Monday May 8 2017, Daily News Digest

Lending Club expenses revenues

News Comments Today’s main news: Experian legislative update. P2P platforms predicted to shift to hybrid models. Millennials spend over 1/3 of take home pay on rent. WeChat Pay enters U.S.market. Today’s main analysis: Lending Club’s lost year (and a half). Alternative return metrics (Cash on Cash Returns). Today’s thought-provoking articles: Record number of banks want to partner with LC. Q1 […]

Lending Club expenses revenues

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

MENA

News Summary

United States

Legislative Update 158 (Experian Email), Rated: AAA

Highlights this issue:

  • On April 14 the CFPB’s Office of Fair Lending and Equal Opportunity issued its annual report on fair lending. The report provides an overview of the work that the Bureau has done over the past year to provide oversight and enforcement of the fair lending laws under its jurisdiction.
  • In March, US Senate Banking Committee Chairman Mike Crapo (R-Idaho) and Ranking Member Sherrod Brown (D-Ohio) announced that they were seeking legislative proposals to promote economic growth. Proposals were due to the Committee on Friday, April 14. Experian worked closely with the CDIA and Chamber of Commerce to ensure that our policy priorities were included in their letters. CDIA’s comment letter recommended that the Committee take up and pass CROA reform, credit score competition and legislation to cap class action damages under the FCRA.
  • On April 19, GAO released a report on fintech and marketplace lending. The report was intended to provide an overview of fintech, as well as the potential benefits and challenges for consumers and small businesses.
  • Texas, H.B. 2333 would require a business that accepts a credit card or debit card for payment and retains any data related to the card, other than a confirmation number, for the transaction, to secure the retained information against a breach of system security. If a breach of system security occurs in which credit card or debit card information is compromised, the business shall notify the attorney general within 24 hours.

See the full report here.

Lending Club’s Lost Year (And A Half) (Seeking Alpha), Rated: AAA

One year later, the question hangs in the air: Has Lending Club recovered?

Source: Lending Club & Seeking Alpha

Meanwhile, G&A expenses ballooned as the company increased spending in compliance, retention, and recruiting. Despite only releasing one product, relative engineering costs also increased significantly during the same period. The company spent $35M in non-adjusted engineering costs, an increase of $11.5M from a year prior. Why have costs expanded, even though the company hasn’t grown?

Following the Jefferies incident (and even in the months leading up to it), one of the concerns that was brought up in 2016 was regarding Lending Club’s underwriting, both in its efficacy and in its efficiency. Many institutions temporarily halted their investments on the platform during the second quarter to do more due diligence, specifically on the concern that additional loans may have had their details changed.

This issue was recognized in the first quarter of 2016, when Lending Club stated that it had begun eliminating high-risk populations from its credit policy. The company announced several more cuts to its underwriting throughout 2016, most recently eliminating another 6% of borrowers from its credit policy. Cumulatively, approximately 17% of borrowers who formerly qualified for loans were cut from the credit policy.

Source: Lending Club

Why is credit deteriorating? Lending Club noted these deteriorating credit trends early in 2017:

“Throughout 2016 and into 2017 we have continued to observe the same trends on the Lending Club platform: indicators suggest a strong U.S. economy, but some borrowers are not offering appropriate levels of risk adjusted return.”

The delinquency rates for grades D-G do seem to be flat/trending down over the course of 2016, but delinquency rates for 36-month loans grades A-C are flat/trending up over the same period.

While not a perfect corollary, S&P/Experian consumer credit default indices also show an increase in bank card defaults over the past six months, which suggests that the increasing level of charge-offs is not limited to Lending Club.

Source: Lending Club

Lending Club also noted that it is spending a significant amount more on in-house collection efforts. Servicing and Origination expenses increased $2M from 4Q 2016 to 1Q 2017.

Lending Club noted that, although its servicing portfolio balance only increased 8% year over year, the revenue collected on its servicing portfolio has increased 34%.

Source: Lending Club

If we tally up our score card, we have:

  1. Revenue has not recovered (but the company has guided investors to growth in 3Q and 4Q).
  2. Relative spend has increased in 3 out of 4 expense categories.
  3. Bad debts will continue to impact note investor portfolios while the 2016 vintages progress through their hazard curves, although there are signs that the increase in loan charge-offs is slowing down and/or reversing for high-risk borrowers.

Alternative Return Metrics: Cash on Cash Return (PeerIQ), Rated: AAA

As evidenced from Prosper’s annualized return calculation methodology, the return calculation can be complicated, involving several moving parts. Marketplace institutional investors appreciate the complexity and diversity of return calculations.  At PeerIQ, we have had numerous conversations in the past with our clients and developed the “Cash-on-Cash Return” metric as one of several tools to monitor portfolio performance.

It varies from Prosper’s Estimated IRR by only considering realized cashflow information. Unlike Annualized Return, it eliminates complication springing from annualizing simple returns. In short, CoCR utilizes few readily available loan and pool level data points and summarizes the historical return of the investment on monthly basis.

Source: PeerIQ
Source: PeerIQ

The disadvantage of the CoCR metric is that returns are not forward-looking. Also, the declining cash-on-cash return performance (a typical characteristic of installment loan portfolios) can create confusion or frustration for retail investors. Retail investors experience strong net annualized returns in the early periods, only to experience returns consistently decline as loans season.

Record Number of Banks Want to Partner with Lending Club (Bank Innovation), Rated: AAA

Banks made up a “record” 40% of the lender’s almost $2 billion originations for the quarter, up from 31% last quarter, according to Lending Club CEO Scott Sanborn.

Bank participation hit its lowest (for the past 12 months) in the third quarter of 2016 — 13% of the total $1.9 billion originations — and has been on a steady increase ever since.

Source: Lending Club

Online lenders feel the pinch (Crain’s Chicago Business), Rated: A

Data glitches are bad for any company. But they are especially terrible for online lenders that trumpet having high-quality data as a main selling point.

And now comes Prosper Marketplace, which said on Thursday that it told investors their returns were inflated because of a systems error. Annual returns for some investors were cut in half, while others declined by 2 percentage points or less.

For example, take a look at a recent securitization by Avant, the Chicago-based online lender that cut its staff by about 30 percent last year and whose loan default rates had been higher than expected. To attract investors to the nearly $220 million deal, Avant had to materially improve the underlying creditworthiness of loans by reducing their length and the amount financed and increasing their risk-adjusted yield, according to PeerIQ.

Data provider Orchard Platform said the average return on online consumer loans was 3.95 percent last year, which doesn’t seem sufficient unless the default rate was extremely low, especially compared with average returns of 6.93 percent in 2015.

The U.S. economy will slow at some point, leading to a reduction in loans and higher defaults. And eventually, all lending will be done online.

LendingTree Announces Top Customer-Rated Lenders by Loan Product for Q1 2017 (PR Newswire), Rated: A

LendingTree®, a leading online loan marketplace, today released its quarterly list of the top customer-rated lenders on its network based on actual customer reviews for the first quarter of 2017. The list features the top lenders in multiple loan product categories, including Mortgages, Personal Loans, Business Loans and Auto Loans, all of which are included in LendingTree’s online loan marketplace.

Lender rankings are based on a weighted average of overall rating and the total volume of customer reviews for mortgage, personal, business and auto loans. Lenders were rated on offered rates, fees and closing costs, responsiveness, customer service and overall customer experience.

Mortgage Category

1)

Insight Loans

2)

J.G. Wentworth Home Lending, LLC

3)

CBC National Bank

4)

Arcadia Financial Group LLC

5)

Veterans United Home Loans

6)

First Midwest Bank

7)

AmeriSave Mortgage Corp

8)

Wyndham Capital Mortgage

9)

First Direct Lending, LLC

10)

HomePlus

Personal Loans Category

1)

First Midwest Bank

2)

Lending Club

3)

Avant

Business Loans Category

1)

Seek Capital

2)

RapidAdvance

3)

Currency Capital

Student Loans Category

1)

RefiJet

2)

up2drive – a division of BMW Bank of North America

3)

rateGenius

How Will a Real Estate Lending Slowdown Affect Marketplace Lenders? (National Real Estate Investor), Rated: A

According to new statistics from the Mortgage Bankers Association, real estate lending is slowing down. Lenders closed $491 billion in mortgage loans in 2016, down 3 percent from the previous year. The decline in the last quarter of 2016 was even more significant, falling 7 percent in comparison with the fourth quarter of 2015.

