Friday July 6 2018, Daily News Digest

p2p loan korea

News Comments Today’s main news: PayPal, Synchrony close consumer credit portfolio deal. Personal loans hit record high. Funding Circle updates projected returns. Furongbao gets $121M investment. Creditshelf to IPO on Frankfurt Stock Exchange. Today’s main analysis: Swindlers in Korea tarnish P2P lending. Today’s thought-provoking articles: Why Kabbage isn’t ready to go public. Why a lack of local payment options hurts […]

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United States

PayPal closes sale of consumer credit portfolio (FinExtra) Rated: AAA

PayPal Holdings, Inc. (NASDAQ: PYPL) today announced the closing of its consumer credit receivables transaction with Synchrony (NYSE: SYF).

Under the terms of the transaction, and related transactions with unaffiliated third parties, Synchrony acquired $7.6 billion in receivables, including PayPal’s U.S. consumer credit receivables portfolio, which totaled $6.8 billion at the time of closing, and approximately $0.8 billion in participation interests in receivables held by unaffiliated third parties. PayPal received approximately $6.9 billion in total consideration at closing.

Why This Ambitious Startup Isn’t Going Public–Yet (INC) Rated: AAA

Petralia was discussing her Atlanta-based company’s ambitious expansion plans this year, which include buying other startups and rolling out new payments products. But she was also joking about what’s shiny and new in the world of financial technology startups: everything and anything involving cryptocurrency, relating to the blockchain, or connected to artificial intelligence. Such startups were heavy on the ground in mid-June, when I interviewed Petralia and her co-founder, Rob Frohwein, at the annual MoneyConf event in Dublin, a 5,000-person gathering of entrepreneurs and established companies in every corner of the fintech ecosystem.

Lending remains a large draw for fintech-focused venture capitalists, who put $900 million into the sector in the first quarter of 2018, according to an April CB Insights report. However, venture capitalists are “on pace for a new low” of money spent on lending startups, even while overall global fintech investment is “on pace for a new high,” the report found. Instead, investors are increasingly willing to bet on startups working in wealth management or robo-advising, insurance and blockchain or cryptocurrency.

Karrot Personal Loans Got Chopped: Here’s Where to Borrow Instead (Student Loan Hero) Rated: A

In 2014, Kabbage introduced Karrot, a program that provided unsecured personal loans up to $35,000.

But Kabbage recently stopped offering Karrot personal loans to grow its other offerings. Customers who already borrowed Karrot personal loans can continue making payments online. But those in need of a personal loan will have to look elsewhere.

Business Loan Company Receives Highest Award from TopConsumerReviews.com (Markets Insider) Rated: B

TopConsumerReviews.com recently awarded their best-in-class 5 star rating to OnDeck, a leader among online lenders who facilitate Business Loans.

SoFi Elects Peggy Alford & Magdalena Yeşil to Board of Directors (Crowdfund Insider) Rated: B

On Tuesday, SoFi announced the election of Peggy Alford and Magdalena Yeşil to its Board of Directors. According to the online lender, Alford is the Chief Financial Officer and Head of Operations for the Chan Zuckerberg Initiative. Previously she held positions at PayPal as CFO of Americas, Global Credit and Global Products and COO in the Asia Pacific region. Most recently, she served as the head of Human Resources-People Operations as well as the head of Cross-Border Trade for PayPal.

Personal Loans Surge to a Record High (Bloomberg) Rated: AAA

Personal loans surged to a record this year and are the fastest-growing U.S. consumer-lending category, according to data from credit bureau TransUnion. Outstanding balances rose about 18 percent in the first quarter to $120 billion. Fintech companies originated 36 percent of total personal loans in 2017 compared with less than 1 percent in 2010, Chicago-based TransUnion said.

Web-based firms like LendingClub, Prosper Marketplace Inc. and closely held Social Finance Inc. are driving the expansion of personal loans. LendingClub said in a filing that personal-loan originations in the first quarter soared 20 percent from a year earlier to $2.1 billion.

Why DC Developers Heart Crowdfunding (Commercial Observer) Rated: A

Small Change, was founded by Eve Picker, an architect and urban designer, with the idea of connecting investors with real estate professionals. The company’s first offering was for a tiny house in Pittsburgh, Penn in 2015. (Picker and Small Change could not provide comment due to federal law. Regulation Crowdfunding requires that all information about an offering reside on the Small Change portal and nowhere else.)

While Small Change is one of the newer platforms to the scene, other online real estate crowdfunding platforms, like Fundrise and Patch of Land, have been around for years.

19 State Attorneys General Unite Against “Madden Fix” Bills (OLPI) Rated: A

The Attorneys General of 19 states and the District of Columbia (the “AGs”) on June 27, 2018, publicly opposed to previously proposed pieces of legislation pending in Congress often referred to as the “Madden fix” bills.   Namely, the AGs made their views against HR 3299 (“Protecting Consumers’ Access to Credit Act of 2017”) and HR 4439 (“Modernizing Credit Opportunities Act”) in a letter (“AG Letter”) to Majority Leader McConnell, Minority Leader Schumer, Chairman Crapo, and Ranking Member Brown.  A copy of the letter can be found here: AG Letter.  HR 3299 passed the U.S. House of Representatives and is pending in the Senate and revises various laws to state that a loan valid when made does not become invalid when it is sold, transferred or assigned.  HR 4439 pending in a House committee would explicitly state that a bank’s being named lender is not affected by any arrangement is has with a service provider.

Nelnet Files Application for Industrial Bank Charter (Nelnet) Rated: A

Nelnet (NYSE: NNI) today announced it has filed an application with the Federal Deposit Insurance Corporation (FDIC) and the Utah Department of Financial Institutions (UDFI) to establish Nelnet Bank, a Utah-chartered industrial bank. If the charter is granted, Nelnet Bank would operate as an internet bank franchise with a home office in Salt Lake City. Nelnet Bank would be a separate subsidiary of Nelnet, and the industrial bank charter would allow the company to maintain its other diversified business offerings.

Nelnet has hired Andrea Moss to lead the application process, and then Nelnet Bank if the charter is granted.

PayNet Sees Small Business Lending Reaching New Heights (Business Wire) Rated: A

The Thomson Reuters / PayNet Small Business Lending Index (SBLI) jumped 9.4 points to 152.7 in May and is up more than 10% on the year. The SBLI 3-month moving average also rose in May and is 11% above its year-ago level.

Of the ten largest states, growth was led by Texas (+12.9% Y/Y) and North Carolina (+12.3% Y/Y), which both climbed to record highs. The majority of industries also experienced growth in May, led by Transportation & Warehousing (+15.0% Y/Y), Mining (+9.4% Y/Y), and Construction (+7.5% Y/Y). Notably, all four of the industries that declined on a year-over-year basis are in the service sector, including Information (-9.3% Y/Y) and Accommodation & Food Services (-8.1% Y/Y). However, Health Care posted its third consecutive monthly gain (+4.1% Y/Y) after a steady two-year decline.

The PayNet Small Business Default Index (SBDFI) fell two basis points to 1.82% in May and is down seven basis points compared to a year ago, its sharpest annual decline since late 2014. On an annual basis, more than half of the major industries saw defaults fall in May, led by Mining (-183bp Y/Y), Transportation & Warehousing (-133bp Y/Y), and Professional Services (-32bp Y/Y). Regionally, defaults fell in eight of the ten largest states on a monthly basis, but were up in half of the largest states relative to year-ago levels. Notably, Texas (-36bp Y/Y) has seen defaults fall by double-digits in each of the last nine months.

United Kingdom

Funding Circle updates projected returns (Bridging & Commercial) Rated: AAA

Following the latest review, the P2P platform has updated the projected returns it displays for each lending option and will now show these returns as a range.

Projected returns are the annual returns that a diversified investor could earn after fees and bad debt, but before tax.

The projected returns for its balanced and conservative lending options are now:

• balanced: 6-7%
• conservative: 5-5.5%

P2P platform Lendy tops £400m funding (Mortgage Finance Gazette) Rated: A

Lendy’s latest milestone comes as some banks pare back their lending and more property developers seek out alternative finance options.

The firm reached £300 million in lending in April last year and has funded hundreds of bridging and commercial property development loans since its launch in 2012. These include residential developments, commercial property, and conversions.

The £400 million has been invested by over 21,500 investors who have earned more than £40 million in interest so far.

Money saving product recommendations “biggest incentive” to use Open Banking (Credit Strategy) Rated: A

Six months into Open Banking, two fifths of customers willing to share their bank transaction data with a new lender would do so if it provided product recommendations which save them money.

That’s according to research carried out by Equifax. Other motivations to share transaction data through Open Banking include the ability to easily compare products from different financial institutions (36 percent), being offered tailored incentives for switching to a new provider (34 percent), and a streamlined process when applying for mortgages (28 percent) and loans (25 percent).

Record first half for Scottish alternative lender (Business Insider) Rated: A

LendingCrowd , the Scottish alternative lending specialist, has reported record first half lending of almost £14m in 2018 and has upped its proportion of loans to Scotland-based businesses, helped by its £2.75m partnership deal with Scottish Enterprise’s investment arm.

After three consecutive months of record lending in April, May and June, the Edinburgh-based company loaned £13.9m in the first six months of the year, compared to £4.9m for the same period last year. Activity during the second quarter also reached an all-time high, with lending of £8.8m – a 225 per cent increase on the £2.7m delivered in the second quarter of 2017.

LendInvest notches another year of profit (AltFi News) Rated: A

Its loan originations came close to doubling, up 91 per cent to £536m. Revenues were also up, increasing to £53m for the year. Originations look set for further growth too, with lending capital growth of 94 per cent to £791m.

However, despite a surge in these key metrics, profits remain relatively modest at just £1.9m before tax for the period, up from £0.1m before tax the previous year, according to the firm’s gross management accounts. By IFRS standards, LendInvest recorded a similar £1.8m in profit last year, but made a loss of £1m in the preceding year (ending 31 March 2017).

Landbay co-founder looks to shake up property market (Peer2Peer Finance) Rated: A

GRAY Stern (pictured), the co-founder of buy-to-let peer-to-peer lender Landbay, is aiming to shake up the UK property market with his new company.

The investment portal, called Dot, enables amateur landlords to invest in UK and US properties that it has already sourced via estate agents and property portals. The properties come with a pre-approved mortgage, enabling anyone with a 30 per cent deposit to buy them instantly.

As part of its package, Dot provides all the services a landlord would need, including insurance, tax compliance, lettings and management, thereby taking some of the hassle out of the process.

Who is guiding the Big Three? (Peer2Peer Finance) Rated: A

The ‘big three’ P2P lenders – Zopa, Funding Circle and RateSetter – have often led the way in this process.

And as these firms have evolved, their board members – both executives and non-executive directors (NEDs) – have reflected these changes.

Here we look at the make-up of these boards and analyse the expertise and experience of the people who are guiding the big three.

Orca Cofounder Jordan Stodart Shares Update and Quiz Info (Crowdfund Insider) Rated: A

In preparation of its Lending Challenge, the P2P investment aggregation provider Orca partnered with UK P2P Lending Knowledge Leaderboard and posted a quiz targeting investors and industry players to see how much people know about the P2P knowledge. Neither questions nor answers will be posted here to keep the quiz fair.

Orca has teamed up with Peer2Peer Finance News; all winners will receive a print subscription to the magazine. The top 3 quiz placers will win:

  • 1st place: £100 John Lewis voucher, P2P Finance News magazine subscription & Trophy
  • 2nd place: Amazon Echo Dot and P2P Finance News magazine subscription & Silver medal
  • 3rd place: Regency Hamper and P2P Finance News magazine subscription & Bronze medal
China

Chinese P2P Lending Platform Furongbao Receives $ 121M Strategic Investment (China Money Network) Rated: AAA

Chinese peer-to-peer lending platform Furongbao announced that it has received a RMB800 million (US$120.6 million) series B round, strategic investment from a controlling shareholder of Wanjiale Gas Appliances, a Chinese household appliances manufacturer.

Chinese P2P platform fails to pay back $ 15m (Global Times) Rated: A

A Hangzhou-based peer-to-peer (P2P) lending platform  has failed to pay around 100 million yuan ($15 million) back to its investors, media reports said on Thursday.

An investor surnamed Zheng who is based in Hangzhou, East China’s Zhejiang Province, told the Global Times on Thursday that he had invested about 50,000 yuan on niubangold.com, but now he cannot withdraw money from the platform. “[Investors] have reported the case to local police,” Zheng said.

According to a statement posted on niubangold.com late Tuesday, projects worth 98.5 million yuan are overdue.

DLA Piper Adds Beijing Partner From Shearman (The American Lawyer) Rated: B

DLA Piper has recruited capital markets partner Yang Ge in Beijing from Shearman & Sterling, where she was counsel.

Ge’s practice focuses on equity and debt securities offerings. During her time at Shearman, which she joined in 2011, she was involved in several Chinese companies’ initial public offerings in the U.S., including advising the underwriters on online lender LexinFintech Holdings Ltd.’s $124.2 million Nasdaq IPO earlier this year and online micro-lender China Rapid Finance Ltd.’s $60 million listing on the New York Stock Exchange last year.

European Union

Creditshelf Plans Initial Public Offering on Frankfurt Stock Exchange in Q3 (Crowdfund Insider) Rated: AAA

Creditshelf Aktiengesellschaft, a Germany based online lender, has announced its intent to do an initial public offering (IPO) on the Frankfurt Stock Exchange. The IPO is currently scheduled to take place for the third quarter of 2018. The offering is expected to be newly issued shares with a capital increase in the amount of around € 15-20 million. Creditshelf says that Hevella Capital GmbH & Co. KGaA (backed by Rolf Elgeti) has placed a backstop order of up to € 15 million if and to the extent the shares are not subscribed for by investors in the course of the offering.

Creditshelf is an online lender that targets the German marketplace providing access to capital for SMEs. The platform targets a larger ticket size than many other SME lenders with an average loan size of around €500,000 and €600,000 – and moving higher.

International

‘Dollars On The Floor’ — Why A Lack Of Local Payment Options Hurts Retailers (PYMNTS) Rated: AAA

As digital technology keeps bringing new efficiencies to transactions, and more consumers around the world turn to eCommerce for retail and other purchases, an accompanying trend is making life interesting for merchants and payment providers. Local payments options are increasing, resulting in a sector that promises to undergo more fragmentation in the coming years.

Scandinavian consumers have embraced Klarna and other pay-by-invoice services — for reasons not entirely understood by Booth and other analysts, it seems.

If a Chinese consumer trying to make an online purchase cannot do so through Alipay or WeChat Pay, that consumer is more likely to search for another merchant that takes that form of payment rather than, say, using their own UnionPay-branded payment card, Booth said.

Key Learnings at the Cambridge Centre for Alternative Finance 2018 Conference (Lend Academy) Rated: A

Greg Medcraft is the former head securities regulator in Australia and is now the Director of the Directorate for Financial and Enterprise Affairs of the OECD. He talked about trust and how trust in business is low today, particularly in finance. The power of the crowd is impacting trust where companies misdeeds are amplified and public opinion can turn against a company quite quickly. One of the antidotes to this is distributed ledger technology that can create networks with more trust, transparency and traceability.

Probably the country with the biggest success story when it comes to financial inclusion is Kenya. While I have heard the story of M-Pesa before I have never heard it from the person that was in charge of overseeing the economy as it was transforming Kenya. Professor Njuguna Ndung’u was the Governor of the Central Bank of Kenya from 2007 to 2015 during which time M-Pesa went from a curiosity to having half of the country’s GDP flowing through its platform. The introduction of such a system was a major challenge for central bankers as they worried about KYC concerns and financial instability.

India

PolicyBazaar.com Becomes First Indian Unicorn Foraying into Blockchain (BW Disrupt) Rated: AAA

Blockchain has been the talk of town primarily because of bitcoin and other crypto tokens’ parabolic rise in price and then the recent downfall. However the underlying technology, blockchain, rarely gets its fair share of limelight. But when a billion-dollar fintech startup plans a foray in this tech, it deserves attention.

In a chat with their CTO and CPO, Ashish Gupta, he revealed their plans to implement blockchain technology at PolicyBazaar.com, his outlook on the technology as well as how it could affect the fintech space in general.

Artha Venture Fund makes first close at Rs 40 crore (The Economic Times) Rated: A

Early stage venture capital firm Artha Venture Fund (AVF) has achieved the first close of its maiden fund having raised Rs 40 crore. Artha Venture Fund I, which received the approval of the Securities and Exchange Board of India in March this year, will have a corpus of Rs 200 crore along with a greenshoe option of Rs 100 crore.

The fund, which is structured as a Category I alternative investment fund, will invest in startups across seed, pre-series A and series-A levels of growth.

Lending platform BigWin Infotech gets NBFC-P2P certification from RBI (Media Nama) Rated: B

Fintech start-up, BigWin Infotech (PaisaDukan.com) has received its Certificate of Registration (CoR) from the Reserve Bank of India (RBI), paving the way for the launch of its Financial Platform – PaisaDukan.com, a release from the company said today.  Though the company received an in-principle approval from RBI to set up an NBFC Peer-to-Peer lending platform in May, the operations could only commence after the firm received a CoR from the central bank. The RBI issued those guidelines last October, to register and accredit P2P lending firms that resell loans from individuals who have money to invest.

P2P platform Monexo Fintech to raise $ 5 million in equity (The Economic Times) Rated: B

Armed with a licence from the banking regulator to operate an NBFC-cum-P2P lending platform, Monexo plans to invest in IT and infrastructure, which require continuous capital injection in the initial stages of any online marketplace.

The Mumbai-headquartered firm received the RBI licence last Friday.

Asia

Swindlers tarnish P2P loans’ reputation (Korea Joongang Daily) Rated: AAA

Korea’s peer-to-peer (P2P) lending market is turning out to be a Wild West of hucksters and frauds, and government regulations are nowhere in sight.

According to Crowd Institute, a research center that specializes in P2P financial markets, to date, about 3.65 trillion won ($3.2 billion) of P2P loans have been taken out in Korea, about five times the amount from two years ago.

Indonesia’s OVO platform to start peer-to-peer lending in Q4 – head (Nasdaq) Rated: B

Indonesian conglomerate Lippo Group’s payment platform OVO plans to start peer-to-peer lending in the fourth quarter of 2018, its head said on Thursday.

Authors:

George Popescu
Allen Taylor

Monday June 18 2018, Daily News Digest

funding circle

News Comments Today’s main news: Opendoor secures $325M in financing. RateSetter IFISA tops 100M GBP. China Rapid Finance’s earnings call slides. Alior Bank, solarisBank, Raisin, Mastercard partner on European digital bank. Harmoney to lend through its own platform. Amazon launches lending platform in India. Today’s main analysis: Rising interest rates and inflation. Today’s thought-provoking articles: Is P2P lending dying? The economic […]

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United States

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News Summary

United States

Opendoor now has $ 325 million more. SoftBank could come next. (Recode) Rated: AAA

Opendoor has already taken out $1.5 billion in loans for home buying. And the company now says it has accepted another $325 million in new financing that values it at more than $2 billion, according to a person familiar with the matter.

Opendoor will expand to 50 cities with the $325 million round. But SoftBank, with its huge $100 billion checkbook, could help Opendoor expand to even more as soon as later this year. The Japanese investor typically invests hundreds of millions of dollars into private companies, and that sort of check would be expected here, though some of the money tends to buy out existing investors.

Rising Rates and Inflation (PeerIQ), Rated: AAA

The Fed raised interest rates for the 2nd time in 2018 and the target Federal Funds Rate now stands at 1.75% – 2%. The committee indicated that it would raise rates twice more in 2018, a departure from the previous stance of 3 rate hikes in 2018.

The Fed summarizes member views using the “dot-plot”. The dot plot consolidates every committee member’s estimates of rates at the end of 2018, 2019, 2020 and the for long-term. The green line shows the median estimate indicating that most Fed members expect rates to be between 2.25% – 2.5% at the end of 2018, and between 3% – 3.25% at the end of 2019.

Source: Federal Reserve, Bloomberg
Source: Bloomberg, PeerIQ

Forward Rates – Where do we go from here?

Source: Bloomberg, PeerIQ

Braviant Holdings Announces $ 50 Million Credit Facility with Keystone National Group (PR Newswire) Rated: A

Braviant Holdings, a provider of tech-enabled credit solutions for underserved Americans, has entered into a $50 million senior secured credit facility with institutional investment firm Keystone National Group.

The Keystone debt facility allows Braviant to expand its newly launched near prime lending platform, Chorus Credit. Chorus is Braviant’s latest offering in support of the company’s mission to promote financial inclusion for 51 million adults considered underbanked by the FDIC. While the FDIC estimates that these adults make up 19.9% of U.S. households, data from the Fair Isaac Corporation, better known as FICO, suggests that 43% of U.S. consumers have below 700 credit scores. In the traditional banking sector, a lower than average FICO score severely limits access to credit for almost half of the nation’s population. Chorus aims to close the credit gap for middle America by offering $2,500 to $10,000 personal loans that are repaid in small, affordable installments.

Is P2PLending Dying? (P2P Lending Expert) Rated: AAA

Seriously. I’m asking. Is p2plending dying? Returns have sucked the last couple of years for all investors, but especially us retail investors since the 2015 and 2016 vintages have performed so poorly. My own returns are 400-500 basis points lower than my returns on my 2013 and 2014 vintage loans were and I know some colleagues and friends who have lost money on these investments.

But can the industry survive?

Source: P2P Lending Expert

How Will the Fed’s Interest Rate Hike Impact the Average Joe? (Dough Roller) Rated: A

On Wednesday, The Federal Reserve decided it was going to increase the federal funds rate by 25 basis points, from 1.75% to 2%. This is the second rate increase already this year. In March, new chairman Jerome Powell and the Fed increased the federal funds rate from 1.5% to 1.75%. The Fed also indicated that they’d be targeting two more increases this year alone.

As I said before, when the Fed increases rates, it usually means something is going well for the economy. And all signs are pointing to that being the case. Unemployment is currently at 3.8%. In the last 50 years, unemployment has only been this low two times. That’s significant, and it means that more people are finding jobs. It may also signify a strengthening job market for you. The Fed projects unemployment will drop to 3.6 percent by the end of the year, too.

Zelle is on track to be more popular than Venmo in 2018 (Business Insider) Rated: A

Zelle is a year-old service that lets you instantly transfer money to someone else, much like Venmo or Square Cash.

But Zelle differs from either service in a major way: because it was built by seven of the largest US banks, it’s often able to integrate more seamlessly with your bank’s mobile app. While other services make you wait a few days for the money you received from friends to show up in your bank account, Zelle can transfer the money almost instantly.

For those reasons, analysts at eMarketer expect Zelle to “leapfrog” other payments services before the end of the year.

Credit Union SMB Loan Approvals Hit Record Lows (PYMNTS) Rated: A

The latest data from the monthly Biz2Credit Small Business Lending Index suggests a slump in small business lending among U.S. credit unions.

press release issued on Wednesday (June 13) detailed the May Index’s latest findings, which found that large banks with more than $10 billion in assets are approving of nearly 30 percent of small business loan applications, a two-tenths of a percent increase from April levels. That figure is also a new high for post-recession big bank lending to small businesses.

Digital-only banks grapple with integrating ‘human’ interaction into their products (Tearsheet) Rated: A

Digital-only banks cater to younger customers who don’t want to talk to bankers at brick-and-mortar branches — or bother visiting a branch at all. Or so they think.

Recent customer surveys indicate otherwise, according to research findings released this month from Celent, commissioned by Samsung. It revealed that customers want some kind of human interaction for complex issues. The study found that about half of U.S. banking customers aged 18 to 44 said they banked digitally, but prefer to resolve some matters in-person. Overall, most customers surveyed preferred dealing with humans on matters like setting up financial goals or getting investment advice. To respond to fraud, a lost or stolen card, or identity theft, a majority of those surveyed across age categories preferred to phone the contact center or address it in a physical branch.

Source: Tearsheet

Real Estate Finance Is Changing, Thanks to ‘Fintech’ Startups (The Bridge) Rated: A

If your student loan debt is larger than your salary, investing in real estate might sound like a joke. But it’s doable, said Dave Conroy of the startup Meridio, a website in beta testing that lets users invest amounts of money that you might have in your wallet right now–even $20–into specific properties. Using blockchain technology keeps each transaction cost low, said Conroy, whose company is an offshoot of Bushwick-based ConsenSys, which is building myriad applications based on the Ethereum platform.

For investors, the service would reduce transactions costs and make a real-estate portfolio more liquid. For owners, it would unlock more capital and streamline transactions. While Meridio won’t provide market intelligence about properties to invest in, prospective investors can call on their own experience, says Conroy, who previously worked for the National Association of Realtors.

Why digital banking and robo advice are pairing up (Financial Planning) Rated: A

Banks and digital wealth startups are headed toward the same goal from different starting points.

Each side is increasingly seeking to package automated investment advice with checking because customers are expressing an interest in getting both services from one provider.

Fifth Third Bancorp’s securities unit teamed up with Fidelity recently to offer automated advice, while the microinvesting app Acorns rolled out a debit card called Spend and opened up 50,000 checking accounts in two days.

Wells Fargo simplifies payments pricing to compete with Square (Payments Source) Rated: A

Wells Fargo will simplify the prices it charges small businesses to accept credit and debit card transactions as the bank responds to pressure from startups such as Jack Dorsey’s Square Inc.

The changes, which are tailored for small businesses that process $100,000 a year or less, eliminate many of the complicated pricing policies that varied from client to client, according to Danny Peltz, who leads treasury management and merchant services at the company. Business customers will also be able to apply online for payment processing capabilities with Wells Fargo, Peltz said.

New Technologies and New Customer Experiences Drive Banking Today (Lend Academy) Rated: A

American Banker’s Penny Crosman sat with Cathy Bessant, Chief Operations and Technology Officer, Bank of America to discuss the bank’s use of AI.  She described how the bank has inventors all over the world in their distributed innovation model.

Peer to Peer Micro-Credit Site Puddle Shuts Down (Crowdfund Insider) Rated: A

Puddle, an online lender that provided micro-credit in a peer to peer platform, is shutting down.

In an email circulated by the company, Puddle founders stated that after five years of operation the businesses model was “unsustainable.”

RealtyMogul, Comunidad Realty Partners Sell Dallas Area Investment Property (Herald Courier) Rated: B

RealtyMogul, a pioneer in providing private real estate to discerning investors, announced that it has sold an investment property in partnership with Comunidad Realty Partners at greater than 1.5 times its purchase price.

