation, the Truth in Lending Act of 1968, the Equal Credit Opportunity Act of 1974 and the Community Reinvestment Act of 1977.These three acts were created before the era of personal computers yet still guide bank lending today.Since the rise of marketplace lending, which began in 2006, where borrowers go through a platform and investors fund those loans, it is becoming increasingly apparent that many of these regulations are in need of updating.
In an overly simplistic interpretation (and I am not an attorney), the regulator is giving an online consumer lender the right to underwrite loans using ‘alternative data’ which before was not in line with how the Equal Opportunity Act is interpreted by lenders.It is not clear what data will be allowed but in a CNBC interview, Upstart co-founder Paul Gu suggested that SAT scores, college grades and even college majors are data points which are helpful in predicting loan defaults.
So assuming the change stands, what is next?
As alternative lenders have more scope to use alternative data, machine learning complex data analysis is opening up an entirely new space for investors.Gone are the days where banks only competed against each other with marketplace lenders now allowing investors to allocate capital in a similar way to banks, choosing loans to fund based on their own ideas and risk profile. For now, this is mostly impacting consumer credit, but in the years to come, look for marketplace lending to impact all areas of lending as investors get more comfortable investing in this space regulations start to adapt.
SoFi’s application to become a bank has almost no chance of approval in the wake of a sex scandal that forced out its chief executive, says a close adviser and former chairman of the Securities and Exchange Commission.
But last week’s departure of Mike Cagney, the co-founder, chairman and chief executive, has effectively killed the application, said Arthur Levitt, a former chairman of the SEC, who began advising the company two years ago.
“This departure of Mike makes that a very questionable attainment,” Mr Levitt said, referring to the charter.
He noted that the FDIC had turned down this type of application “many times” before.
We turned first to SoFi, a consumer-finance unicorn that has raised more than a billion in equity, and over $2 billion in total. The company is now down a CEO after allegations of misconduct brought censure upon its CEO, Michael Cagney, and the company’s culture.
Goldman Sachs has been pilloried for lackluster results from its trading division (paywall), so this week the bank gave investors a peek into its plans (pdf) for making more money. Surprisingly, the Wall Street powerhouse thinks it can generate as much revenue from online consumer loans—a market targeted by many fintech startups—as from buying and selling securities.
Specifically, Goldman thinks it can make $1 billion in extra revenue from its consumer lending business over the next three years, as much as it expects for its trading operations. Combined with new lending for the wealthy and companies, the bank expects to bring in $2 billion in additional sales from loans. Goldman co-chief operating officer Harvey Schwartz said it’s one of the fastest-growing lending platforms ever launched, even though he says the bank is taking its time with the nascent business. The bank’s digital consumer-lending arm called Marcus is expected to have lent out $2 billion by the end of the year.
Meanwhile, big banks have access to cheaper funds than peer-to-peer lenders like Lending Club or Zopa. With consumer deposits and the billions of dollars they routinely borrow in credit markets, banks can undercut the loan rates offered by smaller companies.
That said, Schwartz acknowledged that consumer lending isn’t immune to economic downturns, and analysts cited by Bloomberg were skeptical about Goldman jumping into a market outside its core expertise.
It might seem like it is only a matter of time before the tech giants knock on banking’s door. In fact, a recent World Economic Forum report posited that big tech companies present a greater challenge to banks than fintech startups. The report notes that regulators will accept a more “oligopolistic distribution of financial services products by tech firms.” Already, the fintech providers Social Finance and Square have applied for FDIC-insured banking charters, just as the Office of the Comptroller of the Currency continues work to develop its limited-purpose fintech charter. Are the largest tech firms next in line?
Incumbents still hold the upper hand. The risk of an Amazon or Google or Apple dominating the traditional banking sector is nowhere near a slam dunk.
In every scenario, the tech giants would need to persuade regulators to grant them some kind of charter access in order to effectively compete and level the playing field on funding costs. This would involve easing traditional limits on commercial firms owning banks, and potentially navigating opposition from members of Congress.
But more fundamentally, tech giants have had mixed experiences in rolling out financial services such as Google Wallet and Apple Pay. And despite the reported consumer skepticism of legacy institutions, banks still continue to maintain a high volume of customer relationships.
In the fallout of the Equifax breach, the leading credit bureaus are dealing with an overwhelming volume of credit freeze requests from consumers. While it is still too early to tell, it seems that the genie is out of the bottle. The breach is sparking additional focus on FinTech innovation to protect consumers (e.g., digital identity verification, disposable card numbers, etc.).
Beyond the headlines, SoFi’s growth engine continues. In Q2 2017 alone, SoFi funded $3.1 Bn in loans with $134 Mn in revenue and $61.6 Mn in adjusted EBITDA. Revenue and adjusted EBITDA were up 67% and 60% year over year respectively. The news of Cagney’s resignation coincided with SoFi marketing its latest personal loan deal which priced this Friday. Interest in SCLP 2017-5 was initially strong, however the bond priced somewhat wider than guidance.
SoFi’s Latest Consumer Lending Deal: SCLP 2017-5
After Mike Cagney’s resignation on Friday, the lead underwriter re-launched SCLP 2017-5. Since guidance was released before the critical NY Times article on Tuesday, we have a close (but imperfect) control to study the consequences of management upheaval on deal execution.
ABS investors reacted negatively to the news; the bonds priced 10 to 15 bps wider than guidance on Monday.
LendingClub’s Self-Sponsored Prime Consumer Deal: CLUB 2017-P1
This is the second self-sponsored deal from LendingClub, and it follows the success of CLUB 2017-NP1. LendingClub expects to alternate between prime and near-prime securitizations at least once a year going forward. Of the $363 Mn outstanding, approximately $100 Mn came from LendingClub’s balance sheet (a shift from prior management’s business practice); the remaining loans were contributed from investors.
The CLUB 2017-NP1 and CLUB 2017-P1 deals total to approximately $628 Mn in loans, yet LendingClub has facilitated almost $29 Bn in loans on its platform as of Q2 2017 making it a small part of LendingClub by dollars loaned but a meaningful portion of EBITDA.
Fintech has become a major force over the decade since the financial crisis, with $12.8 billion in venture capital flowing into the sector in 2016 alone. But of the nearly 500 deals that took place in the U.S. last year, less than a dozen went to companies founded by women.
“It’s lonely to be a woman in fintech, especially as a CEO,” says Rachel Mayer, cofounder and CEO of Trigger, an automated tool for investing alerts.
At Anthemis, based in London, 56% of employees are women, a remarkably equitable gender breakdown that is consistent at every level.
Former banking executive Sallie Krawcheck is following a similar playbook with her female-focused investing service, Ellevest. Since founding the company three years ago she has raised over $50 million in venture funding.
In an interview Friday, Upstart co-founder and CEO Dave Girouard explained why the fintech applied for the letter and how it works.
Is it fair to think of a no-action letter as a stay-out-of-jail-free card?
DAVE GIROUARD: We’re careful about not trying to interpret it in any way that is different than what the CFPB says it is. The letter makes it clear that they have reviewed what we do and how we do what we do and that they don’t find issue with it.
How do you feel about the agreement?
We’re pleased that the CFPB recognized the consumer advantage of alternative data and machine learning, the fact that it could make affordable credit more broadly available to more people.
So it’s not just about Upstart for sure — it’s the acceptance of these more modern techniques because they can and will benefit consumers broadly over time.