In commercial real estate, reports show that the decline is even sharper. According to Real Capital Analytics, U.S. commercial property purchases were down 10 percent in 2016 from the previous year, and the trend seems to be continuing into 2017. U.S. investors purchased $50.3 billion in commercial property in January and February of 2017, compared to $80.1 billion during the same timeframe in 2016.

With $300 billion in loans coming due in the next 18 months, it is unlikely that the slowdown is a sign that the industry is poised for a more significant decline.

Strong outlook for marketplace lending

While banks will likely continue to have a small pullback in commercial real estate lending, the outlook for marketplace lending is strong. In 2015, alternative lenders originated 68 percent more loans than the year prior, according to the Mortgage Bankers Association. With American Banker reporting a 700 percent growth in the marketplace lending industry in just four years, this growth is poised to continue.

While commercial real estate lending as a whole may have been down slightly in 2016, the outlook for marketplace and other non-bank lenders is strong for 2017.

A Simple Macroeconomic Case For Avoiding Lending Club (Seeking Alpha), Rated: A

We believe the most commonsense case for avoiding Lending Club (NYSE:LC) as an investment is pretty simple and doesn’t involve a deep dive into the numbers. We think the reasons for avoiding peer to peer lenders can be explained simply and are relatively easy to understand. Lending Club, along with other peer to peer lenders and smaller aggressive regional banks, will likely be a poor investments in coming quarters as a shorter-term debt cycle turns over and the lowest creditworthy types of loans begin to see a spike in delinquencies and faults.

While Lending Club loves to point out to its investors and those who participate in its online marketplace that a lot of its borrowers have great credit scores, the reality of the situation is that the lowest creditworthy people who are denied loans elsewhere will drift to platforms like Lending Club in order to secure a loan they otherwise would not be able to obtain. This is just simply a function of lending markets: the least creditworthy people will find the lowest spot on the totem pole to borrow money.

Enter Lending Club, a pool of investors chasing high yield and borrowers who were likely unable to obtain credit elsewhere. We think the obvious outcome for the broader economy will be significant and continued pressure on all peer to peer lenders, not just Lending Club, going forward over the next couple of years.

Small banks warm up to marketplace lending for SBA expansion (American Banker), Rated: A

Marketplace lenders are slowly gaining traction with community banks eager to do more Small Business Administration lending.

Five Star Bancorp in Rocklin, Calif., is the latest small institution to follow the trend, agreeing earlier this year to try out SmartBiz Loans.

Is PayPal Co-Founder Max Levchin Making The Next Credit Card Killer? (Forbes), Rated: A

Now, Max Levchin’s latest venture, the financial technology company Affirm, is seeking to bring more accountability and transparency to the banking industry through what he calls “fair and honest financing.”

According to CreditCards.com, the average amount of credit card debt is about $9,600. If you make the minimum monthly payment, you could pay more than $11,615 in additional interest during the life of the loan — which is more than you originally borrowed.

Affirm lets shoppers pay for purchases — such as a Casper mattress or Peloton bike — over time with simple-interest loans that are free of any penalty or late fees.

Last month, the San Francisco-based company completed its 1 millionth consumer installment loan.

Max Levchin: We started Affirm 5 years ago with the thesis that we could build smarter underwriting and anti-fraud technology to improve on the tired traditional systems, and therefore create financial products that are simple, transparent, fairly-priced and free of incentive misalignment that so often defines consumer banking.

Since 2014, our loan volume has grown 40+ times over, we’ve added 900 merchant partners including Expedia, Wayfair, Peloton, Casper and Eventbrite, issued more than 1 million loans, all while maintaining an industry-first Net Promoter Score (NPS) of over 70.

Max Levchin: Since 2001, the [CFPB] found that more than 29 million consumers had been harmed by illegal practices perpetrated by bad actors in the finance industry.

There are also several legal, yet equally harmful, practices being used by the industry today that are disproportionately affecting the most financially vulnerable populations.

I would also like to see the CFPB affirm a consumer’s right to access and permission their financial data. Doing so expands access to credit for the 58 million Americans considered credit invisible – those with no credit files or insufficient information in their files to generate a credit score.

Max Levchin: Over the next few years, we [plan] to offer many more services expected from a modern financial institution, while bringing transparency to the industry where too often the customer has to lose for the service provider to win.

A new era for big asset managers? Glass Steagall and fintech (The Financial Revolutionist Email), Rated: A

The current clamor for breaking up America’s big banks should serve to remind those institutions to carefully manage the newfound freedom they will enjoy if Dodd-Frank gets defanged. It should also spur them to continue to seek out new risk-detection and monitoring technologies to avoid the kinds of systematic problems that sparked neo Glass-Steagallism in the first place. Does voice trading have a future?

It’s easy to believe that with the growing role of IM/chat messages, computer on computer communications, sophisticated algos and machine learning, the telephone is destined for oblivion when it comes to trading. But in a new survey conducted by Greenwich Associates, “voice” was reaffirmed as an important element to building trust and detecting nuance between trading counterparties. That’s good news for start-ups like Apple should buy Canada or PayPal.

So instead of creating a money transfer service from scratch, Apple should consider scooping up Venmo and the rest of PayPal with it (and/or A two pizza, Agile future for banks.

ANZ, for example, is the latest bank to announce that it would shift to Agile teams of about ten as a way to

JPMorgan formally quits R3 (Finextra), Rated: A

JPMorgan Chase has formally exited blockchain consortium R3, following in the footsteps of fellow titans Goldman Sachs and Banco Santander who split last November.

The departure comes as R3 continues to pursue fundraising efforts, looking to raise to raise $150 million from its members and strategic investors in return for a 60% stake in the business – a downgrade from its original funding target of $200 million.

Ping-pong capitalism: RE tech firms look to China for cash (The Real Deal), Rated: A

Real estate tech startups like LendingHome, Fundrise, Cadre, RealtyShares and Roofstock also raised money from Chinese firms.

Between 2011 and 2015, annual Chinese investment in U.S. technology companies rose from $300 million to $9.9 billion, according to research firm CB Insights, before falling in 2016 amid a general slowdown in venture investment. The data doesn’t break down how much money went into real estate technology, but sources said it holds a special appeal to Chinese investors.

Hone is backing the real estate investment platforms Roofstock, RealtyShares and Clara Lending, the Airbnb competitor Overnight and the drone-based property inspection service BetterView, among others, making it one of the most active Chinese investors in the space. The social media company Renren invested in mortgage platform LendingHome and crowdfunding company Fundrise, among others. Alibaba founder Jack Ma is an investor in Cadre, the Jared Kushner-backed real estate investment startup.

The fintech revolution is nigh. Our next move is critical. (The Hill), Rated: A

The technology of the future that is thought capable of revolutionizing financial institutions and its regulators is already here. But with no national plan to harness it for economic betterment or regulatory transparency, it may well represent another missed opportunity to restructure the financial system.

One need only look to the evolution of the internet, with its revolutionary concepts of distributed communication that fundamentally changed how the world and its financial institutions communicate. A similar revolutionary technology, distributed ledger technology (DLT), is promising to fundamentally change how financial institutions store and report information, but only if it can become a common good like the internet.

With the CAT rollout and data collection not yet begun, a more robust and comprehensive DLT solution could be proposed, one which combines important CFTC products with those of the SEC in a shared data collection undertaking.

The U.S. needs a comprehensive fintech and regtech (regulatory technology) plan to efficiently deploy DLT.

With standardization, fintech and regtech innovation can enable virtual global views of financial data that is disbursed throughout local computer nodes (data collection points) across the globe. But this is only possible if these nodes conform to both common data standards and common networking protocols.

On Deck Capital subsidiary amended and restated its existing asset-backed revolving debt facility (Reuters), Rated: B

* On May 4, 2017 subsidiary amended and restated its existing asset-backed revolving debt facility – SEC filing

* Fourth A&R credit agreement provides for increase in lender’s revolving commitments from an aggregate amount of $75 million to $100 million

Shark Tank Star Kevin O’Leary Loves Fintech. (Crowdfund Insider), Rated: B

Shark Tank star Kevin O’Leary, also known as “Mr. Wonderful” to some, is a fan of Fintech. O’Leary is sharing the love by delivering the Keynote address at the upcoming Benzinga Fintech Awards scheduled to take place this coming Thursday in New York City (May 11, 2016).  O’Leary is said to be a regular suspect at the Benzinga offices too.

