News Comments Today’s main news: Morningstar to rate blockchain securities. nCino raises $80M. RateSetter rolls out Access, Plus, Max. Revolut losses double. Today’s main analysis: Race and homeownership. Today’s thought-provoking articles: Big banks are losing mortgage share. Race and homeownership. LendIt Fintech Europe highlights. International P2P lending volumes for September 2019. United States Morningstar to offer […]
Chicago-based financial service provider, Morningstar Credit Ratings announced plans to diversify its business operation by providing ratings for debt securities issued on public blockchains, also known as crypto-assets. Morningstar Inc, the parent company of the rating agency is valued at $6.4 billion. Last year it generated $1.7 billion in revenue. The company is well known for rating mutual funds from giants of the financial world like Prudential and Morgan Stanley among others.
In U.S Housing, borrower home equity is hitting all time highs. Homeowners with a mortgage saw equity increase by 4.8% since 2Q2018. This equates to $4,900 gained per American homeowner and a strengthening of the US consumer balance sheet.
Over the past ten years, the largest American banks – Wells Fargo, JPMorgan, and Bank of America – have seem their share of home loan originations fall 30% as digital customer friendly non-banks such as Quicken Loans take share.
Americans who identify as white own a disproportionately large percentage of homes in all of the nation’s 50 largest metros. White Americans make up an average of 59% of people in the metros featured in our study, but they own around 73% of owner-occupied homes.
Where white Americans own the most homes relative to their overall population
% of the population – White alone: 46.99%
Median household income – White alone: $91,806
% of owner-occupied homes – White alone: 68.65%
Difference between % of owner-occupied homes and % of population: 21.66%
% of the population – White alone: 46.20%
Median household income – White alone: $80,276
% of owner-occupied homes – White alone: 65.37%
Difference between % of owner-occupied homes and % of population: 19.17%
% of the population – White alone: 56.41%
Median household income – White alone: $64,423
% of owner-occupied homes – White alone: 75.17%
Difference between % of owner-occupied homes and % of population: 18.76%
Where white Americans own the least homes relative to their overall population
% of the population – White alone: 85.82%
Median household income – White alone: $59,089
% of owner-occupied homes – White alone: 93.29%
Difference between % of owner-occupied homes and % of population: 7.47%
Self, a leading fintech startup offering people a way to build their credit while also saving money, today announced the release of the Self Visa® Credit Card. This first-of-its-kind secured card uses a unique funding model to provide customers with a line of credit without the need for a significant upfront investment or a credit check – two areas that perennially sideline subprime consumers who are looking to build their credit scores.
RiverNorth Marketplace Lending Corporation, an established and currently operating as a closed-end interval fund dedicated to the marketplace lending asset class, announced on Tuesday its monthly distribution of $0.18 per common share for the months of October, November, and December 2019.
Technological efficiencies will result in the biggest reduction in headcount across the U.S. banking industry in its history, with an estimated 200,000 job cuts over the next decade, Wells Fargo & Co. said in a report.
The $150 billion annually that the country’s finance firms are spending on tech — more than any other industry — will lead to lower costs, with employee compensation accounting for half of all bank expenses, said Mike Mayo, a senior analyst at Wells Fargo Securities LLC.
The first one, introduced this summer, is called “booyah” and is aimed at college students and young graduates. The $122 million-asset bank sees it as a way to target a specific audience outside the central Florida area and boost deposits in order to ward off competitive threats from fintechs.
Walk into an auto dealership these days and you might walk out with a seven-year car loan.
That means monthly payments that last well past when the brake pads give out and potentially beyond when the car gets traded in for a new one. About a third of auto loans for new vehicles taken in the first half of 2019 had terms of longer than six years, according to credit-reporting firm Experian PLC. A decade ago, that number was less than 10%.
It’s rare for two loan offers from two lenders to come out to exactly the same number. Different lenders (traditional banks, online lenders, alternative lenders) evaluate a variety of factors, have different algorithms, and may place more emphasis on different aspects of your business history.
Today, Coinbase announced the launch of USDC rewards. US Coinbase customers are now eligible to earn 1.25% APY rewards on all USD Coin ($USDC) held on Coinbase.
This announcement comes amid the DeFi boom in 2019. While 1.25% APY is substantially higher than traditional savings rates at banks, it’s still lagging behind the broader DeFi lending market. As of writing, Compound currently offers 5.34% APY on USDC holdings while dYdX offers 3.85% APY – View current USDC lending rates. This doesn’t account for other stablecoins, such as Dai, where holders can earn upwards of 8%.
Investors on Tuesday said their stock-drop suit against online lender Curo is
about misrepresentations regarding a transition away from its most profitable product, not a simple failure to meet financial goals, as the company suggests. The online lender said in an August dismissal bid that investors were trying to plead a “fraud by hindsight” case in alleging Curo misled them about a transition away from offering lucrative single-pay loans in Canada, which had drawn the scrutiny of regulators there, and into longer-term open-end loans.
eOriginal, a digital lending technology pioneer, is proud to announce that Simon Moir, Chief Product Officer, has been named to HousingWire’s Tech Trendsetters list for 2019. HousingWire’s inaugural award recognizes the impactful and innovative technology leaders serving the housing and mortgage finance industry. This is on the heels of eOriginal’s second consecutive listing as one of HousingWire’s HW Tech 100TM in April 2019.
OYO, the world’s third-largest and fastest-growing chain of hotels, homes and spaces*, has partnered with Biz2Creditto provide working capital and commercial real estate loans to existing and potential hotel partners across the United States.
Finastra has launched Fusion Mortgagebot Data Insights – a powerful new tool that benchmarks mortgage borrower behavior and demographics for banks and credit unions against that of more than 1,400 other Fusion MortgagebotPOS users. The solution leveraged Big Data and machine learning to provide users with new insights into consumer behavior to drive a better borrower experience.
Seattle Bank, a single branch boutique bank with $650 million in assets, has selected Fusion Phoenix from Finastra to be the open, modern core to run its banking operations, enabling the bank to better serve clients. The core banking system will be integrated with additional Finastra solutions, including Fusion Mortgagebot, Fusion Card Payments, Fusion Analytics, Fusion Item Processing Services, Fusion LaserPro, and Fusion Digital Banking.
British financial technology start-up Revolut’s losses doubled in 2018, the firm said Tuesday, as the company embarks on an aggressive global expansion.
The London-headquartered firm recorded a £32.8 million ($40.3 million) net loss on revenues of £58.2 million for 2018. That was more than double the £14.8 million loss it posted a year earlier, while revenue climbed 354%.
After all, one argument for setting up a business as a limited company, rather than operating as a sole trader, is that you separate your affairs from the company’s.
However, while this is true in theory, it may not pan out in practice. If your business needs to borrow, lenders often expect owners to stand behind the loan. They ask for a personal guarantee that the debt will be repaid. These guarantees aren’t secured – they’re not tied to a particular asset, such as your home – but they do give lenders a legal right to come after your personal wealth in the event your business defaults.
When Innovate Finance was formed five years ago, with a mandate to represent an emerging UK fintech community, the picture was different to today. The focus was on models challenging traditional approaches to banking, disrupting the incumbents’ model that had stood for decades.
Drapers’ Next Generation Entrepreneurs are the founders and chief executives that we think are changing fashion. The list shines a light on the new wave of game-changers, innovators and boundary-breakers that are making their mark on the UK fashion industry, as well as emerging businesses that exhibit innovative, entrepreneurial spirit.
The former City minister, who has already tabled several parliamentary questions regarding the role of the Financial Conduct Authority (FCA) in the collapse of Lendy and Collateral, has widened the scope of his P2P queries.
He has tabled two parliamentary written questions in the past week.
The nation’s Central Statistics Office puts the number of active enterprises in the private business economy at over 250,000. As of June, Linked Finance had made more than 2,100 loans for a grand total of more than €100 million.
We have just wrapped up what I think has been the most successful European conference LendIt has ever had.
We kicked off the show with Rishi Khosla, CEO and Co-Founder of OakNorth. Their approach to underwriting is super interesting. While they have very much a digital approach, they are originating loans typically for £5 million to £10 million to fast growth companies.
Fintech startup Bnext has raised a $25 million funding round. The Spanish company is building a banking product and has managed to attract 300,000 active users.
You can lend money to small and medium businesses and earn interest through October, you can save money using Raisin, you can get a loan, a mortgage, an insurance product, etc. Bnext generates revenue from those partnerships.
Peer-to-peer lender RateSetter has announced a partnership with PLAN Australia that will make its unsecured personal loan and car loan products available to the group’s 1,700 brokers and their clients.
It’s been two days since the Reserve Bank board made the call to lower the official cash rate from 1.00% to 0.75% – an historically low rate in Australia.
Athena and Homestar raced out of the blocks following Tuesday’s RBA announcement – both delivering full 0.25% cuts to their respective variable rate home loans before the ink on RBA Governor Philip Lowe’s monetary policy statement was dry.
Fellow online lender UBank wasn’t far behind after announcing a 0.25% rate cut of its own across a number of variable rate offers.
On September 30, 2019, after nearly six months of preparation, the INLOCK project, a peer-to-peer lending solution, was listed on the Liquid by Quoine exchange, one of the largest Japanese crypto exchanges in the Asian region, with a daily turnover of $150-200 million.
INLOCK is a peer-to-peer lending platform; its customers can lend or borrow using their cryptocurrencies as a collateral.
The Monetary Authority of Singapore (MAS) and The Association of Banks in Singapore (ABS) announced today that 40 finalists have been shortlisted for the FinTech Awards to be presented at this year’s Singapore FinTech Festival x Singapore Week of Innovation and Technology (SFF x SWITCH).
Credit scoring fintech company, CredoLab announced on Tuesday, 1 October 2019, that it has officially launched in Africa. Starting in South Africa, CredoLab is aiming to drive financial inclusion in emerging economies on the continent by credit scoring more people, especially those who are new to banking or credit.
According to Ernst & Young’s 2019 Global Fintech Adoption Index, Canada is 14 points, and the U.S. 18 points, behind the global average of 64 per cent consumer fintech adoption, and we trail world leaders like China, India and Russia by even more. The two countries’ approaches to regulating fintech, which in many ways reflect enduring national stereotypes, almost certainly have contributed to our continent’s fintech lag.
News Comments Today’s main news: Prosper’s top concern next year is liquidity. Affirm seeks new funding at $1.5B valuation. LendingHome surpasses $2B in loan originations. ThinCats delays IFIsa launch. Funding Circle hits 3B GBP in lending. Dianrong planning $500M IPO. Today’s main analysis: Acorns puts up a fight to upscale. Mobile credit and financial inclusion. Today’s thought-provoking articles: Is Lending Club […]
Prosper is concerned about liquidity. AT: “As Prosper grows, liquidity will become even more important. The risk is to go bell up or sink the company in debt, which could keep it tied away from expecting profits for years to come. I’d like to see the company hit the level of liquidity it expects.”
Affirm said to be raising funds at $1.5B valuation. AT: “Unicorn status is just a symbol. The real test of success is how the company is run, whether or not it is profitable, and whether it services customers’ expectations well. That said, Affirm has huge potential in the niche it is targeting. We’re just at the beginning stage of this boat ride.”
Acorns puts up a fight to go upmarket. AT: “A few years ago, while building a content marketing company, I discovered that there were two ways a business can pursue the success dragon. You can sell high-dollar products to raving fans and build upon reputation–like Apple–or you can target to the masses and make your profits on slim margins. The latter is the more difficult row to hoe, especially if there is a lot of competition at the price level. Acorns may have a lot of customers, but they can’t bank forever on slim margins. This is a great read.”
Marketplace lender Prosper will make liquidity a top priority as the company moves into 2018, company CEO David Kimball said during a lending conference that took place last week.
“Our main concern… it’s always liquidity, and I think most people in this room understand that the best way to get to liquidity is to have a lot of different options,” Kimball said to attendees of the Investors Conference in Marketplace Lending on Friday, December 1st. “And so I think you’ll see our toolkit expand [in 2018] versus where it is now.”
New retail investors interested in the Lending Club platform are greeted with a friendly statistic, that “99% of portfolios with 100+ Notes have seen positive returns.” That’s a slippery statement, which is probably why they footnoted it.
Affirm Inc., an online lender run by PayPal co-founder Max Levchin, is in advanced talks for a financing round that would earn it a place in the unicorn startup club.
The San Francisco-based startup is discussing an investment of about $150 million, said people familiar with the matter. The deal would value the company at $1.5 billion, about double the valuation from the last round in April 2016, said the people, who asked not to be identified because the terms aren’t finalized. Affirm declined to comment.
The micro-investing app has grown an of army of 2.2M accounts. But making money off these first-time, lower-income investors won’t be easy. To do so, Acorns is building out higher-tier investment services and moving into the highly saturated $40T retirement planning market.
With over 2.2M investment accounts in the US since launch, the company has proved there is a clear niche for its product. It is already the largest robo-advisor by client accounts.
Acorns’ service isn’t free, but it is cheap — the company charges $1 a month or .25% for accounts over $500. At $12 annually for many accounts, that’s not a lot of revenue.
Acorns is making a number of important moves:
It is launching its own retirement savings plan in 2018 called Acorns Later, which could help it reach new users and push up current users’ account size.
It has formed a strategic partnership with investor Paypal to extend its product to Paypal’s huge user base. In addition, its partnership with Paypal could ultimately help Acorns get into bank account services, a move similar to what low-income investing competitor Stash has done.
A B2B offering may also be in the works, based on recent acquisition activity. B2B products have helped other robo-advisors see big jumps in AUM.
Acorns manages approximately $528M in AUM and approximately $407 per account as of September 2017. Compare that to Betterment which manages approximately $28.5K per client account and Wealthfront which averages $42.3K.
On Monday, mortgage marketplace lender LendingHome announced it has originated more than $2 billion in mortgage loans for homeowners and real estate investors. The online lender revealed that the first billion of originations occurred over the course of 30 months, while it took just 12 months for the company to originate its second billion. In the process, LendingHome crossed the major milestone of financing more than 10,000 homes nationwide.
How and when employees get paid should be their choice, Isaacson said. The technology to make that happen is already in the market — Uber and Lyft drivers are taking advantage of it, for example — but the systems aren’t in place at most companies, and there’s a mental barrier for businesses to overcome to begin creating mobile payout experiences.
It’s also too inflexible for some businesses, like a restaurant or store that may need more or fewer cases of Coca Cola than the originally ordered 10. They need to be able to make adjustments like that in real time, Isaacson said. With a mobile device, people can manage and initiate payments in real time and remotely.
Cross River Bank is a business bank, whose clients are some of the biggest fintech companies. Behind the scenes, CRB has developed payments solutions for faster, more secure and lower-cost transfers that have been integrated by TransferWise and the bitcoin wallet Coinbase, as well as Google Wallet and Stripe — which counts Lyft as a customer.
The New York-based investment bank announced Monday the launch of Access Investing, an online roboadviser designed to capture a younger clientele.
The goal of Morgan Stanley’s new offering is to serve as a stepping stone, so to speak, for younger savers who one day might want to tap into the bank’s broader suite of wealth-management services when they are wealthier and older.
Wallet Fitness levels vary widely across the U.S. As we prepare to make resolutions for self-improvement, it’s fair to wonder who’s best positioned for financial success and who has the most work to do. To find out, we compared more than 180 U.S. cities based on 29 key indicators of Wallet Fitness.
Leading crowdfunding real estate investment platform, Rich Uncles, LLC, today announced the appointment of John H. Davis as its new chief financial officer and Jean Ho as its new chief operating officer and chief compliance officer.
Mr. Davis comes to Rich Uncles after more than four decades with KPMG LLP, one of the world’s four largest accounting firms, where he had served as a partner since 1988.
Ms. Ho joined Rich Uncles, LLC in 2016 as the company’s chief financial officer, where she has helped lead the acquisitions of 29 commercial properties across two Rich Uncles-sponsored REITs: Rich Uncles Real Estate Investment Trust I and Rich Uncles NNN REIT, Inc. Prior to joining Rich Uncles, LLC, Ms. Ho held positions as chief operating officer and chief financial officer of Soteira Capital, LLC, chief financial officer of MKA Capital Advisors, LLC, and with KPMG LLP, where she specialized in real estate, financial services, and high net wealth personal financial and estate planning.
Perkins Coie, a law firm that is very active in the Fintech / Blockchain space, has announced the hiring of a former SEC attorney. Michael S. Didiuk has joined the firm’s Investment Management practice group as a partner in the San Francisco office where he will represent clients on various federal securities laws and complex regulatory issues raised by Blockchain technology and with the emergence of digital asset sales and digital securities.
Barclaycard is rebranding itself to Barclays in the US as part of its retail digital banking strategy in 2018.
According to Tearsheet, Barclaycard says since last November it has been targeting prime and super-prime borrowers with an online personal loan offering on a test-and-learn basis to a small group of customers. Barclaycard plans to launch the same offering publicly by the middle of 2018.
Chris Stanley joins Atlantic Capital Bank as Vice President of Fintech Industry Banking, to lead Atlantic Capital’s Fintech Banking practice.
Expanding on a successful payments industry line of business, the new fintech banking practice will focus on emerging growth and growth-stage companies in this evolving technology segment. This will bolster Atlantic Capital’s core deposit gathering strategy.
Secret #1: Yes, You CAN Improve Your Personal Credit Score
Pay down your credit cards. As a yardstick, you’ll want all your cards under 50 percent of their limits. This means no more maxing out cards — for personal or business.
Lower your debt compared to your income. A good benchmark is keeping debt to 30 percent of less of your income. Rather than taking a second mortgage on your home and increasing your debt load, you might be better served to apply for a business loan.
Monitor your credit score. Errors are more common than most people realize. Besides you’ll learn which creditors report to credit agencies and what they report on.
Secret #2: Your Business Credit History May Be Incomplete, But It’s Not Hard to Change That
Establish free profiles with the three major business credit bureaus: D&B, Experian, Equifax
Apply for a business credit card and use it to establish a timely repayment history.
Do business with vendors (“trades”) that report to credit bureaus regularly.
Digital micro-lender, Oakam today announced that it has secured a £35 million debt investment from Victory Park Capital Advisors, LLC (VPC), an investment firm focused on private middle market debt and equity investments.
For years, there has been much talk about the impact of fintech startups like Mondo and Atom Bank on incumbent banks but little has been done to quantify the actual effects fintechs are having on big banks.
New data from The Bank of England (BoE), published as part of its 2017 stress test of the UK banking system, however, is shedding light on this subject.
Where they were then: Trussle, the online mortgage trading company, is a rising star in the fintech industry. The start-up company provides solutions and answers to those looking to invest with a hassle-free process.
Where they are now: Following their funding round in early February to raise £4.5m ($5.68m) backed by Orange and Growth Capital, and existing investors LocalGlobe, Zoopla and Seedcamp, Trussle went on to join forces with Revolut in April to give users direct access to their mortgage brokering services.
Total equity funding: $7.38m (now $7.6m) +2.98%*
Where they were then: Iwoca was created to help make credit and loans of up to £100,000 available to small businesses.
Where they are now: 8 days after the time of writing the previous bio, Iwoca partnered with NatWest through Capital Connections to provide SMB loans, a significant collaboration for the six year-old startup.
Total equity funding: $58.5m (now $90m) +54%*
Where they are now: They currently boast a 6.6% annual return for investors and have earned £156m in interest for investors. They’ve lent £3 billion to UK businesses in a total of 43,251 loans (since 2010).
Total equity funding: $373.2m (now flat) –%*
Where they were then: Crowdcube is an investment crowdfunding platform that lets customers hand pick the businesses they want to back and invest in.
Where they are now: In the third quarter of 2017, Crowdcube registered £1m in company revenue, with 70 pitches.
Funds raised to date: $18.69m (now $28.3m) +51.42%*
Where they were then: Based in the heart of the UK capital, LendInvest is the UK’s leading online property lending and investing businesses.
Where they are now: In September, LendInvest announced the strategic partnership with Clever Lending, a specialist lending solution.
Dianrong.com, a Chinese online lending platform started and run by a co-founder of LendingClubCorp. , is planning an initial public offering as soon as next year that could raise at least $500 million, according to people familiar with the matter.
China is set to implement a social credit system that will rate each of its citizens on a publicly available scale. Officially known as the Social Credit Score or SCS, the system is likely to be implemented by 2020.
It works by giving each citizen a score based on their daily interactions and financial decisions, the score can be affected by debt, spending habits and even social interactions. Obviously, to get this kind of score that will be somewhat compared to a person’s trustworthiness, there will need to be a huge amount of individual monitoring and data collection. The SCS is expected to be rolled out in 2020, but there will be a large scale trial period from now until then so the system can be at optimal functionality when it goes live on its 1.3 billion citizens.
China Rapid Finance will make any adjustments needed to its business practices and the fees it charges in response to Bejing’s new requirements to clean up fast-growing online micro-lenders, its chief executive Zane Wang said on Monday.
Online micro-lenders have come under scrutiny as “problems such as over-lending, repeat borrowing, improper collection, abnormally high interest rates, and privacy violations have become prominent”, Chinese financial regulators said last week.
With financial institutions increasingly employing roboadvisers, China’s central bank and financial regulators issued draft regulations for comment recently, requiring financial institutions to receive regulatory approval for offering such services.
The regulatory authorities said financial institutions should create rational investment strategies and algorithm models, as well as remind investors of the flaws and risks associated with algorithm-based robo-advisory models.
The project that Pinganfang.com was caught up in is a sharing working place project called Bar Works. Every work place was sold at $25,000 and the minimum purchase quota per investor was two each. The expected annual rate of return was between 12% to 15%.On June 30th 2017, the SEC charged Renwick Haddow (the planner of Bar Works project) with multiple counts, including illegal fundraising $36 million from the Bar Works investors.