The property, Lodge at Main, a 208-unit multifamily apartment complex in the Dallas/Fort Worth, Texas area was acquired in 2015.

California may force online business lenders to disclose rates (American Banker) Rated: AAA

A bill pending in California aims to tame the disorderly, confusing and largely unregulated world of online small-business lending by mandating that borrowers receive standard price disclosures.

The bill, which passed the Senate without a vote to spare and has failed to garner much support from either the online lending industry or its critics, still faces a tough fight in the state Assembly. But if the measure does get enacted in California, it could serve as a blueprint for other states.

The legislation tackles the question of whether commercial lenders should be required to disclose the price of financing in a way that enables borrowers to compare multiple offers. Just as nettlesome is the question of how any such comparison metric should be calculated.

Source: American Banker

The bill would apply to small businesses that borrow $500,000 or less.

United Kingdom

RateSetter Reports IFISA Tops £100 Million in Record Time (Crowdfund Insider) Rated: AAA

UK based peer-to-peer lender RateSetter is reporting that subscriptions to its IFISA have surpassed £100 million. This milestone took four months to reach and, according to RateSetter, faster than any other P2P lender. To date, RateSetter has originated over £2.5 billion in online loans to both businesses and individuals.  RateSetter states that more than 10,000 IFISA accounts have now been opened.  The average annual return received by investors stands at 4.4% with more than £100 million in interest having been paid.

Peer-to-peer lender Ratesetter to raise £30m as London float looms (City A.M.) Rated: A

Peer-to-peer lending business Ratesetter is working on a £30m fundraising which is expected to be a prelude to a London float.

According to Sky News Ra

tesetter is working with investment bank Lazard and broker Peel Hunt to raise £30m from investors.

The funding round would value Ratesetter at about £280m.

The fundraising is expected to be a precursor to a stock market flotation which could take place as early as next year.

THE ECONOMIC IMPACT OF LENDING THROUGH FUNDING CIRCLE (Funding Circle) Rated: AAA

In the UK, where Funding Circle has been established the longest, the platform is now competing directly with banks in the small business lending market – with net lending through the platform exceeding that of the entire UK banking system for two successive quarters at the end of 2017. A survey of Funding Circle’s customers undertaken for the study suggests 89 percent of the platform’s UK small business customers would approach
Funding Circle first again in future, rather than going to a bank.

Source: Funding Circle

Read the full report here.

Funding Circle CEO on the Fintech Frenzy in Europe (Yahoo Finance) Rated: A

How the big three shaped P2P (Peer2Peer Finance) Rated: AAA

ALTHOUGH we still tend to think of peer-to-peer lending as a young sector, it is now 13 years since Zopa became the first lender in the market. It was joined five years later by Funding Circle and RateSetter and since then the big three have dominated the P2P market.

Here are some of the key moments in their journeys.

London Block Exchange To Strike Deal With UK Bank (Crypto Daily) Rated: A

London Block Exchange, a UK based crypto provider is alleged to be pairing up with a new UK based bank, ClearBank.

If this news is indeed true, this will mark the first time a lender has struck a deal with a cryptocurrency-based entity.

The UK proves its tech chops, Google’s massive diversity gap and Brexit cause business tensions (Elite Business) Rated: A

Out of Europe’s 34 unicorns, the UK has produced 13. These have a combined value of $23bn, equal to 38% of the European total. This puts the UK ahead of Germany  and France, which have six and three scaleups valued over $1bn respectively. Given the nation has already spawned success stories like Deliveroo and Funding Circle, it’s hardly surprising that VC investment is also booming in the UK. Last year British startups raised $7.9bn compared to Germany’s $3.2bn and France‘s $2.8bn.

Brexit has made UK SMEs worry about talent

Having polled companies in 11 countries, researchers revealed that UK entrepreneurs were much less confident about the conscious uncoupling than those in the EU. Overall, 57% of respondents felt that their biggest challenge was that they had too little time and that they were doing everything themselves. This was double the 24% who thought hiring the right people were their biggest worry.

Alternative finance funds see mixed success (Peer2Peer Finance) Rated: A

Over the past year, P2P Global Investments (P2PGI), VPC Specialty Lending Investments and Ranger Direct Lending (RDL) have moved away from pure P2P to boost returns and narrow their discounts, while the Funding Circle SME Income Fund (FCIF) has remained true to its roots, all with varying outcomes.

The FCIF investment trust solely backs loans originated via the Funding Circle platform and saw its net asset value (NAV) return 6.9 per cent last year, while trading on a healthy premium.

In comparison, RDL – which has recently announced its intention to close – returned 5.4 per cent, VPC – which has shifted from P2P towards balance sheet lenders – saw its NAV total return grow by 3.07 per cent, while P2PGI – which last year merged its manager MW Eaglewood with Pollen Street Capital and is focusing more on asset-backed alternative lenders – reported a NAV return of 3.03 per cent during 2017. RDL and P2PGI are both trading at double-digit discounts to NAV.

Updated Crowd2Fund app includes IFISA management tools (Peer2Peer Finance) Rated: B

PEER-TO-PEER platform Crowd2Fund has relaunched its app to include Innovative Finance ISA (IFISA) management features via their smartphones.

Digital Challenger Redwood Bank Raises £9.8 Million (Crowdfund Insider) Rated: A

Redwood is targeting the SME market. Products include mortgages for business owners and professional landlords, as well as a range of savings accounts. Redwood seeks to offer British businesses fast, simple, transparent loans and savings accounts, coupled with superlative service. They also promise that money is being invested back into British business and into the communities they are a part of. Warrington Borough Council has a 33% stake in the firm that was pegged at £30 million.

BIS wants tighter rules for funds offering credit, fintech (Reuters) Rated: A

Regulations introduced after the financial crisis a decade ago to smooth out banking booms and busts should be extended to funds that provide credit, or shadow banks, and fintech firms, the Bank for International Settlements (BIS) said on Sunday.

The introduction of “macroprudential” policy requiring banks to build up separate “countercyclical” buffers of capital if credit markets become frothy was a core crisis-era innovation.

The buffers can be released if loans begin turning sour and maintain resilience of the financial system to shocks – a departure from the traditional “microprudential” focus on the stability of individual banks.

China

China Rapid Finance 2018 Q1 – Results – Earnings Call Slides (Seeking Alpha) Rated: AAA

Source: Seeking Alpha
Source: Seeking Alpha

Chinese P2P giant Lufax dodges valuation bullet (Nasdaq) Rated: A

Lufax is wisely trying to grow up in private. The Chinese financial technology giant, which focuses on peer-to-peer lending and wealth management, plans to raise more than $1 billion at a $40 billion valuation ahead of a delayed Hong Kong flotation, says Reuters. That makes sense. Listing now could upset Beijing, and might only be achievable at a discounted price. Abundant venture capital allows the Ping An-backed startup to keep growing without a distracting market debut.

European Union

Alior Bank, solarisBank, Raisin and Mastercard to unveil European digital bank (Fintech Futures) Rated: AAA

Poland’s Alior Bank has teamed with solarisBankRaisin and Mastercard to unleash a pan-European digital bank.

The new offering, which is planned to be launched in the fourth quarter of 2018, will be built on the “strengths of all partners”.

Alior Bank will deliver multicurrency accounts with international transfers and deposits.

solarisBank will add the banking infrastructure with its technological, compliance and regulatory framework.

Raisin through its network of partner banks, is adding various savings and investment possibilities to the offering.

N26 launches a revised metal card (Tech Crunch) Rated: A

Fintech startup N26 is updating its N26  Metal product and launching it tomorrow. You might remember that the company first announced its premium card at TechCrunch Disrupt Berlin in December 2017. Shortly after the conference, the card was available in early access for existing N26 Black customers.

But the company had to go back to the drawing board and update the card design. N26 Metal customers had some complaints about the design of the card in particular.

International

Fintechs are staring down the future of banking (Financial Post) Rated: A

For instance, U.S.-based Lending Club, which has been around since 2007 and which is public, has arranged US$35 billion in consumer loans for its two million borrowers. The average loan — and it originates about US$2.4 billion a quarter — is about US$14,000.

Those themes were on full display this week in Toronto at an event organized by the KiWi Private Credit Fund, which raises capital from investors and purchases unsecured consumer loans and secured small business loans originated by established U.S.-based lending marketplaces.

“But they are not good at pricing a 9 per cent or 12 per cent risk,” he added, all of which allows entities such as his, to meet that need. It has US$27 million in assets; an average loan of almost US$14,000 and targets a return in the six- to eight-per-cent range.

Australia/New Zealand

Harmoney is to begin lending money through its own online platform (Interest) Rated: AAA

Peer to peer lending facilitator Harmoney Corp is making a number of tweaks to its operation, which will include the ability to lend its own money through its own platform.

The company has also renamed its ‘platform fee’ – recently the subject of Commerce Commission court action – as an ‘establishment fee’ and dropped the fee by $50 to $450. The company has also tweaked some of its interest rates higher (see below tables).

Harmoney will now be operating two different markets within its platform; the existing P2P facility and a new ‘wholesale market’ operated through a new subsidiary Harmoney Nominee.

Australian regulator sues Westpac for staffer’s poor financial advice (Reuters) Rated: A

An Australian regulator filed a lawsuit against No. 2 lender Westpac Banking Corp (WBC.AX) over a financial planner it alleges gave poor advice for years, upping its scrutiny of a sector already under fire amid an embarrassing public inquiry.

Australia’s A$5 billion ($3.7 billion) financial planning sector has provided some of the most damning evidence at an inquiry into finance sector misconduct, ordered by the government after a string of banking scandals including fraud.

P2P lender cuts rates (Good Returns) Rated: A

Peer to peer lender Lending Crowd has cut its borrower interest rates for all new business and personal loan applications including vehicle purchases and debt consolidations.

A1 grade personal borrowers will have a market leading rate of 6.89% pa and SME businesses will have rates available from 7.98%. Interest rates across all loan grades will range from a low of 6.89%
to a high of 18.96% (previously 7.90% to 19.75%).

Parents giving $ 10k towards kid’s first car (Finder) Rated: A

Survey shows 60% of parents are giving kids $10,594 to buy their first car.

According to research conducted by RateSetter, parents are stumping up $10k to get their child their first set of wheels.

RateSetter found that among parents who bought their child a car, 15% chose a new model, 71% opted for a used one and 14% donated their own vehicle. The majority of families could afford a car under $10,000, while 26% spent between $10,000 and $20,000. A lucky 12% of kids were gifted over $20,000 towards their ride. Parents in Victoria spend the most on their child, up to $13,386. In NSW, the average outlay was $10,404.

India

P2P lending companies change tack in bid to become NBFCs (Business Standard) Rated: AAA

Peer-to-peer (P2P) lending companies are changing their business model as they migrate to becoming (NBFCs).

RBI had created a special category called NBFC-P2P, in view of the proliferation of entities. While mandating Rs 20 million as minimum net worth, RBI had also imposed a Rs 1-mn cap for individual lending on such platforms.

So far, a couple of these entities have got an NBFC licence from RBI. Faircent says it got the licence about 20 days earlier.

Amazon launches lending platform for sellers (The Economic Times) Rated: AAA

Amazon India has launched a platform for lenders and sellers wherein sellers can choose from competitive rates and loan offers. It will also open its APIs to lenders to plug in and lend to the sellers as part of the new programme, called the seller lending network.

India will be the first geography for Amazon where it has launched such a seller platform.

Fiscal 2015 World Bank Lending Report highlights India as one of the biggest Loan Beneficiary (Digital Journal) Rated: AAA

Fintechs offer loans to individuals with low credit scores as well. For instance, in the case of Qbera, individuals with a minimum credit score of 600 can qualify for personal finance. This is not quite so in the case of private banks – individuals need to have a minimum credit score of 750 to be eligible.

Aye Finance Secures $ 21.5M in Series C Funding (Finsmes) Rated: A

Aye Finance, a Gurgaon, India-based provider of financial services to micro and small businesses, secured $21.5m in Series C funding.

Backers included CapitalG, SAIF Partners and LFT.

The company intends to use the funds to accelerate business growth.

P2P lending: Can India replicate the UK experience to achieve Sabka Saath, Sabka Vikas? (Economic Times) Rated: A

India is still struggling with a huge credit gap that is holding back the economy. Getting a bank loan is an extremely cumbersome and long-drawn process for salaried individuals and small businesses, alike. According to a study conducted jointly by ASSOCHAM and EY, around 19% of India’s population remains unserved by the traditional banking sector.

Several million MSMEs that lack a tangible financial record are thus not eligible for credit from legacy financial institutions who still use traditional credit and financial data to evaluate eligibility. For the Indian economy to achieve the next level of growth, the current gap of nearly $200 billion in credit supply to MSMEs and significant under-banked population of India needs to be addressed immediately.

Asia

FSC reins in P2P firms (Korea Joongang Daily) Rated: AAA

In Korea, P2P firms, which directly connect borrowers with investors through online platforms, are not under the direct supervision or management of financial authorities. The Financial Services Commission (FSC) only indirectly supervises them by requiring registration of P2P firms’ lending subsidiaries, which most P2P firms use to carry out the process of lending money to borrowers.

But this safeguard also has many loopholes. TheHighOneFunding, for example, had uploaded the name of a different person as CEO when it registered its lending subsidiary with government regulators.

With more investors attracted to the idea of making easy money through high interest rates on P2P lending, the cumulative amount of loans on such platforms has dramatically increased, from 37.3 billion won in late 2015 to 3.50 trillion won as of May.

MENA

Where’s the money, honey? (Gulf News) Rated: AAA

According to the Khalifa Fund for Enterprise Development, nearly 50 to 70 per cent of loan applications made by SMEs in the UAE are declined by traditional banks, while loans to SMEs account for around four to five per cent of the outstanding bank credit in the UAE.

Enter peer-to-peer lending.

Over the years, such platforms have become big business: In 2016, the size of the peer-to-peer lending market in the US, UK, the European Union, Australia and New Zealand was estimated to be more than $72 billion, according to AltFi. In China, loan originations in 2015 were estimated at $101 billion.

Authors:

George Popescu
Allen Taylor

Thursday January 18 2018, Daily News Digest

mobile banking user growth

News Comments Today’s main news: Marcus passes the $2B loan origination mark. Varo Money secures $45M in Round B. Funding Circle’s fund announces Citibank deal. Qudian enters budget auto financing. PeerStreet intros 30-day notes. Today’s main analysis: Investing in Mintos’ secondary market. Today’s thought-provoking articles: Mobile banking is more important than ever. Credit score changes would force banks to help […]

mobile banking user growth

News Comments

United States

United Kingdom

China

International

India

APAC

News Summary

United States

Goldman Sachs’ Online Lending Platform Marcus Has Originated Over $ 2 Billion in Loans, Deposits Rise to Over $ 5 Billion (Crowdfund Insider), Rated: AAA

Meeting a prediction from this past June set by Goldman Sachs CEO Lloyd Blankfein, online lending platform Marcus topped $2 billion in loan originations. Additionally, Marcus reported online deposits of over $5 billion. Deposits and consumer lending have now been combined under a single brand, thus, in reality, creating a challenger bank for the future.

Overall, Goldman Sachs (NYSE:GS) reported net revenues of $32.07 billion and net earnings of $4.29 billion for the year ended December 31, 2017.

Diluted earnings per common share were $9.01 compared with $16.29 for the year ended December 31, 2016. Goldman reported a Q4 loss of $5.51 per share. The results were impacted by a tax related expense of $4.4 billion. Without this expense, Goldman said earnings per share would have been $5.68.

Varo Money Closes $ 45M Series B Financing Round (Varo Money Email), Rated: AAA

Mobile banking is more important than ever (Business Insider), Rated: AAA

As we’ve seen for the past few quarters, mobile banking is continuing to rise, but the rate of growth is decelerating as offerings mature.

  • JPMorgan Chase 

    How a 23-year-old Max Levchin got Peter Thiel to invest in PayPal in under 24 hours (Business Insider), Rated: A

    Levchin told Shontell, “I saw [Thiel’s] name on the pinboard, wandered into a class that was taught by him, which turned out to be more like seminar with six people in the room. So it was a very small group of people. One: I couldn’t sleep because it would be obvious, but two, he was actually pretty interesting. So I stayed awake and chatted him up afterwards.”

    That turned out to be a good move. Here’s Levchin:

    “In the inimitable Peter Thiel fashion, we basically spend about 20 minutes talking after his lecture, and he said, ‘Well, what are you doing in Silicon Valley?’ I said, ‘I just got here two weeks ago. Probably gonna start a company.’ He said, ‘Oh, great. We should meet for breakfast.’

    “We met the next day. He said, ‘All right, so what companies are you thinking of starting?’ I had two ideas that I was concurrently thinking about. I described No. 1., No. 2. He said, ‘No. 1 is better; you should do that.’ ‘OK.’ ‘I’d like to invest.’ It was less than 24 hours later. Peter was a committed investor in my new project.”

    Credit score changes would saddle banks with risk to help nonbanks (American Banker), Rated: AAA

    Recently, the Federal Housing Finance Agency has been evaluating whether to allow originators that sell loans to Fannie Mae and Freddie Mac to use something other than the currently mandated FICO model. Specifically, the FHFA is evaluating whether originators can also use the VantageScore model offered by a company owned by the three credit bureaus — Equifax, Experian and TransUnion.

    VantageScore contends that its model will provide credit scores on more than 30 million additional consumers and make 7.6 million of these scores eligible for a loan sold to Fannie or Freddie because of the model’s supposed ability to more accurately assess blemished and dormant credit histories and accommodate thin credit files that most often effect younger consumers. VantageScore also argues that, since the model consolidates data from all three credit bureaus, it eliminates scoring differences caused by data discrepancies. The result, the company maintains, will be expanded home ownership, a more vibrant housing market, more consistent underwriting and faster economic growth.

    The major proponents of the alternative credit scoring model are large nonbank originators and credit reporting firms — companies that make their living from the quantity of loans they originate, not the quality. Their business models shield them from ongoing credit risk and require ever-increasing volumes to achieve scale economies. In short, nonbank originators generally don’t eat their own cooking — either in the form of loans or in the form of securities backed by the loans they originate. Therefore, they have everything to gain from this FHFA change, and very little to lose.

    PeerStreet Announces New Investment Product “30-Day Notes” (Crowdfund Insider), Rated: AAA

    On Wednesday, PeerStreet announced the launch of its new investment product, 30-Day Note, to provide increased liquidity for accredited investors at 30-day terms. According to the online lender, the 30-Day Notes product was launched quietly in October as a pilot program, is now offered monthly.

    Axial Members Surpass $ 25 Billion in Closed Middle Market Deals (Axial Email), Rated: A

    Axial, the deal network for the middle market, today announced its members have closed more than $25 billion in deals on 2,000-plus M&A and growth capital transactions since Axial’s launch in 2010. To facilitate these closed transactions, Axial arranged more than 2.1 million private member-to-member deal connections. Nearly one-third (650) of the total transactions closed in 2017.

    In 2017, the revenues of businesses that privately transacted using the Axial deal network ranged from $2.9 million to $610 million, with EBITDA ranging from negative $19 million to $223 million. Top sectors of deal flow activity include Business Services, SaaS, Healthcare IT, Distribution & Logistics, and Manufacturing. Notably, 24% of all growth capital transactions attempted in 2017 were in the Technology sector, more than doubling year-over-year from 10% in 2016.

    Worthy Peer Capital Receives SEC Qualification for 5% Money Market Alternative (Worthy Financial Email), Rated: A

    Worthy Financial, Inc., a modern personal finance company that delivers alternative investment products and digital savings solutions to a wide-range of retail investors, is pleased to announce that its subsidiary Worthy Peer Capital, Inc. has been qualified by the U.S. Securities and Exchange Commission (SEC), under Regulation A+, to bring a new liquid peer-debt product to the entire investing ecosystem.

    The new Worthy Bond offers all investors – including non-accredited investors – a 5% fixed return. Although the bonds have a 36 month term, they can be cashed in at any time for those with imminent liquidity needs, thereby serving more as an alternative to traditional money market products. Bonds may be purchased at .

    Democrats Add Momentum to G.O.P. Push to Loosen Banking Rules (The New York Times), Rated: A

    But unlike the $1.5 trillion tax overhaul, which passed along party lines, the effort to loosen the post-crisis rules is somewhat bipartisan. A group of Senate Democrats has joined Republicans to support legislation that would mark the first major revision of the 2010 Dodd-Frank Act, a signature accomplishment of President Barack Obama that has been deemed “a disaster” by President Trump.

    The bill would allow hundreds of smaller banks to avoid certain elements of federal oversight, including stress tests, which measure a bank’s ability to withstand a severe economic downturn. Under current law, banks with assets of $50 billion or more are considered “systemically important financial institutions” and therefore governed by stricter rules. The bill would raise that threshold to institutions with assets of $250 billion or more, leaving fewer than 10 big banks in the United States subject to the stricter oversight.

    Banks with assets of $50 billion to $100 billion would be immediately freed from those requirements. Financial institutions with $100 billion to $250 billion in assets, such as BB&T and American Express, would no longer be subject to tougher rules after 18 months, although the Federal Reserve would retain the authority to periodically conduct stress tests on those firms.

     

    The One Big Reason It’s So Hard to Refinance Your Student Loans (Money), Rated: A

    More than half of borrowers who applied for refinancing in 2017 were turned down, according on a report released Wednesday by LendEDU, a student loan marketplace that tracked 32,000 applications to eight refinance companies.

    Using data from users of the LendEDU marketplace, the report found that 58% of 2017 refinance applicants were ultimately rejected. And those who passed muster had very high FICO credit scores—the average approved applicant had a score of 764. Nationally, the average credit scoreis 700 out of 850; anything above 720 qualifies as excellent.

    Refinancing companies are currently advertising fixed interest rates that start at about 3.5%. Yet the average on refinanced loans in 2017 was 5.56%, LendEDU found.

    Source: Money

    Bill Gates made these 15 predictions in 1999 — and it’s scary how accurate he was (Business Insider), Rated: A

    Gates’ prediction: “People will carry around small devices that allow them to constantly stay in touch and do electronic business from wherever they are. They will be able to check the news, see flights they have booked, get information from financial markets, and do just about anything else on these devices.”

    No. 3: Instant payments and financing online 

    Gates’ prediction: “Automated price comparison services will be developed, allowing people to see prices across multiple websites, making it effortless to find the cheapest product for all industries.”

    The Top Ten Fintech Predictions for 2018 (Crowdfund Insider), Rated: A

    10. Resurgence of Peer to Peer Lending and the Emergence of A New Asset Class

    We’ve seen coin-backed lending such as Salt Lending. There will be many more platforms that will attempt to solve solvency and liquidity issues with lending in fiat currency backed by coins.

    9. Alternative Internet

    The cost of a simple PayPal transaction might go up dramatically because it was routed through Comcast’s fiber. You may have to pay an additional $3.99 a month for an “Online Banking” package if you want to do online banking…

    8. Banks will rule again

    Most of the online platforms (payments or lending) plus secondary markets are at the mercy of banks. Without a bank charter, you are simply limited on growth.

    6. Baby Boomer Financial, Inc.

    The youngest baby boomers are approaching retirement age. The baby boomer generation is about 75 million people (on par with Millennials) in the US and represents a vast amount of wealth in this country. They want to transact, invest, bank and most importantly transfer their wealth in a responsible way. I predict that there will be Fintech startups specifically addressing the needs of this generation of folks.

    4. Mass Adoption of Zero Latency Payment Clearance/Credit.

    Over the past few decades, we went from a cash society and in-person / in-branch interviews to “same-day” ACH (direct deposit) and next day loan funding. I predict that in 2018, we will see instant credit approval and funding.

    3.  Social Networks Venture Into Credit.

    I am making another prediction that Facebook or Snapchat will venture into extending credit.

    2. Vertical Integration.

    WeWork will get into the Working Capital lending business. And dare I say Indeed, Monster, and LinkedIn, will start lending money based on your resume and activities within your professional connections?!

    BlackRock makes impact a necessity for companies (ImpactAlpha), Rated: A

    Larry Fink flips social impact from a luxury to a necessity for every company. The chief executive of BlackRock, the world’s largest asset manager with $6 trillion under management, served notice on corporate CEOs their companies “must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.” Fink made his point as clearly as possible: “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society.”

    Would a bank payday loan be any safer? (Daily Journal of Commerce), Rated: A

    Thanks to a recent regulatory change, it now may be possible for banks to offer small, short-term loans that could be a lot less dangerous for borrowers. Whether banks will actually do so remains to be seen.

    Standard Chartered creates fintech investment unit (Fintech Futures), Rated: B

    Standard Chartered has established a new business unit, SC Ventures, to invest in fintechs and other start-ups.

    Christopher Blake Joins Cross River Bank Loan Team (Long Island Press), Rated: B

    Veteran loan officer Christopher Blake joined Cross River Bank, where he’ll serve clients in Long Island, Queens and Brooklyn in the lender’s Commercial and Multi-Family Real Estate division, the company announced Tuesday.

    Freefly has teamed up with three fantastic financing partners (Freefly), Rated: B

    AFFIRM FINANCING

    Ideal for individuals looking to finance their Freefly purchases.

    SCL EQUIPMENT FINANCE

    A flexible lender designed for U.S. business, sole proprietors, and independent contractors.

    GLOBAL FINANCE

    A creative lender with options for businesses in the U.S. and many countries across the globe.

    United Kingdom

    Funding Circle’s fund unveils Citibank deal (P2P Finance News), Rated: AAA

    FUNDING Circle’s listed fund has inked a deal with Citibank, whereby the financial institution indirectly channels £50m to small businesses through the peer-to-peer lending platform.

    The transaction was announced by the Funding Circle SME Income Fund (FCIF) on Wednesday.

    Under a rather complicated structured finance deal, Citibank’s London branch will advance a senior, floating rate loan of £50m through two Irish special purpose vehicles. The facility matures in December 2026.

    Funding Circle SME Income Fund Limited (London South East), Rated: A

    The Board is pleased to announce that the Company has entered into a formal agreement with Citibank, N.A. London Branch (“Citibank London”) to establish a funding transaction to make loans to ?UK small businesses through the Funding Circle platform?. The transaction will serve to support the Company’s target dividend yield of 6-7% per annum.

    Under the terms of the agreement Citibank London will provide �50 million of funding into the transaction, by entering into a senior, floating rate loan. The Company will contribute a portfolio of existing UK small business loans at par, and in return shall receive ?approximately �50 million of cash to be deployed in accordance with its investment policy, and junior notes.