O’Leary will be presenting the keynote at the pinnacle of the award celebration.

Alongside O’Leary the following executives will be presenting or participating;

  • Kathleen Murphy, President, Personal Investing at Fidelity Investments
  • Tim Hockey, President and CEO of TD Ameritrade
  • Ron Suber, President of Prosper Marketplace
  • Matt Burton, CEO of Orchard
  • Adam Dell, founder and CEO of Clarity Money
  • Bill Emerson, Vice Chairman at Rock Holdings
United Kingdom

P2P platforms predicted to shift to hybrid models (P2P Finance News), Rated: AAA

UK PEER-TO-PEER lending platforms are poised to shift towards hybrid models to stay afloat, a financial services think tank claimed on Monday.

The P2P industry has re-shaped the country’s small corporate funding and investment market, putting pressure on traditional lenders to step up their game, said the Centre for the Study of Financial Innovation. But it is now facing a plateau that may require it to expand into direct lending and balance-sheet operations, as well as cutting interest rates, to become profitable.

He pointed out that SME lending growth has become relatively stagnant and that less than half of UK small businesses are aware of new online sources of finance. This casts a shadow over the volume growth that P2P lenders need to achieve to become a mass market.

And in response to the digital innovation brought about by P2P players, traditional banks have begun to change the way they address the SME market, upgrading their online services and shortening their decision-making timeframes.

Attracting borrowers and scaling up investment volumes is going to be one of the key challenges for platforms going forward, the report said, alongside proving the soundness of their underwriting during a credit downturn and investing in continued innovation in customer service.

Millennials spend over a third of take home pay on rent despite price growth beginning to slow (LendIt), Rated: AAA

Cash-strapped millennials renting in the UK are spending upwards of a third of their take home pay of £17,359 on rental payments, according to the latest Landbay Rental Index, powered by MIAC.

For tenants aged between 18-39 and living alone, 69% of a monthly post-tax income of £1,447 is spent on £1,012 of rent. In a shared house of two people, overall rent of £1,152 adds up to 39% of each tenant’s income, while those co-habiting in a three-bed property would each spend 30% of their monthly take home pay on a rent of £1,322.

Rents have continued to rise over the last five years, increasing by 9% across the UK since April 2012 and by 8% in London – with monthly payments remaining a huge burden on those struggling to save, despite the pace of rental growth beginning to slow since August 2015, from 2.66% to 0.82%. While rents have begun to fall in prime Central London, outer boroughs popular with millennials, such as Barking and Dagenham, Havering and Bexley have seen rents grow by 26%, 18.9% and 18.2%.

Current accounts: How fintech is revolutionising personal banking (Independent), Rated: A

The gig economy continues to grow, with about 5 million people in the UK working as independents. It makes sense that a bank account provider would want to cash in on that and that is why Coconut has sprung up – to provide tailored banking for freelance and self-employed workers.

Customers can manage and track their income and outgoings via an app, and it even gives reminders of tax deadlines and the end of the financial year.

Increasing numbers of customers are relying on their phones for their daily banking, with data from the British Banking Association revealing that customers used their phones to check their bank balances 895 million times in 2015 alone, a number that is no doubt rocketing upwards.

A number of fintech start-ups are trying to capitalise on this trend and Monzo is one.

The app gives customers a real-time insight into what they are spending and how they are spending it, helping to budget and stay in the black. Users can access their account via an app that gives data on their daily and monthly spending, as well as the overall health of their account.

The first bank to gain a licence while being centred entirely around an app, Atom is racing ahead in the fintech current account stakes. It offers some far-sighted technological developments, including the opportunity to do away with passwords and even debit cards, instead relying on voice and face recognition.

And DiPocket is a new financial app that isn’t a bank but offers customers mobile banking facilities via a prepaid Mastercard.

Funding Circle’s Desai: use P2P for monetary stimulus (P2P Finance News), Rated: A

UK POLICYMAKERS should start using peer-to-peer platforms to stimulate the economy, Funding Circle’s chief executive and co-founder Samir Desai said on Wednesday.

The head of the country’s third-largest business lender called on the government and the Bank of England to bypass the banking system and inject monetary stimulus via P2P platforms, capitalising on the direct access they provide to the real economy.

New direct Lending fund targeting 6.5% yield seeks fresh capital raise (AltFi), Rated: A

The Edinburgh-based RM Secured Direct Lending trust is seeking to raise fresh capital just five months after its launch as it nears full deployment of its capital.

Launched back in December 2016, the closed-ended fund targets the SME lending space investing in loans it originates of between £2-10m. It specialises in secured debt investments and the portfolio has had a good run since its initial public offering (IPO) with most of its capital invested or moving towards deployment.

Total Net Assets are today £48.9m. Nearly £40m has been invested in a total of 11 loans, with borrowers ranging from a healthcare group, a UK high street retailer and a large UK/European forecourt provider.

What role can robots really play in the financial advice market? (The Herald), Rated: A

So, when Royal Bank of Scotland announced in March that it would be rolling out robo-advice for mortgage applications by the end of the third quarter it was clear that that particular innovation is no longer quite so innovative.

Put simply, websites such as Nutmeg, which is by far the best-known name in the fledgling UK market, present would-be investors with a range of questions designed to ascertain their attitude to risk before directing them to a model portfolio that should suit their needs.

However, the issue, according to Stephen Martin, head of Brewin Dolphin’s Glasgow office, is that even where needs are uncomplicated, robo-advisers can only go so far because they will never be able to tease out information peculiar to individual situations.

Hollands agreed, noting that while robo-advisers are a positive addition because they are helping open the investment marketplace to a wider range of people, they cannot be seen as a like-for-like replacement for full financial advice.

While the robo-advice market in the UK remains small, covering in the region of £1.5-2 billion of assets, research from Deloitte suggests that with more and more people having to take responsibility for investing their own pensions the potential for growth is high.

The accountancy giant found that 43 per cent of 35 to 44 year olds with a pension would use robo-advice on where to invest it, with those with the smallest pension pots, who may not be able to afford traditional financial advice, most likely to go to a robo-adviser.

5 ways to finance your start-up business (Business Zone), Rated: B

Business grants: In an unsettled economy, start-ups are seen to be important as a way of encouraging economic growth- this is why so many banks and publicly funded organisations are happy to support your ambitions.

Short term loans: One way in which you can look to finance your business is through a quick loan from a reputable company. Quick loans can help to offer you the perfect cash injection necessary to get your business up and running with the ability for the debt to be paid back over a series of repayments. The key with funding your business through a short term loan is in finding a loan with a low interest rate.

Crowdfunding: Peer to peer lending and crowdfunding have become an increasingly popular way for entrepreneurs to start up their own businesses.

Friends and family: Something to always consider when looking towards funding your own business is to pitch for funding from your family members and friends.

Angel investors: Angel investors can be a great source of investment and can be found in most cities.

China

WeiyangX Fintech Review (Crowdfund Insider), Rated: AAA

WeChat Pay, one of the biggest mobile payment platforms in mainland China, has boosted its cross-border business by entering the U.S. market.

One in four of those aged between 18 and 27 use pay-by-credit services Ant Check Later, a personal loan and installment service under e-payment provider Ant Financial Services Group, as these freer spenders form the very core of the country’s burgeoning consumer-credit landscape.

People born in the 1990s constitute 47.3 percent of the platform’s registered users. Among them, nearly 40 percent prioritized the service as a payment option over its sister service Alipay, China’s largest mobile wallet by market share. This is 11.9 percentage points higher than those born before 1985.

Baidu Financial has announced to launch new consumer mortgage products with the aim of encroaching on consumer credit market.

On May 2, the National Committee of Experts on Internet Finance Security Technology, which was sponsored by the National Internet Emergency Center and the Internet Society of China, released a piece of evaluation criterion for P2P online lending platforms.

The rating standards mainly include five aspects: corporate strength, enterprise qualification, operation indices, cyber security and social reflection.