On November 30th, JD Finance and China UnionPay co-launched a Blockchain-based risk information sharing mechanism.
On December 1st, Alibaba officially set up a poverty alleviation fund. As planned, the fund will invest 10-billion-yuan in the next five years to establish a comprehensive security system and help people fight against poverty. At the fund launch ceremony, Jack Ma, the executive chairman of Alibaba Group, told the media that Ant Financial would suspend plans for an initial public offering.
China has emerged as a leading fintech market globally, with analysts estimating the market size to have exceeded $243 billion by the end of last year, accounting for about 85 percent of the global market share.
The sector’s fast and furious growth was also illustrated by the surge of fintech investment in the country, which attracted capital of $8.8 billion between July 2015 to June 2016, equivalent to an increase of 252 percent since 2010, according to a report by Singaporean banking giant DBS Group and global accounting firm Ernst & Young.
Think for a moment of what your life would be like with no access to credit. Chances are you wouldn’t own a home or a car. Most of us could not have afforded our college education. The entrepreneurs among us would be hard-pressed to build successful businesses. And what about the ways we take advantage of credit cards – basically small-time loans that exist to allow us to pay for emergencies and unexpected expenses? Our financial identity is tied up in our access to these credit opportunities.
The good news, however, is that mobile devices – along with the existence of the cloud – are providing an entirely new landscape for the developing world. This landscape involves assigning a financial identity to those who have largely remained anonymous, reaching these populations through their smartphones. There are scores of creditworthy people on the planet, and we’ve proven before through data science that worthiness has little to do with income or wealth, but instead with the opportunity to demonstrate responsibility.
With this understanding in mind, we reviewed activity in the wake of recent hurricanes that rocked the Caribbean and observed a spike in prepaid mobile users topping up their phone allowances via on-demand credit extensions prior to hurricanes making landfall.
The following image shows the ratio of airtime credit extensions to cash top-ups as the eye of Hurricane Irma hit the Leeward Islands as well as Turks & Caicos.
As Irma made landfall, purchasing airtime from shops become extremely difficult, if not impossible. The graph above shows what happens when cash based-top ups are not possible.
For these reasons, creating a mobile financial identity in order to provide mobile credit remains the best place to start to address financial exclusion in many parts of the world and smartphones are the most logical vehicle for providing it. Nearly 80% of people all across the globe have prepaid phones, and there are nearly $1 trillion in transactions taking place every day.
A “flash crash” on the world’s biggest cryptocurrency exchange has left customers demanding answers and refunds, with many claiming to have lost thousands of dollars.
The price of cryptocurrencies NEO, OMG, and ETP crashed as much as 90% in minutes on the Bitfinex exchange on Wednesday before quickly bouncing back to former levels.
The price crash led Bitfinex, the world’s largest cryptocurrency exchange by daily volume, to close the positions of many traders who had placed leveraged bets on these digital currencies. Leveraged trading involves borrowing money to increase exposure.
Brett Kruger, a Bitfinex user affected by the “flash crash”, told Business Insider he is unhappy with Bitfinex because he claims the website was “lagging, unresponsive” at the time of the crash. He said he was also repeatedly logged out of the website, blaming recent DDoS attacks. Bitfinex announced last Sunday that it had been hit by a distributed denial of service (DDoS) attack, a malicious attack meant to bring down the service.
EthereCash, is a three prong financial platform, wants to eliminate borders, intermediaries and prejudices, providing access to bank services for everybody. It makes all the tedious and lengthy bank operations simple, transparent and secure.
IDFinance strengthens board with ex-CEO of 4finance (ID Finance Email), Rated: A
ID Finance, the emerging markets fintech company, has strengthened its board with the appointment of Kieran Donnelly, ex-CEO of, 4finance, as a board advisor. The appointment will support IDFinance as it continues rapid expansion and further diversification of its business.
Kieran Donnelly served as CEO at 4finance, the European online and mobile consumer lending group for three years. He brings over 30 years of management experience to IDFinance having also held senior roles at Standard Bank Group, MDM Bank and Renaissance Group.
Delhi-NCR-based lifestyle products rental portal Rentickle.com today announced it has raised $4 million in a fresh funding round. The fundraising is a combination of equity and debt.
The equity portion was led by Ajay Relan, Founder and Chairman, CX Partners, and ThinKuvate, a Singapore-based VC firm, with participation from existing investors.Delhi-based NBFC, DMI Finance Pvt Ltd, extended the company a debt line. Rentickle.com had raised $250,000 seed funding in early 2016.
‘P2P Easy’ is a recently founded online platform that works hand in hand with borrowers and lenders for fast loan processing & acceptance.
Although the idea of loaning money dates back to the time when the first bank was established, the core issues are more or less the same to date – i.e. 90% borrowers are rejected, and lenders are skeptic due to a lack of any reasonably acceptable guarantee.
Culum Capital, a Singapore-based receivables and supply chain financing provider, has launched a new investor platform, which is aimed at accredited and institutional investors around the globe, and provides invoice financing to SMEs as an alternative to traditional financing sources.
The platform uses its proprietary credit scoring and on-going risk measurement to identify optimum investment opportunities and provide transparency. The transactions carry a short tenor of maximum 120 days, with the average transaction at 70 days. Annualised gross returns are between 10 and 25 per cent, with a strong SME diversification.
Mobile phones have introduced a sea of opportunities in every sector imaginable, and that includes in finance. Today, anyone with a cellphone can engage in one form or another of cashless transaction, be it paying bills, sending phone credit, transferring cash, or buying goods and services — even in flea markets.
But what makes this a game changer in the financial sector is how it has penetrated different levels of society. This applies particularly to the unbanked, who are unable to access formal financial institutions and often borrow money from informal lenders who may charge high interest rates and where there is no guarantee of consumer protection.
In recent years, new technologies have emerged that are being used to complement and further what mobile money has achieved: machine learning, peer-to-peer lending, biometric technology, cloud computing, and blockchain, among others.
A conscious effort to ensure all these innovations work for the unbanked
But just because it’s fintech doesn’t necessarily mean it covers financial inclusion.
In fact, a number of the technologies being adopted in the sector are largely aimed at consumer convenience instead of the unbanked.
News Comments Today’s main news: Lending Club closes 5 investment funds, rebrands LC Advisors. CommonBond closes $248M securitization, receives AA S&P rating. LendingTree Q3 results. LandlordInvest expects to double IFISA intake. Ant Financial puts off IPO. Renredai volume surpasses 37.8B RMB. New Zealand prepares for open banking. SMART Box to debut in Canada. Today’s main analysis: Don’t forget about loan recoveries. Today’s […]
Big Tech vs. Big Banks. AT: “So far, all this talk of Amazon and Google threatening banks has been speculation. They certainly have the financial clout and technological prowess to be the threat that everyone is anticipating. But we still haven’t seen it happen–yet.”
Yesterday, Lending Clubannounced the closure of several funds. The funds were part of what was previously known as LC Advisors, an investment management company dedicated to investing in notes originated by the platform.
Since each fund is a separate legal entity there were many different buyers that participated. While we don’t know the terms of the deals or who purchased these loans, Suri did share with us that there were over 40 bids for the assets and 5 of the 6 funds have been sold at fair value or a slight premium.
What happens next?
Lending Club is rebranding its asset management business. Now called LendingClub Asset Management or LCAM for short.
When we asked Suri about positioning the new offerings to investors he stated that their biggest flagship fund under LC Advisors had delivered slightly over 6% annualized since 2011.
CommonBond, a leading financial technology company that helps students and graduates pay for higher education, today announces the close of a $248 million securitization of refinanced student loans. The offering’s most senior notes achieved AA ratings from Moody’s, S&P, and DBRS – Aa2, AA, and AA (high), respectively – the company’s highest ratings to date.
The transaction was CommonBond’s fifth and largest to date. Investors submitted $1 billion in orders, making the deal more than four times oversubscribed. Goldman Sachs served as structuring agent, co-lead manager, book-runner, and co-sponsor. Barclays and Citi also served as co-lead managers and book-runners on the transaction, while Guggenheim Securities served as co-manager.
The transaction was the first of CommonBond’s to be rated by S&P, who assigned AA ratings to the transaction, alongside similar ratings from Moody’s and DBRS. Moody’s and DBRS also recently upgraded CommonBond’s ratings on previous deals in recognition of the company’s strong credit performance.
To showcase the significance of the third-party debt collection industry in America, the New York Fed publishes in their Quarterly Report on Household Debt and Credit a ‘Third-Party Collections’ chart (below). As of 2017-Q1, between 12-13% of consumers with debt have debt being collected by third-party agencies (blue line). Of those, the average amount of debt in collections is ~$1,400 (red line).
The 2015-2016 roll rate matrix is experiencing a higher percentage of loans going from non-performing (60-89 DPD & 90-119 DPD) to current when compared to the 2013-2014 roll rate matrix. This 100 bps difference for 60-89 DPD and 200 bps for 90-119 DPD can be attributed to the improvement of servicers’ collection and outreach programs for delinquent loans.
Consumer loans have experienced a monthly recovery rate between 5% to 15% within different portfolios on our platform. Based on this table, a $100M pool of loans would have a $1M valuation difference between a 5% and 15% recovery rate input.
LendingTree, Inc. (NASDAQ: TREE), operator of LendingTree.com, the nation’s leading online loan marketplace, today announced results for the quarter ended September 30, 2017.
Third Quarter 2017 Business Highlights
Record revenue from mortgage products of $73.8 million represents an increase of 38% over third quarter 2016 driven by strong growth in both purchase and refinance revenues at 87% and 24%, respectively. According to Mortgage Bankers Association, originations industry-wide were down 16% in the comparable period.
Record revenue from non-mortgage products of $97.7 million in the third quarter represents an increase of 138% over the third quarter 2016 and increased to 57% of total revenue compared to 43% one year ago.
Home equity revenue growth accelerated, increasing $9.0 million, or 176% over third quarter 2016, and marked the eighth consecutive quarter of year-over-year growth exceeding 100%.
Personal loans revenue of $25.4 million grew 44% over third quarter 2016 and grew 24% sequentially.
Revenue from our credit card offerings grew to $39.4 million in 3Q compared to just $6.6 million in 3Q 2016. On a proforma basis, giving effect to the CompareCards and MagnifyMoney acquisitions as if they had occurred on January 1, 2016, credit cards revenue grew 43%.
More than 6.5 million consumers have now signed up for free credit scores and savings alerts through My LendingTree, and the volume of new enrollments accelerated. Revenue contribution from MyLendingTree grew 96% in the third quarter compared to the prior year period as new features and smarter savings alerts are driving increased engagement.
Third Quarter 2017 Financial Highlights
Record consolidated revenue of $171.5 million represents an increase of $76.9 million, or 81%, over revenue in the third quarter 2016.
GAAP net income from continuing operations of $10.1 million, or $0.74per diluted share.
Record Variable Marketing Margin of $59.1 million represents an increase of $22.8 million, or 63%, over third quarter 2016.
Record Adjusted EBITDA of $34.7 million increased $16.2 million, or 88%, over third quarter 2016.
Adjusted Net Income per share of $1.17 represents growth of 65% over third quarter 2016.
During the quarter, the company repurchased 42 thousand shares of its stock at a weighted-average price per share of $237 for aggregate consideration of $10.0 million. As of September 30, 2017, the company has $38.7 million in repurchase authorization remaining.
Business Outlook – 2017
LendingTree is revising Revenue, Variable Marketing Margin and Adjusted EBITDA guidance for full-year 2017, as follows:
Revenue is anticipated to be in the range of $603 – $608 million, representing growth of 57% – 58% over full-year 2016 and an increase from prior guidance of $580 – $590 million.
Variable Marketing Margin is anticipated to be $202 – $205 millioncompared to prior guidance of $190 – $195 million.
Adjusted EBITDA is anticipated to be in the range of $111 – $113 million, up 59% – 62% over full-year 2016 and an increase from prior guidance of $103 – $106 million.
A recent report from McKinsey on the global banking industry addressed the threat banks face from technology firms. Amazon stock jumped 13% on earnings and reporting that Amazon is increasing its lending footprint. Tune into Bloomberg Radio archive to hear more about this topic as PeerIQ’s CEO discusses the threats and opportunities of big technology with Bloomberg’s Lisa Abramowicz and Pimm Fox.
Summary of Amazon’s Lending Business
Amazon finances small businesses that sell products through the Amazon marketplace on an invitation-only basis. Interest rates range from 6 to 15%, tenor ranges from 4 to 6 months, and loan size is up to $750K.
Although there is no segment-level P&L reporting for the lending unit, loss-rates according to Amazon’s Peeyush Nahar have been “very, very small.” Amazon’s lending makes up a small part of their business (e.g., $3 Bn in loans to date vs. Amazon’s $136 Bn annual revenue). Amazon is also not directly financing the consumers indicating substantial opportunity to grow.
Owning the Customer
The most compelling advantage big tech has outside of data and customer acquisition are the creation of entirely new channels that banks cannot easily replicate.
A few examples:
In-Home: Large consumer tech firms occupy the most intimate space of consumer through services such as Amazon’s Echo, Google’s Home, or Apple’s Siri. These platforms represent a trojan horse for delivering new products and services in a highly personal and exclusive manner.
Personal assistants that are increasingly anticipatory and have access to the calendars, preferences, and daily lives of consumers.
Mobile and virtual wallets which shift the battleground from legacy “share of wallet” and “primary card” concepts to mobile platforms and virtual wallets
Virtual spaces created via social media including Facebook or services such as Lyft or Uber which enable unobstructed access to the consumer.
Technology giants like Google and Amazon, which gained their market muscle from non-finance-related ventures, are slowly stepping into the space. Their next target could be small business lending, and according to some experts, it’s fast approaching the market.
Amazon in particular is positioned to dominate. The company has already lent more than $1 billion to merchants selling on its platform, and, just as alternative lenders put the pressure on traditional FIs with their quick surge into the market, the Amazons of the world will do the same, Mills predicted.
Chatter Picks Up Steam
Karen Mills’ statements have found new backing in the latest banking report released by McKinsey & Co. this week. New reports in Bloomberg on Wednesday (Oct. 25) said the report identifies Amazon as the newest, biggest threat to the small business lending status quo.
The report points to sagging return on equities for the banks, which have not been able to surpass 10 percent since the 2007/2008 global financial crisis. The FIs that collaborate with those FinTechs could boost their return on equities to 14 percent and even higher if they develop their own solutions in-house.
When customers open an account at one of these automated investing firms, they’re put into funds from companies like Charles Schwab Corp. and Vanguard Group and charged a fee of anywhere from 25 to 50 basis points. In return, they get some extra benefits, like tax loss harvesting, which can result in a lower tax bill, and automatic re-balancing at no extra cost.
But there’s a catch, the funds that customers buy through these advisors are all available on free trading platforms such as Robinhood Financial, where there’s no added cost.
Consumer analytics company SelfScore has rebranded as Deserve, writes Julie Muhn at Finovate (Banking Technology‘s sister company).
The California-based company continues to be committed to providing underbanked Americans with access to credit, and to fuel that mission, Deserve has received $12 million in funding. The round was led by Accel, with participation from Aspect Ventures, Pelion Ventures, Mission Holdings, Alumni Venture Group, and GDP Venture, and brings Deserve’s total funding to $27 million.
Blockchain is particularly relevant to the lending market. Lending is a contract-intensive process with an extensive lifecycle; it carries significant risk and limited trust across its value chain – from origination to funding through to the fulfillment and servicing of the loan.
Moreover, the integration of blockchain with digital lending ensures transactions are tracked in an open and transparent way. Banks and lenders get direct visibility into exactly what happened during the lending process – who was involved, who had control over the authoritative copy of the digital assets and ultimately, who owns the value of those assets, as required by law.
Touching on the recent boom in real estate crowdfunding firms, John McNellis, co-founder of Palo Alto, Calif.-based development firm McNellis Partners, divided the crowdfunding sector into two groups: firms that simply connect investors with developers and firms that invest in projects themselves. The first concept should work in the long term, he noted. But when it comes to crowdfunding firms underwriting real estate deals, McNellis pointed out that it takes at least a decade in the business to become a reliable underwriter. “To expect these 20-year-olds who are good at tech to be good at underwriting” is unrealistic, he said. McNellis added that established developers normally already have financial partners that they prefer to work with. The developers most in need of crowdfunding dollars would be either those just starting out in the business or developers with a spotty track record.
The decline in underlying collateral quality — a theme across wider consumer ABS sectors — has been playing out in marketplace loan ABS, with recent deals from Prosper, Marlette Funding and Avant featuring a growing proportion of loans taken by borrowers with credit scores of less than 680.
A 2017 crowdfunding reportby the National Women’s Business Council, for example, found that 47% of successful campaigns on the popular crowdfunding platform Indiegogo were run by women.
Keep in mind that online business loan shopping sites may operate in a variety of ways:
Lead generation sites will simply gather your information then sell it to various lenders, which may then call or email you with information or offers.
Online lenders may offer a specific set of loan products aimed at specific types of borrowers (for example, those with significant credit card sales). Remember: just because you can’t qualify with one lender doesn’t mean you can’t quality with others.
Online brokers may try to help get you funding with various lenders with whom they have a relationship. They may charge a significant fee for this service, so be sure to ask.
Online marketplaces will present you with options and allow you to choose which ones seem right for your needs. Ideally, you’ll also see which loans are best matched to your qualifications. (Disclosure: Nav’s small business loan marketplace operates this way.)
Zeus CrowdFunding once again offers borrowers what other lenders won’t – low rates designed specifically for the real estate investor and their year-end needs. For a limited time, qualified applicants will pay only six percent interest for the first six months of the loan term.
The company loans up to 100 percent of a project’s cost to qualified applicants in as little as four days.
On Deck Capital, Inc. (NYSE:ONDK) is scheduled to be issuing its quarterly earnings data before the market opens on Wednesday, November 1st. Analysts expect the company to announce earnings of $0.03 per share for the quarter.
As banks rush to catch a wave of robo technologies, Wells Fargo Advisors is rolling out a factor-based approach designed for advisors and their clients.
The wirehouse has launched an expansion to its electronic model portfolio services platform, according to Patty Loepker, WFA’s head of research directed advisory programs. The new managed accounts program features allocations built around smart beta ETFs.
Litigation finance specialist Pravati Capital has launched its third fund vehicle to capitalize on opportunities in the burgeoning litigation finance sector.
The new fund, named Pravati Credit Fund III, will invest in mature stage, high-probability, high-value cases or case portfolios where there is established liability and precedent for settlement, according to a statement.
Initially, my co-founders and I had experience verifying identity documents meant for an offline world. The current way of verifying documentation for a standard current account requires hours and hours of face-to-face in-branch and still not getting approved; it’s no wonder there’s a 40% drop-off.
Of the 7 billion people in the world, Facebook has brought their social identity online, LinkedIn has brought their professional identity online and now we’re looking to bring their legal identity online.
How exactly are Onfido providing something that mainstream banks should take notice of?
Very simply, we help business verify the identity of the people they are onboarding digitally. That can be with a photo of their government issued ID that the user can send with a smartphone. We cover 600 IDs globally and use machine learning to verify whether the ID is genuine or not. There are three steps to our core technology. The first, we extract the details, see if the patterns are consistent and compare them to the millions of historically computed IDs. The second step is asking the user to take a photo or short video of their face, which we compare to the photo on their identity document for similarity. The third step is to check that their details – name, date of birth and address – are consistent with records on multiple databases. Altogether this verifies the person is who they claim to be and, end-to-end, takes two minutes.
We use a hybrid machine/human approach – the technology is able to automatically process the vast majority of documents, and the small number of outliers are passed to our expert human team for review. It means that human resource can be put to more effective use, and would heavily cut down on the 30,000 people employed by Citibank, for example, who just work on onboarding and compliance checks.
As a Millennial yourself, how much of a role do you think generations play on attitudes to banking?
Millennials are just so used to doing absolutely everything on their phone.
Fintechs have really monopolised the millennial market and they’re building the models to ensure they keep that market for the next 15-20 years. That’s where PSD2 becomes very relevant as a leveller of the playing field for the market – it’ll increase healthy competition.
Silicon Valley investors have more than doubled funding for UK technology companies this year, in a sign of strengthening links with the world’s biggest tech hub after the Brexit vote.
British start-ups received £884.8m from venture capital backers based in San Francisco and the Bay Area in the first nine months of this year, compared to £342m in the whole of 2016, according to London & Partners, the London mayor’s promotional agency.
According to the latest figures from London & Partners (L&P), the Mayor of London’s official promotional firm, investors from around the world have backed London-based fintech firms to the tune of £825m so far this year. This is a positive sign for the industry after UK fintech investment plummeted by more than a third in 2016 as investors put off decisions in the wake of the Brexit vote.
One of the biggest London fintech success stories, currency exchange platform Transferwise, is reported to be in discussions with investors to raise a further £77m, which would value the company at more than £1.2bn.
Strange as it may seem, using the analogy of Lego may be the best way to demonstrate why we believe the peer-to-peer (P2P) industry also isn’t – and can’t be – a one trick pony. While some see the industry as a fad that is set to become redundant, there are many reasons why this isn’t the case.
P2P platforms are exploring a range of new and old ways, and their aim is to create something which is more equitable, satisfactory and useful for everyone.
Uber has appointed a former senior adviser to the Bank of England as non-executive chair in the UK, as it endeavours to clean up its image and “make things right” after Transport for London last month revoked the ride hailing company’s licence to operate in the city.
Laurel Powers-Freeling, who will take up the newly created position, is currently senior independent director at online lender Atom Bank.
Flush with cash, Chinese financial-technology giant Ant Financial Services Group is putting on hold plans for an initial public offering while it steps up investments in everything from startups to artificial intelligence, according to a senior company executive.
