Credit reports are a pivotal factor in determining if borrowers will be approved for a loan. But is that the best approach to analyse credit worthiness? One company challenging the status quo of the static credit report is Lantern Credit. Lantern Credit’s Interactive Credit Report helps users evaluate “the impact of their financial actions on their credit […]
Credit reports are a pivotal factor in determining if borrowers will be approved for a loan. But is that the best approach to analyse credit worthiness? One company challenging the status quo of the static credit report is Lantern Credit.
Lantern Credit’s Interactive Credit Report helps users evaluate “the impact of their financial actions on their credit scores and accept new credit offers.” The report is based on an interactive machine learning technology, Beam AI, which provides customized recommendations to its customers on ways to improve their credit score.
The company sells its white label product to banks and financial institutions, which displays the bank’s credit products. This enhances the customer experience and reduces adverse action reporting, which proves to be advantageous for lenders and customers. The banks are charged on the basis of actions taken by consumers on the recommendations of Lantern Credit. A non-labelled solution shows all available credit products in the credit report.
Though there are existing apps available like Kredit Karma, Lantern Credit offers flexibility while suggesting ways bank customers can improve their financial habits leading to improved credit scores.
Goal-Centric Approach to Credit Score Improvements
Lantern Credit is able to meet this need of bank customers through the use of proprietary artificial intelligence technology, called Beam AI. The company focuses on what the customer is trying to achieve in terms of funding (i.e. house, car, education, etc.) rather than on just the credit score. Since all analytics are actionable, the customer is able to act swiftly rather wait for long periods of time.
The interactive credit report provides guidance to consumers on ways to improve their credit score through actions like balance transfers and pay downs. It also offers customers available credit options. Rather than targeting consumers across the board, Lantern Credit concentrates on customers whose credit score lies between 650 and 720.
In order to enhance its machine learning engine Beam AI, Lantern Credit acquired Abstract Regression-Classification (ARC) machine learning library. This tool uses non-linear symbolic regression to generate auditable credit models by applying analytical predictions on consumer data acquired from banks. This helps manage risk and provide credit offers in a timely and actionable manner while elevating data accuracy.
Lantern Credit also appointed ARC’s inventor Michael Korn as chief data officer. Beam AI puts most of its emphasis on customer goal achievement rather than credit score alone. It helps customers access credit for large items like auto, home, and loan refinancing. Banks can also identify potential customers based on their goals.
Since Lantern Credit is not a credit reporting agency, this credit improvement model does not required adherence to FCRA regulations. Also, CFPB considers the model transparent as it provides all rules upfront to the consumer. The founder believes it is a more cost-effective tool than a financial advisor. He suggests advisors can use the tool to provide better wealth management services.
Lantern Credit History
Lantern Credit, LLC was founded in 2013 and is headquartered in Newport Beach, California. The company’s previous name was New England Funding Technologies, but was formally changed on July 20, 2017 to reflect the company’s mission (illuminate the world of consumer credit and debt) more acutely.
The company emerged with the aim to “provide customers with unique patented credit tools that enable them to reflect the impact of their actions on their credit score and manage their financial wellness.”
Lantern Credit raised $10 million in its latest round of funding, backed by three investors– John Mack, John Sculley and Kevin Knight. All three are presently board members. The funds were used by the company to accelerate the development of mPowerCredit, a patented online platform that allows consumers to enhance their credit scores in real-time.
G. Christopher Imrey, founder and executive chairman, has more than 20 years experience in technology innovation. He founded Apollo Enterprise Solutions Ltd and holds nine issued and provisional software technology patents. Chad Swensen, co-founder and CEO, has experience in developing and leading technology companies and founded wireless technology solutions provider Sweet Spot Solutions.
Lantern Credit’s board members include luminaries like John Mack, former chairman and CEO of Morgan Stanley, and John Sculley, former Apple CEO and youngest president of Pepsi-Cola Company. The company has 39 employees and expects to expand to 75-100 by the end of the year.
Lantern Credit has been able to stitch together an impressive team, board of members, and clients. Its revolutionary Interactive Credit Report uses proprietary AI to analyze and suggest actions to consumers to improve credit scores. Its ability to remain out of regulatory cross hairs is an important indicator of how big the company is expected to grow.
News Comments Today’s main news: China Rapid Finance goes public at $350M valuation, down from C round valuation of $1bil. VPC Specialty Lending Investments annual results continues to disappoint Morty launches fully-automated mortgage marketplace. Barclay’s opens Europe’s largest fintech site in London. Airwallex wins $17M funding. India to see fintech regulations soon. Today’s main analysis: National survey shows instant […]
PayPal partners with WooCommerce, Xero for ‘Business in a Box’. GP:”A very interesting approach. Square is built on making taking credit card payment easily. PayPal is falling behind on innovation.” AT: I would argue that PayPal was the world’s first digital bank. Many online entrepreneurs, including myself, have been using it as a bank account for years even if the service hasn’t acted like a traditional bank. Now, it looks like PayPal is trying to become an actual bank as well as a small business tool box. Think Quicken + CRB.”
Morty launches fully-automated mortgage marketplace. GP:”The interesting part here is not comparing mortgage prices, Lending Tree does that. It is instead if you can close via the website as well. I am curious to see traction and volume numbers here. I think it is all about customer experience. “
Elevate Credit, Inc. (“Elevate”) announced today that Elastic SPV, which purchases loan participations in the Elastic line of credit product originated by Republic Bank & Trust Company (“Republic Bank”), increased its debt facility with Victory Park Capital from $150 million to $250 million. This is the first step in a two-step process to further increase and diversify the funding capacity for the Elastic line of credit product.
During the second quarter of 2017, an additional SPV will be created as another funding source for the Elastic line of credit product. This additional SPV for Elastic would provide additional funding, diversified funding sources and further lower the cost of funds.
Starting May 15, SoFi staffers will participate in an online series that will offer users tips on communicating their value in the workplace and tell inspirational stories. The company will hold workshops in eight U.S. cities including New York, Chicago, Seattle, San Francisco, and Washington, DC, on negotiating pay raises, non-monetary benefits, and other topics. Career expert Nicole Lapin will appear at the New York event.
The average SoFi student loan customer is about 33 years old and has a student loan balance of about $75,000, more than twice the national average. A SoFi survey also found 50% of young, college-educated professionals had not negotiated their own salaries, and 54% said they don’t know their “market value.”
PayPal today launched a new service, called Business in Box, aimed at bringing more U.S. small business owners to its payments platform. The service, which was developed in partnership with WooCommerce and Xero, offers merchants a suite of tools for running their online businesses, including an online storefront, accounting tools, the ability to apply for working capital from PayPal and, of course, support for taking payments either online or offline, via PayPal.
Business in a Box is largely aimed at first-time business owners who already know what they want to sell and have a roadmap in mind, as well as at established offline businesses that want to make the move online.
Often, these business owners would otherwise turn to an e-commerce platform, like Shopify, Magento, BigCommerce or WooCommerce, to establish their online presence and take advantage of other add-ons that can help them with other aspects of their business, like running promotions, marketing, order management, shipping, social media and more.
The company also noted today that PayPal Working Capital has now helped more than 115,000 businesses worldwide access more than $3 billion in loans and cash advances since the service launched in 2013.
American consumers appear to be warming up to instant financing options when purchasing goods and services online. According to a new national survey, three quarters (75 percent) of consumers indicate they would be likely to select an online retailer that offered instant financing compared to another that did not; 28 percent would be very likely to change merchants in order to use instant financing.
Instant financing is an easy-to-use, revolving line of credit that consumers apply for within a merchant’s online checkout. It allows consumers to spread purchases over time with low APR financing offers, and provides an alternative to credit and debit cards when paying for an online purchase.
The online study was fielded between April 10 and 13, 2017 by Researchscape International on behalf of Klarna North America (www.klarna.com). The survey of 2,024 consumers, ages 18 and older, was designed to better understand the behaviors and attitudes of consumers towards instant financing. Consumers were quota-sampled using 32 different cells (gender by age by region) to closely match the overall national population.
In terms of how instant financing might impact their spending while shopping online, 39 percent of consumers indicated they would spend more money on a purchase if they had the option of instant financing compared to 42 percent who would not and 19 percent who did not know if they would spend more money.
Smartphone owners, 88 percent of consumers who responded, were asked about the ease and willingness to enter certain types of personal information when applying for instant financing. Among the information seen to be “too much trouble” to enter were Social Security number and bank account numbers (51 percent each), and credit card numbers (40 percent). On the other hand, just over a tenth of consumers found it to be too much trouble to enter an email address (11 percent), birthday (12 percent) or spouse’s name (12 percent).
Other key findings of the survey include:
Nearly half of respondents (47 percent) would like to be presented with an instant financing option while shopping online
Just over a quarter of consumers surveyed (28 percent) have used instant financing while 68 percent have not and 4 percent were not sure if they had
Beyond probing consumers’ thoughts regarding availability, the survey also asked about the convenience and ease-of-use factors of instant financing. For instance, a majority of consumers (52 percent) expect to wait three or more minutes to be approved for instant financing. Twenty-eight percent would expect to wait two minutes and just 20 percent would expect to wait under a minute. Klarna’s approval process typically provides an approval in under a minute with only simple, top-of-mind information required.
