Tuesday February 13 2018, Daily News Digest

china asset-backed securities

News Comments Today’s main news: SoFi’s adjusted 2017 profit was $126M. Funding Circle lent over 117M GBP in January. CreditEase Fintech Investment Fund invests in Fair. FT Partners advises Yapstone on $71M Series C round. LendingKart raises Rs1,129 crore. Today’s main analysis: Why China isn’t worried about the slowdown in asset-backed securities. Today’s thought-provoking articles: Goldman’s fintech approach to […]

china asset-backed securities

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Canada

MENA

News Summary

United States

Fintech SoFi blames missed earnings on borrowers skipping payments, increased hiring costs (San Francisco Business Times), Rated: AAA

SoFi said it made an adjusted profit of $126 million after pulling in revenue of $547 million for all of 2017, but did not break out figures for the fourth quarter.

(MarketWatch), Rated: A

SoFi Turns Losers Into Winners (and Investors) with the So Money Sweepstakes (PR Newswire), Rated: A

From February 12th through 16th, SoFi will award $25 in a SoFi Wealth account to 200 losers of HQ Trivia each day. To enter for a chance to win, all people need to do is Tweet to @SoFi on Twitter with a screenshot of their HQ loss screen and the hashtag #SoMoneyEntry. In addition to the $25, winners will also receive SoFi’s new card game, “So Money,” featuring playful questions that aim to encourage people to talk more openly about their financial lives.

Goldman Sachs is taking a fintech approach to grow its consumer lending business (Econsultancy), Rated: AAA

Two of the biggest proofs of Goldman’s transformation were its launch of GS Bank, a internet bank with a $1 deposit requirement, and Marcus, an online consumer lending platform through which well-qualified consumers could obtain personal loans of up to $30,000. GS Bank has since been merged into Marcus, which now serves as Goldman’s consumer brand.

As QZ pointed out, “Goldman thinks it can make $1 billion in extra revenue from its consumer lending business over the next three years, as much as it expects for its trading operations.”

As detailed by the Wall Street Journal, Goldman is reportedly in talks with Apple to offer buyers of Apple devices financing at point-of-sale. “Customers purchasing a $1,000 iPhone X could take out a loan from Goldman instead of charging it to credit cards that often carry high interest rates,” the Journal explained.

This type of financing is big business: by one estimate, $80bn of the $200bn consumers borrowed using retailer-affiliated credit cards or point-of-sale loans went towards big-ticket items including electronic gadgets.

Source: Econsultancy

The Future of Banking (Crowdfund Insider), Rated: AAA

The Use of Artificial Intelligence (AI) Will Increase

Artificial Intelligence (AI) will have a major role in banking for both the short-term and long-term. First, we will see AI help banks with fraud mitigation. Today, most fraud is detected through computer patterns that alert a fraud team who would then take the necessary steps to try to prevent or mitigate the threat. Now that technology has made access to money fast and easy, the transaction volume has increased exponentially.

Banks and Non-Banks Will Form Closer Partnerships

By tapping into a non-bank’s customer base, it will lower the bank’s cost of acquisition while providing more value for the customer. Banks will also realize that non-banks provide them with valuable data from their customer bases that they can leverage to provide a customized banking experience as well as a source for additional revenue streams.

There Will Be More Competition in the Digital Banking Space

Whether it’s JPMorgan Chase with Finn, or Greenhouse by Wells Fargo, big banks are entering into the digital banking space full force with the hope of attracting young consumers. Then you have digital banks like Ally, USAA and Capital One 360 who truly made a major effort in 2017 to attract millennials by tweaking their product, tone, messaging and branding to make sure they start penetrating that segment. We will continue to see that this year.

You still have niche financial products like Sofi that focuses on student loans or Stash Invest that focuses on investing, which are playing in the digital banking space.

Lastly, you have neobanks like Moven, GoBank, Simple and Varo who will continue to flourish and grow, but will be threatened by giants like Amazon, Google and Apple.

Cybersecurity will Get an Upgrade

After the highly publicized and damaging Equifax security breach that affected approximate 145 million Americans, we will surely see a modernization and upgrade of cybersecurity.

We spoke with the creator of the Chase Sapphire Reserve about millennials and the other challenges she’ll confront at JPMorgan (Business Insider), Rated: A

JPMorgan Chase, on the other hand, recently announced plans to expand its network. It’ll add 400 new branches in 15 to 20 new markets over the next five years — an investment spurred in part by the savings from the recently enacted tax law.

JPMorgan has, of course, culled some branches over the years, but far fewer than its peers — just 484, or 8.6%, since 2012, compared with cuts of more than 30% by its competitors Citigroup and Capital One over the same period.

BI: How does what happened with the Chase Sapphire Reserve phenomenon translate to the rest of the Chase consumer business?

Codispoti: The fact that we were able to break some myths with millennials. When I first took the job there was kind of this general consensus in the market that millennials wouldn’t pay a fee for a credit card or wouldn’t be interested in premium products — it just isn’t true. So I think we’re kind of breaking those myths when we think about banking and home lending as well.

We’ve shared in the past that we’ve had some extremely successful initial tests with the Sapphire Reserve customer, offering them a home lending offer of 100,000 points if they completed a home-lending mortgage with us. And 50,000 points for those who upgraded to Chase Private Client and deposited $100,000 into an account. We saw extraordinary results, greater than we ever expected. So clearly this is an engaged customer base, they love the Reserve brand. It transcends card into other areas of their financial life.

Citi Ventures’ Vanessa Colella: ‘No one runs innovation, it’s all about unleashing it’ (Tearsheet), Rated: A

As one of the largest financial institutions in the world, Citi takes its innovation efforts seriously. Combining internal and external models of collaboration with a disciplined corporate venture arm, the financial services giant ensures that it has a lot of coals in the innovation fire.

Real Estate Investment Platform, Sharestates, Continues Impressive Growth Launching New Marketplace in Arizona (AltFi), Rated: A

Today, Sharestates, an online real estate investment platform, announced today their inception into the Arizona Banking Department roster of lenders as Sharestates Investments LLC, NMLS ID number 1538766. With this launch, Sharestates will be offering their loan products to the real estate speculation and development community in a statewide effort.

As a part of Sharestates’ launch into the Arizona market, the company will be attending the 45th Pitbull Hard Money Conference located at the We-Ko-Pa Resort and Conference Center in Scottsdale, Arizona. The event will be held March 14-15, 2018 and members of the Sharestates team will occupy booth #417.

Sharestates has funded more than 895 individual loans, providing an average return on investment of 10.42%.

Realty Mentors Launches Its New Investment Advisory Business (Realty Biz), Rated: B

Realty Mentors announced a new investment advisory business. According to the article in Crowd Fund Insider.com, the company which is a commercial real estate diligence and underwriting company and is an affiliate company of CreditVest is claiming to be the first of its kind to launch in the commercial real estate crowdfunding industry.

When it comes to the real estate crowdfunding industry, their services will encourage new investors to enter the market because they will have the benefit of an objective and independent third party advising them.

Vishal Garg of Better Mortgage (Lend Academy), Rated: A

Our latest guest on the Lend Academy Podcast also thought it was crazy and decided to actually do something about it. Vishal Garg is the CEO and Founder of Better Mortgage and a few years back he missed out on buying his dream home because of the clunky and slow mortgage process. So, he started a company to completely turn this process on its head.

Stock Market Volatility & Your Retirement, Who You Gonna Call? Robo Or Human Advisor (Forbes), Rated: A

Spooked investors looking for reassurance beyond the panic in the headlines have two options to turn to. They can call up a financial advisor, or they can go on the Internet. Artificial intelligence, or fintech’s application of AI, robo advisors, are viewed by many as the future of affordable and effective retirement and investment advice. These algorithms are seen as thetechnology that will disrupt, if not replace, human advice.

Most robo advisor websites provide real-time quantitative information about the market’s performance. But information alone is not necessarily what people are looking for when they are faced with uncertainty. Market performance is public, but the impact on retirement investments is profoundly personal.

That observation touches on the key difference and perhaps the strategic advantage of human advice versus advice by algorithm alone. Clients, which for now are primarily of the human variety, are looking for someone to help them cope and to care as much as they do, as well as someone who has the discipline and expertise to provide perspective to what is otherwise presented in the news as chaos.

Klarna Announces Progressive Parental Leave and Benefit Policy for U.S. Employees (PR Newswire), Rated: A

Global payments provider Klarna (www.klarna.com) has implemented a new parental leave and benefits policy that offers all of its U.S. employees who become parents a comprehensive package that includes 20 weeks of leave at full pay, a flexible, part-time work week “ramp-up period” on their return and a two-year child care subsidy.

As of January 1, 2018, Klarna’s full-time and part-time female and male employees who become parents—either biologically or through adoption—are eligible to receive the new parental leave and benefits. In addition, applicable benefits of the new policy will be extended retroactively to U.S. employees who became parents in 2017.

The new Klarna parental leave and benefits policy for U.S. employees has three core components:

  • Parental Leave: The new parent may take 20 weeks of leave at full pay, and with full health and welfare benefits, during the child’s first two years.
  • Ramp-Up Period: Upon returning to work, employees will have the option to return to work on a part-time schedule.
  • Child Care Subsidy: Upon their return to work, Klarna will provide new parents with a child care benefit during the child’s first two years that will subsidize parents up to $250 per month to defray costs.

Trump Administration Plans To Defang Consumer Protection Watchdog (NPR), Rated: A

Within weeks of coming on board, Mulvaney has worked to make the watchdog agency less aggressive. Under his leadership, the CFPB delayed a new payday lending regulation from going into effect and dropped an investigation into one payday lender that contributed to Mulvaney’s campaign. In another move that particularly upset some staffers, the new boss also dropped a lawsuit against an alleged online loan shark called Golden Valley Lending. The suit says the lender illegally charges people up to 950 percent interest rates. It took CFPB staffers years to build the case.

Bonenfant sent NPR a screenshot from the Golden Valley website. It says on her $900 loan, her scheduled payments in less than 12 months will total $3,735, or more than four times what she borrowed.

Bonenfant has so far paid more than $3,000 to Golden Valley and rung up more than $1,000 in overdraft fees at her bank.

The lawsuit was moving forward until Mulvaney came on board, when it was suddenly dropped.

Federal Rent-a-Bank Bill May Harm Financially Distressed Consumers (Pagosa Daily Post), Rated: A

Recently, it was announced that the U.S. House of Representatives is likely to vote, the week of February 12, on H.R. 3299, the so-called “Madden fix” bill which would preempt state interest rate caps and open the flood gates to online predatory lending. The bill is spearheaded by U.S. Reps. Patrick McHenry (R-N.C.) and Greg Meeks (D-New York).

There are signs that some online lenders are making large numbers of loans that consumers will not have the ability to repay:

  • News reports show that delinquencies and charge-offs at marketplace lenders are rising.
  • One lender has had so many of its loans fail, that it had to repay investors for their losses in consecutive securitizations of the loans it bundled up and sold to Wall Street.
  • One online lender reportedly failed to verify a borrower’s income for a full two-thirds of its loans in 2016.
  • Moody’s credit-rating firm likens this industry to mortgage lending in the years leading up to the 2008 financial crisis in that “the companies that market the loans and approve them quickly sell them off to investors,” relieving themselves of the risk of the loan later going bad.
  • Many marketplace lenders make very large loans of $30,000-$50,000 or higher, and even 36% is a very high rate for such loans. Many states have tiered rate caps in recognition that interest becomes more unaffordable the larger the loan. Iowa, for example, caps interest at 21% for loans over $10,000.
United Kingdom

Funding Circle lends over £117m in January (Bridging&Commercial), Rated: AAA

Funding Circle has announced that it lent more than £117m last month to UK businesses.
The largest portion of funding went to businesses in the South East (22.1%), followed by companies based in London (16.2%), the Midlands (14.4%) and the South West (11.7%).
The property and construction sector received the largest part of the funding (17.6%), followed by professional and business support (13.5%) and retail (11.9%).

Referral schemes: make money from your friends and family (Love Money), Rated: B

People using peer-to-peer platform Funding Circle can net £50 if they recommend a friend or relative who goes on to lend at least £2,000.

Normally, Zopa investors can earn up to £50 if the person they recommend lends £2,000 with the platform. They’ll receive £50 too.

FSB launches new FinTech funding platform for SMEs (Tamebay), Rated: A

The Federation of Small Businesses (FSB) has launched a new fintech platform to provide small businesses and self-employed people with greater access to funding to help them grow and develop their enterprise..

The average amount a small business applies for from an alternative finance provider was found to be £39,000 in the survey, with equipment purchases and working capital for short-term operations or late payments being among the top reasons for businesses seeking finance.

LendInvest Announces Launch of Product Transition Process to Support Developers Throughout Their Projects (Crowdfund Insider), Rated: A

On Monday, LendInvest announced the launch of its new process for development finance borrowers to transition seamlessly between products. According to the online lender, the Product Transition process allows existing borrowers to transfer easily between specialized loans that are tailored to support them at each stage in their development project.

Mobile banking start up Fiinu launches Seedrs crowdfunding campaign (AltFi), Rated: B

Banking start up Fiinu has today launched a crowdfunding campaign on Seedrs,as it seeks £500k in seed funding to support its development and an application for regulatory approval from the Financial Conduct Authority (FCA).

China

CreditEase FinTech Investment Fund to Invest in Automotive Financial Technology Company Fair (Business Insider), Rated: AAA

CreditEase, a Beijing-based leading FinTech conglomerate in China, announced today that its venture fund, CreditEase FinTech Investment Fund (“CEFIF”), recently joined a group of prestigious investors to support California based Fair’s strategic expansion. Other investors in this round of financing include Siemens-backed next47 global venture fund, BMW i Ventures, Millennium Technology Value Partners, 137 Ventures, G Squared and Upfront Ventures.

Fair is a mobile technology platform that allows customers to lease and return a car with flexible terms entirely by using a smartphone.

Why China Isn’t Worried About a Slowdown in This Lending Market (WSJ), Rated: AAA

China’s market for asset-backed securities—which bundle up car loans, mortgages, consumer loans and other receivables into bondlike products—surged in 2017, led by issuers including the financial affiliate of Alibaba Group Holding Ltd. and other nonbank lenders. Total issuance of such instruments, which are mostly denominated in yuan, jumped 90% to over $220 billion last year from 2016, according to S&P Global.

The country is now the world’s second-largest market for securitized assets after the U.S., where issuance reached $510 billion in 2017, it said.

In the past couple of months, however, issuance in China of securities backed by unsecured small consumer loans has slowed sharply. This came after Chinese financial regulators took steps to curb a proliferation of internet lenders making microloans, small, short-term loans that typically carry high interest rates. These small loans represent roughly 40% of all consumer loans backing asset-backed securities in the country, according to S&P.

Around $1.3 billion worth of securities backed by unsecured microloans were issued in January 2018, down from $3 billion in the same month a year ago and versus a peak monthly issuance volume of nearly $7 billion last autumn, according to data provider Wind Info.

Source: The Wall Street Journal

China: WeiyangX Fintech Review (Crowdfund Insider), Rated: A

WeChat has permanently banned over 1000 “cash loans” mini programs which violated its verification and operation rules. Xinhuanet has reported that there were multiple mini programs about “loans” on WeChat (e.g. unsecured loans and quick loans), ranging from 200 to 100,000. Complaints about the illegal credit products reached over 1,000 on one of China’s leading complain platform Ts.21.com

Hong Kong Monetary Authority (HKMA) announced that it would amend the relevant regulations on virtual banks.

Official documents show that the original guidelines require that a virtual bank incorporated in Hong Kong must hold at least 50% of its shares by an officially recognized and reputable bank or financial institution. The new ordinance recommends that non-financial institutions could register an “intermediary holding company” first when setting up a virtual bank, and then use the company to controls the virtual bank. This means that the authorities in Hong Kong have lowered the entry threshold on the financial qualification of virtual bank applicants. Non-financial institutions, including technology companies, can also apply to own and operate virtual banks in Hong Kong.

This week, LähiTaksi, a Finnish taxi company from Helsinki, announced that it would soon accept Alipay payments.

European Union

Robo firms signal their advice intentions (Money Marketing), Rated: A

Robo-advisers will increasingly move towards hybrid models over the next year, combining the human touch with machine learning, experts predict.

Scalable Capital, the Europe-wide robo firm, which has received financial backing from investment giant BlackRock, has just started offering telephone and face-to-face advice for clients who want to progress beyond an initial free session.

Nutmeg and Moneyfarm have both signalled plans to move in a similar direction, while Wealthify, which saw Aviva take a majority stake last year, won’t rule out taking this step in the future.

International

The Most Important FinTech Innovations that Will Change Our Lives in the Near Future (Interesting Engineering), Rated: AAA

It is largely evident that we are looking at inevitable digital disruption in financial services. The traditional banking system is yet to see any major technological innovation in lending whereas the FinTech firms have made huge investments in the same area. China moved96% of its e-commerce sales without the services of a bank. A report by Cisco pegs the peer to peer lending volume in China at approximately $66 billion, for the US that number stands at $16.6 billion, and for the UK it is $5.4 billion. Clearly, the opportunities aren’t fictional, and technology will guide this paradigm change.

American FinTech giants include Stripe, a San Francisco based firm valued at $5 billion, Credit Karma, another Silicon Valley-based FinTech firm valued at $3 billion.

The UK lags behind the US by quite a distance, but is second overall with $5.4 billion investment in the same time frame, thus confirming its position as one of the world’s leading FinTech hubs. Its FinTech bigwigs include TransferWise, DueDil, AstroPay, GoCardless and Digital Shadows.

FT Partners Advises YapStone on its million Series C Financing Round (FT Partners), Rated: AAA

FT Partners is pleased to announce our role as exclusive strategic and financial advisor to 

Source: FT Partners

Read the full transaction profile here.

ETHLend alters terms to encourage use of its own digital currency (P2P Finance News), Rated: A

CRYPTO-BACKED peer-to-peer lending platform ETHLend has reached more than £2m of loans as it announces new incentives to encourage users to transact with its LEND token.

Borrowers can post any digital currency as collateral and loans can be made in Bitcoin or Ethereum or LEND. But ETHLend now wants more people to use the LEND token as the means of exchange so it has said anyone providing funds in LEND won’t have to pay any transaction fees.

There is also a 50 per cent discount when the LEND coin is posted by borrowers as collateral.

Australia

DirectMoney a leading ASX gainer after revealing Alceon investment (Proactive Investors), Rated: AAA

DirectMoney Ltd (ASX:DM1) is an ASX leading gainer intra-day on news of a strategic investment by alternative investment manager Alceon.

The investment comprises an initial placement of $600,000 at $0.042 per share and is equivalent to a 3.1% interest.

India

Lendingkart raises total of Rs1,129 crore after latest funding round (livemint), Rated: AAA

Rs565 crore

What is it? The amount raised in equity funding by Lendingkart Technologies, a fintech start-up that provides online loans to small businesses. The latest fund raise, announced on Monday, takes the total amount raised by the Lendingkart Group to Rs1,129 crore.

Tell me more: Lendingkart’s latest funding round was led by Singapore’s Fullerton Financial Holdings, and also saw participation by existinginvestors, namely Sistema Asia Fund, Bertelsmann India Investment, Mayfield India, India Quotient and Saama Capital.

India fintech seeking to raise at least US$ 87m to grow tech capabilities (Business Times), Rated: A

AN Indian fintech company is seeking to raise over US$87 million of equity funding to expand its technological and analytics capabilities.

Lendingkart Technologies will be doing so through series C capital-raising, with the initiative led by Singapore’s Fullerton Financial Holdings, along with participation from existing investors.

Canada

Payday Loan Use Among Heavily Indebted Borrowers On The Rise (Payment Week), Rated: AAA

Payday loan use among heavily indebted Ontarians continues to escalate, as Ontario in 2017 involve payday loans, up from 27% in 2016.

The average number of payday loans outstanding at the time of insolvency declined to 3.2 in 2017, after peaking at 3.5 loans in 2014. However, the average payday loan size in 2017 is $1,095, an increase of 12.4% from $974 in 2016.  One in ten (9%) loans are $2,500 or more, up from 6% in 2016.

The average insolvent payday loan borrower owes $3,464 in payday loans, or $1.34 for every dollar of monthly take-home pay, on top of $29,997 in other unsecured debts. They are using payday loans to keep up with existing debt repayment.

Borrowell Gives Birth To New TV Campaign (Borrowell Email), Rated: A

Borrowell is making its first major foray into television with a 30-second spot that launches today, called “Home Birth.” Created by Toronto-based agency Conflict, the commercial aims to raise awareness of Borrowell’s free credit score monitoring service.

MENA

Saudi startups have wider funding options amid huge fund volumes (Saudi Gazette), Rated: AAA

In an interview, Nawaf Al Sahhaf, CEO of Badir, said financing options for these startups include without limitation Venture Capital firms, angel investors, accelerators, and incubators in addition to new alternatives such as crowd funding or even P2P lending platforms.

Venture Capital funding is an essential piece of the startup jigsaw.

Venture Funding is unique, however in its characteristic. I define a startup as a company that is looking to receive funding from a venture capitalist. This means that they meet several basic criteria for growth 1) a strong founding team 2) a solution to a clear and identifiable problem 3) a clear path to monetization and most important 4) a scalable product that has a regional if not global market.