Investors and analysts have been expecting Ant to go public sometime in 2018. The Hangzhou-based company last raised $4.5 billion from private investors in April 2016 in a deal that gave it a $60 billion valuation—and its business has since expanded significantly.
51 CreditCard (u51.com), an online platform for credit card bill management, is reported to be listed on Hong Kong Exchanges and Clearing Limited (HKEX) in 2018, aiming to raise at least 500 million dollars.
According to a report of China Daily, the credit database of PBOC has collected credit information of more than 840 million individuals as well as more than 19 million companies and organizations by the end of April. Among these agencies, only 255 licensed micro loan companies have been connected to the company credit information system and 156 to the individual credit information system.
From November 1st, customers will be able to pay their train tickets by using WeChat Pay through the official booking website 12306.com or in the train station (booking office/self-service ticket machine).
On October 18th, Trustdata released the long-awaited “Trustdata: China Consumer Finance Analysis Report (2017)”. The document presents a comprehensive review of consumer finance development in China, makes a deep analysis of payday loan, installment credit and consumer behaviors, and proposes a new concept called “Consumer Finance Development Index”.Statistics from the research notes that, by the end of last month, the credit scale of consumer finance in China has reached more than 110 billion yuan with 3.7 million registered users.
The phenomenon of “Chinese companies lining up for an IPO in the United States or Hong Kong” has re-surfaced recently, Tiger Brokers, an online brokerage helping Chinese investors trade US- or HK-listed stocks, told chinadaily.com.cn Thursday.
Beijing-based Jianpu Technology Inc, which is 100 percent controlled by RONG360 Inc filed its preliminary prospectus with the US Securities and Exchange Commission, without the estimated IPO price range, on Oct 20.
Prior to Jianpu, Chinese online small consumer credit provider Qudian Inc made its debut on the New York Stock Exchange on Oct 18. Qudian priced its IPO of 37,500,000 American depositary shares (ADSs) at $24.00 per ADS for a total offering size of about $900 million, according to Xinhua News Agency. Qudian closed at $26.39 Wednesday after diving 7.24 percent, still above its IPO price.
Recently, Renrendai issued its performance report for the third quarter of 2017.According to the report, the cumulative turnover of the platform surpass 37.88 billion RMB, with 524 thousand transactions in total.
More details, Renrendai remained steady growth in the third quarter. The volume on the platform reached 6.51 billion RMB this quarter, a 109% increase over the same period last year, and the amount of money that investors earn is up 55% from the same period last year. In addition, the per capita borrowing amount on the platform is 80.8 thousand RMB, which represents the capital requirements of small business owners and self-employed people in the class, and always below the national regulations of loan balance ceiling of $200000.
On 27th October, the shares of Qudian tumbled again, closing down $3.59 to $22.8, down 13.6% below the offering price of $24 a share.
The company has fall into constant questioning just after it landed in the SEC. Luo Min, the CEO of Qudian, responded several questions through an interview Qudian’s Luo Min Respond To All, but this move has raised more query. Many media and media outlets gathered to lambast Luo Min for “lying” in her response.
On 23th October, Luo Min avoided all the media interviews again. Since then, the shares of Qudian began to slump, which closed at $26.39 on 26th Oct, down nearly 20 percent from the opening price of $31.89 on Wednesday.
Jianpu Technology Inc, a wholly-owned subsidiary of Chinese fintech firm Rong360, has filed for a $200 million IPO in the US. Goldman Sachs, Morgan Stanley and JP Morgan are bookrunners for the deal, according to a stock exchange filing.
China is preparing to tighten regulation of online consumer lending as part of a campaign against financial risks, dealing a possible setback to Chinese fintech groups that hope to sell shares in the US.
Household debt in China remains low as a share of GDP, and authorities have encouraged growth of consumer credit as a way to rebalance the economy towards consumer spending, but now concerns are rising about irresponsible lending practices online.
Online consumer lending has replaced peer-to-peer lending as the trendy new area in Chinese fintech, as a regulatory crackdown on P2P reduced that sector’s profitability. Short-term consumer loans outstanding in China grew by Rmb1.49tn ($225bn) through the first nine months of this year, compared to an increase of Rmb830bn for all of 2016, according to PBoC data.
Chan also said the rapid growth of new fintech services, such as peer-to-peer lending marketplaces and online money market funds, was made possible by a lack of innovation by the country’s traditional banks in addressing the needs of not only the average consumer, but also many small and medium-sized enterprises.
High-flying start-up Ant Financial Services Group, which runs online payments service Alipay and money market fund Yu’ebao, has made AI a key driver for expanding its businesses and improving customer service.
China was the world’s second-biggest investor in AI enterprises last year, injecting US$2.6 billion into the sector, according to the state-run think tank, Wuzhen Institute. The United States topped the list with US$17.9 billion in investments.
What would your reaction be if you wanted to get a loan and your bank asks to go through your Facebook profile? In China, this is already happening on a large scale, but it’s not banks that are doing the rating—it’s the country’s burgeoning fintech companies. And it’s not Facebook they are looking at—its social platform WeChat and shopping website Taobao.
Social credit scoring analyses data from non-traditional sources: social media, online shopping, payment apps, cell phone accounts, and more. This type of scoring is meant to fill a gap for people who want a loan but don’t have any way of proving they can repay one. In order to gauge whether you are creditworthy or not, the score can take into account a number of variables: who your friends are, what you buy, whether pay your bills on time or even how much time you spend reading the user agreement. It’s like FICO but decidedly more creepy.
Alibaba was once a kind of shadow lender too. The company first started building its own credit scoring model to provide loans to Taobao vendors. For this, it relied solely on the platform’s ability to gather big data—transactions, user ratings, market positioning, and others.
Sesame Score (screenshot above) tracks five areas: identity information, such as information on users’ education and work, ability to keep financial obligations, credit history, behavioral preferences like shopping, money transfers, and connections with other people. In return, it offers deposit-free bike and power bank rentals as well as other benefits.
Yirendai (YRD) is a Chinese fintec company focused on facilitating unsecured loans. Leveraging the experience of its parent company, CreditEase, Yirendai has facilitated more than RMB 47 billion (US$7 billion) of loans since commencing operations in March 2012.
Financials and performance
Yirendai’s core business has seen rapid growth, facilitating over RMB 20 billion(US$3 billion) in loans in 2016, up 112% from 2015. The most recent forecastfrom the company expects loan volume to continue to grow through 2017, with RMB 35-37 billion (US$5.3-5.6 billion) this year. Earnings have been strong and growing as well, with net income for the six months ending June 30, 2017, rising from RMB 392 million to 620 million (US$58.9 million to 93.2 million) over the same prior-year period, translating to diluted earnings per ADS of RMB 6.71 to 10.26 (US$1.01 to 1.54) for the same periods.
China’s upcoming Social Credit System
Presently, eight companies have been licensed to develop algorithmic SCS scoring systems, including China Rapid Finance, a partner of social network TenCent (OTCPK:TCEHY) and Sesame Credit, which is run by Ant Financial, an Alibaba (BABA) affiliate.
Italian P2P firm BorsadelCredito.it has followed in the footsteps of its UK antecedent Funding Circle by launching a closed-end fund. The unlisted fund, which is called Colombo, hopes to raise €100m to invest across a 5 year timespan, and is managed by BorsadelCredito.it (through a vehicle named ART SGR SpA). The fund’s custodian bank is Caceis Bank.
By investing in Italian SME loans, originated exclusively by BorsadelCredito.it, the fund will target a yield of 5 per cent (5.5 per cent pre-tax).
Desai left the audience in no doubt that Funding Circle has “no plans” to launch a bank. Later that same day, Zopa CEO Jaidev Janardana delivered his keynote: “Why we’re launching a bank”.
José Rego, who runs Portuguese P2P firm Raize, sees the issue as black-and-white.
“By definition, if you become a bank, you stop being an alternative lender,” he said. “Becoming a bank is an extremely complex and very expensive strategic decision which typically takes into consideration other elements besides the equity value generated by the alternative lending. Only a select number of platforms are likely to have the opportunity to become banks (if they wish so). So, in reality, I don’t think it should be something we’re thinking about within the industry.”
In a new report ‘Asset & Wealth Management Revolution: Embracing Exponential Change’, PwC anticipates that global Assets under Management (AuM) will almost double in size by 2025, from US$84.9 trillion in 2016 to US$111.2 trillion by 2020, and then again to US$145.4 trillion by 2025.
By 2025, AuM will have almost doubled – rising by 6.2% a year, from US$84.9 trillion in 2016 to US$145.4 trillion in 2025, with the fastest growth seen in the developing markets of Latin America and Asia Pacific.
While active management will continue to grow and play an important role, reaching $87.6 trillion by 2025 (60% of global AuM), PwC predicts growth in passive management to reach $36.6 trillion by 2025 (25% of global AuM).
If current growth is sustained, the industry’s penetration rate (managed assets, as a proportion of total assets) will expand from 39.6% in 2016 to 42.1% by 2025.
PwC anticipates assets growing at 5.7% a year in North America from 2016 to 2020, slowing to 4.0% per annum from 2020 to 2025, lifting assets from US$46.9 trillion to US$71.2 trillion over the nine years. Similarly, Europe is projected to grow at 8.4% and 3.4% per annum respectively over the two periods, with assets rising from US$21.9 trillion to US$35.7 trillion.
McKinsey said that the industry needs to continue its digital makeover to protect the up to 40 percent of revenues at risk by 2025 and prepare for competition from so-called platform companies like Bezos’s Amazon.com Inc.
As he extends Amazon’s reach, the Seattle-based company has had discussions with banking regulators about financial innovation, according to lobbying disclosures reviewed by American Banker. And it already has a small-business lending arm that has doled out more than $3 billion to more than 20,000 of the merchants on its e-commerce platform.
The global banking industry, which had an 8.6 percent return on equity last year, could offset the loss of profits from price competition by partnering with platform companies and generating more revenue from their data. Banks that go further by creating their own platforms could elevate their ROE to 14 percent, according to the report. ROE is a measure of profitability.
Furthermore with smartphone prices of $30 to $50, Asian markets maintain a robust mobile market. 76% of Taiwan is connected to mobile, and 70% of Myanmar is connected.
Experts estimate Asia as the region to become the fastest growing Internet region by 2020. And while their internet industry is flourishing, only 27% of Southeast Asians have a bank account. In 2017, China has 731 million internet users. That is only 53.1% of the population. China represents internet development at a fast pace, but it still has 21% unbanked. Internet traffic growth in Myanmar is at 58%, yet Myanmar is one of the lowest banking rates in Asia with over 70% of adults (aged 15+ years) unbanked.
As an example OECD research points out that financial sector works constitute 19% of the top 1% earners but the share of finance in the overall employment is only 4%.
In developed world, there are huge reserves of money lying in banks at sub zero, zero or miniscule interest rates. On the other hand in the developing world where there is a dearth of credit, loans can only be had at rates as high as 20-30%.
According to Eurostat, SMEs represent around 99% of all enterprises. In OECDcountries alone SMEs are responsible for job creation to the tune of 60-70%.
Karma plans to use the blockchain in such a way that individuals as well as legal entities can make the most of profitable relationships with each other. This will entail creating a community of participants, who will be able to lend money, borrow money, insure against default, Score loans and carry out assessments and even collections. All of this will be fuelled by the Karma token that will be at the centre of this new ecosystem.
The sale of Karma tokens is legal in all jurisdictions including the United States and China. Qualified US investors can participate. The basic price of Karma Token is US$ 0.01. Early investors can get discounts of 50% till US$ 1 mln is collected, thereafter 30% discount is available till US$3 mln is collected and 15% till US$ 8 mln is collected. There is a hard cap of US$ 10 mln on the token sale.
Though fintech can take many forms, “I think the disruption is really in the payer experience,” says Sharon Butler, EVP, education at Flywire, a global payment solutions company. “Essentially we are leveraging banking infrastructure. I think really what fintech is, is sort of the blend of the old and the new.”
Preceding the growth in cross-border tuition fee payment services, which track the money and file it instantly with minimum costs involved, were more staff resources sifting through multiple transactions and matching them to the student, coupled with uncertainty from the student’s side about when or whether the money would actually have arrived.
Improvements in payment services is one of the biggest ways fintech has benefitted students, agrees Devie Mohan, founder of fintech research company, Burnmark.
Fertile ground in China
Financial technology as an industry has grown globally at an unprecedented scale. Last year, fintech reaped $17.4 billion of venture capital investment – a colossal increase on the $2.5 billion it received just four years ago.
And $7.7 billion of this investment went to China, seeing it overtake the US as the top investment market for fintech companies for the first time.
A platform targeting the Chinese market has recently struck a deal to partner with ChinaPay, the online payment subsidiary of China UnionPay, one of the world’s payment giants.
The mobile payment industry is one which has grown particularly quickly in China in comparison with other countries around the world, predominantly led by Alipay and WeChat Pay. These two platforms combined saw $2.9 trillion in transactions overall last year.
Modernising student loans
But it was Prodigy Finance that entered the loan market specifically to serve international students. Since its inception in 2007, the platform has lent over $310 million to international students all around the world to study overseas, and is expanding its services.
Financial services startup Ethercash has proudly announced its Pre-ICO Campaign, which will raise funds to develop its blockchain-backed financial platform. The Ethercash platform aims to revolutionise three core functions of finance to bring greater transparency and security in the way we lend, send and spend. The Etherecash platform will allow its users to leverage their cryptocurrency holdings to acquire fiat currency loans without the need for credit history, through the application of lawyer-backed smart contracts. The Etherecash Pre-ICO campaign will run from October 25th, 2017 until November 7th, 2017 and ICO campaign will begin November 15th, 2017 and finish on December 19th, 2017.
Andrew Sieprath is among the first people in the Europe to embrace “open banking” as a customer.
His chosen banking provider is Revolut, which isn’t even a bank.
Revolut is just one of three “open banking” services due to launch here in the next few months. They will lead New Zealand into something of a banking revolution which threatens to do to banks what Uber is doing to taxi firms, and ultimately put more pressure on them to cut staff or close branches.
There are many emerging open banking models, but as a starting point, think internet banking that’s slicker, more intuitive, and allows users to see and manage accounts from multiple banks in a single place.
While the technology behind robo-advice is making it cheaper to invest, it doesn’t mean it is actually providing advice let alone the right advice, says the Association of Real Return Investment Advisers general manager Rebecca Jacques.
She told a recent Calastone forum that she put a few global and domestic robo-advisers to the test by giving each the same simplistic target: to pay her young children’s private school fees.
Every robo asked for a country of origin; only one asked for a tax bracket – but what was “scary” was that not one asked if the funds would be used for private school tuition, she notes.
But the report found property transactions made up a very small part of that alternative financing industry, making up just $49 million, or 8%, of the $609 million dealt out in 2016.
Australia lags behind the Asia-Pacific average (excluding China) of 17% of alternative financing going towards real estate. The popularity of peer-to-peer property financing in South Korea is a big contributor to the high average.
The $49 million alternative lending spent on real estate in Australia is made up of $36 million in peer-to-peer lending and $13 million in crowdfunding. In the US, peer-to-peer is worth $1 billion and crowdfunding $800 million.
CrowdfundUP – The startup has so far allowed 2,000 people invest in 17 projects, with individual investments typically ranging from $5,000 to $2 million.
CoVESTA – The real estate on offer includes residential, commercial and even agricultural properties, with investors requiring to contribute at least 5% of the purchase price if they wish to be a tenant in the property. For passive ownership, just 1% ownership is required.
It has been observed that, when the P2P lending industry or any other industry is prudently regulated, it attracts more participation. In terms of P2P, the regulation will increase entry of investors as well as borrowers. This is a reason why RBI regulating the NBFC-P2Ps is a long-term positive for the Indian P2P lendingindustry.
RBI regulating the sector means dead-end for players that are looking only to generate money without adding any value.
However, the potential social benefits of P2P lending are contingent on a facilitative and proportionate regulatory ecosystem. A review of the P2P regulations issued by the RBI leaves much to be desired in that sense. Saliently, the P2P regulations delegate potentially arbitrary discretion to RBI in gatekeeping, impose high market-access barriers that would inhibit innovation in a technology-intensive sector, and lack clarity around critical issues like leverage ratio.
A. Excessive regulatory discretion: One of the principal governance issues of a modern state is injecting accountability into regulatory discretion.
B. Disproportionate minimum capital requirements: The RBI has prescribed a mandate that would require a minimum net-owned fund (NOF) of Rs2 crore.
C. Lack of clarity around critical issues like leverage ratio: Leverage ratio is defined as “total outside liabilities divided by owned funds, of the non-banking financial corporation in P2P (NBFC-P2P)”. This leverage ratio has been capped at 2.
The current marketplace for financial products in India is still highly inefficient, time-consuming & uncertain for customers – especially the SMEs and the MSMEs. When they require loans as working capital or for expenditures like purchase of raw materials, payment towards wages etc. to achieve scale and growth, approaching a bank directly or even visiting loan aggregator websites becomes challenging in terms of time & information. Also, due to varied risk appetite of traditional financial institutions, many SME and MSME entrepreneurs are often puzzled in terms of documentation requirements; different banks and lenders have their own set of risk parameters which they assess while sanctioning a lending facility. This results in high rejection rates within the loan ecosystem.
Why online lending is emerging as an enabler for India’s MSME industry
New-age fintech lending marketplaces endeavor to revolutionize the country’s financial lending patterns by changing the way it works. They are enabling easy access to loans by connecting these small businesses to financial institutions on a consolidated platform for quicker sanctions. Such neutral platforms, with customer-centric features offering a wide range of loan products and end-to-end loan fulfillment, enable MSMEs to concentrate on building their businesses rather than worrying about finances to fulfill the gap in their cash flows or fund their expansion and growth.
While the Reserve Bank of India’s (RBI) guidelines for lenders and borrowers on peer to peer (P2P) lending platforms are important cautionary moves, caps on lending should ideally be linked to lenders’ incomes, Neha Agarwal, co-founder of i2ifunding, told Shritama Bose. The company has disbursed more than Rs 3 crore so far in FY18 and has a full-year target of Rs 10 crore, she added.
We have had more than 30,000 registrations on our platform so far, of which around 25,000 people are registered as borrowers and around 5,000 as lenders. Since launch, around 500 loans have been disbursed and we have around 2,000 active lenders.
The average loan size is about Rs 1.5 lakh.
Almost 90% of the lenders have invested more than once. Around 40% of lenders are lending regularly on our platform.
Gregor has a company in Singapore where individuals can securely store their gold and silver.
Using peer to peer lending you can withdraw up to half of your holdings in loans at low-interest rates. For example, if you have $100k worth of gold you can deposit and take out a loan for 50k at around 3.5% interest per year.
The fast growing Fintech industry is another feather in the cap of rising Asia. According to EY FinTech Adoption Index 2017, there is a palpable global shift of fintech activities from the UK and the US to Asia.
Another report provided by KPMG and CB Insights says in 2016, investments in Fintech companies in Asia hit $8.6 billion across 181 deals.
In light of this, fintech innovation labs and fintech accelerator/incubator spaces are rapidly growing throughout Asia, especially in Hong Kong. The FinTech Innovation Lab Asia-Pacific is collaboration between Accenture and leading financial institutions including Bank of America, Merrill Lynch, Goldman Sachs, HSBC, J.P. Morgan, and Standard Chartered, etc.
A bout of high-profile mega-rounds in the Chinese market has also played a vital role in uplifting Fintech investment. One such activity was a whopping US$4.5 billion funding round by Ant Financial, an affiliate of Alibaba group. The other smaller but successful funding rounds in China during 2016 were: US$73 million to Quant Group, and US$30.4 million to China Rapid Finance.
According to a recent research conducted by Startupbootcamp FinTech Mumbai and PwC, it was found that more than 95% of financial service companies are seeking partnership with Fintech startups through collaboration rather than competing with them.
Another report regarding Indian Fintech ecosystem is more interesting. It says Indian Fintech market is expected to double from current US$1.2 billion to US$2.4 billion in 2020.
Tan, who formerly partnered with Sequoia Capital Asia, said his Singapore-based fund is looking for ambitious, strong Korean tech startups to invest in what could become the next unicorn.
He believes Asian-based VCs have a competitive advantage over established VCs from Europe or the US in the region as they can effectively tackle the needs of startups.
Fintech and software as a service, especially targeting small and midsized businesses, are the buzzword in Southeast Asia, according to Yoo Jung-ho, investment manager at Korea Investment Partners.
“In many of these countries, payment, banking abd finance, are still in a nascent stage with only 10 percent of the population utilizing credit and banking services,” said Yoo. “There is a great demand for firms that provides peer-to-peer lending and payment services. “So companies that target small and medium enterprises that make up the majority in Southeast Asia, will have a fighting chance.
According to recent reports, only 12 percent of households in Malawi have access to credit. With 65 percent of the population living under the poverty line, the rural population is especially vulnerable to the limitations of credit.
In today’s modern age, a physical bank is no longer needed to conduct financial services. Virtual and automated banking is expected to replace 30 percent of bank roles in the next ten years. These virtual banks even the playing field for Malawians by allowing consolidated rates, 24/7 access to services, and a location for information about other services. Some of these alternative, virtual services include:
Peer to Peer Loans:Rather than receiving a loan from a financial institution, peer to peer loans allow people to receive a loan directly from an individual financer. In order to apply for a loan, you must visit a peer to peer lending platform such as Prosper or Perform, and the online marketplace will match borrowers and lenders. Although the site still uses credit scores, individuals may have more sympathy towards you and your situation as opposed to a national bank.
Crowdfunding:Another way to finance an opportunity is through crowdfunding. Crowdfunding is a fairly recent innovation that utilizes crowdsourcing as a way to raise funds for a project or business.