Focused on empowering homeowners to make smarter decisions about their mortgages, today Morty (www.himorty.com) launches its fully-automated mortgage marketplace, where homebuyers can shop, compare — and close — any loan option from among its network of lenders. Morty is initially rolling out with 10 major lenders across 10 markets in the United States, with plans to expand nationally by the end of 2017.
Leveraging the founding team’s diverse experience and learning first-hand from homebuyers during its initial pilot, Morty was able to identify pain points from start to finish and prove the benefits of a marketplace model. In the over one thousand real-life loan scenarios it has run for homebuyers, Morty has observed rate and fee variances across lenders that can add up to tens of thousands of dollars in fees and monthly payments.
Morty is creating an entirely new model: access to any lender or mortgage product within a single, unified mortgage process from first click to closing day.
Here’s how it works:
Homebuyers create a simple financial profile by linking their income, assets, employment, and property information and describing their homeownership goals.
Morty’s pricing engine algorithmically matches the homebuyer’s profile with each lender’s eligibility and pricing guidelines to show accurate, customized quotes, inclusive of all lender fees and closing costs.
Borrowers see their loan options in full transparency and compare across lenders and products.
Never once leaving the Morty platform, the homebuyer chooses a loan and Morty automates the process all the way to the closing table.
In addition to its launch, Morty also announces that it has raised $3 million in funding led by Thrive Capital with participation from SV Angel, FJ Labs, Corigin Ventures, MetaProp, Techstars and several angel investors.
RealtyeVest, Formerly IHT Realty Group, officially unveiled their new brand and optimized website. Destined to become one of the largest real estate crowdfunding platforms in the US, the new RealtyeVest website () provides a simple, secure and transparent platform for accredited investors, real estate developers and owner-operators.
“Our decision to rebrand from IHT Realty Group to RealtyeVest was a result of listening to feedback from our strategic partners and observing best practices in the industry,” said Daniel Summers, CEO. “We believe our new name better represents the essence of our business, and we are excited about the innovative technology that powers our new online marketplace. We spared no expense in the new build, providing a win-win to our investors and Sponsors.”
RealtyeVest is an online marketplace that connects investors and Sponsors (real estate owner-operators) to crowdfund exclusive real estate investments. Their platform allows its members to browse, research and make informed investment decisions on these exclusive properties.
China Rapid Finance Ltd. on Friday became just the second consumer lender this year to list in the U.S., following Elevate Credit Inc. earlier in April. Although they do business on opposite sides of the world, the duo has much in common: Both face investor questions about the reliability of their borrowers, both begin trading amid a particularly iffy time in the credit cycle and — perhaps consequently — both slashed their IPO price days before going public.
When LendingClub Corp. went public in 2014, some hailed the event as the dawn of a new era for finance. Shares have since fallen 60 percent from the IPO price.
“China Rapid Finance is coming to the market during a turbulent time in the China peer-to-peer industry as regulators roll out more controls to clean up what has so far been chaotic growth in the past few years,” MCM Partners analyst Ryan Roberts wrote in a note on the stock’s first initiation, a buy rating. “The company reduced the pricing range by about 40 percent, which we suspect reflected tepid demand from backers,” the note said.
Both recent IPOs are now trading up from their reduced offering prices by nearly 25 percent. MCM says the IPO valued China Rapid Finance at 4.7 times its book ratio. William Blair on Monday said that Elevate Credit is trading at 7.5 times its 2018 estimated earnings per share.
Even so, the 29-year-old Williams is a force, as is his company. Since launching, Cadre has generated nearly $1 billion worth of deals, raising close to $70 million in funding from high-profile investors such as Peter Thiel, Goldman Sachs, and Jack Ma.
So Williams set up a website where he could analyze these homes using a tax parcel ID–which tracks the value of a property over time–and measured this against what they were selling for. Using the data, and bolstered by the cash of wealthy Harvard alums including the Kushners, he started buying dozens of properties and flipping them for three times their original price. “By the time I graduated, I was at a crossroads: Do I scale this business nationally, or do I do tech banking at Goldman Sachs?” he recalls thinking.
Williams decided to do both. He pulled 18-hour days as an investment banker–and then would quietly work on his startup from the comfort of a supply-closet-size room by night. Real estate, he figured, was a valuable asset that ought to be made available to more (and more average) investors.
Cadre is an e-commerce site for investing in real estate. It connects customers–primarily wealthy individuals, referred to as “qualified purchasers”–to property deals across the U.S. (Cadre requires a minimum investment of a few hundred thousand dollars; that’s somewhat less than what a traditional fund requires, but likely more than what you’d pay to buy into a real estate investment trust, or REIT, which trades like common stock.) Williams declined to comment on what exactly the company charges its investors–it asks for an upfront fee and a recurring subscription rate–though notes that it’s in the range of a “couple hundred basis points.” A fund, by contrast, will typically take 2 percent of the investment, and then 20 percent of profits over time.
Although Cadre faces competition mainly from the traditional brokers, a growing number of startups have emerged in the real estate leasing space, such as 42Floors, a San Francisco website that lists commercial real estate and office rentals, and Rofo, an online marketplace for property listings and potential tenants that can facilitate lease deals without broker intervention.
NCAP Notice to Clients regarding Public Record Standards (Experian Email), Rated: A
In 2015, Equifax, Experian, and TransUnion announced the National Consumer Assistance Plan (NCAP), a set of initiatives designed to improve the accuracy of credit report information, as well as to provide consumers with a better experience interacting with the nationwide Credit Reporting Agencies (CRAs).
In June 2016, the CRAs announced enhanced public record data standards for the collection and timely updating of public record data reported on consumer credit reports. The enhanced standards require: (i) minimum consumer identifying information (name, address, social security number and/or date of birth) (“PII”) and (ii) minimum collection frequency for public records (at least every 90 days). These enhanced standards will apply to new and existing public record data on the CRAs’ respective consumer credit reporting databases. As previously announced, these enhanced standards are effective July 1, 2017.
Based on information provided by our public record vendor about the data available from courts and recorders’ offices, we expect bankruptcy public record data will continue to meet the enhanced collection and reporting standards. However, civil judgments and approximately half of tax lien data are not expected to meet the enhanced standards.
During the week of July 10, 2017, the CRAs will remove from their databases previously collected public record data that does not meet the enhanced PII standards. This includes the removal of all judgment public records and the portion of tax liens not meeting the enhanced standard. Public record data will also be monitored for adherence to the enhanced PII and collection frequency standards after July 1, 2017.
Despite the anticipated loss of significant volume of public record data from credit files, impact analysis conducted by the CRAs, as well as leading scoring model companies using CRA data, show a modest risk scoring impact and minimal loss in predictive performance as a result of these changes.
Please contact any member of your Account teams with questions you may have or forward questions to:
The proliferation of Robo-Advisors bringing low priced financial services out into the market has received significant buzz over the past few years.
When it comes to managing your money, minimal human intervention can be good or bad. The good comes when the algorithms and mathematical rules produce an asset allocation that is sensible for the purpose for which it is intended. The good also comes when the “human advisor” interjects personal preferences and judgments that are in the clients’ best interest.
Now, let’s analyze the downside, which can be a very deep and chasm. How we consider money, how we use money, how we value money, and what we believe about money is very human, indeed, and cannot be solved by mathematical equations.
For those who are looking for an asset allocation and a low-cost entry into investing, Robo advice can be a great place to start.
Alternative investments constitute a growing $7 trillion industry and more than 10,000 hedge funds have money in alternative platforms. Yet, most retail investors are just learning about these lucrative asset classes.
To illustrate the difference for clients who may not be familiar with alternative investments, ask them to imagine this scenario. A successful real estate flipper has bought and sold 25 properties in five years. After finding a great deal on a house in foreclosure, he applies for a bank loan to purchase it. The bank declines, spooked by four open mortgages he holds on current projects.
He’s never defaulted, but the bank still judges him as overleveraged because his loan-to-value ratio is 50 percent. It doesn’t fit into the bank’s rigid evaluation box, which has become even more stringent after the 2008 financial crisis. The perceived risk is much higher than the actual risk.
Then, he approaches an alternative lender who sees he’s willing to put his own money into a property in a desirable neighborhood and to offer a personal guarantee. The decision comes down to actual risk. Can this property fall in value by 50 percent in nine months? Will the borrower flip it in nine months for a handsome profit? By understanding the data and the flipper’s borrowing track record, the lender concludes that he will flip the house and fronts the capital.
FLEETCOR Technologies, Inc. (NYSE: FLT), a global provider of fuel cards and workforce payment products to businesses, announced today that it has signed a definitive agreement to acquire Cambridge Global Payments (“Cambridge”), a B2B international payments provider.
Lantern Credit, a financial technology company working to solve systematic inefficiencies in the consumer credit industry, adds Ricardo Gomez-Acebo to its Board of Managers. He joins Chairman John Mack, Vice Chairman John Sculley, James Held, Seth Johnson, Kevin Knight and Chad Swensen on the Lantern Board.