    Fintech firms struggling to get a foothold with established lenders (The Irish Times), Rated: A

    Banks and other financial institutions remain extremely wary of working with fintech firms, particularly in Ireland where few are willing to give start-ups the endorsement they need to help secure business elsewhere.

    Andrew Patrick White, founder and chief executive of FundApps, a regtech firm that provides compliance and regulation monitoring services to asset managers and hedge funds, said many financial institutions were afraid of fintech solutions because of a fear that they would be used to replace staff.

    “Your grandmother probably has more sophisticated apps on her iPad than many banks have inhouse,” Mr White added.

    Your morning briefing (PaymentsSource), Rated: A

    ‘All-in-one’ cards get another shotCurve has debuted a card in the U.K. that allows consumers to switch a card used to fund a payment after they have left the store. Through the card’s “back in time” feature, card preferences can be changed for up to two weeks, a system the company is selling as a financial management tool. Curve, which is being offered for free with a $60 premium option with more rewards, works like a regular card and is usable anyplace that accepts Mastercard. While all-in-one cards have struggled to gain traction over the years, more than 100,000 people signed up during the card’s testing phase and spent more than $120 million, according to a release.

    OnePlus’ fraud hit: Electronic equipment company OnePlus became the latest to get hit with card fraud, with consumers reporting unauthorized transactions and the company disabling credit card payments but still allowing PayPal transactions. The company is doing a complete audit of its systems and is looking for alternative payment options.

    When we asked, which, if any, Isas have you used over the 2017/18 tax year, nearly a third (32%) said they’d only used a Stocks and Shares Isa.

    This was followed by nearly a quarter (24%) who’ve only used a Cash Isa, and 17% who use a mixture of different Isas.

    This decline in Cash Isa savings is likely to be attributed to poor cash savings rates and the introduction of the personal savings allowance in April 2017.

    Interestingly, Innovative Finance Isas – used for peer-to-peer lending – don’t appear to have taken off, with just 3% of those who voted in our poll only using this savings vehicle.

    Source: Moneywise

    Name Change for Funding Knight as GLI Finance Updates to Sancus Funding (Crowdfund Insider), Rated: B

    As part of an ongoing strategic update, GLI Finance has renamed peer to peer lending platform FundingKnight to Sancus Funding Limited with immediate effect. GLI Finance, an AIM listed company, has also transferred ownership to Sancus BMS Group Limited.

    China

    Qudian is Moving into Budget Auto Financing (CapitalWatch), Rated: AAA

    The newly listed peer-to-peer lending company in China, Qudian (NYSE: QD), has moved into auto-purchase financing, a new business initiative called “Dabai Auto,” according to the company.

    Launched in late November 2017, Dabai Auto is currently targeting Qudian’s existing high quality users, who have been approved with credit lines, but have not actively transacted in small cash installments. The company also announced that it plans to spend around RMB 100 million ($15.5 million) to promote Dabai Auto through online and offline channels. The offline channels would include Qudian user engagement and delivery centers that are located in the shopping districts of over 100 cities across China.

    HNA-owned P2P lending platform doing business normally, executive says (Global Times), Rated: A

    Payments of investment products on jbh.com, an online peer-to-peer (P2P) platform owned by HNA Group, remain normal and there have not been any capital losses since the platform was set up three years ago, an executive of the company said on Wednesday.

    Payments for all maturing investment products on jbh.com are being made as normal, sina.com.cn reported Wednesday, citing Xia Aobi, president of jbh.com.

    International

    Funding Circle and Lufax: Two High Profile IPOs for 2018 (Lend Academy), Rated: AAA

    Neither IPO is a surprise as both companies have indicated their intentions before. But we now have a clearer indication on the timing. First off the rank will likely be Lufax. The South China Morning Post reported that Lufax is planning to do their IPO in Hong Kong in April at a possible valuation of US$60 billion. This would be more than three times the valuation of their previous funding round in 2016.

    The Funding Circle news actually broke just before the New Year with this article from Sky News. They reported that the company was preparing to hire advisors in the first steps towards an IPO. They are supposedly going to interview investment bankers this quarter with a possible listing in London in late fall which would put us in the latter part of the third quarter.

    A successful Funding Circle IPO, one where the valuation rises after it goes public will be very good for the marketplace lending industry in both the UK and the US. We have had little good news here in the last couple of years when it comes to the public markets and I would very much like to see a success story here.

    Investing on the Mintos Secondary Market – Hint One (P2P-Banking), Rated: AAA

    On the Mintos p2p lending marketplace the majority of investors invest on the primary market into loans, either manually or via autoinvest. But for the 29% of investors that do invest on the secondary market picking loans presents them with a huge choice of about 125,000 offers (no typo, really 125K loan parts on offer!).

    Source: P2P-Banking

    For the shown loans there is a very high probability that they will miss the payment and therefore run an additional 60 days until they are repaid under the buyback guarantee. If that happens the remaining actual loan duration would be 62 or 63 days and the impact of the 0.1% discount on the YTM would be much smaller. The resulting YTM would be somewhere around 11 to 13%. So they would not be a good buy and there are much better offers on the secondary market.

    Source: P2P-Banking

    With two weeks remaining the effective YTM for a buyer is not 36% but rather around 12%. Again there are offers with better YTMs on the secondary market.

    Chinese tech groups undermine banks’ dominance of finance (Financial Times), Rated: AAA

    The recent refusal by US regulators to sign off on Ant Financial’s $1.2bn acquisition of Dallas-based money transfer firm MoneyGram International does not signal the end of the Alibaba-affiliated payments group’s US financial ambitions.

    On one level, the scuppered deal suggests that Chinese companies, whether state-owned or otherwise, will have an ever harder time winning approval for US acquisitions. The move also confirms that the Americans now believe that the definition of national security — their basis for scrutinising overseas deals — embraces anything related to information and data.

    But Ant Financial’s attempted US play also shows how much technology is undermining the dominance of traditional global titans, especially in the financial sphere. It is especially noteworthy that many of the upstart challengers to banks and other legacy companies increasingly either have a Chinese face or Chinese capital behind them. That, in turn, underscores how some Chinese players have leapfrogged into prominence across the world.

    Blockchain is revolutionizing the loan industry – a look at Valorem… (Global Crypto Press), Rated: A

    Smart contracts are providing the solution to the trust issues that are usually the main concerns in the micro loan industry.  Whether it be student loans, cars, or any other kind of micro lending – blockchain technology provides what’s needed to move away from the banks, and towards a peer to peer lending model.

    Volerem Foundation is building the infrastructure to facilitate exactly this.

    India

    Govt should think of new ways to boost sectors like P2P lending: LenDenClub (India Info Online), Rated: A

    Additionally, we also expect the government should think of new ways to boost sectors like P2P lending. Eg.- Enable tax exemption for the lenders on P2P lending platforms, under section 80C. This will result in raising the trust bar and credibility, leading to more and more people investing in such platforms. It will also bring in a good enough capital infusion in the P2P lending space.

    Introducing Syndicates for India (Angel.co), Rated: A

    Today, we are announcing Syndicates for India, a new way for investors in India to invest alongside experienced angels and VC funds that invest in India’s vibrant tech ecosystem.

    To date, over 1,800 startups have raised more than $700M through Syndicates on the AngelList platform, receiving more than $6B in follow-on funding.

    APAC

    Gov’t urged to increase ceiling for individual investment in P2P lenders (Yonhap News Agency), Rated: AAA

    A business lobby of peer to peer (P2P) finance firms said Thursday it has asked financial regulators to raise the annual ceiling on individual investment in P2P lenders.

    The Korea P2P Finance Association has asked the Financial Services Commission (FSC) to increase the limit to 100 million won (US$93,632) per year from the current 10 million won, an association official said.

    ZorroSign Among Top 25 FinTech Companies (PR Newswire), Rated: B

    ZorroSign, Inc., today announced the company has been recognized among the top 25 FinTech companies in Asia-Pacific (APAC) by CIO Outlook. The honor spotlights organizations that are fundamentally disrupting the way companies in the global finance sector do business. ZorroSign offers unique secure eSignature, end-to-end Digital Transaction Management, and post-execution fraud protection solution. With security being on top of mind for financial services providers, ZorroSign Document 4n6 (Forensics) Token technology offers a major advantage to its customers.

    Authors:

    George Popescu
    Allen Taylor

Wednesday August 9 2017, Daily News Digest

SoFi mortgages

News Comments Today’s main news: U.S. credit-card debt hits new record. LendingClub raises its outlook. OnDeck shares rise 17%. Zopa’s disappearing capital from IFISA. Ping An to invest in AI. Blackstone assumes majority stake in Banco Popular’s real estate portfolio. Securities and Exchange Board of India to study impact of fintech on financial markets. Today’s main analysis: SoFi bank charter could […]

SoFi mortgages

News Comments

United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

CARICOM

News Summary

United States

U.S. Credit-Card Debt Surpasses Record Set at Brink of Crisis (Bloomberg), Rated: AAA

U.S. consumer credit-card debt just passed an ominous milestone, beating a record set just before the global financial system almost collapsed in 2008.

Outstanding card loans reached $1.02 trillion in June, data from the Federal Reserve show, as lenders including Citigroup Inc. and JPMorgan Chase & Co. compete to sign up cardholders who may carry balances — a relatively lucrative business in a prolonged period of low interest rates.

 

The tide may be turning for LendingClub (LC) (Markets Insider), Rated: AAA

LendingClub on Monday posted its second highest quarterly revenues in its history. And Wall Street has responded.

Net revenue spiked 35% to $139.6 million in the second quarter, beating Wall Street’s average estimate of $136.4 million, according to Thomson Reuters.

Loan originations were up 10%.

Credit Suisse sent out a note to clients Tuesday morning outlining its case for a 25% boost in LendingClub’s stock price.

Lending Club Beats The Street And Raises Its Outlook (PYMNTS), Rated: AAA

By the numbers, the performance was also in line with what investors wanted to see — revenue was up 35 percent to $139.6 million during Q2, a solid beat on the analysts’ consensus estimate of $136.4 million. Originations returned to growth in the second quarter, up 10 percent to $2.15 billion. Meanwhile, operating expenses fell by 12.5 percent to $165.1 million in the quarter.

Revenue for the year — on the strength of that big performance — got an upward revision to the range of $585 million to $600 million, a reasonable pick-up on the previous forecast of $575 million to $595 million.

Has Lending Club Reached A Turning Point? (Benzinga), Rated: AAA

Following a beat-and-raise quarter from LendingClub Corp LC, analysts surmised the company may have reached an inflection point.

Credit Suisse analysts Stephen Ju and Christopher Ford noted this is the first quarter in about a year in which the company reported year-over-year growth in loan originations. The analysts expect ongoing acceleration throughout the next four quarters, as the company continues to recover.

Canaccord Genuity expects originations to grow sequentially in the third quarter or fourth quarter, aiding revenue growth acceleration in the second half of 2017 and notable sequential margin expansion.

The firm maintains its 2017 earnings per share estimate at 3 cents but nudged up its 2018 earnings per share estimate from 19 cents to 20 cents.

OnDeck shares rise on sunny outlook for loan growth, profitability (Reuters), Rated: AAA

Shares of OnDeck Capital Inc (ONDK.N) rose as much as 17 percent on Monday after the online lender said it had made progress on a plan to cut costs and improve the credit profile of its borrowers, and expects to reach double-digit loan growth again by next year.

SoFi Bank charter could test CRA status quo (Market Intelligence), Rated: AAA

Social Finance Inc., or SoFi, on June 6 applied for a bank charter with the Federal Deposit Insurance Corp.

S&P Global Market Intelligence research shows SoFi originated 1,160 mortgages in 2016, with only two of those mortgages, or 0.2%, made in distressed or underserved tracts, a CRA measure. Across the U.S., 2.0% of all mortgages were in underserved areas that year.

Of the $8 billion in total loans that SoFi said it originated in 2016, about $810 million were property loans, according to S&P Global Market Intelligence data. None of the mortgages issued by the parent company were in SoFi Bank’s proposed CRA assessment area of Salt Lake City and nearby areas.

Fewer than 1.00% of SoFi’s consumer loans are made to borrowers in Utah, according to reports for the company’s asset-backed securities issued in 2015, 2016 and 2017. The securitization documents cover $4.6 billion in principal loan balances.

SoFi’s CRA strategy will revolve around financial literacy, education and scholarships, according to its application. SoFi stated it will measure the success of its CRA plan in terms of employee hours devoted to community service, the number of scholarships awarded and the percent of its investment pool that goes into Utah Housing Bonds.

The 10 Biggest Fintech Companies In America (Forbes), Rated: AAA

Financial technology companies in the U.S. raised $3.5 billion in the first half of 2017, according to KPMG, as investors rushed to place bets in buzzy sectors like insurance and digital currencies.

The U.S. is now home to 13 fintech unicorns who have scored valuations of at least $1 billion.

  1. Stripe – Value: $9.2 billion
  2. SoFi – Value: $4.3 billion
  3. GreenSky  Value: $3.6 billion
  4. Credit Karma  Value: $3.5 billion
  5. Oscar  Value: $2.7 billion
  6. Avant  Value: $2 billion
  7. Zenefits Value: $2 billion
  8. Prosper  Value: $1.9 billion
  9. AvidXchange  Value: $1.4 billion
  10. Robinhood  Value: $1.3 billion

Betterment Introduces New Features And Pricing Plans (Forbes), Rated: A

Betterment’s three new features went live in late July. The features are:

  • Financial Advice Via App: Through Betterment’s mobile app, clients can now message a licensed financial expert. Experts can answer questions like how to set goals, which tax features to use, and how much risk to take in investing.
  • Socially Responsible Investing (SRI) Portfolio Options: These options give customers a way to invest in a globally diversified portfolio of companies considered socially responsible.
  • Combining Plus and Premium Plans: Betterment is now combining its Plus and Premium plans, which allow customers to now make unlimited phone calls to certified financial professionals. The new, combined plan charges a .4% annual fee.

The first feature, the ability to get financial advice through an app, attempts to address a big issue with robo advisors. Many investors want a human touch. They want to talk to an advisor from time to time. This will no doubt be true during the next bear market. Betterment’s new feature attempts to address this need.

The new pricing plan will benefit investors who were already using the higher-level Betterment plans. Those who were Plus customers can now get more personalized advice for the same fee and those who were Premium customers are paying less for the same service–always a good thing.

The Premium plan now gives customers access to more holistic investing advice. This advice can run the full scope of your investments, from your 401(k) to real estate to individual stocks to your Betterment portfolio.

Fed study finds expanded credit access resulting from fintech lending (Ballard Spahr), Rated: A

The study’s key findings include:

  • The fintech lender’s consumer lending activities penetrated into areas that could benefit from additional credit supply, such as areas that have lost a disproportionate number of bank branches and highly concentrated banking markets.
  • Consumers presenting the same credit risk could obtain credit at lower rates through the fintech lender than through traditional credit cards offered by banks.
  • The lender’s use of alternative credit data allowed consumers with few or inaccurate credit records (based on FICO scores) to access credit at lower prices, thereby resulting in enhanced financial inclusion.

SMARTPHONES MAY BECOME SMART ATM’S WITH NEAR FIELD COMMUNICATION (Fintech Today), Rated: A

You may no longer need to worry about carrying your ATM card with you everywhere as long as your bank’s ATM and smartphone are equipped with near field communication technology (NFC). NFC, a method of wireless data transfer that detects and enables technology to communicate, is reportedly being rolled out at banks across the country. Financial institutions believe that cardless or “Smart ATM’s” are the wave of the future and they are enabled as long as ATM’s and customers have a smartphone or mobile device equipped with NFC.

It’s been estimated that 2.2 billion smartphones will be equipped with NFC by 2020.

Robos, digital platforms and human financial advice: What investors really want (Investment News), Rated: A

The emergence of robo-advice and robo-investing platforms in recent years has led many traditional advisory firms to place a greater emphasis on their digital footprints. A growing number, in fact, are moving to offer digital versions of their “human” services. The 2017 InvestmentNews Adviser Technology Study, for example, showed that 7% of independent advisory firms offered a robo-advice option at the end of 2016, compared with just 3% two years earlier. At the same time, 19% of the firms that do not offer a robo-advice option intend to introduce one in 2017—nearly double the number that indicated that intention in 2015.

Only about 4% of the mass affluent and high-net-worth individuals in our survey reported that they use an automated investing or robo-advice tool.

Source: Investment News

For context, some 49% of individuals in our study currently use a financial adviser; the balance are self-directed investors.

Online Lender Better Mortgage Now Available in 13 States as it Expands into Florida (Crowdfund Insider), Rated: A

Better Mortgage is now available in 13 different states as it has received a license to lend to house hunters in Florida.  The Sunshine state is an important addition to the online lenders services as Florida is a popular vacation home state.

Better Mortgage says it is continuing to expand its footprint in the US. The lender is now available and improving access to homeownership in 13 markets including; Arizona, California, Colorado, Connecticut, Washington, DC, Florida, Georgia, Illinois, New Jersey, North Carolina, Oregon, Pennsylvania and Washington. Better Mortgage says that it is seeing particularly strong uptake in Seattle, Washington, San Francisco, California, and Washington, D.C.

Real Estate Crowdfunding Platforms: What to Look For (Equities.com), Rated: A

While each offers a unique focus and value proposition to investors, platforms have now consolidated into several main categories of business model:

  • eREITs: Fundrise and RealtyMogul, two of the original players the real estate crowdfunding space, have pivoted to offering semi-blind funds that aggregate properties throughout the country.
  • Commercial equity investing: probably the closest to the original ideal of real estate crowdfunding, these platforms offer CRE equity opportunities to accredited investors, allowing them to participate in high-upside, larger commercial projects. While the return potential is often great, these tend to be the longer term and riskier than other RECF investments.
  • Debt investing: Some platforms take some or all of an existing real estate loan, secured by a deed on the underlying property, and syndicate it out to a network of individual investors at a fixed rate of return.

Some platforms (like EquityMultiple, see below) perform their own diligence on investments, which should give you some comfort as an investor. Even so, you’ll want to understand some key components of any deal you consider, and be sure it aligns with your investing objectives before pulling the trigger. Here are some of the main things to consider:

  • Risk Factors – Examples of risk factors are tight construction timelines, a precarious labor market in the area, an unsubstantial track record or aggressive leverage on the part of the Sponsor who originated the deal.
  • Payout Structure – Be sure to understand where your investments fits in the capital stack, and what order you will be repaid principal and profits relative to the Sponsor and other LP investors.
  • Cash Flow and Liquidity – Simply looking at how many dollars you’re expected to receive over the lifetime of a deal (the simple return) or even a time-weighted return (IRR – internal rate of return), won’t give a complete picture of the timing and magnitude of returns.

Developer of Vacant Lots in New Orleans Has Crowdfunding Success (Next City), Rated: A

Small Change, a real estate crowdfunding portal, recently completed the sale of its first-ever offering open to all investors — and raised $95,000. Thirty-nine investors put in an average of $2,435. The minimum investment was $500. The money will help OJT (Office of Jonathan Tate), a New Orleans-based developer, finance the construction of two affordable single-family homes, on vacant lots.

The homes will be in New Orleans’ Milan neighborhood, which is two-thirds black and one-third white, and has a median income around $33,000.

Mixing technology and old fashioned salesmanship, Voya expands (Financial-Planning.com), Rated: A

So it has to move beyond the perception that it is a singular service provider, says Voya Financial Advisors’s Tom Halloran, president of its broker-dealer. One way the firm is doing that is by tying together its institutional businesses with retail, mixing technological innovation with old fashioned salesmanship, even considering the deployment of a robo advice platform.

A former Microsoft and Yahoo exec explains how treating your job like a report card can help you get a raise (Business Insider), Rated: B

In fact, it’s up to you to track your performance and ensure that your compensation reflects it, said Joanne Bradford, chief marketing officer of online lender SoFi, on a recent episode of the “So Money” podcast.

Clark County Common Pleas Court cases (Springfield News-Sun), Rated: B

Velocity Investments, LLC, assignee of Lending Club Corp., v. Joshua R. Hawk, judgment for $17,947.

United Kingdom

Investors remark on “disappearing capital” from Zopa IFISA due to IT glitch (P2P Finance News), Rated: AAA

SEVERAL lenders who invested through Zopa’s Innovative Finance ISA (IFISA) have complained that small amounts of money were disappearing from their account.

The issue occurred when funds were invested in the ISA Plus product and appeared to be missing capital rather than negative interest, investors on the P2P Independent Forum said.

Zopa is understood to be rectifying the technical issue.

Report proposes new ways to get people investing (AltFi), Rated: AAA

A new report on savings and investment suggests that savers are missing out on billions of pounds by spurning investment opportunities, including peer-to-peer lending. The report is supported by RateSetter, one of the UK’s largest P2P operators, and was produced by the Social Market Foundation think tank.

The report found that savers are holding more than £200bn in cash above and beyond what is referred to as the “rainy day” level. “Rainy day” funds – which are held in cash in case of emergency – are defined by the report as three months’ worth of income. The Social Market Foundation says that this idle pot of £200bn could have generated returns of £94bn over the past five years, had it been invested in the FTSE 100, or £40bn, if invested via P2P lending.

Ranger Direct Lending fund’s woes continue (AltFi), Rated: A

The £240m Ranger Direct Lending fund was announced its latest dividend of 24.26 pence per ordinary share for the 3-month period to 30 June 2017, its lowest in more than a year.

Its latest numbers show returns were again comparable to the last few months. This was due to a combination of expenses such as legal fees and higher than expected cash levels. In 2017, excluding the estimated dividend mentioned above, a total of 55.44 pence per share has been paid in dividends to ordinary shareholders. In 2016, a total of 89.61 pence per share was paid in dividends to ordinary shareholders.

 

Octopus the latest firm to offer the peer-to-peer Innovative Finance Isa, promises investors interest before Octopus (City A.M.), Rated: A

Investment firm Octopus seems to have its tentacles in all the pies, as it has today become the latest business to offer an Innovative Finance Isa.

Octopus is also aiming to dismiss the risks associated with peer-to-peer lending by contributing five per cent of every loan from its own pocket. Any losses suffered will come out of this sum first, meaning investors can get their initial investment back plus any interest due to them before Octopus earns anything.

Investors will be able to put as little as £10 in the tax-free product, and up to their annual Isa allowance which currently stands at £20,000.

ThinCats Receives Full Authorization By the Financial Conduct Authority (Crowdfund Insider), Rated: A

ThinCats, an alternative lending industry leader, announced on Tuesday it has received full authorization by the Financial Conduct Authority (FCA). According to the online lender, the approval highlights its commitment to protecting consumers and also developing the alternative finance industry as a vital source of capital for businesses and income for investors.

China

With $ 1b war chest, Ping An set to become AI innovation giant (China Daily), Rated: AAA

Chinese financial giant Ping An Insurance (Group) Co will spend more than 7.77 billion yuan ($1.16 billion) on technology research and development this year, and artificial intelligence will be the focus of that R&D, according to a senior executive of the company.

Established in 2008, Ping An Technology has about 4,000 technology workers and has paid attention to R&D in cognition, robot advisory and cloud businesses. Their applications are mainly used in finance and healthcare industries; up to now, there have been more than 200 application scenarios.

Micro-bank micro-credit balance of over 100 billion, has launched the enterprise loan products “micro-credit” (01Caijing), Rated: A

On the evening of August 7, the public bankers issued a friend said that the balance of micro-loan loans over 100 billion. According to the public bank in 2016 annual report, the balance of micro-loan loans 7 months increase of nearly 300%.

In addition, July 16, the public bank retail credit director Fang Zhenyu Lundi summit speech revealed that the balance of microfinance loans 76 billion yuan, which means that the balance of 72 days of microfluice increased by 24 billion yuan. At the same time, he also revealed that the daily loan loans to 150,000 pen, up to 20 to 300,000 pen, the daily repayment of the number of 200,000 pen, a single loan approval time is 0.3 seconds, almost real-time approval. In the allocation of talent, the public bank IT department staff accounted for 57%, background managers accounted for 6%, business and support staff accounted for 37%.

LangDi FinTech Conference in Shanghai. The Biggest Fintech Meetup In The World! (Crowdfund Insider), Rated: A

Last year, the conference had a massive showing of over 1,300 attendees. This year, the conference nearly doubled to 2,400 attendees. There was hardly any place to stand when Soul Htite of DianRong and Renaud Laplache of Upgrade took the main stage to talk about Fintech entrepreneurship.

Gopher Asset Management had investment associates in just about every session at the conference looking for the next investment opportunity. Gopher is a subsidiary of Noah Holding Limited (NOAH:NYSE), one of the biggest wealth management companies in China with a current market cap of USD $1.7 billion.

Galaxy Internet, another Chinese venture capital firm is actively seeking investment opportunities in the area of finance, ecommerce, payments and big data. 

Borrowell is owning the Canadian market in a big way. They just raised a $12 million round. Borrowell is helping Canadian’s to build credit starting with affordable loans. In a short amount of time, Borrowell has amassed over 300,000 borrowers and is looking to expand into other markets.

Jack Quigley, Founder and CEO of CrowdFundUp. He’s probably the hardest working man in Fintech. He’s constantly making deals and connecting dots. He’s 100% committed to China and recently moved to Shanghai and I think he’s not leaving until he brings home the trophy. I visited his office in Shanghai, overlooking a bustling city. CrowdFundUp will be China’s gateway into commercial real estate in Australia.

European Union

Blackstone to take majority stake in Banco Popular’s real estate portfolio (PE Hub Network), Rated: AAA

Banco Popular S.A. (‘Popular’) has today approved the sale of a majority stake in its real estate portfolio to Blackstone Real Estate Partners Europe V (‘Blackstone’). The agreement has been reached following a competitive process in which three international companies with long track records in the management of real estate assets presented offers. Blackstone was selected as the successful bidder after submitting the best offer in terms of both its value and management plan.

The agreement was confirmed after the European Union Directorate General for Competition today approved the acquisition of Popular by Banco Santander S.A. (‘Santander’) with no restrictions.

The transaction will involve the creation of a company to which Banco Popular will transfer assets with an aggregate gross book value of approximately €30 billion, as well as 100% of the share capital of Banco Popular’s real estate management company, Aliseda.

The valuation attributed to the Spanish assets of the business (e.g. properties, loans and tax assets, not including Aliseda) is approximately €10 billion. This is consistent with the valuation and provisions made by Santander during the acquisition of Popular and does not, therefore, result in any material capital gain or loss for Santander or Popular. The final valuation is subject to change depending on the assets remaining within the business at closure and following the integration of Aliseda.

