- Today’s main news: BlueVine secures $75M financing from Fortress. FCA tells P2P lenders to stop lending to each other. Australian FinTech investments hit $656M in 2016.
- Today’s main analysis: U.S. small business credit outlook.
- Today’s thought-provoking articles: The rise of the cross-country landlord. Australian FinTech investments hit $656M in 2016. Trends that can put Indian crowdfunding on the map.
- Silver Lake’s SoFi deal shows appeal of upscale online lending. AT: “Some people might say the rise of the institutional investor in marketplace lending has killed the concept. Others might say it’s a natural evolution, or even that it should be that way. I think it’s a good thing with some drawbacks. Institutional lenders bring big money to the platforms, but it also often means they are first in line for the cup of ice cream. Still, the big money allows platforms like SoFi to expand faster and reach more of the mass market. That’s assuming they want to stick with the mass market.”
- Lending Club, OnDeck. GP:” I disagree that 4Q16 was dismal for Lending Club. On the contrary I believe they showed the banks are back as investors and the company stabilized. The LC stock was only hurt by OnDeck’s underwriting issues.” AT: “There are upsides and downsides to everything.”
- U.S. small business credit outlook. GP:” A very interesting chart on SMB and economic cycles. A must view !”
- Ghostbed offers Klarna financing option. AT: “I can see a day when Klarna will be a household name. More and more U.S. companies are starting to use the service. It could give rise to a true Amazon competitor, or it could become that competitor.”
- Competition heats up as Goldman Sachs enters the personal loan market.
- LendIt’s cofounder Jason Jones talks about FinTech trends. AT: “I’m looking forward to the conference.”
- 12 top FinTech companies to watch.
- FinTech pioneer BlueVine secures $75M financing from Fortress. GP:” The market continues to grow and this is once again a nice sign of strong validation in the submarket of invoice factoring.”
- Business giants to announce creation of a computing system based on Ethereum. AT: “I’m still waiting for blockchain technology to take off.”
- Investing for Millennials, digital financial advice.
- P2P loan groups told to stop lending to each other. AT: “I’ve thought this was a strange practice, but I don’t see the U.S. approaching wholesale lending this way.”
- The rise of the cross-country landlord. AT: “The interesting thing about this is, it could happen in any country. Online lending could further facilitate the trend, if it becomes a trend.”
- Dynamic Planner launches white label robo-advice.
- How to keep online advice fit for purpose.
- Treasury’s redefinition of financial advice will enhance investor protection.
- United States
- Silver Lake’s SoFi Deal Shows Appeal of Upscale Online Lending (Institutional Investor), Rated: AAA
- Lending Club, On Deck (TheStreet), Rated: AAA
- U.S. Small Business Credit Outlook (PayNet Email), Rated: AAA
- Ghostbed offers Klarna financing option (Furniture Today), Rated: A
- Competition heats up as Goldman Sachs enters the personal loan market (Times Leader), Rated: A
- Lendit’s Cofounder Jason Jones Talks Fintech Trends (Forbes), Rated: A
- 12 Top Fintech Companies to Watch (Entrepreneur), Rated: A
- FinTech Pioneer BlueVine secures $ 75 million financing from Fortress (PRNewswire), Rated: A
- Business Giants to Announce Creation of a Computing System Based on Ethereum (The New York Times), Rated: A
- Investing for Millennials, digital financial advice among topics at Wright State’s third annual LIFT2 Symposium (Sidney Daily News), Rated: B
- United Kingdom
- Peer-to-peer loan groups told to stop lending to each other (Financial Times), Rated: AAA
- The rise of the cross-country landlord (Bridging&Commercial), Rated: AAA
- Dynamic Planner launches white-labelled robo-advice (FT Adviser), Rated: AAA
- How to keep online advice fit for purpose (money marketing), Rated: A
- Treasury’s redefinition of financial advice will enhance investor protection, says WMA (The Investment Observer), Rated: B
- European Union
- France Fintech Announces Second Annual Fintech Revolution Event in Paris (Crowdfund Insider), Rated: AAA
- Australian fintech investments hit $ 656m in 2016 (ZDNet), Rated: AAA
- Trends that can put Indian crowdfunding on the global map (Your Story), Rated: AAA
Silver Lake’s SoFi Deal Shows Appeal of Upscale Online Lending (Institutional Investor), Rated: AAA
Private equity firm Silver Lake and Japanese asset manager SoftBank Group were part of a group that this month agreed to invest $500 million in Social Finance, or SoFi, an online lender that started as a refinancer for student loans and is rapidly morphing into a private bank for Silicon Valley’s newest recruits. The latest round of funding created a $4 billion valuation for the company, according to the Wall Street Journal.