Gomez-Acebo has more than 30 years of experience in the Spanish and International Retail Banking sector, holding various executive roles at Spanish banks Banesto and Banco Santander including General Manager of Europe for Banesto. Gomez-Acebo led business development with strategic financial partners at Banco Santander and most recently is heading risk management for the bank.
Incumbent financial services’ millennial strategy (The New Yorker via CB Insights Email), Rated: B
Radix Law’s principal attorney, Jonathan Frutkin, will be a featured speaker at the “Fourth Annual Conference and Workshop for Crowdfunding USA” scheduled for May 4 to 5 at the National Press Club in Washington D.C. Frutkin is the author of the book Equity Crowdfunding: Transforming Customers into Loyal Owners.
RATESETTER’S upgraded data disclosure on its loan book and expected losses has brought its transparency to a top-tier level, according to peer-to-peer lending research firm 4th Way.
Based on the amended methodology, expected cumulative losses now stand at £18.06m, which paired with the current £22.44m provision fund buffer result in a 124 per cent coverage ratio – six per cent higher than last reported.
RateSetter’s data table now provides a clear estimate of the losses expected over the lifetime of its loan book, spelling out the losses that have already materialised and future expected losses for each year of origination, as well as a detailed breakdown of different types of arrears, provision fund adequacy levels, and investors’ expected returns.
What we discovered is that small businesses are going for growth, unfazed by the uncertainty caused by last year’s referendum result and the snap election. Nearly 70% of UK small businesses expect their turnover to increase within the next 12 months – half of whom expect a steady increase of between 6 and 20%, and only 6% expect turnover to decrease.
Small businesses, who already account for 60% of private sector employment, will continue to drive much needed job creation this year. More than half of the businesses we spoke to are planning to hire at least one new full-time member of staff over the next year. With more than 5 million small businesses across the country – this could mean the creation of millions of new jobs in the next 12 months!
When asked what their one policy priority is in the run up to the election, tax was by far the most important issue. With business rates mentioned specifically nearly 300 times, 40% said that they want the new Government to focus on this area after the election. The second most important policy area, according to a quarter of businesses, was of course Brexit.
To date investors have lent £2.2 billion to more than 23,000 UK small businesses.
A vast majority of the 2,300 firms interviewed by the country’s third largest small- and medium-sized enterprises (SME) lender are poised to throw their weight behind Theresa May’s party as the best positioned to deliver Brexit, despite half of them opposing the separation from the 28-nation bloc in the referendum last year.
The research also confirmed that UK SMEs have quickly shrugged off Brexit-induced economic worries, as seven in 10 firms expect to deliver stronger profits in the next 12 months and only six per cent forecast a drop in turnover over the same period.
Peer-to-peer friends and family lender, Flender announced it has now received its full authorisation from the FCA and has also launched operations in Ireland.
The platform says it has funded loans of over €900,000 since its soft-launch, without any marketing or advertising. It has seen demand from companies in a wide range of industry sectors including construction, F&B, energy companies, retailers and more. It reports that it has attracted over 750 registered users, 138 campaigns submitted with 11 currently live on the platform.
RateSetter previously provided financing to George Banco. RateSetter will now lend directly to George Banco’s growing customer base with George Banco generating the leads.der George Banco. RateSetter has also acquired an equity stake in the George Banco company.
Additionally, RateSetter has acquired specialist motor finance providers Vehicle Stocking Limited and Vehicle Credit Limited out of their parent company’s administration. RateSetter will rebrand both businesses and invest in them to build on its current motor finance capabilities. RateSetter previously provided wholesale finance to these businesses.
Growth Street’s marketplace rate dropped on Monday from 6.5% AER to 6.4% AER, rewarding borrowers with a 10bps drop in their costs of funds. The UK P2P lender attributes the drop to the momentum it has built on its platform, welcoming over 700 investors to date since the launch of its investment offering in November.
Loans are split into a minimum of £20 chunks or loan parts allowing investors to achieve a high level of diversification when investing relatively low amounts. Funding Circle suggests lending to a minimum of 100 businesses to achieve a 1% exposure to any one business. When investing a minimum of £2,000, Funding Circle’s auto-bid function will achieve this level of diversification automatically.
Borrowers across Funding Circle are all small to medium sized businesses (SMEs), borrowing between £5,000- £1million for loan terms of 6 months to 5 years.
Funding Circle is the only peer-to-peer lending platform of scale which operates across multiple geographies. The P2P platform has expanded from the UK to the USA, Germany and Spain. 74% of Funding Circle’s group (Funding Circle Holding Limited) revenue in the period ending the 31st December 2015 came from its UK business (Funding Circle UK Limited).
VPC Specialty Lending Investments PLC (LSE:VSL.L) released 2016 annual results last week and according to Chairman Andrew Adcock, results continue to disappoint. Shares in the fund that invests in various online lending assets continue to trade at a significant discount to the net asset value per share. As of December 31, 2016, VPC had deployed 87% of its NAV (with its cash holding of 13% temporarily elevated due to the recent sale of the Funding Circle U.K. portfolio). During 2016, VPC generated an NAV return of 0.85% for the Ordinary Shares and distributed dividends of 6.00 pence per Ordinary Share relating to the income earned during the year.
The recent news that peer-to-peer lending platform Funding Circle plans to stop all property development lending by mid-2018 came as something of a surprise.
Risk is always a factor in construction, but it is how that risk is managed that is important. Funding Circle’s withdrawal could allow other lenders to enter this space, and increased competition will be no bad thing in giving developers greater choice.
While we appreciate that there are always certain areas of the market that give cause for concern, many of our clients have a clear appetite for further growth. While demand is strong, and developers continue to be starved of funds by traditional lenders, the market for alternative finance – and peer-to-peer lending particularly – will come to the fore.
At time of writing shares were trading around $7.10 per share.
The fact that China Rapid Finance and Yirendai before them chose to go public in the US is significant. In a recent Lend Academy podcast with Yirendai CEO Yihan Fang, she stated that they felt the US was more educated on marketplace lending. This coupled with the fact that Ning Tang (Founder of parent company CreditEase) and other management members had experience in the US and were more comfortable with the US capital markets led to their decision to list in the US.
Today, FuMi Tech, MI’s related eco-chain company, announced it has finished A round of financing and raised 100 million RMB. This round of financing led by Buddhism Capital, with MoBai Capital and the previous investor ShunWei Capital participated. The fund will be continuously used to improve users’ experience.
WeBull, one of the products of FuMi Tech, providing trading services of US and HK stocks, and supporting real-time quotes of global stock, foreign exchange, funds and derivatives markets of over 20 countries. In fact, FuMi Tech has previously raised a joint investment of 50 million RMB from MI and ShunWei Capital.
Recently, China Construction Bank(Guangdong Branch) has launched its P2P funding depository product “Dragon depository”, and currently the bank has reached agreements with several P2P lending platforms.
According to an insider of CCB, the two critical measurements for their P2P cooperators are: bad debts and overall strength of the platform.The participation of CCB will promote the compliance process and bring a sustainable development of P2P lending industry.
The first Asia Credit Rating Agencies CEO Fair & Systemic Risk International Seminar was held in Beijing recently. Hongwan Chen, the deputy director of the financial department of National Development and Reform Commission, said that the regional cooperation across Asia is important for it could accelerate the Construction of Credit System in the area. He also advise to build credit record for local companies incorporated overseas and foreign investors, and set up a “blacklist” about those seriously illegal enterprises.
Dr. Wang completed his Ph.D in statistics at the University of Chicago in 1995 before moving on to Sears Credit where as head of analytics he developed models employing credit bureau data while also overseeing the creation of a credit data warehouse. He returned to China, where in 2001 he founded China Rapid Finance which began by developing credit scoring and decisioning models that helped companies issue more than 100 million credit cards.
In 2010 they made the move into marketplace lending, where they teamed up with more than 100 Chinese internet companies to analyze and score data that allowed them to preselect customers.
Seven years later China Rapid Finance has become China’s leading online consumer credit marketplace after facilitating 15 million loans to two million borrowers, beginning with small amounts for short durations and growing into longer-term loans for larger amounts.
EMMAs total 500 million and have been underserved by traditional credit providers, who focus on the 300 million super prime people who work for government or large institutions, Dr. Wang explained. He estimates China’s consumer credit coverage at roughly one-fourth that of the United States. While roughly 60 per cent of Americans have credit coverage, that rate is 16 per cent in China.
EMMAs are prime and near-prime consumers who are educated and have stable employment in the services and with startups and SMEs, but they have little credit history and cannot obtain bank credit. They also largely stayed away from the notorious shadow banks, a large (no one knows precisely how large) opaque industry which helped fuel both real estate and small consumer loans.
Barclays has today opened its flagship open innovation site, Rise London, in Shoreditch. It is Europe’s largest co-working space dedicated to financial technologies (FinTech).
Rise, created by Barclays, brings together from across the world a carefully curated community of FinTech startups, along with our corporate clients and other experts, to work on Barclays’ customer and business opportunities and together help to create the future of financial services.