Blackstone will own a majority 51% stake in the new company while also assuming management responsibilities, while Banco Popular will own the remaining 49% stake. As a result, the aforementioned assets will no longer be consolidated on Banco Popular’s balance sheet.

VC’s behind Zopa, Revolut, Transferwise & Clear Score confirmed for judging panel for PitchIt event (London Loves Business), Rated: A

Representatives from Venture Capitalists: Seedcamp, Blenheim Chalcot, CommerzVentures, and Balderton Capital will form the judging panel of experienced VCs from and around Europe.

Collectively, these four firms are some of the most active investors in the European fintech category and have played key roles in the success of several of the largest fintech successes in Europe.

Lithuania Seeks to Become Fintech Center as Bank of Lithuania Looks to Launch Regulatory Sandbox (Crowdfund Insider), Rated: B

Lithuania is the latest country joining the Fintech revolution by recognizing the importance of fostering a regulatory environment that is conducive to change and challenges established norms. The Bank of Lithuania is out with a statement regarding the launch of a sponsored Fintech Sandbox.

The following measures are will apply:

  • Relatively easy and low-cost authorization process: following submission of all necessary documents, it takes only 3 months for the Bank of Lithuania to take a decision on the issuance of an electronic money or payment institution license. In other EU countries, the process may take 12 months and more.
  • Access to the Bank of Lithuania payment infrastructure for non-banking sector companies planning to provide payment services, thus avoiding a middleman.
  • Newcomer program. The Bank of Lithuania applies a one-stop shop principle for meetings and consultations with potential financial market participants.
  • Specialized banking license. In order to establish a bank in Lithuania that would provide usual banking services, the lowest initial capital requirement in the entire euro area – EUR 1 million – is applied. This is five times less than the requirement applied to banks that provide the full range of services, including investment ones.
International

The Russian Connection (To Alt Lending Globally) (PYMNTS), Rated: AAA

ID Finance Co-Founders Boris Batine and Alexander Dunaev were far from newcomers to the world of finance when they started up their business in 2012. Long before founding a data science, credit scoring and digital finance company, the Russian-born and U.K.-educated entrepreneurs met while working abroad at Renaissance Capital and Deutsche Bank.

And so, in 2012, with only a few hundred thousand of their own dollars to get up and running, ID Finance launched in one of those underserved markets — their home market of Russia.

By 2015, the firm was profitable, and in 2016, it officially relocated it headquarters to Barcelona, Spain, one of three nations outside Russia ID Finance has expanded its efforts into — Belarus and Brazil being the other two.

These days, the firm originates 50,000 new loans a month — loans that it mostly finances off its own balance sheet, as opposed to selling them off on a marketplace. As of February of this year, the firm raised $50 million in debt from a consortium of banks to fund further expansion in South America.

A New $200 Million Fund

As ID Finance has expanded around the world — and partnered with various FIs — its founders realized that there are a host of small businesses that are simply being underdeveloped because they are almost invisible to investors.

Working with Elbrus Capital Fund Manager Yury Popov and asset management company Da Vinci Capital, the FinTech Credit Fund is being jointly offered as a $200 million debt finance fund aimed at FinTech companies focused on alt lending innovation. The funding from the credit fund, according to Batine, is aimed at helping up-and-coming FinTech lenders fund their own loans — and finance their loan portfolios.

“The alternative lending market is worth a potential $2 trillion, and we see a huge opportunity to back the billion dollar companies of tomorrow focused on digital lending,” Dunaev said.

How this social entrepreneur is bringing banks to the fingertips of the unbanked (Huffington Post), Rated: A

Humaniq was launched in 2016 with a vision to build a world where the unbanked and underbanked around the world also have access to the banking and financial transactions. An estimated 2 billion people can be brought under the umbrella of financial inclusion with Humaniq’s services.

Tell us more about Humaniq and the problem you solve?

Humaniq is on a mission to bring new mobile digital services and financial inclusion solutions to the 3.5 billion unbanked / under banked globally who have no access to the digital economy.

How does Humaniq work, especially with respect to privacy and security?

Humaniq offers a biometric blockchain app that can be used in any simple smartphone device.

The Humaniq LITE app is part of a broader humanitarian capitalism venture. Humaniq has a digital currency tied to it, known as HMQ.

Who’s your target audience and how exactly do you help?

We are working with emergent economies – where people live on USD$2.50 a day. Many of them do not have documentation and have had little or no education.

Our first big pilot will be in Ghana with local and international organisations, targeting 18 to 40-year-old low-income smartphone users and merchants in suburban areas including the capital city of Accra.

How did you acquire your first customer and how long did that take?

We did various test in India and Africa with previous test versions of our app. We are also working with Brazilian organizations.

With regards to funding, how did you fund your business? How hard was it and how much time did it take to acquire those funds?

Our business model has thrived on the P2P innovation and blockchain driven crypto economics. We built our model on the back of a crypto, Ethereum driven smart contract Initial Coin Offering(ICO).

Australia/New Zealand

New Zealand advice industry to be overhauled (Financial Standard), Rated: AAA

The New Zealand government is looking to remove the distinction between class and personal advice, as well as allow the provision of digital advice as it seeks to overhaul the country’s regulatory regime for financial advisers.

Unlike the FA Act, the new Bill enables the provision of more types of advice by being technology-neutral, lifting the existing restrictions around advice needing to be provided by a human adviser.

In turn, this allows for the provision of robo-advice and works to future-proof the legislation for technological developments. It also serves to increase the New Zealand population’s access to quality financial advice.

‘Non-bank’ status drives IOOF results (IFA.com.au), Rated: A

IOOF has credited the structure of its “non-bank-aligned” dealer groups and “open architecture” culture with a dramatic increase in revenue inflows from its financial advice business.

The results reflect a 131 per cent year-on-year increase in advice net inflows, according to a statement from IOOF, with $3.0 billion in total advice net inflows for the 2017 year.

India

SEBI Constitutes CFRT Committee To Study Impact Of Fintech On Financial Markets (Inc42), Rated: AAA

The Securities and Exchange Board of India (SEBI) has formed a Committee on Financial and Regulatory Technologies (CFRT) to examine ongoing and medium-term trends related to fintech in the securities and financial markets worldwide.

Thus, regulators are faced with the challenges as well as opportunities to evolve their functioning more effectively through the adoption of new technology solutions. It is in this context that the CFRT committee will help the SEBI deal with relevant risks and challenges.

The Committee would examine, deliberate and advise the SEBI on an ongoing basis on the following issues:

  • Recent and medium term trends (within next 5 years) in fintech developments in securities market worldwide.
  • Opportunities and challenges from new fintech solutions and its impact on Indian Securities Market.
  • Fintech solutions for further widening and deepening of Indian securities market.
  • Approach and framework for the regulatory sandbox in Indian market conditions to facilitate the adoption of fintech and promote financial innovations.
  • Preparing the Indian securities market and regulatory framework to adapt to new fintech solutions while promoting market integrity, market development, consumer protection and managing change, business models and market disruptions.
  • Assessing technological solutions for SEBI regulatory functions viz. information management and data mining, risk management including cyber security, intermediary supervision, consumer protection, etc., through the application of new technological solutions like applying distributed ledger technology, Big Data, data analytics, Artificial Intelligence, machine learning etc.
  • Technology capacity building by Indian securities market in general and SEBI in particular.

Start-up funding may come under SEBI lens (The Hindu), Rated: A

The Committee on Financial and Regulatory Technologies will, among other things, deliberate on financial technology solutions for “further widening and deepening of the Indian securities market” through traditional and alternative platforms, including peer to peer lending and equity crowd-funding.

While questioning the manner in which these entities help start-ups raise funds, the regulator has said that any violation would be “construed as organising an unrecognised stock exchange” and that SEBI would be “constrained to initiate action.”

Under the current legal framework, issue of shares to more than 200 persons constitutes a public issue and needs SEBI approval.

Rubique Appoints Vodafone Ex- M-Pesa CEO Suresh Sethi & Alexia Yannopoulos of Apis Partners as Directors (PR Newswire), Rated: A

Rubique, the one-stop online marketplace providing technology-enabled end-to-end solutions to financing needs of individuals & SMEs has announced the appointment of two directors- Suresh Sethi, EX-CEO & Managing Director of Vodafone M-Pesa and Alexia Yannopoulos Director at Apis Partners LLP.

Asia

CFTE is Helping MAS Assist ASEAN Finance Professionals Gain FinTech Skills (Cryptocoins News), Rated: AAA

The Centre for Finance, Technology and Entrepreneurship (CFTE) has revealed that it is setting up an international hub in Singapore designed to aid finance professionals gain the necessary skills in FinTech.

Working closely with the Monetary Authority of Singapore (MAS), CFTE has been formalizing plans to expand its education platform to the Association of Southeast Asian Nations (ASEAN), according to a report from FinTech Finance.

CFTE is to deliver courses that cover a range of areas in the finance industry. These include artificial intelligence, application programming interfaces (APIs), coding, blockchain, and RegTech. They will either be delivered online or via in-class training.

P2P lending growth slows in July (Yonhap News), Rated: AAA

South Korea’s peer-to-peer lending growth slowed in July after financial regulators asked lenders to tighten guidelines for individual investors, industry data showed Tuesday.

According to data compiled by the Korea P2P Financial Association, lending between peers grew by 104.7 billion won (US$93.1 million) in July to a cumulative 1.2 trillion won.

In comparison, P2P lending grew by 172.8 billion won in June.

P2P financing industry to absorb investors’ demands (Korea Herald), Rated: A

It is especially likely to absorb the investor cluster who, under the government’s new restrictive measures on real estate transactions, are swiftly turning away from banks and seeking for an alternative source of investment income, according to industry watchers.

In late May, the association enforced a set of guidelines, setting a 10 million won ceiling on the investment per business unit, responding to the government’s gesture to protect investors from potential dangers of the new investment platform.

INDONESIAN peer-to-peer (P2P) lending marketplace PT Amartha Mikro Fintek (Amartha) encourages and targets “millenials” to invest in micro-businesses and SMEs through the Amartha Short Movie Festival.

The Amartha Short Movie Festival is a competition divided into two categories which are short documentaries with the theme empowering micro-businesses and short fiction movies with online peer-to-peer lending as the theme. Applications are open from August 8 to October 9, 2017.

CARICOM

Vincentian Set to Launch the Region’s First Equity Crowdfuning Startup Company (St. Lucia Times), Rated: AAA

Global Domination Capital is set to be the regions’ first fintech startup company, offering equity crowdfunding and peer-to-peer lending solutions to the OECS countries and  the CARICOM member states. This includes Barbados, Jamaica, The Bahamas, Trinidad and Tobago and The Turks and Caicos Islands.

Global Domination Capital is expected go live and accept both new investors and borrowers to the platform by late September.

Authors:

George Popescu
Allen Taylor

Wednesday July 5 2017, Daily News Digest

abs market overview

News Comments Today’s main news: SoFi to shut down Zenbanx. Red Ventures to buy Bankrate website for $1.24B. BofE to get tough on consumer lending. UK P2P lending surpasses 10B GBP. China re-thinks social credit. Korean P2P lending passes 300B won. LendInvest out of P2P lending. Today’s main analysis: US ABS market overview. Traditional wealth management challenged by robo boom. Today’s thought-provoking […]

abs market overview

News Comments

United States

  • SoFi to shut down Zenbanx. GP:”We do not know the details of the acquisition but we assume part of the due diligence SoFi was aware of this issue and therefore they didn’t purchase Zenbank for their customers or services, but perhaps for their team and know how?”AT: “I suspected this would happen. If they have the technology and the talent, what else do they need?”
  • US ABS market overview. GP:”steady growth in all segments except maybe auto”
  • How the market pushed Realty Mogul out of residential fix and flips. GP:”I continue to believe that fix and flip is highly correlated with the economic cycle and if a company relies on it there will be years with no origination in that market at some point.”AT: “Markets, and market conditions, change. This looks like a smart move for Realty Mogul. A good rationale, at least.”
  • Ally Bank online savings APY increases to 1.15%. GP:”Goldman Sachs online Bank increased it, Ally increased it… perhaps the FED rate adjustment is having an impact or perhaps the competition for savings dollars is increasing. Or both.  “AT: “If consumers can get better savings interest rates at online banks, why wouldn’t they?”
  • Inside the arms race between banks and startups. AT: “Focuses on negatives for banks. Seems a bit one sided. I don’t believe banks are out of the picture just yet, but we will likely see a steady decline soon. The survivors will be those banks that adapt and adopt the technology of online lenders.”
  • LendingTree, LeadsCon unveil first $25K startup innovation spotlight.
  • Tide raises $14M. GP:”Congratulations!”
  • Lifshitz&Miller investigate LendingClub. GP:”All public companies have an ongoing litany of lawsuits as soon as their stock does something un-usual. This is normal life for a public company in the US.” AT: “I don’t understand why now, a full year after the Renaud Laplanche issues.”
  • Red Ventures to buy Bankrate website for $1.24B. GP:”This is big news, and an amazing valuation. There is money in customer acquisition for fintech.”
  • Goldman raises $1B for real estate fund. GP:”Goldman has been in the real estate funding business for long time. focused on large commercial properties. Perhaps a good usage of the savings capital from Goldman Sachs bank could be real estate crowdfunding as well in the same way as Marcus works for unsecured personal lending? $1B for Goldman is not much money, this is not big news anyway. “
  • Suretly launched initial chocolate offering. GP:”Very amusing, but looks a little desperate.”

United Kingdom

China

European Union

Australia/New Zealand

India

Asia

News Summary

United States

Six months after acquisition, SoFi is shutting down Zenbanx (TechCrunch), Rated: AAA

Online lending company SoFi is closing down Zenbanx, the online banking provider it bought earlier this year. In an email sent to Zenbanx customers, the company announced that it will close all accounts at the end of next month.

According to a SoFi spokesperson, Zenbanx had a partnership with Wilmington Savings Fund Society (WSFS) that expired this month and, rather than renew it or find another partner, the company decided to just close existing accounts.

US ABS Market Overview (Finsight.com), Rated: AAA

Recent New Issue

The Market Pushed Us Out of Residential Fix and Flip (Realty Mogul), Rated: AAA

If you are like many investors, you loved our residential loan product. Short term investments with high yield (9-12%) and monthly distributions, what’s not to love? And as much as our investors love them, you will no longer find them on RealtyMogul.com. We stopped originating them.

The purely local nature of fix and flip lending changed with online lenders having nationwide reach and access to tremendous amounts of capital, either from retail or institutional investors. At one point, RealtyMogul.com had in hand nearly $1 billion in capital commitments to purchase fix and flip loans from institutional buyers – that’s a lot of homes!

In late 2015 we started to notice a market shift. Fix and flip loan pricing started to drop. First it was 11%, then 10%, then 9%, and in many major markets it dropped to 8%. Throw in the cost of servicing these loans and on an 8% loan, investors’ estimated return is 7%.

At 8%, there should be a relatively lower risk profile to a loan. But in fact, the opposite was true. The dramatic increase in capital in the market meant that riskier loans were demanding lower and lower rates. Borrowers with great experience, credit and lower leverage were able to get rates in the 4-5% range from banks, whereas the 9-12% loans were only available in markets where there were no alternatives and the risk was fairly high.

Ally Bank online savings APY increases to 1.15% (Reddit), Rated: A

Chat rep said that my account should reflect the new rate by the end of today.

Peek Inside The Fintech Arms Race Between Banks And Startups (International Business Times), Rated: A

Capital One is opening Capital One Cafes in major cities across the U.S., with hip decor and more laidback consulting vibes than traditional branches. JPMorgan is trying the same idea with its Manhattan technology hub. Bloomberg reportedthe bank’s $9.6 billion technology budget coincided with new startup-style offices featuring foosball tables, open workspaces and snacks. But it might be too little, too late.

While, money transfer apps like Apple Pay, Venmo and WorldRemit garner widespread adoption, some experts predict banks could also lose well over half their retail profits to fintech startups. Flashy offices won’t change the fact that the days of traditional banking are over.

Nubank looks beyond traditional credit scores, using cellphone data and driver’s license information to find creditworthy customers who would never meet the requirements of a traditional bank. Like SoFi mortgages in the U.S., Nubank interest rates are flexible and can change as the customer’s financial security increases. Combine that with a lack of fees plus a smooth mobile experience, and traditional credit cards seem very outdated by comparison.

According to a Gallup poll, the amount of Americans who feel confident in U.S. banks dropped from 49 percent in 2006 to just 27 percent by 2016.

A nationwide survey of 500 chief financial officers byWEX Virtual Payments found 55 percent consider mobile payment options very important, in addition to 54 percent who say to same of blockchain solutions.

53 million Americans aren’t served by the current credit score market,  but have great cash flow,” Thomas told IBT. Nubank in Brazil and the fintech startup Tala, which has distributed around 2 million micro-loans in places like in Kenya and Tanzania, prove there’s no need to restrict loan eligibility to traditional metrics.

LendingTree, LeadsCon Unveil First-Ever $ 25,000 Startup Innovation Spotlight (IT Business Net), Rated: A

LendingTree, the online loan marketplace, and Access Intelligence, a business information and marketing company, today announced a new initiative to showcase the top startup companies in financial technology (fintech) lead generation at LeadsCon this summer.

The “LendingTree Startup Innovation Spotlight” at LeadsCon’s Connect to Convert will recognize the most innovative fintech startups across the consumer lead generation, call center and customer experience sectors. Startups around the world can apply today at  a chance to receive exposure, bragging rights and $25,000 in cash. Finalists will be announced in August and selected live on stage amid 1,000 industry executives at LeadsCon’s Connect to Convert industry conference and expo, August 21-23 at the New York Hilton Midtown.

Banking startup Tide raises $ 14 million to ‘give small businesses back their time (Business Insider), Rated: A

Banking startup Tide raised $14 million in one of the largest Series A funding rounds closed by a fintech company this year.

Tide, a digital-only banking app aimed at small businesses, has also partnered with online lender iwoca, in a move to allow small companies access to loans of up to £100,000.

The funding round was led by specialist fintech investor Anthemis, along with Passion Capital, LocalGlobe and Creandum, the company that backed Spotify.

Lifshitz&Miller LLP Announces Investigation of LendingClub Corporation (PR Newswire), Rated: A

Lifshitz & Miller announces investigation on behalf of LC investors concerning whether LC’s former CEO, Renaud Laplanche, engaged in improper loan transactions and personal investments as a result of material weaknesses in LC’s internal controls.

If you are an LC investor, and would like additional information about our investigation, please complete the Information Request Form or contact Joshua Lifshitz, Esq. by telephone at (516)493-9780 or e-mail atinfo@jlclasslaw.com.

Bankrate website to be bought by Red Ventures for $ 1.24bn (Financial Times), Rated: A

Bankrate, the US personal finance website, is to be bought for $1.24bn by Red Ventures, a digital marketing company which is expanding its footprint in financial services.

Private equity-backed Red Ventures has agreed to pay $14 per share in cash for Bankrate, which produces online content focused on financial advice and research, such as mortgage and savings calculators and credit card and insurance comparison tools.

Goldman Raised $ 1B For A Real Estate Fund (Bisnow), Rated: B

Documents filed with the Securities and Exchange Commission show that the investment bank has raised $1B for a new real estate fund, Broad Street Real Estate Credit Partners III. Further documents show it is on the road looking to raise more capital for the fund, with a source indicating to Bisnow that it is looking to pull in the same amount again over the coming months.

Around $600M came from U.S. investors and the rest from overseas, the documents show. Goldman typically puts around 20% of the equity into the funds it manages.

Suretly launched an Initial Chocolate Offering (Newsbtc), Rated: B

NYC-based startup Suretly, which raised $350K during preICO round this May, launched an Initial Chocolate Offering.

The event took place in Copenhagen, Denmark during Money2020 conference. All guests, who has visited Suretly’s booth, were gifted with a chocolate souvenirs shaped in SUR-token. Each token was packed in the individual memorable wrapping with the future Suretly ICO information.

United Kingdom

The Bank of England is preparing to get tough on consumer lending (Business Insider), Rated: AAA

The Bank of England ordered British banks and other lenders on Tuesday to prove by September that they are not taking on too much risk with their increased lending to consumers.

The BoE’s Prudential Regulation Authority did not set out any new rules on Tuesday but its move was the first time it has ordered firms it supervises to apply consumer credit rule more conservatively.

The PRA said it was “requesting evidence from all firms with material exposures to consumer credit of how they will – across consumer credit portfolios- ensure” they are not taking too much risk after years of low interest rates.

Lenders will have until September to respond and could then be asked to fix any specific areas of weakness by the PRA.

ORCA celebrates peer to peer lending uk surpassing £10 billion mark (Orca Money), Rated: AAA

Peer-to-peer lending has reached a significant milestone since Zopa launched the world’s first P2P platform in 2005. Over £10 billion has been cumulatively lent across 23 UK P2P platforms. In the first half of 2017 alone, over £2 bn was invested through P2P.

Take a look at the UK alternative lending ecosystem.

Traditional wealth management challenged by robo-adviser boom (Raconteur), Rated: AAA

Survey after survey shows that millennials, and indeed most potential investors aged under the age of 60, are happy to entrust their savings to a digital platform or mobile app, so long as it’s credible, secure, trustworthy, capable of offering them a range of low-cost funds and some personal investment advice.

Of the robo-advisers in the UK, the largest is Nutmeg. Launched in 2012, it has so far raised £71 million in five funding rounds from venture capitalists and others. Nutmeg has more than £600 million under management, though it remains loss making, and escalating marketing and advertising costs meant that in 2015 its losses widened from 2014.

Other UK players include Wealthify, launched in 2015; MoneyFarm, launched in Italy in 2012, and in the UK in 2016; and Scalable Capital, launched in 2016.

Brewin Dolphin has launched a robo-adviser that allows customers with between £10,000 and £200,000 to invest in one of six model portfolios at a cost of 0.7 per cent of invested assets, plus underlying charges of between 0.11 per cent and 0.16 per cent.

 

LendInvest out of P2P sticks to managing funds (Anonymous Email), Rated: A

Our sources reported that LendInvest cancelled their FCA application due to their decision to completely exit the p2p lending space.

As can be seen on the FCA website:

Firm name: Lendinvest Limited
Interim Permissions reference number: 658890

 

Permission Description Status Limitation Against Permission Permission End Date
Consumer credit business Entering into a regulated credit agreement as lender; and exercising, or having the right to exercise, the lender’s rights and duties under a regulated credit agreement. Inactive 02/06/2017
Credit brokerage Credit broking
Or
Credit broking limited to credit intermediation
Inactive 02/06/2017
No right to canvass off trade premises

It appears that this decision was due to the 36(H) legal rules around peer top peer in the UK . It has apparently become “more difficul to stay within the new 36(H) rules without becoming a bank or fund manager”. As LendInvest was already a fund manager, the company has decided to remain a fund manager and focus on that structure as opposed to applying for FCA p2p regulation.

In a similar fashion the online lender Wellesley has taken a similar approach having ‘paused’ P2P yet still shows as active.

This change makes Assetz Capital the 2nd largest business and property lender who is P2P in Europe. See

Of £295m lent, c £290m is P2P retail investors.

Kuflink Debuts Property-Backed Innovative Finance ISA & New Investment Options (Crowdfund Insider), Rated: A

UK-based peer-to-peer lending platform Kuflink has launched its Innovative Finance ISA (IFISA) and also two investment options. This news comes just a few months after the online lender received full authorization from the Financial Conduct Authority (FCA).

Assetz Capital bids to lend £300m after profitable year (Bridging&Commercial), Rated: A

Assetz Capital has revealed that it made a seven-figure pre-tax profit during the 2016/17 financial year, while revenues have now reached over £10m pa.
The peer-to-peer lending platform saw a total of £126m lent through it to SMEs between April 2016 and March 2017 with £38m of that total being achieved in the final quarter.

Assetz Capital claimed it would lend over £60m during the first quarter of this current financial year as it bids to reach £300m of lending for the whole of the year.

It’s time to bring ghost houses back to the land of the living – Lendinvest (Mortgage Solutions), Rated: A

As the Council of Mortgage Lenders has previously pointed out, even if the government managed to push the building industry into producing 300,000 homes across the UK each year, 90% of the housing stock that will exist by 2025 has already been built. If we are to tackle the housing issues we face, it’s not just down to increasing the rate at which new developments spring up – we need to make far better use of the houses we already have, too.

An obvious problem with some of these ‘ghost homes’ is that in their current condition nobody would want to live in them. They may have been ignored for years, falling into disrepair to the extent that they may actually be unlivable.

But these are exactly the sorts of properties that savvy investors may be looking for, the worst house on the street which can be done up, turned into a nice, respectable home and then sold on at a profit.

Londoners Borrowed £17B in New Mortgages in 2016, Wimbledon & Wandsworth Top Borrowers (Crowdfund Insider), Rated: A

Londoners borrowed another £17 billion in new mortgages last year as the affluent southwest London neighbourhoods of Wimbledon and Wandsworth topped the borrowing league table and and 17 of the top 20 areas for new mortgage lending last year are in London, reported European P2P lending platform Lendy.

The highest non-London area among for new mortgages is Maidenhead, which placed 11th out of the 2,717 postcode areas in the study.

AI savings platform launches £700,000 crowdfunding campaign (P2P Finance News), Rated: A

AN ARTIFICIAL intelligence platform that has partnered with RateSetter to help people save and invest is looking to raise £700,000 through crowdfunding.

The fintech firm, Plum, has launched a crowdfunding campaign on Seedrs, to build its team and platform.

NatWest trials AI compliance tool to ensure financial advice is spot on (Internet of Business), Rated: A

The UK bank will use the Recordsure compliance tool based on artificial intelligence (AI) from regulatory risk specialist TCC Group in order to record face-to-face and telephone conversations between the bank and its customers – with those customers’ consent, naturally.

The AI technology is able to analyze an interaction and then classify sections of the conversation, according to Recordsure’s creators. For example, it could determine which aspects of the conversation were general chitchat, which involved financial advice, and what topics were discussed.

P2PFA Announces New Associate Membership, Publishes Names of First New Members (Crowdfund Insider), Rated: A

The Peer-to-Peer Finance Association (P2PFA) has created a new category of membership to boost its ranks and add perspective to the association that represents the UK’s top online lenders.