All of these criteria are essential to be eligible for Venture Funding. Many of these criteria may not be applicable or sufficient for alternative funding channels including debt, bank funding or grants.

UAE ranked third for Islamic Fintech start-ups (Gulf Today), Rated: A

The UAE is ranked third in an analysis of Islamic Fintech start-ups, according to a survey by Bloomberg Intelligence, issued today. Malaysia and the United Kingdom are ranked first and second.

Crowdfunding and peer-to-peer (P2P) financing could be a game-changer in Islamic finance, it suggests, giving wider reach and potential to close the gap for small and medium enterprises, SMEs, which generated about 60 per cent of UAE GDP in 2014, with Dubai’s regulator introducing the first tailored regulation for crowdfunding in the GCC.

Authors:

George Popescu
Allen Taylor

Friday January 12 2018, Daily News Digest

bitcoin debt

News Comments Today’s main news: More LendingClub-IEG drama.Black Fish raises $145M.Moneygram partners with Ripple.Kreditech expands into India with Mambu. Today’s main analysis: JP Morgan Chase’s investments into digital technology.Is Yirendai undervalued? Today’s thought-provoking articles: Investors go into debt to buy bitcoin.Small business financing trends.How open banking could change how people manage money.Banks, trade finance, and […]

bitcoin debt

News Comments

United States

United Kingdom

China

European Union

International

India

APAC

Africa

News Summary

United States

Lending Club has a bitcoin pivoting suitor (Financial Times), Rated: AAA

Lending Club has all kinds of problems: a history of profit warnings, faint traces of scandal after a management upheaval almost two years ago, and a share price still more than 80 per cent adrift from its peak.

Add to that list: a bizarre, crypto-fuelled activist campaign waged by a Las Vegas-based payday lender called Paul Mathieson, who told authorities in his native Australia that he fled to America in 2008 because he feared being killed by a mobster.

Mathieson’s case for change at Lending Club, laid out in a letter to the company’s board on 2 January, is not a terrible one, on the face of it. He argues that the cost structure at the loss-making company, a pioneer in peer-to-peer lending, is “excessive,” noting fancy headquarters in San Francisco and “hundreds” of “excess” developers. He says that the board should consider a pivot to using its own balance sheet to lend, rather than acting as a broker, taking fees for matching borrowers with lenders. Underwriting has been sloppy, he says, resulting in sub-par returns to investors.

Mathieson is offering 13 shares in his own penny-stock company, IEG Holdings, for every share in Lending Club. At the time of the offer on Monday morning, that was a premium of 19 cents, or about 5 per cent.

Source: Financial Times

SeeThruEquity Issues Update on IEG Holdings Corporation (Bay Street), Rated: A

IEG Holdings Corporation (OTCQB: IEGH) provides online unsecured consumer loans under the brand name “Mr. Amazing Loans” via its website, www.mramazingloans.com, in 20 US states. The company offers $5,000 and $10,000 personal loans over a five-year term at rates ranging from 19.9% to 29.9% APR. IEG Holdings plans future expansion to a total of 25 US states, which would cover 240mn people and represent approximately 75% of the US population.

Since 2013, IEGH has obtained additional state lending licenses, and they are licensed and originating direct consumer loans in 20 states including: Alabama, Arizona, California, Florida, Georgia, Illinois, Kentucky, Louisiana, Maryland, Missouri, Nevada, New Jersey, New Mexico, Ohio, Oregon, Pennsylvania, Texas, Utah, Virginia, and Wisconsin. The Company was founded in 2010 and is headquartered in Las Vegas, Nevada.

IEG Holdings Plans to Create its own IEGH Crypto/Blockchain Currency Backed by Gold Metal and SEC Registration as a Security

IEGH announced that its wholly owned subsidiary, Investment Evolution Crypto, LLC (“Crypto”), is negotiating to purchase a gold project with gold metal in the ground and prospecting licenses. IEG Holdings plans to utilize a gold resource to investigate creating, through Crypto, and a joint venture with Investment Evolution Corporation, also a wholly owned subsidiary of IEG Holdings, its own gold metal-backed crypto/blockchain currency, and potentially offer loans and accept loan repayments in its own crypto/blockchain currency.

IEGH increases loan originations

The company stated that it provided $960,000 in new consumer loans through its online property mramazingloans.com, from the October 2017 to December 2017 period. This represented a 12.3% increase over its July to September 2017 operating period, during which the company’s new loan originations were $855,000.

Desperate to get into bitcoin, investors slip into debt (CNBC), Rated: AAA

Roughly 18 percent of people who buy bitcoin use a credit card to do so, according to a new survey by loan marketplace LendEDU. Of those, 20 percent have not paid off their balance. The phrase “buy bitcoin with credit” has been trending on Google for weeks.

Another problem with going into debt for cryptocurrencies is that people will have to pay back their debt before they see sufficient returns, said Erika Safran, founder of Safran Wealth Advisors. That may require tapping other resources, potentially creating further financial trouble.

Credit card debt from CNBC.

Small Business Financing Trends To Stay Abreast Of (CXO Today), Rated: AAA

  • Traditional bank loan rejections are notoriously high in all markets
  • Small Business Administration (and equivalent agencies) are nefarious for overextending the time-to-credit tolerances of small businesses
  • Volatility of markets, and exposure of almost all markets to disruption by startups could pose urgent cash needs for businesses, which are generally not considered for loan applications by traditional lenders.

Online Lending And Its Deepening Hold Over The Small Business Finance Market

In 2014, a Federal Reserve (US) survey concluded that one in five small business owners opted for loans from online lenders. Since then, the proliferation of online lending platforms has been on the surge, to the extent that traditional brick and mortar lending institutions have also had to move base to the online domain. In the coming years, multiple factors will result in the success and sustainability of online lending platforms. These include:

  • Growing confidence among small business owners to trust online lending platforms
  • Availability of cheaper, quicker, and more convenient loans
  • Options to truly personalize and customize the loan repayment terms to suit the business’ interests

The Call for Transparency in the Online Lending Market

Though the online lending market has been growing year on year, this doesn’t detract from the concerns around lack of transparency in the way some of these platforms operate. Some of the key concerns are around undisclosed APRs and hidden fees. In fact, some online lenders have been castigated for charging significantly high rates of interests from borrowers, often with service quality issues post-approval. Thankfully, there’s already some progress towards bringing a degree of regulation in place for online lending platforms to be at par with traditional lending regulations.

JPMorgan Chase Competitive Strategy Teardown: How The Bank Stacks Up On Fintech & Innovation (CB Insights), Rated: AAA

JPMorgan is making a bigger push into payments technology as digital banking becomes a strategic priority.

In 2016, the bank spent $9.5B on technology and Dimon has committed $300M alone to improve JPMorgan’s technology for its asset management products. Relative to its peer group, JPM claims the highest number of mobile banking customers and its Chase Mobile app currently sports a 4.7 (out of 5) rating in the App Store.

Earnings call analysis – Barclays, Bank of America, Morgan Stanley talking up digitization

  • JPM discussed continued digital consumer banking growth, which grew 6% in Q3’17.
  • Bank of America spent portions of its Q1’17 and Q3’17 talking about digital banking initiatives and technology investment. Specifically, CEO Brian Moynihan mentioned the bank spent $2.25B on technology initiatives in the first three quarters of 2017. The bank also now sees mobile devices account for 1 of every 5 deposit transactions.
  • On Morgan Stanley’s Q3’17 earnings call, Morgan Stanley CFO Jonathan Pruzan mentioned the bank is beta testing new customer-facing digital products it plans to launch, potentially in the robo-advisory space. Specifically, Pruzan noted: “When we think about our wealth business, it’s a business that’s built on scale. And it’s built on the fact that people with wealth want personal advice. So it’s going to be both a mix of technology and digital with the personal element of the advice channel. And we think that’s the winning formula going forward.”

Based on the data, JPMorgan ranks ahead of most bulge bracket banks when it comes to overall fintech investment since 2013, but behind its peers Goldman Sachs and Citi.

Online Marketplace Lender Nav Facilitated More Than 20,000 Small Business credit Approvals in 2017 (Crowdfund Insider), Rated: A

Nav, a small business marketplace lending platform, announced this week it has facilitated more than 20,000 small business credit approvals in 2017.

The company currently has more than 327,000 entrepreneurs now using its platform to manage their data and access capital.

Bono’s Fund Makes Its First Fintech Investment, Backing Acorns (Bloomberg), Rated: A

The Rise Fund, a private investment firm co-founded by the U2 lead singer, is making its first known bet on a fintech business by backing Acorns Grow Inc., said people familiar with the matter, who asked not to be identified because the details are private.

Georgia Company Acquires S.D. Fintech Startup LoanHero (San Diego Business Journal), Rated: A

LoanHero, one of San Diego’s few financial technology startups, has been acquired by Georgia-based company LendingPoint.

Terms of the deal, announced Jan. 11, were not disclosed.

Small-dollar lender Oportun to open 20 offices in Florida (American Banker), Rated: A

Oportun, a community development financial institution that provides small loans to individuals with little or no credit history, is planning to open 20 lending offices in Florida.

The Redwood City, Calif.-based lender said this week that it has already opened four offices in Miami and Hialeah and that it expects to add 16 more in the Sunshine State, primarily in South Florida, by the end of the year.

6 Key Trends in Fintech to Watch in 2018 (Lend Academy), Rated: A

  1. Convergence of Software and Financial Products  One of the important lessons that Square taught the market is that bundles of software solutions (loyalty, POS, analytics, scheduling and many others) and lending are essential drivers in advancing growth of payment processing.
  2. InsureTech
  3. The Power of the Machines  Companies like LendingClub are using machines to discover new relationships and patterns to introduce more tailored financial offers to their customers.
  4. Emerging Economies  Many growing companies in Africa, Asia, and Latin America are developing and adopting financial solutions, often faster and with more innovation than in developed economies.
  5. Wealth Management
  6. Rise of Crypto and Blockchain

Google Pay brings payment tools under a single brand (Tearsheet), Rated: A

The Internet giant is finally putting its many payments capabilities — Google Wallet, Android Pay and Pay with Google — under a single name, Google Pay, after lagging for years behind Apple Pay and Samsung Pay.

Ladder Secures $ 30M Series B Led by RRE Ventures (coverager), Rated: A

CA-based life insurance MGA Ladder announced it has raised $30M in a Series B round led by RRE Ventures, with participation from Thomvest Ventures, as well as Ladder’s existing investors: Canaan Partners, Lightspeed Venture Partners and Nyca Partners . Ladder launched its fully-digital life insurance solution in California on January 10, 2017, and has since expanded to nearly every state across the country.

Fifth Third regains top CRA grade, an entree to M&A (American Banker), Rated: A

Fifth Third Bancorp has received top marks from the Federal Reserve on its most recent Community Reinvestment Act examination as expected.

Fifth Third announced the results on Wednesday, saying in a press release that the Fed gave it an “outstanding” rating on its most recent exam. The Cincinnati company had said in a regulatory filing last month that it expected to ace the test, which covered the period between Jan. 1, 2014, and June 30, 2016.

A Beginner’s Guide to Applying for College Loans (Student Loan Hero), Rated: A

Student loan debt statistics show that more than 70 percent of students graduating from four-year colleges have debt, so you aren’t alone if you need to borrow to cover educational costs.

Step 1: Understand your options

  • Federal loans for students
  • Federal loans for parents
  • Private loans for students
  • Private loans for parents
Source: Federal Student Aid

Step 7: Determine if you’ll need to apply for private loans

  • Family contributions if parents or other family members are willing and able to pay
  • Savings
  • Scholarships or grants from community groups or other sources
  • Parent PLUS Loans
  • Private student loans

Step 8: Learn how to apply for private student loans

Because there are many private student loan lenders, it’s a good idea to shop around. You should consider:

  • Loan eligibility requirements: What do you need to qualify?
  • Loan terms: How long do you have to repay the loan?
  • Repayment terms: When do you need to start repaying, and is there a prepayment penalty?
  • Fees: Is there a cost to apply for the loan or a loan origination fee?
  • Interest rates: Is the rate fixed or variable? How much will you pay to borrow?

You can visit our private student loan marketplace to find private student loan lenders offering loans to parents and students.

Here are the top 6 lenders of 2018!

LENDER RATES (APR) ELIGIBLE DEGREES
CHECK OUT THE TESTIMONIALS AND OUR IN-DEPTH REVIEWS!
2.58% – 7.25% Undergrad
& Graduate
VISIT SOFI
2.57% – 6.39% Undergrad
& Graduate
VISIT EARNEST
2.76% – 7.25% Undergrad
& Graduate
VISIT COMMONBOND
2.99% – 5.15% Undergrad
& Graduate
VISIT LAUREL ROAD
2.74% – 7.26% Undergrad
& Graduate
VISIT LENDKEY
3.11% – 8.46% Undergrad
& Graduate

 

 

Roostify adds tech veteran Adnan Habib as vice president of engineering (Housingwire), Rated: B

Roostify announced Thursday that it hired Adnan Habib as the company’s new vice president of engineering.

In this role, Habib will lead Roostify’s growing product delivery team and will be responsible for making improvements to the Roostify’s digital lending platform.

Roofstock Appoints Suresh Srinivasan as Chief Marketing Officer (BusinessWire), Rated: B

Roofstock (www.roofstock.com), the leading online marketplace for buying and selling leased single-family rental homes, today announced the strategic hire of Suresh Srinivasan as chief marketing officer. Srinivasan has 20 years’ experience leading marketing, product, and e-commerce functions at Fortune 500 and high-growth tech startups. Most recently serving as the SVP of Marketing for Xome, Srinivasan brings a deep understanding of the fast-growing real estate technology sector to Roofstock where he will be responsible for accelerating growth of Roofstock’s marketplace for single-family rental homes and developing the company’s partnership network.

United Kingdom

An invisible banking reform that ‘could fundamentally change how we manage our money’ is days away (Business Insider), Rated: AAA

Regulators in Europe and the UK are ordering banks and credit card companies to share customer data with other companies if their customers agree. The companies will also be able to carry out payments on a customers’ behalf.

Open Banking forces lenders to offer a digital “fire hose” of data that any third party can use to get standardised access — provided the startup is registered with the UK Financial Conduct Authority (FCA) and the customer agrees to share their data. They won’t have to negotiate deals with banks, just plug into their digital systems and go.

The aim of Opening Banking is to give customers greater control over their data and to encourage account switching.

An investigation by the UK Competition and Markets Authority in 2015 found just 3% of customers switched their banks in the last year, meaning many were left with accounts that were not right for them.

 

ThinCats Says 2018 is Poised for Growth in SME Lending (Crowdfund Insider), Rated: A

ThinCats says 2018 is poised for growth. The online lender reports that December was a record month booking £12 million of funding listed on the platform followed the biggest-ever ThinCats-listed loan of £6.7 million to the Chelsea Yacht & Boat Company at the end of September.

Loan Store Reveals to Reduce Interest Rates on Instant Cash Loans for the UK People (MENAFN), Rated: A

Loan Store is the responsible lending hub that reveals to reduce the interest rates on instant cash loans for the UK people.

Hennery Dicosta, a senior adviser of Loan Store, has offered the complete details about this announcement. This is what he said- In a recent scenario, people usually try to borrow a small loan amount. That is why we have decided to provide the loans for bad credit people with no guarantor and no fees on an instant decision to resolve their short term emergencies. We never charge any processing fee and we are now providing these loans on quite low rates of interest. Besides, we do not judge the creditworthiness of the borrowers with their credit rating and give an instant decision on their loan request.

Crowdstacker joins the Peer-to-Peer Finance Association (P2P Finance News), Rated: B

CROWDSTACKER has joined the Peer-to-Peer Finance Association (P2PFA), becoming the self-regulated trade body’s eighth member.

The business lending P2P platform will be represented by chief executive Karteek Patel.

China

3 Growth Stocks at Deep-Value Prices (The Motley Fool), Rated: AAA

With that in mind, we asked three Motley Fool investors to each profile a company that has a low valuation now compared to its earnings-growth potential. They identified Yirendai (NYSE:YRD)Criteo S.A.(NASDAQ:CRTO), and Changyou.com (NASDAQ:CYOU) as strong contenders trading at attractive discounts.

China’s first P2P online lending platform

The Chinese P2P lending market blossomed in the late 2000s, catering to  customers who were underserved by traditional banks, and is worth about $60 billion today.

Analysts expect Yirendai’s revenue and earnings to rise 74% and 14% respectively this year, followed by 43% revenue growth and 41% earnings growth next year. Yet the stock trades at just 14 times earnings, compared to an industry average of 26 for credit service providers. Based on those numbers, Yirendai looks likely an undervalued growth stock.

But there are some obvious reasons why investors are discounting it.

First, Yirendai is a subprime lender. Just 1.7% of its loans were rated as prime “Grade A” last quarter. Another 8.7% were Grade B, and 14.1% were Grade C — but 75.5% were rated Grade D. Yirendai collects higher fees from lower rated borrowers, but its business could collapse if its delinquency rates rise.

The company only discloses delinquency rates for loans past due by 15 to 89 days, and that rate came in at a low 1.8% last quarter. But it doesn’t report any data on loans delinquent for over 90 days.

Chinese finance platform Black Fish raises $ 145m from Gobi, Lightspeed, others (Deal Street Asia), Rated: AAA

Black Fish, a consumer finance platform based in China’s Nanjing region, has received $145 million in a series A round from a cluster of firms  including Lightspeed China Partners and Shanghai and Kuala Lumpur based Gobi Partners.

Others who participated in the round include Morningside Venture Capital, JAFCO Asia, Fullcent Capital and Zhang Tao, founder of Dianping.com.

At this point, the average annual growth rate of consumer finance is 16.4 percent.

China’s Renren Is Poised To Unlock Value From Its Investment Portfolio And Grow With Blockchain (Seeking Alpha), Rated: A

Renren holds a significant investment portfolio that is easily worth $12 per share.  This value will likely be realized in the near term due to multiple catalysts.

The company has started to get involved with blockchain-related businesses, which potentially turns them into a “blockchain play”.

This situation leads to an asymmetrical payoff structure in which there is very little downside and significant upside. My target price is $18.

Renren was an early VC investor in Sofi, taking part in its seed round of financing as well as a later follow-on round. They currently hold a 13% stake in SoFi, having sold 14.1% of their holdings (representing 2% of SoFi) in April 2017 for $92 million.

Source: Seeking Alpha

Dianrong Signs Strategic Agreement with Dalian Finance Development Bureau & Dalian Finance Industry Investment Group (PR Newswire), Rated: A

Dianrong and the Dalian Finance Development Bureau and Dalian Finance Industry Investment Group (DFIIG) recently signed a strategic cooperation agreement to drive financial innovation in Dalian and across China. According to the agreement, Dianrong will develop a series of specific projects in partnership with the Dalian government, including:

  • Assist the Dalian Finance Development Bureau in creating a financial technology (fintech) cloud platform to provide fintech capabilities for small loan and guarantee companies, and other small and medium-sized financial institutions in the region and at large. Tools and services will include sophisticated fraud detection, big-data risk management tools, payment channel integration, and compliance reporting. The fintech cloud platform will also provide regulators with easier monitoring of local lending activities and trends in an ongoing and comprehensive way, helping them provide timely policy guidance and support on risk management.
  • Work with DFIIG to establish a special Internet finance investment fund for Dalian. The fund will focus on investment in fintech projects and startups with the potential to strengthen Dalian’s new economy and financial services industry.
  • Develop a supply-chain trading platform in Dalian utilizing advanced fintech and blockchain capabilities to help more small and medium-sized suppliers secure needed funding. Last year, Dianrong created the first blockchain platform for supply-chain finance with FoxConn Group, a global leader in consumer electronics.

Shanghai tightens financial sector supervision (Ecns), Rated: B

Shanghai is one of China’s largest financial markets by market trading volume. In 2017, its trading volume was 1,438 trillion yuan ($220.9 trillion).

Shanghai has already launched a campaign against fraud and illegal behavior in financial consumer markets, such as internet-based peer-to-peer lending, cash loans to college students, and pay-day loans.

European Union

Rocket Internet CEO says ready to pounce with cash pile (Business Insider), Rated: AAA

Germany’s Rocket Internet needs to hold on to its mountain of cash so it can compete with rivals from the United States and China and pounce when investment opportunities arise, the chief executive said in an interview.

CAUTIOUS MARKET

Rocket is invested in more than 100 start-ups, including in financial and property tech, logistics and travel sites, with its stakes in the five biggest of them potentially worth more than 1 billion euros to Rocket, according to Berenberg bank.

International

MoneyGram Signs Deal to Work With Currency Startup Ripple (WSJ), Rated: AAA

MoneyGram International Inc. MGI +2.63% signed on to run a pilot program testing XRP, a digital currency created by San Francisco startup Ripple, in its payments network, the companies said Thursday.

The Dallas-based company agreed to test XRP as a tool for reducing money-transfer costs and settlement times.

How Banks Can Use Trade Finance Services and Data to Increase Share of Wallet (Traxpay), Rated: AAA

While global trade presents tremendous growth opportunities, businesses of all sizes are none-the-less finding it difficult to access much needed credit, resulting in a global trade finance gap. According to an Asian Development Bank’s (ADB) 2017 Trade Finance Gaps, Growth, And Jobs Survey, that gap was $1.5 trillion in 2016.