Rise London will house more than 40 FinTech companies, along with Banking and Technology teams from Barclays, and will serve as a gathering place for leaders in the FinTech and venture capital communities. Rise London will play host to more than 200 hours of learning, workshops, hackathons and networking on a monthly basis.
Australian cross-border payment startup Airwallex has secured US$13 million ($17.4 million) in a funding round to continue its expansion overseas.
For Sequoia — the 45-year-old firm famous for investing in famous tech brands such as Apple, Google and AirBnB – the deal represents its Chinese arm’s first investment in an Australian startup.
Airwallex founder and chief executive Jack Zhang told Business Insider that the company, which already can make payments to 100 countries, will use the cash injection to expand its physical presence in locations such as London, Shanghai, Hong Kong, Indonesia, Malaysia and Taiwan.
SoftBank Group Corp. is in talks to invest about $1.4 billion in India’s One97 Communications Ltd. in a deal that would value the owner of the country’s largest digital-payments provider at about $7 billion, according to people familiar with the matter.
The deal is not yet finalized and the terms may yet change, said the people, asking not to be identified because the matter is private. One97 Communications, whose Paytm unit has seen business surge as India took most of its paper bills from circulation, has also had discussions with two other investors, one of the people said. The company was last valued at $4.2 billion, according to research firm CB Insights.
Traditional banks have left quite a few gaping holes when it comes to unsecured loans, especially for salaried people who are not employed in companies that they classify as A/A+ category.
Quick Personal Loans
Customers, it appears, are warming up to online alternative lending portals, and it is predominantly due to the speed with which the loan application is processed, verified and approved. Tedious documentation, in addition to ambiguous rules and non-transparency in the whole process that a customer faces with banks, has made entrepreneurs reinvent lending for salaried employees. The ease and convenience of digital (and painless) transactions are considered priceless. There are lenders such as Qbera, which disburses personal loans up to INR 5 Lakhs in 24 hours.
Alternative Fixed Income Products Become More Popular
2016 saw RBI releasing a set of directives regarding P2P loans in India. The paper recommends NBFCs status for P2P lenders, which is almost consistent with what the P2P sector has been demanding. This liberal approach helps to protect the interest of all stakeholders without choking innovative ideas. P2P lenders are hoping for these recommendations to become regulations after the budget announcement, which will give the arena a facelift.
Short-Term Payday Loans
You don’t get instant cash from banks and online payday loan providers often save the day. As they are offered for shorter tenures compared to online personal loans, it gets repaid more quickly, which is a definite plus. You can even opt for monthly, fortnightly, weekly or daily loans.
News Comments Today’s main news: Invoice Cycle offers underwriting via API. LC hires JPMorgan’s head of new technologies. China Rapid Finance files for U.S. IPO. Today’s main analysis: Robinhood valued at $1.3B. Today’s thought-provoking articles: Zopa and Funding Circle disagree on becoming a bank. Banks no longer fear P2P lenders and robo-advice. United States Robinhood valued at $1.3B. […]
Robinhood valued at $1.3B. GP:” An interesting valuation comparison for fintechs.” AT: “I’m excited about the disrupting potential for Robinhood. It will be interesting to see where stock trading technology heads next.”
LC hires JPMorgan’s head of new technologies. GP:”Scott Sanborn has been hiring a lot of new executives since he joined the company. This new addition from a large bank looks very promissing. Beyond compensation, Lending Club has to pitch the new hires to convince them to leave a prestigious job to join them with an outstanding opportunity. I am very curious what they are told Lending Club’s plan is.” AT: “Interesting news, especially following yesterday’s report that Lending Club is in the top 10 companies that pay the most when poaching.”
First lender/broker API goes live. GP:” Nearly every single company in our space uses Lending Club data to build their underwriting. Invoice Cycle goes even further and is offering underwriting as a service. I think this is a great product, great service and as long as it’s priced properly, I think they will do very well. I expect other firms should rather offer this service instead of trying to sell technology platforms as there are a dime a dozen already. ” AT: “I wonder why we haven’t seen more. Kudos to Invoice Cycle for breaking the ice.”
P2P lending bosses split on whether to become a bank. AT: “Zopa is taking the right path. Funding Circle may be too, for its own business model. But I’m in favor of digital-only banks. For those who get in now, the competitive playing field of the 21st century will treat them well. This is the time to start a digital bank if you’re going to do it. I see Zopa being a leader in banking soon.”
Zero-fee stock trading app Robinhood is completing a huge fund raise to fuel its attack on old brokerage firms that charge around $7 to $10 per trade. According to sources, the round is led by Yuri Milner investment vehicle DST Global and values the company at $1.3 billion.
Last year, it launched its primary revenue stream, a $10 per month premium Robinhood Gold option. That allows users to skip the three-day waiting period for deposits and make trades instantly, as well as borrow up to double the amount of money in their account to trade on margin with leverage.
Earlier today, Fortune reported that Robinhood was seeking a round of financing valuing it at more than $1 billion. Sources tell us that the deal is essentially done, and was led by DST Global, which put in money at a $1.3 billion pre-money valuation.
Global Debt Registry (GDR), a loan validation platform for institutional investors, has added leading online lending platform, Prosper Marketplace to its verification network. GDR says the partnership will enable Prosper investors access to their due diligence tools to ensure loan data integrity. Prosper successfully piloted GDR connectivity in 2016 and is now enabling investors to access GDR’s solutions as a turn-key autonomous solution.
UBS Investment Bank, Credit Suisse and Jefferies are the lead underwriters on the offering.
Rise and Sunny are both installment loans, commanding average percentage rates of 156% and 230% respectively. Elastic is a line of credit with an average interest rate of 91%. The company’s average APR was 146% for 2016, which the company notes is a drop from 2013, when the annualized premium was 251%.
The company targets consumers with credit scores below 700, which is a sector Elevate calls the “New Middle Class” but most consider subprime. About 95% of loan applications are automated, without human review.
Elevate recorded revenue of $580.4 million in 2016, up from $434 million in 2015, but net losses grew from $19.9 million in 2015 to $22.4 million in 2016.
But President Donald Trump issued memorandums in January that could change Elevate’s risk level.
Elevate receives debt financing for its Rise and Sunny loans from Victory Park Management, an affiliate of Victory Park Capital.
Fundbox, the leading cash flow optimization platform for small businesses (SMBs), and Zoho, the leading cloud-based business operating system, today announced a partnership in which Zoho will offer Fundbox to its user base in the U.S. Under the partnership, Zoho will provide access to Fundbox’s technology to streamline and automate the business borrowing experience within the Zoho ecosystem.
Fundbox addresses one of the biggest pain points for small businesses and freelancers: cash flow. A recent Fundbox study revealed that 64 percent of small businesses are adversely affected by late payments. Over 80 percent of small business invoices are over 30 days due. This integration will allow Zoho customers approved for Fundbox Credit to advance funds tied up in their receivables so they can focus on business growth.
Fintech Firm Plaid Raises $ 44 Million (WSJ), Rated: A
Plaid Technologies Inc., whose software allows a variety of financial-technology startups to access their customers’ bank account information, has raised $44 million in a new round led by a fund at Goldman Sachs GroupInc.
The new funding is a boost for apps and websites that use Plaid, which has now raised about $60 million total, as they work to ensure access to customer data held by banks.
Lantern Credit, a financial technology company working to solve systematic inefficiencies in the consumer credit industry, appoints esteemed banking industry veteran John Mack as Chairman of its Board of Advisors, joining current board members John Sculley, former chairman of Apple Computer, James Held, former president and CEO of the Home Shopping Network, Seth Johnson and Kevin Knight.
Mack brings vast leadership experience including Chairman and CEO of Morgan Stanley, Co-CEO of Credit Suisse Group and CEO of Credit Suisse First Boston. Mack is actively serving on several boards including Lending Club, Glencore International AG and Bloomberg Family Foundation. Mack has accumulated 25 years of experience as chairman, serving on the boards of Morgan Stanley, Pequot Capital Management Inc. and New York-Presbyterian Hospital.
Lantern Credit’s white label platform for financial institutions draws personal financial data including credit data, account information and personal goals to provide customers with real-time information to make informed choices designed to improve their financial wellness. Financial Institutions providing the Lantern Interactive Credit Report™ to their customers benefit from more engaged consumers and are better equipped to provide relevant offers to their customers. Instead of the traditional static credit report, Lantern’s Interactive Credit Report delivers access to a free credit report and score, model the effects of financial actions, receive and accept offers directly from lenders, and make payments on existing accounts.
Ally Financial Inc. is launching an online auto finance marketplace that connects lenders and consumers.
Clearlane, which launches today, derives from Ally’s third-quarter acquisition of BlueYield, an online auto-lender exchange.
The Clearlane network includes more than a dozen national, regional and local finance providers that will connect with consumers to finance or refinance their auto loans. Consumers can also speak with live agents and purchase Ally’s F&I products.
The Office of the Comptroller of the Currency’s proposal to require fintech charter applicants to draft and comply with a financial inclusion plan appears to have more teeth than similar Community Reinvestment Act requirements for banks.
The OCC has made it clear that it is not seeking to institute CRA requirements on nonbanks, in part because the 1970s-era law is widely considered outdated in how it promotes financial inclusion.