The change in financial technologies in the coming years will have a great impact in Malawi, and create more access to services for the entire population.
Lendified, a Canada-based lender who provides small business loans online has entered into an agreement with ClearFlow Commercial Finance to increase its lending capacity. According to the lending platform, through the agreement, ClearFlow is providing it with a $60 million credit facility to fund loans delivered through its website.
News Comments Today’s main news: Goldman’s traders have worst first half of Blankfein’s reign. RateSetter hit hard by struggling loans. RateSetter offers investors free sell out option. LandlordInvest hits 1M GBP lending milestone. Revolut offers free personal accounts for Europeans. Today’s main analysis: Goldman has worst first half in Blankfein era. Today’s thought-provoking articles: 35 institutional investors raise stakes in Yirendai. A […]
Millennials want a bank close to home. AT: “We’ve seen the reports before that millennials want a bank account. However, this survey shows that they want a bank account close to home with a brick-and-mortar branch. It seems that millennials aren’t interested to much in online banking, but this is just one survey.”
4 tips for developing a product around an unknown concept. AT: “This is an article written by a marketing professional. As a content marketer with more than a decade experience writing for brands positioning themselves online, I’d have to say I agree with this 100%, particularly points 1 and 4. This advice is more than apt for alternative lenders.”
Goldman Sachs Group Inc. traders turned in their worst first-half performance since Lloyd Blankfein rose from that business to become chief executive officer in 2006.
Investment-banking revenue fell 3 percent to $1.73 billion from a year earlier, better than the $1.59 billion prediction. Investment management as well as the Investing and Lending business also surpassed expectations.
(NYSE:YRD) enjoyed a 74.75% run-up in share price since hitting record low of $18.3. The stock managed 3.53% rise and now stands at $31.98 as of July 17, 2017.
Institutional investors currently hold around $143 million or 7.7% in YRD stock.
Yirendai Ltd. 13F Filings
At the end of Mar reporting period, 35 institutional holders increased their position in Yirendai Ltd. (NYSE:YRD) by some 1,343,454 shares, 22 decreased positions by 2,144,331 and 5 held positions by 1,150,551. That puts total institutional holdings at 4,638,336 shares, according to SEC filings. The stock grabbed 21 new institutional investments totaling 973,854 shares while 12 institutional investors sold out their entire positions totaling 1,445,115 shares.
In a survey held from the end of June into early July and conducted by SurveyMonkey, the web-based survey firm queried more than 1,000 adults above the age of 18, 290 of which were defined as 18- to 34-year-olds: millennials.
Among the findings in the How We Will Pay study: 83 percent of respondents wanted to be able to use an ever-burgeoning roster of new devices to conduct commerce. But, interestingly, when it came to actually transacting, 77 percent of those surveyed said trust remained a key factor when deciding who they want enabling those transactions.
People tend to trust the banks, financial institutions and bank card networks where payments relationships are already in place and already are known to consumers, according to the data.
Most Americans, at 63 percent, have used peer-to-peer payments, said SurveyMonkey. PayPal claimed the lion’s share there at about 80 percent across all demographics. Venmo remains a distant second, at 11 percent, with even greater adoption among millennials at 30 percent. Peer use also mattered to those surveyed, as 28 percent of millennials used the platform because their friends and family members did.
Eighty percent of surveyed millennials wanted the option to visit a brick-and-mortar bank branch based near their towns. In fact, the banks without a tangible footprint in a millennial-centric town lose out, as members of that demographic claimed they would be less likely to open an account with a bank were it not to have a physical branch nearby, said SurveyMonkey.
Now, app-only fintech Tomorrow, which launched services across the US this week, wants to help this group access inheritance products: In the US, 74% of millennials don’t have a will, and 50% of millennial households would struggle to pay their bills without their primary wage earner, according to studies Tomorrow cites. The company’s raised $2.6 million in Seed funding from backers including Plug and Play, Allianz Life, and Curious Capital. It’s now available for iPhone, and will release an Android version later.
When it comes to mobile banking, there’s often a massive gap between the consumer’s experience with a big bank and with a smaller regional operator or credit union. The big banks have embraced mobile as a critical part of their overall delivery experience — with custom mobile banking apps, proprietary mobile wallets, biometric-authentication, cardless ATMs and more.
But when it comes to the smaller players serving more local populations, the well of mobile innovation can run dry rather quickly and for many reasons.
“A staggering statistic I came across recently really gave me pause. A full 42 percent of credit unions still don’t have mobile banking apps — and it’s not because they don’t want them or don’t think they need them,” Steggall remarked, “but because they don’t have the ability or the resources to do the technical integrations, and they can’t justify the cost.”
While Urban FT’s new products with iParse are for smaller FIs, Steggall told Webster the company also sees a profitable future working with existing payments processors in the market today. Steggall said the iParse solution will help those players — including larger processors already offering their own mobile banking services — better serve their smaller bank and credit union partners.
Being an innovator always comes with the huge challenge of educating potential investors, developers and end users on the significance of a totally new product or service. When bitcoin hit the market, its leaders struggled to answer the same question: “Why is this necessary?”
When you’re building something new, your mistakes form the blueprints future entrepreneurs will study. If you’re a trailblazer in a novel space, here are four ways to forge ahead.
1. Don’t sell — educate.
YieldStreet, an online alternative investments platform, created YieldStreet University, which combines video content, infographics and other visuals to help simplify complex concepts about alternative investing for its customers.
2. Slow your roll.
Faster isn’t always better. When you’re dealing with an unknown concept, speed kills the sales process. If your service or product is new to the market, resist the temptation to immediately convert cold traffic. First, take time to make sure your clients or customers understand what they’re working with and how to utilize your product or service to its fullest potential.
3. Be open about swings and misses.
Honesty builds trust. One study from Label Insight showed 73 percent of participants were willing pay more for more transparent brands.
4. Focus on your mission, not personas.
Don’t concern yourself with selling to anyone in Box X or Box Y. If you do, you’ll end up tailoring your product to suit demographics instead of your vision. Identify your mission and purpose, and sell that.
The peer-to-peer lender Ratesetter has been hit by £80m of struggling loans in the first major setback for the nascent online lending sector.
The company said it would use its own funds to prevent losses being taken by its 50,000 users, who are mostly small investors using the website in order to lend their savings to other individuals and benefit from higher interest rates than are available at high street banks.
The company admitted that it had made £36m of loans to a company called Vehicle Trading Group Limited (VTG), a motor finance holding company that then fell into administration because it had taken on too much debt.
It also loaned a further £12m to an advertising company called Adpod, which during 2015 became 50% owned by VTG. The website admits that the loans, of which £8.5m are still outstanding, should not have cleared its own credit policy.
TheCityUK and PwC’s Strategy& have developed a vision for the future of the industry, drawing on extensive engagement with leaders across the industry and a rigorous fact-based assessment. By 2025:
1) The industry will have transformed itself to be highly digitised, innovative and customer-centric. It will be a leader in cyber security, using data in a secure and sophisticated way. This will be alongside new technologies, to drive forward significant improvements in the way services are delivered. Firms will be consistently and relentlessly doing what is right for their customers.
2) London will still be one of the most important and attractive international centres for financial services and global business, retaining the full ecosystem of financial and related professional services. It will continue to play an important domestic role and be a leading FinTech centre that keeps the UK at the forefront of financial innovation.
3) Regional and national financial centres will have become more important within the UK industry. There must be a strong supply of local talent with the relevant skills, competitive costs and high productivity. Banking, insurance and asset management centres outside of London will continue to develop, hosting more headquarters of major companies. While other regional and national hubs will focus on enhancing specialist roles which serve both UK and global markets.
While Funding Circle (and Zopa, for the most part) allow the losses from loans to fall onto lenders, Ratesetter has built a loss reserve to protect investors from bad debts. This “Provision Fund” is funded by taking a fee when a loan is extended and, in times of stress, can be topped up by diverting interest payments and capital away from investors. This means lenders on Ratesetter need to pay attention to the risk in the overall loan book, rather than any individual borrower.
At the moment, the Provision Fund has a 119 per cent coverage ratio, so there is enough money in the fund — if you include expected future fees — to cover losses 1.19 times higher than currently expected. Ratesetter’s target ratio is 125 per cent to 150 per cent.
The important thing here is that the Provision Fund currently has £12.9m in cash and £8.9m of expected future income, versus £18.2m of expected losses. If Ratesetter had let £12m of bad debts suddenly wash into the fund, it would have resulted in a big knock to its coverage ratio. We don’t know what that would do to investor confidence, but it’s fair to say it wouldn’t have helped.
OFF3R is out with a report today on the status of equity crowdfunding in the UK. According to their numbers, the UK investment crowdfunding sector is booming. In fact the OFF3R Index states that UK crowdfunding platforms raised a record £130 million during the first half of 2017.
Additionally, the report states that March of 2017 was a record breaking month as well. Over £40 million was raised with several large crowdfunding rounds on the big three platforms; Crowdcube, Seedrs and SyndicateRoom.
Peru Consulting asked 1000 consumers and 100 Senior IT Leaders in the banking sector. The results, published in our report – Retail Banking IT: Turn to Face the Change – offer a startling insight into the scale and speed of change and the challenges faced by traditional banking’s IT leaders.
For example, when asked about the specifics of banking transactions using mobile phones, nearly two thirds (63%) of consumers in the 18-44 age group stated this was important to them, while only 14% of the 55-64 age group felt the same.
More generally, the next 12 months holds little comfort for the retail banks when it comes to customer loyalty, with 38% of 18-24 year olds and 41% of 25-34 year olds set to change the bank that provides their main account.
We asked the Senior IT Leaders why they though their customers would be likely to switch banks. Strangely, while 64% recognised that challenger banks are taking their market share, less than 5% recognised that customers might be tempted by new technology such as mobile apps. Given the strength of the GAFA companies and fintechs, this is a dangerous blind spot for the traditional banks.
CONSUMER credit comparison site MoneyGuru.com has appointed an experienced channel director to lead its rapid expansion after a successful launch period.
The site has signalled its intention to disrupt the big four in the comparison market by appointing expert Deborah Vickers who has helped some of the biggest names in the market with optimisation and product development.
Deborah, 35, from Northwich brings 13 years of experience in technology and IT to the role, many of these within the financial services sector. She started her career at industry leader MoneySupermarket.com as a service desk manager before working her way up to IT delivery manager during her eight year tenure.
Former U.S. Ambassador to China Max Baucus on Saturday lauded China’s can-do spirit and cited the country’s rush to online payments as an area where the country was overtaking the United States.
Baucus was speaking at an annual LendIt fintech conference held in Shanghai that attracted more than 2,000 participants.
“Apple Pay is trying to be an accepted mode of payment in the United States but it is catching up very slowly,” he said. “It’s disadvantaged, I think, compared with China and other Asian countries’ emerging payment systems. Why? Because established legacy institutions such as banks and credit card companies, while still useful, will soon be overtaken by the new innovative technology being developed here and in other Asian countries.”
Leading investors who specialize in financial technologies and are taking stakes in new technology startups in the country say China is no longer an innovation laggard and in fact is taking a commanding lead in specific areas.
Take online payments. Two Chinese Internet giants, Alibaba Group Holding and Tencent Holdings, already hold strong leads over their U.S. counterparts in this area. Alipay, for instance, is Alibaba’s online escrow payment system that now counts more than 630 million users globally, of which 450 million are in China. Tencent’s messaging app, WeChat, boasts 900 million users, and its WeChat Pay service has about 600 million active users. Both Alipay and WeChat Pay allow their users to make transactions all over the world using their mobile phones, notes Jones, adding that at present not a single U.S. rival can offer a similar global product.
On 17th July, Ping An Insurance announced the affiliate Lufax started a international business platform, Lu International Financial Asset Exchange in Singapore. Lu International was known to have got the capital market service licence(CMS) approved by MAS. It is also the first Chinese fintech company to have a CMS in Singapore, and will start for operation in the third quarter of 2017.
Lu International was registered in Singapore in January 2017, after licensed it will provide a series of wealth management services including securities trading, asset management and custody for investors with overseas bank accounts or assets.
Lu International aim to provide pure online banking services for the Asian middle class, and the investment amount will be among $10 thousand to $1 million,according to Gregory D Gibb, the CEO of LufaxHoldingLtd. The initial product line of Lu International is relatively simple, mainly including monetary fund, fixed income products, bond fund, REITs fund and ETF.
Just days after announcing it secured $66 million through its Series B funding round, digital challenger bank Revolutintroduced free personal euro accounts. The company revealed this new feature enables all its customers, across 42 European countries, to open a free Euro account straight from their smartphone in as little as 60 seconds.
It used to be clear: borrowing cost money. But now Smava, a Berlin-based fintech, has broken new ground by offering loans at a negative rate of interest. In other words, paying consumers to borrow. “Anyone borrowing €1,000 ($1150) will only pay back €994,” says Smava boss Alexander Artopé. That translates to a cool -0.4 percent.
Unsurprisingly, there’s a catch: The largest amount a Smava consumer can borrow at these enviable terms is €1,000, and each person is restricted to a single loan.
Cyprian fintech startup Capital.com has raised $25 million from Larnabel Enterprises and VP Capital and launched its mobile trading app.
The Capital.com app allows investors to trade financial products and receive updates from its patent-pending Smart Feed with news, analysis, and research based on user behaviour. The app, the company claims, uses AI to detect common trading biases and patterns.
The SoftBank Vision Fund, first announced in October 2016, has now closed at least $93B of a target $100B to invest in global technology companies – making it the largest tech investment fund in history.
$100B is an unprecedented sum for a single fund, totaling almost exactly the same amount that all VC-backed companies received in 2016 ($100.8B across 8,372 deals globally, per CB Insights data). Yet the fund’s massive size is raising concerns among some investors, who fear that an influx of high-dollar rounds could overinflate the market and prolong exits while crowding out competing investors.
With both Saudi Arabia and the UAE — which have contributed a combined $60M of sovereign capital to the fund — counting on the Vision Fund’s investments to diversify their national economies, the stakes are high. Other high-profile investors are also placing bets with the Vision Fund: The Vision Fund has closed contributions of $1B or less from Apple, Qualcomm, Sharp, Foxconn, and Larry Ellison’s family office. (SoftBank’s own $25B rounds out the $93B secured so far.)
Cyber-attack poses a significant threat to the global financial system but the Reserve Bank has decided not to introduce more prescriptive requirements at this stage due to the swiftly changing nature of both the threats and the technology, said Reserve Bank head of prudential supervision Toby Fiennes.
Fiennes said the central bank did not believe prescriptive regulations would appreciably improve the outcome, when the technology and threat landscape are both changing so rapidly.
VicSuper has launched a digital advice suite called Beeline to strengthen member engagement.
The digital advice service would act as an online coach to provide members with access to financial advice 24 hours a day, seven days a week, free of cost to members, with the fund saying it would provide super advice at scale.
Areas of financial advice would include additional contributions and investment asset allocation in their superannuation. The service would also provide general advice to members on retirement adequacy and budgeting goals.
The CEFC assisted in a number of clean energy projects in 2016-17 including the establishment of a green loan marketplacewith peer-to-peer lender RateSetter, 500 new energy efficient homes for low income families in New South Wales and ten large-scale solar projects in regional Queensland, New South Wales and Victoria.
Indonesian peer-to-peer (P2P) lending startup Julo has raised an undisclosed amount of investment in a seed round led by Skystar Capital, along with East Ventures, Convergence Ventures, according to an announcement. A few notable angel investors also participated in the round.
Julo is focussed on financial inclusion in Indonesia by helping over 100 million people obtain loans for their various personal use.
Loan applicants can carry out the process from their phones through Julo’s app, where they submit pictures of personal documents and then receive their loan within 24 hours upon successful verification.
One of the recipients of the CMS is Singapore-based P2P lending platform Crowd Genie. Like many of its ilk, Crowd Genie was founded by entrepreneurs who saw that certain traditional financial services were rigid and could not serve certain profiles of clients.
Ideally, the profile of borrowers would be SMEs turning over about S$1 million (US$731,000) to S$5 million (US$3.66 million) in revenue yearly, and would have had a bank loan and a corporate bank account; they would also have to be in operation for about two to four years, and need a short-term funding gap that the banks are not able to extend.
In place of just traditional financial metrics, Mehra and his co-director Bikash Saha, who has experience in a credit rating agency and retail banking, leverage a hybrid of machine-based learning algorithms combined with hands-on groundwork to assess the credit risk profile of potential borrowers.
Part of the reason Crowd Genie is still heavily reliant on human input is that its machine-learning algorithm is currently a work-in-progress. Accurate data analytics can only be achieved once there are enough actionable data points.
Mehra says the next review of the algorithm will take place at the end of the year, when Crowd Genie has accumulated about 300 – 400 cases.
Currently, institutional investors are qualified to be lenders on Crowd Genie; retail investors are barred.
Interestingly, however, a study by international investment house, Legg Mason, personal interaction is still important for these younger investors – 53% of participants in this group indicated that technology can never truly replace personal customer service. This was particularly relevant when it came to retirement and tax planning, but was of less importance when it came to tracking the stock market.
Furthermore, humans can remove irrelevant data from their memory, which allows for increased learning. Robots, however, store all data, which begs the question around the long-term competency of robo-advice.
News Comments Today’s main news: LendingClub receives unsolicited offer from IEG for nearly 10% stake. Goldman looks to spin off Simon at $75M valuation. Assetz Capital to expand UK broker network. Stripe integrates with Alipay, WeChat. Australian advisers drop big banks. Today’s main analysis: MPL securitization tracker. Will China Rapid Finance turn the tide for Chinese IPOS in the U.S.? […]
LendingClub receives unsolicited offer from IEG. AT: “LendingClub must consider its stock valuation much higher than IEG’s offer, a 2-for-1 proposal. The platform told stockholders to ignore the offer. I don’t blame them. LendingClub’s value is going to increase.”
Online lenders tap Wall Street for capital. AT: “While there have been some big raises, it seems the trend is downward for the number and amount of fundraising deals. Does this mean investors are cooling on the sector? I think not. Rather, I think they are being more critical about which opportunities they invest in.”
VW Credit Inc. invests in AutoGravity. AT: “AutoGravity has the potential to become the gold standard in auto shopping and financing. This is a big boon to AutoGravity, and I see more of these arrangements coming.”
Fintech VC funding is in decline. AT: “There could any number of explanations for this. I wouldn’t say the sector is dying. Investors are likely being more critical of the investments they make, the companies and the sectors.”
Financial advisers are leaving big banks. AT: “I say this is a useful trend. If big banks won’t give advisers freedom to choose their recommendations, then perhaps they should walk. It will likely lead to a shift in attitude from those banks.”
This quarter we see quarterly issuance of $3.0 Bn, representing 76% growth over 2Q2016. To date, cumulative issuance equals $21.9 Bn across 92 deals.
Multi-seller club deals and self-sponsored deals have emerged at several leading platforms. All deals were rated in this quarter, including record-sized consumer deals from SoFi, large multi-seller deals from Marlette and Prosper, and the first self-sponsored, near-prime deals from Lending Club and Upstart.
Dealer and rating agency participation continues to intensify. Fitch rated its first Consumer MPL, Prosper’s PMIT 2017-1, indicating broadening acceptance across ratings agencies. Goldman Sachs, Morgan Stanley, and Deutsche Bank lead over 47% of MPL ABS transaction volume. Noteworthy is the rising presence of BNP Paribas, which co-managed CLUB 2017-NP1. DBRS leads the rating agency league table, and Kroll dominates the unsecured consumer sub-segment.
New issuance spreads continued to tighten and flatten—a credit friendly environment for securitization. In 2Q2017, we saw spreads tighten in riskier tranches of consumer ABS, indicating strong investor appetite for MPL ABS paper in the market.
Delinquency rates have continued to increase across in several verticals—such as subprime auto, student, and personal loans—due to exposure to riskier borrowers, a re-leveraging of consumer balance sheets, “loan stacking,” and shifting payment priority trends.
Initial pricing is near record tight levels. Lending Club’s inaugural deal priced at Libor + 110, second only to Marlette’s MFT 2017-1 (L+100) on the Class A bond. Overall, spreads have tightened with greater investor acceptance in an overall “risk on” environment.
Equity financing events dropped to $2.2 billion in deal value across 145 transactions in 2016 down from $5.1 billion across 174 deals in 2015. This pace has continued to trend down in 2017, with 25 deals completed through March, yet SoFi’s $453 million Series G has bumped the total deal value to $754 million.
Instead of an IPO, Prosper has resorted to a major down round to stop the bleeding. The company is raising a $59 million Series E venture round that values the company at $460 million (post-valuation), a steep drop from the $165 million series D raised in 2015 that valued the company at a postval of $1.87 billion.
Goldman Sachs is looking to sell a stake in one of its fintech bets — an online platform for retail bond investors called Simon — that would value the web app at about $75 million, according to The Wall Street Journal.
The investment bank launched Simon — which stands for Structured Investment Marketplace and Online — a couple years ago to help clients more easily learn about structured investments and execute transactions.
Of those surveyed, 55% said that an aggregated view of their key financial accounts would be “extremely useful” or “very useful.” An account reporting dashboard was the second most popular tool, at 50%, followed by customized notifications and alerts (44%) and financial calculators (43%). Each of these tools provides investors with easy access to their own financial information in an easily digestible way. The good news is that advisers agree with investors on what is “extremely” or “very” useful, with financial account aggregators (69%) and account reporting dashboard (67%) being seen as the top tools.
VW Credit, Inc. (VCI) today announced that it has committed to make an equity investment in AutoGravity, pending customary regulatory approvals. With this strategic investment, VCI is supporting its goal to create a digital experience that enhances the customer financing process. AutoGravity is a FinTech pioneer facilitating car shopping and financing with the power of the smartphone.