These new members include:

  • Alterest – Provides non-bank lending markets with loan intelligence infrastructure that enables: seamless exchange of lending data in a secure and timely manner, and flexible analysis of performance and risk of any loan pool or exposure.
  • Altus Consulting: A specialist provider of consultancy services to the financial services sector.
  • Equifax: A global information solutions company that uses data, analytics, technology and industry expertise to power organisations and individuals around the world by transforming knowledge into insights that help make more informed business and personal decisions.
  • Fox Williams LLP: A City law firm with one of the leading Fintech practices in the UK, acting for over fifteen P2P lending platforms.
  • Grant Thornton UK LLP: A global consultancy that is part of a network of over forty-thousand people in 130 countries. In the UK they are led by 185 partners and more than 4,500 people.
  • Orca Money: A platform that is driving the mainstream adoption of peer-to-peer lending by providing research, analysis and tools to empower investors.
  • Simmons & Simmons: An international law firm with a Fintech team that comprises a range of multi-disciplinary lawyers from across their European, Middle Eastern and Asian offices.
  • TLT LLP: Supports large corporates, public institutions and high-growth businesses on their strategic and day-to-day legal needs.

Hive Project Launches Blockchain-Based Invoice Financing Platform, Targets SMEs (Finance Magnates), Rated: A

Despite being the backbone of every economy, small and medium-sized businesses have traditionally faced challenges in securing access to short-term financing from traditional lenders. To resolve this issue, the Hive Project today announced the development of a cryptocurrency invoice financing platform to help SMEs overcome the hurdles they face when trying to get the financing they need.

WiseAlpha Founder & CEO Rezaah Ahmad Comments on Successful Crowdcube Round (Crowdfund Insider), Rated: B

WiseAlpha, a UK first online lending platform that gives investors access to high yield institutional bond and loan investments, has overfunded its £500k target on Crowdcube by 258%, raising £1.29 million.

The largest single investment was £150K.

“We’re thrilled to have overfunded our original target and glad that the 1452 people who have invested in us so far are backing our vision of a fairer investment world where everyday investors aren’t shut out from accessing the biggest and best investments.”

UK P2P Lender RateSetter Update: Targets New Business Borrowers (Crowdfund Insider), Rated: B

Now the lender is planning to boost its direct marketing methods to diversify its new business borrowers sources, according to Peer2Peer Finance News.

Lewis appointed on b2b brief for p2p lending platform (PR Week), Rated: B

Lewis has been appointed by ArchOver, a peer-to-peer lending platform for UK SMEs, to run a campaign aimed at business audiences.

China

China changes tack on ‘social credit’ scheme plan (Financial Times), Rated: AAA

Beijing has pulled back on plans to license big technology companies to develop “social credit” scores for consumers, based mainly on their online activity, because of concern over conflicts of interest, industry analysts said on Tuesday.

The People’s Bank of China, the central bank, selected eight tech companies in 2015 — including e-commerce group Alibaba’s Ant Financial and game developer Tencent — to develop pilot programmes to give consumers credit scores.

The pilots, which monitored spending patterns but also personal behaviour and social media activity, initially raised concerns about consumer privacy. Some of their metrics were seen as irrelevant, including proposals to factor in exercise routines or what time of day people went online. Others were considered more sinister, such as efforts to rate “honesty” or “trustworthiness” by linking credit scores to friends’ social media posts.

Beijing has now decided not to award any licences this year after regulators expressed increasing concern about the potential for conflicts of interest.

MYbank Deepens Push for Business Big Banks Won’t Touch (Bloomberg), Rated: AAA

MYbank, the two-year-old Chinese online lender that already has 3.5 million small-business customers, plans to push deeper into a segment that’s long been shunned by the country’s largest banks.

MYbank wants to capitalize on its links to billionaire Jack Ma’s Alibaba Group Holding Ltd. by offering loans to the more than 10 million smaller merchants that use the company’s e-commerce platforms, MYbank President Huang Hao said in a June 29 interview. Ant Financial, Alibaba’s financial affiliate, owns 30 percent of the online lender.

Formally known as Zhejiang E-Commerce Bank Co., MYbank was able to more than quadruple its lending through 2016, taking its outstanding loans to 33 billion yuan ($4.9 billion).

Its nonperforming-loan ratio was around 1 percent, Huang said, lower than the national average of 1.74 percent. The bank’s technology, which runs loan applications through more than 3,000 computerized risk-control strategies, has kept delinquencies in check, he said.

Still, last year’s lending explosion came at a cost, dragging its capital adequacy ratio down to 11.07 percent by December from 18.51 percent a year earlier.

Chinese tourists are driving mobile payments across the globe (IBS Intelligence), Rated: A

The number of Chinese tourists abroad hit 122 million in 2016, with a vast majority of them paying via their mobile phones. That’s according to a new study from Kapronasia and CANCAN. The survey pool contained 1,000 Chinese consumers abroad and 60 global merchants.

While 67% of respondents reported that they use Alipay or WeChat Pay for overseas purchases. This represents about 41% of overseas consumption and tourists used mobile payments for more than 10% of total transactions.

The report also highlights how Chinese tourists are spending more and more in retail ($900 on average in 2016), instead of luxury items. Only 5.7% spent more than $6,288, with a total amount of $109.8 billion throughout 2016.

80% of merchant respondents cited consumer demand as one of the main reasons for adopting mobile payments, with 70% adding that mainland Chinese consumers were their largest source of global revenue. Clothing, makeup, skincare, food and beverages top the list of goods purchased with mobiles, with travel and accommodation not far behind.

UAV Startup Clobotics Raised its First Round of Financing from GGV Capital (Xing Ping She), Rated: A

Recently, a Shanghai-based Unmanned Aerial Vehicle (UAV) startup—— Clobotics finished its first round of financing from GGV Capital, the amount was not disclosed. According to George Yan, the founder and CEO of Clobotics, this round of financing will focus on developing and iterating their products and technology, expanding the marketing layout, and accelerating the development of Clobotics in the key vertical field.

Set up in November 2016, Clobotics is a provider of business intelligence (BI) and visualizing data, focus on the research of UAV machine vision, industrial big data acquisition, and cloud big data processing and analysis. Unlike many of the domestic manufacturers that focus on hardware plane, Clobotics is good at using leading software, technology and platforms to embed advanced technologies in the field of artificial intelligence, so as to fully explore the value of UAV-collected data.

Police Arrest 32 Employees of Company Behind ‘Straddling Bus’ (Sixth Tone), Rated: B

The test site of China’s fantastical traffic-straddling bus was dismantled in June, and now the peer-to-peer financing company that backed the project is being investigated for illegal fundraising.

Following reports of unlawful conduct, a total of 32 suspects at Beijing-based Huaying Kailai Asset Management Co. Ltd. have been arrested, according to an announcement Sunday by Beijing police on their Weibo microblog.

European Union

Investor protection vs Access to Finance: The Growth of Alternative Finance (Crowdfund Insider), Rated: AAA

Clearly in Europe (Brexit aside) the UK has led sector growth. A combination of a culture of entrepreneurship and risk taking has combined with a supportive government and a regulatory body tasked with a mission of fostering competition – perhaps to the frustration of traditional financial firms. The rise of internet finance in the UK has engendered few occurrences of fraud to date. Growth has been sustained. Perhaps the Brits have gotten the balance right so far?

But which country has the largest alternative finance market in the world? China, of course.

Kleverlaan points to Italy as a country that has stumbled out of the gate. Something the country is attempting to rectify with recent rule changes specifically targeting equity crowdfunding.

View the full report on alternative finance here.

The European Investment Bank Pledges €18.5 million to Finance Continental European SMEs through Lendix (Crowdfund Insider), Rated: A

The European Investment Bank Group (EIB) through the European Investment Fund (EIF) has announced that it will provide €18.5 million to back a joint investment fund designed to lend money to SMEs through crowdlending platform Lendix.

Swedish tech elite’s darling startup Karma just bagged $ 4 million for its hyper-growing food waste app (Business Insider), Rated: A

Swedish startup Karma has built an app that helps restaurants, grocers and cafés reduce their food waste by selling their surplus to consumers at reduced prices.

The company has now raised between 30 and 40 million SEK ($3,5 – $4,7m) to take on Europe after a booming start in its Swedish home market.

The seed round comes from Swedish investor Eequity and global VC fund e.ventures, which has also backed the hyped Swedish fertility app Natural Cycles.

P2P Lender VIAINVEST Hits €10 Million in Funded Loans (Crowdfund Insider), Rated: A

Newly launched peer to peer lending platform VIAINVEST has announced topping €10 million in loans. The 7 month old Latvian platform said consumer loans issued by VIA SMS Group, came from the Czech Republic, Poland, Latvia and Spain.

Australia/New Zealand

Xpress Super and Australian P2P lender RateSetter announce partnership (Finder.com), Rated: A

RateSetter, Australia’s largest peer-to-peer lender, and self-managed-superannuation-fund (SMSF) administrator Xpress Super have today announced a partnership.

Through the partnership, SMSF investors will now have direct access to their RateSetter account via the Xpress Super platform, making it easier for SMSF investors to lend to creditworthy borrowers.

Introducing HashChing – an online marketplace for home loan deals (sa real estate news), Rated: A

Based in the heart of Sydney, HashChing is Australia’s first online home loans marketplace for broker-negotiated home loan deals.

All mortgage brokers are verified and rated through the website Artificial Intelligence Algorithm, selecting the brokers who offer the best services and then recommending them to borrowers in their area. Similar companies that had paved the way before HashChing had simply listed rates to the consumer through the bank or lender’s website.

Home loan rates on HashChing start from 3.59% p.a. and consumers can browse through the home loan deals page to see what offers are available.

Currently the company has helped over 14,500 borrowers with their home loan enquiries, all worth more than $7 billion dollars combined. Of which, $6 billion has come in the last 12 months alone, and the company also currently lists more than 600 verified mortgage brokers – including 30 mortgage brokers from SA.

Colliers’ alternative to bank funding (True Commercial), Rated: B

A new Colliers International service is providing an alternative to traditional bank funding by matching commercial property investors to development and investment opportunities.

The Capital Sourcing unit was established by Tim Lichtenstein, who has a track record in capital raising for commercial real estate assets.

India

UrbanClap Raises $ 21M in Series C (BW Disrupt), Rated: A

Home services start-up firm UrbanClap has raised $21 million in a series C funding round led by Internet investment fund Vy Capital. Led by Alexander Tamas, Dubai-based Vy Capital is a major investor in Zomato.

Early investors SAIF Partners, Accel Partners and series B investor Bessemer Venture Partners also participated in the round. Existing investors also spent approximately $1 million more to buy shares held by some employees and a part of stakes of angel investors Kunal Bahl and Rohit Bansal, the founders of Snapdeal, UrbanClap co-founder Abhiraj Bhal told LiveMint.

Reliance Capital arm invests $ 1 mn in P2P lending platform Billionloans (VC Circle), Rated: A

Billionloans Financial Services Pvt. Ltd, a Bengaluru-based fintech startup that operates a peer-to-peer (P2P) lending platform, has raised $1 million (around Rs 7 crore) in seed funding from Reliance Corporate Advisory Services Ltd, a wholly owned subsidiary of Reliance Capital Ltd.

Asia

Peer-to-peer loans pass 300 billion won for first time (Korea JoongAng Daily), Rated: AAA

The number of peer-to-peer loans more than doubled in just six months, going from 96.9 billion won ($84.5 million) in June last year to over 300 billion won in December.

The change represents a 220.5 percent increase, according to data provided by the Financial Supervisory Service and Financial Services Commission.

The number of users also surged 116.6 percent to 6,632 in June compared to December’s 3,062.

Singapore fintech startup Instarem raises $ 13 mn to expand payment infra (VC Circle), Rated: A

Instarem, a Singapore-headquartered cross-border payments company founded by Indian-origin entrepreneur Prajit Nanu, has raised $13 million in a Series B funding round led by Chinese venture capital firm GSR Ventures, a company statement said.

Singapore fintech startup Validus Capital raises US$ 2.9M to grow SME lending platform (e27), Rated: A

Singapore-based fintech startup Validus Capital has raised S$4 million (US$2.9 million) from Vertex Ventures.

It will use the newly-raised round to expand regionally and grow its online lending platform.

Chinese investors eye Indonesia’s P2P lending marketplace Investree for Series B (udaipur kiran), Rated: A

Indonesian peer-to-peer lending marketplace Investree announced recently that Chinese investors have initiated discussions for an investment in the company for its next Series B round.

If successful, the deal will become one of the first international investments in Indonesia’s fintech space. Previously, the startup has raised an undisclosed Series A round in 2016 from local venture capital Kejora which typically invest US$2 to US$5 million in their portfolio firms.

Authors:

George Popescu
Allen Taylor

Monday February 27 2017, Daily News Digest

funding circle sme income fund

News Comments Today’s main news: SoFi raises $500M for international expansion. Funding Circle business jumped 50% post-Brexit. Bank lending in UK soars. Today’s main analysis: My adventures in various p2p lenders. How P2P funds have fared over the last 12 months. Today’s thought-provoking articles:  Rise of P2P in Korea puts government on edge. Canadian regulators welcome FinTechs. United States SoFi […]

funding circle sme income fund

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United States

United Kingdom

International

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China

India

Asia

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News Summary

United States

SoFi Raises $ 500 Million Led by Silver Lake for Global Expansion (Bloomberg), Rated: AAA

Social Finance Inc. said it raised $500 million in a financing round led by private equity firm Silver Lake Partners. It plans to use the funds for international expansion of its online lending business and development of new financial products.

Other investors in the round include SoftBank Group Corp. and GPI Capital, and the funding brings SoFi’s total investment to $1.9 billion, the company said. Several sovereign wealth funds from countries in Asia and Europe invested as well, said Mike Cagney, SoFi’s chief executive officer and co-founder. The international group will purchase SoFi’s loans in addition to taking an equity stake, he said.

SoFi said it plans to develop new personal finance tools, including mobile deposit, credit and payment products that will be rolled out this year. It also anticipates bringing its lending products to Australia and Canada by the end of the year.

My Adventures in Fintech (Wealth Management), Rated: A

Two major factors have come together to make fintech platforms so popular. First, the rise of smartphones puts the apps right into the hands of millions of users who feel alienated by slow-moving traditional banks. Second, the financial crisis of 2008 eroded the borrowing ability of many middle-class individuals and small business owners as banks curtailed unsecured lending and other high-risk loans.

From 2010 to 2015, investment in fintech has grown from $1.8 billion to $22.3 billion, according to Accenture.

Lending Club

I started investing in Lending Club in 2011. My experience is limited to being an investor. I am a fractional owner in a total of 3,167 notes (see Figure 1).

So, if any one note defaults, my downside is generally limited to $25. Of those notes, 1,387 are current (that is, the individual borrowers are current in their payments), 1,269 notes have been fully paid off, and 432 notes have defaulted and been charged off.

 

My 12.97 percent net annualized return will probably be reduced by 1 to 2 percentage points given the predictable defaults, but I’m very satisfied with the results to date.

I faced two major issues in managing a P2P account. First, how to select notes. Second, how to manage the small amounts of cash that accumulate every day. The Lending Club website lists tens of thousands of notes available for investment at any time, each with details about the underlying borrower such as income, credit score, whether he or she owns or rents, state of residence, purpose of loan, etc. At first, I inspected each note and selected the ones that appealed to me, but that can be a full-time job and is probably counterproductive. It’s much easier, and probably more reliable, to trust the Lending Club automated investment system.

Upstart

Almost all Upstart borrowers are recent college graduates at the beginning of their careers. This population has a much thinner conventional credit history, so Upstart developed an algorithm that looks beyond traditional credit data such as earning potential and employability. To invest with Upstart, you must be an accredited investor.

But lately, the platform is encouraging investors to determine a risk grade then automate the selection. Risk grade notes run from AAA to D. Almost every borrower signals that they intend to use Upstart funds to consolidate high interest credit card debt.

I have funded on a fractional basis 140 three-year notes from exclusively Grade B borrowers. Eight notes have matured. One borrower has defaulted. The value of my account is $13,933. I’ve made $452 in interest and my annualized IRR is 7.24 percent (Figure 3). Based on Upstart’s performance statistics (Figure 4), my performance of 7.42 percent is apparently better than the average across all notes (5.72 percent).

Acorns

I easily linked Acorns with my checking and credit card account more than a year ago. Since then, it has been systematically rounding up my purchases to the next dollar and investing the difference in a diversified portfolio of ETFs.

At the end of a year, I had contributed a total of $283.57, and earned $3.17 in dividends. I’ve paid a total of $8 in fees. The current value of my account is $282.23—not too great of a return until you consider I chose the “conservative” balanced portfolio with 39 percent in government bonds and 18 percent in corporate debt.

Fees are $1 per month or 0.25% per year, depending on your balance. The app is free and fees are waived to college students for four years.

Weekly Online Lending Snapshot – February 24, 2017 (Orchard Platform), Rated: AAA

In China, as reported by the Beijing Bureau of Financial Work, nine out of 10 of the roughly 5,000 lending platforms across the country may not survive the coming year as the government begins a well-telegraphed tightening ofregulatory supervision of these lending platforms. NatWest Bank, in the U.K., announced the launch of a digital platform for small and medium-sized businesses to apply for unsecured loans up GPB$150,000. Australian small business lender Prospa raised an AU$25 million funding round led by Sydney-based AirTree Ventures valuing the firm at AU$235 million.

3 Industries Being Disrupted by Crowdfunding (Entrepreneur), Rated: A

1. Corporate finance: From software to farm equipment

Large finance organizations can use it as a catalyst for gaining small businesses who seek to harness leased products that are tailored to them specifically. What’s more, the lower cost credit of the products they offer will appeal more to businesses that pay sky-high APRs.

For leaseholders of larger equipment, crowdfunding platforms will allow leaseholders such as farmers to finance crops and equipment from other farmers and associates.

2. Real estate: From housing to business establishments

Before crowdfunding, closing an actual real-estate deal required back and forth passing and signing of documents among lawyers. Beyond being slow, the process often added up to thousands of dollars in legal fees. Crowdfunding allows businesses of all sizes to bypass the monotonous process and dodge expenses. What’s more, real-estate crowdfunding allows potential investors access to a wider array of deals.

3. Consumer lending: Cars and home appliances

For financial institutions, this means learning to leverage a crowd’s interest to inform their lending offers. As the trend continues, new crowdfunding platforms will pop up to cater to specific lending verticals. Imagine a crowdfunding space where consumers can get loans for anything related to transportation or kitchen appliances. In this way, brands will be able to save on financing costs while gaining on capital returns.

AUTOFI UNVEILS ONLINE MULTI-LENDER SALES SOLUTION FOR USED CAR DEALERS (iLendingDirect Email) Rated: A

Today AutoFi, a financial technology company that is transforming the way cars are bought and sold, announced the launch of the first fully online sales and multi-lender financing solution for used car dealers. Financing on AutoFi’s platform will be provided by its lender network of banks, speciality lenders, and credit unions. Today, the company announced that its credit union financing will be offered in partnership with iLendingDIRECT.

The AutoFi platform is the first online point-of-sale solution for auto finance. It allows customers to purchase and finance a car completely online, either through a dealer’s website or an in-store digital experience. The company recently announced the world’s first online car sales and financing solution for new car dealers in partnership with Ford Motor Credit. Today’s announcement further expands AutoFi’s ability to serve the multi-billion-dollar used car sales market through its partnership with iLendingDirect.

AutoFi’s platform will now allow used car buyers to research a vehicle on the dealership’s website; select “Buy Now”; receive an automated credit decision; and get loan offers from banks, specialty lenders and iLendingDIRECT’s credit union network who compete for the car buyer’s business in real time.

Consumers can then customize their financing deal by selecting down payment and loan  terms; choose vehicle protection products; and e-sign all financing documents online. The new platform gives used car dealers and buyers the ability to transact online with competitive financing options in a fully automated process.

Lending Club Alters Grace Period for Borrowers (Crowdfund Insider), Rated: A

Lending Club (NYSE:LC) has tweaked the way it manages the “grace period” for borrowers when they make payments past the due date. Previously, borrowers received a 15 day grace period for any penalties on payments less than 15 days late.  Beginning today, Lending Club requires borrowers to pay the additional accrued interest as a result of their late payment.

RentRange Identifies 25 Markets with the Largest Rental Rate Increases (MarketWatch), Rated: A

RentRange, one of the premier providers of market data and analytics for the housing industry, today released data ranking the top 25 U.S. Metropolitan Statistical Areas (MSAs) by average rental rate increase for single-family1 homes between the fourth quarter (Q4) of 2016 and the same quarter in 2015. The data analysis also identified the average vacancy rate within these markets in Q4 2016.

The Q4 2016 RentRange® data identified rental rate increases in areas like Cape Coral and Portland, both of which moved up the list into the top five, as well as newcomers including McAllen, Denver, Boston, Nashville and Miami. While rents remain high in the Bay Area, San Francisco dropped several positions, indicating that the year-over-year rent change was not as significant as seen in past years. Comparatively, San Jose made the list as a new addition in Q4 2016.

Analyzing the average vacancy rate, which demonstrates the percentage of all available units in a rental property that are vacant or unoccupied at a particular time, shows that the highest rates, as reflected from the list, are seen in the Southeast region, where vacancy rates range from 10.5 percent in Charleston to 20.4 percent in Myrtle Beach. In these areas, builders and investors may need to compete for a limited number of renters. An oversupply of new properties can drive up the vacancy rate and eventually push rental rates down. This scenario is currently happening in Myrtle Beach, where more than 3,100 new homes were built in 2015, a 94 percent increase compared to two years earlier.

United Kingdom

Brexit Terrified This CEO. Then Business Jumped 50% (Bloomberg), Rated: AAA

At sunrise on June 24, Samir Desai rushed to his offices near St. Paul’s Cathedral in London. Britain had just voted to quit the European Union and he knew his staff at peer-to-peer lender Funding Circle Ltd. would be freaking out.

As the pound tumbled and the government quaked following the resignation of Prime Minister David Cameron, Desai walked the floor of Funding Circle’s whiteboard-decked offices, fielding anxious questions. The non-British EU citizens feared they’d have to leave the country. The sales team feared that investors funding the firm’s loans to small businesses would bail.

In the eight months since the Brexit vote, Funding Circle has been on a tear. The firm originated more than 530 million pounds ($685 million) in loans during the second half of 2016, a 50 percent jump from the same period a year earlier, according to AltFi Data Ltd., which analyzes the British peer-to-peer industry. In the fourth quarter, Funding Circle’s U.K. division became profitable for the first time.

The question now is whether Funding Circle’s post-referendum run has legs. Meekings theorizes that volume has been driven by the Bank of England’s decision to lower interest rates to 0.25 percent from 0.50 percent in August. That spurred more retail investors to chase yield in the firm’s loans, which are returning an average 6.2 percent annually. Meantime, credit-hungry borrowers may also be flocking to Funding Circle as banks retrench from lending to small companies.

The great British credit boom: Bank lending soars in January (P2P Finance News), Rated: AAA

Figures from the British Bankers Association (BBA) showed that total consumer borrowing growth rose to £538m, more than doubling from December’s figure. This was primarily driven by the increase in personal loans and overdrafts, which rose to an eight-month high of £422m.

Meanwhile, bank lending to businesses rose by £3.4bn in January, which was the largest increase since January 2015.

Banks tightened up lending after the financial crisis which had a detrimental impact on economic recovery, although it created an opportunity for the peer-to-peer lending sector.

At 44,657 in January, mortgage approvals for house purchases were up 18.6 per cent from their August 2016 low, although they were still 2.5 per cent below the January 2016 level.

Gross mortgage borrowing came in at £13.8bn, with re-mortgaging approvals 15.7 per cent higher year on year.

How P2P funds have fared over the past year (P2P Finance News), Rated: AAA

Net asset value (NAV) returns range from three per cent to 20 per cent while discounts to NAV have fallen as low as 20 per cent.

P2P Global Investments

Almost 60 per cent of the assets are in the US, with 23.2 per cent in Europe, 8.7 per cent in cash, 6.4 per cent globally and 2.2 per cent in Australia.

Over the past 12 months its NAV has grown 5.34 per cent and it is currently on a discount to premium of 20.8 per cent.

SME Loan Fund

Almost two thirds, 63 per cent, of assets are in the UK, with 13.1 per cent in the US, 18.6 per cent in Europe and the rest in cash.

The trust has seen its NAV total return grow by seven per cent over the past 12 months and it is currently trading at a discount to net asset value of 10.3 per cent.

Ranger Direct Lending

The ordinary income share class is currently on a discount to NAV of 10.5 per cent while the zero preference and c share classes are on 2.2 per cent and 1.2 per cent respectively.

Funding Circle SME Income Fund

Its regional exposure is currently broken up as 73 per cent in the UK, 17 per cent in the US, two per cent in continental Europe and eight per cent in cash.

It has seen its NAV deliver total returns of 6.7 per cent over the past 12 months and is currently on a premium of 1.6 per cent.

VPC Specialty Lending

The investment trust is composed of 36 per cent marketplace loans and 39 percent in balance sheet investments, with the rest in shares, securitisation and cash.

Its NAV has returned 3.1 per cent over the past year and it is trading at a discount to NAV of 19.4 per cent.

Honeycomb Investment Trust

It has returned 8.7 per cent over the past 12 months and is on a premium to NAV of 7.7 per cent.

RateSetter Forms Partnership With Accountancy Advisor TaxAssist to Engage With SMEs (Crowdfund Insider), Rated: AAA

Online lender RateSetter has formed a partnership with accountancy advisor TaxAssist Accountants to help engage with small and medium-sized enterprises (SMEs). TaxAssist Accountant notably specializes in all businesses with a turnover of £2 million of less. It has more than 290 locations throughout the UK.

I’d use peer-to-peer lending to beat the banks (Moneywise), Rated: A

This growing market, which is now regulated, is dominated by three players – Funding Circle, RateSetter and Zopa. The annual interest on offer varies, ranging from 2.9% (RateSetter) through to in excess of 7% (Funding Circle), but so does the degree of risk you will take.

While the 2.9% interest on offer from RateSetter comes with the backing of a ‘provision fund’ (designed to protect your capital from losses if loans turn bad), the 7% from Funding Circle has no such underpin. If a loan goes bad, your capital could be compromised.

My peer-to-peer money is spread across 16 businesses operating in everything from retail through to IT. It is effectively an investment play on UK plc. When the economy is strong, my companies are more than likely to keep repaying the loans they have secured.

Welendus Live on Seedrs (Welendus Email), Rated: A

I am pleased to announce that Welendus is now back live on Seedrs. I would like to invite you to visit our campaign and watch our video at (

The Funding Network celebrates 15th anniversary (UK Fundraising), Rated: B

The Funding Network celebrates its 15th anniversary this March, having so far raised over £9.8 million for more than 1,450 social change projects through its live events since its 2002 launch.