The new hire is accompanied by the completion of the company’s SOC 2 Type 2 Certification, which affirms that Sharestates now meets the security requirements and parameters for storing information on the cloud as laid out by The American Institute of CPAs (AICPA).
ReliaMax®, the complete private student lending solutions provider for banks, credit unions and alternative lenders, today announced at the 23rd Annual ABS East 2017 Conference a new whole loan trading service, ReliaMax Portfolio Placement, as an extension of its existing capital markets and liquidity programs. The ReliaMax Portfolio Placement service will facilitate qualified existing private student whole loan portfolios for sellers and buyers.
The ReliaMax Portfolio Placement service provides unique value to the private student lending marketplace in multiple ways including insurance, default prevention, credit analysis, and servicing. Some benefits include:
State-of-the-art servicing through ReliaMax helps buyers maximize the value of their portfolio, providing compliance and regulatory support and staffing to manage student loan-specific servicing requirements.
Loan insurance through ReliaMax Surety Company covers 100% principal and interest and mitigates risks, reduces defaults, and provides better cash flow.
Portfolio review and credit analysis provides guidance around the price at which the portfolio might transact.
ReliaMax has been involved in many third-party portfolio transactions. For example, in December 2106, MetaBank acquired a $151 million student loan portfolio which ReliaMax Surety Company now insures. The transaction also included the conversion of the portfolio servicing onto the ReliaMax Platform. Over the last three years, ReliaMax has provided insurance and/or servicing on 12 portfolio placement transactions.
Lendio, the nation’s leading marketplace for small business loans,today announced a partnership with Ocrolus, the emerging leader in bank statement review automation. The PerfectAudit API, powered by Ocrolus, analyzes uploaded bank statements with 99+% accuracy, replacing manual review with automation. Ocrolus technology allows lenders, for the first time, to review every potential borrower’s bank statement data automatically, regardless of whether or not the borrower provides sensitive bank login credentials.
In April, Lendio became the first lending marketplace to integrate with Ocrolus, whose clients include banks, alternative lenders, accounting firms, law firms, and government entities. The PerfectAudit API gives Lendio the ability to systematically combat bank statement fraud and conduct a hyper-accurate review for every potential borrower.
From peer-to-peer lending to online banking, the fintech industry is a rapidly growing area for technology investment. In the first quarter of 2017 alone, U.S. venture capital-backed fintech start-ups raised $1.1 billion across 90 deals, according to CBInsights Global Fintech Report. The only region to outdo the U.S. during this same period was Asia, which reported for the same group investment of $2.7 billion across 226 deals.
There exists a wide range of technologies that fall under the definition of fintech, and each is seeing significant growth. One such technology is artificial intelligence, which, according to the PricewaterhouseCoopers 2017 Global Fintech Report, 30 percent of large financial institutions are investing in. For example, another factoid from a separate PricewaterhouseCoopers report, projects that, by 2020, AI will automate a considerable amount of underwriting.
Mobile payments are another rapidly growing area of fintech, with TechCrunch reporting that there will be an estimated $60 billion worth of payments made on mobile platforms in 2017. The site also predicts that, by 2020, 90 percent of smartphone users will have made a mobile payment, which serves to underscore just how commonplace this fintech will be within a very short time.
A new report from Aon discusses the contemporary market for alternative risk premia: where it is, how it got here; where it may be headed.
The authors, Matthew Towsey and Chris Walvoord, begin with some very basic considerations of what ‘risk premia’ are. They are, on the one hand, the payments one receives for taking on a risk that others do not wish to hold (providing insurance), or they are on the other the winnings one pockets on strategies that take advantage of market anomalies.
How does NerdWallet create its content and recommendations? Do data and algorithms play a role in your platform? I’m curious about the company from a fintech perspective.
It’s actually a mixture of both — algorithms and incredibly smart, financially savvy humans power our recommendations, reviews and expert advice.
The company seems to simplify financial information for everyday consumers. Do you think NerdWallet has helped to democratize the space?
That’s the goal! I truly believe that a person that has spent no time at all thinking about personal finance and can’t afford a financial advisor, should be able to make the same quality of choice as the most financially savvy person in the country
Experts deliver new alternative investment advice and resources for individuals being impacted by the giant 2017 Equifax data breach. This includes all new episodes of SDIRA TV with national finance experts and investment advisors, as well as a side by side comparison white paper on retirement investing options.
Deeper concerns have surfaced as it was discovered three Equifax executives sold off substantial amounts of personally held stock before making the breach known.
In general, those are new untested platforms, which may or may not do well for you over time. These investments have not been time tested during a recession. In addition, I do not understand very well how investment assets are segregated in those platforms, and how things would work out if a project you invested in fails miserably.
He’s talking about fintech, which has leveled the playing field for non-New Yorks to flourish in financial services. Inspired by emerging tech trends, Raznick and Benzinga are taking stakes in Michigan’s future by spearheading the new Detroit Fintech Association.
The nonprofit trade organization will enhance the community’s exposure, connect startups with national leaders and mentors, support talent recruitment and magnify the Detroit voice in U.S. regulatory discussions. The DFA also aims to improve financial literacy in the city through work with Detroit high schools and higher education institutions.
Altisource Portfolio Solutions S.A. (“Altisource”) (NASDAQ: ASPS), a provider of real estate, mortgage and technology services, today issued the results of its inaugural Default Servicing Survey, a survey of over 200 mortgage default servicing professionals. According to the study, nearly three-quarters (71 percent) of servicing professionals surveyed predicted FHA/VA loan volumes would increase within their organizations in the next 12 to 24 months; 41 percent believed FHA loans will offer their organizations the most portfolio growth over the same time period.
According to the U.S. Department for Housing and Urban Development, FHA loans accounted for over 17 percent of newly originated mortgages in 20161 and currently constitute 35 percent of all loans delinquent for 30 or more days2. As the issuance of FHA loans grows, so does the potential increase in volume of default assets. Thus, it is not surprising that 93 percent of servicing professionals surveyed stated that foreclosure/trustee and Claims Without Conveyance of Title (CWCOT) capabilities are important factors to consider when evaluating a vendor to manage growing default portfolios.
Servicing Professionals Cite Challenges Stemming from Costs of FHA Conveyance and Managing CWCOT Programs
Servicing professionals (29 percent) cited remitting fees, costs and financial obligations associated with FHA conveyance as the greatest challenge for effective CWCOT programs. For servicing professionals working with third-party vendors to manage CWCOT portfolios, 15 percent said overall vendor management is a challenge associated with managing CWCOT programs while another 15 percent pointed to timeline delays and increased costs due to attorney oversight; 11 percent cited not having enough in-house personnel on staff to effectively manage the program.
Third-Party Expertise and Central Coordination are Critical to Successful CWCOT Program Administration
In order to overcome the financial, regulatory and oversight challenges associated with their vendors’ CWCOT programs, servicers must carefully evaluate their third-party vendor strategy to ensure vendors possess the right expertise and resources to execute the program. Most servicing professionals surveyed (97 percent) said they are exploring options including a single-vendor approach to help achieve their objectives; 91 percent identified FHA asset management experience as an important criterion for vendors. When specifically evaluating single vendors, 72 percent of servicing professionals surveyed said consistency and efficiency in managing REO properties is a very important consideration; 69 percent also pointed to compliance management.