In addition to this investment, VW Credit, Inc., has worked with AutoGravity to bring Volkswagen and Audi financing directly to car buyers across the United States. Through this project, VW Credit, Inc., has launched the Volkswagen Creditsmartphone app, powered by proprietary AutoGravity technology and available for iOS and Android. Finance options from Volkswagen Credit are now available on the AutoGravity platform, extending the range of options available to more than 400,000 consumers who have downloaded AutoGravity. Volkswagen dealers now can benefit from a new source of potential car buyers.
A survey finds that despite the growing adoption of such financial technology as mobile banking and mobile wallets, enough people are still attached to paper money that it’s not going away soon.
It’s probably also a little alarming how little concerned fintech users are in general about cyberfraud, with Blumberg Capital’s 2017 State of Cybersecurity Report findings indicating “a gross overconfidence in cybersecurity knowledge and safety despite $15 billion being stolen from 13.1 million American consumers in 2015 in the U.S. alone.”
With legal challenges and uncertainty about the agency’s leadership, the Office of the Comptroller of the Currency’s fintech charter appeared dead in the water just months ago. But industry observers say the OCC’s interim chief is emerging as a potential savior for the controversial initiative.
“We’re seeing an assertive OCC,” said Brian Knight, a senior research fellow at the Mercatus Center.
As many as 13 companies backed by investments from CreditEase Fintech Investment Fund (CEFIF) were named today by CB Insights to the prestigious global Fintech 250, a select group of emerging private companies working on groundbreaking financial technology. The list was revealed during The Future of Fintech conference in New York on June 27th.
The winners in relation with CreditEase investments include Addepar, NAV, Tradeshift, Upgrade, Circle, TruMid, WorldCover, TrueAccord, Bocheng (CreditEase Insurance Agency) and others.
According to the limited information available, Apple will automatically issue a virtual payment card to all iOS users, allowing them to receive and hold money in Apple Wallet.
This isn’t Venmo. Or even Paypal. We aren’t linking up accounts and plastic cards here. We are issuing cards. Virtual cards. To all iOS users.
How soon will they start to pay interest? What about something like Apple Wealth? The scale and impact really boggle the mind. We are breaking new ground here. Only WeChat and Alipay are operating on this scale, but let’s face it, they are still one trick ponies operating in a single market.
Assetz Capital is looking to increase its active broker network significantly in the next two years, and has announced a strategy to further support brokers through several methods. This includes using its network of nationwide Regional Relationship Directors to locally support more brokers, further product and pricing improvements, dedicated staff in the head office and a series of regional broker events which are specifically aimed at educating and supporting brokers.
THERE is a limit to how much peer-to peer lending platforms can grow, according to Funding Options’ founder Conrad Ford.
The head of the online small- and medium-sized enterprise (SME) finance aggregator told Peer2Peer Finance News that there are lots of “smallish, niche opportunities” for P2P firms but that they would not be able to graduate to originating larger facilities.
LandlordInvest, a property-focused peer-to-peer lender, has clinched a round of seed funding from Alan Gabbay, director of O&H Properties, a London-based privately owned investment firm with assets valued at around £1bn. Further details of the investment have not been disclosed. The platform is also backed by LNK Capital, and angel investors Reece Chowdhry and Lee Josephs.
THE FINANCIAL Conduct Authority (FCA) has pocketed up to £2m from full authorisation of the peer-to-peer lending sector, figures suggest.
A freedom of information request by Peer2Peer Finance News shows that the City watchdog has considered 146 applications for full permission from P2P platforms since 2014 – when the FCA took over regulating the sector – with firms paying application fees of £600 to £15,000 depending on their income at the time.
This reveals that the regulator has raised up to £2.1m if all firms paid £15,000, or a minimum of £87,600 if all firms paid the lowest fee of £600.
On Friday, UK-based peer-to-peer lending platform Landbay celebrated its third birthday. The online lender revealed that in the past three years, it has lent a total of £47.31 million, which is funding buy-to-let mortgages throughout the UK.
Huddle Capital is the UK’s newest peer-to-peer business lender, but its route to market is somewhat different to those that went before it. Huddle launched too late to operate under the FCA’s interim permissions regime, and achieving full authorisation – as even the biggest peer-to-peer lenders have discovered – takes time.
Huddle has come to market as an Authorised Representative of fully authorised peer-to-peer firm rebuildingsociety.com.
Peer-to-peer lender Funding Circle and mobile banking service Atom Bank secured the biggest amounts of British venture capital investing, raising £83m apiece. In fact, the five largest deals accounted for a third of overall British capital investing.
Indeed, 27 fintech companies secured £262m from 49 investors.
Over half a billion dollars has been raised through so-called “Initial Coin Offerings” (ICOs) since the start of the year, according to Richard Kastelein, a partner at the Cryptoassets Design Group, a company that helps launch ICOs.
To raise money through an ICO, a company issues a new digital currency that can either be spent within its ecosystem, a bit like Disneyland dollars, or used to power part of the business, like the fuel you put in your car.
The integration will now enable all Stripe merchants in over 25 countries make money from Chinese consumers. Alipay, the payments platform of Ant Financial – the financial arm of e-commerce giant Alibaba has over 500 million users on its platform. WeChat Pay, the digital payments platform of WeChat – China’s most popular messaging app – has over 600 million users. The two firms were responsible for handling near $3 trillion in 2016, according to a UN report.
The integration coincides with the payments processor’s official launch in Hong Kong.
The pipeline of Chinese (FXI) IPOs planning to list on the New York Stock Exchange (SPY)(NYSE)(NDAQ)could make 2017 the biggest year for the country’s stocks since 2014 when Alibaba (BABA) listed its shares.
2016 saw new listings worth $119.4 billion on the New York Stock Exchange with Chinese logistics company ZTO Express (ZTO) being the largest with an IPO worth $1.4 billion. So far in 2017, 137 IPOs worth $27.2 billion have been announced in the United states, 6.6% higher year over year.
Shares of Alibaba(BABA) are up 42% while shares of JD.com have surged 94.9% since their IPOs in2014. Shares of Baidu are currently trading 19 times of its IPO price.
On June 27th, The Alibaba Group financial affiliate rolled out an artificial intelligence-driven, image-recognition system to aid vehicle insurance claims adjusters in operating faster and more efficiently.
Yu’E Bao, one of China’s most popular internet-based funds, had amassed CNY 1.43 trillion of assets under management by the end of June, which has already exceeded the size of individual deposits at some of China’s largest banks.
The development of the Shenzhen Municipal Government Financial Services Office, the local banking regulator in Shenzhen, has released guidelines to prompt large and medium-sized banks to set up inclusive finance divisions, a move to increase loans for money-starved small firms, which is the latest native government’s effort to improve links in economy.
Though the actual terms of the Klarna investment, such as dollar size and the magnitude of the equity ownership stake, remain under wraps, the intent was more clearly shaped in an interview between Karen Webster and Bill Gajda, SVP of Innovation and Strategic Investments at Visa following the announcement.
This is Visa, after all, so … think credit — but transactional credit extended at the online point of sale. Think payments, but not just card-based payments, since Klarna today is a pay-by-bank account model. Think cards, but digital ones, accounts issued digitally by the Bank of Klarna.
That comes against a backdrop where Klarna’s transactions grew more than 50 percent over 2015 and volume was up 44 percent in Europe, driven by mobile commerce.
In 2016, venture funding for fintech in the US fell by 13% to $6.2 billion. Much of this decline is attributable to poor performance by lending platforms coupled with a contraction of investment as venture capital firms went slow on investments to figure out what would be the most profitable fintech investment in future.
The situation in the UK was not any better as there was even a greater decline in VC fintech investment during the same year, 2016. The sector attracted only $834 million worth of investment, translating to a 38% decline.
Despite the general decline in fintech VC funding, some sectors are still thriving. For instance, the payments subsector has witnessed sustained growth. Similarly, Insurtech is flourishing especially as far as seed investment is concerned.
Fintech enterprise solutions have increased with innovations around machine learning, distributed ledger, big data and cloud heralding the entry of global tech giants into the fintech sector.
Some national authorities have chosen to regulate fintech companies through preexisting frameworks. This mean using the same set of rules previously applied to all financial and banking institutions. Other authorities have preferred introducing specific and tailored regulations for fintech companies with the aim of adapting the system to the particular needs of the sector and of stimulating the growth of these companies.
For instance, Germany does not have specific regulations for fintech credit platforms. In other words, a fintech credit company must be granted a banking license to pursue a credit activity; however, it must ascertain what type of service the business is providing to verify if the business offer might qualify as a regulated activity under general German financial regulatory laws.
As in Germany, the Netherlands does not have specific regulations for fintech companies. In the Netherlands, a fintech credit platform must obtain a regular license for credit activity from the Dutch Central Bank (“DNB”) and the Netherlands Authority for the Financial Markets (“AFM”) before providing credit to customers.
Several authorities have created specific and tailored regulations for fintech companies by introducing new licenses for fintech platforms. For instance, one of the most customized and effective one is in Switzerland. The national policymakers have introduced a new licensing category for fintech companies. This regulation would give the Swiss Financial Market Supervisory Authority (“FINMA”) the chance to analyze the fintech platforms individually and to tailor the appropriate regulation according to the activity they pursue.
The core of the regulatory framework is represented by the Guiding Opinions on Promoting the Sound Development of Internet Finance and the Provisional Rules for the Administration of the Business Activities of Online Lending Information Intermediary Institutions, respectively were amended by the People’s Bank of China and the China Banking Regulatory Commission (CBRC) with the assistnace of other authorities. However, there is something unusual characterizing the Chinese approach in the way it conceives fintech credit platforms as being essentially information intermediaries rather than credit intermediaries.
Some jurisdictions, such as United Kingdom, Australia and Singapore have introduced a different kind of approach to regulate fintech service providers. Using the innovative approach dubbed “regulatory sandbox”, fintech providers offer their products or services to a limited group of customers to minimize the risks, allowing them to test the market without any risk or regulatory sanctions.
Fintech providers in the United States are not subject to a fintech-specific regulatory framework. However, fintech providers are subjected to numerous and fragmented federal and state licensing or registration requirements depending on the activities of the company, and are also subject to laws and regulations at both the federal and state levels. Such complexity has appeared as an obstacle to the expansion and growth of the entire sector because it may subject fintech companies, looking to expand their business across the U.S., to regulation and supervision by the laws and regulations of different regulators.
Commercial banks remain the most expensive channel for sending money, pricing their services at 11.12%, while a post office is the least expensive channel (5.88%). As for money transfer operators, they were able to decrease the price of sending money to 6.24%.
Non-bank providers charge an average of 0.9% on £10,000, which is 4 times less than the average for banks.
Financial advisers are deserting the major lenders, voting with their feet as the corporate watchdog heightens its scrutiny of the controversial cross-selling of wealth products in the “vertically integrated” lenders.
The big four banks and AMP, which control nearly half of all financial advisers in Australia, have bled more than 400 advisers in the last six months, according to Bell Potter analyst Lafitani Sotiriou.
Mr Sotiriou believes the rush for the exit has been caused by major banks limiting the freedom of their advisers to recommend products offered by rivals.
In the past six months, Commonwealth Bank, Westpac, ANZ, NAB and AMP have lost nearly 2 per cent of their market share in the country’s advisers.
It’s an industry that is blossoming in earnest across the world, with investments worth $7.7bn taking place in China last year, $6.2bn in the US, and $1.5bn in the UK. It’s an industry that was valued at a staggering $867bn in 2016.
To date, the Middle East has accounted for only a small proportion of this, with regional FinTech companies expected to raise $50m in 2017, according to a report by Wamda Research Lab and Payfort – a marked improvement on last year’s $18m. In total, the report shows that only $100m has been raised in the past 10 years, while a 2016 report by FinTech Week said less than 0.1 per cent of global FinTech investments originated in the Middle East.
News Comments Today’s main news: Zopa’s 6.1% return IFISA to launch June 15. CFPB’s Corday extends small biz lending RFI comment period. Zopa looking for 40 tech whizzes. WeChat Pay available globally through Paymentwall. Today’s main analysis: Lending Club and the rise of securtization club deals. Today’s thought-provoking articles: China urges banks to devolve loan approval responsibility. How Thailand could […]
Lending Club and the rise of club deals. GP:”By standardizing documents in a deal it allows for a faster and cheaper securitization. A model worth noting and perhaps even adopting. A must read in all cases.”
CFPB comment period for small business lending RFI extended. GP:”As our readers are aware the CFPB is looking into small business lending regulation. Most lenders are concerned that small business lending could be regulated as personal lending because the loan is in fact underwritten on the business owner him-or-her-self. While it seems unlikely, we look forward to the RFI and the following CFPB decision.”
Elevate launches Elevate Labs. GP:”I find data interesting and we learn that Elevate is using a terabyte-scale Hadoop database with 1.5mil customer records with data from bureaus, web behavior, performance, bank account and other non-traditional data. And they employ 35 people in the analytics team. “
Here are all the financial reforms that will disappear with Dodd-Frank. AT: “Few people will disagree with most of the principles of the CHOICE Act. The real issue is, how do we get to the promised land from here? Even if the Republicans win on Dodd-Frank, this battle won’t go away. It will live on in the mid-term elections and then the next presidential election.”
Industry power players join RealtyShares. GP:”We believe the fix and flip model to be extremely correlated to particular times in the real estate market. I hope RealtyShares is diversified enough beyond this particular market whent he turn comes.”
U.S. business schools embrace fintech. AT: “I’m not quite sure what colleges and universities can teach about fintech that they haven’t already been teaching about business. Fintech is not a business model any more than science fiction is a storytelling technique. It’s one genre in the business world, so why not stick to teaching business principles?”
Zopa hunts for 40 tech whizzes. GP:”It is probably going to be expensive but I am sure they will find it. The Zopa office is cool enough where people really want to work from there. Adn yes, do they really need 40 developers to launch a tech-bank? Usually teams of 6-8 people are ideal so I would expect Zopa has 4-6 systems to build for the bank , hense this many developers.”AT: “This is the first I’ve seen of a number for new employees to help launch bank. Does it really take 40 technology superstars to start a bank?”
Weekly Industry Update: Lending Club and The Rise of Club Deals (PeerIQ Email), Rated: AAA
A club deal program enables Lending Club to drive standardization – in offering docs, covenants, structure, servicing, collateral consistency, and offering cadence. As a sponsor, Lending Club is able control its brand in the public ABS markets and manage competing interests amongst issuers, placement agents, and investors. (See this week’s
Last month, in conjunction with a field hearing, the CFPB issued the RFI, together with a white paper on small business lending. In his remarks, Director Cordray revealed that, in response to requests for additional time to respond to the RFI (which currently has a July 14, 2017 comment deadline), the CFPB is extending the comment period by 60 days.
With regard to the CFPB’s debt collection rulemaking, Director Cordray discussed thedebt collection proposals under consideration by the CFPB which it released last July in anticipation of convening a SBREFA panel.
Elevate Credit, Inc., a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, today announced the launch of Elevate Labs at its new San Diego-based Advanced Analytics center. The center of excellence underscores the company’s commitment to innovation in the non-prime credit market.
Elevate’s industry-leading technology and proprietary risk analytics are optimized to help non-prime consumers meet their immediate financial needs while improving their financial futures. The company annually invests $40 million in its technology and analytics capabilities, including substantial investments in its proprietary IQ and DORA risk technology and analytics platforms, to support rapid scaling and innovation, robust regulatory compliance and ongoing improvements in underwriting.
DORA, Elevate’s proprietary risk analytics platform, utilizes a terabyte-scale Hadoop database composed of thousands of elements, 1.5 million customer records and other wide-ranging data inputs including credit bureau data, web behavioral and performance data, bank account data and other non-traditional data, to accurately assign risk to customers.
Elevate’s cutting edge technology and analytics team, worldwide, consists of the most advanced thinkers in risk analytics with more than 35 data scientists in our Risk Management department including over 25 staff members with advanced degrees and eight with PhDs. While the San Diego location is the company’s most concentrated and fastest growing analytics center, the team is spread across offices in Texas and the United Kingdom.
The U.S. House of Representatives on Thursday passed the Financial CHOICE Act.
The Act has seven principals:
1. Taxpayer bailouts of financial institutions must end and no company can remain too big to fail.
2. Both Wall St. & Washington must be accountable
3. Simplicity must replace complexity
4. Economic growth must be revitalized
5. Every American must be able to achieve financial independence
6. Consumers must be protected
7. Systemic risk must be managed via profit & loss
The Act proposes to restructure the Consumer Financial Protection Bureau, an agency that monitors financial products from loans to high-fee investment products.
Stress tests for America’s big banks, another Dodd Frank invention, are also contentious. The CHOICE Act proposes major changes.
In mortgages, the CHOICE Act will aim to allow smaller banks to increase lending by minimizing a rule about qualified mortgages. The rule increases costs of lending to higher risk borrowers and often precludes banks from holding mortgages on their books. Modifying the rules may allow local banks to increase lending.
The Financial Services industry is in the middle innings of a multi-phased and disruptive process that began in 1993 with the first ETF, and jump-started in 2008 with the first “robo advisor.” These two disruptive events continue to put enormous downward pressure on the fees charged by mutual fund companies and individual Advisors.
I do not believe financial services is racing toward a flat-fee model. However, the pace of fee compression will accelerate as clients have more low-priced options from which to choose. The end-result is enormous pressure on traditional Advisors to justify their higher prices and deliver an asset management solution more sophisticated than buy-hold-rebalance.
There are six key steps to becoming a Quant Advisor:
1. Develop a small but powerful set of investment models that are both unique and compelling. As an example, we only work with a small number of Advisors in an area to create and keep a competitive edge.
2. Have discretion on client accounts. The real value of using models is the ability to affect many client accounts at the same time to create efficiency and scalability. Building scale is the only sustainable way to overcome fee compression.
3. Communicate. Most clients simply don’t need or want to meet with their Advisor four times a year, but they want regular access to bite-sized information about what their Advisor thinks. Creating valuable, but short-and-sweet communications keep a client happy and informed. Generic newsletters do not count (because no one reads them).
4. Create multiple channels for a client to engage. Most traditional Advisors have a simple fee grid based on assets. A Quant Advisor will have a service menu that provides options from super low-cost investment-only relationships all the way to complex financial planning solutions. Due to scale and efficiency, any of these service levels can be highly profitable. Maybe one of the options is aflat fee only service level?
5. Sell more than advice. A Quant Advisor sells financial advice/planning and asset management services. Traditional Advisors only sell advice/planning and pay someone else to provide asset management (such as managed accounts, SMA’s, mutual funds, etc.). By having a unique and compelling asset management capability in-house, Quant Advisors do not have to pay someone to do it for them. That creates a new revenue source and the ability to capture a higher percentage of the total fees paid by the client. As fee compression continues to eat away at advice/planning prices, having multiple services to sell a client creates a more stable revenue stream.
6. Be hyper-transparent. Clients are more afraid of what they do not know than what they do. By proactively talking about and disclosing fees (including the hidden ones), risk and performance the relationship can blossom based on a new level of trust and understanding.
Industry Power Players Join RealtyShares (RealtyShares Email), Rated: A
Stanford University and Georgetown University business schools are planning to offer “fintech” courses for business school students for the first time this fall. New York University is planning a new course for undergraduates after launching a fintech specialization in its business school last year.
They join the University of Pennsylvania’s Wharton School, Columbia University’s business school and the Massachusetts Institute of Technology’s (MIT) Sloan School of Management, which all launched similar programs in recent years.
A number of prominent startups have exploded onto the fintech scene in recent years, fostering interest in mobile payment apps like Venmo, digital loan platforms like SoFi and robotic wealth managers like Betterment.
Unlike the wealthy, retail (individual) investors have limited options to invest in high-risk, high-return alternative instruments. The ticket size of such products — private equity, exclusive wines and paintings — are too high for small investors. But, in recent times, more avenues have opened that allow retail investors to make risky bets in assets other than stocks. For example, bitcoins is one such asset that younger investors are looking at. The price of this virtual currency has gone up from $579.13 a year back to $2,825.03 — a return of 488 per cent.
LendingTree, Inc. (NASDAQ: TREE), operator of LendingTree.com, the nation’s leading online loan marketplace, today announced that it will participate in RBC Financial Technology Investor Day at The Westin New York Grand Central in New York, NY.
Doug Lebda, LendingTree Founder and CEO, is scheduled to present on Wednesday, June 14 at 8:55am ET. The presentation will be webcast live and archived at
Additionally, the company’s latest investor presentation will be available on its investor relations site at investors.lendingtree.com.
RealtyeVest lowered its required minimum investment amount to $5,000 for all offerings on their real estate crowdfunding platform for accredited investors. Previous minimum investment amounts ranged from $15,000 to $50,000, depending on the real estate project. The new $5,000 threshold is intended to draw first-time investors to experience RealtyeVest’s high-caliber performance with a nominal financial commitment. “We are seeing significant activity on our platform, however we feel there is a corner of the market we are not appealing to,” said Daniel Summers, RealtyeVest CEO, in a statement. “So we are offering investors a taste of our service with a new lowered investment amount for all projects. Once they see the quick return on their investments, they will no doubt want to increase their contribution amounts.”
Having raised £32m from investors eager to support the project earlier this month, the group is now looking to bulk out its workforce by at least 16pc – bringing in tech experts able to build a digital bank from scratch.
The hires will come from London and Barcelona, where Zopa opened a technology hub last week.
Zopa’s long-awaited innovative finance Isa (Ifisa) will be made available to existing customers on Thursday 15 June, but it won’t be protected by the company’s Safeguard scheme.
The Isa, offering projected returns of up to 6.1%, will initially be made available to existing Zopa customers wanting to invest new money. It will then be possible to move existing Zopa loans into an Isa wrapper from 1 July, and transfer funds from third-party Isas from 17 August.