TFN is celebrating with a special event on 16th March at the Funding Circle’s Funderbar in London.

International

Marketplace lending news roundup 27/02/17 (AltFi), Rated: AAA

In the UK, the overall market for alternative finance has just ticked over £10bn – including crowdfunding – in terms of the amount of money lent and invested into the equity of companies via crowdfunding platforms.

UK P2P business lending Growth is still in rude health as proven by AltFi Data’s number crunching, in the same week that Funding Circle tops £2bn mark. In the funds world, P2P GI has continued its share buyback strategy while the SME Loan Fund may be about to see an investment management change by New York-based SQN.

Not so good for US-based OnDeck, which despite a surge in Q4 lending is looking to cut jobs amid rising losses.

Financial technologies that make banks better (Finextra), Rated: A

A Reykjavik-based company strongly commits to improving the way the banks function. Meniga is, mostly, known for its money management software that allows the banks to start offering great personal and business financial management applications to their clients without investing heavily into the development.

Recent developments in Payment Services Directive 2 make banking APIs so important as never before. On the one side, banks are required to provide open technology for accessing their customers’ data to third parties. And, instead of investing into the development of open APIs, a bank can pick the technology up from Kontomatik as it already has the API in place. On the other side, smart banks will not only release open APIs but will also do everything at their disposal to benefit from the access to the data of other banks.

Started in 2009, it has taken Kabbage roughly 5 years to come up with a white-label solution that allows financial companies to use its technology for assessing the risks and issuing the loans online. With white-label technologies from Kabbage, a bank should be able to launch a great B2B lending platform without investing into development, testing and implementation of the modern risk assessment models.

Australia

US Market leader delivers keynote address to AltFi Australasia (The Bull), Rated: A

A reluctance by banks and government agencies to share data with alternative lenders is driving up the cost of borrowing in Australia, a global fintech leader told the AltFi Australasia conference in Sydney today.

Rob Young, Senior Vice President, International at OnDeck Capital Inc, said that a lack of open data is a major issue for alternative lenders in the fintech space.

He explained that in Australia, there is limited sharing of credit, banking or tax data, while the UK’s open data regime has forced banks to share customer data and open up their APIs to third parties.

“The UK is a great example of where open data has been in place for several years, the alternative finance sector is flourishing, and even the banks have benefited by opening up cross-sell opportunities within their own businesses. It’s a win-win for the lending sector and its customers,” Mr Young said.

Fintech Business Awards announces 2017 winners (EconoTimes), Rated: B

Midwinter Financial Services that has developed a range of cutting edge financial planning software packages, has been recognized for the Fintech Business Excellence Award for company category, having been awarded the highest points of all winners.

Other awards in the fintech category include Fintech Mentor of the Year that was awarded to Claire Wivell Plater from The Fold Legal and Fintech Start-Up of the Year given to Valiant Finance. Apart from this, Crowdfunding Innovator of the Year, Insurance Innovator of the Year, Payments Innovator of the Year, Investment Innovator of the Year, among other awards were also recognized.

China

The day of reckoning is nigh for fintech startups (SCMP), Rated: A

What started as a venture capital-driven, primal scream against the perceived backwardness of traditional banks and financial institutions has run into problems that no other new technology has faced.

The last two years saw an expansion of incubators and platforms to cultivate fintech startups. And this year, I am observing clues in major fintech centres where leaders are quitting startups and bank sponsored vehicles.

The hope and dream of being able to disintermediate financial institutions and the entire industry is unrealistic given how much protection and restriction is needed to prevent another financial meltdown that threatens to cast a 1930s style depression across the world.

Besides BlackRock’s acquisition of the roboadvisor site FutureAdvisor in 2015 (valuing it between US$150 million to $200 million) other asset managers like Fidelity and Schwab believed they could accomplish roboadvisor front ends on their own.

So approaches and results are very mixed.

India

Fintech aims to facilitate Rs. 100 cr. loan in 100 days (The Hindu), Rated: A

Peer-to-peer lending platform Oxyloans is targeting to facilitate disbursement of Rs. 100 crore as loans in 100 days beginning March 1. The firm, which neither mobilises deposits nor disburses loans, earns revenue from the commission — 1.5% from lenders and 2.5% from borrowers — it charges.

The loans disbursed through the platform are typically short-term, from 6 months to 11 months, and the rate of interest ranges between 14% and 36%.

India to Get Its Own Fintech Hub in Vizag (NewsBTC), Rated: A

India has been making a lot of noise in the banking, fintech and cryptocurrency sector lately. The country, currently heading towards a financial revolution now has plans to set up a fintech hub. The proposed fintech hub will be established in the city of Vizag.

According to reports, the concerned government has allocated resources to set up the necessary infrastructure in the “Fintech Tower”. Slated to go live next month, Thomson Reuters and Visa will be among the first few companies to set up shop in the Fintech Tower.

Asia

Rise of peer-to-peer financing puts gov’t on edge (Korea JoongAng Daily), Rated: AAA

Starting this week, a guideline that sets ground rules for P2P platforms will go into effect nationwide. Other steps to safeguard investors from risk include ongoing efforts by the Financial Services Commission, the country’s financial regulator, to make credit businesses linked to P2P platforms register with the FSC regardless of size.

According to Crowd Institute, a research center in Korea dedicated to P2P finance, the P2P market size grew to as much as 700 billion won ($616 million) by January this year, growing almost 14 times from 2015. The number of P2P platforms also skyrocketed to 131 in January this year from 16 in January 2016.

The Crowd Institute projects that by the end of this year, the size of the market will grow to as large as 1.5 trillion won.

Of the 700 billion won already in the P2P market, over half, or around 408 billion won, is in real estate, according to the institute.

Roof Funding’s model is project financing, which means investors crowdfund a project to build a building from scratch. If the builder goes bankrupt, the ownership is transferred to the investors, and they can choose to auction off the building or sell the units after completing construction with additional funding.

For instance, interest rates on one-year fixed deposits at local commercial banks as of Feb. 21 range from 1.10 percent to 1.75 percent, according to data from the Korea Federation of Banks.

Despite the rising popularity of real estate P2P platforms, financial authorities in Korea warn that the investments may not be as safe as they seem. In one case, a firm called Money Auction declared bankruptcy last November after it was saddled with debt. Founded over a decade ago as one of the first P2P platforms in Korea, it faced a liquidity crunch after payment delays led the firm to owe over 4 billion won to investors.

Those working in the P2P industry note that many apartments are struggling to attract buyers, and when the market suffers, smaller buildings like duplexes and multiplexes (the main investment targets of most P2P platforms) will likely feel the impact first, jeopardizing lenders’ interest and principal.

Lee complains that some clauses in the guideline are too restrictive. “For instance, about 80 percent of all investment made through January exceeded 10 million won, which is especially the case for real estate P2P projects,” he said. “If investors can only invest less than 10 million won per year, it is possible that the entire industry will take a heavy blow.”

SBXbank to Launch Crypto Currency Marketplace (JakartaGlobe), Rated: A

Smart Banking Exchange, better-known as SBXbank, a London-headquartered company, is set to launch a unique marketplace called “Coinxmart,” in which transactions are done using crypto currency, an alternative digital currency not dissimilar to the old bitcoin.

Abdul Rahman Said, SBXbank’s Asean vice president of marketing, told the Jakarta Globe in an interview on Wednesday (25/2) the company seeks to sink up to Rp 100 billion ($7.5 million) into developing financial technology services that offer not only e-commerce, but also peer-to-peer investment and peer-to-peer lending, all of which will use a crypto currency.

Sedania to buy fintech firm for RM12m (The Star), Rated: A

Technology empowerment company, Sedania Innovator Bhd, has proposed to acquire a syariah-based financial technology (fintech) company, Sedania As Salam Capital (SASC), for RM12 million.

In a statement on Monday, Sedania Innovator said the purchase consideration would be satisfied via RM4 million cash, and RM8 million via the issuance of 25.8 million new Sedania Innovator shares at 31 sen each.

Sedania Innovator said under the proposed acquisition, SASC would provide a profit guarantee of RM1.5 million per year for the financial years ending Dec 31, 2017 and 2018.

To-date, it has processed over 300,000 personal financing transactions worth more than RM25 billion.

Canada

Canadian regulators welcome fintech amid rising global oversight interest (Reuters), Rated: AAA

Recognizing the need to shift its regulatory focus to accommodate the use of advanced technology in the delivery of financial services, the Ontario Securities Commission (OSC) has launched initiatives aimed at providing compliance advice and flexible regulatory requirements for fintechs.

The OSC Launchpad initiative provides some flexibility in regulatory compliance for fintechs with the aim of making it easier for startups to innovate. The types of relief or support available through the OSC LaunchPad include informal guidance on regulatory compliance matters from OSC staff and, on a case-by-case basis, eligibility for time-limited registration or exemptive relief. At the same time the OSC has stated (here) that it will continue to scrutinize fintechs for potential investor protection risks.

While the OSC is the first provincial securities regulator to undertake formal fintech initiatives, other provinces and territories have begun to recognize a need for more flexibility in overseeing fintechs. When Lending Loop, a peer-to-peer lending platform, began in Canada in 2015, it had to obtain approval from provincial securities regulators for a prospectus and comply with other securities-related regulatory requirements. The Toronto-based company subsequently paused its operations and re-launched in late 2016 under an exempt market dealer license (here) that was granted by the OSC.

Authors:

George Popescu
Allen Taylor

Thursday February 9 2017, Daily News Digest

south korea p2p

News Comments Today’s main news: Huge spike in deposits after Lending Works launches IFISA. Public-private partnership forms Online Lending Policy Institute. Today’s main analysis: How private debt/alternative credit boosts income, risk-adjusted returns. Today’s thought-provoking articles: What roll-back of Dodd-Frank means for MPL. An end to P2P wholesale lending. BondMason calls for end to provision funds. United States Private-public […]

south korea p2p

News Comments

United States

  • Private-public partnership forms OLPI. AT: “This is an interesting approach to dialogue concerning MPL innovation, regulation, and growth. Where the Marketplace Lending Association exists primarily for the benefit of lenders, the OLPI seems to have its focus on consumers. Both attempt to influence public policy, but they different paths.”
  • What rollback of Dodd-Frank means for MPL. AT: “I completely agree that regulation legitimizes the industry, but I am concerned that over-regulation can kill innovation. On the other hand, there is a real danger that protectionist policies can lead to banks reverting back to risky lending practices, hurting consumers, and making it difficult for marketplace lenders to compete. I hope we can strike a fine balance that encourages innovation, fosters competition, and provides more options for consumers.”
  • Zoot Enterprises XOR Data Exchange partner on risk mitigation.

United Kingdom

European Union

China

Asia

News Summary

United States

Unique Public and Private Partnership Forms Online Lending Policy Institute (Yahoo! Finance), Rated: AAA

The Online Lending Policy Institute (OLPI) today announced its formation and the appointment of its first Executive Director, Professor Cornelius Hurley. OLPI will provide a one-stop resource for those interested in Fintech generally and marketplace lending specifically. The OLPI will provide research and education to ensure informed policy and best practices.

The OLPI provides policy analysis, in-depth research, broad educational initiatives (like the successful MPL Policy Summit), and relevant and engaged thought leadership to foster responsible growth of online lending (providing a strong bridge between established financial services and technology knowledge). To that end, the OLPI convenes various stakeholders, facilitates industry consensus, and encourages the development of a regulatory framework that protects borrowers while promoting innovation.

Key activities of the OLPI will include:

  • Substantive research that affects the online lending industry
  • Publishing white papers, studies, and reports
  • Engaging policy makers and industry stakeholders in the creation of forward-thinking public policy
  • Commissioning studies to ensure policymakers and those studying the industry have accurate data to rely on
  • Hosting the annual MPL Policy Summit to share, educate, and exchange ideas
  • Acting as the one-stop solution for all who seek to understand legal and regulatory landscape of online lending
  • Providing the tools necessary to ensure responsible innovation in Fintech– OLPI will be a valuable research resource for the various associations that have already formed to advocate for Fintech

To reach its goals, the OLPI knew it was important to be led by an expert in financial services thought leadership that has built a reputation of integrity and innovation with the banking community at large. The OLPI is pleased to announce the appointment of Professor Cornelius Hurley as the first Executive Director of the Institute. Professor Hurley brings more than 35 years of diversified legal, entrepreneurial, and academic experience in the financial sector.

OLPI’s growing roster of members includes founding members Cross River Bank, Boston University’s Center for Finance, Law & Policy, and RocketLoans, among others. OLPI will announce its broader membership, including many leading industry players at LendIt 2017, where OLPI will host a day of legal and regulatory panels.

What Trump’s Rollback of Dodd-Frank Means for Marketplace Lending (Forbes), Rated: AAA

For marketplace lenders, the industry has matured despite a relative lack of federal regulation and uniformity. While it has thrived due to reduced oversight from lending authorities, a wave of deregulation in Washington could be a curse rather than a blessing as it can further erode the legitimacy fintech pioneers have started to garner since the great recession.

While reactionary regulations can hinder economic recovery, Dodd-Frank was structured in a way that made enacting new rules a heavily vetted process.

Bank lending has increased at a rate of 6 percent a year since 2013, reaching a record high of $9.1 trillion in commercial loans in 2016 and JPMorgan increased core loans more than 10 percent across all categories. If the banking sector has struggled under Dodd-Frank, it hasn’t curtailed profits.

Dodd-Frank has made it much more difficult for consumers to gain access to mortgages and other loan products and raised some costs, in turn affecting profitability, particularly among smaller community banks.

Regulation For Marketplace Lenders Creates Legitimacy

Without smart regulation, fintech companies will continue to be at a disadvantage when compared to brick and mortar counterparts, making it more difficult for a still-developing industry to establish itself as a legitimate entity.

Disruptive innovation can often flourish in this vacuum, but there’s a cost. Without the legitimacy that regulation offers, marketplace lending could struggle to be taken seriously as a direct competitor of the established banking system.

The danger lies in overregulation, but we are a long way from that.

Zoot Enterprises, XOR Data Exchange Partner For Risk Mitigation (PR Newswire), Rated: A

Zoot Enterprises has announced that it has formalized an agreement with XOR Data Exchange to provide Zoot clients access to multi-industry data predictive of identity theft and fraud risk. With the rise in online fraud, clients rely on Zoot to identify new ways to support their business strategy and quickly react to new fraud trends.

The partnership will bring a wider variety of predictive data sets and analytics to institutions that rely on Zoot for their platform needs across a wide variety of industries including financial services, merchant services, telecom, insurance, and healthcare. By sharing data through XOR, businesses are reducing credit and fraud losses, while providing additional insight into fraud rings that may target several different industries and establishing the creditworthiness of businesses that may not be identified using traditional providers.

United Kingdom

Huge Spike in Deposits Reported After Lending Works IFISA Launched (P2P-Banking), Rated: AAA

Lending Works CEO Matthew Powells reported an influx of more than 500K GBP deposits within 3 hours after launching the Lending Works Innovative Finance ISA (IFISA). Lending Works’ IFISA product offers 4% (up to 3 years) or 4.7% (up to 5 years term) tax-free for investments on the p2p lending marketplace.

A recent survey of Lending Works’ existing investors found that 88% plan to open an IFISA, with around a third expecting to invest between 10,000 GBP and the maximum threshold of 15,240 GBP of their annual ISA allowance into the IFISA before the end of the tax year in April.

First major peer-to-peer Isa becomes available, offering up to 4.7pc tax-free (The Telegraph), Rated: AAA

Lending Works has become the first large peer-to-peer company to offer an “innovative finance Isa”, beating several better-known rival lenders to the launch.

The new Isas will offer the same rates and terms as Lending Works’ existing accounts. Investors can lend over a three or five-year period. Three-year loans attract interest of 4pc and five-year loans earn 4.7pc. 

Of these only three have launched an Isa. The companies, Abundance, CrowdStacker and Crowd2Fund have lent out less than £100m between them in total.

An end to the nascent P2P wholesale lending market (Financial Times), Rated: AAA

Last weekend, the Mail on Sunday reported that lending money to businesses that in turn lend that money on — aka wholesale lending — is something the regulator reckons doesn’t count as P2P lending. According to the Mail, the FCA thinks P2P lenders doing this “would mimic banking – but without the same protection for individuals or regulations for the firms involved”.

Good news for fans of clarity. Less good news for fans of Ratesetter, a leading P2P lender with a boundary blurring business model and a wholesale lending operation that has historically made up around 15 per cent of its loan originations, as we showed in March last year.

The FCA’s views on wholesale lending in the P2P sector are not entirely clear. One advisor to P2P lenders said “different platforms have been getting different messages”, but suggested the practice might raise the question of whether deposit taking was going on. As they explained it, a lending business borrowing from a P2P lender would, in effect, be borrowing money from ordinary people for the purposes of lending it on, which is not a million miles away from what a bank does. In short, the P2P lender might be viewed as a channel for attracting deposits.

P2P investing firm calls for end to provision funds (P2P Finance News), Rated: AAA

PEER-TO-PEER lenders should not use provision funds, a P2P investment manager has argued in a new report.

BondMason claims the funds, used by platforms such as Zopa and RateSetter, are just a tool to attract lenders.

The investment firm, which aims to get clients a seven per cent return by selecting P2P loans across approved platforms on their behalf, argues that provision funds “do little (nothing) to improve returns for well-diversified investors.”

Looking at the wider market, the BondMason report found lending in the P2P market grew by 39 per cent in 2016 to £3.2bn but warned that this was down from the annual growth of 91 per cent between 2014 and 2015.

19 laptops containing customer information have been stolen from fintech company GoCardless (Business Insider), Rated: A

Fintech business GoCardless is offering some customers free credit monitoring for a year after admitting 19 laptops containing personal information were stolen from its offices.

The stolen laptops contained personal data on an unspecified number of customers, such as email addresses, passport numbers, dates of birth, and names, according to The Register, which first reported the theft. Importantly, no financial data was held on the laptops.

LendInvest unveils refurbishment product (Mortgage Introducer), Rated: A

LendInvest has launched a refurbishment product with interest between 0.92% and 1.1% per month which is rolled up and paid at the end of the term.

The loan is based on gross development value, not loan-to-value – and is available up to 70% GDV.

Customers can take out loans between £100,000 and £2m for terms up to 18 months.

Peer to Peer Lending on “Right Path” as Wealth Managers Seek Quality Investments (Crowdfund Insider), Rate: A

BondMason has published its Market Report 2017 reviewing the trends in the UK peer to peer lending market.  BondMason is a platform that provides investors a method to diversify their investments across many P2P lending platforms.

According to BondMason’s research, P2P lending is beginning to see a flight to quality as the industry matures and weaker platforms exit the market. BondMason’s numbers indicate that the UK direct lending market totaled £3.2 billion of lending in 2016. This is an increase of 39% versus 2015 but a drop in growth as the industry grew by 91% from 2014 to 2015.

BondMason believes there is significant room for growth of the online lending sector. While P2P lending accounted for £3.2 billion during 2016, the total addressable market is between £100 to £120 billion in the UK.

NatWest to offer online investment fund service and ‘robo-advice’ (Financial Times), Rated: B

NatWest is unveiling a service for customers to access investment funds online through the bank for the first time, ahead of plans to launch a “robo-advice” service later this year.

The service, called NatWest Invest launches later this month and will allow bank customers who do not wish to pay for financial advice to choose their own funds and invest with a minimum of £500.

Other banks in the UK are planning to follow suit by offering robo-advice. Santander is among the lenders in the process of developing an automated advice service and has invested in robo-adviser provider SigFig.

FinTech Monthly (Tech City News), Rated: B

Monese, an online banking app, raised a $10m Series A round. The app enables non-native citizens to open a UK bank account.

Seedcamp sold part of its stake in money transfer startup TransferWise. This news came shortly after it was reported that US giant Andreessen Horowitz increased its investment in the London-based startup.

And finally, Mastercard has launched a mobile marketplace for East Africa’s agricultural sector. The digital platform, called 2KUZE, meaning ‘let’s grow together’ in Swahili, will enable farmers to buy, sell and receive payments for agricultural goods via their phones.

European Union

How Private Debt/Alternative Credit Boosts Income and Risk-Adjusted Returns (LinkedIn), Rated: AAA

Quantitative easing has caused a significant distortion of asset prices and market dynamics. It has had an enormous impact on the price of most publicly-traded liquid assets, causing yields to drop below a level any return can historically justify. In this context, investors are looking for alternative solutions and private markets offer significant investment opportunities and value enhancement.

Alternative Investments and Alternative Credit have asset solutions that are very different from each other with very dissimilar drivers. Understanding these asset classes requires specialization and expertise. For example, in banks, sub-asset classes such as shipping, trade and commodity finance, infrastructure finance, leverage loans, and leasing are executed by specialized departments and treated as asset classes on their own merits.

Firstly, the active asset managers and institutional investors are providing the alternative sources of credit either directly or through their clients. This began the growth of a credit market along with the traditional bank lending in some sectors. The shrinking balance sheets of banks presented a tremendous opportunity for investors who were jolted by traditional fixed-income securities and needed options for diversification and higher yields.

Secondly, many new so-called Fintech companies in Alternative Lending have entered the market and established business models which are challenging the traditional status quo. They are still small in size in comparison with incumbent players; however, their business model is addressing many current challenges in the financial sector (inefficiency, information asymmetry, maturity transformation).

The increasing participation of the institutional investor market and new platforms are likely to bring more transparency regarding the actual return contribution of different asset classes in the future.

How Does Alternative Credit Enhance Risk-Adjusted Return and Income?

Currently, most liquid fully “institutionalized” asset classes do not offer the appropriate balance between risk and return. Monetary interventions themselves over the past few years have caused a positive return  on the most liquid public assets solely as a result of artificial demand pressure.

Contrary to public traditional fixed-income markets, Alternative Credit offers a private pricing differential (PPD) of 0.5% to 5% over the fixed income market, which is an attractive level.

In these uncertain times, Alternative Credit offers a plausible answer: “Going for the safest part in the capital structure and going for shorter tenors.”

  • Credit investments currently the highest safety in capital structure.
  • Alternative Credit can enable exposure for shorter tenors to self-liquidating assets (trade finance, factoring, supply chain finance).
  • Alternative Credit offers a floating rate exposure.

The best feature of Alternative Credit is its due diligence.

Alternative Credit offers portfolio construction opportunities to diversify other asset classes traditionally owned by banks (not mark to market) and segments that are not yet on the public market’s radar.

As equities became too volatile after the financial crisis of 2008, Private Debt became a surrogate for high-yield bonds. In addition, there was a contraction of more than 70% in the AAA-rated bonds and many of them lost their triple-A status (Preqin, 2014). This provided the cornerstone for the development of Alternative Credit, which enhanced the return of the portfolios by offering a combination of higher rates of return and lower risk.

Alternative Credit has already become the cornerstone of investments in many institutional portfolios and has become a regular source of income. It can be concluded that Alternative Credit is the new form of asset class that is expanding quite rapidly, in part due to the shortage of credit created by the credit crisis.

What drives the success of crowdfunding campaigns? (Invesdor), Rated: A

The first article, titled “Success drivers of online equity crowdfunding campaigns” addresses the research question that Andrea so aptly formulated. The question is highly relevant, as a large part of crowdfunding campaigns – both on Invesdor and on other platforms – have not reached their funding targets. Could something be done to increase the probability of a campaign succeeding?

Based on sixty campaigns that had been conducted via Invesdor, we found the following:

1.  Campaign characteristics that are pre-determined by the target company – with assistance from Invesdor – are relevant in determining the campaign’s success:

  • The lower the minimum investment requirement, the more investors and funds a campaign can be expected to attract.
  • Campaign duration is negatively associated with the number of investors.
  • Higher funding targets seem to attract larger numbers of investors.
  • The availability of financials in the pitch is positively associated with the number of investors.

2. The use of the entrepreneur’s (and Invesdor’s) networks is important for campaign success.

  • The more money the target company can raise through its and Invesdor’s private networks during the hidden phase, the more investors and more funds it is likely to attract in total.
  • Posting the campaign on social media is a strong predictor of success.

3. The understandability of the target company’s products may play a role in success

  • The results indicate that companies that offer consumer products, rather than products targeted to other businesses, may be more likely to conduct successful campaigns.

The results presented here are based on an aggregate assessment of campaigns and investments.

Fellow Finance Group 1 January – 31 December 2016 (Fellow Finance), Rated: B

2016 was a year of rapid growth for Fellow Finance. The number of platform users grew 220% and the total amount of intermediated consumer and business loans in Finland and Poland was above 50 million euros. This growth resulted in the overall loan volume exceeding 90 million euros which strengthened Fellow Finance’s position as the leader of the crowdfunding platforms in the Nordic countries and with 4,3% market share in continental Europe (source: Liberum Altfi Index). In Finland, Fellow Finance’s market share was over 30% of the whole crowdfunding market (source: Ministry of Finance of Finland). The average of annual yield for investors was 11%.

China

Hong Kong government dismisses report ranking city 5th for fintech (South China Morning Post), Rated: AAA

The government has dismissed a research report ranking Hong Kong only fifth last year among leading fintech hubs, saying the study did not directly compare financial technology development but rather financial and business environments as a whole.

During a Legislative Council meeting on Wednesday, finance sector legislator Chan Chun-ying asked the government why Hong Kong ranked three spots behind rival Singapore – which ranked second – in the report by global accounting firm Deloitte.

Banks should embrace fintech boom (The Straits Times), Rated: A

Fintech complements rather than threatens banking institutions. In my experience, banking has always been about technology, so today’s fintech innovation boom represents evolution rather than revolution for traditional banking. It is supplementing and diversifying the existing financial system – not replacing or disrupting it.

If we look closely, fintech is currently only focusing on a mere fraction of the financial services spectrum. To date, much of the focus of fintech has been on retail banking services – lending and financing along with payments-related products and services, where mobile and e-commerce has led to real demand from consumers.

Similarly, peer-to-peer lenders appear to be more focused on small businesses and higher-credit-risk borrowers than on mainstream banked clients.

Asia

Korean government to tighten watch over P2P lending (Pulse), Rated: AAA

From the second quarter, the government plans to toughen watch and scrutiny on peer-to-peer (P2P) lending service in burgeoning demand in South Korea.

Currently, moneylenders with assets worth at least 12 billion won ($10 million) fall under the broad state regulation. Smaller lenders can run money business upon registering with local governments.