Equifax, the US credit-reporting company at the heart of a cyber-security scandal, has admitted that as many as 400,000 UK consumers may have had their personal information stolen.
The company said that while its UK systems were not affected by the massive cyber raid that targeted information for as many as 143m Americans, UK customer data “may potentially have been accessed”, because it was stored on US systems between 2011 and 2016.
If Equifax’s forecast is borne out, the data breach will be the biggest in UK cyber history, bypassing that of payday lender Wonga, which affected more than 250,000 customers.
RATESETTER has launched a hire-purchase (HP) product for individuals looking to buy vehicles.
Consumers will be able to borrow up to £25,000, but the peer-to-peer lender expects the agreements typically to be around £6,000. The terms range between 12 and 60 months, with APRs going from 19.9 per cent to 49.9 per cent depending on the customer’s creditworthiness.
Peer to peer lender Assetz Capital is reporting it has seen a year-on-year increase of 175% in the number of property development projects funded around the UK. The online lender says this rise comes following sustained growth in the funding pool for property developments, as investors hunt for a piece of the development market.
But as new types of Isa have emerged and new rules have been introduced, the situation has become more complicated.
And some Isa features – notably “flexibility”, which allows account holders to make withdrawals and then pay the money back in during the same tax year while keeping the tax benefits – have not been introduced by all providers, which has further muddied the waters.
A Help to Buy Isa, a type of cash Isa, is also an option. First-time buyers can deposit £1,200 in the first month and £200 a month thereafter to put towards a home purchase. The Government then tops up savers’ money by 25pc.
However, you can’t pay into a normal cash Isa and Help to Buy Isa in the same year, unless you choose a provider that allows you to split the cash. Nationwide and Aldermore both offer this option; they pay 2pc and 1.75pc respectively.
The Lifetime Isa is the newest addition to the Isa family.
Consumers between the ages of 18 and 40 can use the accounts to save towards their first home or retirement. Up to £4,000 can be put away each year into either a cash Lisa or a stocks and shares version. Eligible savers can continue to contribute until the age of 50.
Hargreaves Lansdown, Britain’s biggest fund shop, and rivals including AJ Bell, The Share Centre and Nutmeg, an online wealth manager, offer investment Lisas.
Innovative Finance Isas
These Isas shield peer-to-peer investments, which allow consumers to offer unsecured loans to individuals and businesses through online platforms such as Zopa and Ratesetter, and certain “crowdfunding” investments, from tax.
Lending Works was the first to offer the new Isa, paying the same return as the firm’s existing accounts.
Zopa allows existing customers to sell their loans and buy them back within the Isa. They can also transfer their Isas with other providers to Zopa.
There are a lot more people in the world that can collectively lend micro loans on a regular basis than there are corporations that can regularly distribute loans above the value of a thousand dollars.
“A network of independent lenders committed to distributing micro loans could potentially rival long established financial organisations in terms of the combined value of peer to peer loans serviced to borrowers on a world wide scale” says Richard Ochieze, Managing Director at Ledgermark, LTD.
The case for Digital Collateral
The internet makes non repayment of loans a marvellously simple task for borrowers and as such; organisations like the Funding Circle, a peer to peer lending firm, are left wide open to have the profits of their retail investors depleted due to this lingering risk.
Traditional financial institutions have been able to maintain a fortress of checks and balances such as strict collateral requirements for both business and personal loans in order to provide themselves with a means of recourse should a borrower fail to repay his debt.
In this digital age in which peer to peer transactions are becoming the norm, this same form of protection must be made available to the average individual who wishes to loan his money out to borrowers in return for profit.
However, the question must be asked: how can a borrower pledge his house or farm as collateral via an online loans application?
Prior to the invention of the Blockchain such an asset did not exist and now that it does, the door has been opened to allow individuals based anywhere in the world to distribute and/or become the recipient of a secured micro-loan.
Robo-adviser Wealth Wizards, for example, typically charges £65 for advice on investments of up to £30,000, and 0.30%, or £300, for guidance on what to do with a £100,000 retirement savings pot.
A typical financial adviser, meanwhile, charges about £580 for telling you how to invest a £200-a-month pension contribution, or between £1,000 and £2,000 for at-retirement advice on your £100,000 pot, according to figures from UK adviser network Unbiased.
China will strengthen its supervision of overseas investment risks and capital flows from insurance funds, the insurance regulator said on Monday, adding that it will urge companies to improve their risk monitoring systems.
The China Insurance Regulatory Commission (CIRC) will step up supervision over the use of insurance funds, with focus on “chaos” such as irrational stock market fundraising and overseas acquisitions, said Guo Jing, vice head of the finance and accounting department of the CIRC.
Shanghai-based BTCC is the largest and first domestic bitcoin exchange in China. On September 14th, BTCC announced that it would immediately stop new user registration and close operation in China on September 30th.
The 2nd China Fintech Conference (2017) will be held on September 17th, 2017 in Beijing.
IDC Financial Insights announced the 2017 Fintech Rankings and Real Results at Finovate Fall New York 2017. This year, 4 Chinese companies won the honor to be named in the 2017 IDC Fintech Rankings. They are Ping An Technology (38), Hundsun Technologies Inc. (54), Pactera Technology International, Ltd. (55) and ECCOM Network System, Ltd. (64).
Last week, China’s financial and educational regulators announced to ban online lenders from offering loans to college students, and encouraged commercial banks to offer micro-credit products for the campus market. As a response to the call, Industrial and Commercial Bank of China (ICBC) has launched its own student loan product Rong e Loan this week.
Sofort has been bought by Klarna. Although everything should function as normal according to Klarna, since the switch the order is not going into “pending” after checkout — order status is “in checkout”.
This is a good place trying to get this sorted. My questions are:
Is this a new shop or one that runs for a while and worked OK before?
From the screenshot it looks like Sofort sends notifications pretty often, is that true?
The expectation is that the first of those notifications should switch the status to pending and confirming that to Sofort so that they know you got it and then they wouldn’t notify you again, right?
That’s exactly why this is failing. The Ubercart payment module wants to write into its table the value Aus sofort-Überweisung wird Klarna into the field method.
You should notify Sofort AG about this problem and I will do the same.
Today we are proud to announce a new partnership with global technology company Wacom® that further accelerates Klarna’s expansion in the U.S. Wacom is now bringing our simple retail financing solution to the world of creative interface technology and software.
Financing a purchase over time has historically been optimized for brick and mortar stores. But the online equivalent can often be an ordeal, with redirects, lengthy forms and unclear information. Our process only requires a few fields of information, and lets consumers know instantly if they qualify for the financing solution.
Digital technology has changed financial services. It has facilitated innovation, increased competition and made the mobile customer experience the key differentiator.
This embodies a strategic threat with McKinsey estimating that legacy financial institutions will see profits decline by up to 60% by 2025 if they fail to evolve, a figure which should be motivating incumbents to look outside of traditional practices for growth and sustainability.
Millennials and digital natives have turned away from traditional banks in search of mobile alternatives. They are drawn to the best products and experience, and banks with the right level of service can win over this large market. Mobile-only banks like N26 are leading the way.
SME lending also offers a significant opportunity for growth. The European Commission’s SME Performance Review estimated just under 23 million small and medium enterprises generated €3.9 trillion in value add and employed 90 million people in 2016-2016, and McKinsey has identified a $350 billion untapped lending opportunity within this sector.
