Wednesday February 28 2018, Daily News Digest

marketplace lending investment

News Comments Today’s main news: Virgin Money to launch a challenger bank. Equifax partners with Entersekt on digital ID authentication. 1st loan originator in UK joins Mintos. Citi drops $75M into Pagaya. IOU Financial extends Midcap credit facility. Today’s main analysis: Global fintech VC investment sets new record. Global marketplace lending investment in 2017. Today’s thought-provoking articles: Goldman Sachs’ plan […]

marketplace lending investment

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United States

 

Goldman Sachs, Adviser to the Elite, Wants to Be Your Local Bank (WSJ), Rated: AAA

In a glass-walled tower in Utah’s capital, hundreds of Goldman employees are building what amounts to one of the world’s most ambitious consumer-finance startups.

Their address, 111 Main St., stands as a symbol of the changes afoot inside the firm, better known as an elite adviser to big companies and billionaires. Struggling to make money in the postcrisis world, Goldman is pushing into businesses it once dismissed as pedestrian and gimmicky, assembling a suite of banking products for the middle class it hopes will power growth.

Goldman 18 months ago began making online loans of a few thousand dollars under the brand Marcus, named after founder Marcus Goldman. Individuals once needed $10 million to get the attention of Goldman’s elite private bankers. Today, customers can open a Marcus savings account with as little as $1.

 

Where’s the best place to open a small business? (The Sacramento Bee), Rated: A

LendingTree said Sacramento ascended to the top of the list in a study that included data from more 80,000 queries submitted by new small business owners seeking loan offers through LendingTree’s small business loan marketplace to determine where businesses tend to do the best.

Sacramento was one of three California cities on the 10-best list, joining Fresno at ninth and Los Angeles at 10th. Following Sacramento on the list were Grand Rapids, Mich; Portland, Ore.; Knoxville, Tenn.; Denver; Seattle; Tulsa, Okla; Albuquerque, N.M.; Fresno; Los Angeles; and Oklahoma City, respectively. Los Angeles and Oklahoma City tied for 10th.

Cincinnati topped the list of the 10 worst cities to start a new small business. No California cities were on the 10-worst list.

Fiserv Consumer Survey Finds Digital Experiences Factor in Life’s Most Important Financial Decisions (BusinessWire), Rated: AAA

For instance, four of the top five loan payment methods are now electronic, and 21 percent of millennial investors use a robo-advisor service to make investments.

Affluent Consumers and Financial Advice
Human interactions remain an important part of financial advice, especially for the 34 percent of consumers with at least $100,000 in household investable assets. Fifty-eight percent of these affluent consumers work with a financial advisor. Among those without an advisor, only 11 percent report high interest (8-10 on a scale of 0-10) in using one. At the same time, 32 percent of affluent consumers who invest their own money grade their knowledge and expertise as a “C” or lower, suggesting an opportunity to bridge the gap with a hybrid of human and digital advice.

Among all consumers who invest on their own, only 8 percent use a robo-advisor service. However, use of such a service is much more likely among millennials (21 percent) and urban consumers (18 percent).

Rates, Fees and Service Prevail
Topping the list of selection factors among those with at least one loan are interest rates (83 percent) and low fees/service charges (83 percent), followed by customer service (75 percent), company reputation (70 percent), and knowledge of staff (65 percent). Sixty-five percent of consumers say prior experience with a lender is important.

Many consumers expressed willingness to try new ways of interacting with their lender, if there’s a benefit. For instance, if it makes the loan process faster, more than half of consumers would be willing to use a mobile device to e-sign loan documents (56 percent), take and upload photos of loan documents (54 percent), and verify their identity with a photo (51 percent). Forty-two percent of consumers indicate they would be willing to provide access to their financial information by providing their credentials to other online banking applications, up from 32 percent in 2016.

Digital channels, especially mobile, are now leading ways of communicating with a lender, although context matters based on the interaction. A lender’s mobile app is the preferred way to check when a next loan payment is due (21 percent), check the balance term (20 percent) and request a payoff (17 percent), among consumers who have conducted each of these activities in the past six months. For account questions, consumers significantly favor speaking live with a representative via phone (21 percent) over using an automated voice response system (12 percent), e-chat (11 percent) or the mobile app (11 percent).

As online lending grows up, banks work to strengthen partnerships (Tearsheet), Rated: A

Marketplace lending as an industry is hitting its stride. Some platforms are becoming profitable, some are diversifying, new players are entering the market with new business models and the competition is heating up. But that means banks need to start strengthening ties with their online lending partners.

As more consumer-facing fintech companies are learning, that’s best done by building products that make people’s lives easier.

 

 

Fintech Startups Need Industry Partners to Thrive, Report Says (Bloomberg), Rated: B

More than 75 percent of fintech executives surveyed in a new report said their primary business objective is to collaborate with traditional firms, such as banks and insurance companies. Only 18 percent said the main goal was to compete with the established players.

According to the World FinTech Report 2018 from consulting firm Capgemini and corporate networking website LinkedIn Corp., most of the startups are likely to fail if they don’t build partnerships, despite raising more than $110 billion since 2009. The survey, published Tuesday, was based on the responses of 110 global financial technology firms.

Varo Money is bringing bank fees and financial health into its marketing (Tearsheet), Rated: A

Varo Money has been targeting customers of big banks whose fees they’re tired of having to understand and pay. Despite its appeal to potential customers to switch to Varo, its ads don’t call out specific companies, as some of its peers do.

Coming to your banking app soon: Predictive analytics (Bankrate), Rated: A

Bank of America will let mobile banking customers use its new digital assistant, Erica, in March. Besides helping consumers complete routine tasks like transferring funds, Erica will offer financial advice tailored for each user.

If you have a low balance and you’ve spent a lot of money, Erica might warn that you are in danger of overdrawing your checking account. Or she could share opportunities to save additional money.

Wells Fargo has made providing customers with advanced digital tools a top priority. In February, its 17 million mobile users with consumer deposit accounts found themselves with a new predictive banking feature.

Wells Fargo confirmed that these new mobile capabilities are powered by Personetics, a company providing banking solutions that anticipate what consumers might need in the future. Personetics also powers Royal Bank of Canada’s free automated savings tool, NOMI Find & Save, which gives mobile banking customers customized tips and alerts.

Companies like Saylent are trying to help banks make sense of their data resources by identifying the customers they should focus on. Saylent gives customers tools to target people that are shopping for a car loan or a mortgage. The platform will be used by institutions like BankFirst Financial Services, a community-based institution headquartered in Mississippi.

B of A is latest big bank to announce aggressive branch expansion (American Banker), Rated: A

Bank of America plans to open more than 500 branches over the next four years as part of a large-scale investment in retail banking.

The $2.28 trillion-asset company said in a press release Monday that it will hire more than 5,400 employees as part of the expansion. The Charlotte, N.C., company did not specify where the new branches will be located, nor did it say how much the proposed brick-and-mortar expansion plan would cost.

Don’t write off branch banking yet, says KeyBank Colorado exec (Denver Business Journal), Rated: B

Customers “want to talk to people. They want to be guided,” says Michael Walters.

Fintechs’ charter hopes may lie with new FDIC board (American Banker), Rated: A

Among federal bank regulators, the Office of the Comptroller of the Currency has been the most active on fintech chartering options. But another agency, the Federal Deposit Insurance Corp., may provide crucial guidance for fintechs in the shorter term.

The FDIC still has pending an application by Square for an industrial loan company, a limited-purpose bank typically chartered in Utah that receives deposit insurance.

Can Crowdfunding Mortgage Down Payments Make Homes Affordable? (SavingAdvice), Rated: A

A lot what’s being called crowdfunding is actually more like matching funds or subsidies for down payments. The growth of these options seems to be a sign of the times — so few people can afford to buy homes nowadays that the industry has gotten creative.

Unison Financial (formerly known as Rex Home Buyer) offers down payment subsidies in exchange for equity stakes in the home. The program requires that the home buyer put up a down payment of at least 10%.

HomeFundMe provides incentives for individuals to seek out grants that are actually matching funds on down payments. Although the match ratio is impressive, two-to-one, the total grant limited to $2,500 — do the math and you see that the buyer would need to come up with another $5,000 at that maximum amount.

With most residential mortgage lenders requiring minimum down payments of at least 5%, that limits the buyer to homes worth no more than $150,000. That’s well below the average home price in the U.S. — and even beneath affordable housing program prices in many cities.

HOW INVESTING IN CROWDFUNDED REAL ESTATE IMPACTS YOUR TAXES (The College Investor), Rated: A

There are two types of investors in a crowdfunded real estate investment: Accredited and non accredited.

An accredited investor has more opportunities to invest than a non accredited investor but they also bear more risks. SEC Rule 501 of Regulation D defines accredited investor.

These investors have an annual income of least $200,000 for the previous two years and a net worth of more than $1 million.

Non accredited investors buying shares of a fund have the simplest tax impacts.

They receive a 1099-INT from the crowdfunding real estate company they are investing with and are taxed at their ordinary income tax rate.

If the investor is invested in multiple funds, their investments can be aggregated into one 1099-INT rather than receiving an individual 1099-INT for each fund.

For investors who are investing in equity investments, things get more complicated. These investors will receive a K1 tax form. A K1 is for income through business partnerships.

PeerStreet Named a Finalist in Top Real Estate Platform Category in the Second Annual LendIt Fintech Industry Awards Competition (BusinessWire), Rated: B

LendIt Fintech recently announced that they have selected PeerStreet as a finalist in the Top Real Estate Platform category for the LendIt Fintech Industry Awards.

PawnGuru pulls in $ 2.5 mln Series A (PE Hub), Rated: A

PawnGuru, an online marketplace connecting pawn shops and consumers, today announces the close of a $2.5 million Series A. With this funding, PawnGuru intends to expand its network of shops within the US, as well as to international markets, giving consumers worldwide the power to buy directly from local pawn shops online.

 

5 Financial Mistakes That Push Striving Startups Into Bankruptcy (Newsmax), Rated: A

  1. Think Big/Start Big Syndrome – You are permitted to think big but start small to have adequate fund to invest in other areas of the business. When you don’t properly handle these areas, your business might join the 90% businesses that never survived after 5 years.
  2. Lack of Financial Mentorship
  3. Inability to Utilize Viable Loan Options – Bank loans, equipment loans, invoices financing, car title loans, peer-to-peer lending networks and more, are avenues small business owners can obtain loans. It’s however pertinent to get information and evaluate the cost implications of taking a loan to finance your business.
  4. Under-utilization of Digital Technology – In terms of advertising, marketing, automation, time management, human resource functions, cloud computing, data management, blockchain technology etc. digital technology has infused speed and efficiency which has resulted in reduced cost to carryout daily business operations.
  5. Poor Recording of Cash Flow

Understanding the International Student Lending Ecosystem in the U.S. (Lend Academy), Rated: A

There are almost 1.2 million international students currently studying in the United States. They hail from countries all over the world with almost a third – more than 360,000 – coming from China and just over 205,000 coming from India. South Korea and Saudi Arabia follow behind dropping down to just over 70,000 and 55,000, respectively. With education costs often approaching six figures and beyond, an international student loan ecosystem has emerged both in the U.S. and abroad to serve the educational funding needs of this demographic.

Navigate your student-loan maze with this Philly-made calculator (Technical.ly), Rated: B

From his home office in Fishtown, Temple University grad Mason Gallik, 23, is hoping his college debt calculator can help others from making bad choices.

“It’s about being realistic about your decisions,” said Gallik, the founder of LoanMajor. “Sometimes it’s smart to look at college from a financial side and not just an emotional one.”

Currently, the company’s source of income is through affiliate links with loan marketplace Credible. For every visitor that LoanMajor leads to Credible, they get a fee. Another source of revenue Gallik hopes to set up is through affiliate links to credit card companies and banks.

United Kingdom

U.K.’s Virgin Money to Launch Digital Challenger Bank (Bank Innovation), Rated: AAA

U.K.-based lender Virgin Money said it will offer current accounts and savings products.

In its earnings call today, Virgin Money said it will begin testing these products later in the year and has already spent £38.3 million ($53.3 million) over the past year developing this digital bank.

Amigo Loans hires JP Morgan and RBC to prepare 500 million pound London IPO (Reuters), Rate: AAA

British subprime lender Amigo Loans is preparing for a stock market float in London that could value the consumer credit firm at more than $700 million.

1PM Joins Online Business Loan Marketplace For Retail Investors Mintos (London South East), Rated: AAA

1pm PLC said Tuesday that it has entered into a cooperation agreement with AS Mintos Marketplace to be a loan originator on its online loan marketplace.

The AIM-listed financial services provider to UK businesses said that it is the first loan originator from the UK to join the Mintos marketplace, which already has about 30 other loan originators globally.

British banks ordered to help people pay off credit card debts (Reuters), Rated: A

Britain’s Financial Conduct Authority ordered banks on Tuesday to take steps to help people with persistent credit card debt to keep up with repayments.

The FCA’s new rules will, however, will still allow banks to ultimately suspend a credit card if a customer fails to make any progress in repaying debts.

European Union

MIFID II aids RoboAdvice (AltFi), Rated: A

Unfortunately, in the current marketplace many opaque structures lead to charges that even a Finance degree can’t help unravel.  But technology is here to help and most of the new Robo-Advisors have simple and transparent fee structures enabling savers to compare different product offerings quickly and easily.

Whilst many in Financial Services have been critical of the growing ‘regulatory burden’ the changes MiFiD II will bring should be net positive for end users and ultimately society. Although legacy providers are likely to see revenues and margins shrink.

International

Equifax is partnering with a digital ID verification company (Business Insider), Rated: AAA

US credit bureau Equifax has formed a partnershipwith South Africa-based Entersekt, a company specializing in customer authentication and device security.

Fintech Pagaya Receives $ 75 Million in Debt Financing from Citi (Crowdfund Insider), Rated: AAA

Pagaya Investments, a Fintech company in the asset management space, has received $75 million in debt financing from Citi. Simultaneously, Pagaya announced the creation of the “Opportunity Fund” to meet growing institutional interest in consumer credit as an asset class.

Global Venture Capital Investment in Fintech Industry Set Record in 2017, Accenture Analysis Finds (BusinessWire), Rated: AAA

Fintech financing rose 18 percent in 2017, to US$27.4 billion, with the value of deals in the U.S. jumping 31 percent, to $11.3 billion. Deal values almost quadrupled in the U.K., to US$3.4 billion, and soared nearly fivefold in India, to US$2.4 billion. The number of fintech deals also rose sharply, from just over 1,800 in 2016 to nearly 2,700 in 2017, underscoring continued appetite from investors scouring the globe for innovation in insurance, banking and capital markets startups.

“Much of the growth, particularly in the U.S. and UK, has been driven by big new investment flows from China, Russia, the Middle East and other emerging economies,” said Julian Skan, senior managing director in Accenture’s Financial Services practice.

“Much of the growth, particularly in the U.S. and UK, has been driven by big new investment flows from China, Russia, the Middle East and other emerging economies,” said Julian Skan, senior managing director in Accenture’s Financial Services practice.

India, US, UK drove global growth

Kabbage Inc, a U.S. online lender for small businesses, alone raised US$900 million in three separate rounds in 2017. Online lender Social Finance Inc, also known as SoFi, raised US$500 million in February, and LendingPoint raised US$500 million from a credit transaction in September. As startups grow and their businesses mature, funding rounds have increased in size, while some companies have opted to use credit facilities to speed up their expansion.

In the U.K., digital insurance distributor BGL Group raised US$900 million, pushing overall fintech investments in the country to an all-time high of US$3.4 billion. Payments venture TransferWise had the second-largest fundraising in the U.K., raising US$280 million.

India’s digital payments startup Paytm received US$1.4 billion in venture capital, helping drive fintech fundraising activity in the country to nearly five times the 2016 levels. The number of fintech deals in India increased 65 percent over 2016.

More deals in China, fewer megadeals

Mega fintech deals that had catapulted China to the top destination in the world for venture capital money in 2016 fell in 2017, as investors pulled back after pouring billions of dollars into giant-sized transactions. Fintech funding in the country declined 72 percent in 2017, to US$2.8 billion, from a record US$10 billion in 2016, when several companies – including Ant Financial and wealth management platform Lufax – had multi-billion-dollar financing rounds. The average deal size in China in 2017 was US$19 million, down from US$186 million in 2016, though the country still had large transactions, such as the US$440 million that real estate broker Homelink raised in April and the US$290 million that online finance firm Tuandai raised in June.

P2P and marketplace lending equity investments recover in 2017 to set new record (AltFi), Rated: AAA

Deals in the sector slowed down in 2016 with a year on year decrease of 12.8 per cent, possibly as a result of Lending Club’s annus horribilis. Total amount invested fell from $8.6bn in 2015 to $7.5bn the next year.

However, investment rebounded in 2017 to reach $8.9bn, a year on year increase of 18.6 per cent. The top ten P2P and marketplace Lending deals in 2017 raised half of the total funding for the year, raising a combined total of $4.4bn. The largest deal in 2017 was the previously mentioned $1.2bn Series B round to Lufax, led by COFCO with co-investment from China Minsheng Bank and Guotai Junan Securities.


Creditcoin Turns Digital Wallets into an Investment Market (Coinspeaker), Rated: A

In response to this, two reputed fintech innovators, Gluwa and Aella Credita have joined forces to launch Creditcoin, an inter-blockchain P2P lending market that operates across distributed ledgers ensuring permanent record of transactions that cannot be alter or tampered with.

Allianz Investment Arm Co-Leads Funding Round in Fintech C2FO (Bloomberg), Rated: B

Financial technology startup C2FO raised $100 million in funding in a new round led by the investing arm of global insurance and asset management giant Allianz SE as well as Abu Dhabi’s Mubadala Investment Co.

MSTS Taps World Fuel VP As Head Of Business Development For APAC (Payment Week), Rated: B

Australia

Fintech business lenders to self-regulate (Financial Review), Rated: AAA

A lack of transparency around fintech borrowing costs for small businesses has prompted the industry committing to adopt a code of conduct and standardised interest rate and fee disclosures.

The fintech sector hopes moves to self-regulate will help start-ups win trust and avoid concerns that helped prompt the royal commission into the banks.

The Australian Small Business and Family Enterprise Ombudsman, FinTech Australia and the Bank Doctor, an SME advocate, will drive start-ups to improve disclosures that will allow small business customers to compare total costs, understand obligations and penalties if payments are missed, and ensure disputes are dealt with quickly and fairly.