SoFi’s model diverges from other online lenders in a few significant ways. Rather than ignoring traditional financing structures entirely, SoFi melds them with technology to create a high-tech private bank for borrowers with Silicon Valley sensibilities and high salaries. Borrowers who work with SoFi to refinance student debt are offered career counseling, mortgages, and wealth management services as a way to keep them with the company.
“SoFi&’s issuance in 2016 had an average FICO of 777, so that tends to equate to good performance,” said Roelof Slump, a New York-based managing director at Fitch.
It’s no surprise then, that high-profile private equity names are lining up as investors. But it’s also different from the egalitarian hymnal that fintech largely sings from.
Mass market lending platforms tend to bring in borrowers through a somewhat generalist approach: They rely on direct mail, web site ads, and other forms of advertising to get applicants. SoFi, by contrast, is crafting a proprietary deal flow network from its affluent user base.
Regulatory scrutiny, delinquent customers and investor satisfaction pose conflicting challenges for such companies, which are part of the so-called fintech industry that encompasses more than 4,000 firms in the U.S. and the U.K. Investment in such businesses has climbed to $24 billion from $1.8 billion over the past five years, according to the Office of the Comptroller of the Currency, a U.S. regulator.
While Laplanche’s successor is leading a recovery effort that includes stricter internal controls, Lending Club’s loan originations dropped 23% to $1.99 billion during the fourth quarter. The company reported an adjusted loss of 2 cents a share for the period, its third straight quarterly loss.
As investors return to Lending Club’s platform, many want “higher credit quality grades” and are shifting away from the riskier grades that typically have higher margins.
On Deck, meanwhile, reported its fifth consecutive quarterly loss, of an adjusted 44 cents a share, after the firm added additional reserves for potential loan losses of $19 million. That brought total reserves to $55.7 million, up 53%, the company said.
Still, fourth-quarter loan originations climbed 21% year-over-year to $81.8 million.
Both San Fransisco-based Lending Club and New York-based On Deck had initial public offerings in 2014. Lending Club’s shares fell 4.3% to $5.34 on Tuesday, while On Deck dropped 7.3% to $5.34.
U.S. Small Business Credit Outlook (PayNet Email), Rated: AAA
While the mood among the nation’s entrepreneurs has generally brightened since the November election, many uncertainties remain about what lies behind the next door in the form of policies. Our impression is that, before small businesses celebrate, they want to see the substance and the fine print on initiatives such as tax reform, infrastructure spending, foreign trade and government regulation.
Our latest data confirms this uncertainty. A combination of slightly rising delinquencies, developments in higher-risk sectors, and a more robust macro-economic climate suggest that small-business defaults are set to rise from the all-time lows posted in 2015-16. The good news is that we expect defaults to remain within the range associated with the expansionary phase of the business cycle.
Ghostbed offers Klarna financing option (Furniture Today), Rated: A
Klarna ( www.klarna.com ), one of the world’s most innovative payment providers, is partnering with GhostBed ( www.ghostbed.com ), a leading online mattress e-tailer, to provide an instant financing solution for GhostBed customers.
Made in America and purchased via the website, GhostBed prices are among the most competitive in the mattress in a box space, starting at $495 . The full product line features complimentary items that complete the sleep experience, including an all-wood foundation and the popular real-time cooling GhostPillow.
At checkout, GhostBed customers now have additional options which have been seamlessly integrated into the e-tailer’s checkout system. In addition to using a credit or debit card, they can choose from two Klarna financing options—planned payments over six to 36 month periods with a special promotional rate, or flexible month-to-month payments.
Competition heats up as Goldman Sachs enters the personal loan market (Times Leader), Rated: A
Marcus by Goldman Sachs is slated to be a formidable opponent to major online marketplace lenders for a variety of reasons. First and foremost, Marcus loans are funded out of the coffers of Goldman Sachs’ reserves; as a bank, the firm has a substantial amount held in deposit accounts from its customers which it will use to fund its new personal loan offerings. The majority of marketplace lenders currently available to consumers fund loans through the crowd – outside investors who use personal money to fund individual loan requests. Since Marcus loans are funded through Goldman’s deposit accounts, individual borrowers have a great chance of being approved for a loan so long as other underwriting criteria, like credit score and income, are met.