In another attempt to secure a firm grasp on China’s Fintech market, Chinese tech conglomerate LeEco has turned its next venture towards insurance and fund consignment. Since 2015, LeEco has got several financial licenses on various fields: micro credit, private placement, insurance and fund. Specially, LeEco is trying to build a fintech ecosystem, which covers micro finance, equity management, fund and insurance sales.

CreditEase CEO Ning Tang on China’s Marketplace Lending Industry, Robo-Advisors, Credit Scoring, & More (CB Insights), Rated: A

In recent weeks, Ant Financial‘s Yu’e Bao surpassed JPMorgan’s US government money market fund to became the largest in the world, China Rapid Finance became the second Chinese P2P lender to go public on a major US exchange, and Ant Financial upped its bid to acquire MoneyGram, the second largest global money transfer provider.

On the state of marketplace lending in China

Two fintech sectors — payments and marketplace lending — are more mature than others in China, as they have been around for over 10 years, have massive scale, and operate within robust regulatory frameworks and ecosystems.

We think that, over the next decade, sectors like crowdfunding, robo-advisors, insurance tech, blockchain and blockchain-driven applications will emerge. Some are behind marketplace lending by 3 years, some by 5 years, and some are behind by even 10 years, but I think all will go through a similar process in China.

It took 10 years for marketplace lending to grow from an idea to an industry in China. Recently, there has been tightening in the market, but I believe a tighter market will help the industry become more stable and healthy.

On credit scoring in China

Regulators have adopted a strong view that credit scoring is key for China to develop its credit bureau system. It will be a very strict process.

Currently, we use eCommerce data, telecommunications data, bank and credit card data, insurance data, and social security data. Big data is very helpful, but alternative data needs to cooperate with traditional finance and credit data to make the risk evaluation model really work.

I think China will develop a multi-layer system. The core will be the credit bureau — consisting of core credit data — and around it will be different applications for different industries utilizing some industry-specific data. Around that will be additional ancillary data services utilizing big data for anti-fraud, marketing, and so forth.

Still, the core layer will look quite similar to what the US credit system looks like.

On insurance tech in China

The biggest pain point for the insurance industry in China is that it’s never sold in the right way.

We don’t need more insurance products, we need more education and intelligent matching.

Where CreditEase is investing

Chinese investors are in the process of building globally diversified portfolios. From our point of view, we help clients who already have foreign currency outside of China to invest in the US and other parts of the world.

We are still quite interested in opportunities in lending. For example, we invested in (former Lending Club CEO) Renaud Laplanche’s new venture, Upgrade. I believe there are still a lot of opportunities left over from marketplace lending 1.0. We are similarly interested in crowdfunding, insurance tech, and — not only robo-advisors — but also B2B fintech models helping the wealth management and asset management industry.

P2P Industry News (Xing Ping She Email), Rated: A

Over 60% Chinese P2P Lenders achieved profit

According to the latest statistics from Online Lending House, 28 P2P Lending platforms disclosed their financial results, accounting for 1.3% of all the platforms. In 2016, 17 (61%) platforms have achieved profit, while 11 P2P Lenders had a loss.

The data shows that the most profitable platform is Yirendai, with $1.12 billion net profit. However, another US listed platform, China Rapid Finance, has lost $0.23 billion. Excluding lost platforms and those with incomplete data, the average net interest rate of 17 platforms are 25.92%, performing well in profitability.

 

Lenders Revenue

(Million RMB)

Net Profit

(Million RMB)

NetProfit Rate Founding Time Public Company shareholding ratio
Yirendai

3,238

1,116.4

34.48%

Jul. 2012 YRD

direct listing

WeiDai Network

1,776.3

325.50

18.32%

Jul. 2011 HAKIM UNIQUE

12.38%

Niwodai

666.9

64.88

9.73%

Jun. 2011 Jiayin Fin-tech

100%

PPmoney

327.74

43.09

13.15%

Dec. 2012

Wan Hui Technology

100%

AVATAR China

35.03

20.90

59.65%

May. 2015

Neo Telemedia Limited

70%

UF-Club

189.82

19.61

10.33%

Nov. 2013 Hemei Group

51%

Yinhu Network

50.91

2.41

4.72%

Jul. 2014

Panda Financial Holding Corp., Ltd.

100%

PP100

37.85

-12.12

Aug. 2015 Nuode Share

40%

Lcfarm

58.84

-45.10

Mar. 2015 NoPoison

33.64

China Rapid Finance

385.43

-230.25

May. 2015 XRF

direct listing

The huge market of Auto Finance may reach to 1.85 Trillion RMB in 2018 

After the Internet Finance mania in China, more attentions now are paid to bank depository of the auto loan market. In China, with the rapid development of economy, cars gradually become ordinary people’s necessary life consumption, especially in developed areas, and almost every family owning a car.

Meanwhile, the large holding numbers and high liquidity of cars make it one of the most promising vertical field in P2P industry. It was reported that the number of car users in China are rapidly increasing, which contributed to the rapid development of the auto loan market.

According to the latest data, the total volume of Internet auto finance in China is expected to reach at 1.85 trillion RMB, driving the penetration ratio of consumer finance to about 30%.

European Union

Temenos hires FinTech heavyhitter for Marketplace (IBS Intelligence), Rated: A

Temenos has announced Duena Blomstrom as Chief Growth Officer for Marketplace, its online store of 100+ FinTech solutions that have been certified and pre-integrated with the Temenos Suites.

Blomstrom is well known in the FinTech sector as an analyst, entrepreneur and Angel Investor, a mentor for Startupbootcamp and Techstars, and the inventor of the Emotional Banking, EX and Bank Branding concepts. For the past 18 years, she has operated on the strategy and consulting side, be it for sales or marketing.

But banks are not easily displaced. Peer-to-peer lending, for instance, has grown rapidly, but still amounted to just $19bn on America’s biggest platforms and £3.8bn in Britain last year, according to AltFi Data, an analytics company. And some marketplaces now involve banks. Lex Sokolin, director of fintech strategy at Autonomous, a research firm, argues that music—one of the first industries to be attacked by digital revolutionaries—was fairly easily disrupted. Retailing was a little harder, but customers got used to not handling books, cameras and clothes before buying. Finance and health care, he says, are much more difficult. People are rarely inspired by financial products, says Mr Sokolin, which makes it costly to build a brand. It is easier to team up with those who already have the customers.

In the West, regulation is opening up more of the field to fintechs, both large and small. A revised European Union directive on payment services, known as PSD2, allows third parties to offer more convenient ways of paying online or to consolidate information from different accounts (with the holder’s permission) so that people can keep track of their finances. America has no equivalent, but the Office of the Comptroller of the Currency, which oversees national banks, has proposed giving special licences to fintechs.

China’s digital behemoths worry less about such things. Companies like Ant Financial, the financial arm of Alibaba, an e-commerce giant, and JD.com, another online marketplace, have masses of data about those who buy and sell on their platforms. They know their spending habits and how much cash they can spare, so an easy next step is to offer them small loans. Big Chinese banks in any case neglect consumers and small businesses, so customers feel no loyalty towards incumbent lenders. Regulators have also been willing to let online companies shift into finance.

International

Q1 CYBERCRIME REPORT (ThreatMetrix), Rated: AAA

In the ever-evolving world of cybercrime, authentication continues to be a mainstay of global digital businesses; accurately recognizing trusted returning users and promoting a frictionless online environment builds a loyal customer base and reduces attrition.

However, cybercrime is becoming an increasingly global phenomenon, operating across borders in well organized criminal gangs, with knowledge sharing and centralized intelligence. Attacks continue to evolve quicker than the tools and techniques used to detect them.

Some key attack trends analyzed this quarter include:

  • The multifarious attack methods used in a 2017 cybercrime attack
  • The evolution of attacks from single to multi-vector approaches
  • Identity theft is a key issue for all industry sectors as they continue to see attacks involving stolen and synthetic credentials, harvested from omnipresent data breaches
  • The proliferation of RATs in the financial services sector
  • The sophistication of bot attacks
  • The only effective armor is to genuinely understand who your real customers are and how they transact, by collecting and processing all the information you know about them and using this to make informed risk decisions.
Source: ThreatMetrix

See the full report here.