India

Extending access to credit: Are alternate finance platforms creating tangible impact? (ET Rise), Rated: A

In its ‘Consultation Paper on Peer to Peer Lending’, the RBI highlighted how these web-based platforms are providing easier access of credit to small entrepreneurs by bringing prospective borrowers and lenders together. With more individuals lending to one another, interest rates for borrowers are going down, even as the increased availability of affordable credit stimulates greater financial activity and drives business growth. As a result, consumer segments such as MSMEs – until now either com ..
Borrowers from tier-2 and tier-3 cities comprised 20% and 17% of the total number of loans disbursed. New-to-credit borrowers comprised 35% of fulfilled borrowers on the platform, while those with poor credit ratings accounted for 10% of the overall number. Most strikingly, an analysis of credit bureau reports revealed how only 2.5% of the borrowers from tier-3 cities who received funds from the platform got any loans from other banks or financial institutions after the Faircent loan, underlining the major credit gap that the online platform is plugging within the economy.
Asia

Equity crowdfunding in Japan poised to grow fivefold this year (Asian Review), Rated: AAA

Crowdfunding campaigns that offer stock in exchange for capital are set to swell this year in Japan as the prospect of high returns draws investors to a relatively new channel for fledgling companies.

Indonesia’s P2P firm UangTeman likely to raise up to m Series B (Deal Street Asia), Rated: A

Indonesian peer-to-peer lending platform UangTeman said it is set to raise a Series B financing round by mid-2018, claiming it would be one of the largest such rounds for a fintech firm in Southeast Asia.

Canada

IOU Financial Extends Credit Facility with Midcap Financial (Cision), Rated: AAA

IOU FINANCIAL INC. (“IOU” or “the Company”) (TSXV: IOU), online lender to small businesses (IOUFinancial.com), announced today that it has modified and extended its secured credit facility (the “Credit Facility”) with MidCap Financial, (“Midcap”) until December 31, 2020. The amount of the Credit Facility is USD $20 million, with a term portion equal to USD $15 million and a revolver amount of USD $5 million.

IOU and Midcap have further agreed to allocate USD $1 million from the Credit Facility amount of USD $20 million, to support Canadian loan originations. This will be formalized in a separate amendment to this facility.

Authors:

George Popescu
Allen Taylor

Millennials and Alternative Lending

millennial credit

People born in or after 1981 are referred to as “Generation Y,” or “Millennials.” Putting tags aside, the fact is one of the largest generations in history is about to move into its prime spending years and, therefore, it is not surprising at all as to why they are the center of every business plan and strategy. […]

millennial credit

People born in or after 1981 are referred to as “Generation Y,” or “Millennials.” Putting tags aside, the fact is one of the largest generations in history is about to move into its prime spending years and, therefore, it is not surprising at all as to why they are the center of every business plan and strategy. Financial institutions and online lending platforms are making a beeline to cater to this demographic.

Millennials in Numbers

Roughly, millennials account for 1.7 billion individuals globally. They represent approximately 25 percent of the entire world population and will account for 75 percent of the workforce by 2025. In the United States, there are 92 million millennials as compared to 77 million baby boomers making millennials the largest generation in US history. More importantly, 63% of global millennials do not have a credit card, and 70% of them feel their relation with banks is only transaction-based.

Opportunities for P2P lenders

Digital engagement is at an all-time high among millennials, and they are savvy online consumers by default. This demographic offers myriad opportunities for alternative lending companies for the following reasons:

  • Technology Disruptors: Millennials are technology driven and wish to do all their activities digitally. This gives a lucrative opportunity to online lending companies to target them by serving innovative yet tailored products. According to the Consumer Mobility Report, it was observed that nearly one in six (16 percent) in the US are considering options other than cash and checks for doing transactions. The overreliance of this generation on technology works in favor of online lenders as they are able to structure products which are accessible by millennials on their smartphones or tablets.
  • Drowning in Debt: According to HSBC’s 2016 report, the average cost of studying in the US is approximately $33,215, and with the increasing cost of a college degree, millennials are burdened with staggering student loans. It was observed that average debt per graduate student is $57,600, with an average default rate of around 11.8%. Students are drowning in debt and are putting off future plans like buying a home or getting married. A trillion dollar market is in upheaval, as these millennials will look for cheaper and flexible student loans.
  • Lack of Trust: According to a three-year study conducted by Scratch/Viacom Media Networks, it was observed that 71% of millennials would rather visit a dentist than a bank. And another 33% of millennials are of the view that they won’t need banks in the coming five years. Also, 33% of them are willing to switch their banks within 90 days. These loyalty numbers don’t augur well for traditional financial institutions.
  • Low Credit Score or No Credit Score: Millennials are increasingly finding it difficult to secure lending from traditional banks because they either don’t have any credit score or have a low credit score. This is a vicious cycle as banks only lend to individuals with a good FICO score, but you only get a good FICO once you secure and pay off a loan.
  • Preference for Liquidity: As per the PricewaterhouseCoopers and George Washington University’s Global Financial Literacy Excellence Center report, it was found that in spite of having little knowledge about finance; merely 27% of millennials are seeking financial help from professionals, and 42% rely on payday loans for liquidity.

A snapshot on millennial borrowing:

Source: Zoot Enterprises, Inc.

Strategies Used by P2P Lenders

The evolution of our financial system can be gauged from the fact that fintech startups targeting millennials have raised billions in funding from VCs and other institutional investors. These online lenders have differentiated themselves in the following manner:

  • Credit Worthiness – Millennials struggle with their credit score as they usually have a very short financial history. Online lenders understand that a millennial can’t be evaluated on the basis of a single number. They have built their lending algorithms on other qualitative characteristics like social media usage, college degree, and location. Even the time of the loan application is a relevant factor.
  • Banks Going Down the Fintech Path – Fintechs are nimble organizations and are able to react to customer demand on an almost real-time basis. Banks are slow-moving mammoths but have the advantage of ultra-low cost of funds. Instead of competing, many startups have partnered with banks for either becoming their tech partners or onboarding them as their financial partners for lending to millennials. Case-in-point is the OnDeck and JP Morgan partnership for the bank’s SMB clientele.
  • Mobile – Lenders can now disburse loans in minutes. The applicant can actually now apply through his smartphone without even leaving his home. Their systems allow for uploading and verification of all applicable loan documents digitally. This removes any hassle of physically going anywhere for your credit requirements. As compared to weeks of waiting for a response from a brick-and-mortar bank with a fintech lender on your side, you can decide to buy your dream house in a day.
  • Trust Factor – According to Experian’s latest research, millennials are embracing online lenders for their comfort, speed, and convenience.

a) 47 percent of millennials said they are likely to use alternative finance sources in the near future.
b) 57 percent reported that they are willing to use alternative companies and services that innovate to meet their needs.
c) 13 percent said they’ve already taken out a loan from an alternative or non-bank lender.

Being a young startup is actually working in the alternative lender’s favor as it helps them disassociate from traditional bankers who have always been considered as behind-the-curve and untrustworthy. They are leveraging their hip and social image to attract image-cautious millennials.

Conclusion

Originally, traditional banks seemed to have missed the bus in understanding and serving the millennial market. But with acquisitions, strategic partnerships, and massive tech investments, banks like JP Morgan and Goldman Sachs are reinventing themselves. On the other side, many clones of the same underlying business model are springing up in the online world. This herd mentality has led to the commoditization of innovation and the novelty factor. It is imperative that the alternative lending sector matures and consolidates to ensure its continued growth and success.

Author:

Written by Heena Dhir.

Thursday October 19 2017, Daily News Digest

China p2p lenders

News Comments Today’s main news: Affirm wants to offer financial advice. RateSetter to launch IFISA. SoFi announces Entrepreneur Program 2.0. Prosper tightens guidance on consumer loan ABS. Qudian priced IPO above range. IBM partners with 8 banks on blockchain trade platform. GuiaBolso raises $39M in Brazil. Today’s main analysis: U.S. banks get aggressive on growth. Party on, Chinese consumers. Today’s thought-provoking articles: […]

China p2p lenders

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News Summary

United States

Affirm Wants To Move Beyond Simple Lending to Provide Financial Advice (WSJ), Rated: AAA

Online financial services company Affirm Inc. wants to move beyond simple lending to provide financial advice to customers, its founder and chief executive said Wednesday.

Additional services Affirm wants to provide would include helping some consumers “get over this hump” of too much debt.

SoFi Announces Entrepreneur Program 2.0 (Crowdfund Insider), Rated: AAA

Online lending platform SoFi recently announced the launch of its Entrepreneur Program 2.0. The company reported that original program was launched four years ago and since then has helped four classes of 70 companies founded by the lender’s members to get off the ground with its coaching and resources.

SoFi then revealed some improvements, which would benefit the future classes.

  • More Eligibility: The program is now open to all members working as a founder or co-founder either full or part-time on an innovative and scalable tech-enabled business.
  • SoFi Offers Investment: The lender will give equity capital to each of the members of the Class. For this coming Class, this amount will be $25,000 per company.
  • New Curriculum.
  • Alumni engagement:
  • Community engagement: SoFi will engage our 380,000-plus members in the accelerator process and share the incredible companies their fellow members are working on.
  • Dedicated resources:

Prosper tightens guidance on consumer loan ABS (IFRE.com), Rated: AAA

Online lender Prosper Marketplace pulled in guidance on its US$501.05m consumer loan ABS on Wednesday, with all three of the deal’s tranches heard to be at least twice covered.

Guidance was announced at 85bp area over EDSF on the largest 0.85-year A-/A tranche (Fitch/Kroll) and 165bp-175bp over iSwaps for the US$77m 2.14-year BBB-/BBB tranche.

Guidance on the 2.89-year Class C, unrated by Fitch and rated B+ by Kroll, is 340bp area over iSwaps.

Those levels were tightened from whispers circulated at 85bp-95bp over EDSF, 180bp-190bp over iSwaps and mid-300bp over iSwaps, respectively.

US banks abandon crisis-era taboo of growth (Financial Times), Rated: AAA

“I’m happy to say our focus has shifted beyond the implementation of regulations . . . to growth,” said Mr Chavez.

No other big US bank put it that bluntly, but the sentiment seemed to be shared. With the notable exception of Wells Fargo, still trying to shake off the damage of its fake-account scandal, executives were making encouraging noises about new businesses and top-line expansion as they presented third-quarter results.

At Citigroup, for example, which shed about $500bn of assets in the years after the crisis, CFO John Gerspach talked about growth in credit cards in Mexico and wealth management in Asia. At Bank of America, which added about $90bn of assets over the year, CFO Paul D’Onofrio said he welcomed any “refinement” to rules that “allows us more access and control over our capital [and] liquidity in support of responsible growth”.

Source: Financial Times

At Morgan Stanley, James Gorman said the bank “won’t be shy” about doing deals such as last month’s acquisition of Mesa West Capital, a commercial real estate platform — prompting one analyst to remark on the chief executive’s “more aggressive” tone.

“We’re not looking for any grand splash here, but we’re open for business opportunistically,” said Mr Gorman.

Source: Financial Times

Now the mood has changed in Washington. Few laws have been ripped up, as yet, despite Donald Trump’s early pledge to “do a number” on Dodd-Frank. But new figures in agencies such as Randy Quarles, appointed this month to the most powerful bank regulatory job in the country, should make a real difference. Trade groups say they are expecting him to take a looser grip on the banks than Daniel Tarullo, the previous supervisor-in-chief at the Federal Reserve.

Banks Need Next-Generation KYC to Confront Today’s Digital Identity Crisis (Dealbreaker), Rated: AAA

Cybercrime has evolved to exploit gaps in enterprise data security and disrupted identity theft in the process. It has spawned a parallel black market on the Dark Web, where criminals transact in bitcoin to anonymously trade stolen data, minting hundreds of billions in annual and often untraceable proceeds for sellers[1].

Javelin Strategy & Research’s 2017 Identity Fraud Study said ID theft hit a record high in 2016, victimizing 15.4 million people, or roughly two-million more victims than the previous year[2]. ID theft is generally a precursor to credit card fraud, which attributed to worldwide losses of $21.84 billion in 2016[3].

Card issuers incurred 72%, of those losses last year, with card fraud expected to syphon a grand total of $88.87 billion out of the global financial system over the next four years.

Understanding the vast supply-and-demand mechanism of the Dark Web economy is integral to KYC strategy for banks. The Center for Strategic and International Studies pegs the worldwide cost of cybercrime at $445 billion a year[5]. According to the 2016 Cost of Cybercrime Study, data breaches, cyber-fraud and related disruptions impact U.S. organizations the hardest, with the average cyberattack generating $17.36 million in costs. Of the 4149 data breaches and 4.2 billion records exposed in 2016[6], as reported by cybersecurity firm RiskBased Security, the U.S. comprised 47.5% and 68.2% of those numbers, respectively.

Feedzai closes $ 50M Series C to help banks and merchants identify fraud with AI (TechCrunch), Rated: A

Feedzai is announcing a $50 million Series C this morning led by an unnamed VC with additional capital from Sapphire Ventures. The six year old startup builds machine learning tools to help banks and merchants spot payment fraud.

With 60 clients including major financial institutions like Capital One and Citi, Feedzai remains optimistic that allowing savvy customers to build on top of its service is the key to longevity.

Affirm CEO: Credit Security Is Centuries Behind (WSJ), Rated: A

Women who own businesses find bank loans harder to get (Fox Business), Rated: A

A survey of businesses conducted this summer and released Wednesday found that 30 percent of companies owned by women were able to get bank loans during the previous three months, compared to half of all the owners surveyed.

Only 21 percent of the women surveyed said they expected it will be easy to raise debt financing — essentially loans — in the next six months, compared to 44 percent of all companies. Fewer of those owners said they were likely to pursue a bank loan, at 67 percent compared to 75 percent of all owners.

The number of U.S. businesses owned by women grew nearly 27 percent from 2007 to 2012, rising to nearly 10 million from 7.8 million, according to the most recent Census Bureau figures. The total number of businesses grew less than 2 percent.

Bank of America found this year that 11 percent of owners who are women applied for loans the past two years versus 13 percent of owners who are men. Some banks have realized they need to be more aggressive in lending to businesses owned by women; Wells Fargo set a goal of $55 billion in loans by 2020, but surpassed that number in 2013, spokesman Jim Seitz says.

iCapital and CAIA Partner On Alternative Investment Education Initiative (FIN Alternatives), Rated: A

Financial technology platform iCapital Network has partnered with the Chartered Alternative Investment Analyst (CAIA) Association on a sweeping education initiative aimed at increasing knowledge about alternative investing.

As part of the new initiative, iCapital will offer CAIA’s Fundamentals of Alternative Investments program to its member network of more than 1,900 registered investment advisors, broker-dealers, private banks and family offices.

Harvard Partners LLC Announces Investment Interests in Commercial Finance (Lessors), Rated: A

Harvard Partners CEO Bill Verhelle announced his firm is seeking to invest in, or purchase, small innovative U.S.-based commercial finance firms. Interest is not limited to companies already in the equipment leasing and finance industry, though he will be at that industry’s annual convention next week.

Harvard Partners is specifically interested in companies with demonstrated experience and capable management teams employing new business models. Harvard Partners’ first equity investment this year, along with another private equity investor, involved a West Coast business lending and equipment finance firm with advanced financial technology (fintech) capabilities.

Top of the Morning (Axios), Rated: B

Another sovereign wealth fund is opening shop in Silicon Valley. This time it’s Abu Dhabi-based Mubadala Investment Co., which also is launching a $400 million direct VC fund (in partnership with SoftBank) and a $200 million VC fund-of-funds.

  • “It’s more than just setting up an office — it’s a real committed and genuine intent to be an active member of this community,” Mubadala’s Ibrahim Ajami tells Axios’ Kia Kokalitcheva, who scooped the news.
  • He adds that the direct fund shouldn’t compete with SoftBank Vision Fund, into which Mubadala has pumped $15 billion, given that it will be looking at earlier-stage deals. Get the full story.

REALTYSHARES REVIEW: AN EASY WAY TO START INVESTING IN REAL ESTATE (The College Investor), Rated: B

Real estate crowdfunding is one of the fastest growing trends in the investment community. They provide obvious value to investors who would otherwise be priced out of commercial and private equity deals. RealtyShares is one of these crowdfunding platforms, but they have a unique niche.

They work with both institutional investors and “the crowd” of smaller investors to find a wide range of projects.

To invest in RealtyShares, you need to be an accredited investor.

What Types Of Investments Does RealtyShares Offer?

  • First position liens
  • Preferred Equity
  • Mezzanine Debt (aka Bridge Loan)
  • JV (Joint Venture) Equity

Your minimum investment is $5000, and you’ll pay a 1% investment fee on equity investments, and up to a 2% interest rate spread on debt.

Private Lending Association Partners With Deal-Flow Company (Broadway World), Rated: B

American Association of Private Lenders (AAPL) has partnered with Private Money Lending Guide (PMLG). The partnership brings together an association that provides education, ethics and networking opportunities for private money lenders and a tool for deal-flow that enables borrowers and lenders to find the appropriate counterpart for their deals.

Ken Rees, CEO of Elevate, to Speak at Money 20/20 Conference (BusinessWire), Rated: B

Ken Rees, Chief Executive Officer at Elevate, a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, will speak on a panel at the Money 20/20 conference in Las Vegas on October 24, 2017. The panel will focus on the future of alternative lending, including fintech’s potential to partner with banks to create better outcomes for both parties. The panel will also tackle the challenges that alternative lenders face now, and how to use innovation and creative solutions to address them.

SESSION: Reinventing Consumer Lending: More Access, New Models & Overcoming Big Challenges

WHEN: Tuesday, October 24, 2017 at 3:10-4:00pm PT

WHERE: San Polo, The Venetian Level 3 – The Venetian Las Vegas, 3355 S Las Vegas Blvd, Las Vegas, NV 89109

United Kingdom

RateSetter plans to launch IFISA this tax year (P2P Finance News), Rated: AAA

RATESETTER has said it plans to apply to HMRC for ISA manager status and launch its Innovative Finance ISA (IFISA) before the end of the current tax year.

RateSetter said on Wednesday that it will keep lenders updated via its website but also gave people the option to sign up to its IFISA mailing list.

FCA identifies low P2P usage but fewer signs of consumer vulnerability (P2P Finance News), Rated: A

JUST 1.4 per cent of the adult population are using peer-to-peer lending or crowdfunding but the product has among the proportionally lowest levels of financially vulnerable customers, figures from the Financial Conduct Authority (FCA) suggest.

The data is revealed in the City watchdog’s financial lives survey, a poll of almost 13,000 consumers about the products they hold and their experiences of them.

The research shows just 180 out of 12,865 adults, or 1.4 per cent, surveyed said they have used a crowdfunding or P2P product, which the FCA says works out as 700,000 adults when weighted against the UK population.

Of those who are using P2P, 74 per cent of respondents identified themselves as male and 25 per cent said they were female.

Wellesley & Co: Get ready for proptech 3.0 with “elite survivors” (P2P Finance News), Rated: A

WELLESLEY & Co has cited predictions that there will be consolidation in the proptech sector, as firms drop by the wayside leaving “a crop of elite survivors”.

The alternative property lender said it expects the rest of 2017 and early 2018 to be “exciting for the progression of property technology” with lots of M&A activity.

LendingCrowd launches Refer a Friend promotion (AltFi), Rated: A

LendingCrowd, the peer-to-peer (P2P) lender, has launched a £50 “refer a friend” promotion as it continues to experience strong demand from borrowers across the UK.