One path is acquisition, which banks like BBVA have followed by acquiring companies like Finland’s Holvi and neobank Simple. This is an expensive option complicated by having to find a company with the right fit for the business.
Given the technology available, a cleaner option would be to build a digital banking spinoff which can operate like a FinTech.
The far reaching nature of the internet has allowed the myriad of local economies that exist in the world to become merged into one, global, interwoven marketplace.
Despite this, it is still incredibly difficult for people to get a loan from an international organisation – without offering some form of collateral and/or proving credit worthiness.
The average size of deposit needed to get a mortgage is 62% of annual income, and in London, it’s 131%.
As a result, only 20% of 25-year-olds own their home today compared with 46% 20 years ago – less than half.
If you have a bad (or no) credit history, it is virtually impossible to borrow from a mainstream lender.
Banks and building societies advertise temptingly low rates, but they only need to apply to 51% of successful applicants, so almost half of all borrowers pay a different rate – probably higher.
Director of Ledgermark LTD, Richard Ochieze, explains:
An alternative should be offered to people who are being let down by the traditional banking system. We believe that the Meridian system can do a lot to alleviate some of the problems that exist in today’s online lending market.
The Meridian service offers users the opportunity to procure a loan of up to one Bitcoin at a time.
To qualify for a loan users must pledge a certain amount of Meridian tokens as collateral.
Meridian tokens can be purchased during the ICO on 12 October 2017 and will then become tradable on all alternative currency exchanges.
Google is expected to launch a mobile payments app in India next week, according to several news reports. Google Tez, which means “fast” in Hindi is the anticipated name of the payments service, which Indian news outlet The Ken says is “largely fashioned on the company’s global product – Android Pay“.
As TechCrunch notes, “this is a big deal because Google hasn’t made a big push into payments outside of the US.”
In a first of its kind for India, ICICI Bank will partner with e-commercefirms to provide automated payday loan-type credit to customers at the bottom of the digital pyramid. Unlike other software-based loans, the digital credit planned by the bank will be available to non-customers and new-to-credit borrowers.
Speaking to TOI, Anup Bagchi, executive director, ICICI Bank, said that the bank would price these loans similar to credit card advances. In the West, payday loans are advances that fund the low-income individuals to make up for cash shortfalls until their salary. The difference in the ICICI Bank loan is that for the first month, the buyer will get free credit for up to 45 days. It is only if they do not pay on the due date that borrowers will be charged interest at close to credit card rates.
The bank will lend to new-to-credit customers based on their track record with the e-commerce provider.
“The RBI is concerned that this can go big and get out of control,” says Harish.
Faircent—which is backed by financial institutions like JM Financial, venture fund Aarin Capital and Mohandas Pai-promoted 3one4 Capital—is seen as the largest online P2P lender in India. Other names include Lendbox, Rupaiya Exchange and LenDen Club.
There are typically three models through which such lenders operate, says Aditya Kumar, founder and chief executive officer at Qbera.com, an online lender that began operations in February this year and claims to have a Rs 10 crore loan book. “While there are at least 30-40 P2P players, who connect lenders to borrowers, 15-20 do marketplace lending (where money is raised from banks and other financial institutions) and then there are loan aggregators who have been around for longer,” says Kumar.
While Kumar says the total P2P lending market size would be around Rs 25 crore, Rajat Gandhi, founder and CEO at Faircent, puts the figure at Rs 50-70 crore on an annualised basis.
Figures available with Peer2Peer Finance Association (P2PFA) suggest that the global P2P lending market saw cumulative lending of £8.5 billion during the first quarter of 2017, against £5.8 billion three quarters before. In the same period, the number of lenders grew by a fifth from 1.5 lakh to just over 1.8 lakh.
The discourse around P2P lending has always been centered around what it means for borrowers and the advantages they can derive. However, what gets missed is that P2P lending has the potential to be a great source of investment for the lenders contributing to their retirement fund.
P2P lending is an investment delivering multiple benefits when building a retirement plan:
1. Add Lending to your Portfolio Mix: The adage that talks of not putting all your eggs in one basket still holds true. An investor should not limit his portfolio to only a few asset class, but focus on investing across investment opportunities so that market fluctuations do not have a huge negative impact on their retirement funds.
2. Steady and high returns not Linked to Stock Markets: P2P lending adds to building such a diversified investment portfolio while delivering returns that are not merely comparable, but often preferable to returns from other investment instruments such as mutual funds, stocks, and SIPs.
Lenders on Faircent.com are earning gross returns to the tune of 18% to 24% per annum on an average by building a diversified loans portfolio.
3. Income Generation & Power of Compounding: Another reason that P2P investment does well is because investors can compound their earnings. Lenders are earning back part of their investment, both principal and return, every month.
MicroMoney co-founder and CEO Anton Dzyatkovsky on attracting new customers, recruitment issues and risks in greenfield countries.
Now that we’ve opened new offices in Myanmar, Thailand and Sri-Lanka, our decision to start with Cambodia can be seen as a definitive step which enabled us to embrace the largest community of unbanked people in the region, bringing the advantages of Blockchain as the key technology for global financial inclusion.
Cambodia is all about banks
For us as Europeans, the first surprise was the population’s absolute trust in local banks.
The US dollar is as used in Cambodia as the local currency is, and the exchange rate has remained stable for over 20 years. State regulators do not exercise particular pressure on the financial industry, and by the time we stepped into the game, 50 organizations had been involved in the consumer loan industry, each with an average capital of $1.5 mln and an ARPU of $5,000.
30-day overdue loans in Cambodia account for only 0.9 percent of the total, so the PAR ratio (portfolio at risk) is quite profitable (according to the local Central Bank).
Our Cambodian lessons
A growing share of the middle class due to the growth of GDP. For instance, Cambodian GDP grew six percent in 2016.
A market capable of generating cheap leads. We discovered all Cambodians belonging to the target audience have at least one active Facebook account, and for them Facebook often equals Internet in general: every national mobile operator provides free access to Facebook.
Dormant or non-existent competition. in Cambodia there were no paperless lending services without an escrow of land or real estate property.
Eager audience in need of a product. when we were checking out the market, we found only five percent of the population had a credit record. According to McKinsey, the number of ‘unbanked’ people in Asian region overall ranges from 65 to 80 percent of the adult population.
Collaboration at the local level. It helped us understand local customers and comply with local regulations (in this case you must be ready to assign 51 percent of your newly established company to a local partner).
Funding Societies, which started in Singapore in 2015, is one of the first peer-to-peer (P2P) financing companies to open its doors here in Malaysia in February this year. It is also present in Indonesia.
Wong, who learned about alternative financing while studying at Harvard Business School, says P2P is well-suited for the Malaysian and South-East Asian markets where there is a big gap in SME financing. He estimates financing needs for small businesses in Malaysia to be at RM80bil.
According to Research and Markets, the global P2P lending market was valued at US$26bil in 2015 and is projected to reach US$460bil by 2022, growing at a compound annual growth rate of 51.5% from 2016 to 2022.
Funding Societies has made it to the Fintech 250 list, which is recognised and regulated by Securities Commission Malaysia, to provide financing to SMEs. The company also provides flexible investment opportunities with rigorous risk assessment and returns of up to 14% per year for investors, says Wong.