Non-financial institution competitors are aggressively targeting this market, using innovations such as blockchain to develop products and tools that not only replace outdated paper and manual-based processes, but also deliver unprecedented levels of cybersecurity that are critical in today’s digital transaction space. The same ADB survey revealed more than $13 billion in venture capital was invested in FinTech trade finance in 2016 alone.

The recent Simmons & Simmons Hyperfinance studyof the world’s leading trade banks found that only 7% believe they are at the forefront of digital innovation in spite of the fact that 80% of innovation leaders report digitally-driven products and services introduced over the past three years have expanded revenue growth. This illustrates the reality that financial institutions recognize the importance of developing a digital strategy, but few are moving aggressively enough to take advantage of these new technologies.

PRINCIPLES, ESG, AND CREDIT RISK (All About Alpha), Rated: AAA

The question before the house right now, though, is: what about the credit rating agencies? The question comes in three parts: there are the global CRAs; the smaller/regional CRAs in most of the world, and regional CRAs in the special case of China.

First, the global CRAs [there are just two of them, Moody’s and S&P] are making “strong efforts” to incorporate an understanding of ESG issues. They are hiring staff with ESG backgrounds, equipping their existing analysts with the relevant expertise, and drawing on third party providers.

Then there is China. Its CRAs include Dagong Global, China Chengxin, and Golden Credit Ratings. The idea of integrating ESG into their analyses is thus far limited to the issue of green bonds, that is, bonds issued for the development of brownfield sites. Government policy in China encourages green bonds and the CRAs have responded. The resulting assessments are focused on the “E,” not so much the “S” or the “G.” And their environmental assessments rely on measuring the impact of the project the bond aims to finance.

  • Research very generally supports the hypothesis that there exists a causal link between ESG factors and the credit worthiness of a borrower;
  • Academic research in limited in that it is too exclusively content to measure credit risk by credit ratings, rather than testing the ratings themselves against alternative measures;
  • But some research does employ the spread of credit default swaps as an independent measure of risk;
  • Anecdotal observation indicates a clear link between G and defaults, although the linkage between E and S and defaults is more difficult to pin down;
  • There is much evidence in the linkage of ESG to macroeconomic factors and potential growth, which in turn are important to sovereign risk in particular.

ABS braces for more auto deals after strong start to year (IFR), Rated: A

The asset-backed bond market is braced for a slew of new issues next week, with deal flow expected to be dominated by auto issuers including BMW and Mercedes.

Just two issuers sold deals this week – GM Financial and Consumer Portfolio Services – and both auto trades were met with strong demand from investors. One banker on the GM deal said the deal was over-subscribed across the capital stack.

The biggest tightening though was seen on the smallest and lower rated tranches. The 3.58-year Class B, rated Aa3/AA by Moody’s and Fitch, priced at 30bp over interpolated swaps versus guidance of 35-40bp and whispers of 45bp area.

The 3.58-year Class C, rated A1/A, priced at 50bp over interpolated swaps versus guidance of 55-60bp and whispers of 65bp area.

FROM BANKING TO BITCOIN, FINTECH IS POISED TO CHANGE THE WORLD (Tech Genix), Rated: A

Currently, it represents only 1 percent of the global financial industry. By comparison, digital media accounts for 40 percent while eCommerce accounts for around 10 percent.

Source: Tech Genix

To give you a perspective, venture capitalists invested more than $13 billion across 840 different fintech holdings in 2016, according to a report by KPMG. This is 7 percent more than they invested in 2015.

According to the McKinsey report, five areas will see high growth over the next decade. They are consumer finance, mortgage, lending, retail payment, and wealth management.

Online payments

PayPal handled $1.73 billion worth of transactions in the first quarter of 2017 alone, representing a 30 percent increase year-on-year.

Borrowing and lending

However, the delinquency rates have been increasingover the last few years. These rates have increased from 0.56 percent in January 2015 to 0.75 percent in December of the same year.

Overstock.com’s 2017 Highlights: Innovation, Expansion, and Recognition (Business Insider), Rated: A

Overstock’s blockchain-focused subsidiary, Medici Ventures, named its board of directors in 2017, and also saw a number of its portfolio companies continue to use blockchain to revolutionize industries including capital markets, money and banking, property registry, voting, identity, and underlying blockchain technology, including:

  • tZERO, the world’s first SEC approved, blockchain-based alternative trading system, launched its initial coin offering (ICO), which attracted over 10,000 subscribers and raised $100M in commitments in the first 12 hours of its pre-sale. A significant portion of the tZERO security tokens issued will be available to accredited investors in the public sale beginning in January, 2018.
  • DeSoto Inc., a joint venture between Overstock.com founder and CEO Patrick Byrne and world-renowned economist Hernando de Soto, was created to develop a global property registry system to surface the property rights of billions of people in the developing world.
  • Bitt, a Barbados-based financial technology company using blockchain to create central banking tools and mobile money applications, named Rawdon Adams, son of former Barbadian Prime Minister Tom Adams, as its CEO. Bitt also fully launched its new mMoney digital payment product, bringing to market a blockchain-based mobile wallet that allows users to participate in digital transactions on their smartphones without the need for a traditional bank account, helping to foster financial inclusion in the region.
  • South-American based Ripio (formally known as BitPagos), participated in an ICO that raised $37M to fund its Ethereum-based peer-to-peer lending platform, Ripio Credit Network.
  • Belgium-based SettleMint launched a token sale for its DataBroker DAO, a peer-to-peer marketplace created to provide Internet of Things (IoT) sensor-owners with a clear path to data monetization, and data consumers with a decentralized marketplace in order to buy IoT sensor data. SettleMint also signed an agreement with The Islamic Research and Training Institute, the research arm of the Islamic Development Bank Group, to work with local partner Ateon on developing blockchain-based financial products that can be used to support development and inclusion in IsDB member countries.

Global lender selects Aussie fintech, Trade Ledger, as worldwide technology partner (PR Newswire), Rated: A

Zürich-based lender, TradePlus24, has selected Australian deep tech startup, Trade Ledger, as its global technology partner to roll out its new trade insurance wrapped lending product across their European lending network, and enter the Australian market.

Bankers fear they will get Amazon-ed in tech disruption (Financial Times), Rated: A

According to IDC, only about a quarter of US bank technology budgets is spent on digital transformation, as opposed to business as usual. They expect this to grow to nearer 40 per cent in 2020.

Secondly, this spending could substantially boost banks’ productivity, and profits.

Banks will drive up the cost of customer acquisition for start-ups who will increasingly struggle unless they build network effects and scale very quickly. Roboadvisers and peer-to-peer lenders will be on heightened alert. Some start-ups will need to rethink their plans to disrupt and look to form partnerships instead.

Changes in financial regulation, such as a lighter touch fintech charter being examined in the US or the second payment services directive in Europe, could potentially make this more likely. The tech giants have the brands, customer reach, digital processes and flair to develop good products, and to take swift advantage of any regulatory changes.

Karma token trading opens after successful million ICO campaign (Crypto Ninjas), Rated: B

India

German Online Lender Kreditech Heads to India (Bank Innovation), Rated: AAA

German online lender Kreditech is making its way to India, Bank Innovation has learned.

For this expedition, the fintech has teamed up with SaaS banking platform Mambu for providing short-term lending products specifically tailored to local consumers.

Kreditech selects Mambu’s SaaS banking engine for its passage to India (Finextra), Rated: A

Kreditech currently operates in Europe and Latin America and will expand into India in early 2018, together with its partner PayU, a global online payments provider and Mambu client in Latin America.

The loan product is expected to go live in the first quarter of 2018, all data will be hosted by AWS India.

NiYO Solutions Raises $ 13.2M in Series A Funding (FINSSMES), Rated: A

NiYO Solutions Inc., a Bangalore, India-based fintech startup for salaried employees, raised $13.2m (85 crore) in Series A funding.

APAC

Myanmar takes small steps towards providing greater liquidity for SMEs (Myanmar Times), Rated: AAA

A rising number of start-ups as well as small and medium enterprises (SMEs) are emerging in Myanmar as business opportunities rise. However, many companies fail to achieve their full potential and contribute substantially to the economy because capital assistance is lacking in the country.

A rising number of start-ups as well as small and medium enterprises (SMEs) are emerging in Myanmar as business opportunities rise. However, many companies fail to achieve their full potential and contribute substantially to the economy because capital assistance is lacking in the country.

Currently, local banks extend loans at interest rates ranging between 8.5 percent and 13pc. The local banks began offering SME loans at8.5pc interest in 2015. Since then, the Japan International Cooperation Agency (JICA) and KfW Development Bank from Germany have also launched SME loans.

P2P lending

To get around the financial constraints, borrowing from family members and peers is common.

In fact, a rising number of businesses have resorted to P2P lending for funds to build up their businesses. Without any guarantees of success though, many entrepreneurs ultimately end up in debt. Others fall prey to fraud. Last year, The Myanmar Times reported at least three cases of fraud involving fake promises of repayments with up to 30pc interest.

Cloud Lending Solutions Recognized as a Top 25 FinTech Company of 2017 (BusinessWire), Rated: B

Cloud Lending Solutions was recognized as a “Top 25 FinTech Company for 2017” by APAC CIO Outlook Magazine. A panel of industrial experts and executives collaborated with the editorial board to curate the list with an aim to provide clarity into the ideal FinTech partners.

Africa

Local digital currency eyes real estate disruption (ITWeb), Rated: AAA

Cape Town-based fintech company, Wealth Migrate, has launched a global   – WEALTHE Coin.

According to Wealth Migrate, while almost half of the world’s wealth is held in real estate, fewer than 13% of people have access or the resources to invest in and  from this lucrative market.

Authors:

George Popescu
Allen Taylor

Thursday October 6 2017, Daily News Digest

China mortgage loans

News Comments Today’s main news: SoFi surpasses $25B in originations. JPMorgan Chase rolls out mobile banking app. ID Analytics has 85% visibility into online consumer lending. Zopa prices new securitization. Fannie Mae expands digital mortgage platform. SEC investigated Bank of Internet. China’s cash loan market hits 1 trillion RMB. Lendified secures $60M credit facility. Facebook, Clearbanc partner on merchant cash advance. Today’s main […]

China mortgage loans

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Asia

Canada

News Summary

United States

A new milestone: we’ve surpassed $ 25b in loan originations! (@SoFi on Twitter), Rated: AAA

Thank you to our community of over 390,000 people for growing with us.

Will JPM’s millennial-app experiment grant access to new markets? (American Banker), Rated: AAA

JPMorgan Chase spent more than a year researching what millennials (and clients wanting to bank like them) desire in a financial relationship. The result is a new mobile-only app that lets people sign up for a bank account within minutes and also helps manage their spending.

The megabank made a splash on Monday debuting Finn by Chase, an app that includes a checking and savings account and a physical debit card.

ID Analytics Now Has 85% Visibility Into Online Consumer Lending (deBanked), Rated: AAA

At Money2020, deBanked caught up with Kevin King, Director of Product Marketing and Ken Meiser, VP of Identity Solutions for ID Analytics. The last time I crossed paths with the company was six months ago at the LendIt Conference in New York City. Since then, the company has increased its visibility into the online consumer lending market to 85%.

Fannie Mae goes all-out on fintech collaborations (Business Insider), Rated: AAA

Fannie Mae, a US government agency that funds mortgages for lenders, rolled out 

92.3% of acceptance partners said Behalf increased their sales 10-20% (Behalf), Rated: AAA

Behalf’s merchant acceptance partners have found a way to apply Amazon’s small business strategies to their own business models. By adding the Behalf instant credit approval tool to their ecommerce experience, they also unlock the power of flexible terms on every sale. Customers of our partners can get instant access to up to $50,000 in buying power with their choice of flexible payment terms. With this boost in working capital, small businesses are able to invest in their growth, which increases their business purchasing velocity. Case in point: 92.3% of the Behalf acceptance partners surveyed reported that adding Behalf to their checkout experience drove a 10-20% sales lift.

Source: Behalf

Download and read the full whitepaper here.

Bank of Internet was under 16-month SEC investigation (New York Post), Rated: AAA

Online lender Bank of Internet was the subject of a formal 16-month Securities and Exchange Commission investigation, according to a report.

The company, led by Chief Executive Greg Garrabrants, was the subject of scrutiny until June — when it ceased without the SEC taking any action.

The probe was focused on alleged conflicts of interests, auditing practices, and loans made to two entities, according to subpoenas and government documents obtained by Probes Reporter, a publisher of investment research.

Wealthier Depositors Pressure Banks to Pay Up (WSJ), Rated: AAA

Large U.S. banks are starting to pay up to keep depositors from moving their money, saying customers are becoming increasingly demanding as the stronger economy nudges interest rates higher.

The average interest rate paid by the biggest U.S. banks on interest-bearing deposits jumped to 0.40% in the third quarter, the highest level since 2012 and the biggest quarterly increase this year, from 0.34% in the second quarter, according to Autonomous Research.

Bank executives said that the newest pressure for higher rates is coming primarily from wealth-management customers, typically well-to-do individuals and families who deposit cash as part of their investment accounts.

Fifth Third executives said they were raising deposit rates for some of those customers, particularly those who had other relationships with the bank.

Source: The Wall Street Journal

FT Partners Advises Credit Sesame on its ,000,000 Growth Financing (FT Partners), Rated: A

  • On October 25, 2017, Credit Sesame announced it has raised over $42 million in equity and venture debt
    • The funding comes from existing and new investors including Menlo Ventures, Inventus Capital, Globespan Capital, IA Capital, SF Capital, among others, along with a strategic investor
  • The $42 million in funding is comprised of $26.6 million in equity and $15.5 million in venture debt, bringing the Company’s total funding to over $77 million
  • Headquartered in Mountain View, CA, Credit Sesame was founded in 2011 and has provided credit and loan management tools to over 12 million members
    • The mobile and web solution provides consumers with tools to build a path to achieve financial wellness, including free access to their credit profile complete with their credit score, credit report grades, credit monitoring, interactive step-by-step tools and recommendations for better lending options
Source: FT Partners

 

The 13 Chinese Companies That Listed On US Stock Exchanges In 2017 (Frontera), Rated: A

With about $2.4 billion raised in IPOs on US exchanges by Chinese companies so far this year, other China-based firms are increasingly vying for US investors and exchanges.

Qudian Inc (QD)

On October 18, Chinese online micro-credit provider Qudian Inc listed on the NYSE, raising $900 million in an IPO that was priced at $24, in the biggest ever US listing by a Chinese fintech firm. The financial sector firm’s stock, trading under the symbol QD, closed at $33 as of October 23. The stock commands a market capitalization of $8.8 billion in the US stock market.

Year-end Forward P/E for the depository receipt is estimated at 21.47. Estimated earnings-per-share stand at $8.21.

China Internet Nationwide Financial Services (CIFS)

This Beijing-based financial sector firm, trades under the ticker CIFS on the NASDAQ GM stock exchange, is engaged in providing financial advisory services in China. The company’s stock listed on the US stock market on August 8 at an initial offer price of $10 a share, raising $20.2 million for the company. The stock, trading at $31.5 (as of October 23rd), commands a market capitalization of $693 million in the US stock market.

China Rapid Finance Ltd (XRF)

Listed since April 28th on the NYSE stock market, China Rapid Finance Limited operates one of China’s largest online consumer lending marketplaces.  The company caters well to China’s 500 million EMMAs (Emerging Middle-class Mobile Active consumers), and has facilitated over 20 million loans to more than 2.7 million borrowers. Back in April, the company raised $69 million in an IPO, marking its listing on the US stock exchange under the ticker XRF. The shares initially offered at $6 a share, and now trade at $9.06 (as of October 23) with a market capitalization of $586.2 million.

Source: Frontera

Leading Banks are Embracing Digital Strategies More Than Ever (Lend Academy), Rated: A

JPMorgan was the first major US bank to partner with a fintech company when they launched their small business lending partnership with OnDeck in early 2016. That partnership was renewed earlier this year and has helped the bank to offer a seamless small business lending experience and reach customers it might not have otherwise. In recent months they have struck a new partnership with Mosaic Smart Data to help the slumping fixed income trading revenues and they have also completed an acquisition of WePay, a Silicon Valley company that offers payment capabilities to business platforms using APIs. Finally, just this week they launched Finn by Chase, an app aimed at millennials that allows people to use a phone to open a bank account, make deposits, issue checks, track spending and set up savings plans.

Bank of America saw more than 1 million users added to their digital channels and active digital banking users go from 32.8 million to 34.5 million in the last year. The main driver of this growth was through their mobile app. Customers are using the mobile deposit feature more than any other, mobile deposits now account for 21 percent of total bank deposits.

Wells Fargo’s digital growth, which includes web based and mobile users, saw a 2 percent increase from 2016. Branch and ATM interactions were down 6 percent while digital sessions through the web and mobile app increased 6 percent.

Citi is the first global bank to integrate banking, money movement and wealth management on mobile.

How Tech is Changing Multifamily Lending (Multi-Housing News), Rated: A

“Technology has helped us bring efficiency, speed and first-rate customer service to the small-loan space for all of our stakeholders, borrowers and brokers alike,” said Bonnie Habyan, executive vice president, marketing, at Arbor. Small-balance owners and operators need to work long hours to be successful, and the time and paperwork dedicated to obtaining financing is an inefficient use of time. Online multifamily financing platforms such as Arbor LoanExpress, or ALEX, address this by providing the ability to e-sign and upload documents.

“Crowdfunding was originally created to give average investors access to investments they normally wouldn’t have access to, and to give sponsors or borrowers easier access to capital,”said Bill Lanting, vice president, Commercial Debt at RealtyShares. “We were formed specifically with that idea in mind, to make borrowing easier and less cumbersome, and also to make investments in assets more available to everybody.”

AutoGravity Announces Partnership With Global Lending Services (PR Newswire), Rated: A

AutoGravity, a FinTech pioneer on a mission to transform car financing by harnessing the power of the smartphone, announced a partnership with Global Lending Services LLC, a South Carolina-based auto finance company, to provide access to finance offers through the innovative AutoGravity digital platform. Qualified car buyers gain access to an even broader set of car finance options through the AutoGravity iOS, Android and Web Apps.

Can employers help solve the student debt problem? (HRDive), Rated: A

The good news about student loans is that they allow millions of people to earn college degrees who otherwise wouldn’t be able to afford them. The bad news is that college graduates enter the workforce deeply mired in debt that deflates their net worth and keeps them cash-strapped for years, if not decades. The current wave of college graduates is facing debt in amounts far above previous generations.

Oliver Wyman, a global management consulting firm, sets the median figure for an undergraduate degree at more than $25,000. That figure rises with each advanced degree. Graduates with MBAs enter the workforce with a median debt of $45,000. Medical school graduates can expect to be $200,000 in debt.

Debt repayments for the typical college graduate will amount to $265 a month and for medical school graduates, $1,600 a month.

Target.com Introduces GiftNow (PYMNTS), Rated: B

Target announced that, starting this November, the retailer will integrate a wallet function in its Target mobile app. The purpose, says the retailer, is to allow customers to pay for purchases and redeem promotions through the use of a smartphone.

Legendary Investor Jim Rogers Believes FinTech Will Replace Banks and Cash (Cryptocoins News), Rated: B

Veteran investor Jim Rogers believes that banks must invest in the financial technology (fintech) space or they face being replaced.

According to the report, he has invested in Hong Kong-based ITF Corporation, the world’s first financial technology bank founded by Hui Jie Lim. Rogers has also invested in Tiger Broker, a Chinese online brokerage.

He also believes that digital currencies could change how we see money in the next 10 to 20 years. Even though he hasn’t invested in the crypto market Rogers is of the opinion that governments could issue their own cryptocurrencies in the future.

United Kingdom

New Zopa securitisation priced, highlights market confidence (AltFi), Rated: AAA

A securitisation of loans originated by peer-to-peer lending firm Zopa has received a warm reception in the market. The deal, which is the second securitisation of Zopa loans, has been priced significantly tighter than last year’s transaction.

The securitisation was led by P2P Global Investments PLC, the first UK listed investment trust to dedicate itself to investing in marketplace loans, and was arranged by Deutsche Bank. The most senior class of notes was priced at 70bps over one month Libor, compared to 145bps last year.

The senior tranche of the £209m securitisation, which represents 80 per cent of the portfolio, was rated AA by Moody’s.

Using the secondary market for above average returns on investment (P2P Banking), Rated: AAA

One central piece to understanding why trading (or flipping) strategies can be highly attractive is the effect of even small premiums pocketed on the portfolio yield. Take an investor that invests into a 100 (whatever currency) loan part and sells that part for 100.40 after holding it for 5 days. That is only a 0.4% premium, but the annualized yield is 33.8%.

Two main strategy approaches

Investors can
A) Invest on the primary market and then sell the loan later on the secondary market
or
B) Buy loan parts on the secondary market which they deem underpriced and then sell at a higher price. Be it buying at discount and selling at a lower discount, or already buying at premium and selling at an even higher premium.

One important point, is that market conditions change, usually good opportunities will stop working after a few months or weeks either because too many investors try to use them, or more general  the demand/supply ratio changes or the marketplace itself changes the rules how the market functions.