Following a record quarter for new loans and the rising popularity of its tax-free* Innovative ISA (IFISA) accounts, investors on the P2P lending platform will be given a £50 bonus when each friend they refer invests at least £2,000. Each friend will also receive a £50 referral reward.

China

China’s Qudian IPO seen priced above range (Reuters), Rated: AAA

Online micro-credit provider Qudian Inc’s (QD.N) initial public offering could be priced above the expected range of $19-$22 per American depositary share, sources familiar with the matter told Reuters.

The offering could give the company, backed by Alibaba’s (BABA.N) banking unit Ant Financial, a market capitalization of more than $7 billion and raise over $825 million.

Party On, Chinese Consumers (Bloomberg), Rated: AAA

Qudian Inc., operator of a loan platform for consumers and small businesses, jumped 22 percent on its New York trading debut Wednesday. The Beijing-based company raised $900 million in an initial public offering on the eve of China’s 19th party congress, pricing its shares above the high end of its indicative range. It’s the largest U.S. listing by a Chinese company since the $1.4 billion sale by logistics company ZTO Express (Cayman) Inc. in September 2016.

Qudian’s experience stands in sharp contrast to that of China Rapid Finance Ltd., a peer-to-peer consumer lender. In April, China Rapid Finance managed to raise only $60 million, having priced at the bottom end of its range. Since then, though, the shares have soared more than 90 percent, with most of the gain coming this month. Similarly, the October rally has brought the advance for Beijing-based consumer finance company Yirendai Ltd. to 150 percent this year.

Source: Bloomberg

Looking at Qudian’s financials, one can’t help the bullish feeling that China’s consumer credit market is only in its early stages. Qudian’s rate of loan delinquencies, defined as those over 30 days past due, is only 0.5 percent or less this year, according to the company, which relies on Alibaba Group Holding Ltd.’s Ant Financial affiliate for new borrowers and credit rating services.

Source: Bloomberg

The Young and the Leveraged (BreakingViews), Rated: A

Betting on China’s next generation of borrowers just got easier. Qudian, an online microlender backed by e-commerce giant Alibaba’s financial unit, priced its U.S. listing above its expected range on Tuesday, says Reuters. It offers fast growth, low default rates and, unlike many tech startups, is already profitable. At $24 per share, the final price represents a 2018 PE of 13.8, compared to 13.0 for smaller U.S.-listed online lender Yirendai.

China’s household debt relative to income is still low, and consumer credit is underpenetrated at 7 percent of gross domestic product, versus 20 percent in the United States, says Goldman Sachs. The investment bank expects outstanding consumer credit excluding mortgages to more than double to $1.9 trillion by 2020.

Qudian focuses on the younger segment of this market, providing small, short-term loans for ordinary purchases.

Source: BreakingViews

The truth about Ant Financial … (The Finanser), Rated: AAA

A key theme in the new book is financial inclusion and, to those ends, I made a visit to Hangzhou, China, to meet the executive team of Ant Financial.

As Americans struggle with the pains of Chip & PIN and Europeans embrace contactless payments, China has leap-frogged us all. In 2016, Chinese consumers spent $5.5 trillion through their mobile apps. That’s more than any other economy and many predict that China will be first major economy to be completely cashless. The chosen mobile payment system for most Chinese citizens is Alipay, and the company has recently started to expand its footprint globally.

Many of you may have heard of Alipay, but it is not the Chinese version of PayPal, as many think. In fact, it bears no relationship or resemblance to anything we see in Europe or America. It is distinctly Chinese and, having been born out of a need to trade, is now moving towards global dominance.

How far things have changed, in that today’s Alipay monitors every transaction from its 450 million users, in real-time with artificial intelligence monitors constantly searching for potentially fraudulent transactions. That is a far cry from where they started, but then the company has refreshed its systems architecture four times in the last twelve years and has just embarked in another refresh. They moved from basic escrow services to real-time payments to cloud to microservices, and are now working on their new machine learning and super intelligent structure. A structure that can process 250,000 transactions per second today, and is architecting systems that will scale to over 100 billion transactions per day. To put that in perspective, Visa and MasterCard handle just over 60 billion transactions per year combined, and average near 2,000 transactions per second.

Source: The Finanser

China: The frontier of networked money (SupChina), Rated: A

In the last two years, China has gone from a country without credit cards to a cashless society where even beggars use mobile phones to accept payments.

The number of P2P companies has been reduced through attrition and government regulation, and a few strong players are emerging:

  • Caixin reports (paywall) that P2P platform PPDAI Group has announced plans “to raise up to $350 million through a New York initial public offering (IPO).
  • In September, online-only insurer ZhongAn Online P&C Insurance raised $1.5 billion in an IPO on the Hong Kong Stock Exchange.
  • The South China Morning Post reports that shares of Qudian, a leading online consumer credit provider, “surged nearly 46 percent to US$35 on its debut trading on the New York Stock Exchange on Wednesday morning.” Aside from fierce competition in the sector, the SCMP says that “Qudian has one other worry — potential competition with its principal shareholder Ant Financial,” which is, like the SCMP itself, an Alibaba affiliate.
International

IBM and eight banks unleash we.trade platform for blockchain-powered commerce (Banking Technology), Rated: AAA

Since January 2017, a group of seven banks (Deutsche Bank, HSBC, KBC, Natixis, Rabobank, Societe Generale and UniCredit), together with IBM, have been developing the Digital Trade Chain platform.

Now with the recent addition of Banco Santander as a founding partner, the group have decided to rebrand the Digital Trade Chain platform to we.trade.

Banks Start Broad Use of Blockchain, as JP Morgan, IBM Lead Way (DarkReading), Rated: A

Two major players announced cross-border payment networks built on blockchain technologies Monday, and more financial services will follow soon, despite opinions about Bitcoin.

The distributed ledger technology that underpins cryptocurrency like Bitcoin is rapidly going mainstream. Blockchain is building a tremendous amount of buzz as technology and financial industry heavyweights and startups race to apply the technology in innovative new applications for the banking sector. Their efforts are starting to bear fruit in the area of cross-border payments, as three separate announcements from IBM, J.P. Morgan, and Bank of Canada highlighted this week.

The ultimate goal is to provide a secure, speedy and transparent financial platform between global markets that may have found it difficult to do business with one another due to the bureaucratic pitfalls of legacy international payment networks.

The developments this week underline that banking executives are increasingly seeing the upside of combining distributed ledgers with solid cryptographic applications for new means of facilitating payments, trades, contracts, and transactions of all stripes.

Six courses that will get you clued up on fintech (CNBC), Rated: B

New York University’s Stern School of Business has a number of courses on fintech that consider innovations in the sector, regulatory challenges and opportunities for growth.

Students have the option to learn about digital currencies, blockchain, robo advisors, personal finance and payments.

The U.K.’s Oxford University, ranked by Times Higher Education as the number one institution in the world, made its fintech debut this month.

Oxford’s Saïd Business School launched the Oxford Fintech Programme in collaboration with GetSmarter, which is owned by education tech giant 2U Inc.

Students on the course study a range of subjects within the fintech sector, including digital payments, regulatory technology, blockchain and artificial intelligence.

Imperial College London is another British university to have its own course dedicated to all things fintech.

Imperial’s ‘Fintech — Innovative Banking’ course focuses on three key areas of the industry: blockchain, digital identity and digital money and payments.

India

P2P lending platforms can put downward pressure on interest rates (livemint), Rated: AAA

Mint Money spoke to Rajat Gandhi, founder and chief executive officer of Faircent, a P2P marketplace which has been in operations since 2014, on his vision for the nascent industry in India.

Now that the RBI has given NBFC status to P2P platforms and has also come out with guidelines for the sector, what is the way ahead?

Most of the guidelines also are in line with the industry expectations, just that there are a few grey areas where we would need some more clarifications. The way I see it, the RBI document is a framework, rather than hard guidelines.

In the short term, we all have to file our applications and get certifications in place.

The P2P lending process was legitimate; the RBI framework has just validated it further. An important development is that the framework has created a redressal system— both for the borrower and the lender. While a lot of obligations will be on the platforms, there is also a lot of clarity now on our roles and responsibilities.

How do the RBI guidelines help a consumer, borrower or lender? 

The guidelines basically tell the lender particularly what they are getting into, including the fact that the principal is not protected. We as companies should also keep telling them. Because the moment an investor hears interest rate, the immediate thought is assured returns.

Secondly, the guidelines have unlocked the supply side. Borrowing till now was restricted to banks and NBFCs, which have stringent guidelines. Whereas out here, this is an exchange model and the P2P platforms cannot lend from their own balance sheet, so the platform’s returns become interest rate agnostic. Their role is only to rate and price the borrowers, and as a platform, we do not directly benefit from this rating and pricing.

If a P2P platform is interest rate agnostic, what is your business model and how does your business make money?

Basically, we charge 1% from the lender and 2-4% from the borrower, of the loan disbursed.

The guidelines also talk about P2P platforms giving services to lenders for recovery of loans. How does that work?

We have a panel of lawyers who will take up the matter on behalf of the lenders. This is charged as this is a separate service.

What is the size of P2P lending industry in India at present? 

The size right now will be roughly around (RS) 50-60 crores on an annualised basis.

Fresh funding to enable LenDenClub meet capital requirement set by RBI (India.com), Rated: A

After a successful growth stint in the past six months, LenDenClub, a P2P lending platform is looking to meet the capital requirement set by the Reserve Bank of India (RBI) regulations, banking on the newly secured capital which is being used to enhance the product platform and improve tech automation.

Earlier this month, the firm closed a USD 500,000 pre-series A round from a fund based out of Mumbai.

Kotak Bank ties up with Samsung Pay (India Times), Rated: B

Private sector lender Kotak Mahindra Bank today said its credit and debit card holders will be able to tap and pay using smartphones at merchant establishments.

The city-based lender has tied up with Samsung, under which its cardholders will be able to tap and pay using smartphones of the Korean electronics major having the Samsung Pay acceptance machines, a bank statement said.

PayPal bets big on India’s FinTech boom (Ogilvy), Rated: B

Financial transaction company PayPal has long been a supporter of innovation in India, having set up an incubator programme there to support local start-ups. And now, the company is evolving its partnerships with the start-ups that join the incubator, taking equity in participating firms.

Asia

Fintech startup Finja breaks new ground in Pakistan with $ 1.5m series A funding (Tech in Asia), Rated: A

The catalyst for ecommerce and other internet businesses to flourish in China, India, and Southeast Asia is digital payments. This in turn has a multiplier effect on economic growth.

That’s why today’s announcement of US$1.5 million series A funding for Pakistani fintech startup Finja is notable. More so, because Swedish investment company Vostok led the round – the Pakistan startup ecosystem rarely hits headlines for attracting international investment. Dubai-headquartered Gray Mackenzie Engineering Services also participated in the round.

Finja is giving a push to digital payments in Pakistan with its SimSim wallet.

Finja claims SimSim has been doubling its mobile wallets every month to notch up 80,000 accounts since it went live a few months ago. It has clocked transactions worth a total of US$14 million so far.

Danadidik, the platform that helps Indonesian students fund their study, raises seed funding (e27), Rated: A

Indonesian student loan platform Danadidik announced on Wednesday that it has raised an undisclosed seed funding round from Singapore-based impact investment fund Garden Impact Investments.

Danadidik Co-Founder and CEO Dipo Satria said that the new funding will be focussed on hiring, product development, and marketing.

He also stated that for the year 2018, the South Jakarta-based startup plans to launch its mobile app and is targeting to fund 2,000 students.

MENA

Abu Dhabi Inks FinTech Development Pact with Mastercard (Cryptocoins News), Rated: A

Abu Dhabi’s international financial center has entered a collaboration with payments giant Mastercard to develop and accelerate FinTech solutions in the region.

The Abu Dhabi Global Market (ADGM), an international financial center established by a UAE Federal Decree to develop and strengthen financial services in Dubai as a global center for business and finance, is partnering Mastercard to develop FinTech activities in UAE’s capital and the wider MENA (The Middle East North Africa) region.

Latin America

Amid Brazil’s persistent economic crisis, fintech startup GuiaBolso raises $ 39 million (TechCrunch), Rated: AAA

Despite a continuing economic crisis, Brazil’s technology startups are continuing to attract cash and financing, with the mobile personal financial service GuiaBolso raising $39 million in fresh funding.

The new round was led by Vostok Emerging Finance, a publicly traded Swedish fund with its roots in big Russian private equity. Additional investors include Ribbit Capital, the International Finance Corp. and QED Investors, while impact investment firms Endeavor Catalyst and the Omidyar Network also participated.

Authors:

George Popescu
Allen Taylor

Tuesday October 17 2017, Daily News Digest

PeerIQ IMF

News Comments Today’s main news: RateSetter receives full FCA approval. PayPal’s market value eclipses American Express’s. Lending Club files 8-K entry into material definitive agreement. Some of Zopa’s loans are up for sale by P2PGI. Hexindai sets terms for U.S. IPO. PolicyBazaar becomes most-funded insurance aggregator worldwide. Today’s main analysis: Big bank earnings, IMF global growth forecast. Betterment vs. Wealthfront. Today’s […]

PeerIQ IMF

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

APAC

Africa

News Summary

United States

PayPal’s Market Value Eclipses AmEx, Nears Morgan Stanley, Goldman (WSJ), Rated: AAA

PayPal Holdings Inc. PYPL +0.04% vaulted over American ExpressCo. AXP -0.20% in terms of market value this week, punctuating a rally that has pushed up the payments company’s shares by nearly 75% since the start of 2017.

Its market capitalization stands at about $83 billion, nearly double the $47 billion value it had when it spun off from eBay Inc. a little over two years ago.

PayPal is even gaining ground on Wall Street titans. Its market value is now about $6 billion less than Morgan Stanley ’s and about $10 billion less than that of Goldman Sachs Group Inc.

PayPal, which reports earnings on Thursday, now trades at a multiple of about 32 times forward earnings, according to FactSet. So although its market value is about half that of Mastercard Inc. and about two-fifths that of Visa Inc., its earnings multiple is far dearer. Visa trades around 27 times forward earnings and Mastercard is around 29 times. AmEx, meanwhile, trades just shy of 15 times.

Ron Suber: We are in the Golden Age of Fintech (Crowdfund Insider), Rated: AAA

So what exactly is the “Golden Age of Fintech”?

Ron Suber: Innovation cycles take 50 years. PayPal started it in 1998, Lending Club and Prosper accelerated it in 2006 by giving people reasons to borrow and lend online … similar to how AOL and EBay gave people reasons to go on the World Wide Web in the early internet days. And now we are in the Golden Age of Fintech which is the middle 10 years of the 50 year innovation cycle.

How does this fit with the online lending space? Can early MPL/Online Lenders remain competitive? And what do they need to do to remain competitive?

Ron Suber: Yes, The keys (KPI’s = key performance indicators) continue to be:

A) Loan Performance

B) Equilibrium between capital and borrowers

C) Committed Long term, low cost of capital

D) Unique, diversified and low cost methods of acquiring borrowers

E) Increasing Life Time Value (LTV) with multiple loans and additional products

F) Platform efficiency, customer experience and profitability

G) Scale and Brand.

What is next for you? Was Lend360 really your final appearance as the “Godfather of Fintech”? Or is this the intermission before the next act?

Ron Suber: Lend360 was my last presentation in North America … I am heading back to Australia and Southeast Asia for the remainder of the year … then to Patagonia for a Q1 vacation and then onto Africa to do some teaching about lending and entrepreneurship with Opportunity International (OI). OI provides entrepreneurs around the world with access to loans, savings, insurance and training – tools that empower them to work their way out of poverty…..a hand up, not a handout.

[Editors Note: Ron has created his own “Rewirement” web site available here.

LendingClub Corporation (NYSE:LC) Files An 8-K Entry into a Material Definitive Agreement (Market Exclusive), Rated: AAA

On October 10, 2017, LendingClub Warehouse I LLC (“Warehouse”), a wholly-owned subsidiary of LendingClub Corporation (the “Company” or “Lending Club”), entered into a Warehouse Credit Agreement (the “Warehouse Agreement”) with certain lenders from time to time party thereto (the “Lenders”), a large commercial bank as administrative agent (the “Administrative Agent”), and a national banking association as the collateral trustee (in such capacity, the “Collateral Trustee”) and as paying agent. to the Warehouse Agreement, the Lenders agree to provide a $250 million secured revolving credit facility (the “Credit Facility”) to Warehouse, which Warehouse may draw upon from the Credit Facility closing date until the earlier of October 10, 2019 or another event that constitutes a “Commitment Terminate Date” under the Warehouse Agreement. Proceeds under the Credit Facility may only be used to purchase certain unsecured consumer loans from the Company and related rights and documents and pay fees and expenses related to the Credit Facility.

IMF Raises Global Growth Forecast, GS Enters Fix-and-Flip, Deep Dive on Big Bank Earnings (PeerIQ), Rated: AAA

During an unusual period of global synchronized growth, the IMF raised its Global Growth Forecast for 2017 and 2018 by 10 bps to 3.6% and 3.7%, respectively. The IMF also named nine banks that will struggle to achieve profitability.

Source: IMF

In securitization news, Marlette Funding Trust 2017-3 is expected to close at the end of October with $298 Mn in loans. MFT 2017-3 is the fifth ABS from this platform and the fourth on the MFT shelf (the first was on Citi’s CHAI shelf).

In this week’s newsletter, PeerIQ dives into the earnings and loan loss provisions for the major money center banks.

The big money center banks released earnings this week to a mixed reception although YTD stock performance is strong. FICC trading revenues were down year-over-year across the board. ROE levels for the big banks remain mired in the low double-digit area or lower.

Source: PeerIQ, Company Information

Highlights:

JP Morgan

  • JP Morgan is currently the largest US Bank ranked by total US Deposits, which has grown 9% year over year.
  • JP Morgan credit card costs were up about $200 Mn year-on-year driven by the successful Sapphire launch, and higher net charge-offs.
  • Q3 2017 provision for credit losses was $1.5 Bn, up from $1.3 Bn in the prior year. Currently at 3.3%, credit card allowance to total loans rose every quarter this year.

Citigroup

  • Citi built approximately $500 Mn in card loan loss reserves this quarter:
    • $150 Mn from regular seasoning and volume growth.
    • $50 Mn from hurricanes and other natural disasters.
    • $300 Mn attributable to forward-looking NCL expectations.
  • Citi expects NCL rate on branded cards to increase 10 bps in 2018 to 295 bps.
  • Citi shifted away from rewards oriented products and more towards value products due to heavy competition in rewards products (see Chase Sapphire Reserve). These cards typically have non-yielding promotional balances in the near term.

Bank of America

  • Quarterly profit rose 13% year over year.
  • Provision for loan losses increased by nearly 15% quarter over quarter while allowance for loan losses decreased 1.7% over the same period.
  • Allowance for loan losses as a percentage of total loans decreased to 1.15% from 1.19% last quarter and from 1.29% last year.