Another differentiating factor of Marcus loans is the fee structure for borrowers. Unlike alternative lenders, Marcus loans tout no hidden or glaring charges for origination or funding, late payments, or prepayment of a loan. A number of marketplace lenders assess fees for each of these activities, making the total cost of borrowing more involved than the cost of interest alone. Marcus loans also allow for tailored due dates and, like most other personal loan solutions, a fixed repayment amount due each month.
Lendit’s Cofounder Jason Jones Talks Fintech Trends (Forbes), Rated: A
Next week, more than 5,000 attendees, 350 thought leaders and more than 2,400 companies will participate in the fourth annual NYC conference.
Jones: Our strength is in our community, and the education. We are operators in our industry and we do what we can to help our community network and learn.
The first year the focus was online lending, the second year we added real estate, the third year digital wealth, and this year we now have tracks focused on insurtech, financial inclusion and banking technology.
Jones: Payments is the area we need to grow in the most, but in the future we will add speakers from payments companies and develop specific tracks into the program.
Jones: We don’t have Hackathons at LendIt, but we have a great startup competition: PitchIt, which we co-host with 500 Startups. This year we had 260 companies apply. Out of the 260 applications, we will choose eight startup finalists that will pitch themselves on stage at the conference to a team of investor judges.
Jones: Personal Financial Management + Messaging is a killer combination. We like the customer engagement on the front end combined with distribution on the back end – it is the Trojan horse of financial services.
Blockchain smart contracts used in the enterprise for things like trade finance and marketplaces will be a game changer. This will be a big area of focus at LendIt this year.
Our conference this year is going to be dominated by artificial intelligence. Computing is extending beyond the desktop and natural language processing is finally taking center stage.
Jones: In the past, real estate was the least attended – this year it’s totally going to flip. Companies like Point, Unison, Opendoor, Offerpad,and Knock are rethinking home ownership financing in new ways.
Jones: We have many early stage companies at LendIt including a startup competition. Axoni in the blockchain space is rebuilding credit derivatives and T0 (Overstock spinout) is actively launching new capital markets products on the blockchain. Knock is a new online real estate startup that will sell your home in within 6 weeks. AutoFi and AutoGravity are creating a new software layer in car financing. Juvo is focused on financial wellness and financial inclusion through mobile operators.
Jones: The future of traditional banking is about knowing your client in new ways and finding ways to de-risk those clients. Education, community, and communication are not commonly associated with banking, but expect these trends to play an increasingly important role in the future of banking.
12 Top Fintech Companies to Watch (Entrepreneur), Rated: A
Financial technology (or “fintech”) has become an extremely trendy industry for startupsbecause of its high growth potential and opportunity for nearly endless disruptive innovation. In fact, these scrappy companies have the potential to take away $4.7 worth of revenue from traditional financial services, according to Goldman Sachs.
Stripe recently raised $150 million in November of 2016 in a deal co-led by General Catalyst Partners and CapitalG, which valued the startup at $9.2 billion. This almost double the $5 billion valuation it had achieved in 2015.
YapStone, founded in 1999, has focused on providing end-to-end payment solutions to multi-billion dollar sharing economy marketplaces and vertical markets, such apartment and vacation rentals.
Adyen is a technology company based in Amsterdam that provides businesses with a single solution to accept payments anywhere in the world. Adyen serves more than 4,500 businesses including Facebook, Uber, Airbnb, Netflix, L’Oreal, Spotify, Dropbox, Evernote, Booking.com, Vodafone, Mango, Crocs, O’Neill, SoundCloud, KLM, and JustFab.
5. Lending Club
Lending Club has gone from birth to IPO while arranging $7.6 billion in financing, and now lending to small businesses. Lending Club stated that $15.98 billion in loans had been originated through its platform in 2015.
With student loan debt being a real issue, Commonbond is a marketplace lender that lowers the cost of student loans for borrowers and provides financial returns to investors. The company refinances graduate and undergraduate student loans for graduates, saving the average borrower over $14,000 over the life of the loan.
In 2016, Kabbage raised $135 million, giving it a valuation of $1 billion. In 2016, Kabbage was named to CNBC’s annual Disruptor 50 List and was named to the Inc. 500 list for the second year in a row.
The company started 2013 with $97 million in assets under management and grew by 450% in one year. As of December 2016, Wealthfront had more than $4 billion of assets under management. The company has a valuation of $700 million.