I believe that the tide is turning for Lending Club. I believe there are a number of factors that will contribute to its success going forward. I believe the company will leave negative PR in the dust, grow, and regain a positive EPS. Make no mistake, this is a high risk (potentially) high reward opportunity. This is not an investment for the faint of heart.
The company has a market cap of $2.2B. It has fallen nearly 80% since its IPO and currently has negative earnings per share.
Regarding full year 2017 guidance, Lending Club expects 17% growth, a GAAP net loss of $84 to $69m, and positive EBITDA. In my opinion the company will go positive again in 2018 if current trends continue.
The company’s balance sheet is a star among mud. Lending Club has no debt. It has $1.29 of cash per share and a total book value of $2.45 per share. I love a company that has no debt.
Lending Club is obviously at the mercy of the consumer credit cycle. It goes without saying that if borrowers can’t pay their loans, the company will suffer. If charge offs increase Lending Club may lose investors providing the capital for the loans. Lending Club may also have to increase its rates which would reduce its competitive advantage over traditional banks.
First Lender/Broker API goes live (Invoice Cycle Email), Rated: AAA
Invoice Cycle – the UK SME lender – is excited to announce the release of a new API for partners. This development allows partners to interface directly with the Invoice Cycle proprietary risk algorithm and gain a pre-approval for an SME financing facility within seconds. The first partner to integrate this offering is FundingXchange – the cutting-edge business finance marketplace. This means that FundingXchange customers will be able to get an Invoice Cycle facility in place within hours of starting their funding search!
Gideon Shaw CEO of Invoice Cycle said of the development “One of our core principals is to provide the highest level service to our customers. In the fast paced world of business, decisions need to be made as soon as possible, we aim to turn an application around within 24 hours. This new API will help us meet these targets and allow us to provide a better service to both our client and partners. This release demonstrates how we strive to be at the forefront of technological innovation in the industry.”
He went on to identify the three types of bank collaboration that have sprung up across the marketplace lending space: banks buying marketplace loans, banks referring customers to platforms and “co-branding” opportunities. He was critical of “lending-as-a-service” integrations, which broadly speaking entail platforms letting banks make use of their technology. Desai said there is “only one winner” in such arrangements.
Janardana confirmed in his speech that Zopa will be using deposits to fund loans through the marketplace.
LendInvest will offer a loan term of up to 18 months, and borrowers who then wish to apply for development finance with LendInvest after gaining planning permission will have their applications fast-tracked.
The pre-construction product has no exit fees and is available on loans between £75,000 and £5 million up to 65% LTV. Interest is charged at 1% – 1.50% per calendar month.
Ultimately the use of automated solutions will provide a more standardized service and increase the control the compliance department has on the quality of the service delivered. It will also help to reduce costs, thereby ultimately benefitting the customer by reducing the charges that need to be applied to the policy.
We should be looking at the arrival of robo-advice, not in terms of making huge changes but in terms of providing incremental improvements to our customer service levels, our ease of achieving our regulatory compliance and our ability to provide better value to life and pension customers. The impact of robots on the industry should be less like a technological disruption than a technology-supported evolution of service levels.
Three new alternative lenders have joined the recently launched Association of Alternative Business Finance (AABF) – Invoice Cycle, Merchant Money and Reward Finance Group.
The AABF was launched on 1 February this year with the major ambition of championing and promoting the best standards of industry practice.
The seven founding members, Capify UK, Catalyst Finance, Credit4, Fleximize, Liberis, The Just Loans Group and YesGrowth established four clearly defined operating principles that members will be required to adhere to:
The new report from the Economist Intelligence Unit finds bank/fintech collaboration will be key to the survival of both ends of the market.
While P2P and marketplace lenders as well as robo advice firms are increasing their market share, big banks are less concerned by their technology-enabled competitors than before. The report found PSD2 and open architecture framework is widely seen as a game changer between banks and fintechs.
Acquisition costs are often higher than expected, compliance costs are climbing and margins are already falling in P2P lending and robo advice, Freidman says.
Now London-based ETFmatic is targeting the Irish market along with 31 other European countries, hoping that investors will be attracted by annual management charges starting from 0.3 per cent.
The minimum initial investment for ETFmatic, for example, is just €100. Portfolios with less than €25,000 carry a management fee of 0.5 per cent, falling to 0.3 per cent for portfolios above €25,000.
Consequently, the all-inclusive fee for an ETFmatic portfolio ranges from 0.4 to 0.85 per cent.
For now, robo-advisers remain a niche option, accounting for less than 1 per cent of assets under management. However, the space is a rapidly-expanding one that may account for 10 per cent of global assets by 2020, according to a BI Intelligence report last year. Almost half of wealthy investors not currently using robo-services would consider using them in the future, according to a PwC report last year.
Robo-advice may be here to stay, but the beneficiaries may be the big players who are increasingly moving into the space rather than startups such as ETFmatic.
Today our experience shows most superannuation executives instinctively accept that digital advice will increase in importance as one means of delivering better service to all members. However, like any business investment, it needs a business case.
Retention of members is the number one priority for many superannuation providers. Decimal’s research shows it is also the area in which the greatest financial gains can be made.
Nevertheless, our data indicates that funds implementing digital advice that includes contribution related advice topics can reduce retention risk by approximately 15 per cent.
In the cases analysed, it was found 40 per cent of these passive members could be engaged with digital advice. Of that 40 per cent, 25 per cent moved through to actioning a Statement of Advice (SOA). That equates to 10 in every 100 passive members making some level of additional financial contribution.
In cases where members have had some level of engagement in the past but have never taken a real course of action, digital advice was found to be successful in re-engaging approximately 30 per cent.
News Comments Today’s main news: Ron Suber offers 5 ways alt lenders can work with banks to prosper. OCC comptroller fires back at FinTech charter critics. Zopa has record lending month. RateSetter returns fall due to high demand. Today’s main analysis: Corporate credit spread tightens following Trump’s address to Congress. Today’s thought-provoking articles: China consumer finance needs high tech solution. […]
Corporate credit spreads tighten following Trump’s address to Congress. GP:” I am surprised that what the president says has so much weight on the corporate credit market. I think there is a lot of unpredicatibility between what he says and what he does. And I also don’t think the president has that much effect on the real fundamentals. Perhaps it makes more sense to trade the fundamentals then the talks.” AT: “There appears to be a lot of confidence in the current administration’s focus on less regulation for the industry.”
OCC comptroller hits back at FinTech charter critics. GP:” Pandonra’s box is open. There discussion of having an OCC charter is a must. ” AT: “There should be no question about the OCC’s acceptance of alternative lending as a business model following LendIt 2017.”
Lantern Credit boosts machine learning engine through ARC library acquisition. GP:” I am always a little worry about people using fashionable words like machine learning to hype things. I believe that the actual results of the system are much more interesting than whatever label we slap on it. I look forward to seeing what ARC library brings to Lantern Credit as measurable quantifiable results. ” AT: “I think we can stop talking about machine learning for financial services applications in terms of what to expect in the future. Machine learning is now an acceptable practice for the presence, and you could even say it is becoming a common part of the ecosystem.”
RealtyShares raises $32.9M for midwest RE projects through crowdfunding. GP:” I think a better vocabulary is that RealtyShares originates $32.9M in Midwest projects. I would retain the word “raise” when the money is raised for the company to dispose of as it sees fit. In this case investors chose the projects and committed the money to that project, not to Realty Shares.”
While the markets pulled back slightly in the latter half of the week, risk assets remained near their highs after a significant boost Wednesday following President Donald Trump’s address to Congress. The average spread of the Morningstar Corporate Bond Index, our proxy for the investment-grade bond market, tightened 5 basis points to +118 last week. In the high-yield market, the credit spread of the Bank of America Merrill Lynch High Yield Master Index tightened 24 basis points to +360.
In a speech to the LendIT conference in New York, Curry offered a stout defence to charges laid by banking trade bodies and state regulators over its plans.
“To be clear, the National Bank Act does give the OCC the legal authority to grant national bank charters to companies engaged in the business of banking,” Curry told the conference. “That authority includes granting charters to companies that limit their business models to certain aspects of banking, and it is not circumscribed just because a company delivers banking services in new ways with innovative technology.”
Kabbage, a billion-dollar startup that combines machine learning algorithms, data from public profiles on the internet and other factors to rate and then loan people money for their small businesses, is today announcing another big step up in its ambitions. The company has secured over $500 million in fixed-rate, asset-backed notes, money that it will use to expand the amount, payback terms and size of loans it makes to SMBs over the next three years. To date, Kabbage has loaned over $2.7 billion to SMBs since being founded in 2009.
Kabbage said the securitization was oversubscribed.
As part of this closing, Kabbage is forming a new subsidiary,Kabbage Asset Securitization, to issue the notes in four classes. Kabbage said that the senior class of notes is “anticipated to be rated ‘A(sf)’ on the closing date by Kroll Bond Rating Agency (KBRA).”
Kabbage notes that this is an upgrade on its previous rating.