Wells Fargo

  • Wells Fargo was the only reporting bank that had decreasing negative returns YTD and a ROE decline YOY.
  • Revenue fell 2% year over year, and Wells is the only reporting bank to have falling revenues.
Source: PeerIQ, Company Information

It Was a Busy Quarter for Deals in Fintech (Bloomberg), Rated: AAA

Traditional Wall Street firms are keeping financial technology humming as they set their sights on developing technologies of their own. The third-quarter saw the second highest financing deal count ever, with 412 total transactions, according to a report from investment bank FT Partners.

Still, some areas are hotter than others. Banking — which includes peer-to-peer lending — and payments reported the most deals in the period. The largest was Softbank Group Corp.’s $250 million investment in online lending startup Kabbage Inc. Payments startups Toast Inc. and Raise Marketplace Inc. were also in the top 10 deals with $101 million and $60 million investments, respectively.

Robo-Advisor Teardown: How Betterment And Wealthfront Stack Up (CB Insights), Rated: AAA

In the battle for assets under management (AUM), incumbent wealth management firms have faced significant pressure from insurgent robo-advisors, as investors have poured over $1.6B into robo-advisors across 151 investments since 2013.

The two largest of these robo-advisors, Betterment and Wealthfront, have collectively raised $405M in aggregate funding to date and have both voiced the long-term goal of going public. Nearly a decade after launch, Betterment and Wealthfront together manage approximately $15.9B of assets for over 495K client accounts.

Some of the key takeaways from our analysis include:

  • Betterment continues to outpace Wealthfront in client accounts. As of Q1’17, Betterment managed approximately 330K accounts, nearly 2X as many accounts as Wealthfront (at 165K accounts).
  • Wealthfront has a higher growth rate than Betterment. As of their respective filings in Q1’17 and Q2’17, Wealthfront had added 65K accounts, representing 65% growth, while Betterment added 52K accounts and grew 19%.
  • Betterment has raised more than 2X the amount of funding as Wealthfront. Betterment has raised $275M total as of its latest investment (a $70M Series E – II round in Q3’17), while Wealthfront has raised $129.5M as of its last funding (a $64M Series D in Q3’14).
  • Betterment has taken the lead over Wealthfront for total AUM since 2015.
  • Wealthfront has consistently had a higher AUM per client. Wealthfront clients average $40.9K per account, compared to Betterment’s account average of $27.4K.

CLIENT ACCOUNTS: WEALTHFRONT COULD SURPASS BETTERMENT IN 3 YEARS

An analysis of the data shows that while Betterment leads Wealthfront in number of client accounts today, Wealthfront’s higher growth rate suggests that Wealthfront could surpass Betterment within 3 years. Wealthfront added 65K accounts in H1’17, representing 65% growth, while Betterment added 52K accounts and grew only 19% over the same period.

Comparing average AUM per client, Wealthfront has consistently had a higher AUM per client ($40.9K invested per account, vs. Betterment’s average of $27.4K), and as it continues to add additional services like PATH and the portfolio line of credit, that average could grow over time.

Source: CB Insights

 

ASSETS UNDER MANAGEMENT (AUM): BETTERMENT GROWTH SLOWS

Betterment grew AUM by approximately 13% since their last filing, their slowest quarter for growth. Again, this comes on the heels of the backlash against changes in Betterment’s fee structure in Q1’17. In contrast, Wealthfront set a new record for AUM growth in Q2’17, adding approximately $1.76B in AUM since the previous quarter. This was Wealthfront’s largest quarterly dollar increase in AUM.

Source: CB Insights

Mortgage startups blur lines between old and new capital strategies (National Mortgage News), Rated: AAA

Marketplace lending is, in many respects, an evolution of the privately funded mortgage market, which has co-existed with mainstream lenders without posing much threat for years.

Technology used by marketplace lenders offers deeper insights and transparency into transactions, while more easily connecting investors and borrowers in disparate locations.

LendingHome has raised $110 million in venture capital since it was founded in 2013 and is looking for more. It’s done six bridge-loan securitizations totaling $183 million and has a marketplace lending vehicle where accredited investors can purchase fractional interests in loans.

This suggests that the legacy of fintech and marketplace lenders will not be defined by drawing lines between this new breed of lenders and mainstream incumbents, but rather by how those lines are blurred.

Source: National Mortgage News

Income&, while reaching out directly to investors, is working to serve retirees potentially more interested in accessing the mainstream mortgage market’s lower-risk cash-flows than taking on more risk in order to reach for yield the way marketplace lenders’ investor bases tend to.

The company structures the investments through a twist on traditional securitization.

SoFi Bails On Being A Bank (PYMNTS), Rated: A

“With SoFi’s leadership in transition, we’re withdrawing our application with the FDIC for now,” SoFi spokesman Jim Prosser said in a statement to Reuters. “A bank charter remains an attractive option when the time is right. This decision does not change our plans to make deposit accounts available through partner banks in the near future.”

Barclays CEO Says Bank Must Protect Payments Business From Apple, Amazon (Bloomberg), Rated: A

Barclays Plc will need to defend its advantages in the payments business from encroachment by technology companies including Amazon.com Inc. and Apple Inc., according to Chief Executive Officer Jes Staley.

LendingHome adds $ 450 million to ramp up originations (National Mortgage News), Rated: A

A fund LendingHome began setting up earlier this year raised $100 million in commitments and established a $300 million credit facility that brings its total potential assets to $400 million.

LendingHome Opportunity Fund II is committed to buying more than $1 billion in high-yield bridge loans over a two-year period, but the company also will continue to sell loans to other investors through other existing channels.

Pefin Leverages Artificial Intelligence To Provide A Comprehensive Set Of Financial Advisory Services (Superb Crew), Rated: A

Q: Catherine, what is Pefin?

A: Pefin understands a user’s complete financial situation, including their current spending patterns, their debt and investments and their goals. An interactive chat experience helps users plan for life events that matter to them- like buying a home, having kids, sending them to college, and retiring in comfort. Pefin then incorporates the economy, markets, social security rules, federal and state taxes and much more to craft a thorough financial plan tailored to each user, showing the affordability of their plans. It provides ongoing advice on how they can save to achieve their plans, when they should repay debt, and whether investing is appropriate. If it is, Pefin also offers investment advice and portfolio management services through its SEC regulated subsidiary, Pefin Advisors. Pefin does not require that users invest through its platform, but if they choose to do so, it tailors each portfolio to help users achieve their plans.

Source: Superb Crew

Q: Who are the primary users of Pefin and what are some of the key challenges you are helping them solve?

The typical human advisor charges between $2,000 – $,5000 for a one-time financial plan and being static, it is obsolete moments after it is created. Robo-Advisors, while affordable, are unable to offer a comprehensive financial plan, instead focusing on recommending a generic portfolio (one of 10 or so static investment portfolios), primarily based on a risk level the user picks. Pefin’s AI stays on top of 2-5 million data points per user and updates plans real-time, ensuring the advice users receive is current and anything but generic. And Pefin does all this, for $10 a month. As for investments, Pefin requires no minimum investment size, and fees are 0.25% of assets under management, with the first $5,000 managed for free.

Q: Can you give us more insights into your Artificial Intelligence powered solution?

The neural network understands these financial rules and relationships, and propagates them forward in time, up to 80 years depending on the age of the client. The network starts with a user’s current finances and projects how they change over time with market conditions, inflation, taxes, government rules, and their plans. For any given user, the network evaluates anywhere from 2-5 million data points, depending on the complexity of their financial situation and financial plans are available 24/7.

BlueVine Expands Reach With up to $ 130 Million in New Debt Financing, Business Credit Line With Monthly Payments (PR Newswire), Rated: A

BlueVine is expanding its reach in online business lending with new debt financing of up to $130 million and a new additional line of credit product that allows business owners to make monthly, instead of weekly, payments, over 12 months.

BlueVine secured major funding as the company rolls out a 12-month business line of credit based on monthly payments, a new offering that would make it easier for business owners to meet their everyday funding needs.

BlueVine introduced the new product in response to client requests for a longer-term business line of credit with monthly payment plans. The new financing underscores the fintech pioneer’s commitment to innovation based on customer needs.

The new product gives business owners 12 months to repay each withdrawal in full, meaning lower payments each month.

Fintech market moves beyond lending (Financial Times), Rated: A

Goldman Sachs, arguably the world’s leading investment bank, has not been the greatest success story of recent times. After all the challenges of the 2008 financial crisis and the post-crisis regulatory glut, its profitability has declined sharply.

Today its stock market valuation, though far stronger than most banks, puts it on a so-called price-to-book valuation of 1.1 times. That is to say, its shares are worth 10 per cent more than the value of its net assets.

Compare that with the market’s view of Lending Club, the upstart peer-to-peer lender. Despite a scandal last year founded in slipshod controls, and a fall in the group’s share price from a 2015 high of more than $25 to barely a fifth of that today, it is relatively far more valuable than the Wall Street titan, with a price-to-book multiple of 2.6 times.

All that has yet to follow is a re-rating of Goldman stock — from bank to fintech. Though with barely $1bn of Goldman’s near $1tn balance sheet so far devoted to online lending, it may have a while to wait.

In a sign that the fintech business is maturing into more sophisticated areas, “regtech” is among the fastest-growing areas, accounting for a chunk of applications to the Future of Fintech awards.

Community Banks Take A Swing At FinTech Collaboration (PYMNTS), Rated: A

Community banks are typically a better bet for small businesses in search of a loan, with approval rates higher than those at larger financial institutions. But the latest data on SMB lending in the U.S. suggests a shift is ahead.

Earlier this month, Biz2Credit released its monthly Small Business Lending Index and found that approval rates at large banks increased more than they did at smaller community banks. And while community banks’ SMB loan approval rates are still higher than those at large banks (49.1 percent compared to 24.8 percent, respectively), separate analysis from the Federal Reserve, also published earlier this month, concluded that community banks are beginning to reexamine how small businesses fit into their broader loan portfolios.

The Fed found that small business lending at community banks actually declined in 2016, while SMB lending at big banks increased over the same period.

SENATE DEMOCRATS CLAIM A TOP BANKING REGULATOR IS SERVING ILLEGALLY IN HIS POSITION (The Intercept), Rated: A

SIX SENATE DEMOCRATS have asked the Treasury Department’s inspector general to investigate whether Keith Noreika, head of the Office of the Comptroller of the Currency, is illegally serving in office.

Noreika planned to serve temporarily until Joseph Otting, former CEO of OneWest Bank and Trump’s nominee for the OCC, was confirmed. But that hasn’t happened yet; Otting’s nomination has sat on the Senate calendar for over a month.

Special government employees are limited to 130 days of service over a 365-day period. The OCC contends that the number only refers to business days, meaning weekends can be taken off and Noreika still has until November to go. But “business days” appears nowhere in the statute.

No, Trello Didn’t “Fail To Build A Billion Dollar Business” (Medium), Rated: A

I’ve seen a lot of folks passing around that article about how Trello failed to build a billion dollar business. It’s stunningly obtuse.

The premise is that the software that was sold for a $400m acquisition was a failure because it wasn’t worth $1b.

When Fog Creek spun Trello off as its own entity, the amount of money they raised was $10m. That was the only money they ever raised, and it was all they needed to raise.

For almost anyone with a sincere connection to reality, a $400,000,000 exit is an amazing win.

The “Trello Failed” take is not only wrong…

Really, what is the issue with an exit that large, after a fundraise that small? I believe there’s a level of unicorn fetishism at play here that’s more than a little depressing. To think that on any level a company either reaches a billion dollars or has “failed” is to denigrate the work of entrepreneurs building amazing products and achieving amazing things.

I have no real interest in billion dollar companies. I’m interested in companies that serve their customers, build amazing products and make money. If they happen to reach a billion, that’s great. But getting to a billion is not a goal that keeps me up at night.

Companies Are Owning Less And Creating More Value (Forbes), Rated: A

Although our society and culture are slow to realize it, the assets of yesterday are quickly becoming the liabilities of today. This is true in business and in our individual lives as well.

Digital technology and digital assets, rather than physical things, are giving us options that are newer, faster, cheaper, and more convenient.  It appears that today, the less you own, the more have.

By owning less and relying on a network to share the load, they operate more profitably and scale rapidly and inexpensively, trouncing big, established, asset-heavy players.

So, what are we doing in a world where less (stuff) is becoming more (valuable) and access is trumping ownership?

  • First, we are lightening our balance sheets, both personal and corporate. People are carefully considering which assets they actually need to own, and what stuff actually creates more value than its cost of ownership.
  • Second, we are using our intangible assets, like skills, ideas, technology, and particularly relationships, to serve us in ways never before possible.
  • Third, we are identifying our own professional skills and differentiators for the gig economy.

Congress Should Fix Fintech Lending Model (Competitive Enterprise Institute), Rated: A

Originally announced for markup, the Protecting Consumers’ Access to Credit Act of 2017 never made it to a vote. Yet, this is one of the most important bills Congress can pass this session, as it provides a legislative fix to a damaging U.S. Court of Appeals ruling, Madden v. Midland Funding.

Nonbank Fintech lenders are not currently chartered at the federal level. Instead, each Fintech lender is required to charter in each the state in which it originates loans. Each state sets its own regulations with regards to interest rates. Such a patchwork of different regulations means that Fintech lenders often cannot lend to customers in other states at the same interest rates that they lend to their in-state clients. This puts Fintech lenders at a competitive disadvantage, as solely state-chartered firms cannot offer consistent products nationwide that can provide benefits from economies of scale.

Source: CEI.org

Fintech’s Achilles heel: Reaching low-income consumers (American Banker), Rated: A

Over the last decade, fintech companies have launched robo-advisers, digitized lending, improved fraud detection and created virtual currencies. In short, fintech firms have helped change our understanding of what is possible in financial services.

However, the fintech revolution has largely ignored the financial needs of the bottom third of the U.S. population. For instance, fintech companies have so far failed to successfully create an alternative to credit scores for the 51% of people with subprime scores. Secondly, fintech firms have yet to help move our national savings rate in a positive direction. Thirdly, the amount of money that lower-income households have left over every month after paying their expenses is still declining despite fintech apps’ promise to help people budget. According to data from the Pew Charitable Trusts, the typical low-income household had $1,500 of income left over after expenses in 2004. In 2014, they were $2,300 in the red after expenses.

One explanation: Consumer spending dictates the preponderance of innovation and investment, and spending by 5% of households with the highest income now directs one-fifth of gross domestic product.

AI can help people save more of their paycheck

Close to half of Americans have expenses that equal or exceed their income, making every month a financial balancing act.

A fintech company could use artificial intelligence to identify patterns in someone’s past family financial behavior — both successful and unsuccessful — to recommend an easy-to-follow budget, send reminders or prompts, and eventually, say, help someone consistently lower expenditures and increase savings. Digit, for instance, is one example of a fintech company paving the way to do just that. The digital service mines someone’s checking account data to determine what he or she can afford to save and then Digit automatically transfers that amount into someone’s savings account.

Improve government-issued benefit cards

Each month, 52.2 million Americans receive government benefits — and most of them receive the benefits on a payment card. Most of these payment cards lack associated mobile apps that could make it easier for someone to check balances, track spending or fund savings. The cards also fail to let someone pay utility or phone bills directly.

Peer-to-peer platforms that enable lending between friends and family

Twenty percent of Americans have a credit score below 600 and another 19.3% of Americans are considered to be “unscored” or “credit invisible.”

Pro-consumer auto and mortgage loan calculators

In 2014, auto loans (29%) and mortgages (28%) were the second and third largest debt categories in America. In a world where visiting two additional mortgage brokers (or getting two more quotes) could save someone over $24,000 over the lifetime of their loan, the lack of clarity and understanding when people are signing their loan documents is reprehensible.

Wall Street Veteran Joins PeerStreet To Lead Capital Markets Team (BusinessWire), Rated: B

PeerStreet, an award-winning platform for investing in real estate backed loans, is excited to announce the appointment of Louis Nees as Head of Capital Markets. He will be based in the firm’s headquarters in Los Angeles, California.

In this role, Nees is responsible for leading PeerStreet’s Capital Markets team, which plays a crucial part in interfacing with the growing number of investors seeking to invest in loans on PeerStreet. The company recently surpassed half a billion in cumulative loans funded, all with zero losses to investors, and monthly origination volumes now reach above $50 million.

With his deep Wall Street background, Nees will provide key guidance on multiple and varied capital sources for PeerStreet.

Centana Growth Partners Expands Investment Team with Senior Hires (BusinessWire), Rated: B

Centana Growth Partners (Centana), a unique growth equity firm focused on the future of financial services, today announced an expansion of its investment team with the hiring of Tom Davis, Principal, and Matthew Alfieri, Vice President. Mr. Davis and Mr. Alfieri join the firm after the successful close of its $250 million fund earlier this year.

Mr. Alfieri joins Centana from Goldman Sachs where he spent nine years, most recently as a Vice President with the Principal Strategic Investments team, where he invested in financial technology and enterprise technology companies.

Kansas AG’s office targeting student loan scammers (WIBW News Now), Rated: B

Kansas Attorney General Derek Schmidt is joining the Federal Trade Commission and ten of his colleagues from other states in a coordinated crackdown against student loan scammers.

“The student loan market is the second largest debt market after mortgages,” said Schmidt. “There’s more than $1.4 trillion in outstanding student loan balances around the country.”

Around 42 million Americans have student loan debt.

United Kingdom

UK Peer-To-Peer Lender RateSetter Receives FCA Regulatory OK (The New York Times), Rated: AAA

British peer-to-peer lending platform RateSetter on Tuesday said it had received full regulatory authorisation from the country’s Financial Conduct Authority watchdog.

P2PGI puts portion of Zopa loans up for sale (P2P Finance News), Rated: AAA

PEER-TO-PEER investment trust P2P Global Investments (P2PGI) has appointed Deutsche Bank to sell off 31,153 Zopa loans in its portfolio in the latest securitisation activity in the sector.

The bank is offering the loans in three tranches worth £208.9m overall.

The average value is £7,488 with an average interest rate of 7.2 per cent and remaining term of 45.7 months, Deutsche Bank said.

Inflation hitting higher income households hardest (P2P Finance News), Rated: AAA

NEW analysis by investment and financial planning group Tilney has revealed that the wealthiest households have experienced a much higher rate of inflation over the last two decades than everyone else.

In its household inflation index report, Tilney calculated that the top 10 per cent of households – those with incomes above £78,500 a year – have seen overall inflation of 64 per cent since 1997. That’s compared to 50.7 per cent for typical households (those with incomes of £26,900 to £30,000 a year) and 53.8 per cent for the lowest income families (less than £10,400).

Inflation has grown sharply in recent months, hitting a higher-than-expected 2.9 per cent in August, making it ever more difficult to savers to find an inflation-beating return from conventional savings accounts, adding to the allure of the peer-to-peer lending market.

Payday P2P lender Welendus receives full FCA approval (P2P Finance News), Rated: A

WELENDUS, the peer-to-peer payday lender, has received full authorisation from the Financial Conduct Authority (FCA.)

The milestone comes a year after the company was formed.

The platform, which wants to shake-up the payday lending market by offering more reasonable interest rates than its competitors, launched a crowdfunding campaign on Seedrs in January to raise £300,000, but closed that campaign two weeks ago and instead started a new one to raise £100,000.