Financial technology is proving less of a battleground than feared (The Economist), Rated: A

To be sure, a gang of newcomers have muscled their way into their domains. Peer-to-peer or marketplace lenders, such as Lending Club and SoFi in America, or Funding Circle and RateSetter in Britain, connect people and companies that want to borrow with those that have money to lend, promising both sides keener rates. Britain’s MarketInvoice allows small companies to borrow against receivables immediately, rather than turn to a bank or wait for bills to be paid. Digital banks such as N26 in Germany, Tinkoff Bank in Russia and an array of British hopefuls are challenging incumbents.

Islamic Fintech Alliance Publishes Fintech Industry Snapshop Report (Crowdfund Insider), Rated: A

The Islamic Fintech Alliance (IFT Alliance) has published its inaugural report on the emerging Fintech sector for the Muslim community.

Munshi is the founder and CEO of Ethis Ventures, a company that operates several platforms including crowdfunding. Mushis states that Muslims must unite to take advantage of this “unprecedented opportunity” to invigorate Islamic financial services with new forms of finance.

See the full report here.

Australia

Financial advisers should consider bitcoin as an asset class: Dunworth (Financial Standard), Rated: A

This week the cryptocurrency broke record-highs when it started trading above USD$1680 against the US dollar. As at May this year, the total market cap of the bitcoin market has more than doubled to US$23 billion since it hit the US$10 billion mark just three years ago.

“A lot of people say that bitcoin is very volatile. It is in the short term but if I were doing fund management for my client, I see it as a very good long term investment,” he said.

Cambridge University counts as many as 5.8 million unique users of the so-called crypto currency wallet, most of whom use bitcoin. More than 100,000 merchants and vendors now accept bitcoin as a form of payment albeit regulators warn that bitcoin users are not covered by refund rights.

Australia going cashless is great for fintech (AltFi), Rated: B

Australia is set to be an almost cashless society by 2020, promising benefits for fintech.

Since 2010, cash payments have declined a staggering 46 percent, and now make up less than 10 percent of all payments, according to new research by East & Partners Australia.

The hope for fintechs is that as payments go digital and the data supply increases, so too will demand for new technologies. It will also improve Australia’s attractiveness to foreign investors.

Writing in The Guardian, the economist Philip Soos denounced a cashless economy as empowering the security state and the banks.

India

Instamojo Wants To Help India’s Five Crore Small Businesses Transact Online (Bloomberg Quint), Rated: AAA

Digital modes of payment are becoming ubiquitous, riding on the government’s less-cash drive after demonetisation. Yet, Instamojo, a Bengaluru-based fintech company, feels not enough is being done for small businesses.

The company wants to help India’s micro, small, and medium enterprises receive payments online in a simple, hassle-free manner, said Sampad Swain, one of its founders and also the chief executive officer. The government last year projected that the number of such businesses has grown to over 5 crore.

The only two requirements for the company’s service to work is that both parties must have a mobile number and a bank account.

“If the mango seller wants to use our platform, he has to first do an e-KYC, which takes a few minutes,” said Swain. This can be done either through a mobile application that can be downloaded from the Play Store, or on Instamojo’s website.

The seller then generates a link by providing information on the ‘purpose’ of the transaction, and the amount that the buyer has to pay. In this case, the purpose would be a crate of alphonso mangoes, and the price would be Rs 1,700, Swain explained.

Once the link is generated, the seller can forward it to the buyer by any messaging mode, like WhatsApp, Facebook, email, or even an SMS. When the buyer clicks on the link, he or she is directed to Instamojo’s website, where a number of online payment options are available.

MENA

Middle East, North Africa (MENA) FinTech Update: Slow to Adopt or Miles Ahead? (EdgyLabs), Rated: AAA

Headquartered in Dubai, Wamda (which means “sparkle” in Arabic) is an organization that supports the entrepreneurial spirit and business initiatives in the MENA region. Along with PAYFORT, an online payment platform, Wamda Research Lab released a report that provides in-depth data about FinTech in MENA.

According to the ‘State of FinTech,’ over $100 million USD were invested in Fintech in the MENA region over the last decade, with $50 million expected for 2017 alone. In 2013, the number of Fintech startups was 46. Then, in 2015, that number increased to 105–with the United Arab Emirates leading the pack with 30 independent FinTech startups–and the overall MENA number is expected to reach 250 by 2020.

Authors:

George Popescu
Allen Taylor

Friday May 5 2017, Daily News Digest

Friday May 5 2017, Daily News Digest

News Comments Today’s main news: Lending Club’s Q1 2017 results: a little disappointing. SmartFinance to IPO in U.S. Prosper says system error overstated returns. Details on NAV’s raise of $38mil Series B. Next Insurance secures $29M during Series A. Metro Bank hits 1 million accounts. LendIt Europe to meet in London this year. Mexican fintech raises $4M in Series A. Today’s main […]

Friday May 5 2017, Daily News Digest

News Comments

United States

United Kingdom

  • Metro Bank hits one million accounts. GP:”This is a very large number of accounts. I am very impressed.”AT: “Great achievement. Congratulations.”
  • Sand. Meet Head. GP:”Certainly worth a read.”AT: “I love Anand’s sense of humor, but his insights are prescient, as well. I’m always amazed at the hubris of incumbents in any industry. Any time there is market disruption, the surest path to survival is humility, not boasting.”
  • LendIt Europe returns to London. GP:”I think there was no doubt it will be in London and stay in London. “
  • Robo-advisor to provide full retirement advice in two hours. GP:”I am not sure why it takes 2 hours to compute such a simple algortihmic solution. “AT: “This sounds like a joke, but I know it isn’t. I think most people will want the robot’s advice checked by a human until they are 100% comfortable with the technology.”
  • Octopus-backed Moola goes live.
  • What is fintech and why Google and Facebook will be the banks of the future. GP:”Google is already struggling to defent against monopole attacks and Facebook is avoiding carefully to be turned into a credit bureau. I doubt they will move in that direction. Also banks don’t have a good image with the public and aren’t that profitable so I see no reason for Google or Facebook to come even close to being banks.”AT: “The headline is misleading and somewhat overstated.”
  • Fintech: What will bring the most change? AT: “A poll indicates that blockchain may be the most disruptive fintech technology in fintech. I think it certainly has the potential to be, but we haven’t seen it yet.”
  • What does rising inflation mean for your money? AT: “A blog post at Funding Circle.”

China

European Union

India

Middle East

Central America

News Summary

United States

Lending Club Reports First Quarter 2017 Results (Crossroads Today), Rated: AAA

($ in millions)

March 31,
2017

December 31,
2016

March 31,
2016

Originations

$

1,958.7

$

1,987.3

$

2,750.0

Net Revenue

$

124.5

$

130.5

$

152.3

Net Income (Loss)

$

(29.8)

$

(32.3)

$

4.1

Adjusted EBITDA (1) (2)

$

0.2

$

(0.9)

$

26.3

Key accomplishments and developments in the first quarter across the Lending Club platform include:

Investors

  • Banks further increased their purchasing, funding 40% of total originations for the quarter, up from 31% in the fourth quarter, and retail investors expanded to 15%, up from 13% in the prior quarter
  • Developed a retail investor mobile application, now available in the App Store
  • Lending Club initiated activities to support the securitization of Lending Club loans with external partners

Borrowers

  • Achieved another nearly $2 billion originations, surpassing $26 billion in total loans since inception almost ten years ago
  • Continued the Company’s lead as the largest personal loan provider in the U.S. with a borrower base of almost 2 million individuals
  • Introduced an enhanced version of our Joint Application loan program, giving borrowers the ability to jointly apply for a personal loan

Adjusted EBITDA (3) Adjusted EBITDA was $0.2 million in the first quarter of 2017, improving $1.0 million from the fourth quarter of 2016, resulting from the decrease in revenue noted above, and a decrease of $10.3 million in other general and administrative expenses. The decrease in other general and administrative expenses was primarily driven by an insurance recovery of $9.6 million. Adjusted EBITDA also includes $10.6 million of expenses primarily associated with the Board Review that was disclosed in 2016.

Lending Club’s $ 30M quarterly loss is its smallest in the last year (American Banker), Rated: AAA

Lending Club, the online consumer lender whose fortunes were hurt by scandal last year, lost $29.8 million in the first quarter amid lower revenues and rising expenses.