Lantern Credit, a financial technology company working to solve systematic inefficiencies in the consumer credit industry, is enhancing its proprietary machine learning engine, Beam AI, with the acquisition of the Abstract Regression-Classification (ARC) Machine Learning Library.
The machine learning library enables Lantern Credit to use a human-machine hybrid learning approach that incorporates human guidance in the machine learning training process to produce more reliable outputs.
Lantern Credit’s Beam AI will use the symbolic regression technology to ensure that credit offers presented to consumers are actionable and timely.
RealtyShares, a leading online marketplace for real estate investing, has released new data showing the extent of crowdfunded investments in several Midwest real estate markets.
Developers, sponsors and borrowers in Ohio, Wisconsin, Michigan, Indiana and Illinois have raised $32.9 million to date from RealtyShares’ network of investors, offering a source of financing for real estate projects by leveraging technology to connect potential investors with expertly vetted real estate deals.
Thus far 114 deals have been funded in the region through RealtyShares, with an average deal price of $288,000. Deals of up to $1.5 million have been financed in both Columbus, Ohio, and Chicago, Ill. Anchoring RealtyShares’ position in the region, $14 million has been raised for 53 deals in Illinois, with several investors targeting properties in and around Chicago. Buckeyes are also showing a significant level of activity, with $12.25 million raised for 30 deals in Ohio, concentrating around the Cincinnati and Cleveland areas.
Patch of Land, a leading online real estate marketplace lender and crowdfunding platform, announces the addition of Matthew Zall as Chief Investment Product Officer as the firm prepares to expand into the single-family rental market with longer term, permanent financing products. The number of non-owner occupied single-family properties in the U.S. including townhomes, condos, and 2-4 unit properties grew to almost 24 million units valued at over $6 trillion in 2016, according to ATTOM Data Solutions.
Zall brings to Patch of Land more than 12 years of real estate and mortgage experience, as well as expertise in financing and product development. He pioneered three of the industry’s first-ever multi-borrower single-family rental securitizations, helping to build Blackstone Group subsidiary, B2R Finance, (now known as Finance of America Holdings, LLC) from start up to a multibillion dollar lender in only a few years. Prior to joining B2R, Matt was a Commercial Real Estate (CRE) trader at J.P. Morgan and Bear Stearns. At Patch of Land, Zall will execute strategies to enable the expansion of the firm’s position as a marketplace lender by offering both accredited and institutional investors additional opportunities to invest in this asset class.
However, not all Fintech business models have yet matured into profitability, key to the definition of success. A structural element of future success for new entrants resides in their ability to access cheaper funding and quality customers. Who can offer these things? With that in mind, Banks, especially small ones, should feel confident they can monetize their position to bring down their cost of innovation. By working with innovative companies in financial technology, they can quickly benefit from new and very cost efficient ways to grow revenues. Online lending could be the first expertise to explore in order to welcome small business back and help them grow.
It is true that technology has enabled new entrants to offer innovative services not available at banks, either as a product offering or at a more competitive price. It is also true that banks have been slow at embracing technology as a growth engine, mostly due to lack of capital to fund innovation. This is especially the case for smaller banks who tend to lack financial and human capital to invest heavily in R&D and innovate. Large banks with deep pockets have found ways to either build or partner and grow their presence in areas where technology offer a clear competitive edge. Large banks have in fact recognized the win-win rationale for partnering with Fintech, an opportunity also open to small banks. Large banks love Fintech because they can afford it. Small banks can as well.
How will the paradox divide disappear between banks and Fintech Alternative Lenders? It will dissipate with the online lender taking time to educate banks about their efficient loan platforms and how they can help banks reach new customers, develop new funding sources and grow revenues, especially non-recourse fee income. Banks should also be curious and consult with online lenders to better define how they can benefit from their technology and expertise in lending small.
Today was a big day for Tim Milazzo, his company StackSource and possibly commercial real estate lending as whole. Tim had been selected as a pitch finalist for the LendIt conference in New York.
But, Tim had an extra surprise in store for this big day. His company StackSource has been a tool for property lenders to centralize workflow. While they are a new company, emerging from the TechStars accelerator program late last year, they have already helped property owners process over $1B of loan offers on the platform. But, this was never the end game for Tim and his co-founder Nathan. They started the company with the idea of creating a marketplace for commercial real estate borrowers. Today, they not only pitched at LendIt, they also went live with the marketplace that they originally envisioned.
P2P lender RateSetter announced a partnership with national mortgage aggregator Connective which aims to give accredited brokers access to their personal loan products.
The move is part of RateSetter’s ongoing focus on the broker channel to continue its growth in consumer and business lending. By joining Connective’s lending panel, RateSetter plans to help brokers improve client’s financial wellbeing in areas outside of the traditional mortgage offerings.
RETURNS on RateSetter’s shorter-term accounts have fallen slightly due to changes in market demand.
The platform’s rolling market product was at 3.3 per cent last week and is now offering three per cent, its one year fix is now 2.9 per cent, down from three per cent, while its five year fix has actually increased slightly from 4.8 per cent to 4.9 per cent.
The rates are set by market demand on the RateSetter platform, but as of the end of March 2016 they were at 3.4 per cent for one month, 3.7 per cent for one year, 4.8 per cent for three years and 6.1 per cent for five years.
Misys is making gamification an integral part of its Misys FusionBanking Essence Digital platform to help banks educate the next generation on better money management. Integrating Moroku’s GameSystem directly into the Essence Digital architecture enables banks to inject some fun into personal financial management (PFM) and help consumers achieve their savings goals.
With research research forecasting the mobile gaming market in MENA to be worth up to US$400m by 2021, the case for gamification in helping banks to attract, engage and retain customers is compelling. Banks stand to benefit from building greater trust with consumers and capturing market share. Gamification can also deliver a significant boost to customer experience. FusionBanking Essence Digital brings points, leaderboards and rewards to standard banking activity, to educate and also support savings and spend management.
The challenge of expanding consumer finance to China’s vast population can only be effectively tackled with a high-tech solution that enables low-cost customer acquisition, Dr. Zhengyu (Zane) Wang, founder, chairman and chief executive officer of China Rapid Finance Limited (“CRF” or “the company”), told the LendIt USA 2017 conference.
Over the past two decades, China has emerged from being a market that in 2000 featured essentially no credit bureau, decision science, or consumer finance, Dr. Wang said in a March 7 keynote address at LendIt USA 2017, which was held at the Jacob Javits Center in New York City. China’s consumer finance market today boasts many of the same elements as the U.S. China now has a central bureau for credit reporting that covers 800 million people, while credit cards serve about 300 million people, he said.
Still, China’s consumer finance market has a long way to go, in a nation where non-mortgage credit is only 2 percent of GDP, Dr. Wang told the LendIt audience. Only about 16 percent of Chinese consumers have credit cards, compared with about 60 percent in the U.S.
Iranian financial technology companies have banded together to create Iran’s FinTech Association, several months after the Central Bank of Iran (CBI) suggested the idea, reports the Financial Tribune.
Known as FinTech A, the Iran FinTech Association is designed to bring industry players under a single area so that solutions can be found to their problems and improvements can be made between innovators and regulatory bodies.
Nasser Hakimi, director of CBI’s IT Department, said to the Financial Tribune, that he had proposed that FinTech companies develop a forum to figure out the challenges involved, identity key questions, as well as reach out to the regulator for solutions.
Last February, it was reported that while economic sanctions had been lifted against Iran, screening rules were still in place when trading with Iran, putting barriers in place for those within the U.S. and the EU who wanted to conduct bitcoin transactions within the country.
Indonesian P2P lending platform for unbankable society Amartha today announced that it has raised “seven digit” US Dollar in Series A round led by Mandiri Capital Indonesia (MCI).
Amartha plans to use the new funding to expand their coverage by creating mini-branch across Java and Bali, which they aim to complete by end of 2017.
Having had disbursed “more than” IDR68 billion (US$5 million) to 30,000 women who owns small businesses, the startup aims to disburse US$30 million to 100,000 borrowers by end of the year, with 10,000 active lenders on board.
News Comments Today’s main news: ID Analytics, a new credit bureau created by Lending Club, Prosper, and Marlette. CFPB come out with a report to encourage fintechs. Today’s main analysis : The UK faces a huge test in the wake of Brexit. Today’s thought-provoking articles: How venture capitalists vet deals with crowdfunding. Canada gets its first FinTech […]
New online lending network promises to protect consumers and businesses. AT: “Following the news of OnDeck leading the way on price comparison and several online lenders cooperating to kick off a marketplace lending association, here is more evidence that online lending is trying hard to keep regulators off their backs. It’s another positive sign of growth and respectability for the industry. My only concern is that it could get out of hand with too many competing self-regulatory attempts.” GP : ” One needs to make the difference between SMART Box and ID Analytics clear : SMART box allows SME borrowers to compare the cost of capital between lenders with a standard method. ID Analytics is perhaps very close to being a credit bureau where Lending Club, Prosper, and Marlette contribute information to prevent loan stacking. If I were them I would certainly expect the regulators to name ID Analytics a credit bureau.”