Moneyfarm is changing the face of wealth management (City A.M.), Rated: A

Moneyfarm is one of the new kids on the block. Founders Giovanni Dapra and Paolo Galvani left behind their City careers to set it up in 2011. It’s an app-based digital wealth management platform, which expanded into the UK from Italy last year. Dapra, the firm’s chief executive, is on a mission.

Since moving to London, the business has doubled its user base, now managing £260m in assets across the UK and Italy.

As well as a partnership with Allianz Global Investors, and launching separate partnerships with Uberand Revolut, Moneyfarm is in the process of launching a pension product.

Fewer people are saving into a private pension plan than at any point for the past 60 years. Auto-enrolment has gone some of the way to curing this ill, yet still there is a reluctance to think ahead.

Collaboration brings benefits to business at every level, say bosses (The Yorkshire Post), Rated: A

One banking leader said that the rise of fintech and challenger banks had forced his and other large scale banks to collaborate more widely while all assembled agreed that universities and business leaders should work together more closely for the benefit of students as well as their respective organisations.

Pete Sumners, director of corporate structure finance at Clydesdale Yorkshire Bank, said that recent innovations in disruptive lending technology has meant that the banking sector at large had had to admit it did not have the technology to offer certain services and as such was forced to work with fintech companies: “In terms of banking, not just CYBG, collaboration has been forced on us by competition.

Simon Pilling, partner at Bond Dickinson, agreed that the rise of artificial intelligence had meant professional services had needed to change their business model but that there was still a need for skilled lawyers in all ends of the process.

Future of Fintech Awards shortlist 2017 (Financial Times), Rated: A

There are two categories; the Impact Award is for larger and more established fintech companies, which are starting to have an effect on the financial services industry, while the Innovation Award is for newer fintech companies that are bringing out novel solutions.

Impact Award

Funding Circle, a direct lending platform that connects investors to borrowers, is shortlisted for the second year running for our Impact Award. With valuation of more than $1bn it is one of the UK’s “unicorns” and the largest British online “peer-to-peer” company by cumulative amount lent. More than £3bn has now been lent through the platform, with £1.1bn of that in 2016.

THE JUDGES SAID:

“The company is big enough to be making an impact in small business lending now.”

Ant Financial Services, founded in 2014, is an affiliate of Alibaba, the Chinese e-commerce company.

THE JUDGES SAID:

“This is clearly one of the most innovative and impactful fintech companies of the moment, changing the landscape completely.”

California based Ripple, founded in 2012, has grown to be one of the world’s biggest blockchain networks. It allows businesses to transfer money globally at low cost using its own cryptocurrency XRP.

THE JUDGES SAID:

“This is no longer a prototype. Ripple is actually sending blockchain payments through. Many of these are still test payments but it is further than a lot of others.”

EFL Global provides alternative credit scoring for people who have previously been outside the banking system.

THE JUDGES SAID:

“There were many credit scoring entries and we liked what many of these were doing in terms of giving more people access to finance. However, we particularly liked the way EFL went beyond traditional credit score information.”

Digital Reasoning uses cognitive computing techniques to detect rogue traders at financial services companies.

THE JUDGES SAID:

“We thought this idea was cool. Cutting rogue trader activity and fraud at banks is a serious issue with consequences beyond just the banks themselves.”

Innovation Award

Micro finance lending platform QCash Financial was founded by the Washington State Employee Credit Union as an alternative to expensive payday loans.

THE JUDGES SAID:

“We liked this because it was an alternative to payday lending and an instance of an established financial institution doing something innovative.”

Token is creating an open banking platform aimed at making it easier for people, businesses and financial institutions to move money around. Using digital identity and smart tokens it offers a way for people to give third parties access to their account details in a secure and simple way.

THE JUDGES SAID:

“This is solving the problem that PSD2 brings, where banks need to provide APIs to authorised third parties. Token simplifies the many APIs and is already integrating 10 banks into the system.

RSRCHXchange was founded in 2014 as a one-stop-shop for asset management firms to purchase research services from banks, brokers and boutique providers. It will be particularly useful in helping banks comply with the EU’s new Mifid II rules, which come into force at the start of 2018.

THE JUDGES SAID:

This is solving a problem that comes with Mifid II. A more sophisticated solution than others in the market.

Bricklane.com is an online property ISA allowing anyone to participate in the housing market with an initial investment of as little as £100.

THE JUDGES SAID:

“We liked this because it is creating a new product. The founders say the main competitor is cash, with most of their funds coming from people transferring their ISAs.”

Castlight Financial is aiming to prevent another credit crunch by providing a more accurate way to assess what a consumer can afford to borrow. It collects data in real time from customers’ banks accounts, including income and expenditure, and uses these to build a clear picture of a their monthly disposable income. People who may have previously been refused loans because banks had too little data about them may become eligible for credit. Castlight says it can also speed up the mortgage decision process from six weeks to 10 minutes.

THE JUDGES SAID:

“The idea of better credit scoring is attractive and it is significant that the company has made a profit from the first year and has not had to take any financing.”

SMEs are ignoring their credit score (P2P Finance News), Rated: A

ALMOST half (44 per cent) of small- and medium-sized enterprises (SMEs) have never checked their credit score, new research from RateSetter Business Finance shows.

The study, released on Monday, found that a further six per cent have opted against checking their score in the last year, while less than one in five (18 per cent) have checked the score in the last six months.

The peer-to-peer lender pointed out that credit scores are an integral part of establishing whether a business has a decent record of repaying debt, and have a significant impact on their chances of getting further finance.

Epiphany appointed by Wonga to help with brand perception (Prolific North), Rated: B

Leeds search specialist Epiphany has been appointed to help improve the brand perception of payday loan company Wonga.

Epiphany will work in partnership with Wonga’s content agency, Cedar, on brand perception and delivering a customer-first multi-channel content strategy.  The agency will also be responsible for driving traffic and enquiries from organic search.

China

Chinese peer-to-peer marketplace Hexindai sets terms for $ 58 million min-max US IPO (NASDAQ), Rated: AAA

Hexindai, a Chinese marketplace for peer-to-peer lending, announced terms for its min-max US IPO on Monday. The offering is being made on a best-efforts, min-max basis and therefore will not be included in our IPO stats.

The Beijing, China-based company plans to raise at least $30,000,000 by offering a minimum of 2.7 million ADSs and a maximum of 8.9 million ADSs at a price range of $9 to $11. At the midpoint of the proposed range, Hexindai would command a fully diluted market value of $487 million.

European Union

Credimi: four asset management funds renovate and increase the commitment up to €72.5 million (Credimi Email), Rated: AAA

Barely a year after the launch, Credimi – the digital financing platform for SMEs that makes liquid the working capital in short time at low costs – has renewed the agreement with the four primary investment funds. They committed up to 72,5M€ to purchase the entire portfolio of commercial credits originated by the fintech platform.

Credimi is a fintech company officially authorized by the Bank of Italy to the public financing activity according to the dispositions contained in the new art.106 of the Banking Consolidated Law. The company will be able to provide funding to SMEs up to €300 million in the next months .

The four partners previously involved, Anima Sgr, Anthilia Capital Partner Sgr, BG Fund Management Luxembourg S.A. and Tikehau Capital, have decided to renew the agreement. Credimi is therefore reinforcing the attractiveness of its notes, which are the among the most profitable and diversified asset class among investments with a comparable risk profile.  In fact, the notes combine an average life of the underlying invoices of less than 3 months with a spread around 450 base points and credit losses of 0.3%.  Credimi finances hundreds of SMEs with average ticket of 20,000€, creating a low risk, diversified portfolio.

The portfolio subscribed by the four noteholders is untranched and pays a quarterly  coupon. Additionally, Credimi continues to keep a stake of around 5% (as fifth noteholder alongside with the other four) to have ‘skin in the game’. This is not requested by law as the note is untranched and is ensured by Credimi to the noteholders on a voluntary basis.

Since launch on the market, Credimi has achieved outstanding results, exceeding initial expectations: €40million of loans have been delivered to Italian SMEs and more than 2.000 invoices have been financed. The same strong  results have been obtained with the Supply Chain financing: by signing deals with corporations – such as Ariston Thermo, Jab group (Jimmy Choo and Bally), Pittarosso and few others – Credimi helps large enterprises to finance their suppliers at competitive prices and with an unmatched flexibility.

International

Lenddo and EFL Team Up to Lead Financial Inclusion Revolution (Lenddo Email), Rated: A

United by the common vision of providing financial inclusion for more than one billion new and underserved individuals across the globe, Lenddo and EFL will together provide a suite of credit scoring and identity verification products to more than 20 emerging markets.

Lenddo and EFL have individually facilitated over 5 million credit assessments since inception, allowing more than 50 financial institutions to disburse over $2 billion USD in credit to people with limited information. The combined company will work directly with banks, telcos, retailers, microfinance institutions and insurers to serve individuals and small businesses.

The first joint product offering goes live in Asia and Latin America today, with additional products and features scheduled for release in the coming months.

Australia

Australian banking doesn’t need Google to be competitive (Financial Review), Rated: A

A leading member of Australia’s fintech community has backed the view of veteran bankers that technology giants will be dissuaded from setting up shop in Australia and taking on the big four. But the disrupters see different reasons for Google’s absence.

SocietyOne CEO Jason Yetton said for the tech companies with the resources it wasn’t a question of whether they could disrupt the incumbents but whether they should do so.

In Australia there is a raft of smaller companies looking to carve out their own share of the financial services market including personal loans company Ratesetter, layby purchases Afterpay and online lender Zipmoney.

Tyro is a payments and technology company that also lends to small businesses. It also has Australia’s newest banking licence and is therefore subject to the same oversight as other authorised deposit taking institutions (ADIs).

Online Lender Prospa Forms New Partnership With Retail Marketplace MyDeal (Crowdfund Insider), Rated: A

Prospa, an Australian online lender for small businesses, has formed a partnership with Gandel-backed retail marketplace MyDeal, which will allow retailers on its platform to apply for loans of up to $250,000.

Senvirtne and his MyDeal team will be receiving a 1-2% small commission for every loan that comes through the marketplace.

India

PolicyBazaar Raises $ 77M at a $ 500M Valuation (Coverager), Rated: AAA

Gurgaon-based PolicyBazaar announced it has raised $77M in a Series E round led by Wellington Management , with participation from IDG Ventures India and True North; to name two. The online insurance aggregator has raised a total of $146.6M since its inception in 2008 and is currently valued at $500M.

According to VCCiRCLE, the company plans to go public by the end of 2018 after breaking even in November 2016.

Source: Coverager

Micro-lending startup KrazyBee raises $ 8M, plans to enter payday-loan segment (YourStory), Rated: A

On Monday, Bengaluru-based micro-lending startup KrazyBee said it had raised $8 million in a Series A round led by Xiaomi Technologies and Chinese venture capital fund Shunwei Capital. The funding raised was a combination of equity and debt, with participation from Essel Group’s E-City Ventures and RK Group.

The funding announcement comes within a year of the firm raising $3 million pre-Series A round in January from Plum Ventures. Prior to this, KrazyBee had raised a seed round of $2 million in May 2016.

Until July this year, the company claimed they had disbursed 80,000 loans and processed close to 170,000 loan applications. As of October 2017, the company had disbursed close to 150,000 loans and processed above 200,000 loan applications.  The founder claims that of this number, 75,000 loans have already matured with steady settlement.

The average size of loans by KrazyBee is around Rs 15,000 with the maximum tenure being 12 months.

Lending and borrowing limits on peer-to-peer lending platforms (Livemint), Rated: B

Many lenders find P2P platforms attractive because of their potential for giving higher returns, compared to fixed and savings bank deposits. In fact, these platforms also market their services by comparing the returns from P2P lending with returns from mutual funds. It is important to note here that these platforms cannot guarantee any return.

Thus, the RBI imposed limits on how much can be lent and how much can be borrowed by individuals from these platforms—to limit the risk exposure of individuals.

If such a person was to take a personal loan from a bank, it would come at 16-17%. Through P2P lending they can get that loan at around 14%. Those with low credit scores typically go to other NBFCs, and get loans at 22-23%.

No borrower can have loans of more than Rs10 lakh, from all the P2P platforms combined; and no more than Rs50,000 from one lender. All loans through P2P platforms come with a payback period that cannot be more than 36 months.

APAC

Markel International Launches Fintech Insurance for Asian Market (Insurance Journal), Rated: A

Markel International, the specialist insurer, has unveiled a fintech policy offering comprehensive protection for businesses in the financial technology sector in Asia, having successfully launched it in the UK early last year.

Coverage also extends to the costs involved when sensitive documents or data are lost.

On top of the professional indemnity core cover, the policy offers protection for three additional perils to protect clients against their key exposures:

  • Directors’ and officers’ liability cover protects against claims of mismanagement, which could be brought by shareholders, employees, creditors or regulators.
  • Theft option covers the insured against the stealing of money or other financial instruments, through both electronic and non-electronic means, including through extortion. It will also cover the cost of rectifying computer systems following a theft.
  • Cyber liability and loss cover provides protection if the insured suffers a network security incident, such as a hack, denial of service attack, or a computer virus, and will also cover business interruption losses arising from such an incident. This section includes cover for the cost of rectifying computer systems following a network security incident.

Baker McKenzie snags top G+T partner (Australasian Lawyer), Rated: B

Baker McKenzie has snagged a top partner from Gilbert + Tobin.

In addition to his knowledge in DCM matters, McGrath brings to Baker McKenzie a practice that covers a wide range of areas, including securitisation, leveraged and general finance, peer-to-peer lending, insolvency and restructuring, blockchain, and smart contracts.

Africa

SA’s Retailer Pick n Pay Reaches 200 000 Money Transfer Users (Tech Financials), Rated: AAA

South Africa’s Pick n Pay announced on Tuesday that it has 200 000 registered money transfer customers as of 27 August 2017.

The largest online grocery business in Africa is in partnership with digital bank TymeDigital, a subsidiary of Commonwealth Bank, to deliver money transfer.

In line with its plans to launch a digital bank, TymeDigital was recently awarded a banking licence by the South African Reserve Bank, a first in 18 years.

Authors:

George Popescu
Allen Taylor

Monday May 15 2017, Daily News Digest

alternative lending

News Comments Today’s main news: New York sues OCC. SoFi prez to leave for biotech firm. RateSetter clarifies types of lending. Prudential chairman to join RateSetter. JP Morgan launches virtual branch in China. BNI Europa invests in MarketInvoice. Nubank reports $39M net loss. Today’s main analysis: How bad Brexit will be for UK households. Alt lending deals on pace for new low. […]

alternative lending

News Comments

United States

United Kingdom

China

European Union

International

India

Asia

South America

Philippines

News Summary

United States

New York regulator sues U.S. OCC over ‘fintech’ charters (Reuters), Rated: AAA

New York’s banking regulator on Friday sued the U.S. Office of the Comptroller of the Currency over its decision to offer special-purpose charters that would let online lenders and other “fintech” companies do business nationwide.

In the lawsuit, filed in U.S. district court in Manhattan, Maria Vullo, superintendent of the New York Department of Financial Services, called the decision to grant the national charters “lawless, ill-conceived and destabilizing of financial markets” that are properly and most effectively regulated by the state.

Weekly Industry Update: Future of Fintech & OnDeck Earnings (PeerIQ Email), Rated: AAA

PeerIQ held a panel discussion this Tuesday titled, “What’s Next in Fintech Lending” featuring speakers including moderator, Peter Rudegeair (WSJ), and panelists Ram Ahluwalia (PeerIQ), Zhengyuan Lu (Victory Park), William Black (Moody’s Investors Service) and Greg Nowak (Pepper Hamilton). Discussion centered on credit performance, regulatory developments, and company news. Access the full replay here.

Also, Michael Gilroy, a Cannan Partners VC, penned an op-ed in American Banker, “Fintech’s Future is In the Backend”.

OnDeck released earnings this past Monday. The stock was down 7% on earnings day and, remarkably, trades slightly above book value, fueling M&A speculation and investor interest. Gross revenues and loan loss provisions were up 48% and 82% respectively from the prior year period. Tighter underwriting criteria slowed origination growth to 1%. Guidance for sale of loans thru the marketplace channel reduced from 18% to 5%. Balance sheet funding is now central.

  • Our interpretation is that OnDeck is taking actions that are at least consistent with pursuing a bank charter:
  • Bank regulator friendly actions – OnDeck has gradually lowered rates over time, tightened underwriting, and announced a focus on profitability rather than growth (targeting 2018 GAAP profitability).
  • Increasing bank executive on board and management – Seasoned banking executive, Jim Rosenthal (former COO of Morgan Stanley), joined OnDeck’s board. Seasoned banking personnel are a key requirement ahead of any bank charter approval.
  • Continued focus on originating loans under the JPM bank-approved credit policy.

A PeerIQ analysis shows that a shift to deposit funding would create ~$30 to $40 Mn in savings by reducing financing costs from ~5.9% to funding costs observed in the brokered CD market.

SoFi President Nino Fanlo to Leave Firm for Biotech Startup (WSJ), Rated: AAA

The No. 2 executive at online lender Social Finance Inc. is exiting the company to take a senior job at a biotechnology startup.

Nino Fanlo, SoFi’s president and chief financial officer, is leaving the firm at the end of the month to take over as finance chief at Human Longevity Inc., a four-year-old genomics company, the two companies said. After that time, Mr. Fanlo plans to remain a board observer and adviser to SoFi.

On an interim basis, Mr. Fanlo’s duties will be assumed by Steven Freiberg, a former top executive at E*Trade Financial Corp. ETFC -1.43% and Citigroup Inc. who joined SoFi’s board earlier this year. The company plans to launch a formal search for Mr. Fanlo’s successor.

The next battlefield for Alipay and WeChat is in the US (The Asset), Rated: AAA

As the two most successful payment platforms in China, Alipay and WeChat both share aspirations for overseas expansion.

In China’s domestic online payment market, which is now the largest in the world, Alipay accounts for 42.7% of online payments, while Tenpay (WeChat) accounts for 19.2%, as of Q4 2016.

Data from Iresearch show that mobile payments in China totalled US$5.5 trillion in 2016. In the US, the equivalent figure was only US$112 billion, according to Forrester.

A Birdseye Views Of Alternative Finance (PYMNTS), Rated: A

The Consumer Financial Protection Bureau (CFPB) has kicked off an inquiry into the U.S.’ SME finance space to understand how lenders lend to small businesses — or even define what they are.

The bureau has requested information from industry stakeholders to kick off its inquiry and also released a white paper to explore SME lending, in which it concluded there is a “current lack of comprehensive data in this area.”

The bureau has requested information from industry stakeholders to kick off its inquiry and also released a white paper to explore SME lending, in which it concluded there is a “current lack of comprehensive data in this area.”

$34.2 trillion is held by the world’s shadow banking market, with the U.S. holding the most of that money than anyone else in the world, according to the latest data from the global Financial Stability Board (FSB).