  1. First an investor will want to look how loan information is presented on the primary and secondary market.
  2. Understand the allocation mechanism on the primary market. How does the autoinvest feature work exactly?
  3. When is interest paid? Does it accrue for each of the day held, or does the investor holding the loan at the date of the interest payment gets full interest credited. This is important, because if in the example at the start of the article the investor not only makes a 0.40 capital gain but also collects interest for the 5 days he held the part, it will have a huge impact on yield
  4. Usually for this strategy longer duration loans are more attractive.
  5. Usually smaller loans are more attractive.
  6. Usually the time span a trading investor wants to hold on to a loan part, will be as short as possible (days). However there might be patterns observed where it could be desirable to hold for longer time spans.
  7. Strategies that allow to hold parts only at a time when the status of a loan cannot change can be attractive.

Monzo and Starling take bigger steps towards payment integration (AltFi), Rated: A

Monzo has announced today, after a week of dropping hints on various Twitter accounts, that it plans to integrate Android Pay into its user interface for current account users.

A few hours earlier, Starling Bank confirmed this morning that it will be the first bank in the UK to connect with Fitbit Pay.

Case study: the technology behind P2P (Banking Technology), Rated: A

The UK peer-to-peer (P2P) lending market has flourished in the last decade. Lending volumes among the major platforms are increasing rapidly, pushing the cumulative total above £7 billion for the first time, as the understanding of the investment model continues to grow.

New technology architectures, as well as the ability to quickly run up minimal viable products, mean that emerging P2P companies can turn ideas into reality much faster than their larger counterparts (“fail fast” or as I like to call it, “test quickly”).

This prioritisation of speed and efficiency, coupled with the ability to focus, means that P2P lenders can zero in on specific problems and provide what customers want and are increasingly expecting. At Landbay we can bring a new micro service up from scratch in 20 minutes, with the lag for code from committing to going live being about six to eight minutes whilst still maintaining the up time required.

Brokers should consider the P2P option (Mortgage Introducer), Rated: A

As the alternative finance market has become saturated with different funding options, it can be difficult for brokers to determine the best solution to suit their clients’ needs.

Loans can also be tailored to fit the specific needs of customers, with fixed rates available to allow customers to budget effectively for the full term of the loan. The flexibility of loans means borrowers can cover unexpected costs or finance planned purchases at more affordable rates, meaning P2P finance is a great option when situations happen to change at a company.

Whilst 25% of borrowers that apply to banks have their loan application rejected, according to British Business Bank, other forms of lending have paved the way for businesses to obtain cash, with P2P lending becoming one of the most prominent solutions in the current market.

Open letter to Andrew Bailey, chief executive of FCA (Specialist Banking), Rated: A

Dear Andrew, your comments on the BBC on Monday 16th October reflect the concerns that many share with the FCA about the effect of the high cost of credit impacting society widely and, in particular, the young.You cited concerns about certain aspects of credit card and payday lending practices, but you did not pass comment on the retail banks and their provision of overdraft credit at rates that may well exceed the rates of payday and credit card loans.It should be noted that at 1p per day for every £7 of overdraft, the fees for an overdraft of, for example, £2,000 pa, are in excess of 50% interest, uncompounded. This is certainly higher than many credit cards.Alex Letts
Founder and chief unbanking officer, U
China

Chinese Cash loan market grown to 1 trillion RMB in one year (Xing Ping She), Rated: AAA

Cash loan originated from the payday loan in America, and accelerated in China. In less than one year, the total volume increased from 600 billion RMB to 1 trillion RMB. As a branch of consumer finance, cash loan developed rapidly as much as P2P lending industry.

Early in this April, the regulator issued the first order to clean up the “cash loans”,while after six months the trend of compliance in the field is still unclear. Recently, with several relative businesses coming to the U.S. for IPO, the critical voice on the profiteering of cash loan becomes louder.

However, owing to the annual lending rate much more than the rate legal limited (36%), taking the consumer finance vents, cash loan still grow wildly under strict regulation.

Xi’s Neighborhood Watch (Bloomberg), Rated: AAA

Houses are for living in, not for speculation, Chinese President Xi Jinping said last week. The trouble is, fueling this speculation has been a surge in consumer lending, not only by banks but also by fintech firms such as recently listedQudian Inc.

Thanks to improved earnings and corporate debt that’s souring at a slower rate, Chinese bank shares have rallied this year.

Source: Bloomberg

What investors may be ignoring at their peril, however, is the spike in household advances. Consisting of mortgages, credit-card debt and auto loans, consumer lending as a share of the total is relatively low. Only 400 million Chinese had personal loans in 2016, or about 29 percent of the population. The ratio in the U.S. is about 82 percent, according to Bloomberg Intelligence. But it’s been growing fast and even People’s Bank of China Governor Zhou Xiaochuan is worried. China’s household debt-to-GDP ratio reached 47 percent in the first half, according to a recent Citigroup Inc. report.

Source: Bloomberg

Ali Microcredit Ltd. made 2.6 billion RMB in first half, exceeding 14 public banks (Xing Ping She), Rated: A

In the first half year of 2017, Chongqing Ali Microcredit Ltd. has made the revenue of 3.97 billion RMB, which increased 100 million RMB compared to the 3.86 billion RMB of 2016. The company’s net profit was 2.644 billion RMB, in a growth of about 700 million RMB from the end of 2016.

As one of the Ant Financial eco-system, Ali Microcredit takes the business of credit loan (Ant Jiebei). Therefore, Ali Microcredit is already the industry leader in the consumer finance field. Even compared to the listed banks, Ali Microcredit’s profit data can defeat many of them. Take the first half year for example, the company profit exceeded 14 of all the 38 listed banks in stock exchange of Shanghai, Hong Kong and Shenzhen, including Guangzhou Rural Commercial Bank (01551.HK, profit of 2.639 billion RMB), Bank of Tianjin(01578.HK,profit of 2.62 billion RMB), Bank of Hangzhou(600926.SH, profit of 2.53 billion RMB),etc.

Cash loan controversy (Global Times), Rated: A

Chinese people are becoming more and more willing to spend. But if they don’t have money, they borrow. This ever-growing phenomenon has recently thrown cash loans, also known as fast loans, right under the public spotlight.

Han, a 26-year-old white-collar worker in Shanghai, who preferred only to give her surname, borrowed a 6-month loan of 10,000 yuan ($1505.53) from Mayi Jiebei, the online cash loan service provided by e-commerce giant Alibaba’s subsidiary Ant Financial, at the end of September.

When borrowing the money, Han was informed by Mayi Jiebei that she will need to pay a monthly interest rate of slightly more than 100 yuan. In total, Han will need to pay an interest rate of 637 yuan to the provider.

Currently, the entire cash loan market is worth between 600 billion yuan and 1 trillion yuan, the wdzj.com report showed.

LendingClub of China: World’s no.2 economy is a fintech haven (MSN), Rated: A

China provides the infrastructure for financial technology to succeed, such as clearly-defined laws and good internet penetration, says Soul Htite, Dianrong CEO.
Watch the video interview here.

China Rapid Finance names Zhou Ji’an a non-executive independent director (Bankless Times), Rated: B

China Rapid Finance has named Zhou Ji’an a non-executive independent director. He becomes the seventh member of a board that includes former executives of Hewlett Packard, McKinsey & Company, Morgan Stanley, and UBS.

Mr. Zhou is the executive director and general manager of China United SME Guarantee Corporation aka Sino Guarantee. He previously served in senior roles with China Export & Credit Insurance Corporation, and China Life Insurance Co . and is a senior scholar of the Eisenhower Fellowships, an international nonprofit leadership corporation.

European Union

ECN Convention Debates Technology & Cross-border Future in EU Alternative Finance & Crowdfunding (Crowdfund Insider), Rated: AAA

Two main topics of the 6th Annual Convention of the European Crowdfunding Network (ECN) on October 19th and 20th were technology innovation and cross-border finance.

To retain their lead in innovation over banks and traditional finance’s Fintech, startups must keep delivering greater customer orientation and execution efficiency. The success of Initial Coin Offerings (ICOs) is a clear signal, and a red flag, that there exist gaps in technology and cross-border funding that finance has not filled.

Cross-border alternative finance is still hampered by the fragmentation of the European Union (EU) regulation at many levels: Not only do crowdfunding and crowdlending regulation differ from one country to the next, but so do investor taxation and corporate law.

Ingi Sigurdsson, CEO, Karolina Engine, claimed that artificial intelligence enables the platform to predict the success of crowdfunding campaigns with 80% accuracy. Mads Dalsgaar CMO, Funderbeam, explained how Funderbeam uses Bitcoin’s blockchain to register, clear and settle the trading of private companies’ shares. For Rein Ojavere, CFO of Bondora, technology enables his lending platform to “cut through the layers of fat” of multiple investment intermediaries. In the same vein, Lasse Mäkelä, CEO of Invesdor, called his company a “digital investment bank.”

Umberto Piattelli of law firm Osborne Clarke summarized the conclusion of ECN’s updated complete review of national crowdfunding and crowdlending regulations in 29 countries. He stressed the strong correlation between the growth of alternative finance and effective crowdfunding regulation. Only 11 out of the 28 EU markets researched have published specific regulations for crowdfunding and crowdlending. These markets have taken off rapidly after the issuing of such regulations.

Tink secures investment and bank partners as it plans European expansion (Banking Technology), Rated: A

Swedish fintech company Tink has signed with Nordic banks NordeaKlarna and Nordnet. Integrating in 2018, the banks will use Tink’s payment technology and personal finance management (PFM) platform within their existing customer channels.

In addition to the partnership agreements, SEB, Nordea, Nordnet, ABN Amro, Creades and Sunstone has invested €14 million in Tink.

International

DTCC: HOW TO THINK ABOUT FINTECH (All About Alpha), Rated: A

The Depository Trust and Clearing Corporation (DTCC), a provider of clearance, settlement, and a wide range of other services to the financial markets, has issued a new white paper on technological innovations and the disruptions fintech may generate.

By “core banking functions,” (1) the authors of the white paper have in mind credit, liquidity, and maturity transformation. The banks have more institutional experience handling these functions than upstart fintech firms and, to the extent the latter take over the core functions of the former, there may be reason to worry. Likewise, the fragmentation (2) of “the creation and delivery of financial services across additional providers and platforms” could cause errors and inefficiencies. And (3) if certain players could become too good at delivering these services in this way, they could pose systemic risks.

Source: DTCC

Read the full report here.

The Importance of Fintech Spreads Across the Financial Industry (PR Newswire), Rated: A

A research report by Transparency Market Research, predicts that the global peer-to-peer (P2P) market lending valuation will reach US$897.85 billion by 2024, as it expands at a significant CAGR of 48.2% from 2016 to 2024.

Dragon Victory International Limited (NASDAQ:  LYL) announced today that, the Company has entered into a Strategic Cooperation Agreement (the “Agreement”) with Shenzhen 708090 Investment and Development Co., Ltd (“708090”), a leading provider of shared workspace, community, and services for entrepreneurs, freelancers, startups and small businesses, to promote incubation services.

On October 24th, Fiserv announced that Regions Bank will expand their digital money movement capabilities with the addition of person-to-person payment and account-to-account transfer solutions from Fiserv.

On June 15th, Yirendai announced that it was awarded the Best P2P Lending Platform in ChinaAward at The Future of Finance Summit (the “Summit”) held in Singapore. Yirendai is the first FinTech company in China to receive this prestigious reward.

Qudian Inc. (NYSE: QD) is a leading provider of online small consumer credit in China. The Company uses big data-enabled technologies, such as artificial intelligence and machine learning, to transform the consumer finance experience in China. The company recently emphasizes Its collection efforts and pricing policy. The Company’s collection efforts extend to every delinquent borrower. The Company’s collection process is divided into distinct stages based on the severity of delinquency, which dictates the level of collection steps taken. As part of the major upgrade of the Company’s risk management system in January 2017, the Company has developed a machine learning algorithm to better allocate collection resources based on more detailed grouping of larger delinquency risk. Higher risk groups are allocated with more collection resources as the likelihood of their outstanding balance becoming longer-term delinquent or even uncollectable is generally higher.

Australia

ANZ BBSW penalty too low: P2P lender (InvestorDaily), Rated: A

On Tuesday, ASIC announced that it had reached a confidential in-principle settlement with ANZ resolving the dispute over alleged BBSW misconduct. Commenting on the matter, RateSetter chief executive Daniel Foggo said the corporate regulator’s activity in this area of the market bodes well for a more transparent financial system.

India

Gratification Unleashed (OutlookMoney), Rated: A

There was a time when a loan mostly meant you were going to buy a house or a car. This is not the case any longer. With changing times, now there are loans against salary advance to fund even your honeymoon. Today, there are loans available practically for every need and dream.

Take the case of the ubiquitous car loan, the advent of luxury cars has turned several car companies to offer loans that are tailored to suit customer offerings. For instance, Volkswagen Finance (India), offers financing solutions to customers for both new and pre-owned Volkswagen group vehicles (namely Volkswagen, Skoda, Audi, Porsche, Lamborghini, MAN and Scania) through registered and authorised Volkswagen group dealer channels.

Yet, borrowing is not as smooth as one would expect it to be. Take for instance Mumbai-based Amit Shukla, he had to take a personal loan of Rs 5 lakh to fund his first commercial car, because a car loan did not work out the way he wanted it to work for him.

Asia

Finance: Ensuring a safe investment crowdfunding landscape (The Edge Markets), Rated: AAA

When equity and debt-based crowdfunding platforms were launched in the market, there were concerns that these vehicles could be used for money laundering. After all, investors could unknowingly fund a fraudulent company and the money could end up being misused by the issuers for their personal gain or, even worse, to fund criminal activities.

The Securities Commission Malaysia (SC) introduced a legal and regulatory framework for equity crowdfunding (ECF) in 2015 and peer-to-peer (P2P) financing last year to address these concerns. According to the SC’s deputy general manager Tengku Ahmad Ruzhuar Tengku Ali, the regulator views money-laundering activities to be of minimal risk on ECF and P2P platforms due to the safeguards built into their frameworks and the platform operators’ vetting process.

There have been several cases of fraud linked to investment crowdfunding. The first widely known case, involving US-based Ascenergy, came to light in 2015. The company had raised US$5 million from about 90 local and foreign investors by leveraging some of the better known crowdfunding platforms such as Fundable and EquityNet.

The SC’s approach

All six ECF operators registered in Malaysia are operational. According to Tengku Ahmad Ruzhuar, 31 issuers had successfully raised RM18.3 million on ECF platforms as at end-September, reaching 80% of their target amount.

Retail investors are allowed to invest up to RM5,000 per issuer and a total investment of RM50,000 within a 12-month period. Angel investors registered with the Malaysian Business Angel Network can invest up to RM500,000 while there are no restrictions for sophisticated investors.

Issuers are able to keep the funds raised if they reach a minimum of 80% of the target amount, but they are not allowed to raise multiple funds for the same purpose.

Canada

Canadian Small Business Lender Lendified Secures $ 60 Million Credit Facility From ClearFlow (Crowdfund Insider), Rated: AAA

Lendified, a Canada-based lender who provides small business loans online has entered into an agreement with ClearFlow Commercial Finance to increase its lending capacity. According to the lending platform, through the agreement, ClearFlow is providing it with a $60 million credit facility to fund loans delivered through its website.

Facebook teams up with Clearbanc to offer cash advances to business (Financial Times), Rated: AAA

Small businesses advertising on Facebook can now get their hands on up to half a million dollars in growth capital, in the latest example of an online platform moving into territory historically dominated by bricks-and-mortar banks.

The social network has been trialling a scheme in partnership with Clearbanc, a Toronto-based firm, since February. Under the scheme, known as “Chrged,” customers connect their Facebook Ads account and their payment processor with Clearbanc, which then makes an offer.

Funds are not loans but merchant cash advances, giving Clearbanc the right to a certain portion of revenues flowing through the customer’s account until it gets its money back, plus a fee, typically of 5-10 per cent. The fee is set by analysing daily cash flows to determine the customer’s ability to repay.

About 1,000 small-business owners have so far taken up an offer.

MONEYTREE Q3 REPORT: STRONG AI AND FINTECH FUNDING PUSHING 2017 BACK ON TRACK (Betakit), Rated: A

According to CB Insights and PwC’s Canada’s latest MoneyTree report, 2017’s sluggish start may transform into a podium finish by year’s end.

The report, which tracks VC activity in Canada for Q3 2017, indicates that Canada could exceed $2.5 billion ($2 billion USD) across more than 300 deals for the year. The result would match or surpass activity from last year, when a total of $2.2 billion USD was invested, and 2016, which fell just below the $2 billion USD threshold.

Source: Betakit

Seed-stage deals accounted for 32 percent of deals in Q3 2017, a 19 percent drop from 51 percent of all deals in Q2 2017. However, early-stage and expansion-stage deals increased to 27 percent and 21 percent of deal share, respectively. Expansion-stage deals climbed to an eight-quarter high in Q3 — a strong contrast from past quarters where seed-stage deals were the most prominent, and perhaps a sign of a more robust investment ecosystem.

FinTech was another notably strong sector, as Canadian FinTech companies have received $252 million ($200 million USD) across 27 deals. This year is on pace to see $341 million ($270 million USD) invested across over 30 deals, on par with last year’s figure of $351 million ($278 million USD).

Source: Betakit

Authors:

George Popescu
Allen Taylor

Friday July 14 2017, Daily News Digest

Visa revenues

News Comments Today’s main news: DBRS assigns provisional ratings to SoFi Professional Loan Program 2017-D. IEG Holdings cites slim margins, weak underwriting as reasons for LendingClub offer. Bank execs say UK sets the standard for fintech regulation. Rocket Internet sells stake in Lendico. Today’s main analysis: Visa’s international expansion. Today’s thought-provoking articles: DBRS Student Loan ABS report (a […]

Visa revenues

News Comments

United States

United Kingdom

China

European Union

International

Israel

India

Latin America

Canada

News Summary

United States

DBRS Assigns Provisional Ratings to SoFi Professional Loan Program 2017-D (DBRS), Rated: AAA

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes of notes issued by SoFi Professional Loan Program 2017-D (SoFi 2017-D):

— $245,000,000 Class A-1FX Notes at AAA (sf)
— $266,000,000 Class A-2FX Notes at AAA (sf)
— $40,000,000 Class B-FX Notes at AA (sf)

DBRS Student Loan ABS report (DBRS), Rated: AAA

In this commentary, DBRS provides the following:
— A review of Q1 2017 student loan ABS performance and H1 2017 student loan ABS issuance.
— An outlook for future student loan ABS issuance and the trends expected in H2 2017.
— Analysis and highlights of student loan collateral performance.

Download the full report here.

IEG Holdings Highlights the Urgency of LendingClub Correcting its Flawed, Slim Margin “Broker” Business Model and Weak Underwriting Standards (Sys-Con), Rated: AAA

IEG Holdings yesterday announced the commencement of a tender offer to exchange four shares of IEG Holdings’ common stock for each share of LendingClub common stock, up to an aggregate of 40,345,603 shares of LendingClub common stock, representing approximately 9.99% of LendingClub’s outstanding shares as of April 28, 2017, validly tendered and not properly withdrawn in the offer.

IEG Holdings Corporation (OTCQB: IEGH) (“IEG Holdings”) cautions shareholders of LendingClub Corporation (“LendingClub”) against dismissing IEG Holdings’ tender offer. IEG Holdings believes that the LendingClub board of directors should be held accountable by its shareholders for continuing to pursue a flawed, slim margin “broker” business model. IEG Holdings urges LendingClub to enter into negotiations with IEG Holdings, rather than simply dismissing the tender offer.

FLAWED, SLIM MARGIN, LOSS-MAKING BUSINESS MODEL

Despite brokering more than $26 billion of loans since inception, LendingClub still reported a loss of $29.8 million for Q1 2017 and loss of $146.0 million for the 2016 full year. Transitioning to a balance sheet lender likely would significantly increase gross margins, without a significant change in customer acquisition costs.

WEAK UNDERWRITING STANDARDS

A recent media report by Bloomberg indicates that:

  • LendingClub only verified income about a third of the time for one of the most popular loans it made in 2016, and
  • If LendingClub finds errors in a loan application, it may still approve the loan.

LACK OF COMPANY-OWNED STATE LENDING LICENSES

LendingClub doesn’t hold individual state lending licenses and instead utilizes the services of a Utah-based bank. This raises regulatory risks around issues such as the potential breaking of individual state interest rate caps and compliance.

POOR STOCK MARKET PERFORMANCE AND ZERO DIVIDENDS TO SHAREHOLDERS

LendingClub’s share price has decreased 79% since its initial public offering in December 2014, dropping from $25.74 in December 2014 to $5.39 yesterday, after reaching a low of $3.51 in May 2016. In addition, LendingClub has never paid, and has no reported intention to pay, a dividend to shareholders.

IEG Holdings’ Reasons for the Offer

IEG Holdings believes that changing LendingClub’s business model to a balance sheet lender model would enable the company to generate significantly higher gross margins, provide significantly higher long duration cash flow from customers, build increased customer goodwill with customers and enable increased customer refinancing. The longer duration cash flow would provide more flexibility in reducing lending volumes during periods when underwriting risk levels are rising, as the company would be less dependent on brokering new loan deals every day to provide revenue.