CFPB assesses FinTech as positive. GP ” Like all regulators, CFPB has its detractors and its proponents. CFPB courageously came out encouraging “firms focused on giving credit to access the roughly 45 million consumers with little-or-no credit history by using alternative measures”. The agency also discourages “deceptive, harmful and discriminatory behavior”. It’s hard to disagree with that. While some behavior is clearly over the line, the main issue is to identify a clear method on what is close to the line. For example, if one offers auto loans, and most people buying cars are man, is that discriminatory ? I heard of a company who offers wedding loans, and most people taking them were of a certain ethnicity. Is that discriminatory ? Is that cultural ? Should we shut down that company ? Does it discriminate against people who are planning to never get married ? “
How venture capitalists use crowdfunding as a way to vet deals. AT: “Not only is it effective, but it should be encouraged. There’s got to be a way to narrow the prospects for the capital backers. Crowdfunding is a terrific vehicle.” GP: ” With one limitation. Crowdfunding works great for B2C products, not so much for B2B. Also, there is a large tendance to over promise, do an outstanding crowd sale, and make it impossible to deliver. The laws of physics seem to be hard to change no matter how much money one has. Also, and I learned a lot from Lampix and the Highway 1 accelerator, the hardware is slow and most crowdfunding sites are for hardware devices. “
Bad debts drive CircleBack out of lending. AT: “How much more will follow? Perhaps the online lending sector needs to adopt better vetting practice for borrowers. This is why an online lending network is necessary.”
ID Analytics LLC, a company in consumer risk management, today announced the launch of the Online Lending Network, a new consortium formed to enhance responsible lending, help protect consumers and businesses, and address credit and fraud risks. Founding members include Lending Club, Prosper Marketplace, and Marlette Funding, as well as lenders representing online, marketplace, specialty finance and social lending. The network has achieved significant coverage of prime and sub-prime lending in only a few months, including over two-thirds of marketplace lending activity.
Through the Online Lending Network, lenders report when a consumer requests an offer for a loan product, submits a loan application, or when a loan is funded. In return, the lender receives information on whether that consumer has either requested other loan offers or applied for loans elsewhere in the days, hours or minutes before. The near real-time nature of the response makes high-velocity fraud, like loan stacking, very difficult. It also has the potential to protect authentic consumers from overextending their credit capacity to facilitate responsible lending.
The Online Lending Network will also provide access to tools to evaluate credit, including the detection of synthetic identities, and detection of potential identity theft, as online lenders are a target for fraudsters using stolen identities.
The federal consumer finance regulator released a report Monday on consumer-friendly financial-technology products, marking the agency’s first overview of the rapidly expanding industry.
The report covers the work the Consumer Financial Protection Bureau has done on its “Project Catalyst,” which aims to encourage the development of innovative consumer financial products that meet regulatory requirements.
The CFPB outlined in its report the types of fintech products and services that it would encourage. In particular, the agency is looking at firms focused on giving credit access to roughly 45 million consumers with little-or-no credit history by using alternative measures. The agency is also looking at firms that provide better technology for mortgage servicing, digital disclosures, credit reporting, and products that help consumers refinance student loans and manage cash flows through access to their wages.
The report also came with several broad warnings to fintech firms about creating products that are harmful, deceptive or discriminatory. The CFPB noted that both banks and nonbank fintech firms should be held to the same rules and oversight—a topic driving much debate among consumer groups, who want fintech firms to adhere to the same rules that apply to banks, and some in the industry who don’t want sweeping regulation.
The crowdfunding industry is growing at an incredible rate, allowing startups and small businesses to launch more crowdfunding campaigns than ever before. Entrepreneurs from all types of industries have leveraged the opportunities that crowdfunding offers to raise much-needed capital for their companies. As such, some VCs have begun to embrace crowdfunding as a new source of deal flow that allows them to vet deals much quicker than in days past.
Crowdfunding platforms not only provide VCs with efficient instruments to review deals and maintain communication with entrepreneurs, it also provides them with the additional deal flow. It gives them the ability to look at more deals in more geographically disparate locations and invest. VCs can review business plans, proforma financials, disclosures and other documentation without having to listen to a glossy sales pitch. They are then able to ask crucial questions of the entrepreneur seeking funding.
Crowdfunding also helps the class of VCs and other investors that don’t have staff dedicated to sourcing projects, and when entrepreneurs approach this class of investor, they are more likely to get a more personal and direct response, rather than be vetted by staff that are not likely to be as knowledgeable as the investors who make the final decisions.
Crowdfunding, while still a relatively young industry, is proving itself as a valued partner to the VC community. As it continues to grow, we will likely see much more interaction between the two industries.
Queen City Fintech, the accelerator program based in uptown, is currently accepting applications for its 2017 cohort.
The program has gained support from major financial firms since launching in 2011. Companies including Bank of America, Wells Fargo, Ally Bank, Synchrony Financial, BB&T, Barings and Ernst & Young see value in investing in an accelerator for the financial technology space.
Bank of America plans to provide customers with a chatty “virtual assistant” named Erica who will use artificial intelligence to make suggestions over mobile phones for improving their financial affairs.
Michelle Moore, head of digital banking for Bank of America, said in an interview on Monday that Erica will be smarter than a robot because she will bring up topics on her own, using predictive analytics as opposed to only answering questions customers ask.
Erica will be introduced to customers late next year, and will be able to converse by text as well as voice, said Moore.
When Dupont-based Fundrise first launched in 2012, the company’s mission was to “democratize” real estate investing — to “give everyone the opportunity to invest directly in high-quality real estate.”
The company’s tech-driven model allowed for a significant departure from the old school methods of real estate investing, but there was a rub — Fundrise’s democracy had imposed legal limits. That’s because, back in 2012, Fundrise couldn’t actually give “everyone” the same investment opportunity. Under the SEC rules of the time, any individual investing with Fundrise needed to be an “accredited investor” — an individual with a net worth of $1 million or $200,000 in annual income. That’s a pretty limited democracy.
But even back in 2012 this was starting to change. That year President Barack Obamasigned the JOBS Act, Title III of which opens up equity crowdfunding to non-accredited investors. And finally, on May 16, 2016, that section of the Act was implemented by the SEC.
There are still some limitations, though. For example, each Real Estate Investment Trust (REIT or eREIT as Fundrise calls them) that the company sets up has a $50 million cap. According to Davis, demand is much higher than this.
Large segments of the US population are unable to access mainstream credit offer for various reasons. Lending to those underserved segments requires specialized credit risk assessment and management. As banks try to expand access to credit to underserved borrowers, they are turning to innovative technologies to meet the financial needs of more people.
Lantern Credit is using machine learning real-time credit modeling and education to enable consumers to gain better control over their finances and improve their credit wellness. The Company is partnering with lenders and retailers to predict credit worthiness of consumers with greater precision and to facilitate improved matching between credit products and interested customers.
Bizfi (www.bizfi.com), a leading fintech company with a platform that combines aggregation, funding and a marketplace for small businesses, announced its board of directors has appointed John Donovan as the Company’s chief executive officer (CEO). Donovan is a 30-year veteran in the payments and alternative finance industry serving both small businesses and consumers.
British peer-to-peer lenders were preparing for serious trouble even before the Brexit vote rocked the U.K. on June 23.
Funding Circle Ltd., the No. 1 online lender to small and medium-sized businesses, carried out a stress test envisioning a three-year recession beginning in January 2017 that would crater the property market. If the U.K.’s split from the European Union wreaks that type of havoc, investors in the platform’s loans should still pocket a net return of 6.4 percent, says Jerome Le Luel, the firm’s chief risk officer. That’s not far off the 7.2 percent the loans should generate without a crisis.
The debate shows the tension at play as the industry, which accounts for just 3.6 percent of total lending to small businesses and consumers in Britain, tries to move into the mainstream. First developed 11 years ago by Zopa, the model has taken off around the world: Global peer-to-peer loan volume is projected to hit almost $350 billion this year, a 12-fold increase since 2013, according to research firm AltFi Data Ltd.
The fallout from the Brexit vote isn’t the only source of uncertainty facing the industry. After more than a year of review, the FCA has yet to clear the way for Funding Circle, Zopa, and other big platforms to tap a deep well of new customers: the government’s Individual Savings Account program. Millions of savers use so-called ISAs to manage assets worth 518 billion pounds.
Meanwhile, Philp, the member of Parliament, is pushing for changes that could upend the industry’s economics. He’s asked Andrew Bailey, the head of the FCA, to consider requiring peer-to-peer lenders to invest their own capital as a portion of every loan they arrange for investors.
Policy makers keen to stimulate economic growth are embracing the approach. The week of the EU referendum, the bloc’s European Investment Bank started distributing 100 million pounds in loans to British small businesses through Funding Circle’s platform. The firm was hopeful it would be the first tranche of a recurring program. Now, due to Brexit, it’s probably a one-off.
At first blush, Brexit hasn’t frightened off investors. In September, British platforms originated a record 364 million pounds in loans, a 30 percent jump over September 2015.
As £1.4bn has been pulled from UK property funds post Brexit, a new study from BrickVest says 21% of respondents both Dublin and Hamburg as top European cities; while 16% selected Frankfurt, highlighting a new trend towards German commercial real estate.