57.4 percent of U.K. SMEs are unaware of alternative lending options, finds the newest analysis from Close Brothers in its Business Barometer. Just over a third, the report found, said they are familiar with how invoice financing works.

OnDeck shares fell 8 percent last week immediately following the alternative lender’s announcement that it would be increasing credit requirements further in an effort to boost long-term profitability.

The 1 percent decline in loan origination volume posted by Lending Club could have investors worried as analysts said progress for the alternative lender has, on a whole, stalled.

The 1 percent decline in loan origination volume posted by Lending Club could have investors worried as analysts said progress for the alternative lender has, on a whole, stalled.

Ron Suber of Prosper Marketplace to Keynote at LEND360 (Lend360 Email), Rate: A

Join Prosper Marketplace President Ron Suber on Thursday, October 12, at 9:00 AM CT as he discusses the opportunities on the horizon in marketplace lending and how non-banks are solidifying their role in providing financial services.
Ron will also explore how the industry can work together and invent ways to deliver much needed access to credit to millions of consumers and small businesses.

New York joins common state licensing platform for fintechs (American Banker), Rated: A

The New York State Department of Financial Services announced Thursday it will allow fintech companies to register through a common platform used by a majority of state regulators, marking another step toward better regulatory coordination that will help states compete with the Office of the Comptroller of the Currency’s fintech charter.

Upstart Loans with Interest Rates Calculated by AI (Nanalyze), Rated: A

Founded in 2012, San Carlos California startup Upstart has taken in $85.65 million in funding so far from the likes of Peter Thiel, Mark Cuban, Google Ventures, and Khosla Ventures among many others. The Company first unveiled their peer to peer (P2P) lending product in May of 2014 and since then they have originated over $700 million in loans with an average loan size of around $12,000:

We’re not really sure what to make of that double-digit interest rate for a used car loan but that seems to be normal for Upstart since they claim that their average borrower pays 12% for a loan.

Whereas in peer-to-peer platforms like Lending Club you are allowed to select the loans you want to take part in for as little as $25, Upstart allocates loans to lenders randomly with  a minimum requirement of $100. The minimum amount you need to invest to use the platform is $5,000 and that means that you have a 98.9% chance of achieving a rate of return greater than zero. You can also expect an average return of 5.8% using the platform.

From a lenders point of view, it doesn’t appear that AI gives you that much value add. You get around the same rate and the same likelihood of a positive return.

Lending Club Upstart
A 1.55% 3.19%
B 3.16% 3.65%
C 5.91% 5.47%
D 9.72% 13.62%
E 14.09% 11.59%
Total 5.476% 5.483%

River North marketplace lending fund reaches $ 72m, joins Fidelity investor platform (AltFi), Rated: A

Back in September 2016 River North, an alternative asset manager based in Chicago, launched a new fund targeting income investors and offering exposure solely to marketplace – often called P2P – lending.

The fund is a registered 1940 Act closed-end interval fund dedicated to the rapidly growing marketplace lending online lending asset class.

Since inception, the fund has returned 4.46 per cent, which is largely inline with expectations.

Source: River North

InterNex Capital Raises $ 3.85 Million in Oversubscribed Offering (PR Newswire), Rated: A

Digital asset-based lender InterNex Capital (“InterNex”) raised $3.85 million from family offices and private investors in an oversubscribed seed offering. The convertible notes offering, which originally targeted $2.5 million, closed last week.

InterNex was founded in May 2015 by former GE Capital senior executives & fintech experts. The company’s digital lending platform offers small- and mid-sized businesses an optimized client experience while enhancing asset-based underwriting and monitoring reliability through integrated technology, data analytics and artificial intelligence.

Small- and mid-sized businesses are heavily underserved when it comes to their working capital needs. The seed offering closed on the heels of InterNex securing a $100 million debt financing from 400 Capital Management in late 2016 and growing its digital asset-based revolving line of credit financing solution. InterNex has funded over $5 million to its business clients to date.

SOFI’S 2017 NURSING SCHOOL RANKINGS—WHAT YOU’LL MAKE AND WHAT YOU’LL OWE (SoFi), Rated: A

The mean wage for registered nurses is $72,180 a year, and rises to over $100,000 for nurse midwives, nurse practitioners, and nurse anesthetists, who make a mean annual salary of about $164,000, according to the Bureau of Labor Statistics (BLS).

But nurses can also end up carrying tens of thousands of dollars in debt. Graduate nursing students have a median debt of $40,000-$54,999, according to a 2017 loan survey by the American Association of Colleges of Nursing (AACN). Just under a third have to swallow the bitter pill of owing $70,000 or more.

Nursing grads from all of our 10 least lucrative schools had more debt owed than salary paid.

It’s worth noting that one of our least lucrative schools–-Seton Hall University, one of U.S. News & World Report’s top 100 graduate nursing schools–-is in the same state (New Jersey) as one of our most lucrative schools, Fairleigh Dickinson. Seton Hall nursing grads earn an average of $87,510 a year, but have to pay back over 1.5 times as much.

“When Markets Quake” Online Banks and Their Past, Present and Future” (Orchard Platform), Rated: A

It seems like every few months, or so, another article or paper appears that retells the history of online lending. Orchard published one a few years back, and I’ve written one or two on the subject before joining the team last year. And although I personally have no interest in retreading that ground anytime soon as a writer, I do keep up with the reading. The latest example, “When Markets Quake” Online Banks and Their Past, Present and Future,” comes out of the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School, written by Marshall Lux and Martin Chorzempa.

The authors paint a mostly positive picture of a rapidly evolving industry—acknowledging the fits, starts, and bumps experienced over its short lifespan, doubtless there will be more as we head into the next leg of the credit cycle but confident that the industry will survive (in one form or another) and that the innovation demonstrated by online lenders will likely continue to have “significant benefits for the financial economy.” 

The pair also provides examples of how banks and online lenders are working together today. The 2016 partnership between Avant and Regions Bank resulted in a co-branded portal that channeled borrowers to one or the other company based on underwriting criteria, and SoFi has sold more than $1 billion of its loans to banks and insurers.

The co-authors also voice concerns about the risk of standardizing loans to allow for a more liquid secondary market via open-end funds—because of the liquidity mismatch between the open-end fund (often with daily liquidity) and the underlying asset (loans with three-to-five-year maturities).

AlphaFlow Adds Veteran Fintech Executive AdaPia d’Errico To Management Team (AlphaFlow Email), Rated: A

AlphaFlow, the first automated portfolio service for real estate investments, announced today that veteran fintech executive AdaPia d’Errico has joined the company as Chief Operating Officer to scale the investor platform and expand AlphaFlow’s customer channels.  Ms. d’Errico is nationally recognized for growing businesses through brand advocacy and designing innovative platforms that build engaged communities. She has been at the forefront of real estate crowdfunding since 2014, advocating the power of increased transparency, education and technology to provide opportunities in real estate investments.

Ms. d’Errico’s career spans retail banking, investment management, intellectual property and brand development, and financial technology. Most recently she was Chief Marketing Officer at Patch of Land where she led brand, marketing strategy and operations, and built the investor platform. Prior to Patch of Land, she provided brand and online growth strategy services to consumer and media companies in the US and the UK, and co-founded two businesses.  Ms. d’Errico has over 10 years of experience in banking and investment management with a focus on customer management, client communications and investor relations.

AlphaFlow continues to grow its team with key people from the marketplace lending industry; earlier this year the company hired Miles Deamer, an early LendingHome employee who scaled lending operations there. Mr. Deamer is responsible for portfolio management along with Mr. Sturm.

AlphaFlow Optimized Portfolios are a truly passive, highly diversified and fully transparent managed portfolio service, bringing to real estate what ETFs brought to stocks. For a low minimum investment, each client’s capital is invested in 1st lien real estate loans to produce a personal portfolio of 75-100 notes spread across 15+ states, selected, rebalanced and managed by portfolio managers with the help of smart automation, algorithms and analytics.

SoFi is One Quirky Lender, But It’s Working (Fortune), Rated: A

Fast-forward seven years and SoFi is on fire, the rare example of a startup that hasn’t seemed to flounder after advertising during the Super Bowl.

Whatever SoFi is doing is working. Cagney says the company originated $8 billion in loans last year, a figure that will double this year. He reckons the company will earn $200 million on a pre-tax basis in 2017 on revenues of $650 million.

Podcast 100: A Retrospective With the Lend Academy Team (Lend Academy), Rated: B

For our 100th episode I thought we would do something a little different. We decided to bring the Lend Academy team (pictured above) together to get their perspective on their favorite episodes in the first 100 podcasts.

In this podcast you will learn:

  • Mike Cagney of SoFi (podcast 89) highlights:
    • The speed, scale and unparalleled execution that is SoFi.
    • The user experience when taking a loan at SoFi.
    • The club-like feel that SoFi promotes among its customer base.
  • Stephen Dash of Credible (podcast 78) highlights:
    • How deeply integrated they are with their lending partners.
    • The concept of customer co-ownership because you can’t offer them everything.
    • The idea of intermediation as a way to better serve customers.
  • Todd Nelson of Lightstream (podcast 73) highlights:
    • A great example of a bank (SunTrust) buying an online lending platform.
    • They are under the radar, they have built one of the top five online consumer lenders.
    • Many years before Marcus by Goldman Sachs Lightstream was originating loans.
  • Andrea Jung of Grameen (podcast 95) highlights:
    • How they underwrite risky entrepreneurs with a tiny 0.3% default rate.
    • The importance of social support for successful loan payback.
  • Brew Johnson of Peerstreet (podcast 58) highlights:
    • How grounded they are in data analytics.
    • The importance of finding good partners for a steady stream of borrowers.
  • The Founders of Streetshares (podcast 71) highlights:
    • Using an affinity model to create a unique community driven business.
    • Their groundbreaking offering for non-accredited investors.
  • Brendan Ross of Direct Lending Investments (podcast 74) highlights:
    • The incredible growth record of the DLI fund.
    • The way Brendan was able to negotiate protection for his investors.
    • Their consistent track record as seen in Peter’s quarterly reports.

Ally to Add Digital Signature and Contract Management Capability to Clearlane (PR Newswire), Rated: B

Customers looking to finance or refinance their vehicles through Ally’s newly launched auto finance marketplace, Clearlane, will soon be able to complete financing online through a new digital signing capability. Built on top of the industry’s leading digital transaction management platform, the SmartSign technology from eOriginal will be incorporated into the Clearlane platform in July 2017, and will allow customers to sign and submit their financing documents online or via mobile devices, facilitating a more efficient transaction.

A top banker explains why he left Wells Fargo to join a tech company (Business Insider), Rated: B

DeVall, who served as Senior Vice President of Wells Fargo for two years, recently joined Tipalti, a California-based fintech company that seeks to simplify business to business transactions. He joined the company in March as its director of alliances and business development after a career of more than a decade in banking.

United Kingdom

Mark Carney on how bad Brexit will be for the UK’s household finances (Business Insider), Rated: AAA

On Thursday afternoon, Bank of England Governor Mark Carney did what he does every three months and took questions from the press after the bank released its Quarterly Inflation Report.

As Carney made clear, sclerotic wage growth is not something that is solely happening because of Brexit, and in the past handful of decades myriad factors — including but certainly not limited to the rise of zero-hours contracts and the waning influence of trade unions — have helped subdue the speed at which pay packets are growing.

However, with the return of inflation since June last year, a real and painful squeeze is underway for British households. Inflation, at the last reading, is running at 2.3%, while wage growth was just 2.2%. Inflation’s surge from close to zero reflects the growing cost of imports triggered by the crash in the pound since the referendum.

RateSetter clarifies types of lending (P2P Finance News), Rated: AAA

NEW MONEY invested through RateSetter’s platform may be matched to existing wholesale loans, the firm said on Friday.

The ‘big three’ peer-to-peer lender announced in late 2016 that it was winding down its wholesale loan book as the activity may be in breach of regulations.

RateSetter lands FTSE 100 heavyweight as new chairman (Business Insider), Rated: AAA

The chairman of global insurance giant Prudential is joining to board of online lender RateSetter as non-executive chairman.

Paul Manduca will join the board of the peer-to-peer lender in June and will become chair on July 17 when current chairman Alan Hughes’ three-year term expires.

The appointment of a veteran of public markets will likely fuel speculation that RateSetter could soon look to list on the stock market.

LendInvest Finances 66 Affordable Homes in Key Crossrail Town (Landlord News), Rated: A

LendInvest, a leading specialist mortgage lender, has completed its largest development finance deal to date with an experienced borrower, who will build 66 new affordable homes in West Drayton, Hillingdon, a town set to benefit from a Crossrail station in 2019.

LendInvest has been working with the borrower since June 2016, when it provided a bridging loan to acquire the site, while the client applied for enhanced planning for 53 new homes. The borrower then transitioned to a £17m development loan to finance the construction.

The total loan provision for both sites is £21m, with the total gross development value forecast to exceed £31m.

makepositive secures £1m funding round (London Loves Business), Rated: B

makepositive, a London-based consultancy that helps firms to make better use of Salesforce, has raised £1m, made up of £800k in equity finance plus a £200k loan facility from P2P provider RateSetter Business Finance. The additional funding has enabled the business to invest in consultants, sales and marketing as well as in R & D to support the creation of new solutions on the Salesforce platform.

UCL Will Host the P2P Financial Systems International Workshop 2017, July 20-21 (Crypto Insider), Rated: B

The upcoming P2P Financial Systems International Workshop 2017 (P2PFISY) will be held at University College London (UCL), Wilkins Building, on 20-21 July 2017. Partners of the event are the Federal Reserve Bank of Cleveland, De Netherlandsche Bank, and the Bank of Canada with the patronage of the UCL Centre for Blockchain Technologies (UCL CBT).

China

JP Morgan launches virtual branch in China (The Asset), Rated: AAA

JP Morgan has launched a virtual branch in China. The service eliminates the need to be physically present at bank branches. JP Morgan hopes to reduce manual interventions and improve turnaround times through faster transaction processing.

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

DYCD and Jingdong Finance issued 625M RMB
On May 12th , Diyichedai, a Chinese P2P lending platform focused on auto loans, announced that they have jointed with Jingdong Finance to issue an 625 million RMB ABS of “Zhejing•Weirong-7 ABS trust plan”, and Zhejin Trust acted as trustee agency of the basic assets. The product was launched in otc structured financing market, consisted of ABS products based on used car financial assets.

According to DYCD, Jingdong Finance took part in the program as the credit monitoring services agency, monitoring the basic assets of duration in real time. Up to now, with the uproar of ABS origination in China, it has already become one of the most important source of finance for auto financing companies.

Yu’E Bao Rates Back to 4%, Banks Shrug
Recently, the annualized interest return for 7days of Yu’E Bao, the world’s biggest money funds, has reached over 4%. It is the first time for the rates back to this level after June 2015. Up to Q1 of this year, Yu’E Bao’s accumulative assets up to around 1.14 trillion RMB.

It was revealed that the reason for the increase of Yu’E Bao’s rates was based on the regulator intensifying control on the leverage ratio, along with the liquidity of the financial system has been keeping tightening. As one of the “Big 2” online payments in China, Alipay has been proposing the cash free time. However, unlike official banks, Alipay is not allowed to pay interests directly to their customers according to related Financial Regulatory Policy. Therefore, it created “Yu’E Bao” to provide financial services on Alipay account.

Great interest in peer-to-peer lending (Startup Ticker), Rated: B

Lendity connects alternative lending platforms with the traditional banking system using its infrastructure and technology.

Lendity has been accelerated by F10, Switzerland’s Fintech accelerator founded by SIX, PwC and Julius Baer.

The event proofed that there is a great interest in investing in peer-to-peer lending, marketplace lending, crowdlending and factoring. 200 participants flocked to the event.

European Union

Fintech lender MarketInvoice gets a boost as Portuguese bank puts £45 million on its platform (Business Insider), Rated: AAA

Portuguese bank BNI Europa has agreed to lend £45 million ($57.87 million) over MarketInvoice, a UK peer-to-peer lender for small businesses.

MarketInvoice recently launched a new product, Pro, that allows small businesses to access a rolling credit line and Coelho namechecks this as a reason BNI signed on.

BNI Europa was launched in 2014 and is Portugal’s fastest growing digital-only bank.

Contrarian Lending Marketplace Younited Credit Crosses €500 million Milestone (Crowdfund Insider), Rated: A

Since it opened for business in 2012, French lending startup Younited Credit has thrived by implementing strategic choices that ran contrary to common practice among lending marketplaces. It was the first of its kind (and still is the only one so far) to get a full banking license and to start fueling its growth through loan securitization.

What sets Younited Credit apart from its competitors is not so much its record growth, as how the company achieved it and how this positions it for the future.

Whereas other lending marketplaces opt for a broker or other financial intermediary status, and often, like Lending Club in the US and Auxmoney in Germany, use a fronting bank to actually issue the loans, Charles Egly and his partners decided that Younited Credit should get its own banking license, an agreement as a credit institution and investment service provider. This came at very high cost in terms of capital requirements, including €5 million in equity plus a €3 million buffer, as well as in financing the two years needed to obtain the agreement from the French regulator, the Autorité de Contrôle Prudentiel et de Résolution.

The faster Younited Credit grows, the more its needs large institutional lenders. Major international institutional investors such as the Dutch insurer Aegon, investment companies Zencap, Eiffel Investment Group and Hexagone Finance are investing through Younited Credit. The company favors institutional investors with patient money such as insurers, investment funds and family offices, rather than the more volatile ones, such as hedge funds.

Millennial wealth gap leads to concerns over intragenerational fairness (The Herald), Rated: A

Online property lending is becoming big business in the UK, generating £700 million worth of investment in 2015 alone. Newer entrants to the industry include Bricklane, which is selling its own property ISA, and Octopus Choice, which offers a target rate of 4.2 per cent.

A further boost has been provided by the introduction of the Innovative Finance ISA, which shields all P2P returns from tax, although only a handful of providers have regulatory permission to sell the product so far, including Lending Crowd, Landbay and LandlordInvest.

The trend is being driven not just by institutional investors but young web-savvy investors who are disillusioned with poor rates of savings. One P2P platform – ThinCats – reckons that millennials are four times more likely to choose this option as those aged over 55.

Property investors also need to note the difference between P2P lending and crowdfunding, which is the category that Housecrowd falls into. Haaris Ahmed, founder of property crowdfunding platform uOwn, said P2P lending consisted of property-backed loans where a lender will pay an interest rate that is “set in stone”, unless a borrower was to default.

Registration for LendIt Europe 2017 is Now Open (Lend Academy), Rated: B

Our 2017 event will be a little different to last year. Similar to what we have done at our USA event we are expanding to include other aspects of fintech beyond online lending. While we will still be covering lending in some depth we also want to highlight the innovations happening in other areas of financial services.

Early confirmed keynote speakers include Jaidev Janardana, the CEO of Zopa, Francesco Brenna, an Executive Partner at IBM Global Business Services and Shane Williams, the co-head of UBS Smartwealth. Our current confirmed speakers are here and if you are interested in becoming a speaker at LendIt Europe 2017 you can submit an application here.