So far, the company has done more than 800 deals and disbursed more than RM180mil in financing to SMEs in Malaysia, Singapore and Indonesia.
Taiwanese could soon be able to open bank accounts denominated in foreign currencies on the Internet after the central bank on Thursday gave its go-ahead to the plan.
Local banks could seek approval for the new accounts by the end of this year, or 60 days after the introduction of the new regulations, the central bank said in a statement.
Taishin, the banking arm of Taishin Financial Holding Co (台新金控) and the nation’s largest online lender by the number of accounts, told reporters that it aims to be the first applicant when the notification period begins.
Trade credit is an essential tool for facilitating trade and capturing new business. After World War II, a lot of trade occurred in order to rebuild national economies. The war gave birth to trade credit and trade credit insurance and the US is one of the oldest trade credit insurance markets in the world. Although […]
Trade credit is an essential tool for facilitating trade and capturing new business. After World War II, a lot of trade occurred in order to rebuild national economies. The war gave birth to trade credit and trade credit insurance and the US is one of the oldest trade credit insurance markets in the world.
Although the US was the birthplace of trade credit insurance, currently, only 3% of the market is utilized compared to 15% in Europe. Reasons the product is not popular in the US are:
Americans are natural risk takers.
Companies prefer tools like factoring that facilitate cash flow.
Businesses rely on trade ratings from multiple agencies for evaluating trade credit.
In today’s global trade, there are commercial and political risks that are beyond the control of both supplier and customer. Such unforeseen risk, or unexpected insolvencies, not only hit the bottom line of a business, but they can also jeopardize its financial health. With its unique credit insurance solutions, Euler Hermes provides a channel for hedging a supplier’s bet on a customer. By insuring client receivables, the company enables businesses in securing future cash flow and also helps leverage protected receivables with a bank or lending company.
Euler Hermes’ Unique Selling Point
Euler Hermes has an in-house rating mechanism that assesses the risk grade of an organization. With an extensive database of around 55 million companies rated on a scale from 1 to 10 with 1 being outstanding and 10 being in administration, they assess industry risk, market insights, and a company’s ability to pay bills on a 12-month basis.
Insuring receivables is much cheaper than factoring. The average premium is 35 basis points on sales versus 2% per month for factoring. That is a huge difference and a competitive advantage, which many businesses fail to utilize. Moreover, most companies price the cost into their sales to insured customers.
The Euler Hermes Model
Euler Hermes doesn’t safeguard loan payments. Rather, they provide security against the non-payment of outstanding receivables. This ensures that the supplier can focus on its core job of sales rather than assessing the creditworthiness of every new client.
The company also works with US factoring companies who insure their books with Euler Hermes. The company acts as an arbitrage and a credit insurance policy for such lenders.
The Underwriting Process
Over the years, Euler Hermes has mastered the art of underwriting. They follow an uncomplicated approach by grading the buyer on the scale from 1 to 10 and evaluating each business’s default probability. It also looks factors like the usage limits of the business’s credit facility and traditional data such as balance sheets and income statements.
The company has leveraged social media data and open data sources for creating a more comprehensive model while hiring multiple data scientists and collaborating with tech partners to incorporate databases for enhanced insight.
The benchmark in this industry is a percentage of insurance ledger approval. If a competitor is offering insurance of 80% versus 75% offered by Euler, the competitor will win the contract. Thus, to ensure extensive coverage, they have integrated artificial intelligence and machine learning into their algorithms for higher approval rates.
Nowadays, the nerve center of companies has shifted from brick-and-mortar offices to the virtual world, so it makes sense for the company to include the social activities businesses such as Twitter, Yelp, Facebook reviews.
Euler Hermes have partnered with URICA, a fintech SME lender, for its invoice funding product in the UK and France. The salient points of this partnership are the ability to offer single invoice cover, real-time credit decisions, and real-time price adjustments on the basis of the debt quality.
The prospective client can now send ledger data via spreadsheet and the company evaluates it against their database. They’ve also developed an API, which links into client systems to directly assess accounts receivable data. The API automatically calculates the finance or insurance premium for the selected invoices and helps during instantaneous decision making for management.
Euler Hermes are in partnership discussions with multiple US fintech lenders to become their insurance provider. These partnerships hedge lender books and allows the lender to provide the customer a different product.
Euler Hermes have a 125-year history that includes multiple reorganizations. In the last 20 years, the company has been the world´s leading provider of innovative solutions in the credit insurance space. It is backed by Alliance Group, a financial services provider, and has been rated AA- by Standard & Poor.
James Daly is leading the push into the American fintech industry for Euler Hermes. He has been associated with the Euler Group for over 13 years and started his career in the UK. For the last three years, he has headed the Euler office in North America.
News Comments Today’s main news: Enter the bear market in bonds? D+H launches cloud-based small biz lending platform for banks. Over 50K investors register with RateSetter. Revolut partners with Lending Works to offer cut-price instant credit. Blender procures Electric Money Institution license. Blackmoon partners with ID Finance. Today’s main analysis: Fundbox study reveals impact of late SMB payments. The British Business Bank […]
Carvana hires banks for IPO. AT: “What will make used car buying in an MPL world truly innovative is a platform that connects individual buyers with individual sellers and the added value of a financing option. While this has been tried, so far there hasn’t been a success story. Carvana is upping the game, however.”
Stocks and bonds struggled while the dollar climbed Tuesday.
The yield on the 10-year Treasury note on Monday rose to 2.609%, the highest since September 2014. That’s up from 1.867% on Election Day, and nearly double the all-time low of 1.366% hit last July.
Bill Gross, the famed bond investor, underlined the 2.6% yield in January as the pivot point that will usher in the long-anticipated bear market in bonds. Mr. Gross warned that, should yields march above that threshold, it would indicate a “secular bear market has begun.” A break above 2.6%, he observed in chartist vernacular, would break a downward trend line that has been in place for the past three decades.
Fundbox Study Reveals Impact of Late SMB Payments (Fundbox Email), Rated: AAA
Late and unpaid payments cripple small businesses (SMBs) and it’s something they have to deal with on a daily basis. In fact, 64% of SMBs are affected by late payments on open invoices. I would like to give you an early look at a new Fundbox study, which dug deeper to understand the microeconomic impact that takes place when a business is paid late.
Key findings include:
Hiring freeze – 23% can’t hire new employees
Owner pay cuts – 79% of SMB owners said they can’t pay themselves
New equipment gets the squeeze – 23% can’t invest in new equipment
Can’t advertise – 20% can’t spend on marketing efforts
Reduced Payroll – 18% hold back on pay increases or bonuses for employees
Inventory freeze – 17% can’t build up inventory
If paid on time, Fundbox estimates that these SMBs across the U.S. could hire an additional 2.1 million employees, which would reduce unemployment by 27%.
Fundbox helps SMBs overcome cash flow gaps by funding outstanding invoices. Attached please find the infographic. Would you like to also see the release? I can also connect you with Prashant Fuloria, Chief Product Officer at Fundbox who can discuss the critical need for services that solve cash flow gaps.
D+H Launches Cloud-Based Small Business Lending Technology (D+H Email), Rated: AAA
DH Corporation (TSX: DH) (“D+H”), a leading provider of technology solutions to financial institutions globally, today launched Total Lending™ Small Business, a new digital, mobile-first lending solution designed to boost profitability of financial institutions and improve the lending experience for small business owners across the United States. Now, banks and credit unions can deploy an intuitive, online loan application for small businesses, enabling more application throughput than the traditional paper-based branch model.