BRIEF-Lending Club reports Q1 adjusted loss per share $ 0.02 (Reuters), Rated: AAA

  • LendingClub corp – qtrly originations $1,958.7 million versus $2,750.0 million
  • Q1 adjusted loss per share $0.02
  • Q1 loss per share $0.07
  • Q1 earnings per share view $-0.03 — Thomson Reuters I/B/E/S
  • Q1 revenue $124.5 million versus i/b/e/s view $122.8 million

Here is the Lending Club Q1 Earnings Deck (Crowdfund Insider), Rated: AAA

Below is the Lending Club Q1 earnings deck. The company is predicted Q2 growth of 6% to 10%. Full year sequential growth is expected to be 15% to 19%.

See the Lending Club Q1 2017 results in full here.

Lending Club slowly woos investors back after last year’s scandal (Financial Times), Rated: AAA

In the first quarter the San Francisco-based company originated $1.96bn of loans, it said on Thursday, down slightly from the $1.99bn of the fourth quarter. Banks bought 40 per cent of the loans, up from 31 per cent in the fourth quarter, indicating that many are now satisfied that the company has ironed out its problems.

But net revenues for the quarter were $125m, down 5 per cent from the fourth quarter. The quarterly net loss was $29.8m, slightly less than the previous period.

According to data from Orchard, a technology provider to the industry, total returns from an index of US consumer loans came to 3.95 per cent last year, down from 8.71 per cent in 2014.

Online Lender Prosper Says System Error Overstated Returns (Bloomberg), Rated: AAA

Prosper Marketplace Inc., one of the largest U.S. online-lending platforms, notified the majority of the investors that buy its loans that it had overstated their annual returns due to a system error, a spokeswoman said.

The error has been fixed, according to spokeswoman Sarah Cain. Some of the investors that were affected saw their annual returns fall in half, but in most cases returns fell less than 2 percentage points, Cain said. The issue has been going for “several quarters,” she said.

The glitch didn’t affect the cash that investors received, tax documents, expected future returns, or any other information the startup provided to loan buyers. In a small number of cases, returns were understated, Cain said.

Q1 2017 Shareholder Letter (Square), Rated: AAA

Our first-quarter results demonstrate our continued ability to grow the business at scale while balancing investment and margin expansion. Improvements in net loss and Adjusted EBITDA reflect strong top-line growth, coupled with ongoing operating leverage and improvements in transaction loss rates. Similar to previous quarters, we saw strong momentum across our products, with revenue growth driven by both transaction-based and subscription and services-based monetization.

We launched in the UK, our fourth international market, where small and medium businesses (SMBs) generated £1.8 trillion of revenue in 2016.

Square is a great fit for the UK market, which has 5.5 million SMBs2 and a thriving entrepreneurial scene. The annual revenue of SMBs in 2016 was £1.8 trillion, which is 47% of all private sector UK revenue. In the UK, the average adult now carries less than £25 in cash and 70% of shoppers prefer to pay by card, yet industry research estimates that half of UK small businesses still do not take card payments. Our contactless and chip reader aims to meet the needs of the UK market, where there are more than 100 million contactless cards.

See Square’s full Q1 2017 report.

FT Partners Advises NAV on Series B Financing (FT Partners), Rated: AAA

Read the full announcement here.

PeerStreet Hits New Milestone: $ 300 Million in Loans Funded (PeerStreet), Rated: A

Under a year ago, we announced PeerStreet had funded $75 Million, October we rounded $150 Million and now, thanks to the ongoing support from our investors and lenders, we’ve just surpassed $300 Million with zero losses to date.

The number of lenders PeerStreet works with has grown from 25 to 89. The loans we’ve recently made available for investment are more diverse than ever, with 11 new states added since this time last year, now totaling coverage across 28 states and Washington D.C. Currently, we are publishing triple the number of loans we did a year ago. To support this growth, our underwriting and portfolio management teams have doubled since last year.

Next Insurance Secures $ 29 Million During Series A Funding Round (Crowdfund Insider), Rated: A

Next Insurance, an insurtech company that specializes in small to medium businesses, announced on Wednesday it secured $29 million during its Series A funding round, which was led by Munich Re/HSB Ventures with participation from  Markel, Nationwide, and other existing investors.

The funding from the Series A funding round will go towards continuing to grow Next Insurance’s insurance products and expand the company’s offering to new business sectors. The announcement follows Next Insurance’s recent release of the first ever Facebook chatbot for small business insurance.

CAN ALTERNATIVE DATA SOLVE ONLINE LENDERS’ ‘ALGORACISM’ PROBLEM? (The Alternative Lending Report), Rated: A

A March 2017 letter written by Congressman Emanuel Cleaver, II (D-Mo.), to Consumer Financial Protection Bureau Director Richard Cordray raises fresh concerns about “algoracism” tainting the creditrisk-scoring models used by online lenders.

Cleaver’s letter highlighted five predatory practices cited by the HBS paper as pervasive in the “Wild West” of online lending and alleges that risk-scoring algorithms may be designed to discriminate against minorityowned, small business borrowers.

Minority-owned businesses comprise roughly 15% of the 28.8 million small businesses in the United States, according to a 2016 Small Business Administration report.

Biased algorithm design can occur if engineers code data correlation parameters with attributes that make inadvertently discriminatory assumptions, which could be violating the Equal Credit Opportunity Act. ECOA prohibits creditors from discriminating against borrowers on the basis of race, color, religion, national origin, sex, marital status, age or because they receive income from a public assistance program.

In fact, FastPay’s loan algorithm is over 80% weighted towards the credit risk of the brand counterparties, which typically average 90-days sales outstanding before they pay their creative and advertising technology vendors. Despite prolonged payment terms, Proctor & Gamble and other Fortune 500 brands pose extremely low credit-default risks to invoice financiers like FastPay.

Ultimately, Arora attributes flawed credit-risk modeling in fintech to the big banks that refuse to share data. But banks in the U.S., unlike in Singapore and the UK, where lenders are opensourcing their loan algorithms, see no incentive to make accountholder data available to third parties.

Regardless, Mills said Kabbage, which charges an annual percentage rate, ranging from 24% to 99%, is an interesting fintech small business lender because they factor variables like borrower credit card data and the company’s Facebook page into their risk scoring models.

Source: The Alternative Lending Report

See the full report at SmallBusinessLending.io.

How Lending Club Is Differentiating Itself From Other Online Lenders (Forbes), Rated: A

In less than a year, Sanborn cut and rehired 179 jobs and hired a new CFO, COO, general counsel and chief capital officer. In addition, the company launched a new auto refinance product and an investor mobile application, Lending Club Invest.

Sanborn: Nearly 75% of borrowers also say that their FICO score has increased by 19 points after consolidating debt or paying off credit cards, which can help put them on a better financial track.

Sanborn: Today we have more than 148,000 retail investors – more than any other online lender. Part of the evolution of our marketplace is growing and balancing the mix of investors – having the right mix of investors strengthens our marketplace and makes us more resilient, scalable, and better able to serve a wide range of borrowers of all credit profiles.

Sanborn: Our mission has been to transform the banking system to make credit more affordable and investing more rewarding. So, everything that we do comes from this goal and with the intention of delivering a great experience for everyone who comes to our marketplace. With 10 years of experience and incredibly powerful data and insight that informs us on our customers’ behaviors, choices and needs. We’re also able to calibrate this data into our models to price credit risk and better manage our marketplace and the success of both our borrowers and investors.

A traditional bank uses government-guaranteed deposits to lend to make a spread and can only give loans to a narrow spectrum of borrowers. Our credit marketplace attracts investors that span retail, asset managers, funds and banks, all with different risk appetites, to invest in loans across the credit spectrum so we can say yes to more borrowers. Our diverse investor base also means we’re not reliant on any one type of investor to fund our loans, so we have the agility to pivot funding channels to meet changing market conditions.

OCC fintech charter plans in jeopardy as Curry departs (Finextra), Rated: A

Proposals by the US Office of the Comptroller of the Currency to issue special purpose banking charters to fintech firms are up in the air following the departure of leading advocate Thomas Curry and his replacement as acting head of the Federal agency by Simpson Thacher & Bartlett partner Keith Noreika

Curry completed his five-year term as Comptroller last month but planned to stay on and push through his controversial fintech charter.
Noreika, a member of the Trump transition team, has extensive experience advising banks on regulatory issues, although his views on Curry’s fintech plans are not known.