The launch price of £795 is in effect until June 2nd, but as a Lend Academy reader you can receive an additional 15% discount by using the code LENDACADEMYVIP at checkout. The discount code is always good for 15% off but you will receive the best pricing if you purchase before midnight on June 2nd. You can register now on the LendIt website.

International

Alternative Lending Deals On Pace For New Low (CB Insights), Rated: AAA

Today, 8 of the 22 global private fintech companies valued at $1B or more are alternative lenders. But 11 years after the founding of Lending Club, investments to private alternative lending companies are hitting new lows, according to CB Insights data.

China Rapid Finance, which last year raised funds at a $1B valuation, went public last month at a $350M valuation.

Deals and dollars to alternative lending companies trended up between 2012 through 2015. Funding saw a 188% funding increase from $1.54B in 2014 to a record $4.43B in 2015 across 94 deals. But at the current run rate, 2017 will see a dip to approximately 42 deals worth $2.01B. And this funding run-rate is actually inflated by SoFi’s $500M Series F, which represents 73% of funding in the year-to-date. The full-year total could come in far lower than $2B.

Alternative lending companies saw both deals and dollars retreat on a year-over-year basis in 2016 with 78 deals worth approximately $2.45B in funding.

Digging into the quarterly data, Q2’15 saw a record 30 deals worth approximately $1.45B in funding.

Q3’15 was a record quarter for funding with approximately $2.14B invested across 24 deals.

India

Indian millennials are taking to peer-to-peer lending for investment (India Times), Rated: A

When 28-year-old Karan Lalchandani had to take a call on expanding his investment portfolio, he steered away from the common options -real estate, equities and precious metal.Instead, he took a small loan on peer-to-peer (p2p) lending platform Faircent.

Lalchandani is part of a growing tribe of young professionals who, not happy with the rate of return or long lock-in period that traditional investment options have, are looking at the p2p lending model.

According to Rajat Gandhi, chief executive of Faircent, about 60% of the 10,000 lenders on the platform are under the age of 35, with a significant chunk being under 30. “Most 30-year-olds haven’t experienced a good asset class.This offers quick returns monthon-month,“ he said.

This trend has been visible across various p2p lending platforms like Lendbox and i2iFunding, many of which rely solely on social media to reach out to this lender profile. Chaudhary, for instance, came across p2p lending through a simple online search on investment options.

Should you invest in Bitcoins, crowd funding, P2P lending? (India Times), Rated: A

After dabbling in traditional investment avenues like stocks, fixed deposits, gold, mutual funds and real estate, some investors are
venturing into more adventurous territory—digital currency, crowdfunding and P2P funding—to make their wealth grow.

There are a little over 15 million bitcoins in circulation today and no more than 21 million will be mined ever, making the virtual currency attractive to investors. The rising demand for and lack of supply of have pushed up the price of bitcoins from $16 per coin in 2013 to $1,700 today.

P2P platforms have brought lenders and borrowers closer. Technology allows easy credit to borrowers, while lenders earn high returns on idle funds. Chennai-based Jose Joseph, 45, has been lending on P2P platforms since 2015. On the Rs 1 lakh he has put in so far, he has earned an average return of 20%.

Microfinance and P2P lending – Twin Brothers? (Telangana Today), Rated: B

Microfinance consists in providing of financial help to low-income families or individuals who traditionally lack access to banking and loans (a.k.a. the “unbanked”).

Going by the above, there is no relationship or link between microfinance loan product and peer to peer lending. Urban MFIs have a income household parameter of minimum 1.6 lacs per annum. Do they have an individual income parameter? If yes, they could partner with P2P platforms and lend on the platform.Going by what we have above, it is not possible to design a P2P platform to suit the needs of microfinance landscape. But it is a very important question to ask how MFIs can decrease their operational and transactional costs using technology. This is being addressed since almost 10 years with less success. Is it really possible to successfully implement BC/CSP model?

Asia

Indonesian P2P lending platform Taralite raises US$ 6.3M, aims to build “world class” R&D team (e27), Rated: AAA

Jakarta-based P2P lending platform Taralite today announced that it has a raised a funding round from Japanese fintech conglomerate SBI Group.

It operates a US$300 million finTech-focussed fund.

To achieve this, it partners with various online marketplaces and booking platform such as Tokopedia, Bukalapak, Lazada, MatahariMall, and Airy Rooms.

Taralite offers swift application processes and affordable loans starting from 0.99 per cent per month. It claimed to have disbursed loans to 1,000 borrowers with more than 70 per cent retention rate.

South America

Nubank reported a net loss of $ 39 million (Conexao Fintech), Rated: AAA

Nubank, Brazil’s biggest Fintech startup, reported a net loss of BRL 122 million last year. In 2015, the loss had been BRL 32.7 million. Operating income in the period was BRL 77.09 million, a significant expansion of BRL 10.4 million from the previous year.

In order to finance the operations with the rotary – whose rates vary from 2.75% to 14% per month – Nubank allocates part of its card receivables portfolio to a fund. The portfolio totals BRL 1.4 billion, while the receivables fund closed 2016 with approximately BRL 150 million.

Philippines

Peer-to-peer lending The Basics and The Benefits (Manila Bulletin), Rated: A

Peer-to-peer lending, sometimes referred to as “social lending”, allows individuals to borrow and lend money without the intervention of standard or official financial institutions, like banks.

  1. It’s hassle-free.
  2. It’s a win-win process.
  3. Hello flexible fees!
  4. It’s user-friendly.
  5. Enter into a new community

Authors:

George Popescu
Allen Taylor

Friday September 30st 2016, Daily News Digest

Friday September 30st 2016, Daily News Digest

News Comments Today’s main news: Prosper shutting down secondary market; 3 major banks on their knees; JP Morgan deal with Invest Cloud. Today’s main analysis: Lending Club’s email to their clients. Today’s main thought provokers: How Monzo got 40,000 clients. United States A very interesting email from Lending Club, very smartly written in Patrick’s name and […]

Friday September 30st 2016, Daily News Digest

News Comments

  • Today’s main news: Prosper shutting down secondary market; 3 major banks on their knees; JP Morgan deal with Invest Cloud.
  • Today’s main analysis: Lending Club’s email to their clients.
  • Today’s main thought provokers: How Monzo got 40,000 clients.

United States

  • A very interesting email from Lending Club, very smartly written in Patrick’s name and from his point of view. Who’s Patrick ? I commented in line extensively paragraph by paragraph (as today was a slow news day and I had more time).
  • 3 banks are on their knees: Wells Frago, Deutsche Bank, and Commerzbank. Two of them are the major banks in Germany.  This news is critical for a few reasons. First, it will affect interbank interest rates, which will propagate into all interest rates. Second, if banks who are top lenders like Wells Fargo have to cut cost they will also cut business lines. Which is a great door open for our industry? And last, if this gets worse, it may, in fact, be the beginning of a next Greece-like crisis , except affecting major economies.
  • Prosper is discontinuing their secondary market because nobody is using it. I have a lot of thoughts on this and I wish they had reached out to talk about it 1st. I am a frequent user of both Prosper’s Secondary Market and Lending Club’s Secondary market. I wonder if anybody at Prosper is using both ? Here is my takeaway: if I want to sell something at Lending Club the process is simple, clear and I always manage to sell them. I tested and I can sell notes in seconds if I discount 20% the price. On Prosper I tried numerous times and I never managed to sell a single note. Why ? Both platforms are powered by the same legal setup with Folio Investing. So the problem is the process of listing, the pricing and the liquidity. I strongly believe a secondary market is MUST HAVE for these platforms. I deplore that they are closing it down. Please, please let me help launch it right so that you can keep it open.
  • JP Morgan signs deal with InvestCloud (not that long after the deal with OnDeck). Dimon committed to spending $300 million over the next three years on digital improvements in asset management.
  • Single-Family rentals vacancies inch up a little. I think it is still noise, no new signal.
  • How Monzo got 40,000 new clients with hardly any marketing spend? A very interesting process.

Other countries

  • Today I didn’t find any relevant news from other countries, regrettably. I am surprised as well. Please feel free to point us to news worth covering. Our readers in aggregate are by far my best source of news.

 

United States

 Update on where Lending Club stands, what we’re working on, where we’re headed, (Email Lending Club), Rated: AAA

Comment: this is an email sent from Lending Club to all clients. It was written in the name of their newly hired Chief Capital Officer, Patrick Dunne.


Dear George,

I wanted to take a moment to introduce myself. I’m Patrick, Chief Capital Officer at Lending Club. I joined the Lending Club team a few months ago. My job is ensuring that all of our investors have a great investment experience at Lending Club. I wanted to provide an update on where Lending Club stands today, what we’re working on, and where we’re headed.”

Comment: I like the direct personal tone and the feeling of approachability by introducing himself as Patrick instead of, the other extreme, which would be Mr. Dunne. As a retail client I relate to this tone well.

Email continues :

“Where we stand today. We’re proud that we have the largest retail investor base of any company in the marketplace lending industry and are committed to expanding our offering so more retail investors can access Lending Club products. Over the past several months, we have focused on strengthening our business processes and steps were taken to enhance asset quality by increasing interest rates and tightening credit criteria for loans. We added some tremendous talent including Sameer Gulati (Chief Operating Officer), Tom Casey (Chief Financial Officer), Russ Elmer (General Counsel), Valerie Kay (Head of Institutional Investors), and Raman Suri (Head of Retail Investors). We also welcomed Tim Mayopoulos (President and CEO of Fannie Mae) to the Lending Club Board of Directors.”

Comment: Outstanding job at building such a team in so short. The only concern would be if the stage Lending Club’s is in matches this new “very large company” team’s experience. This team didn’t build those companies. However Lending Club is not a startup anymore. And it often takes a complete new type of team to take a company from 0 to $1mil in revenue, from $1m to $20m, from $20m to $100m and from $100m to $1bil. So I do think that most likely a “large company” team will turn Lending Club into a large company (with its processes, bureaucracy and more) and perhaps that is what LC needs.

“What we’re working on. For the remainder of 2016, we are focused on serving you better. We’re making investments in reporting, compliance and controls, technology, and the organizational foundation that will drive the next phase of growth.”

Comment: I find it a little vague and predictable.

Where we’re headed. We have ambitious long term goals. We aspire to allow every type of investor – individual retail and institutional investors – to participate in what we believe is a compelling product that can offer solid risk-adjusted returns. Many more investors of all kinds may benefit from adding Lending Club products to their portfolios, and we’re looking forward to proving that we deserve a place in their portfolios.”

Comment: Many retail investors are concerned that if they are left unprotected institutional investors will have better API connections and technology and they will be left with the notes no sofisticated investor wants.

“Some investors have asked me–after 20+ years at Barclays Global Investors and BlackRock, why did I join Lending Club ? I had the unique opportunity to be a part of the innovative team that created iShares, which today is the global market leader in ETFs. It took many years to grow the iShares business and show investors that it should be a big part of their investment strategy. I see that same parallel with the products we offer at Lending Club”

Comment: There is a tradeoff between salary and equity. Rarely will a salary be a life changing event however it makes people comfortable. People join startups to create a non-negligible probability of a life changing event via equity. They also join to give themselves a challenge when they may be bored. And often at startup/young companies the reward is more proportional to the value added and success.

Fines, Withdrawals, Job Cuts. It Was an Ugly Day for Global Banks, (Bloomberg), Rated: AAA

Comment:These news are critical for a few reasons. First it will affect interbank interest rates, which will propagate into all interest rates. Second, if banks who are top lenders like Wells Fargo have to cut cost they will also cut business lines. Which is a great door open for our industry. And last, if this gets worse, it may in fact be the beginning of a next Greece-like crisis , except affecting major economies.

Commerzbank Chief Executive Officer Martin Zielke announced plans Thursday to eliminate 9,600 jobs

In Washington, came still more blistering attacks on John Stumpf, whose grip atop embattled Wells Fargo & Co., the largest U.S. mortgage lender, remains tenuous amid the uproar over a scandal involving unauthorized accounts.

And then, back in Germany, came the bombshell: revelations that some hedge funds were moving to reduce their financial exposure to Deutsche Bank, now the biggest worry in global finance; sending its New York-listed shares down as much as 9.1 percent

The 38-company Bloomberg Europe Banks and Financial Services Index has tumbled 24 percent this year.

A Message from Prosper and Folio Investing, (Email, Prosper), Rated: AAA

We are writing to let you know that as of October 27, 2016, Prosper will no longer offer the Folio Investing Note Trader platform, the secondary market for Prosper Notes. Prosper has found over time that very few investors are using the secondary market and, as such, has made the decision to no longer offer this service. We apologize for any inconvenience that this causes. Prosper remains committed to its retail investor clients and to providing them a great experience.

Once the secondary market trading service is terminated, you will not be able to sell Notes that you own, and you will need to hold them to maturity.

JPMorgan Hires InvestCloud In Response to Silicon Valley Threats, (Fortune), Rated: A

JPMorgan Chase jpm said it had hired and would take a stake in InvestCloud, which provides software that makes online transactions easier for customers with banking and investment accounts. The InvestCloud deal is also part of Dimon’s commitment to spend $300 million over the next three years on digital improvements in asset management.

Starting early next year, the bank will use InvestCloud to customize website dashboards and mobile apps for clients ranging from individuals with investments of $1,000 to managers of family investment offices with $1 billion or more.

Single-Family Rental Research: Performance Summary – September, (Morningstar), Rated: A

Vacancies increased to 5.0% from 4.8% in July, the first time this metric has touched 5.0% since November 2015. This month’s Performance Summary tracks the performance of 23 single-borrower transactions and more than 90,000 properties. Rents for properties backing single-family rental securitizations in September rose by 5.1% from their prior contractual rents. Delinquencies were flat at 0.6%.

How startup bank Monzo is using a community-based marketing approach, (Tradestreaming), Rated: A

The startup, still in test mode, has added 40,000 new users in under a year by taking a completely open approach to building a product that fits the needs of its customers, which it inevitably calls “Monzonauts.” For instance, Monzo users can submit their needs to an online forum or sound off on Twitter. The company has put its entire product roadmap online, where users can vote on features they’d like to see. For example, a Monzo app for Android devices. After getting 232 votes, this feature rolled out this week.

On its forum, which launched in December, users share tips on things like using a Monzo card abroad. The posts that generate the most discussion in its forum are also included at monthly meetings.

Referrals aren’t new. But they have given Monzo’s word-of-mouth tactics a turbo boost. When users download the app they are added to its waiting list. Those who refer a friend to the service with a unique code are bumped up the queue by 4,000 places. “What we wanted was to get everyone on that list to feel excited about it,” Kursar said. In 48 hours, its landing page received 12,000 submissions.

“We don’t want to become the kind of company where every campaign has 100 different iterations ending with something aggressive that says ‘download, download, download,’” she added.
Author:

George Popescu

Amex and the 4 types of large-company-approach to SMB lending

This year  retail giant Costco ended a 16-year partnership with Amex. Co-branded cards with Costco accounted for 8 percent of worldwide annual spending and 10% of total cards in circulation for Amex in 2014. Simultaneously, joining companies like JP Morgan, Wells Fargo, and others, Amex has announced a deeper entrance into the SMB credit space […]

This year  retail giant Costco ended a 16-year partnership with Amex. Co-branded cards with Costco accounted for 8 percent of worldwide annual spending and 10% of total cards in circulation for Amex in 2014. Simultaneously, joining companies like JP Morgan, Wells Fargo, and others, Amex has announced a deeper entrance into the SMB credit space with their own in-house venture , poorly named in my opinion, “Working Capital Terms” (WCT).

The 4 approaches to Marketplace Lending for SMBs

One route into the SMB credit space is the partnership approach taken by JP Morgan, Scotia Bank, and Santander. The second route, taken by Wells Fargo is controlling all pieces of technology and client experience under its own house. The 3rd route, as you will read below, and taken by Amex, is to participate into aggregators like Lendio and Fundera under its own brand. And the 4th route, favored by Citi Bank, Deutsche Bank, and Morgan Stanley, is to participate in the space indirectly from the arrears by providing lending capital or securitization services. Which approach will succeed ? If the space is as large as people believe it is most likely all 4 approaches will succeed. Which approach is the most profitable ? One should not jump to conclusion by looking at short term profitability. Real profitability, as companies like AIG demonstrated in 2008, is measured across an entire credit cycle.

Amex’s 3 prong approach, with WTC in addition to their participation in Fundera and Lendio, is in fact quite unique and has the advantage of flexibility, low fixed cost and visibility into the market.

Amex: from Costco to Lendio and Fundera

Ken Chenault, the long-term CEO must have been under tremendous pressure to replace the outgoing business.  It is not that the company had not tested the waters of online lending. It had partnered with Lendio in April, an online small business credit marketplace aggregator. The partnership probably served three objectives:  to expand its merchant financing portfolio, to perhaps to test the waters for Amex’s own plans in the space and to replace the Costco partnership which had a 20% pie in the total Amex loan portfolio.

The Lendio partnership catered to merchants with at least 2 years of operational history and minimum $50,000 in revenue. The loans range from $5000 to $ 2 mil and up to a maximum tenure of 2 years.

The Lendio partnership was preceded by a different kind of association with Fundera. For customers who want to compare its business charge cards with traditional loans, American Express has featured its charge cards on online marketplace Fundera since February 2016. The charge cards offered by American Express available on Fundera are known as Open cards; they are specifically introduced for companies that need to fund large spot purchases of inventory or raw materials, and each month they can pay off the balance in full. Open cards do not have any interest but there is fixed annual fees. Spending limits adjust with usage and payment history.

Amex’s venture named “Working Capital Terms”

On July 5th, 2015 Bloomberg announced Amex’s new initiative, called “Working Capital Terms”. This new venture is targeted at existing small-business cardholders and will be primarily used by merchants to pay their vendors especially those who do not accept credit cards. Thus Amex is muscling in to capture a bigger pie of the business of the existing clients. This is a smart move as it will ensure that cost of acquisition of customers is almost negligible and the existing relationship is enhanced by offering an additional feature. The loan amount will range from $1000 to $750,000 and the payment will be directly made by Amex to the vendor. Charges will be 0.5% for a 30-day loan and 1.5% for a 90-day loan. The pricing is extremely aggressive especially considering the other online lenders.

In 2014, Amex cards for small businesses funded $190 billion in purchases, up from $122 billion in 2010. American Express is focussing on small-business loans where they already have a strong grip to make up for the revenue they have lost. They think small- business cards have room to grow in near future, unlike consumer spending. It considers cards have immense potential in small-business funding space because small businesses tend to traditionally rely more heavily on cash and traditional loans.

Amex vs Square and OnDeck

It plans to begin the online platform for its small business clients, aiming for the market share occupied by start-ups like Square Inc. and On Deck Capital Inc. The company can leverage its existing clientele and low cost of funds to offer sweeter deals. To grow its presence in small businesses, American Express has made some other moves, like the improvement of its OptBlue program that simplifies the acceptance of Amex cards at small business locations. By 2019, American Express wants to reach its goal of parity coverage to other card networks. They have also teamed up with Mexican mobile point-of-sale (mPOS) provider Clip and German mPOS vendor Payleven. American Express’s entry into the small business lending world is proof that Wall Street believes that online lending is here to stay.