  • IEG Holdings intends to encourage LendingClub to undertake substantial costs cuts by terminating excess employees, achieving substantial cuts in advertising/marketing costs and other significant cost cutting measures;
  • IEG Holdings intends to encourage LendingClub to transform its broker business model with low gross margins and high volumes to focus on high gross margin unsecured loans to near prime clients with strong underwriting, company owned individual state licenses and retention of loans on its balance sheet to secure long duration cash flow from longer term loans; and
  • The acquisition of LendingClub shares would be substantially net asset per share accretive for IEG Holdings stockholders and substantially increase shareholder equity.

New partnership turns PayPal into Apple App Store payment option (Banking Tech), Rated: A

This week the company announced a partnership with Apple to allow shoppers pay for their purchases at the App Store using PayPal. The feature will be available for users of a variety of Apple devices including iPhone, iPad, Apple TV, Apple Watch, and iPod.In addition to the App Store, PayPal will be a payment option for a variety of Apple services including Apple Music, iTunes, and iBooks.

Finicity and JP Morgan Chase pair for data share (Banking Tech), Rated: A

Data aggregation provider Finicity has signed an agreement with JP Morgan Chase to let the bank’s customers choose data to share with apps.

The companies will use a direct API to allow Chase customers to share information with the apps and services that Finicity supports. According to the firms, this tokenised access will eliminate the need for customers to share their Chase credentials with third-party apps.

Paypal Holdings Inc (NASDAQ:PYPL): Beginning of Market Dominance (Library for Smart Investors), Rated: A

Paypal Holdings Inc (NASDAQ:PYPL) is getting investors attention after the stock touched fresh highs amid a new partnership with Apple.

The stock is up over 43% since the start of the year.

In the first quarter, PayPal saw a jump of 10.3% in monthly active users on year-over-year basis. The total number of transactions also increased by 22.5% in the period.

In the first quarter, Venmo processed $6.8 billion in total payments, a 100% growth on year-over-year basis. Venmo is slated to grow more as the company expands to small businesses.

WEALTHTECH — THE DIGITIZATION OF WEALTH MANAGEMENT (FT Partners), Rated: A

WealthTech companies are targeting inefficiencies that span the entire wealth management value chain, from client prospecting to investing to portfolio management and reporting. Benefits include more efficient workflows, improved client experiences and greater transparency. Regardless of their value proposition, WealthTech companies are seeking to improve overall wealth management and investing.

This report highlights a number of key trends within the broader WealthTech industry such as…

  • Growing number of advisors joining the independent channel
  • Incumbent financial institutions are entering the robo-advice space
  • Increased demand for alternative investments
  • Financial planning trending towards goal-based approaches
  • Higher levels of active risk management
  • Commoditization of portfolio management software is leading to expanded offerings
  • RIA custodians evolving into more holistic roles

Download the full report here.

Wells Fargo trims auto loans as market cools, risk overhaul kicks in (Reuters), Rated: A

Wells Fargo & Co (WFC.N) is scaling back and remolding its auto lending business in response to growing stress in the market, as well as a bank-wide push for more centralized risk controls.

Wells, which was the No. 2 U.S. provider of auto loans less than a year ago, has already cut quarterly originations by nearly 30 percent over the nine months leading into March 31, according to a May 11 company presentation. It has also begun consolidating the collections operation in a move that people familiar with the business say could eliminate hundreds of jobs, after a new head of auto finance took the reins in April.

5 Fintech Startups Under the Radar (Bank Innovation), Rated: A

Spotme

This New York City-based startup facilitates micro-loans between borrowers and lenders, allowing users to set up pretty much all the parameters of a loan themselves: users can control the amount, the interest rate, the payback period, and the way they are reimbursed for the loan themselves.

Ledger

Ledger might be able to help out there: this San Francisco-based startup allows users to “open tabs with friends,” boiling down a transaction to just 3 clicks. By connecting with a user’s financial accounts (protected by “military-grade” cybersecurity, according to the company), users are able to aggregate all of their transactions in one place, as well as receive notification about when transactions are due.

Wallio

More and more companies are striving to solve the main problem when it comes to personal finance management services: how do you make a user actually take the financial advice that is being offered?

Wallio starts off the week by giving a user an allocated amount of money they can spend for that week, on whatever the user wants (expenses and savings are already factored into this amount). If a user underspends, great: Wallio will allow that user to put that money towards a goal. If a user overspends, Wallio will simply allocate less money for the user to spend next week.

Samwise

This robo-investing startup allows users to turn their existing brokerage account into an autonomous investing account using machine learning algorithms.

OnePebble

Invest, and make a difference in the world at the same time: that’s the dream of OnePebble, an online investment broker/dealer that puts each investment toward companies “doing good in the world.”

3 Investing Trends to Keep on Your Radar (Morningstar), Rated: A

Trend: Passive products continue to gain assets.

This is the trend shaping the investment management industry today. Asset flows to passive products, both traditional index mutual funds and exchange-traded funds, began in earnest following disappointing active-fund performance during the financial crisis.

Trend: New ways to hire–and pay for–financial advice. 

Robo-advisors provide automated advice for a low annual fee as low as 0.25% or even less. Meanwhile, mutual fund companies and brokerage firms may provide advice for customers who have amassed sufficient assets at the firm. For example, Vanguard Personal Advisor Service charges 0.30% and is available to investors with at least $50,000 in assets at the firm. (The service combines human financial advisors with robo-advisor technology.)

What to watch out for: The profusion of different business models means that the business of selecting an advisor is more complicated than ever. Robo-advisor fees might look like a screaming buy relative to the fees that a full-service human advisor charges, but the robo won’t be able to give you advice on nonportfolio matters like whether to pay off your mortgage or purchase long-term care insurance.

Trend: An increased emphasis on behavioral factors that can affect investor outcomes.

What’s to like: Many robo-advisors have also embedded behaviorial research into their services.

What to watch out for: Behavioral finance is trendy right now, and with any trend comes the opportunity for gimmickry. Beware of advisors who are using behavioral finance as their main hook to snag clients; high-quality advisors have been employing behavioral finance into their practices for years.

US Tax Professionals Tackles the Tax implications of Crowdfunding (Digital Journal), Rated: A

It’s important to understand that all the income a person receives, regardless of the source, is considered taxable income in the eyes of the IRS. That includes crowdfunding dollars.

Even if the campaign only raised the projected $15,000 and no gifts were offered, the money would still be considered taxable income and need to be reported as such on a tax return.

Generally, crowdfunding revenues are included in income as long as they are not:

  • Loans that must be repaid;
  • Capital contributed to an entity in exchange for an equity interest in the entity; or
  • Gifts made out of detached generosity and without any “quid pro quo.” However, a voluntary transfer without a “quid pro quo” isn’t necessarily a gift for federal income tax purposes.

Morgan Stanley digital chief: AI to help advisers, not ‘cyborg bots’ (Financial-Planning), Rated: A

Advisers tasked with processing a “mountain of information” will get a reprieve through artificial intelligence, according to Morgan Stanley Wealth Management’s chief digital officer.

“What we want to do is, with one click of a button, they can take action on that research report to all their clients within minutes, not hours, not phone calls,” Hassan said. “That’s the promise of what we’re trying to build.”

Rival firms have shown they’re headed down a similar path. Like Morgan’s planned offering, the UBS-SigFig service will save advisers’ time through automated messaging to clients on important dates, according to Richard Steinmeier, the head of the UBS Wealth Advice Center.

Congress Should Use Congressional Review Act to Strike Down Ill-Advised Arbitration Rule (Daily Signal), Rated: B

Cutting through the hyperbole that the arbitration rule protects consumers from “unfairness” that would deny them “their day in court,” this rule is in fact highly anti-consumer and harmful to innovation.

This regulation could have particularly harmful effects on FinTech innovations, such as peer-to-peer lending.”

How much money do Arizonans spend playing the lottery? Less than most Americans (AZ Central), Rated: B

Arizonans on average shelled out $100.85 per capita on lottery tickets in 2015, according to the study by LendEDU, based on preliminary data for state government finances collected by the Census Bureau. For Americans overall, the per-capita figure was $206.69.

United Kingdom

UK setting the bar for fintech regulation, bank execs say (SNL.com), Rated: AAA

U.K. authorities have created a world-leading regulatory environment for the burgeoning fintech industry that is being emulated elsewhere, according to bankers.

The Financial Conduct Authority’s “sandbox,” a program launched in 2015 to let companies test innovative ideas under close regulatory supervision, has been particularly helpful, she said.

Meanwhile, initiatives such as FCA-organized hackathons — or “TechSprints” as it prefers to call them — have been particularly appreciated by the industry, according to Sophie Guibaud, vice president of European expansion at Fidor Bank AG, a German online lender that was bought by Groupe BPCE in 2016. These events invite market participants to come up with technological solutions to certain problems, such as financial issues faced by people with mental health problems.

The U.K. is home to more fintech companies valued at more than $1 billion than the rest of Europe put together, according to an April 2017 report by technology investment bank GP Bullhound. Three U.K.-based companies, Funding Circle, Paysafe and Transferwise, have crossed that threshold, and GP Bullhound said that it does not expect London to relinquish its lead, due to its prominence in international financial services.

Comparison site GoCompare invests in mortgage robo-adviser (AltFi), Rated: A

Financial comparison site GoCompare is hoping to transform the UK’s mortgage application process by investing in MortgageGym, a digital mortgage robo-adviser.

Users can complete a free application within 15 minutes on MortgageGym and receive matches within 60 seconds, as well as robo advice and access to live advisers. The website will use automated algorithms to match applicants with the best mortgage providers.

The House Crowd hits £50m via mix of P2P and crowdfunding (P2P Finance News), Rated: A

THE HOUSE CROWD has hit the £50m funding target it set out to achieve in October last year.

The Manchester-based property platform started targeting institutional money at the end of last year to achieve its first £50m of funds channelled to property and buy-to-let borrowers, through both its peer-to-peer side and its crowdfunding arm.

The firm raised over £15m in the six months to early 2017, while a loan it closed last month added another £600,000.

Fintech CurrencyCloud tapped up investors months before Google raise (Business Insider), Rated: A

CurrencyCloud, which provides a platform to process international payments, raised £9.5 million from its existing investors in December 2016. The company had £10.5 million in the bank at the end of the month, accounts show, suggesting the platform had around £1 million left at the time of the fundraising.

The volume of payments jumped by 110% to 1.5 million but net revenue from currency transactions increased by just 10% to £3.2 million. Meanwhile, administrative expenses rose by 54% to £13.9 million as CurrencyCloud invested in “recruiting staff, developing our technology infrastructure and operations services, and moving to new office premises.”

P2P fund share issues boost investment trust sector (P2P Finance News), Rated: A

FUNDRAISINGS by Honeycomb and the Funding Circle SME Income Fund (FCIF) helped push share issues to record levels in the investment trust sector for the first half of 2017.

Secondary issuances raised £3.3bn in the first six months of the year, trade body the Association of Investment Companies has revealed, up from £1.8bn at the same time in 2016.

FCIF raised £142m in conversion shares in April, the largest total in the specialist debt sector, while the Honeycomb investment trust raised £105m through a ordinary share issue.

Alternative Credit funds drive record cash raise (AltFi), Rated: A

Assets in investment trusts have hit an all time high thanks in part to a huge swathe of secondary issuance in closed-ended funds’ shares.

In the first half of 2017, the most poplar area of the investment trust market was Infrastructure – in terms secondary issuance – raising £1.2bn. This was followed by Alternative Credit at  £514m. Funding Circle SME Income raised the largest total in the sector securing £142m via its C share issue, followed by Honeycomb Investment Trust (£105m).

China

The number of Online Financial platforms in China Exceed 19,000, ranking the first place of the world. (Xing Ping She), Rated: AAA

According to data from National Institution of Internet Financial Risk Analysis &Technology,there are more than 19,000 online financial platforms across China, including over 6000 online lending platforms, nearly 3500 online assets managers, and 800 crowdfunding platforms. The total cumulative volume of internet loans, crowdfunding and internet payment have reached to 70 trillion RMB (US$ 10.33 trillion). Zhou Hongren, director of the National Committee of Internet Finance Professional Technology, claimed that, “No matter in terms of quantity or scale, China has already become the largest international finance marketplace around the world.”

European Union

Rocket Internet Sells Stake in Lendico Startup (Handelsblatt), Rated: AAA

Incubator firm Rocket Internet has sold its majority stake in peer-to-peer lender Lendico to Arrowgrass, Handelsblatt has learned, as the British hedge fund acquired complete ownership of the Berlin startup.

The partners to the transaction agreed to keep the purchase price confidential. Rocket Internet, which specializes in helping online startups get off the ground, most recently valued its 50-percent-plus stake in Lendico at €140 million ($159 million).

Funding Circle Germany Takes a Fresh Start (Crowdfund Insider), Rated: AAA

Germany is a huge SME and VSME (very small business) credit market. But it is not as mature a market for online marketplace lending as the UK, the US, or even the Netherlands. This partly explains why Funding Circle Germany’s early loan book underperformed. Now the platform is starting afresh to match its market’s reality.

With offices and business in Germany, the Netherlands and Spain, Zencap had originated €35 million in loans to 500 SMEs at the time of its acquisition. Its operations were very small in comparison with the more than $1.5 billion originated by Funding Circle in the US and the UK at the time (meanwhile Funding Circle passed the $3 billion mark).

The second reason for starting afresh, was a need to revisit the credit model. Since January, the new German team has been busy recalibrating and restarting the German operations.

Loan origination resumed at previous level in the first half of 2017 and is expected to grow again in the second half of this year.

Spanish Fintech Industry Comes into its Own (Finance Magnates), Rated: A

The Spanish fintech ecosystem has been a steadily growing force over the past few years, swelling from just fifty financial technology startups in 2013 to well over three hundred in 2017. This rapid surge is only going to continue with this number estimated to hit four hundred companies by 2018.

In terms of the value of the operations, this sector passed rose from just €35 million in 2014 to €206 million in 2016, justifying a 600 percent growth in just two years.

According to the Spanish Association for Fintech and Insurtech (Asociación Española de Fintech e Insurtech – Aefi), companies operating in this space in Spain are going to create a total of 10,000 jobs in 2017 alone.

While the value offintech operations in Spain is increasing, two areas that constitute the most focus are the crowdfactoring or invoice factoring crowdfunding platforms – these saw a total of €120 milion euros in 2016, that concentrate most of the operations domestically, followed by crowdfunding with €43.5 million and crowdlending or p2p lending with €42 million.

International

Visa Expands Its Footprint in Europe (Market Realist), Rated: AAA

In May 2017, Visa announced that in order to give consumers more control and make transactions transparent, the company will create digital card management experiences for its partners. Visa’s partners include financial institutions. Since the new offerings will lead to more transparency, Visa expects to see volume growth in fiscal 3Q17. Market analysts expect Visa to report revenues of $4.36 billion in fiscal 3Q17—a decline of 2.7%.

 

What Can Visa Expect from Russia, China, Japan, and India?

In fiscal 2Q17, there was growth in Visa’s cross-border business due to Russia’s developed economy. Visa implemented ~1,600 point-of-sale terminals. As a result, payment volumes are expected to grow in fiscal 3Q17.

Management thinks that obtaining a domestic license in China is a time-consuming process. Visa is expected to witness lower revenues and payment volumes from China due to discontinued dual branded cards.

Management has a positive outlook on Japan’s economy due to digitization. Japan’s government has become more inclined to use digital and electronic payments.

In fiscal 3Q17, India could be a major contributor to payment volume growth.

Visa has delivered a return on equity of 16.2% on trailing 12-months basis. Other consumer financial peers (XLF) have delivered the following return on equity on a trailing 12-month basis:

  • American Express (AXP) – 25.1%
  • MasterCard (MA) – 75%Discover Financial Services (DFS) – 21.10%

Visa Expects to Benefit from Its European Business

Visa’s (V) acquisition of Visa Europe allowed the company to enhance its global reach. The main agenda behind the acquisition was to bring innovation to the European market. Visa had been working closely with its partners and clients. The company also plans to create new services and products.

Israel

THE SURPRISING COUNTRY LEADING THE FINTECH REVOLUTION (Ozy.com), Rated: AAA

The country that gave the world smart drip irrigation and the Epilady has also been an early and enthusiastic adopter of financial technology, as in mobile banking apps, digital wallets, online lending and other services that manage moola. In fact, a survey of selected industrialized countries shows that:

As for the specifics, 50 percent of Israeli adults use mobile banking apps at least once a month. In the U.S., it was 38 percent; the U.K., 37 percent; in France, 35 percent; and in Germany, a surprisingly anemic 28 percent.

The five largest banks in Israel control more than 90 percent of the market, and as Sandra Octaviani, research lead for fintech at the University of Utah’s Center for Innovation in Banking and Financial Services, notes, traditional banks tend to serve low-risk, highly profitable clients, which creates an opportunity for nimbler fintech firms to swoop in and serve the underserved.

India

RBI wary of first loan default guarantee cover (India Times), Rated: AAA

The Reserve Bank of India is learnt to be wary of peerto-peer lending platforms offering any FLDG, or first loan default guarantee, cover to institutional lenders for any lending they do through these technology startups, said sources familiar with the discussions.

While various lending entities are keen on exploring this space as a cheap source of customers, they often look for a security cover against loans going bad. Experts say such guarantees or covers might go against the intentions of the central bank.

SME Lending Based on Payment History is the Next Big Wave in Fintech (BW Disrupt), Rated: A

ftCash aims to empower micro-merchants and entrepreneurs with the power of electronic payments and loans with zero upfront cost and no monthly rentals. Merchants are able to offer their customers multiple payment methods including credit cards, debit cards, net banking, mobile wallets, PayPal and more.

Nonethless, credit lending is the next big wave of Indian fintech. Lodha explains, “SME Lending based on payment history will be next big wave in fintech. On an active basis, it allows a lender to decide the paying ability of a merchant/business and the recollection of these loans can be done from the payment platform itself. The combination of the payments data along with GST data provides deeper insights into a business. We at ftcash are heavily invested in this idea and believe there is a great potential for scale here.”

Latin America

Venture fund for Latino entrepreneurs, fintech in Mexico  (ImpactAlpha), Rated: AAA

Financial technology, or fintech, startups offering digital payment, remittances and lending services, could capture 30% of Mexico’s banking market within 10 years, according to Finnovista, a fintech accelerator. Six in 10 Mexicans are unbanked. Financial exclusion is a problem but “also an opportunity,” Francisco Meré, the director of Bankaool, one of the first online-only banks in Mexico, told the Financial Times[paywall]. “The cost of engaging a customer through technology is a fraction of using a branch.” Clip has grown to become one of Mexico’s largest digital payment providers (Accion sold its stake in February). Kubo Financieroprovides peer-to-peer lending; Albo, mobile-based banking; and Kueski, a digital micro-lender — all have secured venture backing. More than 150 fintech, or financial technology, firms now operate in Mexico, giving Mexico 35% of fintech companies serving the under- and un-banked in Latin America.

AFLUENTA INCORPORATES THE MEXICAN INVESTMENT FUND IGNIA TO ITS PRESTIGIOUS LIST OF SHAREHOLDERS (AltFi), Rated: A

Afluenta (www.afluenta.com), a leading online credit platform for the people of Latin America, announced the addition of Mexican venture capital fund IGNIA to its group of shareholders. IGNIA is a venture capital fund specializing in investments in entrepreneurial companies with great potential for growth, whose services meet the needs of the emerging middle class.

In Mexico, where local credit to the private sector is below 35% of GDP, compared to 68% in Brazil, Afluenta aims to revolutionize the market with its human approach to credit and investment.

Afluenta connects borrowers with investors who can be individuals or companies, eliminating intermediaries such as traditional financial institutions. Its technology allows investors to receive competitive returns on their contributions in a simple, fast and efficient way, while applicants obtain loans faster, without bureaucracy and at a lower interest rate than in a bank.

Canada

Katipult CEO finalist for the prestigious EY Entrepreneur Of The Year 2017 (Digital Journal), Rated: A

Brock Murray, CEO of Katipult, a SaaS company that enables firms to design, setup, and manage an investment crowdfunding, Peer to Peer lending, or investor management platform, has been named a finalist in Ernst & Young’s Entrepreneur of the Year in the Emerging Technology category in Prairies.

Authors:

George Popescu
Allen Taylor

Friday July 14 2017, Daily News Digest

Visa revenues

News Comments Today’s main news: DBRS assigns provisional ratings to SoFi Professional Loan Program 2017-D. IEG Holdings cites slim margins, weak underwriting as reasons for LendingClub offer. Bank execs say UK sets the standard for fintech regulation. Rocket Internet sells stake in Lendico. Today’s main analysis: Visa’s international expansion. Today’s thought-provoking articles: DBRS Student Loan ABS report (a […]

Visa revenues

News Comments

United States

United Kingdom

China

European Union

International

Israel

India

Latin America

Canada

News Summary

United States

DBRS Assigns Provisional Ratings to SoFi Professional Loan Program 2017-D (DBRS), Rated: AAA

DBRS, Inc. (DBRS) has today assigned provisional ratings to the following classes of notes issued by SoFi Professional Loan Program 2017-D (SoFi 2017-D):

— $245,000,000 Class A-1FX Notes at AAA (sf)
— $266,000,000 Class A-2FX Notes at AAA (sf)
— $40,000,000 Class B-FX Notes at AA (sf)

DBRS Student Loan ABS report (DBRS), Rated: AAA

In this commentary, DBRS provides the following:
— A review of Q1 2017 student loan ABS performance and H1 2017 student loan ABS issuance.
— An outlook for future student loan ABS issuance and the trends expected in H2 2017.
— Analysis and highlights of student loan collateral performance.