The firm’s lending algorithms ignore strict credit scores used by banks in favor of practical indicators of ability to pay. As of 2016, SoFi has funded more than $12 billion in total loan volume and has 175,000 members. The company now plans to compete directly with traditional banks.
FinTech Pioneer BlueVine secures $ 75 million financing from Fortress (PRNewswire), Rated: A
BlueVine, the leading provider of online working capital financing to small and medium-sized businesses, announced today that it has secured a warehouse credit line of up to $75 million from Fortress Credit Corp. and/or funds managed by affiliates of Fortress Investment Group LLC.
The financing will allow BlueVine to expand its fast-growing line of credit financing solution called Flex Credit and enhance the FinTech pioneer’s ability to help business owners meet their working capital needs.
Founded in 2013, BlueVine offers business owners convenient access to capital for their everyday funding needs through a sophisticated online financing platform.
BlueVine expanded its reach last year with the introduction of Flex Credit, an on-demand revolving business credit line of up to $100,000. Flex Credit has become an exceptionally popular BlueVine financing option and is expected to grow more than four times in 2017.
BlueVine is best known as the pioneer of online invoice factoring, which allows businesses to turn their unpaid invoices into working capital. BlueVine offers a factoring credit line of $20,000 to $2 million and is the only company providing a completely online, cloud-based invoice factoring service.
Business Giants to Announce Creation of a Computing System Based on Ethereum (The New York Times), Rated: A
The new organization, a nonprofit, is part of a broader movement to harness the technological concept known as the blockchain, which was introduced to the world by Bitcoin.
Accenture released a report last month arguing that blockchain technology could save the 10 largest banks $8 billion to $12 billion a year in infrastructure costs — or 30 percent of their total costs in that area. Accenture is one of 11 companies on the governing board of the Ethereum alliance.
The current Ethereum network has an internal virtual currency known as Ether, the value of which has risen and fallen over the last two years. On Monday, a single Ether was worth around $15, and all the outstanding Ether were worth around $1.3 billion.
Ethereum, however, is much more than just a system for tracking currency. It also allows people to write what are known as smart contracts into the Ethereum blockchain. Two companies could, for instance, create a contract that would automatically send money to one of them if a particular news authority reported that the Chicago Cubs won the World Series or that “La La Land” won the Oscar for best picture. (As the latter example shows, what would happen if the authority was wrong is a more difficult question.)
The companies working on the Enterprise Ethereum Alliance want to create a private version of Ethereum that can be rolled out for specific purposes and be open only to certified participants. Banks could create one blockchain for themselves, and shipping companies could create another for their own purposes.
Investing for Millennials, digital financial advice among topics at Wright State’s third annual LIFT2 Symposium (Sidney Daily News), Rated: B
The future of financial planning — including investing for Millennials and digital financial advice — will be some highlight topics addressed by leaders in the industry at the third annual LIFT2 Symposium hosted by Wright State University.
LIFT2 (Leading Innovation in Finance Today and Tomorrow) will be held Friday, March 24, in the Student Union from 8 a.m. to 6 p.m.
It is expected to attract hundreds of financial planning professionals from as far away as Columbus, Cincinnati and Indianapolis.
Peer-to-peer loan groups told to stop lending to each other (Financial Times), Rated: AAA
The City watchdog has written to chief executives of peer-to-peer loan companies to warn them against lending to other lenders.
In the latest sign of the growing complexity of the sector, the Financial Conduct Authority said businesses borrowing money and lending it out must have permission to “accept deposits” — which is a feature of the banking sector.
The letter on Tuesday will fuel further debate about what P2P lenders should be allowed to do without seeking full banking permissions. The FCA recently signalled plans to impose tougher rules on the sector, warning that it was “testing the boundaries” of what crowdfunding regulations allowed.
In its letter to chief executives on Tuesday, the FCA’s director of supervision Jonathan Davidson told lenders that any company borrowing and lending onwards without correct regulatory permission may be committing a criminal offence.
RateSetter, one of the three largest UK P2P lenders, has engaged in the practice of lending to lenders — known as wholesale lending — since 2013.
RateSetter said it stopped writing wholesale loans in mid-December, shortly before being asked to do so by the FCA.
The rise of the cross-country landlord (Bridging&Commercial), Rated: AAA
Only one postcode from outside the South East – Northampton – managed to sneak into the top 10, but it could not compete with the likes of Romford, Luton and Dartford that dominate the top of the table.