It is expected that new customers will have to wait two months or longer before being invited to open a Zopa Ifisa, due to expected high demand.
Zopa’s Safeguard scheme is a central compensation fund that aims to pay out to lenders whenever a borrower defaults on a loan. This fund is limited, so it could run out if lots of borrowers fail to repay, but it has covered 100% of eligible loans to date.
However, this scheme won’t be offered to Isa customers, nor will it be available to any new investors after December 2017.
It will offer two savings products in an Isa wrapper.
Zopa Core, in which your money will only be lent to lower-risk borrowers, offers expected returns of 3.9%.
Zopa Plus lends your money to a wider range of borrowers, offering expected returns of 6.1%.
More than a decade after the first peer-to-peer sites launched in the UK, the sector that allows investors to lend directly to individuals and small businesses is coming of age. Two of the largest sites in the UK — Zopa and Funding Circle — were last month authorised by the City watchdog, marking a seal of approval for the lenders and providing a boost to the broader sector.
Institutional investors are already piling in. High-profile fund managers including Neil Woodford and Artemis invested more equity capital into RateSetter in recent weeks, valuing the company at more than £200m. Zopa completed a £32m funding round, led by Wadhawan Global Capital, an Indian financial services company.
The rise of peer-to-peer sites means that lending, which as an asset class has been a monopoly for the banks, is opening up to ordinary investors.
Credit Crowd gets on Othera’s blockchain, citing transparency as the key issue.
Blockchain provider Othera has linked up with Australian fintech lender Credit Crowd, allowing the Sydney fintech to digitise its loans on blockchain.
The partnership will allow Credit Crowd’s loans to be tokenised and traded on digital asset token exchanges—in effect, a kind of securitisation.
Credit Crowd is a P2P marketplace that specialises in short-term loans, secured by first mortgage properties. The company claims to have facilitated more than A$100 million worth of loans since its founding in 2012 and managed over A$50 million in their retail fund.
To date, robo-advice offerings have tended to focus more on the less complex end of the financial advice spectrum. The FCA’s enthusiasm for robo-advisers stemmed largely from concerns about an ‘advice gap’, situations where consumers (particularly those with limited assets) are unable to get advice and guidance on a need they have at a price they are willing to pay. The FCA has therefore seen robo-advisers as a way of providing quick and inexpensive advice primarily in relation to lower value or less complex scenarios. Robo-advice is still in its infancy and is generally not yet at the stage where it can provide sophisticated advice in relation to complex circumstances. Certain external factors are also slowing the spread of robo-advice. For example, recent research sponsored by ING suggests that the majority of the public remains uncomfortable with the idea of automated advice and this attitude will take time to change. In addition, PI Insurers may feel, by necessity, that they need to take a relatively cautious view in relation to new and untested technology. Firms implementing robo-advice solutions may therefore face increased insurance premiums, which is a further potential brake on innovation.
For the foreseeable future then, it appears that human advisers have no need to be concerned. Robo-advice is in the process of automating only one part of the wider industry and even then at a relatively restricted pace. But what about the longer term? If we make the reasonable assumption that advances in robo-adviser technology are inevitable does that mean that robo-advisers will one day become so sophisticated and accepted as to render human input redundant?
Winner of the startup stage Curve, started out in 2015 to cut out the noise and disconnection in the banking landscape. The digital wallet platform is designed to connect all of a person’s financial services into a single go-to place online, which is accessed with a Mastercard.
Finimize has grown an online community of 100,000 people. Each day, members receive a newsletter that digests the biggest finance stories of the day and why they should matter to them.
AgentCASH is an enterprise grade omnichannel platform that enables SMEs to sell and manage their products on multiple channels in real time.
Crowdsurfer brings big-data engineering expertise to crowd and peer finance to help the world understand where funds are flowing to.
Reposit was developed by its CEO Curran McKay as a faster, more affordable alternative to the £3.5 billion tenancy deposit system.
Lendr uses artificial intelligence to act as a reverse auction platform for mortgages.
Co-founder of Capitalise Paul Surtees has built technology that enables SMEs and their advisors to find, compare and select the best lenders available to them – allowing them to access the funding available. The platform matches SMEs with lenders, who are ranked based on their past successes.
London-based Paybase rolls an end-to-end solution for payments, compliance and risk into one unified API. The platform is designed for marketplaces such as the sharing economy or crowdfunding sites, as well as fintech apps and products that have complex payment processes.
The Chinese Internet Investment Fund was founded jointly by the Cyberspace Administration of China and the Ministry of Finance. The total size of the fund is around $14.9billion. The initial subscription (almost $4.4 billion) has been finished with $300million was acquired by central government as guiding fund, and the rest was raised from strategic investors. Thus, the driven coefficient of the government funds reached to 1:14.
On 9th June, shares of Alibaba jumped by 13.29% and closed at $142.34 per share, the companies’ total market value reached to $362.3 billion. Exceeding Tencent for the second time and become Aisa’s most valuable company.
Previously, Alibaba issued its annual report of 2017 fiscal year, showing that Alibaba has surpassed Tencent on core metrics such as revenue, net earnings and cash flow.
According a report released by Deutsche Bank, Alibaba's estimated revenue for 2018 fiscal year will be far higher than expected, and the disclosed information will drive its stock price up further.
Sepaking at the recent WSJ D.Live Asia event in Hong Kong, Ping An CIO Jonathan Larsen said Ping An is launching a new fund to invest in early stage Fintech ranging from $10 million to $30 million, according to a report from Dow Jones (here).
CHINA Rapid Finance will follow the strategy of “low and grow” to realize a stable and sustainable growth after its debut on the New York Stock Exchange on April 28, Wang Zhengyu, founder and CEO of the Shanghai-based peer-to-peer lender, said in Shanghai yesterday.
CreditEase’s founder and CEO Ning Tang was invited to deliver a keynote speech today at The Asian Banker’s 18th flagship Summit “The Future of Finance” in Singapore. The Summit gathered leading industry, government and academic speakers such as Barney Frank, former US Congressman and a leading co-sponsor of the 2010 Dodd–Frank Act, David Shrier, Managing Director, MIT Connection Science and Engineering, and representatives from: ANZ, Bank of the Philippine Islands, DBS Bank, the Federal Reserve Bank of Chicago, Prosper Marketplace, Prudential, and Uber.
Future Life, Future Finance
The theme of this year’s Summit shares the same vision as CreditEase at its 11th anniversary – “Future Life, Future Finance”.
In his keynote speech, Tang shared his insights as a pioneer and thought leader in the FinTech industry, giving an overview of the current landscape, and anticipating where opportunities will be against the backdrop of potential or inevitable changes.
After 10 years of successful domestic growth, at its 11th anniversary, CreditEase is ready to accelerate its global expansion. The opening of the new Singapore office and Tang’s delivery of the keynote speech at one of world’s renowned financial summits is just part of the global voyage. In addition to Singapore, CreditEase Wealth Management operates overseas offices and affiliate offices in Hong Kong, New York, and Tel Aviv and its domestic mainland China network covers over 40 cities. Its resources are also spread across the US west coast, Germany, UK, and Australia.
On June 3, 2017 Tsinghua PBCSF Global Finance Forum, which was hosted by Tsinghua University, and organized jointly by the Tsinghua University PBC School of Finance (PBCSF) and Tsinghua University National Institute of Financial Research (NIFR), convened in Beijing.
The highlights of the forum include:
Digital Financial Inclusion: LI Dongrong, President of National Internet Finance Association of China, pointed out in his speech that China and the world had the potential to drive the growth of inclusive economies by promoting digital financial services. While tremendous gains in financial inclusion have already been achieved, digital financial services, together with effective supervision, are essential to close the remaining gaps in financial inclusion.
InsurTech Innovation: JIANG Bo, Director-General of the International Department of China Insurance Regulatory Commission and Member of the strategic Council of PBCSF, said that Insurance technology (InsurTech) is a burgeoning phenomenon that has the potential to help the insurance industry reconnect with its customers following a period of increasing alienation and disengagement.
Three Chinese Fintech Companies Join Slate of Overseas Listing in 2017
Rong360, an online platform for financial product search, comparison and recommendation, has announced to raise at least $400 million in an initial public offering in the U.S. as soon as 2017.
With its rapid expansion, Chinese online lending platform Neo Capital has revealed its IPO plan in the U.S. last year.
On June 5, Chinese company Xiaomi, perhaps best known for its smartphones, announced that its affiliate Xiaomi Loan would partner with CITIC Securities to list CNY600 million asset backed securities (ABS) under a shelf registration on Shanghai Stock Exchange.
The ABS product was split into three tranches: AAA, AA and the subprime:
Paymentwall has partnered with Tencent to bring WeChat Pay (Weixin Pay) to every online and retail store. The partnership allows every business owner around the world to get instant access to 600 million Chinese shoppers in China and abroad.
With over 600 million active users, WeChat Pay is now one of the most popular payment methods in the world. WeChat Pay processed over $1.5 trillion in Chinese digital payments, representing over 30% of all online transactions made in 2016.
A combination of human and robo could be the answer for underserved Asian investors seeking low-cost technology-driven financial advice, a market that pure robo-advice providers have found hard to crack.
Inexpensive, automated robo-advisors could be a solution, but unlike in the large markets of US and Europe, in Asia they face difficulties stemming from regulatory fragmentation, lack of scale and investors’ preference for human contact.
The hybrid approach uses automated financial advice systems, but provides a layer of personal contact when dealing with the institution. Some call this approach “cyborg-advisor”, others “bionic advisor”.
Due to low profit margins of robo-advisory services and the necessity to achieve scale in order to be profitable, independent robo-advisors are not likely to succeed in the region under current regulations, according to Aldcroft.
Flipkart, one of the largest e-commerce platforms in India sales topping $2 billion each year, is getting into Fintech. Flipkart states that with the creation of a new focused team for financial services and products, Flipkart will be providing the public the option of obtaining loans from e-lending firms.
Flipkart is also expected to start offering other financial services such as access to funds.
Lendingkart, an online platform for lending to small businesses and entrepreneurs, has raised debt funding worth Rs 50 crore from Yes Bank Ltd. The company said that this is the first step towards eventually shifting from non-banking financial companies (NBFCs), who provide loans at a higher rate, to banks.
In June last year, Lendingkart had raised Rs 205 crore ($32 million) in a series B round of funding led by Bertelsmann India Investments (BII) and Darrin Capital Management, with participation from existing investors Mayfield India, Saama Capital and India Quotient. Of this, $20 million was raised through equity sale and remaining $12 million through debt financing.
Peer to peer lending is hardly new. But it has risen to commercial prominence in the past few years, thanks to technology. The emergence of marketplace lending platforms connecting individual borrowers and lenders is disrupting the business of lending.
Peer to peer lending is hardly new. But it has risen to commercial prominence in the past few years, thanks to technology. The emergence of marketplace lending platforms connecting individual borrowers and lenders is disrupting the business of lending.
A 2015 survey shows that 25% of U.S. millennials have used a P2P lending platform. According to recent research, the cumulative amount of loans that originated via marketplace lending platforms in China was over $150 billion in 2015. In US and UK, it was close to $30 billion and $10 billion respectively.
While the Indian P2P market is much smaller, the scene is heating up. Last year alone, 20 lending firms cropped up to take the total to about 30. What does this imply for our banking industry?
Omise, a payment management platform founded by Jun Hasegawa and Ezra Don Harinsut, is Thai fintech’s greatest success story to date. In 2016, it raised a $17.5 million Series B round and currently operates in Thailand, Japan, Indonesia and Singapore.
The Thai Fintech Association formed in 2016 as a networking club that would facilitate connections among fintech startups, big banks and investors, according to Disyadej. But the organization filed as an association with the Ministry of the Interior this year so it could take a more hands-on role in the industry’s development.
Although TechGrind operates in six countries in the region, it has relocated several of its startups to Bangkok so they can make use of TechGrind’s network and resources there. But TechGrind approaches opportunities in fintech — and in all startup sectors — from a cross-border perspective.
One such company is Pymlo, which creates accounting software for small businesses in Thailand and the broader region.
Governments across Asia – most notably Hong Kong and Singapore – have launched a raft of initiatives to grab a slice of the $100 billion invested in financial technology globally but the regulatory hotchpotch is making it tough for firms to scale up, the Asia Securities Industry and Financial Markets Association (ASIFMA) said in a report on Friday.
Investors poured $19 billion worldwide into fintech – including P2P lenders, distributed ledger technology and crowdfunding platforms – in 2016 alone and thousands of fintech start-ups continue to proliferate, according to a February report by global regulatory body the International Organization of Securities Commissions (IOSCO).
Hong Kong, Singapore, Australia, Japan, South Korea and Malaysia have launched a range of special programs to attract and foster fintech ventures, from incubators and grants, to temporary license waiver schemes, with competition fiercest between Hong Kong and Singapore.
Consolidated credit database likely to improve lending in the Philippines in 2018 (ASEAN Today), Rated: A
Bulk of lending in the Philippines have been corporate loan, forming more than 80% of loan books. Consumer lending business have been secondary to corporate lending – analysts explained that the lack of consumer level data can explain this.
The gap between corporate and retail lending is the lack of a credible database.
The government’s Credit Information Corporate collects data from banks in the Philippines. This will be extended to rural financial institutions to build a credible database by 2018.
GDR partners with Equifax. AT: “I’m encouraged to see online loan verification firms partnering with traditional credit bureaus. This will only strengthen the marketplace for both lenders and borrowers.”
KPMG acquires Matchi. AT: “Matchi should be on any bank’s list of platforms to check if looking for a partnership with a fintech innovator.”
7 ways fintech is changing the job market. AT: “Interesting read. Takeaway for alt lenders: If you want to hire great talent, look for people with excellent skills in other industries and ready to make a career change. Look at industries that are dying, diminishing in importance, or where great talent is being replaced by automation. Fintech skill sets are often developed in other places.”
Loan data specialist Global Debt Registry has partnered with global information solutions giant Equifax that will incorporate the company’s income data into its eValidation suite of verification tools for investors and warehouse lenders in the online lending space.
The new partnership will utilize Equifax’s anonymous income data to incorporate additional loan verification data and enable benchmarking and monitoring of income inflation over time, the company said in a statement.
“It’s critical for investors to have the assurance that when they invest in online lending, the loan data is independently, externally validated,” said Charlie Moore, president of GDR.
Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to one class of notes issued by SoFi Consumer Loan Program 2017-3 LLC (“SCLP 2017-3”). This is a $530 million consumer loan ABS transaction that is closing on May 18, 2017.
This transaction represents SoFi Lending Corp.’s (“SoFi” or “the Company”) ninth rated securitization collateralized by a portfolio of unsecured consumer loans.
KBRA analyzed the transaction using the U.S. Consumer Loan ABS Rating Methodology published on March 28, 2017. KBRA’s consumer loan methodology incorporates an analysis of: (1) the underlying collateral pool, (2) the originator’s historical static pool data, segmented by characteristics including credit quality and product type, (3) the proposed capital structure for the transaction, (4) KBRA’s operational assessment of the originator and servicer and (5) the legal structure, transaction documents, and legal opinions.
With many people underserved by traditional lending institutions, including the close to 45 million adults in the U.S. who the Consumer Financial Protection Bureau estimates are “credit invisible” or have had past credit challenges, emerging FinTech lenders and online lending platforms (FinTech firms) have established themselves as valuable lending resources for both investors and consumers.
Undoubtedly, the digital footprints (both active and passive) left by consumers online offer valuable insights about those consumers’ preferences and behaviors, which can be useful to FinTech firms in assessing whether to extend credit. But the use of the Internet, which provides unprecedented access to an extraordinary amount of consumer information (some of which might be obtained without a consumer’s consent or knowledge), has raised significant privacy questions that FinTech firms might have to confront in order to overcome inevitable regulatory scrutiny.
In the context of marketplace lending, for example, which can include peer-to-peer lending as well as funding through institutional investors, hedge funds, and other financial institutions, market analysts estimate significant growth in loan origination volumes as well as an expansion in the types of products being offered. The California Department of Business Oversight conducted a survey of marketplace lenders and found that marketplace lenders provided over $13 billion in financing to consumers in 2014, having only provided less than $2 billion in 2010.
FinTech firms should be aware of potential risks about the types of alternative data they collect and the means through which they obtain that data. As the National Consumer Law Center has warned, “the devil is in the details” as the use of alternative data can potentially raise a number of significant legal issues, most notably fair lending and privacy concerns.
Gathering information from social networking systems, in particular, can provide significant information about a consumer’s interests and preferences, as well as the consumer’s location and travel history. While Internet users can furnish actively some of this information through entry of data into a system, a significant amount of information also can be gathered passively through cookies and the tracking of user IP addresses.
With the regulatory uncertainty surrounding the use of alternative data (caveating that regulatory priorities may shift under the current administration of President Trump), FinTech firms should consider carefully assessing what data they are collecting and maintaining to ensure that they are complying with current consumer privacy regulations.
Today, I thought it would be useful to take a step back and reflect on what we have learned in the past year.
The industry is bigger than one person – the industry did not fall apart because of his departure.
Investors still need yield and borrowers still like installment loans – The main premise for the rise of marketplace lending is still very much in play today. It is no secret that the growth of the industry over the past five years has been driven by institutional investors seeking yield. Lending Club shared in their quarterly earnings report last week that not only are the banks back investing in loans but they are doing so at record levels.On the borrower side there has been no slowdown in demand.
Banks and marketplace lenders are important partners
Compliance can be a selling tool – The sense I had is that compliance was viewed as a necessary burden and not something that could be a sales tool. That changed a year ago and now an investment in compliance has been viewed as essential.
Finance is just as (perhaps more) important as technology when it comes to fintech – The narrative of marketplace lending has often been about the cost savings and customer experience improvements that can be made through advanced technology. I have seen many presentations that talked about how the legacy technology of banks are causing such inefficiencies and that fintech companies can solve this with better technology. All that may well be true but the bottom line we have learned is that in the lending business we should be focused on finance first. If you get that wrong the greatest technology in the world will not matter.
These programs slow the rate of repayment on Federal Family Education Loans, putting the bonds they back at risk of technical default if the securities fail to pay off at maturity. When Moody’s Investors Service and Fitch Ratings raised the alarm early in 2015, eventually putting some $100 billion of bonds under review for downgrade, the market sold off heavily. New issuance ground to a halt.
Yet Navient and Nelnet, the two largest student loan servicers, avoided downgrades on some $18 billion of FFELP bonds. They did so using a strategy that, at first, did not seem promising: extending the maturities of the bonds.
Their efforts were aided by DealVector, an online registry of asset ownership and messaging platform, which helped the two servicers identify holders and collect votes. Over the past year, the two servicers have sent about 165 tranches out for consent; some 60% of those were successful, and about 10% are still in process. The total original face value of tranches passed to date exceeds $18 billion.
Like other kinds of financial assets, FFELP bonds are held “in street name” by a brokerage firm, bank, or dealer on behalf of a purchaser, obscuring their true ownership. This isn’t just a problem for consent solicitations; it also imposes large costs on determining an appropriate price for a security, forming creditor classes, and many other events requiring communication among deal participants.
Zeus CrowdFunding, the fastest real estate crowdfunding site in America, will offer borrowers a new incentive unmatched in the rapidly growing financial sector: the real estate crowdfunding industry’s first loyalty program. Repeat borrowers with the company can borrow up to 80 percent of a property’s after-repair value (ARV).
The program is called LoyaltyZ, and its mechanics are simple. On a borrower’s first loan with Zeus CrowdFunding, they’re eligible to receive up to 75 percent loan-to-value (LTV) of his or her approved project’s ARV. With each loan that they finish paying back to Zeus CrowdFunding, the borrower will receive one more point on their LTV on their next loan—up to 80 percent of the ARV. On a borrower’s second loan from Zeus CrowdFunding, for example, he or she is eligible to borrow up to 76 percent of the ARV; on his or her third loan, up to 77 percent, and so on. Beginning with his or her sixth loan, a repeat borrower can borrow up to 80 percent of the ARV on every loan.
Zeus CrowdFunding Founder and Chief Acceleration Officer Steven Kaufman says that LoyaltyZ was designed for real estate borrowers interested in completing multiple projects as quickly as possible. No additional sign-up or commitment is required of them.
Fintech firms are prime targets for cyberattacks, according to research revealing 130 million fraud attacks detected in just a 90-day period with the growth in attacks outpacing transaction growth by 50%.
Data revealed 50% more cybercrime attacks originating from all of Europe than U.S., the single most attacked nation, and increasing cyberattacks from South America.
The Q1 2017 Cybercrime Report also revealed that attack vectors and patterns are more evolved and malicious, including:
Remote access Trojans, which contain a strong footprint in the financial services industry.
Identity-spoofing attacks target fintech firms through peer-to-peer loans, global remittance and potential loopholes in new and emerging platforms. ThreatMetrix research showed an 80% increase in digital wallet transactions year-on-year as well as a 180% increase in associated bot attacks, typically used to mass test identity credentials.
According to ThreatMetrix, fraudsters use bots to mass test identity credentials and infiltrate trusted user accounts. New attack trends disclose fraudsters targeting emerging and fintech industries, which they view as more vulnerable to attack.
defi SOLUTIONS announces the launch of defi EXCHANGE, a secure, online portfolio marketplace where sellers of auto loan portfolios can access multiple buyers and manage the entire sales process. defi EXCHANGE improves efficiencies and profitability by automating and enhancing processes, revolutionizing the way auto loan portfolios are bought and sold.