Under a new act that would go into effect in the second quarter, small lenders also would have to comply with state regulation and watch.

Kelvin Teo erases borders with an online lending platform (Asian Review), Rated: A

In January last year, Riza Fansuri was in a quandary. The 37-year-old, who runs a small food supplier in a Jakarta suburb, wanted to develop new products, but that would take money. He tried applying for loans at banks, but they all turned him down because he could not provide sufficient collateral.

Desperate for help, he turned to a website for peer-to-peer lending, a method of debt financing that allows individuals to lend and borrow money directly from each other online instead of borrowing from banks. Half in doubt, he applied for a loan, and a week later, he managed to secure the 100 million rupiah ($7,485) needed to carry out his plan. His company successfully created two new products — instant ice cream and pudding mixes — that now account for 40% of its sales.

The website Fansuri used is run by Funding Societies, a fintech startup that operates in Indonesia, Singapore and soon in Malaysia. The company was founded by Kelvin Teo, a graduate from Harvard Business School, and Reynold Wijaya, an Indonesian classmate from the school. In less than two years, the company has arranged more than 360 loans worth a total of $19 million.

Authors:

George Popescu
Allen Taylor

Monday October 31st, Daily News Digest

Monday October 31st, Daily News Digest

News Comments Today’s main news: 2017 Forecast of MPL ABS volumes. Today’s main analysis : Discussion, ahead of Q3 Lending Club results, of present data and expectations. Lending Club’s PPT presentation where they announced and discuss auto lending. Today’s thought-provoking articles: A Marketplace critic supported by PwC’s denovo quarterly report. United States A weekly summary of the MPL space […]

Monday October 31st, Daily News Digest

News Comments

United States

United Kingdom

Asia

  • Korea to become a fintech hub. GP ” I strongly believe this will be the case, as I’ve seen Korean volumes in other financial sectors demonstrate Korea is a serious financial hub.”

Canada

China

United States

Weekly PeerIQ newsletter, (Email), Rated: AAA

US GDP growth clocked in at an annual growth rate of 2.9% and the probability of a December rate hike is increased to over 70%. A

2017 Forecast by PeerIQ, (Email), Rated: AAA

We expect the U.S. MPL market to grow in 2017. Specifically, we expect 47% YoY growth ($26.7 billion in life-to-date new issuance volumes since 2013) in the new issuance market under our base case.
Our forecast methodology is as follows:
  1. We start with consumer demand. We observe re-leveraging of consumer credit post-2011 and conclude that consumer demand for loans will continue to expand in 2017.
  2. We predict continued demand for short duration MPL ABS bonds given i) elevated interest rate risk and potential steeper yield curve for fixed-income investors, and ii) the favorable relative value of MPL ABS to other credit spread products.
  3. We build a bottoms-up framework that examines the pace and size of deal activity across repeat issuers to forecast 2017 ABS volumes under a base, bear, and bull case.
  4. Finally, we observe that ~55% of loans were funded via the ABS market in 1H 2016. We use an assumption of 50% funding via ABS to back out total MPL originations.
 
In our base case, we do not foresee a severe negative shock to the U.S. economy, and consumer debt growth stays on the same trajectory as next year. As the U.S. household market moves out of the balance sheet deleveraging phase, we expect an expansion in the total addressable consumer credit market.
Fixed-income Investors Continue to Favor MPL ABS in 2017
Asset managers are seeking short duration assets that have lower interest rate sensitivity in a rising rate environment. Within the ABS sector, we observe that marketplace ABS papers present strong relative-value. For instance, MPL student refi ABS papers retains ~50 bps of spread pick-up as compared to traditional private student loans ABS.
Fixed-income investors, especially traditional securitized product investors, will continue to actively bid the MPL ABS bonds in 2017 amidst rising inflation expectations and a global reach for yield. A healthy yield appetite from bond investors will support stable demand for new issuance.
Repeat Issuers Continue to Power the New Issuance Market in 2017
We believe that the emergence of repeat issuers and broader rating agency coverage allow the MPL ABS category to be incorporated into mainstream ABS sector.Indeed, as warehouse financing roll risk increases non-bank lenders are increasingly funding via securitization to raise permanent, low-cost, non-recourse capital.

MPL ABS Issuance to Grow Approximately 47% YoY for 2017

Looking ahead to 2017, we believe that the MPL ABS new issuance market will continue to be dominated by repeat issuers, such as SoFi, Marlette, Avant, Earnest, CommonBond, and others.

Given the repeat issuers make up about 80% of the MPL ABS issuance, we put our base case new issuance outlook at $11.2 billion, or a $26.7 billion total ABS issuance, backed by $30 billion of loans, by YE 2017.  We ignore growth in the real estate MPL market for this analysis (although we do observe ABS activity with LendingHome and expect others to follow).

Ron Suber: “Victory Goes to the Ones Who Change and Adjust”, (Crowdfund Insider), Rated: A

In a recent article on Lending Times, Suber highlighted 5 lessons learned during 2015:

  • We can’t do it alone
  • You better have awesome partners
  • Focus on what’s critical on your path to success
  • A reputation takes years to build, but minutes to tarnish
  • Victory goes to the ones that change and adjust

But the fact of the matter is that online lending is based on a simple premise of providing a better service, at a lower cost, while delivering higher returns for investors. While some observers are of the belief the industry is not sustainable because they aren’t banks (and don’t have deposits), the industry continues to evolve, adjust and improve – addressing challenges head on.

Loan originations are growing again. Online lending is not a static industry but fairly agile and, if Orchard is correct, “things appear to be getting back on track”.

“While it’s now clear that all press is not good press, 2016 was a year of complete industry education, awareness, and understanding (EAU). 2017 will become the year of platform profitability, ubiquity and secured permanent capital for the leading online providers of credit to consumers, small business, mortgage, student and real estate loans.”

Can better products and lending practices heal marketplace lending’s hangover?, (Tradestreaming), Rated: AAA

In 2016, the trend reversed. For Lending Club, total originations for Q2 2016 came in at $1.96 billion, down from a peak of $2.75 billion in Q1. In 2Q15, Prosper reported a steep decline of over 50% in originations compared to same period a year before.

The hype can be clearly seen in PwC’s DeNovo quarterly report, which tracks fintech trends. Marketplace lending was the top trend for the first three-quarters in 2015 but dropped to the second-largest trend in 4Q15. In 1Q16, the industry did not even make the top 10.

The repercussions of such action are now visible with a rise in delinquencies and a damning report from Moody’s questioning the viability of the asset class. “Investor overreacted to that news,” said Wu, adding that the 2015 vintages are hurting current performance, overshadowing newer and better vintages that will generate long-term growth and returns for investors.

Marketplace lenders are at a crossroads. The resulting shakeout, however, might prove to be beneficial to the market.

“Investors are getting more realistic about returns, and platforms are getting more realistic about what they can get away with. They need to come back and offer products that are compelling for investors,” Wu concluded.

Lending Club’s Third-Quarter Earnings Release: A Preview, (Seeking Alpha), Rated: AAA

Lending Club guided investors to a 3Q loss of -$15M to -$30M.
This may be optimistic, as originations likely shrunk from $1.9B to $1.5-$1.75B.
The company is likely to announce an adjusted loss of $20-$40M.

In a previous article, we noted that Lending Club had several chores ahead of it in order to win back investor confidence.

Demonstrate to regulatory authorities that fraud had not spread throughout the company
Immediately adapt company expenses to match the lower revenue growth expectations
Shore up note investor confidence in the company’s efficacy and underwriting

On Auto Loan Refinancing

Lending Club began as a way for consumers to obtain non-secured loans. The auto loan refinancing business represents a move into secured assets and puts further distance between Lending Club and the retail investors it once relied upon. The company noted that most auto dealers place a 1-3% surcharge on top of the loan that is backed by the bank, and the competitive advantage of the auto loan refinancing is that the company will be able to offer lower rates by cutting out the middleman.

In their statement, we noted that loan servicing is outsourced. With no ordination fee charged to borrowers and no servicing fee charged to lenders, it is unlikely we will see these loans on either the whole loan market or the fractional market. Either Lending Club will remain a balance sheet lender, or it will securitize the loans and sell them in batches to institutional investors.

Here is the Lending Club Presentation Where They Introduce Auto Loans, (Crowdfund Insider), Rated: A

The Powerpoint Presentation

On one of the slides, Lending Club itemized their four verticals today:

Personal Loans
Patient Finance
Small Business
Auto

Lending Club will announce Q3 results on November 7th at 8AM ET. Perhaps we will learn more at that time.

United Kingdom

Ex-FSA head: maturing P2P industry could cause regulatory headaches, (CityAM), Rated: B

Although Lord Turner said that peer-to-peer lenders are “a useful part of the system” he cautioned that regulators should be concerned by any move towards complex securitisation – when debts are packaged together as financial instruments to be sold on. The “real flashing red light” would be the emergence of instruments such as structured investment vehicles (SIVs), he warned.

Asia

Korea to become next fintech hub, (Korea Times), Rated: A

Korea is at the initial stage of embracing fintech, compared with other industry-leading marketplaces such as the United States or the United Kingdom,” the 31-year-old CEO said in an interview.

“But the fintech market here is getting more activated and popularized, as Korea is on a path to deregulate for emerging fintech business,” he said. “In the U.S. and China, the fintech market is growing fast, due to their open environment toward regulations.”

“Korea has tight and centralized financial information management infrastructure, which is why I believe the nation will become one of the world’s most influential fintech powerhouses,” he said.

“We collected some 800,000 big datasets in Korea to analyze investment patterns of each investor,” he said. “The big data allowed us to create a ‘recommended algorithm’ for investors. This is then used to create a more specific and personalized investment portfolio for them to reinvest on our platform.”

LENDIT is currently the nation’s top-tier P2P lending operator. The company has grown rapidly to have lent a total of more than 21 billion won in just 18 months after its foundation in March last year.

Canada

Canadian P2P Lending Loop open for business, (Bankless Times), Rated: A

Toronto-based Lending Loop, a platform connecting small businesses in need of financing with Canadian investors,  is open for business after completing its registration with the Ontario Securities Commission and additional regulators. It is available in every Canadian province except Quebec.

Founders Cato Pastoll and Brandon Vlaar launched Lending Loop in late 2015. The registration process to become an exempt market dealer began this March.

China

China’s Loosely Regulated Online Lending Has Inspired an Army of Freelance Debt Collectors, (Fortune), Rated: A

Chinese news website The Paper reports that hundreds of groups of freelance debt collectors have emerged on Chinese social media, dubbing the phenomenon a”gray chain of debt collection.” Users in these groups would share “best practices” from bombarding borrowers with frequent phone calls to posting public notices around their homes or even swarming them with “beggars,” practices that a Chinese lawyer told The Paper could veer into illegal territory.

Authors:

George Popescu
Allen Taylor

July 25th 2016, Daily News Digest

News Comments United States A good summary by PeerIQ of the latest securitizations of SoFi and Marlette with good comparisons to previous securitizations done by the same firms and other firms. Article describing as has been the trend lately, how a German fintech bank partners with Telefonica which has more accounts than CommerzBank and Postbank, […]

News Comments

United States

United Kingdom

Taiwan

Korea

Singapore

India

China

 

News Summary

 

United States

Weekly securitization update (PeerIQ), Rated: AAA

Last week saw a substantial uptick in issuance news in MPL ABS securitization space. Four deals, totaling more than $1 billion of bonds, were either priced or announced last week.
SoFi and Marlette priced a student and consumer loan deal respectively. Both deals executed at meaningfully tighter levels.
SoFi
SoFi strengthens its lead as the largest MPL ABS issuer by volume and is enjoying a virtuous cycle of lower funding costs, improved liquidity, and expansion of the ABS base. At the current pace, PeerIQ predicts SoFi may issue 8 to 10 deals this year and is on pace to be one of the largest issuers globally in certain markets.
   sofi securitization comparison
sofi securitization details and comparison
Marlette
Marlette is a balance sheet lender that originates unsecured consumer loans via the Marlette BestEgg Platform. Loans issued through the Marlette platform are originated by Cross River Bank (CRB). CRB and Marlette retain a share of loans issued through their online platform addressing potential “skin in the game” and true lender concerns.
 marlette securitization comparison
marlette securitization details and comparison
MFT 2016-1 is the second deal from Marlette this year and is backed by a $205 million loan pool. The pricing of MFT 2016-1 is about 200 basis points tighter across capital structure as compared to CHAI 2016-MF1 (Chart 1).
The consequence of better execution on IRR for equity tranche holders is significant. We find that the excess spread on MFT 2016-1 increases IRR by a whopping ~20% as compared to CHAI 2016-MF1.
Market Outlook
In our view, ABS issuance growth trends remain robust this quarter. We predict Q3 will lead to record issuance exceeding historical quarterly deal volumes including prior quarter ($1.7 billion), and last year’s quarter Q3 ($1.1 billion).
Dynamics remain favorable–a global low yield environment, the short duration of MPL ABS assets, and improved IRRs for junior tranche holders–will lead to growth in MPL ABS securitization as we have suggested in our 2Q 2016 Securitization Tracker.
Platforms that generate strong credit performance, build investor trust, and can improve the distribution of their products (via ABS or otherwise) are well positioned to grow.

Counting Down to the Bank of Facebook, (Bloomberg), Rated: AAA

The latest move in upstart finance will soon arrive in Germany, where a new mobile banking service from phone carrier Telefonica will offer checking accounts, a free MasterCard and small instant loans. Telefonica’s partnering with digital bank Fidor, effectively using its license as a springboard for financial services.

It’s a deal that makes sense on both sides. Telefonica wants to assure customer loyalty while maybe gaining a bit of revenue. Fidor needs scale: its customer base of around 100,000 in Germany is hardly the stuff of nightmares for, say, Commerzbank and its 16 million individual customers. But Telefonica’s 43 million customers is a different ballgame.

fidora n26 customers source Bloomberg

That’s not to say it’s a recipe for success — telecoms’ past forays into finance have been mixed. Vodafone’s early experiments with mobile payments in Africa were a big success. U.S. carrier T-Mobile started offering pre-paid debit cards and money transfers to customers in 2014, and ended the service this month because it faced too many competitors.

Tech Threat
A survey of bankers shows non-banks are seen as the biggest threat, ahead of start-ups or incumbents

tech threat sources

For now, the tech giants have barely scratched the surface. Apple and Google have mobile payment tools, Facebook users can send money to friends through Messenger and Amazon is pitching student loans in partnership with Wells Fargo, but they’re not exactly setting the financial world on fire. Their Asian cousins are more advanced: WeChat and Tencent can now be used to pay for everything from rent to a taxi, and Alibaba runs mutual funds.

They’re set to be the main competitors for the payments business in Europe, according to 96 percent of respondents to a Finextra/FIS survey of finance companies last year.

This doesn’t have to be just a nightmare for incumbents. It could be an opportunity. European banks could lift pre-tax profits by 40 percent in five years if they find the right way to limit the impact of disintermediation and capitalize on new tech, according to BCG Partners.

With more ventures like Telefonica’s on the way, expect the pressure to rise.

Marketplace Lending Is ‘Likely Here To Stay,’ But Needs Clearer Regulation, (S&P Global), Rated: A

Edith Ramirez, chairwoman of the Federal Trade Commission, acknowledged the significant growth of the marketplace lending industry during a June 9 forum hosted by the FTC, the first in a series of events focused on fintech. She mentioned the “rocky spring” for marketplace lending and noted reports that show flagging investor interest in the space. Still, Ramirez said that the potential benefits of the services provided by this new breed of financial institution mean that marketplace lending is “likely here to stay.”

“It’s not a good idea to look at the bank model and just port that over and drop it on,” Knight added. “They are different models and they generate different risks and the regulation should reflect that.”

Conor French pointed out that the regulatory environment in the U.K. is easier to navigate for online lenders who are overseen directly by the country’s Financial Conduct Authority.

Lauren Saunders, associate director at the National Consumer Law Center, pointed to the need to “flush out the bad actors” from the marketplace lending industry.

French of Funding Circle pointed out that the traditional lending choices in the financial services industry are not working. They are leaving many consumers “underserved and underbanked,” he said.

Jessica Rich, director of the Bureau of Consumer Protection at the FTC, said that it is “encouraging to learn that marketplace lenders are taking proactive steps to self-regulate.” Still, she pointed out that self-regulation is “not enough.”

Lending Club’s Savior Is Patrick Dunne, (Seeking Alpha), Rated:A

Lending Club hired Patrick Dunne as its Chief Capital Officer.

Patrick Dunne brings a global network of contacts to Lending Club and has experience in dealing with failed products.

Patrick led the growth of BlackRock’s iShares business, whose products often got shut down.

Patrick has worked as a strategist, whose job is to convince clients that a certain trade is attractive.

Adventurous investors may want to pick up shares on the revival of Lending Club’s growth.

SoFi Consumer Loan Program 2016-2 LLC (“SCLP 2016-2”) ( Press Release Kroll Bond Rating Agency), Rated: A

This is a $480.55 million consumer loan ABS transaction that is expected to close on August 1, 2016.

This transaction represents SoFi Lending Corp.’s (“SoFi”) second rated securitization collateralized by a portfolio of unsecured consumer loans. SoFi currently originates personal loans through its 21 state licenses or complies with certain requirements where a state lending license is not required. There was one prior unrated securitization, in which SoFi or SoFi’s institutional investors were the sponsors and the collateral was unsecured consumer loans.

Please click on the link below to access the full report: SCLP 2016-2

Collaborators Outnumber Would-Be Disruptors at Fintech Demo Event, (American Banker), Rated: A

“Fintech is destroying legacy systems and legacy attitudes,” declared Jesse Podell, the emcee and managing director of startupbootcamp FinTech New York, bounding on and off the stage in high spirits.

Five of the 10 graduates from the startupbootcamp accelerator program pitched technology designed to be used by traditional banks.

AlphaPack‘s product, Sandbox, gives banks a safe place to try out new technologies from fintech partners.

Fluent, a startup that began in Kentucky and is migrating east, has a blockchain-based platform for the $6 trillion trade finance space.

RepreZen set out to solve a longstanding problem for banks: data integration.

VendorMach provides what it calls an “early warning system” for vendor risk management. The software is designed to monitor banks’ vendors for signs of liquidity risk, data breaches and other potential issues.

Visualize Wealth has created white-label software for banks to embed in their mobile apps, to give their customers a view of their investments and an objective sense of how those investments are performing.

The Disruptors

CFX has built an online trading platform for private real estate investment trusts, a market the startup pegs at $84 billion, with 1.2 million retail shareholders.

Factury has a blockchain-based lending platform. “The lending industry is filled with fraud and inefficiency at every level,” said Arturs Ivanovs, Factury’s chief marketing officer. “It’s mostly driven by paper-based processes and human labor. Only 7% of this industry is digitized.” Distributed ledger technology will be the fundamental infrastructure for the lending industry, he said.

Consumer-Facing Plays

Seal has built mobile payments into its app providing professional agreements.

token says it’s working to make credit card fraud a thing of the past. “Our credit cards get stolen every day when we shop online,” said Yana Zaidiner, token’s chief operating officer. The firm’s mobile app lets people use a pseudo credit card and payment identity while keeping their real payment information hidden, similar to another startup called Privacy.com.

Lawnmower.io made a pitch that’s even more meta and of-the-moment than AlphaBox’s: a mobile app for investing in blockchain assets.

United Kingdom

Growth in UK marketplace lending stagnates, (Financial News), Rated: AAA

Alternative finance data provider AltFi Data estimates that UK P2P platforms will have originated between £260 million and £290 million in loans July, in line with the amount lent monthly since April.

Origination had grown rapidly up to March, when lending spiked to reach £345 million.

He said: “It’s too early to tell what the impact of Brexit has been on origination volumes in the marketplace lending industry. We do know that volume growth has been tepid for the last nine months – long before Brexit was dominating the headlines. Brexit, however, may be added to the potential headwinds facing the industry.” According to AltFi Data, the sector has been experiencing a decline in its monthly net lending growth, which measures the change in outstanding principal. Net lending at the UK’s top four platforms was £44 million in June, down 37% from the previous month.

Rhydian Lewis, the chief executive and co-founder at RateSetter, said: “In recent months there’s been a levelling-off in general borrower demand as people defer large purchases, perhaps reflecting economic uncertainty. A more longstanding thing in our sector specifically is that platforms’ focus has been on sustainability rather than growth, with, for example, the involved process of gaining full regulatory authorisation.”

Landbay: From Prelaunch to Established Platform, How Crowdfunding Fueled Business Growth, (Crowdfund Insider), Rated: AAA

John Goodall and Gray Stern launched their company, Landbay, with the help of Seedrs.  Before their website was even live, Goodall and Stern were raising seed capital on the crowdfunding platform for their vision of mortgage finance.  Their first funding round was for only £50,000 in SEIS eligible seed funding. The round closed in December of 2013 at £71,590 with a pre-money valuation of £616,667.

Jump forward three years and several crowdfunding rounds later, and Landbay, a peer to peer lending platform for secured property loans, has now financed over £42 million for hundreds of mortgages. Landbay has joined the highly respected UK P2PFA, received an investment from Zoopla and reported a  £250 million wholesale funding line provided by a European asset management firm and a major bank. Landbay is now moving forward with a strategy of balancing retail investors and institutional money and ultimately securitization. These are a step stones to furthering growth as Landbay has captured traction as a niche player in the vibrant peer to peer lending market in the UK.

We chose crowdfunding as we have found it to be an effective marketing channel to increase brand awareness and to build a network of users from day one, whilst of course raising capital!

Things are going really well at Landbay. It’s now been two years since our first loan completed, and we’ve lent a total of £42.78 million – in fact, we were 2015’s fastest growing peer-to-peer lending platform in the UK.

This startup helps people get student loans funded by grads of Harvard, Cambridge, and other top unis, (Business Insider), Rated: A

Prodigy Finance has so far lent $200 million (£152.7 million) over its platform since launch in 2008, but CEO and cofounder Cameron Stevens believes loans will total $500 million by the end of the year thanks to several big institutional clients who are set to partner with the platform.

Stevens says: “If you’re coming from India and you’ve been accepted to Harvard or London Business School or wherever it may be — all of the domestic students can access finance but if you’re coming and you’re crossing a border, none of your credit history is following you and you’re excluded from all of that.

Prodigy Finance has so far provided student loans to 4,500 people, with an average loan size of $40,000. Most of the funding goes towards post-graduate students who are looking to do an MBA or similar. Stevens says it has a 99% repayment rate on its loans.

Lending Club Scandal Provokes Major UK ‘Peer-To-Peer’ Investigation,(Forbes), Rated: A

Comment: This article brings no new point of view or additional information but summarises well the last few weeks of press in the UK on p2p.

Campaign for Fair Finance (CFF) founder Dr Roger Gewolb has welcomed the intervention of the UK Financial Conduct Authority’s (FCA) new chief executive Andrew Bailey as an investigation gets underway into peer-to-peer (P2P) lending, a relatively new internet-based way of obtaining a loan. It comes amid concerns in the US and UK about how safe the sector is and protections afforded to consumers.

The P2P lending market in the UK grew to over £2.3bn in 2015 from £1.2bn of new lending in 2014 according to data sourced directly from P2P platform loan books and proprietary BondMason research. It has been predicted that while the rate of growth will slow, a further £1bn to £1.5bn will be added in 2016.

“We want crowdfunding and peer-to-peer lending to succeed,” states Gewolb, a British American financier and consumer protection advocate. “We need an alternative to the tired old banks, but they need better oversight without regulating or legislating them out of business.”

Turning to Andrew Bailey’s first grilling before the Treasury Select Committee earlier this week on Wednesday 20 July, the new CEO of the FCA, a main UK financial regulatory body that operates independently of the government, said that he was actually concerned about the way peer-to-peer lending is sold to consumers. And, he believes lenders get very close to promising investors they will get their money back, plus the interest they have been promised.

However, this cannot in fact always be guaranteed in all instances as P2P lenders are not protected by the UK’s government-backed Financial Services Compensation Scheme (FSCS). Any funds lent through a P2P website are not covered by the FSCS, which by contrasts with safeguards traditional bank savers have for up to £75,000 (c.$100,000).

Mr Bailey also even warned that he felt there were similarities in the way UK’s P2P lenders operate to those of Northern Rock, a British savings bank that crashed mightily and had to be bailed out by taxpayers’ money during the financial crash of 2008. One wonders if it could all happen again.

Recently, other questions have been raised about how safe P2P lending actually is. Highlighting matters, Funding Knight, a UK P2P website platform that promised investors returns as high as 12% for lending money to small businesses, was rescued by investment firm GLI Finance earlier this July after falling into administration (a British form of ‘Chapter 11’). Hundreds of people had feared that they would lose all of their money when the company simply ran out of cash.

Gewolb stresses vigorously too that: “The P2P platforms are clearly competing for bank deposits from the public, and yet they are running without anything near the strict supervision, transparency, independent oversight and protection that banks in the UK are subjected to as a matter of course.” “As things stand, the P2P loans market is relatively untried, untested and not vigorously regulated. Who is looking out for the consumer if it all goes wrong?,” asks Gewolb. He has a point.

“We are here to help,” explains Gewolb. “Whilst we want the industry to survive and thrive, we fear that to date there is not the requisite amount of transparency and independent oversight needed.”

“At the same time we are concerned that there could be over reaction by the regulators and the industry could be regulated out of sight,” argues the campaigner. As the Chinese proverb goes ‘Be careful what you wish for – You just might get it’.

Taiwan

Regulatory Development of Peer-to-Peer Lending in Taiwan, (p2p Banking), Rated: A

Comment: the language in the article seems translated from Chinese. 

In order to encourage and accelerate the development of fintech industry in Taiwan, the financial authority, Financial Supervisory Commission (FSC) of Taiwan, has published Fintech Development Strategy White Paper on May 2016[i]. One of main goals is evaluating the possibility of introducing the mechanism of P2P lending into Taiwan’s capital market and providing a regime for regulating this industry.

Some business models of P2P lending are forbidden due to conflict with The Banking Act[ii] in Taiwan. Recently, it is considered to be introduced in Taiwan and evaluated by the recently established project team of the financial authority in Taiwan, Financial Supervisory Commission (FSC)[iii]. Despite the fact that the attitude toward P2P lending industry of financial authority in Taiwan is still vague, as of July 2016 there are three P2P lending platforms already providing their services in Taiwan, including Lend & Borrow[iv], Wow88[v], XiangMinDai[vi]. They have tried to design their business model to avoid potential legal risks. For better understanding of the P2P lending industry, this article tries to provide a brief regulatory overview of Taiwan in following part.