Some 40% of the top ten voted European cities were German, compared with 38% of institutional real estate investors who cite London as the top European city to invest in commercial real estate, ahead of Berlin (36%), Munich (31%) and Paris (22%). Even so, real estate investment platform, BrickVest’s research showed that three in ten (30%) institutional investors believe Brexit will either increase or significantly increase European commercial real estate investment opportunities. A further one in four (23%) institutional investors believe that Brexit will have no impact on commercial real estate investment opportunities.
The research did, however, highlight some concern regarding the illiquidity of commercial real estate investing. Three-fifths (61%) of respondents do not believe that in light of £1.4bn being pulled from UK property funds post Brexit, real estate investors have enough access to a secondary property investment market.
In light of Brexit, which European cities are you currently looking at/planning to look at for commercial real estate investment? (survey with 96 investors)
The UK has been heralded as the gold-standard of regulatory policy regarding crowdfunding, peer to peer lending and Fintech in general. Many countries have studied the approach established by the Financial Conduct Authority (FCA) before enacting rules of their own.
Today, the FCA is in the midst of a scheduled post-implementation review of the crowdfunding market and regulatory framework. The agency has published a paper explaining their thoughts and perspective on how disruptive finance has evolved alongside some of their concerns.
Bruce Davis: The FCA made great efforts to consult the industry in the process of developing the regulatory framework for crowdfunding in 2014.
At an individual level, the sector is supervised by a flexible team within the FCA who cover issues as and when they arise. We believe that this level of supervision is sufficient for the risks within the industry although we would like to see a greater emphasis on enforcement of rules against businesses which are adjacent to our sector or operating under an exemption.
Bruce Davis: Aside from the odd ‘off the cuff’ comment, we have found the FCA takes its responsibilities to foster competition and innovation seriously. It could still do more to encourage innovations which will encourage more people to take control of their money and how it is invested.
Bruce Davis: I think that pound for pound the crowdfunding industry is perhaps the most supervised sector in the whole financial services industry. Our track record of customer satisfaction and low levels of complaints suggests that this could be scaled back and more focus put on enforcement of the rules against those who operate outside of our regulated sector (but who still offer investments to the public under exemptions or old assumptions about the permissions surrounding an offer of investments to the public).
The Ontario Securities Commission (OSC), one of the thirteen provincial financial regulators in Canada, today unveiled a new fintech-focused hub called LaunchPad which aims to help guide FinTech startups through the complexities of the regulatory framework.
LaunchPad will be staffed by a dedicated team who will work directly with fintech companies to help them navigate, and even potentially tailor, Ontario’s securities laws while ensuring investors remain protected.
The OSC will apply what it learns through the LaunchPad hub more broadly to modernize regulation for similar businesses. These include online advisory firms, peer-to-peer lending services, crowdfunding platforms and angel investor organizations.
The program has a dedicated website, which can be accessed through www.osclaunchpad.ca, and already accepting now requests for support from eligible fintech businesses.
Canadian financial technology startup Lending Loop said on Monday it was re-launching its online lending marketplace after receiving regulator approval to sell investment opportunities to lenders regardless of their wealth.
The company, which paused its unlicensed operation in March, said the Ontario Securities Commission has now granted it an exempt market dealer license, and that it can connect small businesses looking to raise capital to individual lenders seeking a return on capital everywhere in Canada except Quebec.
The approval, which follows a rival company’s green light last month, suggests Canadian regulators are coming to terms with the peer-to-peer lending model, which is already popular in the United States, Europe and elsewhere.
The company will allow borrowers – typically small and medium-sized businesses – to seek loans of between C$5,000 and C$500,000 and over durations ranging from 3 months to 5 years.
Rival Lendified Holdings Inc and its Vault Circle Inc subsidiary secured an exempt market dealer license on Sept. 28. It plans to present lending opportunities only to accredited investors, who must have significant financial assets when it launches in the first quarter of 2017.
Estonian p2p lending marketplace Bondora will open a new European office in Germany, saying that post Brexit London is no longer attractive as a Fintech hub. Bondora formerly planned to move to London but stopped the plan after the Brexit vote. ‘There is too much uncertainty, the UK lost its attractiveness as a fintech hub’ explains Bondora CEO Pärtel Tomberg the decision.
For the Bondora business model very good access to the European market is crucial says Tomberg. He sees uncertainty how long London might be able to provide this.
Peer-to-peer lending, which aims at shaking up the banking market and attacking one of the core profit-generating activities of banks, is not likely to displace banks from their core roles of lending to retail consumers, according to a report by Deloitte.
Despite the promising outlook, the P2P lending industry has recently come under fire as Renaud Laplanche, CEO of Lending Club, one of the leading platforms in the US, was forced to resigned after the company revealed that it had provided mis-assessed loans to Jefferies and Co., which was distributing the loans to institutional investors, reports the Wall Street Daily.
The skepticism over P2P lending has also been felt in China where loan sharks have been widely criticized for practicing aggressive debt recovery tactics, demanding, for instance, nude photos as collateral from female borrowers for blackmail if they fall behind on their repayments, reports the Financial Times. Other disturbing debt recovery tactics in China include property destruction and bodily injury.
Yet, P2P lending remains a risky bet compared to other savings and investment options, according to Deloitte. However, it highly depends on the market. Switzerland seems to be a very attractive destination. The country is known to be very reliable and strict in credit-Risk Management and investors can get attractive yields with the likes of CreditGate24 and others.
Bravura Solutions is proof that fintech is one of Australia’s unheralded export successes. At least that’s the view of chief executive Tony Klim, who says his company’s return to the ranks of the ASX will show it is possible to build an internationally successful fintech business based in Australia.
Bravura, which is in the midst of a $200 million, pre-Christmas share sale, provides software and technology services for superannuation, life insurance, and private wealth firms. It administers about $2.3 trillion of assets for clients including Bank of New York Mellon, JPMorgan, Mercer, Fidelity, and Citigroup.
The initial public offering for the company, backed by local private equity firm Ironbridge, is Bravura’s second attempt at life on the ASX, coming a decade after it first floated on the exchange as a two-year-old business focused on the British and Asian markets.
One of the biggest differences between then and now, Klim says, is that Australia is much more focused on technology, as the commodities boom that has powered the national economy for decades fades and the government attempts to identify and help develop other sectors that may one day take the place of mining.
While fintech firms operating in consumer niches such as peer-to-peer loans have captured the imagination of the media and investors alike, Klim proudly says Bravura has been profitable by focusing on less sexy stuff.
Fintech companies classified under “other financial services” will now be permitted 100% foreign direct investment (FDI) through the automatic route, as opposed to the approval route earlier, according to a Reserve Bank of India (RBI) notification.
The RBI and other regulatory authorities have an uphill task of trying to figure out which fintech companies fall under whose purview. Regulators will have to spell out explicit rules and come out with more detailed classification. Fintech companies operate in areas where regulation in unclear, and regulators need to update themselves on their activities and specify what a particular company can and cannot do.
Peer-to-peer lending in South Korea rapidly grew in the third quarter, reaching 188 billion won (US$166 million), according to the data compiled by industry tracker Crowd Institute.
Local banks shunned lending to such small businesses amid a protracted economic slowdown, but for investors hunting for high returns, P2P lending emerged as an alternative investment tool amid record low-interest rates in Asia‘s fourth-largest economy.
The alternative lending service has gained popularity in the past few years, with accumulated P2P loans reaching over 150 billion won as of June this year, and the figure is expected to top 300 billion won by the end of the year.
While fintech holds great promise for the society with key benefits being cost-effectiveness, efficiency, and exceptional user experience, it is still a fairly nascent sector. As with all industries that are developing rapidly, there are growing pains and issues to be ironed out, especially those surrounding corporate governance and regulatory requirements.
Singapore has been proactively addressing the subject with the Monetary Authority of Singapore (MAS) setting up a fintech and Innovation Group in 2015 to examine regulatory policies and sector development strategies.
Besides online lending, cryptocurrencies such as bitcoin have also had their fair share of issues. Bitcoin famously vouched to give a bank account to anyone without requiring identity verification. While the process becomes more seamless, the anonymity of it may expose it to vulnerabilities. In August this year, hackers stole US$65 million worth of bitcoins from bitcoin exchange Bitfinex and in 2014, US$460 million of bitcoins vanished from Mt Gox, the world’s largest bitcoin exchange before it declared bankruptcy after the hack. Incidents such as these are a cause for concern, but it is important to keep in mind that they are rare and far between. These scandals expose the gaps in the sector and provide a valuable learning experience.
In Singapore, the MAS has set up a regulatory sandbox to allow startups to experiment with fintech solutions within a well-defined space and duration. For that period, the MAS will ease certain regulatory requirements and provide appropriate safeguards to contain the consequences of failure for customers. Other countries such as Thailand, Australia, the UK, and Malaysia are also implementing their own versions of a regulatory sandbox to develop a safe and conducive sector where innovation has the space to flourish.
As with every worthy endeavor, growing pains are an inevitable part of the process. With the government’s active involvement in the sector, Singapore is in a good position to learn from experience and embrace change instead of being hampered by short-term challenges.