Crowdfunding Real Estate Isn’t Just For Millionaires Anymore. (Yes Magazine), Rated: A

In up-and-coming neighborhoods, it’s not uncommon for developers to swoop in and alter historic buildings beyond recognition, or tear them down completely to make way for new projects. But when Eve Picker, president and founder of the real estate crowdfunding portal Small Change, came across a three-story property called the Buvinger Building in Pittsburgh’s Lawrenceville neighborhood, she saw a way to both preserve history and add much-needed housing units in a thriving area.

Luckily for Picker, the funding process is easier than it used to be. She posted a detailed project overview on Small Change’s website, which included information about the building’s history and aesthetics, the financial returns and risk factors, and a link to invest. Small Change met their investment goal of about $240,000 in just under three months, and construction on the project began in late Feb. 2017.

Though the internet paved the way for Title III crowdfunding, it solves a problem that existed long before the digital revolution. When securities regulations were put in place to protect non-wealthy investors after the stock market crash of 1929, one unintended consequence was that those very same investors were frozen out of a broader range of investment opportunities. It took years for the SEC to approve the Title III regulations in the JOBS Act, Roderick explains, because of the challenge inherent in striking a balance between protecting investors and making it easier for developers to raise money.

Small Change, however, is raising more than just capital. It’s a crowdfunding platform that backs real estate development projects only if they benefit underserved communities.

It also means that, in addition to financial returns, many Small Change investors are seeking investments that align with their values. It’s not something easy to quantify—and that’s where the Change Index comes in. The index is Small Change’s proprietary system for measuring a project’s viability in terms of transportation, the environment, and economic inclusiveness.

The Index also provides a metric for potential partners and investors to gauge their compatibility with a particular project.

Small Change plans to launch its first Reg CF offerings later this spring. It’s still one of only about 25 Title III electronic crowdfunding portals that the SEC has approved. While most Title III portals are focused on startup and small business financing, Small Change deals exclusively with real estate, which makes it even more of an outlier.

Major Credit Unions Will Unveil New Blockchain Tech Next Week (Coindesk), Rated: A

CULedger, a consortium project unveiled late last summer, is supported by more than 50 credit unions and four of the biggest credit union service organizations in the US. Spearheading the project are the Credit Union National Association and Mountain West Credit Union Association (MWCUA).

Those involved in the initiative say they want to utilize the tech in a bid to improve how credit unions function – while also making them more competitive in an increasingly tough environment for financial institutions. The idea is to create a blockchain-powered utility through which credit unions could send money or exchange other types of information.

FinTech and Digital Wallets are the Core of Financial Inclusion (Due), Rated: B

In a FDIC survey released in 2016, the Federal organization found the roughly 7% of American households are unbanked. That is 9 million households with no checking account or savings account. No direct deposit. No credit cards. These families utilize virtually no mainstream financial services. In some parts of the country, as much as 40% of the population is unbanked!

With no bank relationship, these individuals have little if any credit history and poor credit scores. There is a lack of trust and understanding of how banks and mainstream financial services work. This is a serious problem the entire financial industry needs to overcome.

Instead, less savory businesses are often chomping at the bit for this demographic’s financial business. Payday loans, title loans, and other expensive, low-quality financial products are all these people have had access to.

In many ways, digital wallets work like a bank account. You can store funds, make payments, and transfer to other financial accounts. In the case of Bluebird, you can even write checks!

Digital wallets look a lot like a regular checking account to outsiders, but there are some important technical differences between bank accounts and digital wallet accounts.

Financial technology startups are not encumbered by those sentiments. While the rules of the game are the same, startups can quickly adapt to new market trends, customer feedback, and more.

Unlike a giant bank where you have to navigate a series of annoying phone menus to reach a live human, startups are right on the pulse of what their customers are saying and doing. That is a major advantage.

United Kingdom

Challenger bank hits one million accounts (AltFi), Rated: AAA

Metro Bank surpasses one million customer accounts less than seven years removed from launch.

Metro Bank, which became the first new high street bank in the UK for over one hundred years in 2010, now has more than a million customer accounts. The milestone was reached, fittingly, on the bank holiday Monday, when the majority of incumbent banks are closed.

Some stats from the last seven years include: being open 75 per cent longer than the average bank, saving customers over 4 million days by printing over 1 million cards instantly in-store, and preventing over 20,000 cards from being cancelled unnecessarily.

Sand. Meet head. (CB Insights), Rated: AAA

Source: CB Insights
Source: CB Insights

It goes by many names.

Hubris.
Arrogance.
Cluelessness.

It’s also worth understanding that there is no upside to saying stuff like this.

Cuz more often than not, you’ll find yourself on the wrong side of history like so many of these CEOs.

And then we’ll make slides to immortalize your cluelessness.

Europe’s largest lending and fintech event, LendIt Europe, returns to London this autumn (LendIt Email), Rated: AAA

LendIt Europe 2017 launched last night with a cocktail reception for 75 of London’s fintech elite at the Dion in St. Paul’s. The 2017 event is set to be Europe’s largest lending and fintech event, with over 1,000 participants from the UK and Continental Europe as well as North America and Asia. Taking place at the Intercontinental O2 Hotel on October 9-10, this year’s conference is expanding with the industry to cover the hottest topics in fintech including blockchain, insurtech, digital banking, and much more.

Early confirmed keynote speakers are Jaidev Janardana, CEO of Zopa, Francesco Brenna, Partner at IBM Global Business Services, and Shane Williams, co-founder of UBS Smartwealth. With six tracks of content including Digital Banking, Credit & Underwriting, Policy & Regulation, The Cutting Edge in Fintech, Innovations in Lending, and Investor Insights, this year’s LendIt Europe agenda will be the most comprehensive yet, with more details being released on www.lendit.com/europe in the coming months.

A featured component to this year’s conference, and back for its second year running, is the PitchIt startup competition. PitchIt allows innovative fintech startups from across EMEA to present their solution in front of the LendIt audience of international investors and industry leaders. The PitchIt programme has been an exciting part of the LendIt series of events, with past winners and finalists going on to secure significant investment and publicity.

Robo-adviser to provide full retirement advice in 2 hours (FT Adviser), Rated: A

Robo-adviser Wealth Wizards has launched a new automated paraplanner tool to help firms provide retirement advice in less than two hours.

Wealth Wizards said the tool generates a “regulated advice solution” made up of an annuity, drawdown or a blend of the two.

The report could then be edited by an adviser to make sure it suited the client’s needs.

Octopus-backed robo advisor Moola goes live (AltFi), Rated: A

Investors have a new robo advisor to choose from following the soft launch of Moola.

The firm, which is backed by private equity specialist asset manager Octopus, announced back in December that it had received full regulatory approval from the Financial Conduct Authority (FCA) as well that it had arranged a tie-up with Blackrock-owned ETF provider iShares.

The passive only portfolios are risk targeted and cost just 0.75 per cent per year.

What is FinTech and why Google and Facebook could be the banks of the future (Manchester Evening News), Rated: A

In total, the sector generated almost £7bn revenue last year and now employs more than 60,000 people.

Not only that, but the big players are wising up to this need for disruption with Barclays opening a flagship FinTech accelerator in May, offering 500 workspaces for start-up innovators.

HSBC and Tradeshift have also confirmed that their new ‘procure-to-pay’ product will go live in summer allowing businesses to manage their entire supply chain and working capital requirements in one place, from any device.

The innovation specialist at SoftwareONE said: “Back in the 80s, when ATMs came into play, people thought it would be the end of bank branches and jobs, but instead it freed up clerks to perform other tasks, like mortgage advice, which actually added value to the customer.

“Moving on to the current day and bank branches have now become mobile phones – or apps – people can access their accounts and information at a touch of the screen.”

AccessPay, which moved from London to Manchester, is flying after a recent £2m funding boost.

Based in City Tower, the fast-growing firm is looking to recruit 60 new staff and expand into the US after securing funds from Clydesdale and Yorkshire Banks’ Growth Finance team.

The specialist in cloud-based payments and cash products has been driving innovation in the sector since it was founded in 2012.