In contrast, Liverpool still represents a great option. As the index reveals, it enjoys one of the highest rental yields in the country at 5.5%. Even with the harsher stress tests employed by buy-to-let lenders as a result of the new rules, securing a 75% mortgage is relatively straightforward.
For some time now, we have suggested that the UK is likely to see a growth in the ‘cross-country landlord’ – those who own investment properties across the UK, in some cases a significant distance from where they themselves are based. The new lay of the land in the buy-to-let world is only likely to encourage more investors to adopt that cross-country approach.
How to keep online advice fit for purpose (money marketing), Rated: A
Even if Said So has more in common with traditional advice services than it has with fully automated robo-advice, there is more to it than creating a website and expecting clients to flock there.
Interestingly, more people in the 55-64 age bracket (16 per cent) are using the site than those aged 18-24 (11.7 per cent). The remaining 10.5 per cent of users are 65 and over.
Said So is working hard to build trust in online advice and ensuring people do not confuse its services with algorithm-based ones. The security of data is another important issue that has been addressed.
Last year, Said So launched a wealth dashbord app, which has been shortlisted in the Surrey Digital Awards 2017. The app is a projection tool, allowing people to input a range of factors to get an idea of how much money they will have in the future; for example, when they retire.
Treasury’s redefinition of financial advice will enhance investor protection, says WMA (The Investment Observer), Rated: B
The Treasury’s latest move to ensure that only regulated firms are able to provide financial advice to clients will enhance investor protection, says the industry’s trade body.
The UK Treasury have committed to bring the UK definition of advice in line with the Markets in Financial Instruments Directive definition’s of advice as a ‘personal recommendation’.
France Fintech Announces Second Annual Fintech Revolution Event in Paris (Crowdfund Insider), Rated: AAA
France Fintech, the French Fintech association, announced it is set to host its second annual Fintech Revolution on March 28th. The event will be held at the la Gaîté Lyrique in Paris and will reportedly have over 1,000 participants.
Speaks of the event include:
- Alexa Von Tobel, CEO of LearnVest
- Ron Suber, CEO of Prosper.
- Phin Upham, Managing Partner of Thiel Capital.
- Nilan Peiris, VP Growth of TransferWise.
- Vilius Sapoka, Minister of Finance, Lithuania.
Australian fintech investments hit $ 656m in 2016 (ZDNet), Rated: AAA
Investment in Australian fintech reached a record $656 million in 2016, more than triple the $185 million invested in 2015, according to a report by professional services firm KPMG.
This equates to an annual average growth rate of around 90 percent over the four years leading to 2016.
The growth was driven by large mergers and acquisitions, and venture capital transactions, including CHAMP Private Equity’s acquisition of Pepperstone, Stirling Products’ acquisition of Mx360 Group, and large funding rounds from Tyro and Prospa, according to KPMG’s The Pulse of Fintech report.
The report shows venture capital investment in fintech reached $71 million in 2016, a substantial drop from 2015’s $175 million total, though on a similar level to 2014’s $88 million total.
Trends that can put Indian crowdfunding on the global map (Your Story), Rated: AAA
However, this growth rate cannot yet be applied to the Indian crowdfunding scene. By simply adding the funds raised by various crowdfunding platforms, it will be fair to estimate that the Indian crowdfunding industry stands at approximately Rs 300 crore. Considering that it is just a miniscule part of the global value, this leaves the crowdfunding industry in India with enormous space before it hits a plateau in its growth curve.
We have shortlisted three trends which have been game-changers for the crowdfunding industry in countries such as the US and UK. These trends can help India inch closer towards having a significant presence in the global crowdfunding scenario.
There is no shortage of crowdfunding platforms in India, and their success has shown us that we do not lack motivated funders to support innovators. However, India still has miles to go in order to match up to the scale of innovation taking place in a country like the US.
Globally, the P2P lending model holds the highest share of the $34 billion pie. with $25 billion. Recent statistics value this model at Rs 20 crore, with leading platform Faircent.com lending about Rs 1.25 crore every month.
However, in India, it still remains unregulated by the RBI, restricting it from reaching a larger audience. There are guidelines which have been proposed by the premier banking body last year to regulate P2P lending. Regulation of this model will make it a lot more credible, resulting in a massive boost in its acceptance amongst a wider consumer base.
Patreon has been the flag bearer for this model globally, raising over $50 million for the creators. In India, award-winning singer-songwriter and composer Suraj Mani adopted this model last year, providing subscribers with exclusive access to the recording of performances by indie artists at his venue OO Heaven.