Download the full report here.

IEG Holdings Highlights the Urgency of LendingClub Correcting its Flawed, Slim Margin “Broker” Business Model and Weak Underwriting Standards (Sys-Con), Rated: AAA

IEG Holdings yesterday announced the commencement of a tender offer to exchange four shares of IEG Holdings’ common stock for each share of LendingClub common stock, up to an aggregate of 40,345,603 shares of LendingClub common stock, representing approximately 9.99% of LendingClub’s outstanding shares as of April 28, 2017, validly tendered and not properly withdrawn in the offer.

IEG Holdings Corporation (OTCQB: IEGH) (“IEG Holdings”) cautions shareholders of LendingClub Corporation (“LendingClub”) against dismissing IEG Holdings’ tender offer. IEG Holdings believes that the LendingClub board of directors should be held accountable by its shareholders for continuing to pursue a flawed, slim margin “broker” business model. IEG Holdings urges LendingClub to enter into negotiations with IEG Holdings, rather than simply dismissing the tender offer.

FLAWED, SLIM MARGIN, LOSS-MAKING BUSINESS MODEL

Despite brokering more than $26 billion of loans since inception, LendingClub still reported a loss of $29.8 million for Q1 2017 and loss of $146.0 million for the 2016 full year. Transitioning to a balance sheet lender likely would significantly increase gross margins, without a significant change in customer acquisition costs.

WEAK UNDERWRITING STANDARDS

A recent media report by Bloomberg indicates that:

  • LendingClub only verified income about a third of the time for one of the most popular loans it made in 2016, and
  • If LendingClub finds errors in a loan application, it may still approve the loan.

LACK OF COMPANY-OWNED STATE LENDING LICENSES

LendingClub doesn’t hold individual state lending licenses and instead utilizes the services of a Utah-based bank. This raises regulatory risks around issues such as the potential breaking of individual state interest rate caps and compliance.

POOR STOCK MARKET PERFORMANCE AND ZERO DIVIDENDS TO SHAREHOLDERS

LendingClub’s share price has decreased 79% since its initial public offering in December 2014, dropping from $25.74 in December 2014 to $5.39 yesterday, after reaching a low of $3.51 in May 2016. In addition, LendingClub has never paid, and has no reported intention to pay, a dividend to shareholders.

IEG Holdings’ Reasons for the Offer

IEG Holdings believes that changing LendingClub’s business model to a balance sheet lender model would enable the company to generate significantly higher gross margins, provide significantly higher long duration cash flow from customers, build increased customer goodwill with customers and enable increased customer refinancing. The longer duration cash flow would provide more flexibility in reducing lending volumes during periods when underwriting risk levels are rising, as the company would be less dependent on brokering new loan deals every day to provide revenue.

  • IEG Holdings intends to encourage LendingClub to undertake substantial costs cuts by terminating excess employees, achieving substantial cuts in advertising/marketing costs and other significant cost cutting measures;
  • IEG Holdings intends to encourage LendingClub to transform its broker business model with low gross margins and high volumes to focus on high gross margin unsecured loans to near prime clients with strong underwriting, company owned individual state licenses and retention of loans on its balance sheet to secure long duration cash flow from longer term loans; and
  • The acquisition of LendingClub shares would be substantially net asset per share accretive for IEG Holdings stockholders and substantially increase shareholder equity.

New partnership turns PayPal into Apple App Store payment option (Banking Tech), Rated: A

This week the company announced a partnership with Apple to allow shoppers pay for their purchases at the App Store using PayPal. The feature will be available for users of a variety of Apple devices including iPhone, iPad, Apple TV, Apple Watch, and iPod.In addition to the App Store, PayPal will be a payment option for a variety of Apple services including Apple Music, iTunes, and iBooks.

Finicity and JP Morgan Chase pair for data share (Banking Tech), Rated: A

Data aggregation provider Finicity has signed an agreement with JP Morgan Chase to let the bank’s customers choose data to share with apps.

The companies will use a direct API to allow Chase customers to share information with the apps and services that Finicity supports. According to the firms, this tokenised access will eliminate the need for customers to share their Chase credentials with third-party apps.

Paypal Holdings Inc (NASDAQ:PYPL): Beginning of Market Dominance (Library for Smart Investors), Rated: A

Paypal Holdings Inc (NASDAQ:PYPL) is getting investors attention after the stock touched fresh highs amid a new partnership with Apple.

The stock is up over 43% since the start of the year.

In the first quarter, PayPal saw a jump of 10.3% in monthly active users on year-over-year basis. The total number of transactions also increased by 22.5% in the period.

In the first quarter, Venmo processed $6.8 billion in total payments, a 100% growth on year-over-year basis. Venmo is slated to grow more as the company expands to small businesses.

WEALTHTECH — THE DIGITIZATION OF WEALTH MANAGEMENT (FT Partners), Rated: A

WealthTech companies are targeting inefficiencies that span the entire wealth management value chain, from client prospecting to investing to portfolio management and reporting. Benefits include more efficient workflows, improved client experiences and greater transparency. Regardless of their value proposition, WealthTech companies are seeking to improve overall wealth management and investing.

This report highlights a number of key trends within the broader WealthTech industry such as…

  • Growing number of advisors joining the independent channel
  • Incumbent financial institutions are entering the robo-advice space
  • Increased demand for alternative investments
  • Financial planning trending towards goal-based approaches
  • Higher levels of active risk management
  • Commoditization of portfolio management software is leading to expanded offerings
  • RIA custodians evolving into more holistic roles

Download the full report here.

Wells Fargo trims auto loans as market cools, risk overhaul kicks in (Reuters), Rated: A

Wells Fargo & Co (WFC.N) is scaling back and remolding its auto lending business in response to growing stress in the market, as well as a bank-wide push for more centralized risk controls.

Wells, which was the No. 2 U.S. provider of auto loans less than a year ago, has already cut quarterly originations by nearly 30 percent over the nine months leading into March 31, according to a May 11 company presentation. It has also begun consolidating the collections operation in a move that people familiar with the business say could eliminate hundreds of jobs, after a new head of auto finance took the reins in April.

5 Fintech Startups Under the Radar (Bank Innovation), Rated: A

Spotme

This New York City-based startup facilitates micro-loans between borrowers and lenders, allowing users to set up pretty much all the parameters of a loan themselves: users can control the amount, the interest rate, the payback period, and the way they are reimbursed for the loan themselves.

Ledger

Ledger might be able to help out there: this San Francisco-based startup allows users to “open tabs with friends,” boiling down a transaction to just 3 clicks. By connecting with a user’s financial accounts (protected by “military-grade” cybersecurity, according to the company), users are able to aggregate all of their transactions in one place, as well as receive notification about when transactions are due.

Wallio

More and more companies are striving to solve the main problem when it comes to personal finance management services: how do you make a user actually take the financial advice that is being offered?

Wallio starts off the week by giving a user an allocated amount of money they can spend for that week, on whatever the user wants (expenses and savings are already factored into this amount). If a user underspends, great: Wallio will allow that user to put that money towards a goal. If a user overspends, Wallio will simply allocate less money for the user to spend next week.

Samwise

This robo-investing startup allows users to turn their existing brokerage account into an autonomous investing account using machine learning algorithms.

OnePebble

Invest, and make a difference in the world at the same time: that’s the dream of OnePebble, an online investment broker/dealer that puts each investment toward companies “doing good in the world.”

3 Investing Trends to Keep on Your Radar (Morningstar), Rated: A

Trend: Passive products continue to gain assets.

This is the trend shaping the investment management industry today. Asset flows to passive products, both traditional index mutual funds and exchange-traded funds, began in earnest following disappointing active-fund performance during the financial crisis.

Trend: New ways to hire–and pay for–financial advice. 

Robo-advisors provide automated advice for a low annual fee as low as 0.25% or even less. Meanwhile, mutual fund companies and brokerage firms may provide advice for customers who have amassed sufficient assets at the firm. For example, Vanguard Personal Advisor Service charges 0.30% and is available to investors with at least $50,000 in assets at the firm. (The service combines human financial advisors with robo-advisor technology.)

What to watch out for: The profusion of different business models means that the business of selecting an advisor is more complicated than ever. Robo-advisor fees might look like a screaming buy relative to the fees that a full-service human advisor charges, but the robo won’t be able to give you advice on nonportfolio matters like whether to pay off your mortgage or purchase long-term care insurance.

Trend: An increased emphasis on behavioral factors that can affect investor outcomes.

What’s to like: Many robo-advisors have also embedded behaviorial research into their services.

What to watch out for: Behavioral finance is trendy right now, and with any trend comes the opportunity for gimmickry. Beware of advisors who are using behavioral finance as their main hook to snag clients; high-quality advisors have been employing behavioral finance into their practices for years.

US Tax Professionals Tackles the Tax implications of Crowdfunding (Digital Journal), Rated: A

It’s important to understand that all the income a person receives, regardless of the source, is considered taxable income in the eyes of the IRS. That includes crowdfunding dollars.

Even if the campaign only raised the projected $15,000 and no gifts were offered, the money would still be considered taxable income and need to be reported as such on a tax return.

Generally, crowdfunding revenues are included in income as long as they are not:

  • Loans that must be repaid;
  • Capital contributed to an entity in exchange for an equity interest in the entity; or
  • Gifts made out of detached generosity and without any “quid pro quo.” However, a voluntary transfer without a “quid pro quo” isn’t necessarily a gift for federal income tax purposes.

Morgan Stanley digital chief: AI to help advisers, not ‘cyborg bots’ (Financial-Planning), Rated: A

Advisers tasked with processing a “mountain of information” will get a reprieve through artificial intelligence, according to Morgan Stanley Wealth Management’s chief digital officer.

“What we want to do is, with one click of a button, they can take action on that research report to all their clients within minutes, not hours, not phone calls,” Hassan said. “That’s the promise of what we’re trying to build.”

Rival firms have shown they’re headed down a similar path. Like Morgan’s planned offering, the UBS-SigFig service will save advisers’ time through automated messaging to clients on important dates, according to Richard Steinmeier, the head of the UBS Wealth Advice Center.

Congress Should Use Congressional Review Act to Strike Down Ill-Advised Arbitration Rule (Daily Signal), Rated: B

Cutting through the hyperbole that the arbitration rule protects consumers from “unfairness” that would deny them “their day in court,” this rule is in fact highly anti-consumer and harmful to innovation.

This regulation could have particularly harmful effects on FinTech innovations, such as peer-to-peer lending.”

How much money do Arizonans spend playing the lottery? Less than most Americans (AZ Central), Rated: B

Arizonans on average shelled out $100.85 per capita on lottery tickets in 2015, according to the study by LendEDU, based on preliminary data for state government finances collected by the Census Bureau. For Americans overall, the per-capita figure was $206.69.

United Kingdom

UK setting the bar for fintech regulation, bank execs say (SNL.com), Rated: AAA

U.K. authorities have created a world-leading regulatory environment for the burgeoning fintech industry that is being emulated elsewhere, according to bankers.

The Financial Conduct Authority’s “sandbox,” a program launched in 2015 to let companies test innovative ideas under close regulatory supervision, has been particularly helpful, she said.

Meanwhile, initiatives such as FCA-organized hackathons — or “TechSprints” as it prefers to call them — have been particularly appreciated by the industry, according to Sophie Guibaud, vice president of European expansion at Fidor Bank AG, a German online lender that was bought by Groupe BPCE in 2016. These events invite market participants to come up with technological solutions to certain problems, such as financial issues faced by people with mental health problems.

The U.K. is home to more fintech companies valued at more than $1 billion than the rest of Europe put together, according to an April 2017 report by technology investment bank GP Bullhound. Three U.K.-based companies, Funding Circle, Paysafe and Transferwise, have crossed that threshold, and GP Bullhound said that it does not expect London to relinquish its lead, due to its prominence in international financial services.

Comparison site GoCompare invests in mortgage robo-adviser (AltFi), Rated: A

Financial comparison site GoCompare is hoping to transform the UK’s mortgage application process by investing in MortgageGym, a digital mortgage robo-adviser.

Users can complete a free application within 15 minutes on MortgageGym and receive matches within 60 seconds, as well as robo advice and access to live advisers. The website will use automated algorithms to match applicants with the best mortgage providers.

The House Crowd hits £50m via mix of P2P and crowdfunding (P2P Finance News), Rated: A

THE HOUSE CROWD has hit the £50m funding target it set out to achieve in October last year.

The Manchester-based property platform started targeting institutional money at the end of last year to achieve its first £50m of funds channelled to property and buy-to-let borrowers, through both its peer-to-peer side and its crowdfunding arm.

The firm raised over £15m in the six months to early 2017, while a loan it closed last month added another £600,000.

Fintech CurrencyCloud tapped up investors months before Google raise (Business Insider), Rated: A

CurrencyCloud, which provides a platform to process international payments, raised £9.5 million from its existing investors in December 2016. The company had £10.5 million in the bank at the end of the month, accounts show, suggesting the platform had around £1 million left at the time of the fundraising.

The volume of payments jumped by 110% to 1.5 million but net revenue from currency transactions increased by just 10% to £3.2 million. Meanwhile, administrative expenses rose by 54% to £13.9 million as CurrencyCloud invested in “recruiting staff, developing our technology infrastructure and operations services, and moving to new office premises.”

P2P fund share issues boost investment trust sector (P2P Finance News), Rated: A

FUNDRAISINGS by Honeycomb and the Funding Circle SME Income Fund (FCIF) helped push share issues to record levels in the investment trust sector for the first half of 2017.

Secondary issuances raised £3.3bn in the first six months of the year, trade body the Association of Investment Companies has revealed, up from £1.8bn at the same time in 2016.

FCIF raised £142m in conversion shares in April, the largest total in the specialist debt sector, while the Honeycomb investment trust raised £105m through a ordinary share issue.

Alternative Credit funds drive record cash raise (AltFi), Rated: A

Assets in investment trusts have hit an all time high thanks in part to a huge swathe of secondary issuance in closed-ended funds’ shares.

In the first half of 2017, the most poplar area of the investment trust market was Infrastructure – in terms secondary issuance – raising £1.2bn. This was followed by Alternative Credit at  £514m. Funding Circle SME Income raised the largest total in the sector securing £142m via its C share issue, followed by Honeycomb Investment Trust (£105m).

China

The number of Online Financial platforms in China Exceed 19,000, ranking the first place of the world. (Xing Ping She), Rated: AAA

According to data from National Institution of Internet Financial Risk Analysis &Technology,there are more than 19,000 online financial platforms across China, including over 6000 online lending platforms, nearly 3500 online assets managers, and 800 crowdfunding platforms. The total cumulative volume of internet loans, crowdfunding and internet payment have reached to 70 trillion RMB (US$ 10.33 trillion). Zhou Hongren, director of the National Committee of Internet Finance Professional Technology, claimed that, “No matter in terms of quantity or scale, China has already become the largest international finance marketplace around the world.”

European Union

Rocket Internet Sells Stake in Lendico Startup (Handelsblatt), Rated: AAA

Incubator firm Rocket Internet has sold its majority stake in peer-to-peer lender Lendico to Arrowgrass, Handelsblatt has learned, as the British hedge fund acquired complete ownership of the Berlin startup.

The partners to the transaction agreed to keep the purchase price confidential. Rocket Internet, which specializes in helping online startups get off the ground, most recently valued its 50-percent-plus stake in Lendico at €140 million ($159 million).

Funding Circle Germany Takes a Fresh Start (Crowdfund Insider), Rated: AAA

Germany is a huge SME and VSME (very small business) credit market. But it is not as mature a market for online marketplace lending as the UK, the US, or even the Netherlands. This partly explains why Funding Circle Germany’s early loan book underperformed. Now the platform is starting afresh to match its market’s reality.

With offices and business in Germany, the Netherlands and Spain, Zencap had originated €35 million in loans to 500 SMEs at the time of its acquisition. Its operations were very small in comparison with the more than $1.5 billion originated by Funding Circle in the US and the UK at the time (meanwhile Funding Circle passed the $3 billion mark).

The second reason for starting afresh, was a need to revisit the credit model. Since January, the new German team has been busy recalibrating and restarting the German operations.

Loan origination resumed at previous level in the first half of 2017 and is expected to grow again in the second half of this year.

Spanish Fintech Industry Comes into its Own (Finance Magnates), Rated: A

The Spanish fintech ecosystem has been a steadily growing force over the past few years, swelling from just fifty financial technology startups in 2013 to well over three hundred in 2017. This rapid surge is only going to continue with this number estimated to hit four hundred companies by 2018.

In terms of the value of the operations, this sector passed rose from just €35 million in 2014 to €206 million in 2016, justifying a 600 percent growth in just two years.

According to the Spanish Association for Fintech and Insurtech (Asociación Española de Fintech e Insurtech – Aefi), companies operating in this space in Spain are going to create a total of 10,000 jobs in 2017 alone.

While the value offintech operations in Spain is increasing, two areas that constitute the most focus are the crowdfactoring or invoice factoring crowdfunding platforms – these saw a total of €120 milion euros in 2016, that concentrate most of the operations domestically, followed by crowdfunding with €43.5 million and crowdlending or p2p lending with €42 million.

International

Visa Expands Its Footprint in Europe (Market Realist), Rated: AAA

In May 2017, Visa announced that in order to give consumers more control and make transactions transparent, the company will create digital card management experiences for its partners. Visa’s partners include financial institutions. Since the new offerings will lead to more transparency, Visa expects to see volume growth in fiscal 3Q17. Market analysts expect Visa to report revenues of $4.36 billion in fiscal 3Q17—a decline of 2.7%.

 

What Can Visa Expect from Russia, China, Japan, and India?

In fiscal 2Q17, there was growth in Visa’s cross-border business due to Russia’s developed economy. Visa implemented ~1,600 point-of-sale terminals. As a result, payment volumes are expected to grow in fiscal 3Q17.

Management thinks that obtaining a domestic license in China is a time-consuming process. Visa is expected to witness lower revenues and payment volumes from China due to discontinued dual branded cards.

Management has a positive outlook on Japan’s economy due to digitization. Japan’s government has become more inclined to use digital and electronic payments.

In fiscal 3Q17, India could be a major contributor to payment volume growth.

Visa has delivered a return on equity of 16.2% on trailing 12-months basis. Other consumer financial peers (XLF) have delivered the following return on equity on a trailing 12-month basis:

  • American Express (AXP) – 25.1%
  • MasterCard (MA) – 75%Discover Financial Services (DFS) – 21.10%

Visa Expects to Benefit from Its European Business

Visa’s (V) acquisition of Visa Europe allowed the company to enhance its global reach. The main agenda behind the acquisition was to bring innovation to the European market. Visa had been working closely with its partners and clients. The company also plans to create new services and products.

Israel

THE SURPRISING COUNTRY LEADING THE FINTECH REVOLUTION (Ozy.com), Rated: AAA

The country that gave the world smart drip irrigation and the Epilady has also been an early and enthusiastic adopter of financial technology, as in mobile banking apps, digital wallets, online lending and other services that manage moola. In fact, a survey of selected industrialized countries shows that:

As for the specifics, 50 percent of Israeli adults use mobile banking apps at least once a month. In the U.S., it was 38 percent; the U.K., 37 percent; in France, 35 percent; and in Germany, a surprisingly anemic 28 percent.

The five largest banks in Israel control more than 90 percent of the market, and as Sandra Octaviani, research lead for fintech at the University of Utah’s Center for Innovation in Banking and Financial Services, notes, traditional banks tend to serve low-risk, highly profitable clients, which creates an opportunity for nimbler fintech firms to swoop in and serve the underserved.

India

RBI wary of first loan default guarantee cover (India Times), Rated: AAA

The Reserve Bank of India is learnt to be wary of peerto-peer lending platforms offering any FLDG, or first loan default guarantee, cover to institutional lenders for any lending they do through these technology startups, said sources familiar with the discussions.

While various lending entities are keen on exploring this space as a cheap source of customers, they often look for a security cover against loans going bad. Experts say such guarantees or covers might go against the intentions of the central bank.

SME Lending Based on Payment History is the Next Big Wave in Fintech (BW Disrupt), Rated: A

ftCash aims to empower micro-merchants and entrepreneurs with the power of electronic payments and loans with zero upfront cost and no monthly rentals. Merchants are able to offer their customers multiple payment methods including credit cards, debit cards, net banking, mobile wallets, PayPal and more.

Nonethless, credit lending is the next big wave of Indian fintech. Lodha explains, “SME Lending based on payment history will be next big wave in fintech. On an active basis, it allows a lender to decide the paying ability of a merchant/business and the recollection of these loans can be done from the payment platform itself. The combination of the payments data along with GST data provides deeper insights into a business. We at ftcash are heavily invested in this idea and believe there is a great potential for scale here.”