Total Lending™ Small Business is designed to empower financial institutions to build a more profitable small business loan portfolio. By bringing the loan process online, banks will benefit from reduced overhead and greater scale. An improved application process will also attract more loan requests from new and existing customers who prefer the convenience of the online or mobile experience.
New Data Shows C&I Lending Can Bring Higher Profitability to Community Banks in 2017 (PayNet Email), Rated: AAA
At $4.4 trillion in trade payables, term loans, and working capital loans, private-company credit represents one of the largest credit markets in the U.S. Today, C&I lending represents about 25% of all loans, down from over 40% in 1950. According to a new study by PayNet, Inc. banks can look to higher profitability in 2017 in their core franchise credit C&I business.
PayNet’s study shows that between 2008 and 2016, banks could have achieved $2.6 billion in additional net income, at a higher risk-adjusted return, had they maintained their share of C&I lending.
Banks can find financial technology useful to reduce the time to underwrite a loan from 50 hours to just over 2 hours. In addition, banks can further utilize technology to lower the cost of loan review by 40% while at the same time increasing the frequency of the loan review cycle from once per year to four times per year for the highest risk accounts.
U.S. used-auto retailer Carvana LLC, which allows customers to pick up cars they buy on the internet from vending machine-like towers, has tapped investment banks for an initial public offering, according to people familiar with the matter.
Carvana has hired Wells Fargo & Co (WFC.N) and Bank of America Corp (BAC.N) to lead its IPO, the people said this week.
Carvana sells cars through its website and operates automated towers that store cars in U.S. cities such as Austin and Dallas in Texas, and Nashville, Tennessee.
Now an auto insurance startup called Root is taking that conclusion to the bank, so to speak. It believes that the investigation, as well as its own studies on the matter, make a strong case that Teslas with Autopilot are safer than just plain humans. So confident is Root about this that, starting today, it is charging Tesla drivers lower fees if they turn on and use the controversial Autopilot feature.
The Tesla discount is a natural outgrowth of Root’s business model, which is based on using technology to identify safe drivers and offer them low rates. If you suck at driving, you don’t get a policy. Before getting coverage, customers must submit to a two-to-three-week testing period, downloading the Root app to their phones, which will use the sensors in the device to track location, speed, acceleration, and whether they are weaving recklessly between lanes at 2 a.m. after leaving a taproom. Or whether they are using the actual phone measuring their driving skills to text while in motion. This actually happens, says Timm, because after a few days drivers forget that they are being monitored and revert to bad habits.
According to Timm, about 70 percent of those who undergo this process will be deemed safe drivers, whereupon the company will offer them a low rate, with the entire transaction done on the phone. (Even your proof-of-insurance card will be stored on the device.) The other 30 percent have to get insurance from Root’s competitors.
One might think this will be a boon for insurers, who will see claims drop dramatically. Timm argues otherwise: The paucity of accidents and claims will drop the real cost of insurance so low that the established companies, stuck with high overheads, won’t be able to cut their prices enough. They will thus be subject to Uber-level disruption from newcomers who will be able to charge fees as low as $30 every six months.
Root has not contacted Tesla directly, but says that even without the car manufacturer’s help, the Root app can figure out when a Tesla owner is using Autopilot. Timm hopes that in the future, the company can work directly with Tesla to get better data.
SmartBiz Loans Adds Former SBA Head of Capital Access to Board of Directors (SmartBiz Loans Email), Rated: B
SmartBiz Loans, the first SBA marketplace and bank-enabling technology platform, today announced the addition of Ann Marie Mehlum to the company’s board of directors, a former Small Business Association (SBA) associate administrator and seasoned banking industry veteran, with more than 30 years’ experience.
As former associate administrator for the SBA’s Office of Capital Access, Mehlum directed the government agency’s flagship credit programs including the 7(a) general business loan guarantee program, the 504 program for real estate and long term asset financing, and the microloan programs, with a combined portfolio of more than $100 billion. The SBA is a federal agency that encourages lenders, typically banks, to originate loans to small businesses by providing a guarantee for these loans.
SmartBiz Loans’ SBA marketplace automatically connects small business owners with the right bank which helps to increase loan application approval rates and speed. SmartBiz®bank partners utilize the SmartBiz software platform to increase their efficiency in processing SBA loans by up to 70 percent. SBA loans are widely considered the best type of loan for many small businesses because of their low rates and long repayment terms.
Financial tech firm Finexio is moving its hub from Silicon Valley to Orlando – a move that will open up 10 high-wage jobs, the Orlando Business Journals reported. The startup, which offers a business-to-business commercial payment network, recently decided that the relocation is necessary in order to support its growth.
The company chose Orlando because of its growing reputation as an innovative city, drawing in professionals particularly in the financial technology industry. This move echoes that of other industry giants such as Deloitte and KPMG, which have ramped hiring in Central Florida.
At its new Orlando-based location, Finexio will be looking to hire professionals to work in its corporate headquarters and engineering department.
According to the Orlando Economic Partnership, another reason Finexio chose Orlando is because of the resources available in the area for hiring software engineers. For example, the University of Central Florida is located nearby, which offers a top-tier engineering school.
Peer-to-peer lending platform RateSetter has announced it now has over 50,000 investors.
This was just one of a number of milestones that RateSetter has recently reached, including collecting £1bn of repayments, investors having now earned more than £60m in total interest and more than £1.75bn of loans being delivered to borrowers across the UK.
Revolut has today announced a partnership with peer-to-peer (P2P) loan firm Lending Works to provide instant credit at half the cost of UK banks.
In just two minutes, Revolut customers can now apply for credit from anywhere in the world via their smartphone and receive funds instantly to their Revolut account.
This process cuts out the banks entirely, meaning that Revolut customers are charged just £52 on average to borrow £1,000 over a 12 month period, with a representative APR of 9.9%. In contrast, a recent survey of five major UK banks, whose personal loans are notoriously expensive with time-consuming application processes, showed that consumers are charged £120 on average to borrow the same amount over a 12 month period, with a representative APR of 23.8%*. Credit card rates are also sky-high, reaching a record average purchasing rate of 21.6 per cent APR in March 2016 (Source: moneyfacts).
The new credit features mean Revolut is the first company to approve and pay out P2P loans instantly.
The Revolut app currently offers UK users credit from as little as £500 to a maximum of £5,000, and users can adjust their repayment period between 12 and 60 months. In contrast to many banks, there are no fees to repay the loan early.
Since it was established in November 2014, the British Business Bank has invested Â£135m in peer-to-peer platforms.
Following a freedom of information request submitted by Bridging & Commercial, it was also discovered that in the calendar year 2016, £11.5m was drawn down for participation in loans generated by peer-to-peer lending platforms.
CapitalRise, a London-based property investment platform, announced on Monday it is launching an Innovative Finance ISA (IFISA) wrapper for residential property. According to the platform, the new IFISA allows savers to invest a minimum of £1,000 and up to £15,240 in the current tax year (rising to £20,000 in the 2017-2018 tax year) in residential property, targeting tax-free returns between 10-14% per annum.
We used five full years of historical loan performance data to simulate how the returns in a typical investor’s portfolio can change over time. In our example, an investor lent £10,000 across all the loans originated through Funding Circle in 2012. Each month, the loan repayments and interest received were lent to new borrowers.