Currently, there is no any specific regulation toward this industry in Taiwan. Although there is no financial regulation of P2P lending in Taiwan, Banking Bureau of FSC has issued a statement[ix] on April 14, 2016, pointing out some legal compliance issues for P2P lending platforms, including (1) platforms should not involve in issuing any securities, (2) ensure privacy of customers, (3) activities of deposit and store-value business without licenses are forbidden, (4) illegal ways of debt-collection is forbidden.

Korea

Online Lending Takes Root in Korea, Spurring Rush for Regulation, (Bloomberg), Rated: AAA

South Korean investors beset by Asia’s third-lowest benchmark yields are embracing peer-to-peer loans that offer average rates of about 9 percent and not a lot of information about where the money winds up.

The nascent online P2P lending market more than doubled to 72.4 billion won ($63.7 million) in the first three months of 2016, Korea’s Financial Services Commission reported on July 12. Cumulatively, P2P loans made since 8Percent became the first platform in December 2014 totaled 153 billion won as of June, the Korea P2P Finance Association of 22 companies estimates.

The expansion is being stoked by South Koreans’ desperation for returns, with the yield for 10-year government bonds slumping to 1.42 percent last week. That’s lower than every Asian nation apart from Taiwan and Japan. The rapid growth has added to urgency for Korea’s government to protect investors from potential fraud, and the Financial Services Commission held a meeting Friday to start drafting industry guidelines. China cracked down last year after a site called ­Ezubao was alleged to have cheated 900,000 investors.

“You must watch out because many P2P businesses don’t clearly disclose where the investment money goes,” said Park Tae-woo, a credit analyst at Samsung Securities.

P2P lenders such as 8Percent, Funda and Midrate directly match lenders with individuals or businesses in need of money. The industry generally offers average rates of about 9 percent to 10 percent, according to the firm 8Percent. The Bank of Korea on July 14 held its benchmark interest rate at a record low 1.25 percent.

Singapore

Singapore: Crowdo gets MAS licence for P2P lending, equity crowdfunding, (Deal Street Asia) ,Rated: A

Singapore-based crowdfunding platform Crowdo has received its full Capital Market Services (CMS) licence from the Monetary Authority of Singapore (MAS) for securities crowdfunding (SCF) to deliver both peer-to-peer (P2P lending) and equity crowdfunding.

The Securities Commission Malaysia is currently in the midst of operationalising P2P financing for small and medium businesses by 2017. It has called for submissions from those interested in launching P2P financing platforms and had reportedly received about 100 submissions.

Crowdo’s platforms in Malaysia and Indonesia were started just a few months of each other. Since then, the ECF platform in Malaysia has gone on to help facilitate both the largest ECF offer in the region and the first ECF offer lead by a venture capital firm Gobi Partners. On the Indonesian lending platform, it has processed more than 600 loans with zero defaults.

“The license granted to us by MAS effectively makes us the first and only operator in Southeast Asia that can undertake P2P lending under a full license. We are here to stay and to play our part in making Singapore a truly exciting global fintech hub,” it said.

India

Should you look at alternative loans?, (LiveMint), Rated: A

There is a high rate of technology adoption in the SME segment and most of the applications get completed online, he said. Capital Float lends Rs.50,000 to Rs.1 crore, for tenors of 60 days to 4 years, with interest rates in the range of 16-19% per annum, Rishyasringa added.

w_money-lead-kBAG--414x621@LiveMint

China

The regulated evolution of P2P lending in China, (Fintech Innovation), Rated: AAA

The latest regional report on Alternative Financing published by the University of Cambridge, Tsinghua University and University of Sydney in partnership with KPMG titled “Harnessing Potential: The Asia Pacific Alternative Financing Benchmarketing Report” positions China as the world’s largest alternative finance market with transaction volume in excess of US$101.7 billion in 2015 – almost 99% of the total volume of Asia Pacific.

The online alternative finance market in China grew from US$5.56 billion in 2013 to reach US$101.7 billion in 2015 averaging 328% growth rate over two years. Peer-to-peer lending, both consumer and business together, account for about 91% of all alternative financing in the mainland.

alternative_financing_in_china_2015-600x349

Peer-to-peer (P2P) lending remains the popular option for consumers and small and medium-sized businesses (SMBs) in China that otherwise would have difficulty getting funding from banks. The lack of regular oversight during the early days of P2P lending in China has led to a mushrooming of online lending platforms with some estimates of as many as 2,595 P2P platforms in 2015. The closure of over 896 such platforms in 2015, in addition to high profile scandals such as the eZubao Ponzi scheme, has prompted the China Banking Regulatory Commission (CBRC) to released new rules.

growth_of_alternative_financing_in_china_2015

China’s CreditEase to Raise $ 200 Million for Private Equity Fund, (Bloomberg Tech), Rated: AAA

CreditEase Group, which runs a wealth manager and peer-to-peer lender Yirendai Ltd., is seeking to raise $200 million for a global private equity fund as Chinese individuals step up investing abroad.

The fund, which CreditEase started in May, invests in companies directly as well as private equity funds. Representatives from KKR and Blackstone declined to comment.

A separate $80 million pool has invested $50 million in consumer loans from U.S. Internet lenders Prosper Marketplace Inc. and Avant Inc., according to Williamson. The firm has also set up funds focusing on areas such as financial technology and real estate both overseas and in China.

CreditEase distributes products through its 3,200 wealth advisers from about 150 offices in China. The wealth business had more than $6 billion of assets under management at the end of last year. The firm is the majority shareholder of Yirendai, the first Chinese online-loan platform to obtain an overseas listing. Shares of Yirendai have more than doubled in New York trading this year.

Default Pain Turns Into Gain for China’s Debt Rating Companies, (Bloomberg), Rated: AAA

China Bond Rating Co. started selling “The Riskiest Chinese Bond Issuer List” this year and has offered more training sessions to financial institutions than in the whole of 2015. Golden Credit Rating International Co. said it had set up a new department to address investors’ inquiries and provide seminars. S&P Global Ratings and Moody’s Investors Service also reported a spike in interest from fund managers.

Chinese regulators have stepped up controls on rating firms after investors expressed dissatisfaction. The China Securities Regulatory Commission said in March it had issued warning letters to six of them on violations.

Dagong Global Credit Rating Co., Shanghai Brilliance Credit Rating & Investors Service Co., China Chengxin International Credit Rating Co. and China Lianhe Credit Rating Co. cut a record 88 bond issuer ratings in the first half of this year, compared with 57 downgrades in the same period of 2015, according to data compiled by Bloomberg. Corporate bond defaults dropped to zero in July, from one in June and five in May, amid signs that local governments are helping companies in financial trouble.

china downgrades vs upgrades chart

China Bond Rating’s Yang said there has been an “obvious” increase in foreign investor subscriptions to the firm’s list of the riskiest bonds. It provides risk appraisal on debt portfolios for investment firms, and started issuing a daily report evaluating newly sold notes from February. The firm has trained almost 1,000 people nationwide on credit risk management through 10 workshops it has held this year, up from 7 in 2015.

“The surging defaults are giving space for rating agencies to develop risk management businesses,” said Fullgoal’s Ye. “But Chinese regulators should make sure there are firewalls between a ranking company’s rating and investment advisory services.”

Luo Guang, chairman of Golden Credit, sees more defaults in the second half than the first.

China has a boom in ‘get rich quick’ schemes, instead of the economic reform it needs, (South China Morning Post), Rated: A

The Chinese government has been promoting the slogan “All People Innovate, Tens of Thousands Start Business”.  This movement is becoming a bubble with tragic consequences down the road. Starting a business is hard. Innovation is harder.

The start-up mania won’t solve China’s economic difficulties. The economy has been in the doldrums for four years because the government is not addressing the structural problems. The truth is that the investment and export-led model has run into a brick wall; the world is just not big enough for China to develop like Japan or the Asian tigers.

China’s needed reforms are not coming because they conflict with the political doctrine of concentrating economic power in the state sector. Hence one bubble after another has been stoked in the hope that a miracle would happen to the economy without the need to shrink the government.

P2P is the latest, but by no means the biggest, example of the true nature of China’s bubbles. They are about robbing the masses to enrich the few, all in the name of innovation or boosting the economy.

“Get rich quick” is the reigning ideology today, especially for the young. Nothing fits the description better than the internet bubble.

China should stop chasing pipe dreams and get back to basics. Its economy has great potential. Its per capita income could be doubled just by carrying out proper reforms: first, household disposable income should be lifted from 40 to 60 per cent of GDP; second, investment should decrease to 30 per cent from half of the economy; and third, the market, not the National Development and Reform Commission, should decide where and how much to invest.

The hard part is that all these necessary reforms depend on shrinking the state sector and limiting government power. China’s future depends on it.

Author:

George Popescu
George Popescu

July 12th 2016, Daily News Digest

July 12th 2016, Daily News Digest

News Comments United States LendingClub’s charge off grows from 4.58% to 6.31%. Some people claim it is due to the company verifying only 26.8% of borrower’s income vs 49% in 2013. However, there was a higher proportion of bad loans among those verified than those that weren’t verified, roughly 12% vs 7% respectively. The real […]

July 12th 2016, Daily News Digest

News Comments

United States

European Union

United Kingdom

Korea

India

New Zealand

News Summary

 

Country

LendingClub’s Newest Problem: Its Borrowers, (Wall Street Journal), Rated: AAA

From loans made in 2013 through the first quarter of 2015, gross charge-offs of LendingClub’s lower-graded loans a year after issuance jumped to 6.31% from 4.58%, an increase of 38% or 1.73 percentage points. Charge-off rates on top-graded loans—which go to borrowers with stronger credit histories—rose less dramatically, to 1.51% from 1.46%, according to a presentation by the firm in May. Note: Do not mix charge-off rate and non-performing rate. Charge-off is a usually small subset of non-performing.

Charge-offs are ticking up at some other lenders. As of May, about 4.2% of the principal amount lent by Prosper Marketplace Inc. in the first quarter of 2015 had been charged off, according to MyCRO, a data tracker from online lending and securitization platform Insikt. Loans made a year or two earlier had seen charge-offs of 3.0% and 3.8%, respectively, after a similar amount of time had passed. A Prosper spokeswoman had no immediate comment.

Meanwhile, the percentage of loans written off by banks on their credit-card books last year hit the lowest level since the 1980s, according to Federal Reserve data. The rate was 3.16% in the first quarter versus 3.78% at the beginning of 2013, according to the regulator’s data.

As part of their loan-approval process, most lenders have automated the processes of checking borrowers’ credit metrics and looking up their histories while in many cases avoiding more labor-intensive practices of collecting and reviewing pay stubs or tax returns. For instance, this year, through the first quarter of 2016, LendingClub had verified actual income for 26.8% of loans, down from a peak of 49% in 2013. The company also has argued that verifying every applicant’s income is unnecessary. For loans made in 2012, for example, there was a higher portion of bad loans among those verified than those that weren’t verified—roughly 12% and 7%, respectively.

While about one-third of borrowers said they were paying down credit cards with their online loans, 46% actually started carrying at least 10% more in credit-card debt after getting the loan—well above the 30% rate for unsecured personal loans made by all lenders, Experian said.

LendingClub borrowers are among those who have become more indebted as the firm expanded. Debt-to-income ratios—a common credit measure—for LendingClub borrowers rose to 19.2 in 2015 from 13.8 in 2011, according to an analysis of loan data by research firm MonJa.

Legislation Proposed to Counteract Court Ruling on State Usury Caps, (Wall Street Journal), Rated: AAA

A Republican lawmaker late Monday introduced a bill aimed at helping debt buyers bypass state interest-rate caps, mounting a direct response to a case the Supreme Court recently declined to hear. The move comes after the Supreme Court declined to hear a case in which the Second U.S. Circuit Court of Appeals in New York determined debt buyer Midland Funding LLC couldn’t charge an interest rate higher than New York’s usury cap after purchasing the debt from a Bank of America Corp. unit.

“This ruling will restrict the expansion of credit and restrict innovation” and “poses a risk to the secondary credit markets. It also undermines peer-to-peer lending platforms in the current business model,” Mr. McHenry, a top Republican on the House Financial Services Committee, said in an interview with The Wall Street Journal. “The consequences of the court ruling is what we’re seeking to fix.”

The proposal is likely to generate as much opposition as the case, with debt buyers wanting to keep federal pre-emption and consumer groups pushing hard for states’ rights to protect consumers from being charged high interest rates. Analysts have already predicted any legislation in this area would be difficult to pass.

“It will have trouble passing because the Democrats are going to look at it as a means of circumventing consumers and Republicans will look at it as an unnecessary overlay of states’ rights,” said Isaac Boltansky, an analyst at Compass Point Research & Trading LLC.

The proposal is among a series of bills that Mr. McHenry has been rolling out as part of a package to promote financial innovation called the Innovation Initiative.

As a part of the initiative, Mr. McHenry introduced another bill Monday to the House Ways and Means Committee that would require the Internal Revenue Service to use “website-based, real time responses” when a lender requests a document from the IRS to verify a person’s income and other data points to approve a loan.

Amazon Looks Set to Deliver in Structured Credit After Hire, (PeerIQ), Rated: AAA

Online retailer Amazon has been quietly building a business lending to its customers and now looks set to open this asset book up to investors by securitizing some of these loans.

Nick Clemente, a former director with BNP Paribas’ structured credit team responsible for origination and execution of structured credit and credit derivatives, has joined the tech giant to run capital markets for its Amazon Lending business.

A recent investor newsletter from the firm referred to the group as having provided financing of over $1.5 billion to small and medium-sized businesses across the US, UK and Japan. Amazon Lending specialises in short-term lending and is said to be sitting on $400 million of loans.

The newsletter adds that Amazon Lending is looking to partner with a bank so that these dealers can manage the “bulk of the credit risk”.

How New York Beat Silicon Valley in Fintech Funding in Q1, (Datamation), Rated: AAA

In the first quarter (Q1) of 2016, and for the first time ever, New York City beat Silicon Valley in terms of fintech (financial technology) financing, $690 million versus $511 million, states Fintech’s Golden Age, a new report from Accenture and the Partnership Fund for New York City. In all of 2015, investments in New York totaled $2.3 billion, triple the amount raised by the area’s fintech startups the previous year.

It’s easy to attribute New York City’s rise in fintech scene to the proximity local startups enjoy to Wall Street banks and financial firms. But there are other forces at play, said Maria Gotsch, president and CEO of the Partnership Fund for New York City and co-founder of the FinTech Innovation Lab.

With ready access to funding, established customer relationships and their own considerable experience in maintaining large and complex IT ecosystems, New York City’s banks and other big financial institutions became natural allies for fledgling fintech companies. Funding aside, the area’s deep-pocketed firms are also looking to cut deals with startups that can help them bolster their services offerings.

“Financial institutions have made some major acquisitions,” said Gotsch. “Exits are always good.”

Fed’s Williams Prefers MBS Buying to ECB Tactics in Next Crisis, (Bloomberg), Rated: AAA

When the next crisis comes, don’t expect Federal Reserve Bank of San Francisco chief John Williams to try persuading his colleagues to pull a Mario Draghi.

The European Central Bank president has gotten creative with monetary policy as euro-area growth and inflation have remained sluggish despite rock-bottom interest rates. He’s tried charging banks for overnight deposits to encourage them to lend the cash instead, doling out long-term loans at ultra-low costs to credit institutions, and adding corporate bonds to his quantitative-easing program. He’s also employed measures that the Fed has also used, like signaling policy stance through forward guidance.

Draghi’s innovations would either come in second to tried-and-proven quantitative easing in the U.S. or would be purely off the table, in Williams’ view.

Regulator sounds new alert on banks’ property lending, (Financial Times), Rated: AAA

A top US regulator has sounded a new alert over banks’ commercial real estate lending, adding to concerns that bubbles may be forming in parts of the country’s property market.

CRE loans originated by banks in the first quarter leapt by 44 per cent from the same period in 2015, according to Morgan Stanley. Banks’ share of CRE originations has risen from just over a third in 2014 to more than half in the first quarter of 2016 — a record.

Thomas Curry, comptroller of the currency, used the watchdog’s twice-yearly report on financial risks published on Monday to warn about looser underwriting standards and concentrations in banks’ CRE portfolios. “Our exams found looser underwriting standards with less-restrictive covenants, extended maturities, longer interest-only periods, limited guarantor requirements, and deficient-stress testing practices.”

Several bank executives signalled during the last results season that they weretightening up CRE lending standards, and a survey of loan officers by regulators in the first quarter suggested many were indeed doing so.

Morgan Stanley identified 25 institutions that “may face pressure from regulators given rapid growth and high concentrations”. This “could lead smaller banks to pull back on CRE lending, raise equity and/or drive M&A”, said its report.

U.S. bank regulator toughens commercial real estate oversight, (KFGO), Rated: AAA

Credit risks have risen in U.S. commercial real estate as lenders compete more fiercely in a low rate environment, a federal banking regulator said on Monday, adding that it was stepping up its scrutiny of the sector.

The Office of the Comptroller of the Currency (OCC) said in its semiannual risk report that while the financial performance of lenders improved in 2015 compared to a year earlier, credit risks were higher across the industry. The agency has escalated its oversight of commercial real estate risk from ordinary monitoring to “additional emphasis.”

Curry also mentioned financial technology and marketplace lending as areas the OCC is keeping a close eye on.

Small U.S. banks are delivering healthier profits than their bigger peers, the report noted. Banks with less than $1 billion in total assets delivered return on equity above 10 percent last year while larger banks only delivered single-digit returns.

Tech coalition targets financial startups’ regulatory hurdles, (The Hill), Rated: A

Financial Innovation Now released a report Monday evening detailing how new financial technology (“FinTech”) companies struggle with a patchwork system of state laws and federal laws geared toward traditional institutions.

The report explains how two theoretical FinTech companies–a lending company and a payments processing company–could struggle to comply with decades of regulations geared toward traditional banks.  “Our hope is that this report helps policymakers understand the regulatory landscape for financial technology,” said Peters.

Congress on Tuesday will take a crack at understanding the landscape for marketplace lending companies with a House Financial Services Subcommittee hearing.

The report also tries to tamp down on cybersecurity concerns by boasting financial technology companies’ knowledge and capability with modern tech security features. The report argues FinTech companies are better equipped and more experienced to handle threats than traditional institutions. “Anecdotal breaches will always occur at technology companies just as at other businesses,” the report reads. But “they pale into insignificance compared to the breaches at banks and major retailers.”

Surprise: Auto Loan Durations Decrease Despite Popularity of Extended 72 and 84 Month Loan Terms, (TransUnion), Rated: A

The TransUnion AutoLoan study can be found here.

The study found that the average term for new auto loans rose from 62 months in 2010 to 67 months in 2015. In the third quarter of 2015, seven in 10 new auto loans had terms longer than 60 months. Five years prior, only half of all loans had terms longer than 60 months.

While the length of typical auto loans (with prices averaging ~$21K) have extended to as long as 84 months, the risk factors for these consumers extending to lower their monthly payments, did not change. In fact, many of these loans are not coming to term as the durations of the loans have actually decreased by one month. Cars are either sold before payoff or the loans can often be re-financed. Most surprisingly, the longer auto loan terms actually resulted in increased serious delinquencies (beyond 60 days) for consumers who are cash squeezed.

 

European Union

Europe’s Asset-Backed Bond Market Is Growing More Mysterious, (Bloomberg), Rated: AAA

Europe’s asset-backed securities market (ABS) is going underground. Private bilateral sales of the bonds, which are typically backed by collateral such as car loans or mortgages, now outstrip public sales to investors, according to Bank of America Corp. analysts led by Alexander Batchvarov.

So-called retained transactions, which are kept on banks’  balance sheets, rose to 78 billion euros ($87 billion) in the first six months of the year, which is more than double the 30 billion euros sold in the same period of 2015, according to Bank of America data. For investors in the public market, new-issue supply totalled just 41 billion euros, or roughly half the volume recorded a year earlier.

Synthetic securitizations, in which credit derivatives are used to transfer risk, are also said to be growing in favor as banks seek to bolster their balance sheets — and even as regulators push back against use of such “regulatory capital” trades.

“Discussions with market participants suggest that the volume may be (much) larger,” Batchvarov wrote. “The revival of synthetic securitisations speak[s] to the need of the banks to manage their capital and credit risk of their balance sheet, but apparently this is now done through bilateral transactions, mostly not rated, and rarely seen.”

 

United Kingdom

Re-setting Ratesetter’s default ratings, (FT Alphaville), Rated: AAA

At the end of last month, we reported on Ratesetter’s higher than expected default rates, which has raised questions about the resilience of its provision fund. The story was based on information from the Ratesetter website, where the level of provisioning per year and the expected vs. actual default rates were made available to investors, along with other information like how much of the yearly provisions had been been used up.

That’s the nature of transparency: you should disclose the bad as well as the good.

But now Ratesetter has decided that publishing expected default rates for each year “are not meaningful for [our] model, since investors do not need to provide for defaults”.

And that’s not the only change.

Ratesetter is now tweaking the way it calculates its provision fund coverage ratio. Instead of just subtracting expected losses from the current value of the provision fund, Ratesetter will now add “expected future income” in as well, thereby boosting the coverage ratio. Here’s their explanation of the change:

The “Expected Future Income” from open loans will be included in the calculation of the Coverage Ratio. This will be introduced alongside our regular update of the Expected Future Losses figure. Two years ago we made the strategic choice to spread more of the Provision Fund’s fees over the lifetime of loans as opposed to all being upfront when the loans are made. This obviously changed the short term flow of cash into the Provision Fund but we believe, in the long run, it is a more sustainable model. Today the total value of this contracted future income stands at over £6m.

The provision fund, which at one point Ratesetter thought to invest in its own loans, currently has almost £17.4m covering for £610m worth of lending — that figure doesn’t yet appear to account for the £6m of future income (nor does it account for any recoveries on defaulted debt, Ratesetter points out in its blog). The loss rate expected is 2.3 per cent, while a rate of 2.85 per cent would eat up all of the provisions. That’s a 55 basis point margin of error and probably the number worth remembering even after all these changes.

Financial markets welcome Leadsom quitting UK’s Prime Minister race, (Press Release), Rated: AAA

Andrea Leadsom’s decision to quit the UK’s Conservative party leadership battle is likely to be welcomed by the financial markets, affirms the boss of one of the world’s largest independent financial advisory organizations.

“First, Leadsom quitting eradicates one layer of the uncertainty that has been hanging over the UK since the historic vote to leave the EU.  The many question marks since the Brexit decision have, unsurprisingly, created volatility in the markets.  With Leadsom pulling out there is one less question mark.

“May could possibly kick triggering Article 50 way into the long grass, or go for the Norwegian model and allow free movement in exchange for access to the single market.

“This kind of ‘Brexit-Lite’ might well please the markets – which had widely priced in and were largely relying upon a Remain victory before the shock result.”

 

Korea

P2P raises concerns about fraud, (Korea JoongAng Daily), Rated: A

As of March, there were 20 P2P lenders in Korea that directly connect lenders and borrowers without intermediation by existing financial companies.

The average loan issuance was 22.1 million won per head. Individual loans on credit accounted for about 85 percent of all P2P lending, the data showed. About 6 percent of individual borrowers took out loans from P2P businesses, taking their properties as collateral.

“I was introduced to the company by one of my acquaintances and heard it was a thriving P2P lender that attracts quite a lot investors as it promises 15 percent returns annually,” Choi said.

The FSS has reported such complaints by consumers to police and prosecutors and said it will enhance monitoring on similar practices.

 

India

Education loans marketplace GyanDhan gets funding from Stanford Angels, Harvard Angels, (Techcircle), Rated: A

GyanDhan, an education loans marketplace operated by Delhi-based Senbonzakura Consultancy Pvt. Ltd, has raised an undisclosed amount in seed funding from Stanford Angels & Entrepreneurs and Harvard Angels.

GyanDhan had earlier received angel funding from Satyen Kothari, founder of Cube and Citrus Pay, to grow operations from the concept phase to its first loan disbursal.

The company will use the money raised in the latest round to build the tech platform to provide a better experience both to banks and students, and to develop its data sciences capabilities.

GyanDhan’s product offerings include loans up to Rs 30 lakh without any collateral for higher education abroad.

The company claims it has processed about 2,500 applications to date and has helped students avail loans worth Rs 10 crore through its partner financial institutions. The firm expects to process transactions worth Rs 30 crore by the end of the year.

Peer-to-peer lenders will help you borrow even from banks or non-bank financial corporations, (DNA India), Rated: A

Online businesses like BankBazaar, Paisabazaar, Policy Bazaar, etc have emerged and established themselves as loan aggregators, thereby passing on leads to financial companies like banks and NBFC’s. However, the quality of the lead has to be still ascertained by the banks and NBFCs through their own efforts, due diligence and filtering to assess the suitability of these leads and the conversion from a lead to a prospect and finally to a borrower.

The need to meet deployment targets is another major reason that banks have challenges in finding adequate numbers of borrowers who meet all their criteria.

A P2P platform provides a curated list of pre-verified, credit assessed list of borrowers from whom the financial companies can cherry-pick based on their appetite and provide loans, thereby significantly reducing their loan origination cost and improving their operating spreads.

Increasingly, banks and other financial companies will see a lot of value accruing to their business by aligning themselves with P2P marketplaces who perform all the necessary verification, credit assessment and also use various social and other information to rate borrowers and build a lot of analytics for intelligent credit decisions over and above the conventional methods which will prove to be an irresistible proposition to conventional financial institutions.

New Zealand

Harmoney’s P2P loan insurance a Kiwi world first, (Biz Edge), Rated: A

Harmoney has claimed to be the first in the world to use peer-to-peer lending for ‘unforeseen hardship’ on loans, the company reports. Its Payment Protect offering is a ‘repayment waiver’ that can protect against unexpected events that can affect loan repayment, such as death, terminal illness, disability or redundancy.

“For an individual loan, the waived repayments could be greater than the Payment Protect fee earned. However, across a whole portfolio the fee income and additional interest should outweigh any waived repayments and fee costs,’ Hagstrom explains.

Hagstrom says the method of delivering ‘peace of mind’ to customers through peer-to-peer lending is a rival to traditional insurance and borrowing methods, while providing lender returns through interest income, returns and yield enhancement.

The Financial Markets Authority issued Harmoney the first P2P lending licence in 2014. The company has raised $30 million in working capital, assessed more than $2 billion in loan applications and paid more than $24 million in interest to lenders.

Author:

George Popescu