Latin America

Venture fund for Latino entrepreneurs, fintech in Mexico  (ImpactAlpha), Rated: AAA

Financial technology, or fintech, startups offering digital payment, remittances and lending services, could capture 30% of Mexico’s banking market within 10 years, according to Finnovista, a fintech accelerator. Six in 10 Mexicans are unbanked. Financial exclusion is a problem but “also an opportunity,” Francisco Meré, the director of Bankaool, one of the first online-only banks in Mexico, told the Financial Times[paywall]. “The cost of engaging a customer through technology is a fraction of using a branch.” Clip has grown to become one of Mexico’s largest digital payment providers (Accion sold its stake in February). Kubo Financieroprovides peer-to-peer lending; Albo, mobile-based banking; and Kueski, a digital micro-lender — all have secured venture backing. More than 150 fintech, or financial technology, firms now operate in Mexico, giving Mexico 35% of fintech companies serving the under- and un-banked in Latin America.

AFLUENTA INCORPORATES THE MEXICAN INVESTMENT FUND IGNIA TO ITS PRESTIGIOUS LIST OF SHAREHOLDERS (AltFi), Rated: A

Afluenta (www.afluenta.com), a leading online credit platform for the people of Latin America, announced the addition of Mexican venture capital fund IGNIA to its group of shareholders. IGNIA is a venture capital fund specializing in investments in entrepreneurial companies with great potential for growth, whose services meet the needs of the emerging middle class.

In Mexico, where local credit to the private sector is below 35% of GDP, compared to 68% in Brazil, Afluenta aims to revolutionize the market with its human approach to credit and investment.

Afluenta connects borrowers with investors who can be individuals or companies, eliminating intermediaries such as traditional financial institutions. Its technology allows investors to receive competitive returns on their contributions in a simple, fast and efficient way, while applicants obtain loans faster, without bureaucracy and at a lower interest rate than in a bank.

Canada

Katipult CEO finalist for the prestigious EY Entrepreneur Of The Year 2017 (Digital Journal), Rated: A

Brock Murray, CEO of Katipult, a SaaS company that enables firms to design, setup, and manage an investment crowdfunding, Peer to Peer lending, or investor management platform, has been named a finalist in Ernst & Young’s Entrepreneur of the Year in the Emerging Technology category in Prairies.

Authors:

George Popescu
Allen Taylor

July 29th 2016, Daily News Digest

July 29th 2016, Daily News Digest

News Comments Today we have a lot of articles about banks and how banks are surfing successfully on the FinTech wave. The bank articles are mostly in the US section but the Australia section has an interesting article as well. Note the 1st article from Bloomberg and the 7th and 8th articles.  In the India […]

July 29th 2016, Daily News Digest

News Comments

  • Today we have a lot of articles about banks and how banks are surfing successfully on the FinTech wave. The bank articles are mostly in the US section but the Australia section has an interesting article as well. Note the 1st article from Bloomberg and the 7th and 8th articles.
  •  In the India section, you will find an article of quotes from P2P lenders in India which are worth a quick read. And in the UK section a very interesting article, the 1st one, just talking about the profitability of Zopa and Funding Circle, but the real interesting piece are the profitability of LendInvest and RateSetter which are not in the title. And a 2nd article that is also very clear and well thought out.

United States

United Kingdom

European Union

India

Australia

 

United States

Big Banks Turn Silicon Valley Competition Into Profit, (Bloomberg), Rated: AAA

It’s not that the upstarts — often called fintech — are failing to gain traction. Internet ventures pitching loans to cash-strapped consumers, small businesses and home buyers, for instance, have posted spectacular growth in recent years. It’s just that banks have a huge lead in lending and are watching the startups closely. As borrowers embrace new services, traditional firms are riding along.

Here are five examples:

LendingClub’s Backers

In May, LendingClub broke out its sales to banks: Community banks and other old fashioned lenders snapped up about 34 percent of the $2.8 billion of loans it arranged in the first quarter, up from an average of about 25 percent during 2015.

Some of LendingClub’s biggest loan buyers have bolstered their war chests or operations with financing from banks. Colchis Income Advisors entered into a credit agreement with Bawag PSK of Austria, according to regulatory filings. Arcadia Funds arranged for two of its Cirrix partnerships to borrow from Silicon Valley Bank. And MW Eaglewood lined up financing for its main LendingClub fund from Capital One Financial Corp. in 2012. Spokesmen for the funds and banks declined to comment or didn’t respond to messages.

Chasing Entrepreneurs

Small businesses can thank internet ventures for simplifying loan applications, speeding decisions and providing much-needed credit when many traditional banks were pulling back in the wake of 2008’s financial crisis. Nonbanks now provide about one-quarter of the $800 billion in loans outstanding to the sector, according to research by QED Investors and Oliver Wyman. But the interest rates aren’t always low.

For a time, banks were content backing the loans. Goldman Sachs was among firms that entrusted more than $300 million years ago to fund lending by On Deck Capital Inc., one of the largest providers of small business loans over the internet.

Now, established lenders are taking a more active role. JPMorgan announced a deal in December, letting it access On Deck’s proprietary credit-scoring system to quickly evaluate applicants before using its own balance sheet to make loans. On Deck, in turn, gets a foothold in the burgeoning “fintech as a service” market. But the arrangement has done little to stop a 49 percent slide in the company’s stock this year.

More recently, established lenders have announced their own online lending portals for entrepreneurs.

Wells Fargo & Co. said in May that its new “fast decision” platform will help it reach a goal of providing $100 billion in new loans to small businesses by 2019. AmEx, which already provides more than $200 billion of funding to entrepreneurs for business purchases on their credit cards, expects a new online-loan portal will let it handle even more of their spending.

Mortgage Apps

Fintech ventures starred in Super Bowl ads this year, with Quicken Loans toutingRocket Mortgage, a platform letting users apply for home loans on smartphones.

The tidal wave is benefiting banks, too. Behind the scenes, many of the upstarts get support from traditional banks. Detroit-based Quicken, for example, raised $1.25 billion for itself and its parent company last year in a bond sale underwritten by JPMorgan and Credit Suisse Group AG. It also used lines of credit from banks to help close $80 billion in home loans that year.

[Comment: 4th was Blockchain, not very relevant to our readers here]

Robo-Advisers

Top Wall Street firms, seeking stable fee income, are now developing their own robotic arms. Bank of America Corp. will unveil an automated investment prototype this year after assigning dozens of employees to the project in November, people familiar with the matter told Bloomberg at the time. Morgan Stanley and Wells Fargo also have said they would build or buy a robo-adviser.

US consumer agency seeks to overhaul debt collection industry, (CNBC), Rated: AAA

“Today we are considering proposals that would drastically overhaul the debt collection market,” said Consumer Financial Protection Bureau Director Richard Cordray in a statement. “This is about bringing better accuracy and accountability to a market that desperately needs it.”

According to a summary, the proposal would make sure collectors “substantiate the debt before contacting consumers,” by confirming their identities and the amount owed, as well as checking for any payments made after a default. Consumers frequently file complaints at the agency about receiving calls for debts that do not exist.

In an attempt to “limit excessive contact,” the proposal would cap agencies’ calls to debtors to six attempts each week. It would also create a 30-day waiting period after a person dies for contacting survivors.

Agencies would have to communicate specific information to consumers, such as when outstanding debt is too old for a lawsuit. They would also have to make it easier to both dispute or pay a debt through tear-off coupons on the bottoms of collection notices.

Roughly 13 percent of consumers have a debt currently in third-party collection, with an average amount of $1,300, data from the Federal Reserve Bank of New York shows.

In a survey released alongside its proposal, the CFPB found more than three-quarters of the country’s 3,994 debt collection firms are small, with less than 100 employees. Larger firms pull in about two-thirds of the industry’s $12.18 billion total revenue.

The agency also found credit card, student loan and automobile debts in collection typically have balances of $2,000 or more.

Cloudvirga Raises $ 7.5 M to Automate the Entire Mortgage Process, (PR Newswire), Rated: A

Cloudvirga, the company developing the cloud-based intelligent Mortgage Platform® (iMP) designed to streamline the mortgage process, today announced it has raised $7.5M in its series A funding sponsored by Dallas Capital with participation from Upfront Ventures and Tribeca Angels.

“Increased regulations stemming from the subprime mortgage crisis have made the entire process more labor intensive and time consuming than ever, and those are the pain points we’re alleviating with iMP,”

Come Together – Finding Common Ground in Small Business Lending Associations, (Lend Academy), Rated: AAA

So where do we go from here? Advancing the marketplace lending industry’s efforts to create a more transparent and efficient financial system is critical as the industry matures.

The good news is that small businesses today – even those with lackluster or thin credit history – can choose from a dynamic set of loan products including term loans (both traditional and short-term), business lines of credit, loans for startup companies, equipment purpose loans, various SBA loans, accounts receivable financing, merchant cash advances, and peer-to-peer loans. This is a far cry from where we were in 2008-2010, when (according to the Huffington Post) more than 170,000 small businesses shut down.

At Lendio, we’re convinced that there needs to be a single, industry unifier – and we feel the SMART Box is headed in that direction. Lendio will now participate in the 90-day engagement period and I’m asking all those who offer loan products throughout the Lendio platform to consider doing so as well.

How Much Lower Will Your Student Loan Rate Be With a Cosigner?, (Wall Street Journal), Rated: AAA

Undergraduates who qualified for private student loans with a cosigner–often a parent–were offered average interest rates of 5.37% versus 7.46% without a cosigner, according to Credible.com, a student-loan marketplace. Rates for graduate students were also discounted to 4.59% on average with a cosigner compared to 6.22% without one.

The figures from Credible.com are based on five lenders’ responses and offers—which included a mix of fixed and variable interest rates—to nearly 8,000 applicants who shopped for student loans on the site over a 12-month period through early June. The lenders include Citizens Financial Group—which is quickly gaining market share in the private student loan market—as well as online lenders CommonBond and College Ave Student Loans.

Approval rates fall dramatically without cosigners. Fifty-one percent of undergraduates shopping for loans on Credible.com received offers compared with 20% of those without a cosigner. Similarly, 56% of graduate students–who lenders have historically viewed as relatively safer borrowers–received offers with a cosigner versus 45% without.

In some cases, it can be cheaper for parents to join their children on a private student loan as opposed to signing up for a parent-only loan from the federal government. The 5.37% average rate undergraduates received with a cosigner on private student loans is nearly one percentage point cheaper than the interest rate on the federal Plus loan for parents that charges 6.31% for the upcoming academic year. Private lenders also don’t charge origination fees, while the Plus loan currently has a roughly 4.3% upfront charge.

Think twice before you co-sign on a student loan, (CNBC), Rated: AAA

But co-signing is risky. It ties you to that debt, meaning you could be responsible for the entire amount outstanding if the primary borrowercan’t — or won’t — pay up. Nearly 40 percent of co-signers found themselves on the hook for at least part of the bill, according to a June survey from CreditCards.com, and 28 percent saw a drop in their credit score from the primary borrower’s bad credit habits.

How Ayasdi’s machine learning is giving banks an analytical advantage, (Tradestreaming), Rated: AAA

“The future is already here — it’s just not very evenly distributed.” Banks are increasingly using machine learning to power part of their operations, but the adoption of these new technologies is not uniform.

Top data scientists are employed by financial institutions and working with programming tools like SPCC and R, they filter and analyze huge data sets in order to perform analytical tasks. “No human being can wrap his head around that amount of data,” said Daniel Druker, CMO of Ayasdi, a machine learning company that partners with financial institutions, like Citi and Credit Suisse. Instead, using machine learning algorithms, a computer can surface insights and recommendations from those data sets, while the quants examine and take actions based on those learnings.

According to McKinsey’s 2015 Global Banking Report, banks that have replaced older statistical-modeling approaches to credit risk with machine learning techniques have experienced up to 20 percent increases in cash collections from outstanding loans.

Out of over 20 banks that work with Ayasdi, Drucker said, 100% are either already operating in this stage or actively exploring implementing such technology.

The highest level of machine learning application is the fully automating business processes. Take a life insurer, for example. When a customer applies for a policy, he might be asked to fill out a 40-page long form and get a physical examination. That information is then sent back to the company for approval. The entire process can take over a month to complete.

According to McKinsey, some European banks using these techniques report 10 percent increases in sales of new products, 20 percent savings in capital expenditures, and 20 percent declines in customer churn.

CB Insights has identified 41 companies providing machine learning solutions in the financial industry. Together with the explosion of general applications of  AI, deals and investments in AI companies reached record levels in 2016. Since the beginning of 2016, over 15 fintech AI companies have closed investment rounds.

How Digital Investments Are Changing the Face of Banking, (The financial Brand), Rated: AAA

Investment in digital banking is driving increased customer acquisition, cross-selling and satisfaction while decreasing branch traffic and related costs.

This is confirmed by the J.D. Power research that showed that there is an immediate lift in overall satisfaction when customers use mobile banking (+27 points on a 1,000-point scale), and this impact increases even more when banks provide their mobile banking customers with a highly satisfying experience (+82). According to J.D. Power, “The outlook for Big Banks remains positive, driven by their (big banks) ability to invest in customer-centric innovations (e.g., digital channels, analytics, and branch transformation), as well as their success in growing customer segments.”

Recent disclosures of mobile banking use by the big banks provides a glimpse of the impact of digital investment on mobile use. Of the three largest U.S. banks, JPMorgan Chase leads the way with nearly 25 million active mobile customers as of the second quarter. That was up 18% compared with the same period last year. Bank of America had the second most active mobile users, with 20.2 million monthly active app users, with Wells Fargo reporting 18 million active users.

 

United Kingdom

Britain’s 2 biggest peer-to-peer lenders lost £50 million in the last decade

The two platforms have facilitated almost £3 billion of loans between them but Funding Circle, founded in 2010, has never made a profit, while Zopa, founded in 2005, made a small profit 2 years running, totalling less than £60,000.

Here’s the breakdown of Zopa and Funding Circle’s financial performance, as per accounts filed with Companies House:

  • Zopa: losses between 2005 and 2014 total £21.79 million, according to accounts filed with Companies House, on cumulative revenues of £25.84 million. The platform made a small profit in in 2011 and 2012, totalling £58,648.
  • Funding Circle: cumulative net loss of £28.71 million on total revenues of £20.89 million, according to accounts covering 2010 to 2014. The company has yet to make a profit.

These losses have been funded by investment from venture capitalists: $273 million (£208.1 million) for Funding Circle and at least $56.6 million (£43 million) for Zopa, according to Crunchbase.

Funding Circle, which offers loans to small businesses, declined to comment on its losses when contacted by BI but pointed to comments CEO Samir Desai made to BI last year when we reported the company’s latest financial results. Desai said at the time:

“If you actually look at the core business of doing loans in the UK — strip away the technology investment and all the other extra stuff we’re doing — the business is already profitable in the UK and is moving that way in the US as well. A lot of the investment we’re doing is investing in creating a global business.”

Zopa’s CEO Jaidev Janardana told BI in an emailed statement:

“We have demonstrated that our business model is profitable with two consecutive profitable years in 2011 and 2012. Since then our investors and the business have placed more value on investing in our growth. In doing so we have been able to double our loan volumes last year, deliver positive returns for our customers at the same time investing in talent, technology, and our office.

“This all means we are in the best position to deliver on our strategic plan for continued growth and profitability long-term. Looking forward, I’m glad to say that we expect to be EBIDTA positive in Q4 2016 and profitable in 2017.”

Christian Faes, CEO of the UK’s fourth largest marketplace lender LendInvest, told BI he thinks that loss-making platforms will face increased pressure to turn a profit to “prove that they can.” Remember, the growth that Zopa and Funding Circle are chasing could be disappearing.

LendInvest, which lets investors put money into short-term mortgages for people looking to renovate then sell properties, made a pre-tax profit of £3.1 million in 2015 and £1.1 million in 2014.

A spokesperson for RateSetter told BI: “We have recorded a profit for two consecutive financial years, proving that our model works and is sustainable. We are now investing to scale up, broaden, and deepen our market while continuing to deliver maximum value for investors.”

Is the dream of peer-to-peer lending beginning to fade?, (Thersa), Rated: AAA

Why is this a problem? Because unlike banks, which can make money on captive and repeat business in current accounts, credit cards and remortgages, P2P lenders need to continuously find and process new borrowers in order to earn commission. Should the sluggish times continue, the danger is that P2P lenders may soon be tempted to shoot for riskier borrowers in order to maintain their rate of growth. Remember that these platforms have investors of their own to placate and appease, many of whom will be pushing for decisive action to keep transaction volumes on an upward trajectory.

Finally, there is the question of where the money flows to on these platforms. Nesta and Cambridge University’s research is unequivocal: peer-to-peer lending has helped many thousands of people and businesses access loans in the face of rejection from high street banks. Yet only 20 percent of borrowers using P2P consumer lending platforms are women, and only a quarter earn less than £25k (note that the median wage of workers in the UK is  £27.5k). Although the makeup of borrowers using P2P platforms may simply reflect lending patterns across the financial industry, it challenges the theory that fintech innovations are inherently more inclusive.

The point of raising these red flags is not to pour cold water on the P2P lending phenomenon. Many of these platforms promise users a brilliant customer experience, faster decision making, more choice and – for some – better rates on loans than they can find elsewhere. Indeed, one of the greatest impacts P2P lenders have had is in changing the practices of long-standing incumbents. Take Wells Fargo, which recently launched a rapid turnaround system for small business loans, partly to match the responsiveness of P2P startups. These innovations should linger on even if P2P platforms fade away, and suggests the sector could catalyse positive transformation in financial services without needing to achieve a dominant position in the loans market.

No, this is not to dismiss the real achievements of P2P platforms. Rather, it is a plea to be pragmatic and realistic about what P2P lending – and all forms of fintech for that matter – can ultimately achieve without a more significant structural change in the nature of the financial industry. John Kay, in his brilliantly detailed new book Other People’s Money, rightly reminds us of the fundamental functions of finance: to enable people to save for the future, receive and send money, manage everyday risks, and borrow to invest in a real economy that truly creates value for others.

Ablrate & Access Commercial Finance Tout Origination Partnership, (Crowdfund Insider), Rated: A

Asset-backed peer to peer lender Ablrate has released information on an origination partnership with Access Commercial Finance based in Leeds. The arrangement is said to have generated over £2.5 million of loans so far this year. Ablrate launched as a niche P2P lender focusing on aircraft finance but has since branched out into capital equipment and property. Ablrate’s arrangement with Access is thus driving platform growth. Ablrate also offers a secondary market for investors in their loans.

The origination partnership is said to have resulted in sizeable deals for a range of sectors, including an £800,000 funding boost for a previously mothballed Eco Park, near Newcastle. The deal is expected to grow by £1.4 million. The waste management plant in Blaydon suffered following the collapse of Lehman Bros in 2013. The £800,000 in finance  raised through Ablrate and Access is expected to get the plant fully operational by October creating at least 30 jobs.

European Union

BBVA Plans New Management Revamp as Chairman Pushes Digital Bank, (Bloomberg), Rated: AAA

Banco Bilbao Vizcaya Argentaria SA is preparing its second management reorganization in 14 months as Chairman Francisco Gonzalez streamlines Spain’s second-biggest lender and accelerates its push into digital banking.

BBVA is pushing to offer more products and services online and via mobile phones as Gonzalez predicts few banks will survive competition from technology companies such as Google Inc. or Facebook Inc.

Vicente Rodero, current head of Country Networks, a unit created last year to boost the results of the group’s lenders in various countries, is set to leave his post. Chief Financial Officer Jaime Saenz de Tejada and Javier Rodriguez Soler, head of strategy and M&A, will be given additional responsibilities.

India

Fintech firms to take profit-first approach, say panellists at VCCircle summit

India’s fintech startups will also learn more from China, owing to similar demographic opportunities and challenges, unlike other industries that primarily learnt from the US, the panellists said. While there are no successful models yet, companies are experimenting with different models that include marketplace, bidding process and intermediary, they added.

Adhil Shetty, founder and CEO of Bankbazaar, said the popularity of the company is that its website received 90 lakh visitors in the month of March alone. Hence, it won’t be an extended arm as the platform offers products from partnering financial services companies as well standalone products.

Gaurav Hinduja, co-founder of Capital Float, which operates a hybrid model by lending online through its non-banking finance company, said these data sets will reduce the time taken from application to disbursal to 10 minutes. He added that social data can be used for verification as well as help in recoveries.

Rajat Gandhi of Gurgaon-based Faircent, which operates a peer-to-peer (P2P) lending platform facilitating borrowers and lenders through a bidding process, said that credit score would continue to be main criteria for disbursal of loans while data from social media can only be a value-add.

Vaddadi also said that fintech companies are increasing focus on customer acquisition, but added that this will not be done by burning cash.

The panellists also said that chances of default by borrowers are lower for fintech companies as these firms monitor the business performance of the borrower through analytics that can give out an early warning. Vaddadi said his firm has a 0.16% default rate.  [Comment: I do not believe this is true unless the fintechs really download the business’s information regularly and reliably. I am not aware of any company who really does this well. ]

Australia

Global banks: Is fintech a threat or an opportunity?, (Financial Review), Rated: AAA

UBS banking analysts surveyed 27,914 customers of more than 210 banks in 24 countries, along with 61 management teams from banks around the world. Local UBS banking analyst Jonathan Mott along with analysts in London, New York and Tokyo.

The survey found that a growing number of Australians are considering trying fintech services in the next 12 months: 15 per cent of Australian respondents said they will use a fintech money transfer business; 14 per cent said they will use a mobile payment fintech; 9 per cent will use peer-to-peer lending; and 9 per cent said they are likely to use a “robo adviser” for digital financial advice.