The below chart shows the annualised return, after fees and bad debt but before tax, earned by the example investor over a five year investment period.
For the first few months the investor’s annualised return is at its highest, at approximately 7.8% after the 1% annual servicing fee is deducted. This is because the investor has typically yet to experience any borrowers being unable to repay their loans.
Bad debts generally start to occur approximately six months after the loans are made. This is reflected in the chart above, where our example investor’s return starts to dip after six months. This trend then naturally decreases over time as the rate at which businesses run into difficulties tends to decrease.
After 18 months the example investor’s return stabilises, then generally increases as recovery payments start to arrive. As of 1st February 2017, 44% of the value of loans defaulted between 2010 and 2014 has been recovered. This trend typically continues for the rest of the investment period, with the example investor ending the five year investment period having earned an annualised return of 6.5% after fees and bad debt.
A London-based financial advisor has launched a robo advice like service for its clients. FOL Wealth, began offering its automated service at the end of February to give customers access to low-cost advice.
The wealth manager charges an annual fee of 0.90 per cent with a minimum investment of £1,000.
Events abroad meanwhile are dominated by what is happening in the US, where the volatility of change and the frequency of significant news events – what journalists call ‘story burn’ – are increasingly alarming.
In the case of Money&Co, the company I founded and of which I am CEO, we bring individuals looking for a good return on capital together with carefully vetted, well-established and profitable small and medium-sized enterprises (SMEs) seeking funds for growth. We have also recently introduced property lending.
As a P2P business lender, Money&Co does what the banks cannot or will not do – we fund SMEs and we provide a gross yield of nearly 9% a year to the lenders, who extend credit via our platform.
To be fair, banks have baggage we do not – for example, headcount, bonus culture and general institutional sclerosis.
The IFISA was launched almost a year ago, but most P2P lending platforms are still unable to offer it, as they require full Financial Conduct Authority (FCA) approval in order to do so. Money&Co has full FCA approval and so we can now offer the IFISA.
Money&Co’s loan book is currently generating an average gross yield of 8.95%. Investors can choose to either roll up the interest in their ISA account or pay the interest out monthly. We take a fee of 1% a year and so the net yield is 7.95%.
We will also be offering asset-backed loans for inclusion in the IFISA. They will yield slightly less – at around 7% a year net of fees – but I would expect them to be particularly popular with ISA investors.
Yet while the average rate on an easy-access account stands at just 0.37 per cent, the rates on so-called peer-to-peer lending range from 2.6 per cent to 7.2 per cent.
Zopa was the first UK firm to set up in 2005 and now has 75,000 investors on its books.
It was swiftly followed by RateSetter and Funding Circle, which together with Zopa now account for two-thirds of the UK’s peer-to-peer market.
RateSetter alone lent £668 million to individuals and businesses across the UK last year.
It offers three accounts. There is a rolling account — which means your money is not tied in for any length of time — paying 2.6 per cent, a one-year fix at 3 per cent and a five-year deal at 4.8 per cent.
Zopa has three deals on offer, paying 2.9 per cent, 3.7 per cent or 6.1 per cent.
Blender, an international consumer e-lending platform, has garnered a new license to operate as a financial institution in the European Union – the license recognizes Blender as an E-Money Institution, which includes a range of banking activities for the group, per a company statement.
In particular, Blender can now grant loans, transfer funds between customers and service the platform to other companies. Moreover, the licensing agreement also allows for the execution of most banking activities, except leveraging deposits.
ID Finance has integrated with Blackmoon and is now executing investment transactions via the Russian online lending platform. ID Finance is a data science, credit scoring and “nonbank digital lending as an application” provider. ID Finance has is currently operating in Russia, Kazakhstan, Georgia, Poland, Spain and Brazil.
Under the arrangement, loans are screened and scored by ID Finance’s advanced risk assessment system. Blackmoon investors may benefit from interest rates higher than traditional investment tools. If the issued loans meet the strategies of investors that deal with Blackmoon, the system registers the fact of sale, the investor’s funds are transferred to the creditor and the transaction is deemed closed. ID Finance registers the profit by the securitised portfolio and continues servicing borrowers who are redeeming the loans now to the benefit of Blackmoon investors. In this case, Blackmoon ensures execution of transactions, analysis, accounting and investment process management for the investor and lender.
These include AimBrain, which has developed a multi-modal mobile biometric authentication platform.
Another two on the watch list are EZMCOM, a developer of a technology that identifies users with their passphrase, voice modulations and facial authentication, with advanced liveness detection features such as movement of lips and blinking of eye, and Crowd Valley, a technology platform that can create, operate and manage online investing or a lending marketplace.
Qumram made their regional debut at Meftech 2017 when showcasing technology that ensures compliance, aids fraud detection and improves customer experience by recording, analysing and replaying every digital interaction – on web, social and mobile.
The Personal Financial Management innovation of Strands is also on display, while White Label Crowdfunding won the delegates over with their online marketplace lending solution that connects credit demand and supply in a transparent and efficient way.
Software company Leveris was also a highlight with their solution that promises to bypass the ‘spaghetti junction’ of IT legacy architecture with a modular banking-as-a-platform (BaaP) solution.
The BlinkID real-time ID scanner by MicroBlink was another star of the show. And making up the impressive list is a platform developed by Agreement Express that allows financial institutions to on-board new clients without requiring paper or ink signatures; and a dynamic Enterprise Planning Platform for Financial Institutions by Inplenion.
Cell phones make communication easier and quicker, but there’s one drawback. They’ve made it easier for fraudsters to target lenders, insurance companies, and a host of other industries where trust is a key factor. A new service from Whitepages Pro, however, could change the game and add a new layer of security to get through […]
Cell phones make communication easier and quicker, but there’s one drawback. They’ve made it easier for fraudsters to target lenders, insurance companies, and a host of other industries where trust is a key factor. A new service from Whitepages Pro, however, could change the game and add a new layer of security to get through for bad actors bent on fraud.
Whitepages Pro is a subsidiary of Whitepages Inc. Started by Alex Algard in 1997 while pursuing a masters degree at Stanford University, Whitepages.com provides customers a free and unambiguous online directory assistance service. In 2005, Whitepages raised $45 million in its first round of funding from two investors–Providence Equity Partners and TVC. Today, Whitepages is a leading provider of contact information in North America with over 55 million monthly users.
Despite enjoying a strong customer base and great traffic flow, Whitepages.com and 411.com were not structured for the needs of financial institutions. Whitepages Pro was formed to serve exclusively the business needs of the corporate market.
In 2012, Whitepages Pro was established as an Application Interface (API) and web-based service with headquarters in Seattle, Washington. Additional offices were opened in New York and Budapest. Approximately 500 million users from around the world fill its database. There are three vital parameters to the Whitepages Pro business model:
Different APIs for different products.
Pay-per-transaction volume; the pay-as-use service helps businesses try the product before committing to long-term licenses.
Users can also access Pro products via license for a particular time period.
One user license starts at $300 per month. That makes the service affordable even for the startup community.
Whitepages Pro’s flagship service is called Global Identity Verification and uses a phone number as a global identifier. The service then organizes information gathered on its users into data sets that connect a identities to physical addresses, mobile phone numbers, email addresses, and IP addresses.