With defi EXCHANGE, buyers no longer need to build their bulk deal evaluation outside their lending platform in spreadsheets and with manual processes that require extra data scrutiny and attention. Sellers no longer need to provide sensitive consumer data to many potential buyers and then follow up manually. defi EXCHANGE eliminates processing inefficiencies and allows for the complete evaluation and pricing provided by a Loan Origination System.
defi EXCHANGE resulted from the purchase of SellYourBulk.com, the first-ever auto loan marketplace that began operations in 2015.
Peer-to-peer payment systems like Venmo gained traction amongst the millennial generation and are beginning to make their way to the broader consumer population as banks consider the appeal in this convenient, paper-free payment approach.
Startups like Branch.co, ZestFinance and MyBucks are using AI and machine learning to offer low-rate payday lending loans. By relying on data and algorithms, these startups believe they offer a faster, more accurate and unbiased way to determine a consumer’s credit worthiness and their corresponding interest rate. Similarly, by removing the loan officer from the equation, these FinTechs can save on costs and ensure a profit from their low rate loans.
The importance of embracing mobile technology is not new in the banking sector. But what is new is how certain FinTech startups like Moven are using the mobile platform to offer services that help consumers better manage their money. Moven, which is an online bank of sorts that works alongside traditional banks, is giving consumers insight into their spending habits — offering them tools to see where their money is going and how they can better prepare for the future. It’s all about transparency and putting the consumer in control of their financial health.
While the technology to create automated investment advice is not new, access to it (by those who are not wealth managers) is. It’s simpler, more accessible and cheaper for the consumer.
Witnessing the success of FinTech robo-advisory startups, and the unmet need they are filling within the market, banks have begun jumping into this market.
If You Can’t Beat ’Em, Join ’Em. Why Banks are Starting to Partner with FinTechs.
Today there are more than 2,000 FinTech start-ups as compared to 2015 when there were only 800. This is why many banks and credit unions have changed their approach; instead of competing with the FinTechs, they are trying to partner with them.
At SilverCloud, we are helping banks and credit unions do just that — give their customers and members the ability to access all the information they need through digital banking channels without ever having to pick up the phone. We are helping banks and credit unions evolve with the demands of customers by providing an engaging digital experience that lowers support costs and drives more revenue through a better experience for the customer and member.
Last week Financial Innovation Now (FIN), an alliance of companies which includes Fintech behemoths innovator Amazon, Apple, Google, Intuit and PayPal, spoke out against language used in the Financial CHOICE Act that would repeal debit swipe fee reform. In a letter penned by FIN Executive Director Brian Peters and addressed to US House of Representatives Speaker of the House Rep. Paul Ryan and Minority Leader Rep. Nancy Pelosi, FIN identifies debt reform’s promotion of payment innovation and tech advancement, identifying that “lower debit fees and improved routing choice have meaningfully spurred competition and technological development. Payment innovators are building on this opportunity to deliver real solutions to the marketplace, and more is on the way. This innovation should not be foreclosed.”
No system is perfect, and like any form of lending, P2P is not without its challenges. Many people are worried about the regulation of the P2P system, since it is fairly new, and laws have not come into effect to control the industry. Additionally, many Americans are worried about financial cyber security with all-online platforms, since data breaches are a frequent occurrence around the globe. Some of the biggest challenges, however, are on a smaller scale. Though P2P lending platforms don’t have the same requirements for borrowers that banks do, credit score can be an issue for some borrowers. It’s currently not possible to use a business credit score, meaning that poor personal credit could affect potential borrowers’ ability to get a loan at a decent interest rate.
Kingdom Trust, a leader in Self-Directed IRA, alternative asset and institutional custody solutions, recently completed its Consider the Alternatives eBook series. The collection of eBooks illustrates the investment potential of the four main alternative asset classes held on the firm’s platform: real estate, precious metals, private lending and private equity.
LandlordInvest is a UK-based peer-to-peer lending platform for residential and commercial mortgages.
What are the three main advantages for investors?
Security – I personally would not invest in unsecured loans given the risks and the potentially very lengthy enforcement process to reclaim part of the capital, if any at all.
Returns – We offer returns of up to 12%, although we recently funded a loan with a rate of 19% to investors.
What are the three main advantages for borrowers?
Manual underwriting – For us, the most important part of our assessment is that the borrower has a verifiable track-record and that the security is enforceable in the event of the default.
Speed – we recently assessed a loan, had it fully funded and completed in two days.
Online application with a simple online control panel
You recently launched an IFISA product. How has the investor uptake been so far and was it a big advantage to be in the forefront of approved providers?
The demand for our IFISA has been good. IFISA account holders, although only around 20% of the total registered investors, account for 50% of all funds on the platform. As such, IFISA account holders usually deposit more than non-IFISA account holders and also invest more.
What was the biggest challenge in launching LandlordInvest and what have been challenges since?
The biggest challenge has been operating under a “real” P2P model, i.e. no pre-funding of loans.
Which marketing channels do you use to attract investors and borrowers?
We use a multichannel approach including, establishing good relations with the press, having an interactive presence on various forums and blogs, affiliate marketing programs and social media presence.
I hear you are planning a secondary market? Will that work with premium and discounts or at par? What other features do you plan to roll out this year?
We are indeed developing a secondary market and expect to launch it in the beginning of May this year. Investors will only be able to sell loan or loan parts at par. Investors will also be able to sell parts of loans.
The growth prospects of SMEs are being potentially stalled due to late payments, according to new research of over 1,000 SMEs commissioned by Crossflow Payments, the Fintech platform delivering supply chain finance solutions.
Keypoints from the research:
£266 billion is held up as 15% of SME annual turnover is subject to late payment
Over half (55%) of SMEs who receive payment late for invoices admit payment is regularly late by ten days or more, as a quarter (23%) of SMEs cite late payment problem
3.4 million jobs could be created by solving the late payment problem, as two in three (63%)
SMEs would hire up to five new members of staff if their working capital improved
Businesses experiencing Brexit payment crunch, as one in ten (10%) SMEs have also witnessed worsening in payment terms since 2016 EU Referendum
Sara Hsu: Do you think that P2P [peer to peer lending] firms like yours are helping to make China’s financial system more market-based?
Ning Tang: The bigger picture is that P2P and fintech help the financial system to become more comprehensive. Fintech helps make the financial system more comprehensive, and helps make bank services more efficient.
Hsu: Many P2P companies have failed. What are some of the risks that P2P companies face?
Tang: There are three major risks. One is the platform itself. Is it legit? Is it legal? In many cases, you see fraud. The second risk is on the borrower, the credit quality side. Even if it’s a legit market place, if it cannot assess risk, it will not be sustainable. The third risk is on the lending side—is the source of capital sustainable?
Hsu: What is the impact of regulations on the industry?
Tang: Our experience is that it will make the industry more stable, healthier, and in the coming 10-20 years, it will be a much better industry.
Hsu: Do you advise other P2P firms in terms of credit risk?
Tang: In terms of pooling data together, we are partners. We made it possible for other market place lenders and new finance companies to access our data.
Hexindai Inc. (“Hexindai” or “the Company”), a fast-growing consumer lending marketplace in China, today announced that it has entered into an agreement with Fair Isaac Corporation’s (FICO) to implement its decision rules management solution, BLAZE ADVISOR. Implementation of this decision engine will allow the Company to automate the loan origination approval process, greatly shorten the decision-making time, and lower operational risks, all of which should help drive the Company’s risk management to a higher level. The Company expects to launch the system in the fourth quarter of this year.
Bitcoin SME marketplace loan platform Bitbond today announced that it received a commitment from Obotritia Capital to fund loans worth €5 million. Additionally, Obotritia invested an undisclosed amount of equity in acquiring a stake in Bitbond.
With the debt commitment, SME loans from European prime borrowers will be funded instantaneously on Bitbond. This will reduce the time it takes for business owners to apply and receive a loan to 30 minutes.
Over 1,700 loans worth €1.4 million were originated through Bitbond since its launch in 2013. 90,000 users from 120 countries registered with the service to date.
KPMG International has announced the acquisition of Matchi, a leading global fintech innovation and matchmaking platform that connects financial institutions, including banks and insurance companies, with leading-edge financial services technology solutions and companies worldwide.
The Matchi platform includes more than 700 curated fintech solutions and a database of more than 2,500 fintech companies that financial institutions can work with to apply innovative fintech capabilities to solving their business problems and pursuing new market opportunities.
Fintech companies and solutions are reviewed and undergo a curation process in order to qualify to appear on KPMG’s innovative Matchi platform. Financial institutions are able to search for a specific company or solution, or they can use the platform’s proprietary “Innovation Challenge” capability to present specific problem statements to the global fintech market and receive recommendations on solutions from Fintech innovators. In this way, financial institutions are able to access and unlock the leading edge technology and deep customer insight of the world’s best fintech firms for their own operations.
Since its inception in 2013, Matchi has connected more than 100 leading banks and insurance companies with fintech innovations, including solutions in next generation payments, regtech, blockchain and P2P insurance.
Remote work becoming more viable – Due to the perks of working remotely, many professionals have also opted to become independent contractors over regular employment.
More payment options for employees – There are now even a variety of ways to get paid due to the rise of payment services and digital currencies. Some companies now offer wages in Bitcoin as an alternative to traditional currencies. Some freelancers based in countries where cross-border payments are difficult even take gift cards as payment.
Fintech-empowered rewards and benefits – Aside from digital currencies, the growth of brand loyalty cards also now gives employers options to reward staff.
New technical skills required
Soft skills are increasingly important
More job cuts in traditional institutions likely – Last year, Bank of America laid off 8,400 jobs as the bank invests more in digital initiatives. Brick-and-mortar banks branches even face closure as online and mobile banking grow. In addition, major developments in artificial intelligence and machine learning now allow for the automation of tasks across business functions. Chatbots are now being used to function as front liners in sales and support. Robo-advisors also challenge the competence of human financial advisers. Job cuts are inevitable as these technologies mature.
More opportunities with startups – Those who are displaced from traditional institutions may look into retooling and transitioning to fintech ventures instead. Fintech is a growth industry and there are a variety of segments to venture into. Currently, most fintech ventures are in payments, investments, lending, and personal finance though others are already working on insurance and foreign exchange.
RATESETTER’S Australian division has welcomed the country’s banking reforms unveiled in the Federal Budget on Tuesday.
Changes imposed in the major fiscal event include a bumper levy on the country’s biggest banks, an “open banking” scheme to give customers greater access to their banking data and measures to boost competition and accountability in the sector.
The Productivity Commission, an independent review and advisory body created by the Australian government, published its recommendations for banking reforms on Monday ahead of the Federal Budget. The organisation suggested that banks build APIs to enable data sharing with customers.
Flexiti Financial, a leading provider of point-of-sale (POS) financing and payment technology for retailers, today announced the appointment of Jerome Peeters as Chief Operating Officer (COO) and Colin Franks as Chief Risk Officer (CRO) to its senior executive team. Both positions are newly created and come at a critical time for Flexiti Financial as the company continues to experience rapid growth in the consumer financing space.
Mr. Peeters joins Flexiti Financial from B2B Bank, where he served as Vice-President, Operations and Client Services. Prior to this, he spent four years at Sears Canada in a series of progressive senior marketing and operational roles within Sears Financial Services and the broader company. Before joining Sears, Mr. Peeters was Senior Director, Marketing and Change Management at CIBC, supporting the President’s Choice Financial business.
Mr. Franks was most recently Chief Risk Officer, Canadian Credit Cards at JP Morgan Chase where he managed Risk across several retail partners including Sears, Amazon and Best Buy. Before joining JP Morgan Chase, he spent over nine years at MBNA managing all aspects of the Risk lifecycle and eventually becoming Director of Strategic and Risk Planning.
News Comments Today’s main news: Lending Club charge-off rates increase from 4.2% to 6.2% from 09/15 to 09/16. Fundrise is crowdfunding under Reg A+. LandlordInvest offers first property-backed IFISA. Zopa cuts rates – again. Today’s main analysis: Savers want better returns more than FSCS protection. Today’s thought-provoking articles: Funding Circle changes property loan prices. United States […]
Fundrise is crowdfunding itself under Reg A+. AT: “Other RECF platforms like Sharestates and P2P platforms like Wellesley seek growth capital through 3rd party crowdfunding platforms. Instead, Fundrise is going to sponsor its own capital-raising push. Very interesting, and they have the chops to pull it off.” GP:” This is another flavor of p2p, it’s p2-to-equity-to-build-a- marketplace-lender-to-p. “
Zopa cuts rates again. GP:”This comes on the heels of Zopa refusing any new lending capital for a short period of time at the end of last year. Cutting lending rates confirms that they have more lending demand then borrowing demand. Competition will in fact affect borrower rates, pushing them down, and lender rates pushing them up not down. I am not certain how this could be due to competition.”
Savers want better returns more than FSCS protection. AT: “I don’t know why anyone should be surprised by this. If you have nothing to protect, then why not increase the risk. It makes sense that savers would want higher interest rates considering their savings are low to begin with.”
Klarna CEO says Trump, Brexit could be good for business. GP:”The capital markets agree with Klarna’s CEO, at least for now. And that’s where people vote with their money. Watch what people do not what they say. ” AT: “Siemiatkowski’s personals beliefs are at odds with his business sense, and that’s a good thing.”
Fundrise first filed a preliminary Form 1-A with the SEC at the end of December 2016. The filing was done under “Rise Companies Corp.” so it fell under the radar of many people. The most recent version offering circular indicates that Fundrise wants to sell up to 1 million shares of their Class B non-voting Common stock. The price per share is not yet available. Initially, Fundrise will limit the offer and sale of the shares to investors who have purchased investments sponsored on their platform.
Since Fundrise’s launch, they have originated approximately $210 million in both equity and debt investments deployed across more than approximately $1.19 billion of real estate property. This amount alone makes it part of a select group of the largest online real estate marketplaces in the US. Their first five sponsored “eREITs” have collectively generated $119 million in investment as of the beginning of this year.
Fundrise claims a compound annual growth rate of 780% – going from $0.9 to $70.9 million for a three-year period from January 2013 to December 2015. For the 9 month period ending September 2016, Fundrise had year over year growth of 129% going from $45.1 million to $103 million. For the six months ended June 30, 2016, net revenue stood at $3.5 million.
The average size of the real estate assets originated by Fundrise during the nine months ended September 2016 was about $5.7 million.
“Investor performance is coming down for peer-to-peer loans because there’s a growing number of charge-offs where a bank or a lender can’t collect on the loan and then the loan is deemed worthless,” says Colin Plunkett, equity research analyst at Morningstar in Chicago.
Plunkett cites Lending Club Corp. (ticker: LC), whose annualized charge-off rates increased from 4.2 percent to 6.2 percent in the personal loans-standard program and 5.9 percent to 11 percent for the personal loans-custom loans program from September 2015 to September 2016.
Sid Jajodia, chief investment officer at Lending Club in San Francisco, says the lender updated its credit policy to tighten its thresholds to stabilize delinquency rates by not lending to as many borrowers who had high debt-to-income ratios and other risk factors. The standard loan program that includes borrowers with a FICO score of 660 and above is open to institutional and retail investors, but the custom loan program, which includes a riskier pool of borrowers with a FICO score of 600-659, is open only to institutional investors, Jajodia says.
Investors need to decide if the borrowers have the long-term credit ability and a willingness to repay versus what was projected when the security was initially priced, says Burke Dempsey, managing director of investment banking at Wedbush Securities in New York. They also need to examine the trustworthiness of the loan originator and if that lending company has “the integrity and commitment to deliver a transparent and quality product to all parties, especially under pressure of high growth or a turn in the economy,” he says.
Plunkett says it’s also important for investors to consider how a company makes its money. A key difference between Social Finance and Lending Club is how the companies maintain their balance sheets, he says.
Andrew Crosby, a senior at the University of Puget Sound and president of Four Horsemen, says the nonprofit switched from using Prosper, after experiencing a 12.21 percent default rate, to Lending Club, which has netted an 8.38 percent default rate.
Both Crosby and Livingston say they’ve also seen the industry migrate from offering loans for weddings, home improvement and college tuition to narrowly focusing on debt consolidation.
According to the Economist, current U.S. student loan debt exceeds $1.2 trillion, a staggering increase of over 300% for the past decade.
Seven out of 10 graduating seniors at public and non-profit colleges had student loans in 2014, with an average debt of $28,950. This represents an increase of 2% over the Class of 2013.
One driver of student debt is the skyrocketing costs of attending college. The average cost of a non-profit private four-year college for 2014-15 was $42,419, up from $30,664 from 2000-2001. Public four-year college costs expanded over the same period from $11,635 to $18,943, according to CNBC.
Graduates of the class of 2014 in Delaware had the dubious honor of carrying the highest student debt load, averaging $33,808. New Hampshire, Pennsylvania, Rhode Island and Minnesota round out the five worst states for student debt, with an average indebtedness of over $31,000. These states tend to have a higher percentage of students carrying debt, for example, New Hampshire had a whopping 76% of students shouldering debt upon graduation.
The best states for low student debt are led by Utah with an average of $18,921 for the class of 2014, with a relatively low 54% carrying some student debt. It appears that there is a little overlap with averages and the amount of students with debt. While states like States Utah, have lower percentages of students in debt, higher debt averages tend to have higher amounts of students with debt. The other states in the top five are New Mexico, Nevada, California and Arizona, with an average of $20,418 owed. These best states for student debt have an average of 52% of graduates saddled with student debt.
Peer-to-peer (P2P) platform LandlordInvest has become the first provider to offer a property-backed Innovative Finance ISA (IFISA) after receiving HM Revenue & Customs approval as an ISA manager.
The property-backed IFISA will allow savers to invest up to £15,240 in the current tax year – rising to £20,000 next year -in P2P loans secured by residential property. According to LandlordInvest, savers could earn between 5% and 12% tax-free returns a year.
ZOPA has lowered its lender rates by 0.2 per cent across all accounts, just four months since its last reduction, citing competition in the personal loans market.
Access account lenders will see interest rates cut from 3.1 per cent to 2.9 per cent, Classic investors will see a drop from 3.9 per cent to 3.7 per cent, while Plus account holders will see targeted returns fall from 6.3 per cent to 6.1 per cent.
Lender rates were last reduced in September, a month after the Bank of England cut interest rates.
On Wednesday, marketplace lending platform Funding Circle announced changes as to how it prices property loans. The lender revealed that following a recent review of its property loan offering, it is increasing the interest rate on certain property loans and will begin to list some loans at a higher risk band than A+ or A.
Explaining why it is making the changes, Funding Circle stated:
“Over the past three years, you have lent over £300 million to experienced property professionals, earning over £16 million in interest after fees and bad debt. This has provided us with an ever-growing source of property credit performance data, which we use to regularly review our credit assessment models and help us make even more accurate pricing and risk banding decisions.”
Savers would rather get a better interest rate on their money than benefit from more FSCS protection, according to research from peer-to-peer lending platform RateSetter.
According to RateSetter’s research, only 4% of people in the UK have more than £75,000 in savings and therefore stand to benefit from the increase in protection. More than two-thirds of people (67%) have £10,000 or less in savings.
The FSCS limit was reduced from £85,000 to £75,000 in January 2016 following changes in the pound/euro exchange rate, but RateSetter research carried out at that time found that just a quarter of savers were aware of it.
Asked whether they would rather have a more protection for their savings or earn a higher rate of return, the vast majority of savers favoured the latter, with 69% saying they would rather earn 1 percentage point more in interest than have an extra £10,000 of FSCS protection.
The governor of the Bank of England has put banks and fintech companies on notice to expect tougher, more intrusive regulation as the use of disruptive technology in financial services becomes more sophisticated and widespread.
Mark Carney, who is also chairman of the Financial Stability Board that makes recommendations to G20 nations, said on Wednesday that fintech could signal an end to the traditional universal bank model. He added that it could also increase “herding” risks and make the system more interconnected and complex.
Mr Carney said on Wednesday that the burgeoning peer-to-peer lending sector, which in the UK now represents about 14 per cent of new lending to small businesses, “does not, for now, appear to pose material systemic risks”.
Earlier on Wednesday, Bundesbank president Jens Weidmann, who is also involved in the FSB, echoed the views of his Bank of England counterpart, saying that while enhancements in financial technology could bring banking services to more people, they could also “exacerbate financial volatility”.
Both Mr Carney and the Bundesbank president warned that there were risks emanating from the use of so-called robo-advice, where algorithms are used to manage risk.
The millennial generation are four times more likely to have money invested in peer to peer than people aged 55 and over, according to research from ThinCats.
Hamstrung by rock-bottom interest rates for most of their adult lives, 4 per cent of 18-34-year-olds currently have money in the emergent peer to peer sector, compared to 1 per cent over-55s.
A third (29 per cent) of the millennial generation cite the ability to cut out banks as the sector’s biggest attraction, while 28 per cent like that they can lend directly to businesses. A quarter (23 per cent) have had peer to peer recommended to them by a friend.
One of the key reasons for the peer to peer demographic split could be appetite for risk adjusted rate of return. Younger investors place much greater emphasis in earning high returns in exchange for greater risk, with one in five (19 per cent) citing this as their primary motivation when investing, compared to only one in ten (9 per cent) over-55s.
Despite his personal disappointment at Britain’s plans to leave the European Union, Siemiatkowski believes Brexit, along with President Trump’s protectionist rhetoric in the US, could actually be good for his business.
“Isn’t it so sad that you’ve got the younger generation that has been brought up with the amazing promise of Europe. All of us have lived and travelled and worked where we want. Then the older generation decides, end of party — you’re going back to the old ways.”
The majority of market participants at Deutsche Borse’s Funding and Financing Summit are looking at alternative securities lending structures.
Over 60% of the audience at the Luxembourg event this week claimed to be exploring new models as part of their financing efforts in the current low yielding environment accompanied by strict regulatory requirements.