According to the management survey, 38 per cent of banks have a fintech partnership and this is expected to rise to 51 per cent over the next 12 months. The report said that in developed markets, bank returns on equity could be lifted from an average of 9.8 per cent to 10.2 per cent, as global cost to income ratios fall.

The survey found a high level of satisfaction from customers in the US and Britain using P2P lending which pointed to the threat to banks being real.
Australia’s largest P2P lender, SocietyOne, said this week it had appointed DDB Group to lift brand awareness through a TV, online, radio and print advertising campaign after the company, which is being led by former Westpac senior executive Jason Yetton, raised a further $25 million in equity in May.

UBS also predicted “the use of robo-advisers looks likely to grow exponentially” by between 70 and 150 per cent over the next year.

Cyber security is an area of concern, with 35 per cent of the customer respondents indicating a lack of trust in security as an explanation for not using fintech mobile payment services.

Author:

George Popescu

July 29th 2016, Daily News Digest

July 29th 2016, Daily News Digest

News Comments Today we have a lot of articles about banks and how banks are surfing successfully on the FinTech wave. The bank articles are mostly in the US section but the Australia section has an interesting article as well. Note the 1st article from Bloomberg and the 7th and 8th articles.  In the India […]

July 29th 2016, Daily News Digest

News Comments

  • Today we have a lot of articles about banks and how banks are surfing successfully on the FinTech wave. The bank articles are mostly in the US section but the Australia section has an interesting article as well. Note the 1st article from Bloomberg and the 7th and 8th articles.
  •  In the India section, you will find an article of quotes from P2P lenders in India which are worth a quick read. And in the UK section a very interesting article, the 1st one, just talking about the profitability of Zopa and Funding Circle, but the real interesting piece are the profitability of LendInvest and RateSetter which are not in the title. And a 2nd article that is also very clear and well thought out.

United States

United Kingdom

European Union

India

Australia

 

United States

Big Banks Turn Silicon Valley Competition Into Profit, (Bloomberg), Rated: AAA

It’s not that the upstarts — often called fintech — are failing to gain traction. Internet ventures pitching loans to cash-strapped consumers, small businesses and home buyers, for instance, have posted spectacular growth in recent years. It’s just that banks have a huge lead in lending and are watching the startups closely. As borrowers embrace new services, traditional firms are riding along.

Here are five examples:

LendingClub’s Backers

In May, LendingClub broke out its sales to banks: Community banks and other old fashioned lenders snapped up about 34 percent of the $2.8 billion of loans it arranged in the first quarter, up from an average of about 25 percent during 2015.

Some of LendingClub’s biggest loan buyers have bolstered their war chests or operations with financing from banks. Colchis Income Advisors entered into a credit agreement with Bawag PSK of Austria, according to regulatory filings. Arcadia Funds arranged for two of its Cirrix partnerships to borrow from Silicon Valley Bank. And MW Eaglewood lined up financing for its main LendingClub fund from Capital One Financial Corp. in 2012. Spokesmen for the funds and banks declined to comment or didn’t respond to messages.

Chasing Entrepreneurs

Small businesses can thank internet ventures for simplifying loan applications, speeding decisions and providing much-needed credit when many traditional banks were pulling back in the wake of 2008’s financial crisis. Nonbanks now provide about one-quarter of the $800 billion in loans outstanding to the sector, according to research by QED Investors and Oliver Wyman. But the interest rates aren’t always low.

For a time, banks were content backing the loans. Goldman Sachs was among firms that entrusted more than $300 million years ago to fund lending by On Deck Capital Inc., one of the largest providers of small business loans over the internet.

Now, established lenders are taking a more active role. JPMorgan announced a deal in December, letting it access On Deck’s proprietary credit-scoring system to quickly evaluate applicants before using its own balance sheet to make loans. On Deck, in turn, gets a foothold in the burgeoning “fintech as a service” market. But the arrangement has done little to stop a 49 percent slide in the company’s stock this year.

More recently, established lenders have announced their own online lending portals for entrepreneurs.

Wells Fargo & Co. said in May that its new “fast decision” platform will help it reach a goal of providing $100 billion in new loans to small businesses by 2019. AmEx, which already provides more than $200 billion of funding to entrepreneurs for business purchases on their credit cards, expects a new online-loan portal will let it handle even more of their spending.

Mortgage Apps

Fintech ventures starred in Super Bowl ads this year, with Quicken Loans toutingRocket Mortgage, a platform letting users apply for home loans on smartphones.

The tidal wave is benefiting banks, too. Behind the scenes, many of the upstarts get support from traditional banks. Detroit-based Quicken, for example, raised $1.25 billion for itself and its parent company last year in a bond sale underwritten by JPMorgan and Credit Suisse Group AG. It also used lines of credit from banks to help close $80 billion in home loans that year.

[Comment: 4th was Blockchain, not very relevant to our readers here]

Robo-Advisers

Top Wall Street firms, seeking stable fee income, are now developing their own robotic arms. Bank of America Corp. will unveil an automated investment prototype this year after assigning dozens of employees to the project in November, people familiar with the matter told Bloomberg at the time. Morgan Stanley and Wells Fargo also have said they would build or buy a robo-adviser.

US consumer agency seeks to overhaul debt collection industry, (CNBC), Rated: AAA

“Today we are considering proposals that would drastically overhaul the debt collection market,” said Consumer Financial Protection Bureau Director Richard Cordray in a statement. “This is about bringing better accuracy and accountability to a market that desperately needs it.”

According to a summary, the proposal would make sure collectors “substantiate the debt before contacting consumers,” by confirming their identities and the amount owed, as well as checking for any payments made after a default. Consumers frequently file complaints at the agency about receiving calls for debts that do not exist.

In an attempt to “limit excessive contact,” the proposal would cap agencies’ calls to debtors to six attempts each week. It would also create a 30-day waiting period after a person dies for contacting survivors.

Agencies would have to communicate specific information to consumers, such as when outstanding debt is too old for a lawsuit. They would also have to make it easier to both dispute or pay a debt through tear-off coupons on the bottoms of collection notices.

Roughly 13 percent of consumers have a debt currently in third-party collection, with an average amount of $1,300, data from the Federal Reserve Bank of New York shows.

In a survey released alongside its proposal, the CFPB found more than three-quarters of the country’s 3,994 debt collection firms are small, with less than 100 employees. Larger firms pull in about two-thirds of the industry’s $12.18 billion total revenue.

The agency also found credit card, student loan and automobile debts in collection typically have balances of $2,000 or more.

Cloudvirga Raises $ 7.5 M to Automate the Entire Mortgage Process, (PR Newswire), Rated: A

Cloudvirga, the company developing the cloud-based intelligent Mortgage Platform® (iMP) designed to streamline the mortgage process, today announced it has raised $7.5M in its series A funding sponsored by Dallas Capital with participation from Upfront Ventures and Tribeca Angels.

“Increased regulations stemming from the subprime mortgage crisis have made the entire process more labor intensive and time consuming than ever, and those are the pain points we’re alleviating with iMP,”

Come Together – Finding Common Ground in Small Business Lending Associations, (Lend Academy), Rated: AAA

So where do we go from here? Advancing the marketplace lending industry’s efforts to create a more transparent and efficient financial system is critical as the industry matures.

The good news is that small businesses today – even those with lackluster or thin credit history – can choose from a dynamic set of loan products including term loans (both traditional and short-term), business lines of credit, loans for startup companies, equipment purpose loans, various SBA loans, accounts receivable financing, merchant cash advances, and peer-to-peer loans. This is a far cry from where we were in 2008-2010, when (according to the Huffington Post) more than 170,000 small businesses shut down.

At Lendio, we’re convinced that there needs to be a single, industry unifier – and we feel the SMART Box is headed in that direction. Lendio will now participate in the 90-day engagement period and I’m asking all those who offer loan products throughout the Lendio platform to consider doing so as well.

How Much Lower Will Your Student Loan Rate Be With a Cosigner?, (Wall Street Journal), Rated: AAA

Undergraduates who qualified for private student loans with a cosigner–often a parent–were offered average interest rates of 5.37% versus 7.46% without a cosigner, according to Credible.com, a student-loan marketplace. Rates for graduate students were also discounted to 4.59% on average with a cosigner compared to 6.22% without one.

The figures from Credible.com are based on five lenders’ responses and offers—which included a mix of fixed and variable interest rates—to nearly 8,000 applicants who shopped for student loans on the site over a 12-month period through early June. The lenders include Citizens Financial Group—which is quickly gaining market share in the private student loan market—as well as online lenders CommonBond and College Ave Student Loans.

Approval rates fall dramatically without cosigners. Fifty-one percent of undergraduates shopping for loans on Credible.com received offers compared with 20% of those without a cosigner. Similarly, 56% of graduate students–who lenders have historically viewed as relatively safer borrowers–received offers with a cosigner versus 45% without.

In some cases, it can be cheaper for parents to join their children on a private student loan as opposed to signing up for a parent-only loan from the federal government. The 5.37% average rate undergraduates received with a cosigner on private student loans is nearly one percentage point cheaper than the interest rate on the federal Plus loan for parents that charges 6.31% for the upcoming academic year. Private lenders also don’t charge origination fees, while the Plus loan currently has a roughly 4.3% upfront charge.

Think twice before you co-sign on a student loan, (CNBC), Rated: AAA

But co-signing is risky. It ties you to that debt, meaning you could be responsible for the entire amount outstanding if the primary borrowercan’t — or won’t — pay up. Nearly 40 percent of co-signers found themselves on the hook for at least part of the bill, according to a June survey from CreditCards.com, and 28 percent saw a drop in their credit score from the primary borrower’s bad credit habits.

How Ayasdi’s machine learning is giving banks an analytical advantage, (Tradestreaming), Rated: AAA

“The future is already here — it’s just not very evenly distributed.” Banks are increasingly using machine learning to power part of their operations, but the adoption of these new technologies is not uniform.

Top data scientists are employed by financial institutions and working with programming tools like SPCC and R, they filter and analyze huge data sets in order to perform analytical tasks. “No human being can wrap his head around that amount of data,” said Daniel Druker, CMO of Ayasdi, a machine learning company that partners with financial institutions, like Citi and Credit Suisse. Instead, using machine learning algorithms, a computer can surface insights and recommendations from those data sets, while the quants examine and take actions based on those learnings.

According to McKinsey’s 2015 Global Banking Report, banks that have replaced older statistical-modeling approaches to credit risk with machine learning techniques have experienced up to 20 percent increases in cash collections from outstanding loans.

Out of over 20 banks that work with Ayasdi, Drucker said, 100% are either already operating in this stage or actively exploring implementing such technology.

The highest level of machine learning application is the fully automating business processes. Take a life insurer, for example. When a customer applies for a policy, he might be asked to fill out a 40-page long form and get a physical examination. That information is then sent back to the company for approval. The entire process can take over a month to complete.

According to McKinsey, some European banks using these techniques report 10 percent increases in sales of new products, 20 percent savings in capital expenditures, and 20 percent declines in customer churn.

CB Insights has identified 41 companies providing machine learning solutions in the financial industry. Together with the explosion of general applications of  AI, deals and investments in AI companies reached record levels in 2016. Since the beginning of 2016, over 15 fintech AI companies have closed investment rounds.

How Digital Investments Are Changing the Face of Banking, (The financial Brand), Rated: AAA

Investment in digital banking is driving increased customer acquisition, cross-selling and satisfaction while decreasing branch traffic and related costs.

This is confirmed by the J.D. Power research that showed that there is an immediate lift in overall satisfaction when customers use mobile banking (+27 points on a 1,000-point scale), and this impact increases even more when banks provide their mobile banking customers with a highly satisfying experience (+82). According to J.D. Power, “The outlook for Big Banks remains positive, driven by their (big banks) ability to invest in customer-centric innovations (e.g., digital channels, analytics, and branch transformation), as well as their success in growing customer segments.”

Recent disclosures of mobile banking use by the big banks provides a glimpse of the impact of digital investment on mobile use. Of the three largest U.S. banks, JPMorgan Chase leads the way with nearly 25 million active mobile customers as of the second quarter. That was up 18% compared with the same period last year. Bank of America had the second most active mobile users, with 20.2 million monthly active app users, with Wells Fargo reporting 18 million active users.

 

United Kingdom

Britain’s 2 biggest peer-to-peer lenders lost £50 million in the last decade

The two platforms have facilitated almost £3 billion of loans between them but Funding Circle, founded in 2010, has never made a profit, while Zopa, founded in 2005, made a small profit 2 years running, totalling less than £60,000.

Here’s the breakdown of Zopa and Funding Circle’s financial performance, as per accounts filed with Companies House:

  • Zopa: losses between 2005 and 2014 total £21.79 million, according to accounts filed with Companies House, on cumulative revenues of £25.84 million. The platform made a small profit in in 2011 and 2012, totalling £58,648.
  • Funding Circle: cumulative net loss of £28.71 million on total revenues of £20.89 million, according to accounts covering 2010 to 2014. The company has yet to make a profit.

These losses have been funded by investment from venture capitalists: $273 million (£208.1 million) for Funding Circle and at least $56.6 million (£43 million) for Zopa, according to Crunchbase.

Funding Circle, which offers loans to small businesses, declined to comment on its losses when contacted by BI but pointed to comments CEO Samir Desai made to BI last year when we reported the company’s latest financial results. Desai said at the time:

“If you actually look at the core business of doing loans in the UK — strip away the technology investment and all the other extra stuff we’re doing — the business is already profitable in the UK and is moving that way in the US as well. A lot of the investment we’re doing is investing in creating a global business.”

Zopa’s CEO Jaidev Janardana told BI in an emailed statement:

“We have demonstrated that our business model is profitable with two consecutive profitable years in 2011 and 2012. Since then our investors and the business have placed more value on investing in our growth. In doing so we have been able to double our loan volumes last year, deliver positive returns for our customers at the same time investing in talent, technology, and our office.

“This all means we are in the best position to deliver on our strategic plan for continued growth and profitability long-term. Looking forward, I’m glad to say that we expect to be EBIDTA positive in Q4 2016 and profitable in 2017.”

Christian Faes, CEO of the UK’s fourth largest marketplace lender LendInvest, told BI he thinks that loss-making platforms will face increased pressure to turn a profit to “prove that they can.” Remember, the growth that Zopa and Funding Circle are chasing could be disappearing.

LendInvest, which lets investors put money into short-term mortgages for people looking to renovate then sell properties, made a pre-tax profit of £3.1 million in 2015 and £1.1 million in 2014.

A spokesperson for RateSetter told BI: “We have recorded a profit for two consecutive financial years, proving that our model works and is sustainable. We are now investing to scale up, broaden, and deepen our market while continuing to deliver maximum value for investors.”

Is the dream of peer-to-peer lending beginning to fade?, (Thersa), Rated: AAA

Why is this a problem? Because unlike banks, which can make money on captive and repeat business in current accounts, credit cards and remortgages, P2P lenders need to continuously find and process new borrowers in order to earn commission. Should the sluggish times continue, the danger is that P2P lenders may soon be tempted to shoot for riskier borrowers in order to maintain their rate of growth. Remember that these platforms have investors of their own to placate and appease, many of whom will be pushing for decisive action to keep transaction volumes on an upward trajectory.

Finally, there is the question of where the money flows to on these platforms. Nesta and Cambridge University’s research is unequivocal: peer-to-peer lending has helped many thousands of people and businesses access loans in the face of rejection from high street banks. Yet only 20 percent of borrowers using P2P consumer lending platforms are women, and only a quarter earn less than £25k (note that the median wage of workers in the UK is  £27.5k). Although the makeup of borrowers using P2P platforms may simply reflect lending patterns across the financial industry, it challenges the theory that fintech innovations are inherently more inclusive.

The point of raising these red flags is not to pour cold water on the P2P lending phenomenon. Many of these platforms promise users a brilliant customer experience, faster decision making, more choice and – for some – better rates on loans than they can find elsewhere. Indeed, one of the greatest impacts P2P lenders have had is in changing the practices of long-standing incumbents. Take Wells Fargo, which recently launched a rapid turnaround system for small business loans, partly to match the responsiveness of P2P startups. These innovations should linger on even if P2P platforms fade away, and suggests the sector could catalyse positive transformation in financial services without needing to achieve a dominant position in the loans market.

No, this is not to dismiss the real achievements of P2P platforms. Rather, it is a plea to be pragmatic and realistic about what P2P lending – and all forms of fintech for that matter – can ultimately achieve without a more significant structural change in the nature of the financial industry. John Kay, in his brilliantly detailed new book Other People’s Money, rightly reminds us of the fundamental functions of finance: to enable people to save for the future, receive and send money, manage everyday risks, and borrow to invest in a real economy that truly creates value for others.

Ablrate & Access Commercial Finance Tout Origination Partnership, (Crowdfund Insider), Rated: A

Asset-backed peer to peer lender Ablrate has released information on an origination partnership with Access Commercial Finance based in Leeds. The arrangement is said to have generated over £2.5 million of loans so far this year. Ablrate launched as a niche P2P lender focusing on aircraft finance but has since branched out into capital equipment and property. Ablrate’s arrangement with Access is thus driving platform growth. Ablrate also offers a secondary market for investors in their loans.

The origination partnership is said to have resulted in sizeable deals for a range of sectors, including an £800,000 funding boost for a previously mothballed Eco Park, near Newcastle. The deal is expected to grow by £1.4 million. The waste management plant in Blaydon suffered following the collapse of Lehman Bros in 2013. The £800,000 in finance  raised through Ablrate and Access is expected to get the plant fully operational by October creating at least 30 jobs.

European Union

BBVA Plans New Management Revamp as Chairman Pushes Digital Bank, (Bloomberg), Rated: AAA

Banco Bilbao Vizcaya Argentaria SA is preparing its second management reorganization in 14 months as Chairman Francisco Gonzalez streamlines Spain’s second-biggest lender and accelerates its push into digital banking.

BBVA is pushing to offer more products and services online and via mobile phones as Gonzalez predicts few banks will survive competition from technology companies such as Google Inc. or Facebook Inc.

Vicente Rodero, current head of Country Networks, a unit created last year to boost the results of the group’s lenders in various countries, is set to leave his post. Chief Financial Officer Jaime Saenz de Tejada and Javier Rodriguez Soler, head of strategy and M&A, will be given additional responsibilities.

India

Fintech firms to take profit-first approach, say panellists at VCCircle summit

India’s fintech startups will also learn more from China, owing to similar demographic opportunities and challenges, unlike other industries that primarily learnt from the US, the panellists said. While there are no successful models yet, companies are experimenting with different models that include marketplace, bidding process and intermediary, they added.

Adhil Shetty, founder and CEO of Bankbazaar, said the popularity of the company is that its website received 90 lakh visitors in the month of March alone. Hence, it won’t be an extended arm as the platform offers products from partnering financial services companies as well standalone products.

Gaurav Hinduja, co-founder of Capital Float, which operates a hybrid model by lending online through its non-banking finance company, said these data sets will reduce the time taken from application to disbursal to 10 minutes. He added that social data can be used for verification as well as help in recoveries.

Rajat Gandhi of Gurgaon-based Faircent, which operates a peer-to-peer (P2P) lending platform facilitating borrowers and lenders through a bidding process, said that credit score would continue to be main criteria for disbursal of loans while data from social media can only be a value-add.

Vaddadi also said that fintech companies are increasing focus on customer acquisition, but added that this will not be done by burning cash.

The panellists also said that chances of default by borrowers are lower for fintech companies as these firms monitor the business performance of the borrower through analytics that can give out an early warning. Vaddadi said his firm has a 0.16% default rate.  [Comment: I do not believe this is true unless the fintechs really download the business’s information regularly and reliably. I am not aware of any company who really does this well. ]

Australia

Global banks: Is fintech a threat or an opportunity?, (Financial Review), Rated: AAA

UBS banking analysts surveyed 27,914 customers of more than 210 banks in 24 countries, along with 61 management teams from banks around the world. Local UBS banking analyst Jonathan Mott along with analysts in London, New York and Tokyo.

The survey found that a growing number of Australians are considering trying fintech services in the next 12 months: 15 per cent of Australian respondents said they will use a fintech money transfer business; 14 per cent said they will use a mobile payment fintech; 9 per cent will use peer-to-peer lending; and 9 per cent said they are likely to use a “robo adviser” for digital financial advice.

According to the management survey, 38 per cent of banks have a fintech partnership and this is expected to rise to 51 per cent over the next 12 months. The report said that in developed markets, bank returns on equity could be lifted from an average of 9.8 per cent to 10.2 per cent, as global cost to income ratios fall.

The survey found a high level of satisfaction from customers in the US and Britain using P2P lending which pointed to the threat to banks being real.
Australia’s largest P2P lender, SocietyOne, said this week it had appointed DDB Group to lift brand awareness through a TV, online, radio and print advertising campaign after the company, which is being led by former Westpac senior executive Jason Yetton, raised a further $25 million in equity in May.

UBS also predicted “the use of robo-advisers looks likely to grow exponentially” by between 70 and 150 per cent over the next year.

Cyber security is an area of concern, with 35 per cent of the customer respondents indicating a lack of trust in security as an explanation for not using fintech mobile payment services.

Author:

George Popescu