Pro API helps online lenders fight against identity fraud and other malicious acts. The web form links with Identity Check API and helps the lender identify combinations of IP addresses, phone numbers, and IP names. It also helps to reduce new account fraud. The company is able to create the link between data provided by the user and the information retrieved independently. This helps determine the creditworthiness of the prospective borrower.
Identity Check and Reverse Phone API are also useful for e-commerce, FinTech, and travel and hospitality companies.
Whitepages Pro is integrated with risk management solution providers Accertify and Cybersource, and serves airline companies like JetBlue, Alaska Airlines, and American Airlines. The airlines use Identity Check and Reverse Phone API to avoid fraud in ticketing and reservation processes. Pro products also provide improved reservation review to travel companies by alleviating risk before the booking is approved. It automates the reservation process by reducing the manual review queue and speeds up the reservation process with RESTful API. Retail and e-commerce companies use Identity Check and Reverse API in the same way for quickly identifying risky transactions and processing orders at greater velocity.
Financial services enterprises can also benefit from the APIs. Web lookup services utilize consumer identity assessment, call tracking, and linkage services that visually connect a person, phone, and address to risk signals and house-holding attributes. FICO integration provides dynamic data to FICO customers. Casualty insurance companies Bank of Internet USA, Progressive, and Prudential use combined FICO and Pro scores in their risk assessment practices.
Whitepages Pro API streamlines creditworthy applicants using Identity Check, and it catches fraud applications in the infant stage of lending so lenders can screen for risky borrowers.
Global Identity Verification and Lead Verify API rely on dynamic mobile data to find loan applications with high risk through Identity Check. Only prioritized applications with complete and valid demographic information are provided to lenders.
Whitepages Pro’s data comes from credit bureaus, public records, utility companies, telecom companies, and similar sources. The company also uses advanced data science to curate useful information.
WhitePages Pro clocked $ 70 million in revenue in 2015. It operates in 30 countries and is currently beta testing Identity Check in Europe, South America, and Asia. The company started with eight FinTech clients. It now has 150.
In the brave new world of machine learning, big data and artificial intelligence, no good deed will go unnoticed and no bad deed will go unpunished. Or so at least the dream goes.
Continue reading: Breaking insurance models with big data
In the brave new world of machine learning, big data and artificial intelligence, no good deed will go unnoticed and no bad deed will go unpunished. Or so at least the dream goes.
ReliaMax provides an end-to-end turnkey package of origination, servicing, insurance, and capital markets support on private student loans. ReliaMax has insured loans worth $2.6 billion, issued by more than 450 financial institutions to students attending colleges and universities in 49 states and District of Columbia. Business model ReliaxMax has a vertical business model; it’s a 3 […]
ReliaMax provides an end-to-end turnkey package of origination, servicing, insurance, and capital markets support on private student loans. ReliaMax has insured loans worth $2.6 billion, issued by more than 450 financial institutions to students attending colleges and universities in 49 states and District of Columbia.
ReliaxMax has a vertical business model; it’s a 3 party contract between ReliaMax, the borrower, and the lenders. ReliaMax provides borrower acquisition, designs the underwriting, and insures 100% of the principal and interest of each loan for their client financial institutions . In case of borrower default, bankruptcy, or disability, even if the debt is not discharged, ReliaMax will pay the claim to the lender, will own the loan, and will work with the borrower over the life of the loan. The revenue model of Reliamax consists of receiving a premium from the banks for insuring the loans.
ReliaMax Surety Company, an insurance company subsidiary of ReliaMax, works with banks, credit unions, alternative lenders, and institutional investors to provide insurance coverage for private student loans. They are a fully registered licensed insurance company registered across 49 states and DC, therefore, they have in-depth knowledge of regulatory framework all across the country. It also acts as barriers to entry as the founder believes it will take 10 years and a $100 mil for a competitor to attain the regulatory acceptance, technical and market expertise to challenge his company.
Lenders charge interest and the premiums are lower than the interest charged. Credit Unions are therefore still profitable and tend to absorb the fees, partially because they are not in this for the profit. Banks either add a closing-cost or they convert the additional fees into an increased interest rate for the loans. For regulatory reasons, ReliaMax needs a substantial capital reserve to cover all the loans; a substantial amount is offset by buying reinsurance from large reinsurers.
ReliaMax was founded in 2006 after its founder; Michael VanErdewyk acquired HEMAR –a 3rd party insurance company in July 2006 from Sallie Mae. By acquiring HEMAR, ReliaMax got 18 years worth of data on $12 billion of student loans. The founder had entered the insurance sector by buying HEMAR.
By acquiring HEMAR, ReliaMax got 18 years worth of data on $12 billion of student loans. The founder had entered the insurance sector by buying HEMAR in 2000, a private student loan company formed in 1986. Many key people from HEMAR joined the ReliaMax team during the transition. Their expertise, along with the proprietary modeling and database from HEMAR, created a compelling combination of industry knowledge and data that represents now over $14.6 billion in private student loan disbursements to more than 1 million students over 25 years, reason why ReliaMax is successful in the private student loan market.
ReliaMax is headquartered in Sioux Falls, South Dakota. Sioux Falls and South Dakota are known for having no corporate income tax, a very small tax on insurance premiums, and most importantly having a very knowledgeable South Dakota Insurance Department due to 30 years of interaction with HEMAR.
The company leverages this data through custom analytical models to help their clients manage their reputational, operational, and financial risk and meet stringent regulatory requirements. ReliaMax has insured loans issued by more than 450 financial institutions, to students attending colleges and universities. The founder claims that it is the only insurer of private loans in the world. That type of innovation and domination is difficult to beat.
Michael, CEO and founder of ReliaMax feels there is huge potential in private student space as this is the second largest asset class behind mortgages. The top management consists of Jonathon Albright, Chief Financial Officer, ReliaMax Holding Company, and has more than 10 years of CFO experience in North America and Europe. Mark Payne COO of their subsidiary ReliaMax Surety Company has a lot of experience in extensive management and leadership. ReliaMax has 70 full-time working employees and they will insure $600 to $700 million in loans this year and next year is expecting to cross the $1 billion mark.
Partnering with SoFi and fintechs
The alternative lending industry provides another scope of growth and expansion for ReliaMax. Since the company has a massive reservoir of data in the private student loan space, all the new entrants in this market want to partner with ReliaMax.
One of the new entrants in the private student loan market is SoFi; who many consider as a possible threat to ReliaMax’s traditional clients. SoFi mainly deals in consolidating refinancing of loans, as they do not have the depth to go down the credit curve. They usually only provide loans to borrowers with FICO of 725 and to individuals with annual income of $200,000 or more, whereas ReliaMax’s clients can go as low as FICO 680 and in some cases even lower.
ReliaMax also feels there are more opportunities in prime as compared to the super prime space.Therefore the founder believes that SoFi could be a good partner for them and they can help SoFi expand its product offerings and go down the FICO score curve for targeting more students.
According to MeasureOne private student loan report of 2016, private student loan market is estimated to be 102 billion or 7.5 percent of the $1.36 trillion student loan market, which is presently covered by the six largest lenders in US private school lending market(Citizens Bank, Discover Bank; Navient; PNC Bank,. Sallie Mae Bank and Wells Fargo), that is nearly 67 percent of the market. By providing excellent solutions and services to the borrowers and lenders, ReliaMax’s customers can definitely take some share away from the big six companies.