Amex’s future plans ?

In a recent interview with Lendio’s CEO, Brock Blake, Lending Times has inquired about Amex’s revealed plans with the Lendio partnership given Amex’s WTC announcement. Brock has clarified that in his view Amex has no expressed any intention to canceling their partnership with Lendio.

Amex is de factor offering 3 different products, through 3 different venues, Lendio , Fundera and their own in-house WTC. Each of these directions is probably complementary, independent, and do not have large fixed costs. I would, therefore, expect for Amex to use these initiatives as an opportunity to test different products and markets. As time goes we shouldn’t be surprised if any or all 3 of these initiatives that demonstrate traction will receive increase resources and in fact ramp up. In an ideal scenario, having a diversified portfolio of  3 profitable products for the SMB credit space can only help the company.

Wells Fargo’s Transplex

As mentioned at the beginning American Express is not the only big lender that is trying to enter small business lending. In May, Wells Fargo &Co, the third-biggest U.S. bank by assets, introduced their small online loan arm known as Transplex. Other major rivals like JP Morgan Chase & Co., Scotia bank, and Santander are collaborating with On Deck, Kabbage etc to speed up the process of providing loans to the same space. These entrances validate the space, the market, and the approach. One route is the partnership approach, where traditional bank partners with an online lender to grow its books. The second route, taken by Wells Fargo is controlling all pieces of technology and client experience under its own house. Though partnership helps in a faster entry, managing a relationship is fraught with complexities in the long run. On the other side, when you own the entire chain, the bank can decide on how to structure every move. But the question is whether the bank has the tech chops and the start-up spirit to compete with the free-wheeling world of fintechs.

The partnership approach, where traditional bank partners with an online lender to grow its books, is a known tech-vendor/bank relationship which is very standard. It is expensive, involving, extensive and with high risks. It has the advantages of leaving the bank in full financial control and having hardly any regulatory risk.

The second route, taken by Wells Fargo is controlling all pieces of technology and client experience under its own house. It has the full control, confidentiality, and probably the best profit margin advantage. If this approach was easy large companies will never buy startups. It is very difficult for large companies to build news businesses and this is probably the hardest, most expensive and riskiest approach with the most benefits if successful.

The partnership approach is the fastest, cheapest and lowest risk approach and probably the least financially profitable one. Managing a relationship is fraught with complexities in the long run. As an entrepreneur, I strongly believe that it is the people managing these initiatives, and not the approach, who will decide which will succeed and which will fail.

 

Author:

George Popescu
George Popescu

July 14th 2016, Daily News Digest

July 14th 2016, Daily News Digest

News Comments Dear Readers, As you are probably aware Lending Times is organizing an event in New York on Monday August 15th titled “The future of Market Place Lending – Madden and beyond”. We would like to welcome our interested readers to participate in the panel. We have 1 seat available at this time. Please […]

July 14th 2016, Daily News Digest

News Comments

  • Dear Readers,
  • As you are probably aware Lending Times is organizing an event in New York on Monday August 15th titled “The future of Market Place Lending – Madden and beyond”. We would like to welcome our interested readers to participate in the panel. We have 1 seat available at this time. Please contact us if you are interested in participating in the panel.
  • Thank you.
  • George Popescu

United States

United Kingdom

European Union

China

New Zealand

  • Lending Crowd, the 4th licensed p2p lender in NZ,  is seeking up to $5 million from financial services sector investors to help the peer-to-peer (P2P) lender build scale and grow loan volumes.  To date, Croad said Lending Crowd has received $22 million worth of loan applications and written $2.5 million worth of loans with 60% of this total comprising personal and motor vehicle loans, and 40% business loans.

 

United States

Personal loans are cheap, but can I get one?, (Bankrate.com), Rated: AAA

In Bankrate’s national survey of interest rates from banks and thrifts for July 13, 2016, the rate on personal loans remained unchanged for the 4th consecutive week at 10.94%. This week’s average rate is down four-tenths of a percentage point from its 2016 high. A year ago, interest on the average personal loan was 11.12%.

There are 3 types of places where you can look for a personal loan:

  1. Banks
  2. Credit unions
  3. Finance companies (including online lenders)

As recently as a few years ago, banks dominated this space, accounting for 40% of all personal loan originations, according to the credit bureau TransUnion.

“Even though Prosper and Avant and Lending Club to a certain extent have pulled back, there are other lenders that are filling the void,” Tarkan says. “So I don’t know if there’s going to be this massive decline in availability of credit because the marketplace lending sector is contracting.”

John Ulzheimer, a credit expert who formerly worked for FICO and Equifax, says “every mainstream lender” now issues personal loans, and there are many good options, particularly for people with good credit.

To give some examples, Wells Fargo branches throughout the country offer personal loans. In Los Angeles, the nation’s second-largest bank offers personal loans for as little as 9.25%, while Houston-based Integrity Bank — with 3 southeast Texas branches — charges 9%, according to the Bankrate survey.

Global M&A, PE and VC activity declines in the first half of 2016 after reaching record highs last year, (Bureau Van Dijk), Rated: AAA

View the full report here.

Both the volume and value of global mergers and acquisitions dropped significantly over the opening half of 2016, according to information collected by Zephyr, the leading global M&A database. Over the first six months this year, only 43,352 deals were announced for a combined $1.94 trillion. This is down nearly 20% in volume and over 40% in value compared to the 53,287 deals worth $3.27 trillion in the last half of 2015, and 52,637 deals worth $2.94 trillion in the first half of 2016.

The one exception was the Middle East and North Africa, where value climbed 23% to $15.7 billion over the six-month span, despite a small dip in volume. All other regions declined over the same time frame, with the steepest drop reserved for Central and Eastern Europe, which slipped 52% from $88.45 billion in H2 2015 to $42.58 billion this year. The top-performing countries by value for H1 2016 were the US, China, the UK, Switzerland, and Canada.

The Zephyr database also showed both the volume and value of global private equity and venture capital investment followed the same pattern as M&A in H1 2016, declining in the preceding six months and year-on-year. In all, there totaled 2,651 deals worth a combined $196 billion during H1 2016, a 20% decline in volume and 47% fall in value from the final six months of 2015.

Congressional Committee Reviews Marketplace Lending, (Crowdfund Insider), Rated: AAA

Comment: a more detailed article on the hearing from July 12th, 2 days ago.

The meeting saw the participation of several industry executives including representatives from Prosper, CAN Capital, the American Bankers Association, the law firm of O’Melveny & Myer and the National Community Reinvestment Coalition. The meeting was timely as multiple regulatory agencies are moving towards applying additional regulations on online lenders – an act that may place financial innovation at risk.

The “key takeaway” offered by the Committee was that online lending may deliver access to credit to underserved or underbanked communities. For both consumers and SMEs alike. Of course, advancement by online lenders may put traditional banks under additional pressure – something the ABA representative expressed by saying regulation should be based Rob Nichols ABAon activities – in other words, banks want similar rules to apply to online lenders.

Parris Sanz from CAN Capital struggled to explain away their avoidance of using an APR and what approximately CAN Capital was charging borrowers (Ms. Levi clarified it as 36% to 60%).

A FINRA survey of US consumer financial capability, (FINRA), Rated: AAA

The US household financial picture is improving.

Financial health

  • 18% spend more than they household income, 38% spend all their household income. ( in 2009 20% spent more than their household income)
  • 21% of households have medical debt vs 26% in 2012
  • 50% of households have no rainy-day fund , also a diminishing %
  • 26% of households have used non-bank borrowing vs 28% in 2012
  • 32% of households only pay the minimum payments on their credit cards vs 40$ in 2009
  • 9% are underwater in their home equity vs 14% in 2012

Literacy

Study participants were asked five questions covering aspects of economics and finance encountered in everyday life, such as compound interest, inflation, principles relating to risk and diversification, the relationship between bond prices and interest rates, and the impact that a shorter term can have on total interest payments over the life of a mortgage.

63% of individuals got 3 of fewer basic questions correct in 2015 vs 58% in 2009

Comparison

Most Americans do not compare offers or collect information from more than one company when shopping for credit cards. This practice suggests a gap in applying financial decision-making skills to real life situations.

58% of Americans do NOT compare credit card offers before choosing a credit card to use.

 Lendio Announces Support for SMART Box Initiative Focused on Enhancing Online Lending Disclosures, (Press Release), Rated: A

Lendio (www.lendio.com), a marketplace for small business loans, announced today that it will join industry leaders as an early engagement participant in supporting the model small business lending disclosure called the SMART (Straightforward Metrics Around Rate and Total cost) Box, developed by members of the Innovative Lending Platform Association (ILPA).

The SMART Box is a voluntary initiative to promote transparency through standardized pricing comparison tools and explanations, including both various total dollar cost and annual percentage rate (APR) metrics to further empower a small business to assess and compare financing options.

JPMorgan had a blowout quarter in fixed income, and it’s big news for Wall Street, (Business Insider), Rated: A

JPM had a particularly strong quarter was fixed income, currencies, and commodities, or FICC, trading, which produced revenues of $3.96 billion — up 385% from the same quarter last year. Analysts had forecast FICC revenues of $3.57 billion, according to Bloomberg estimates. Those are the highest quarterly FICC revenues for the firm since Q1 2015 ($4.1 billion). You’d have to go back to Q1 2013 to find significantly better results ($4.8 billion).

Many firms have been cutting FICC headcount, including Deutsche Bank, Credit Suisse, Goldman Sachs, and Morgan Stanley, which cut 25% of the division last year.

“We’re investing in it,” CEO Jamie Dimon said at the bank’s investor day in February. “We’re investing in it more on the technology side.”

Now the question is whether JPMorgan was the sole firm to smash expectations or whether we’ll see comparable results across the Street in the coming days.

Jefferies in June reported trading — and fixed income — revenues that were better than normal but not by much. Goldman Sachs has previously laid out a bull case for fixed income; we’ll have a window into its FICC business when that firm reports earnings on Tuesday.

OnDeck Announces Date Of Second Quarter 2016 Earnings Conference Call, (Yahoo Finance), Rated: B

.0.0.1.2.0.1.0.0.0.0.0.0.$SideTop-0-HeadComponentTitle-Proxy.$SideTop-0-HeadComponentTitle.0">OnDeck Announces Date Of Second Quarter 2016 Earnings Conference Call, (Yahoo Finance), Rated: B

OnDeck will report financial results for the second quarter ended June 30, 2016, on Monday, August 8, 2016, after the market close.

United Kingdom

How are the alternative finance industry and the .6 trillion wealth management market approaching each other?, (City A.M.), Rated: AAA

If you use an independent financial adviser or wealth manager, they’ve probably never mentioned P2P lending.

This might seem strange: there’s been a lot of talk of how the peer-to-peer industry is “moving mainstream”, and volumes reflect that. In 2015, the online alternative finance industry in the UK grew to £3.2bn – an 84 per cent increase from 2014 – and alternative finance lending accounted for around 14 per cent of new loans to small firms.

And at the same time, institutional money has flowed readily into the sector. In the last six months, according to AltFi Data, it accounted for 40 per cent of involvement in the UK market – from almost nothing prior to 2014. But most of this money comes from specialist funds, and institutional money is notoriously fickle.

Financial advisers, however, still seem reticent. “They have always been very interested, but what’s needed is conversations. When we get them in a room and speak to them – show them our processes and due diligence – they become more positive on the space. That can give them the confidence to promote P2P lending to consumers,” says James Meekings, co-founder of Funding Circle.

Most advisers will say that, while they’re not against P2P in principle – often far from it – they want to see the sector go through a cycle before seriously considering it. As wealth management veteran John Spiers says (see below), while Zopa was around during the crisis, other major players weren’t – and 2007 and 2009 were unusual anyway because the level of bankruptcies was so low, owing to interest rates being slashed so fast.

As Spiers also points out, plenty of IFAs have been burnt in the past. Now, they have to demonstrate that they’ve done a certain amount of due diligence on each product they’re recommending and, as has always been the case, they want a fee for those recommendations. As one industry analyst bluntly puts it: “if the IFA hasn’t got a product to sell, he’s not going to recommend P2P. It comes down to whether something has a metric next to it that he can understand, then he can sell it.”

For advisers “funds are the way forward,” says Meekings. They can buy stocks, shares, and funds and manage money on behalf of clients, and their existing tools mean they can buy a fund today. “It gives them diversification and global exposure – which is important, because diversifying across platforms [which can focus on just one area, like consumer credit], rather than assets, won’t necessarily do that,” he adds.

“The industry is working to create a scoring system for returns. This should be a function of the return and the shape, i.e. volatility, of that return. If advisers can study lending performance, based on meaningful and detailed data, they can begin to perform satisfactory due diligence,” says Rupert Taylor, co-founder of AltFi Data.

The Innovative Finance Isa is already giving retail investors the opportunity to hold P2P investments in the recognizable wrapper. While many investors wait for the largest platforms to get approval from the Financial Conduct Authority (currently, only three smaller platforms have been given the okay), it has enticed big players like Hargreaves Lansdown into the ring. And it’s worth noting that investors can, even without the dedicated vehicle, populate a stocks and shares Isa or a Sipp with P2P investments.

Moreover, alternative investments heavyweight Octopus Investments launched P2P product Octopus Choice in April, enabling customers to target higher interest rates than deposit accounts, but with less risk than stocks and shares.

Head of Octopus Choice Richard Wazz says that the reception from the hundreds of financial advisers introduced to the product has been “incredibly positive. Advisers are proving themselves to be not only comfortable but excited to recommend it to large numbers of their clients – seeing it as a new and welcome way of diversifying their portfolios.”

P2P body chief denies FCA delays damaged industry, (FT Adviser), Rated: A

By the time the new Isa had launched in April, just eight out of 86 peer-to-peer lending platforms had been granted the necessary permissions to offer the savings vehicle, according to the industry body. Kevin Caley, managing director of ThinCats, said he does not expect approval to happen before the end of August, adding he guessed it “may well take quite a bit longer”.

But speaking to FTAdviser, the P2P Finance Association’s chair Christine Farnish said the delays were not such a big deal because investors’ money can be put into the Isa at any point.

“It’s just a question of a small amount of time in the overall scheme of things,” she said, adding Isas are designed to be a long-term savings product.

The delays were partly a result of the FCA being made responsible for 30,000 consumer credit firms in 2014, and Ms. Farnish said the peer-to-peer sector got “put to the back of the queue”.

AngelsDen & Funding Circle’s Alum Verto Homes Launches £1M Funding Raise on Crowdcube, (Crowdfund Insider), Rated: A

Founded in 2010 by entrepreneurs, Tom Carr and Richard Pearce, Verto Homes stated it designs, builds, and sells intelligent, sustainable homes that produce and store clean energy from the sun. The company noted that none of their homes burn fossil fuels for lighting or heat and each is featured automation technology and  is controlled by a smartphone app, called Vesta, which was launched on iTunes in 2015.  The homes are available starting at £190,000.

Verto Homes, a London-based builder that creates sustainable homes, launched an equity crowdfunding campaign on Crowdcube to raise £1 million. Within just a few hours, the initiative successfully secured 41% of its targetted goal (£415,000) from 14 investors.

European Union

Leading German Crowdfunding Platform, P2P Lender Auxmoney Powers On, (Crowdfund Insider), Rated: AAA

Germany’s leading lending marketplace AuxMoney reports continued strong growth. Loan volume increased from €39.3 million in the first half of last year to €79.5 million in the first half of 2016 ‒ an increase of more than 100%.

Founded in 2007, by Raffael Johnen, Philip Kamp, and Philipp Kriependorf, Auxmoney is Germany’s largest crowdfunding platform and Continental Europe’s second largest P2P lender after French Younited Credit – with whom it is now competing neck and neck. According to research institute GfK, Auxmoney is also the most famous FinTech firm in Germany, which does not come as a surprise given its 1.5 million registered members.

In 2015, Auxmoney’s growth was fueled by a spectacular commitment by Dutch insurance company Aegon, as an Institutional Investor, to lend €150 million through the platform. As for its own capital needs, Auxmoney is backed by top venture-capital firms such as Seven Ventures, Index Ventures, Union Square, Foundation Capital and Partech.

Since its beginnings, Auxmoney has originated €268 million worth of loans, out of which nearly two-thirds were originated in the past 18 months alone. Both the number and the size of loans are increasing: the number of loans originated increased by 69% from 6,337 in the first half of 2015 to 10,688 loans in the first half of 2016; at the same time the average loan size increased from €6,196 to €7,439, a 20% increase.

China

264 Peer to Peer Lenders Shut Down in China During First Half of 2016, (Crowdfund Insider), Rated: A

During the first six months of 2016, at least 264 peer to peer lending platforms were shut down in China. This is a direct reaction to the tightening grip of Chinese regulators. The report published in ECNS, states that even tougher oversight is in store for the P2P lending industry as authorities become more vigilant in uncovering fraud and shutting down platforms that do not qualify under Chinese rules.

China published draft rules in 2015 but like many other government initiatives it was not completely clear as to how enforcement would proceed. There have been multiple high-profile P2P platforms that have collapsed. The best known is Ezubao that was described as a Ponzi-scheme months before regulators showed up to shutter the doors. Ezubao apparently fleeced investors of over $7 billion – an incredible amount. Allegedly over 95% of the projects listed in Ezubao were faked.

As of June, there were an estimated 2,349 P2P platforms in operation in China. Chinese is the largest P2P market in the world.

New Zealand

Peer-to-peer lender Lending Crowd seeking capital to help it grow, (Interest), Rated: A

Lending Crowd is seeking up to $5 million from financial services sector investors to help the peer-to-peer (P2P) lender build scale and grow loan volumes. Co-founder Wayne Croad, who majority owns Lending Crowd’s major shareholder Finance Direct, told interest.co.nz the P2P lender has hired Greg Anderson of Northington Partners to raise up to $5 million dollars through a capital raise.

Funds raised will be used to “assist with growing loan volume by extending marketing and product development initiatives.”

Lending Crowd became New Zealand’s fourth licensed P2P lender last year, receiving its license from the Financial Markets Authority. At the time Croad said Lending Crowd would facilitate secured loans of between $2,000 and $200,000 through its website for small and medium sized businesses, vehicles and personal loans for three and five-year terms.

To date, Croad said Lending Crowd has received $22 million worth of loan applications and written $2.5 million worth of loans with 60% of this total comprising personal and motor vehicle loans, and 40% business loans. He said registered non-bank deposit taker Finance Direct has participated in $900,000 of the loans on the Lending Crowd platform on equal terms with retail investors. There are 220 registered retail investors, and 165 active investors. In terms of loan security, Croad said 30% of loans are secured by cars plus a property, 50% are secured by vehicles, and 20% are secured by property only.

“The average weighted return for investors to date has been 12.50% after fees,” Croad said.

Lending Crowd has just released its first financial statements. They show fee and commission income of $18,601 up to March 31, and operating expenses of $39,748, leaving a loss of $17,450.

Author:

George Popescu