Centrally cleared stock loan trades (40% of the audience), principal lending, peer-to-peer trades and pledge structures (17%) are among the new routes being looked at as extensions or complete replacements of the traditional agent lender model.
Increased regulations, demonetisation and the push towards Digital India have brought the country’s banking system and financial services sector into the limelight.
With rapid advancements and huge inflow of data, having analytics and Big Data tools/services is now critical for any financial institution to be able to understand and analyse credit risk, fraud risk or to make more efficient, fast and profitable decisions.
This is great news for FICO whose credit rating services would come in handy for institutions in the lending business.
A growing consumption and shift to digital or disruptive modes of financial transactions like P2P lending, brings along risks like fraud, data theft and cyber crime.
In a recent study by Kroll, global provider of risk solutions, when survey participants were asked what dissuaded them from operating in a particular country. About 19 percent of respondents stated they were dissuaded from operating in India because of digital fraud concerns, the second most after China (25 percent).
Financial institutions can further increase revenues by deploying analytics frameworks to improve customer cross-sell, enhance acquisition effectiveness, increase wealth management, penetration in high net worth customers and staying more cautious of ‘riskier’ customers.
Onfido, a global identity verification company, announced this week it is helping to bring financial services to the 2 billion unbanked individuals worldwide with its Machine Learning-based solution. The company stated it plans to use its proprietary technology to verify people’s identification by comparing an identity document to a selfie and is helping convert the previously unbanked for some fintech companies.
Onfido, a global identity verification company, announced this week it is helping to bring financial services to the 2 billion unbanked individuals worldwide with its Machine Learning-based solution. The company stated it plans to use its proprietary technology to verify people’s identification by comparing an identity document to a selfie and is helping convert the previously unbanked for some fintech companies.
News Comments Today’s main news: Funding Circle stops originating loans in Spain. Today’s main analysis: LendInvest opens property development academy. FinTech predictions for 2017 Today’s thought-provoking articles: Yirendai bullish on lending prospects. P2P needs big data. United States VCs in FinTech pivoting toward insurance & RegTech. GP:”We clearly see that the fintech VCs are now focused […]
VCs in FinTech pivoting toward insurance & RegTech. GP:”We clearly see that the fintech VCs are now focused more on insuretech than on lending. RegTech is not as clear though but I also see the need and applications there.” AT: I’d expect this pivot to lead to a new phase of startups in those two sub-niches.”
FinTech predictions for 2017. AT: “Interestingly, the pundits are still talking about consolidation. More interesting, I think, is the prospect of foreign investors getting into the U.S. market.” GP:” I continue to be scheptical on consolidation. However, foreign proven models getting in the US market seems plausible due to its size as long as they have a interesting mouse trap, niche , tech or know how. The best example is probably Klarna.”
Funding Circle stops originating loans in Spain. AT: “Interesting. I didn’t see a reason for the decision. It could just be a shift in focus on other markets, which is mentioned in the article.” GP:” We can speculate, without any particular knowledge, that it is likely due to regulation.”
Yirendai bullish on lending prospects. GP:” Their stock continue to perform unbelieavably. We continue to be unsure about the solidity of their business, default rates and underwriting quality. We seem to be in the minority though. “
P2P lending needs big data to have a future. GP:” Underwriting, underwriting, underwriting. If one has 5 rating grades and 5 subgrades per grade, that is 25 categories. One needs at least a few hundred defaults per category to know what a default looks like. We are talking 25*300= 7500 defaults. With a default rate of , lets assume 5%, that means 150,000 loans. So one really has data once it originated 150,000 loans. And once you modify the underwriting parameters the counter resets before you know if your modifications worked or not…”
The panelists agreed that the fintech market is getting oversaturated and over-funded. This means that the pressure is on to seek original ideas that leapfrog entire processes in financial services as opposed to just digitizing existing services. They pointed to payments and lending as two areas where the market has defined clear winners, but as credit becomes more expensive, this could shake loose new opportunities for entrepreneurs.
But confidence in insurance and regulatory technology (RegTech) is high. Kapoor Collins encouraged entrepreneurs to think about regulations on two levels. At a basic level, founders should factor in regulatory policies and changes into their business plans.
2017 will continue to be the year where the top players pull away from the pack. At the beginning of 2016, there were an estimated 400+ fintech lenders in the U.S. – in 2017, I expect the supermajority of the lending to come from just 10 or so platforms.
Fintechs looking to disrupt core banking products like checking and savings accounts, and the products attached to them like debit cards will likely become more prominent in 2017.
Most of this will come in the form of partnerships – fintech front ends, traditional bank back ends – but partnership might not be the “construct du jour” much beyond 2017.
Acquisition will be the answer for some traditional players. I can’t tell you how many transactions there will be, but I can tell you the conditions have never been more ripe.
As investors in newer markets get hip to fintech, they may also want to invest in the U.S., where the fintech market is stable, large, and growing. We’ve already started to see it happen on the equity investment side, and we’ll likely see it happen on the credit investment side too – that is, investment in the loans of fintech lenders. Interest rates in some international markets are significantly lower, making yields found in the U.S. that much more attractive. The stability of the U.S. market remains a large draw relative to local markets as well.
The P2P business model is starkly different from that of traditional banks. As their name implies, P2P sites began as ways for individuals to borrow from other individuals but now several of the sites have evolved into places where small business owners can borrow from individuals and even institutional investors.
P2P loans are unsecured, so you don’t have to tie up precious collateral, the funding process is faster than a bank and requires less paperwork.
Now that P2P sites are also open to institutional funders, the line between P2P and marketplace lending isn’t as clear as it once was. Marketplace lenders have created websites where small businesses can get offers from multiple funders on a wide range of capital needs, from short-term funding to equipment finance and even long-term loans backed by a guarantee from the U.S. Small Business Administration.
On a crowdfunding site, you can use words, pictures and even videos to sell people—many of whom won’t know you or your business—on your business idea and include how much you need and what you’ll use the money for.
Capitalization for Ilan’s newest acquisition resulted partially from real estate equity crowdfunding, which as a sub-industry in real estate, topped $2.5 billion in 2015, according to Massolution, an industry research and advisory firm. For this project, Ilan turned to Crowdstreet, a real estate crowdfunding platform.
Ilan’s new property is located within the heart of the Texas Medical Center in Houston and several shopping and dining choices, and is positioned to draw residents employed in the Medical Center, Uptown, Downtown and EaDo areas of Houston, according to Michael Harger, Adara’s vice president of marketing and development.
LandlordInvest, a peer-to-peer lending platform, this week received Isa manager approval from Revenue & Customs, even though other platforms, including Funding Circle, Zopa and RateSetter, are still waiting for the go-ahead.
By October 2016 only 15 companies had been approved to offer such Isas to peer-to-peer and crowdfunding investors, although the market finally seems to be growing.
Welendus Live on Seedrs (Welendus Email), Rated: A
Welendus fundraising campaign is now live on Seedrs. You can click here to access the campaign and watch the video.
Welendus are raising £300k for equity.
In short peer-to-peer lending allows investors to make money by helping borrowers to escape the bad practice of payday lenders like Wonga, and the high overdraft rates charged by banks.
This peer-to-peer lending market reached £3.2bn in 2015 and is due to reach £19bn by 2020, fueled by increasing demand and supportive government policies designed for a low interest rate, post-Brexit economy.
The short-term lending market is a huge market that is let down by existing players.
Seedrs do accept international investors with a strong pre-existing connection.
Habito, the digital mortgage adviser which uses AI technology, has just raised millions in funding from investors in Silicon Valley – and says it is on course to have processed half a billion pounds’ worth of mortgage applications by the end of 2017.
Ribbit Capital, which has invested in Funding Circle and Robinhood among other fintech companies, backed Habito with £5.5m.
Following big news of a $100 million funding round, Funding Circle has announced it will stop issuing new loans in Spain. The online lender has made the decision to concentrate its Continental Europe resources on the Netherlands and Germany.
Since launching in Spain, Funding Circle has helped 217 Spanish businesses raise money with the help of 579 active investors. The platform has managed a meager €16 million in loans in Spain, approximately 0.1% of its global volume.
China’s strict vigil on the peer-to-peer lending sector may have crimped fortunes for several companies, but opened the doors for organised players like Yirendai. The New York-listed firm, unlike its peers, has not only been expanding its business rapidly, but also set its sights on disbursing loans worth 100 billion yuan (HK$112.8 billion) a year by 2020.
According to available information, loan transactions on the Yirendai platform was about 20 billion yuan in 2016, and Tang’s ambition is to achieve annual transactions of 100 billion yuan by 2020.
When it comes to profitability, Indonesian banks are the envy of Asia. Their robustly handsome margins are a dream for banks in Malaysia, Thailand, Philippines and India.
That’s even more remarkable given that the archipelago of 18,000 islands has almost 120 banks while its peers in ASEAN have merely one-third of that number. Clearly the number of competitors has not impacted profits. After years of peaceful co-existence, it seems finally there is pressure at the periphery. A new phenomenon is underway in Indonesia in the form of peer-to-peer (P2P) banking.
Indonesia is wisely being cautious. The Financial Services Authority (OJK), the regulator, has laid out regulations for the same which includes conditions like foreign ownership being restricted to 85 percent, loan size capped at US$150,000 and the fact that foreigners can only be lenders.
News Comments Today’s main news: Funding Circle raises another $100M, praised by chancellor. Today’s main analysis: Brussels, London form FinTech bridge. Today’s thought-provoking articles: What every entrepreneur needs to know before starting a business. United States What every entrepreneur needs to know before starting a business. AT: “Sharestates CEO Allen Shayanfekr shares from his own […]
P2P to explode in 2017 while platforms close. AT: “The interesting thing here are he closures even as the industry on the whole does well, a reminder that markets often come with a mixed bag of success for some and failure for others. A rising tide is not a tidal wave.”
Global loan servicing software market to grow over 14% through 2021. AT: “This is a come-on to sell a report, but the interesting thing is that the software we’re talking about is software that can be used by MPLs and other financial services in the alt lending space. If the software market goes up, it’s a good sign that the industry is moving in the same direction.”
As the founder of a real estate crowdfunding startup, I have learned a lot over the last two years and am eager to share that information with other entrepreneurs.
The first tip I would give any entrepreneur is to forget the concept of a 9-5 work day. If you start your company thinking that all of your responsibilities will be handled in an 8-hour day, you are setting yourself up for failure.
Without a solid operations team, the inefficiencies from department to department will end up costing much more in the long term.
The capital raising environment is volatile and the key to survive a raise is to find the quickest path to profitability even if it means growing slower. Because raising capital is a long and tough process, you should make every single penny count. Sharestates started out with a $25,000 family loan and now has originated over $200 million in real estate loans since its inception in 2014. Until your company is ready to raise capital, be sure to be in touch with each department’s spend to ensure you are maximizing each dollar.
Make sure you consult an attorney to ascertain all regulatory and compliance risks – not everyone is aware that sometimes their line of business is subject to some form of scrutiny. This is especially important in an industry as new as marketplace lending.
In the old days, banks were imposing granite buildings housing massive vaults and offering 3% on savings and 6% mortgages. Later they morphed into unassuming suburban branches distinguished from fast-food outlets primarily by having multiple drive-through lanes. 21st Century banks increasingly live online, and the chief exemplar of that is SoFi.
Another difference is that SoFi relies less on credit scores when deciding to grant a loan compared to mainstream lenders. “We’re looking primarily at free cash flow — do you have enough money at the end of the month to pay us back for this loan?” Macklin says.
Perhaps the most marked divergence between SoFi and mainstream banks is its interest in customers’ personal lives. The company hosts meet-and-greet singles events and community dinners and provides career planning and job search assistance. It even offers coaching to help would-be entrepreneurs launch businesses.
Roseman says SoFi appears to seek refinancing business with borrowers whose student loan balances are $80,000 and up. “With that type of loan balance, they’re looking at the Ivy Leagues and the Stanford grads, more of the private college folks,” he says.
On life insurance, he suggests looking at other options before signing up for SoFi’s. SoFi doesn’t require medical exams from applicants. which means the insurer shoulders more risk, which generally means higher premiums.
He also cautions against refinancing government student loans as part of a mortgage refinance without accounting for the fact that government loans may allow for modifying payments or forgiving part of the loan.
Most lenders spread their loans across a variety of rankings—with the bulk in the highest-quality ratings (lowest default risk) and some in the lower quality, where yields can top 20% to offset the higher risk.
One of the big advantages of P2P lending is the very low correlation these loans have to traditional stock and bond markets.
Due to the nature and number of the loans you’ll make, the correlation to the stock market for a P2P portfolio is just 0.19. For US bonds, the correlation is even less, -0.13.
There are also add-on services you can use to improve your overall returns while better managing your risk. One tool we analyzed in our report consistently provided a net annual return of over 14%.
Financial technology (fintech) is a young but $78.6 billion–strong industry, and legal precedents can only help it thrive. Unethical business practices by one company can ruin opportunities for all, and that would be a tragedy given that alternative finance holds the power to transform the industry, bringing services to millions who have long been excluded from the system.
Traditional firms like Goldman Sachs will capitalize on Lending Club’s missteps by arguing that point of sale is where it’s at — and they’ll be right.
Mobile apps aren’t merely add-ons for banks trying to appeal to younger generations; they’re now baseline requirements.
2017 will be the year of alternative payments. Heavy hitters like PayPal, Apple Pay and Google Pay will continue to flourish as merchants increasingly encourage customers to pay via their phones or digital wallets. But smaller companies will emphasize mobile payments as well, using new apps and streamlined systems to drive more widespread adoption among consumers.
The natural next step from alternative payments is for smartphones to become people’s go-to personal finance management systems. Individuals will pay their bills, monitor their budgets and make purchases almost exclusively through mobile apps and notifications.
Approximately 24 million U.S. households rely on services like pawnshops and payday loans to access cash and credit. Fintech companies will target these millions through new products and underwriting models that look beyond traditional credit indicators.
Improved efficiencies will empower consumers and hold banks and fintech companies to higher standards of transparency and ethics.
Enhancements in financing will also enable individual verticals or marketplaces build cooperative microeconomies, thanks to improved access to capital.
Last spring, following a loan-doctoring scandal at Lending Club—at the time, the industry leader—capital for online lending startups became harder to come by and many suffered layoffs. Avant, Prosper, and Lending Club cut staff by the hundreds.
Funding Circle weathered the storm, closing 2016 on a high note with $485 million in Q4 loans to small businesses. In total last year, the company lent $1.4 billion. According to Hodges, Funding Circle is cash-flow positive in its home market, the United Kingdom (where it benefits from the support of the government-owned British Business Bank), and expects to make its U.S. business profitable in 2017.
Online lenders also face increased competition from banks, many of which have shiny new platforms thanks to partnerships with startups. Kabbage, for example, has made bank partnerships central to its strategy; CEO Rob Frohwein says that licensing Kabbage technology to banks has grown to become an “eight-figure business” for his organization.
LQD Business Finance, an alternative lender that uses a proprietary credit-scoring algorithm to underwrite business loans, announced standout business results in 2016, its first full year of operations. Last year, LQD grew its flow of loan applications to over $140 million and loans closed to $33 million. In addition, the company closed a significant Series A funding round, complementing the $30 million credit facility secured in 2015.
Looking ahead, Souri said LQD anticipates growing its origination run rate to $80 million by the end of 2017 and to more than $200 million over the next 24 months, largely by expanding its data-driven lead generation and targeting the $200 billion market of prime and near-prime loans between $250,000 and $2 million. That market is underserved by both banks and existing alternative lenders. Additionally, LQD is in partnership talks with several banks interested in the company’s underwriting platform.
Professional Bank Services and Austin Associates Announce Strategic Merger (ProBank Email), Rated: B
Professional Bank Services, Inc. (PBS) and Austin Associates, LLC (Austin) announced today they have completed a strategic merger to create the nation’s premier bank consulting and investment banking firm. The resulting firm will operate under the name ProBank Austin, with offices in Louisville, KY, Nashville, TN and Toledo, OH.
Transaction terms are not being disclosed. ProBank Austin will continue to be privately-owned by the management and employees of PBS and Austin.
PricewaterhouseCoopers (PwC), one of the Big Four auditors and a multi-bln dollar professional services firm, launched a program called “Startup Collider” in early September of last year. The program, which begins today, will support young entrepreneurs and startups working within the Blockchain and fintech industries.
By the end of the program, PwC hopes to see its startups cooperate with industry leaders and introduce their technologies to mlns of users and consumers. Dissimilar to many venture capital firms or accelerators, PwC also allows startups to test their technologies with its multi-bln dollar clients and partner corporations. If startups wish to pivot away from their focal point to another market within fintech or Blockchain, PwC will support the decision.
Chancellor Philip Hammond has praised Funding Circle as “a real success story” after the British peer-to-peer lender raised a further $100 million (£82 million).
The company announced its sixth funding round on Thursday, which takes its total equity funding to over $370 million (£300 million).
The latest funding round was led by existing investor Accel Partners, with participation from other existing backers including Baillie Gifford, DST Global, Index Ventures, Rocket Internet, Temasek, and Union Square Ventures.
UK MD and co-founder James Meekings told Business Insider that the money will go towards building out Funding Circle’s technology platform and hiring more staff.
“B-Hive,” the part-government-owned platform set up to facilitate innovation between Belgium’s fintech sector and the traditional financial and technology sectors, has signed a memorandum of understanding (MoU) with Innovate Finance, the trade body for Britain’s fintech sector, it said on Wednesday.
In 2015 Britain’s fintech sector, whose ranges from app-based payment services to crowdfunding and peer-to-peer lending firms, employed over 60,000 people and generated 6.6 billion pounds ($8 billion) in revenue, according to the Treasury.
Yesterday we published an article about BrewDog raising £10 million on Crowdcube. The funding round via Mini-bonds was described as the largest ever on a UK crowdfunding platform. Later in the day, Crowdfund Insider was contacted by Crowdstacker saying not so fast – they believe they have the largest crowdfund record for a UK platform.
Their new record-breaking claim to a single raise has been undertaken via its peer to peer lending platform for leading specialist lender, Amicus Finance plc. To date, £12 million has been invested.
With less than a week until its Seedrs campaign comes to an end, P2P lending platform Flender has secured 98% of its £500,000 funding target (more than £485,000) from 225 investors.
Funds from the equity crowdfunding campaign will be used for key hires, including a direct sales team and in-house software developers; marketing, including online targeting and above-the-line advertising; product development, specifically native iOS and Android versions plus roadmap features for all channels. Flender’s Seedrs initiative is currently scheduled to close next Tuesday (January 17th).
The lender stated that the app would connect lenders and borrowers directly, helping them to control their finances and transfer money while on the go. Through the app, iBAN users will have a modern money management tool, integrated with gamification, and risk management.
4thWay, a P2P ranking site, has published a report on the UK peer to peer lending market. According to their numbers, delivered another “record year”, with a total of £3.02 billion facilitated via 35 various platforms in the UK.
The totals are as follows:
Consumer loans £1.27bn
SME loans including invoices £1.01bn
Development and short-term property loans £690m
Asset-backed (HNW pawnbroking) £40m
Rental property £10m
4thWay said investors typically received returns of 3%-7% net of costs and bad debts. Lower returns went to investors who desired greater liquidity and the higher returns to those lending for up to five years.
Bad debts at the majority of P2P lending platforms remained consistently very low at less than 1%.
LANDLORDINVEST has been approved by HMRC as an ISA manager, paving the way for the launch of its Innovative Finance ISA (IFISA), Peer-to-Peer Finance News has learnt.
At present, just 18 companies are authorised to offer IFISAs, most of which are very small firms. Out of the eight members of the Peer-to-Peer Finance Association, only Lending Works has HMRC approval. Just before Christmas, Landbaygained full authorisation from the FCA, meaning that HMRC permission is the next step.
LandlordInvest has said that its IFISA will offer investors annual returns ranging between five and 10 per cent.
PEER-TO-PEER lending will grow by 50 per cent this year driven by the Innovative Finance ISA (IFISA), but some platforms will fall by the wayside, predicts new research.
Just five IFISAs have been launched so far, but independent P2P analysis firm 4th Way is forecasting a total of 16 by the end of the year, which will boost lending.
“Interest rates in peer-to-peer lending will continue to fall in 2017, benefiting borrowers at the expense of lenders,” he said. “However, we believe P2P has been kind to lenders, as they have been rewarded generously for low risk.
“Over the long term, the amount of interest lenders can earn will be aligned to risk. The high-quality of the loans that most lenders are lending in means more lenders will pile in to push rates closer to a fairer level.”
Crowdfunding, the world over, has been about peer-to-peer funding. However, there are many challenges in the Indian real estate market, such as the absence of an organised trust/agency, which make crowdfunding a non-starter. So, what makes crowdfunding different from a Real Estate Investment Trust (REIT)?
With REITs, investors only know the portfolio and not the properties. However, in crowdfunding, individuals can single out a particular building or builder to invest in, he explains.
David Walker, MD of SARE Homes, points out that REIT has already gained official sanction, while crowdfunding is still not officially recognised in India, unlike in the developed nations.
The market study covers the present scenario and growth prospects of the global loan servicing market for 2017-2021. The report also presents a detailed analysis of the key vendors in the market, along with a comprehensive analysis of the emerging trends and challenges faced by the vendors.
The increasing demand for the lending market has given rise to efficient loan servicing software that helps the lenders in managing loan databases and debt collection activities.
Loan servicing software enables lending organizations to minimize financial risk exposure in addition to increasing their operational efficiency. Loan servicing software also supports a wide variety of loan industries and lending products that include SME lending, peer-to-peer lending, mortgage lending, payday loans, credit unions, microfinance, retail lending, POS financing, auto lending, and medical financing. Loan servicing software handles the mortgage, home equity, and other consumer loans on one platform. All these factors are collectively increasing the adoption of loan servicing software.