Fintech: What Will Bring the Most Change? (City A.M.), Rated: A

Finance professionals have two basic questions about fintech and what it means for them:

  • How will fintech positively affect their careers?
  • How will fintech negatively affect their careers? For example, will peer-to-peer (P2P) lenders replace banks as the preferred platform or intermediary for borrowing and lending? If the answer is yes, then bank loan officers and credit risk analysts should start looking for alternative careers. The particular areas of fintech that evoke this sort of existential concern include blockchain, mobile payment, P2P lending, and robo-advisers.

 

The responses of our 333 poll participants suggest that interest in blockchain technology has risen to an all-time high, with four out of 10 readers opting for that choice. Another 22% are believers in robo-advisers.

Read between the lines: What does rising inflation mean for your money? (Funding Circle), Rated: B

Inflation is rising – and is set to climb even higher by the end of the year. Official figures revealed a surprise jump in the headline rate of inflation to 2.3% in March, its highest rate for four years. And it is estimated to climb to 2.8% by the end of the year.

But there’s one area where inflation is hitting hard right now – our savings. If you can’t get a savings return higher than inflation, you’re losing money. The cash in your nest egg will be worth less and less as inflation outstrips the returns you get. And right now, no-one can get an inflation-beating rate from traditional banks and building societies with even the much-heralded new Government-backed savings bond paying less than inflation at 2.2%.

China

Chinese online lender SmartFinance targets IPO in US (Deal Street Asia), Rated: AAA

SmartFinance, a Chinese internet loans business that judges borrowers on factors including how often they charge their phones, has consulted banks about a possible U.S. listing that could happen as soon as this year.

The rapidly expanding company, which anticipates it will reach a $1 billion valuation by the end of 2017, has hired former Cheetah Mobile Chief Financial Officer Andy Yeung to help better manage investor relations and smooth the path to an eventual listing.

Jiao, who is known to colleagues by his English name UBee, told Bloomberg the company’s next step is an initial public offering, probably in the U.S. By the end of 2017, he expects to have more than 2,000 staff and facilitate as many as 4 million loans a month.

SmartFinance is more commonly known as Yongqianbao, which translates as “need money pal,” and taps into as many as 1,200 data points collected by its smartphone app to assign credit ratings for would-be customers. Making calls that go unanswered or failing to frequently charge your phone are all potential signs of a problematic borrower.

China’s Ping An to launch first overseas fintech and healthcare fund of $ 1 bln (Reuters), Rated: A

Ping An Insurance Group Co of China Ltd, the country’s largest insurer by market value, is launching its first overseas fund to primarily invest in financial and healthcare technology worldwide, underscoring its push beyond its home market.

The initial size of the so-called Ping An Global Voyager Fund will be $1 billion, the insurer said in a statement on Thursday. It will be managed from Hong Kong and led by Jonathan Larsen, an 18-year stalwart of Citigroup who joined Ping An as its chief innovation officer.

P2P Industry News (Xing Ping She Email), Rated: A

IPO boom of P2P Lending platforms is coming!
China Rapid Finance (CRF) has gone public in the US and it is also the second P2P Lender listed successfully in America, which may bring an IPO boom of Internet finance industry.

It was revealed that Qudian, a P2P lender focusing on providing consumer finance products for young people, has already submitted their IPO prospectus to the SEC, expecting to finish IPO process by the second quarter of this year. Fintech companies such as PPDAI, Lego Group Inc. Are also actively preparing for US IPO. Several giants are among the long waiting list of IPO candidates, including Ant Financial, Lufax, Zhongan Insurance and Jingdong Finance etc. In fact, the assessment value of Ant Financial has already reached to $60 billion, and once the IPO could be successful, the director Jack Ma may become the China’s richest person again with holding at least 5% shares.

Ant Financial planning to buy MoneyGram with $3.5 billion Loan
Recently, an insider revealed that Ant Financial is going to sign a loan contract valued $3.5 billion for the acquisition of an American company MoneyGram International.

The loan application has attracted 14 providers, including ANZ, Barclays, Citi, Credit Suisse, DBS, Goldman Sachs, HSBC, ING, J.P. Morgan, Mizuho Bank and Morgan Stanley. With Deutsche Bank and Societe Generale participated as leading banks, and BNP Paribas SA is the sponsor. Ant Financial has got the Green Light for the acquisition by raising the biding price by 1/3 and surpassed its rivals.

European Union

Altisource Launches Enhanced Vendor Oversight Platform to the Market (Yahoo! Finance), Rated: AAA

Altisource Portfolio Solutions S.A. (“Altisource”) (ASPS), a leading provider of real estate, mortgage and technology services, today announced the expansion of the Vendorly™ platform, an innovative vendor oversight platform for financial institutions. The platform launched last year exclusively for members of the Lenders One® Cooperative, a national alliance of independent mortgage bankers, and is now available to the broader mortgage and community bankers market outside of the Lenders One network. The Vendorly platform is designed to help streamline vendor due diligence, document maintenance, monitoring and audits.

The scrutiny of vendor oversight practices continues to be a focus of regulators. It’s important for mortgage and community bankers to have a multifaceted vendor oversight program. Through the Vendorly platform, and its vendor oversight offerings, Vendorly can help strengthen its customers’ compliance management framework and increase their operational efficiencies. Vendorly offers managed vendor oversight services, including due diligence, document management, annual assessments, information security assessments, financial condition reviews and on-site audits.

Vendorly is announcing collaboration with Secure Insight, an innovator in the mortgage industry in providing settlement agent risk evaluation, rating, monitoring and database reporting on fully vetted mortgage closing professionals. Currently servicing close to 100 clients nationwide, Secure Insight will deliver real-time risk ratings and related settlement agent data to clients through the Vendorly platform. Together, Secure Insight and Vendorly intend to develop a platform that produces a transaction-based tool with risk data on each transaction prior to a closing (and just before the proceeds are wired). It is expected that this process will provide data in a more efficient, streamlined manner and give lenders greater comfort in the protection of their money, documents and consumer data at each closing.

India

i-lend plans to venture out with funds from 50K  (India Times), Rated: A

Peer-to-peer lending startup i-lend has raised an undisclosed amount in a pre-series A round from early-stage venture capital firm, 50K Ventures. It plans to spend the money on marketing, scaling up and expanding its core team.

The Hyderabad-based company recently started operations in Bengaluru and plans to expand to a few more cities in the coming months. It is also looking to raise Series-A funds later this year.

The company has disbursed more than 600 loans since its inception in Ventures is thinking 2013 and 50K Ventures is thinking about expanding i-lend to other verticals.

Why Nomura, Google, IBM and Amazon are Investing in Indian Fintech (Edgy Labs), Rated: A

In a press release, Nomura Holdings, Inc. unveiled its initiative, called the “Voyager-Nomura FinTech Partnership in India.” Through the Voyager Program, the company invites startups and entrepreneurs with innovative Fintech solutions for the financial industry, especially capital markets and investment banking.

To further consolidate the Voyager Program, Nomura Holdings has recruited the expertise of many authoritative partners, including Google, Amazon, IBM, PwC and Internet Services Pvt. Ltd.

Middle East

Responsible finance summit focus on Islamic fintech (Middle East Association), Rated: AAA

With the retail share of responsible investment doubling to 26 per cent in 2016, ethical, responsible and Islamic fintech can support further growth to deliver the financial products, experts said at a summit in Zurich, Switzerland.

The Responsible Finance & Investment (RFI) Summit opened yesterday (May 3) with leaders from across the responsible investment, impact investment and Islamic finance sectors gathering to discuss how to promote greater awareness of and engagement within responsible finance.

The first day’s sessions focused on ethical, responsible and Islamic fintech and the power they harness which can disrupt financial services and in doing so address the inequities in society and support equitable, inclusive and sustainable economic growth.

Central America

Sr. Pago raises 4 million dollars in its Series A investment round (Crossroads Today), Rated: AAA

Sr. Pago, the first 100% Mexican financial integrator for acceptance of credit and debit cards provided for the country’s non-banking population, through the placement of its Series A has successfully raised four million dollars in capital, thus ensuring the acceleration of its operations and underpinning its long-term vision.

This raising of capital is taking place thanks to the confidence of three recognized investment funds: IGNIA and EB Capital, with headquarters in Mexico City, and an international fund with its headquarters in Miami, FL, which through this capitalization have become strategic partners of Sr. Pago, supporting the business model of this Mexican Fintech company as the only one that has the country’s non-banking economically active population as its primary market and main consumer.

Authors:

George Popescu
Allen Taylor