Thursday December 20 2018, Daily News Digest

US Yield Curve

News Comments Today’s main news: OnDeck to enter equipment financing. SoFi releases video to destigmatize debt. RateSetter sees 47% revenue growth. Funding Circle fund expects lower returns. 360 Finance financials. Today’s main analysis: U.S. yield curve inverts. Today’s thought-provoking articles: Why did OnDeck file suit in Arlington? Fewer Americans rely on cash. More than half of Americans can’t cover a $1,000 […]

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US Yield Curve

News Comments

United States

United Kingdom

China/Hong Kong

Southeast Asia

Other

News Summary

United States

OnDeck (ONDK) to Enter Equipment Financing Market (StreetInsider), Rated: AAA

OnDeck announced today that it will begin offering equipment finance loans to select U.S. small businesses next year, bringing its heralded technology and digital lending expertise to what has traditionally been a slow-moving, opaque, and complicated process.

Who’s On Deck? And why are they in Arlington? We explain. (Biz Journals), Rated: AAA

At 2 p.m. on a Friday in mid-October, it’s judgment day for 13 small companies from across the country.

The plaintiff is On Deck Capital Inc., a publicly traded online small business lender based in New York that has sued each of the 13 companies for not repaying loans. Its choice of setting: the Arlington General District Courthouse.

New SoFi Campaign Aims To Destigmatize Debt and Financial Insecurity In Powerful “Money Talks” Video (PR Newswire), Rated: AAA

SoFi today launched a campaign showcasing some of its members’ most intimate stories around their personal struggles with money. Produced in collaboration with director Tatia Pilieva, the filmmaker most notably known for her sensational short film ‘First Kiss,’ the video captures twelve SoFi members, strangers to each other, meeting for the first time to have open-ended, unfiltered conversations about their lives, their money, and their views for their futures.

The video, along with more about the members featured in the video, are now live at 

US Yield Curve Inverts; Spreads Widening on New FinTech Deals (PeerIQ), Rated: AAA

Core CPI rose by 2.2% keeping the Fed on track to raise interest rates next week for the fourth time this year. The market-implied probability of a rate hike next week is ~77%, although the rate hike path in 2019 remains uncertain. The US yield curve saw its first post-crisis flatteningwhich we will look at in greater detail below.

US Yield Curve Inverts for the First Time Post-Crisis

The US yield-curve saw its first inversion post-crisis as the spreads between the yields on 3-year and 5-year Treasuries fell to -1 bps. The spread between the yields on 3-month and 10-year treasuries has been an accurate predictor of past recessions. As the chart below shows, there have been 6 recessions since 1970 after the 3-month – 10-year curve inverted. Currently, the 3-month – 10-year curve is 49 bps away from inversion, but markets are watching every part of the yield curve closely.

Source: Federal Reserve, PeerIQ

Spreads are Widening on New FinTech Deals

LendingClub and CommonBond are out with new securitizations. KBRA has rated the tranches on LendingClub’s latest $272 Mn deal CLUB 2018-P3 A-, BBB, and BB. The $300 Mn collateral pool consists of 17,825 Prime loans with an average balance of $16.8 k, a weighted average coupon of 14.58%, and a weighted average remaining term of 48 months. The weighted average FICO score of the borrowers is 703. The deal has an initial O/C of 9.2% and an excess spread of 9.1%. Both the O/C and excess spread are the lowest for LC’s 2018 prime deals. This deal priced 27-50bps wider than LC’s prior deal in September due to market volatility and widening structured products spreads, according to DebtWire.

More Americans are making no weekly purchases with cash (Pew Research), Rated: AAA

Entegra Bank Chooses Velocity Solutions to Power Its Small Business Digital Lending (deBanked), Rated: A

Velocity Solutions announced today that its Akouba digital lending platform was selected by Entegra Bank to power the bank’s digital lending for its small and medium-sized business customers. Akouba provides community and regional banks with origination and underwriting services.

LoanStreet Signs Up Workers Credit Union to Use Fintech Loan Participation Platform (Crowdfund Insider), Rated: B

LoanStreet, a Fintech “loan participation platform,” has signed up Massachusetts-based Workers Credit Union to its growing network.

Lending Express Appoints Former Maple Founder Ofer Ariel to Chief Product Officer; Promotes Daniel Katz to Chief Operating Officer (PR Newswire), Rated: B

Lending Express, the technology company dedicated to increasing access to funding for small businesses, today announced the promotions of Ofer Ariel and Daniel Katz to Chief Product Officer and Chief Operating Officer, respectively. This announcement follows a period of impressive growth for the company, and is indicative of its commitment to provide best-in-class service to both its customers and partners.

United Kingdom

RateSetter Announces 2017-18 Revenue Growth of 47% (Crowdfund Insider), Rated: AAA

UK based peer-to-peer lender RateSetter announced last week the results of its 2017-2018 financial year, which ended on March 31, 2018. The lending platform reported that revenues were up by 47% (which was £34.3 million) from the previous year (£23.4 million). The company noted that the year-end, there were 44,441 active investors on the platform with loans under management of £700 million.

Funding Circle fund expecting lower returns (AltFi), Rated: AAA

A hit from its European Investment Bank transaction as well as higher UK loss rates have prompted a fall in expected returns for the Funding Circle SME Income fund.

The £332m Funding Circle SME Income Fund saw a fall in its net asset value (NAV) of 1.4 per cent in November as the investment trust’s board said it expected returns for the full year would be lower than previously anticipated owing to a higher expected rate of defaults among certain loan pools.

Orca opens waiting list ahead of 2019 IFISA launch (P2P Finance News), Rated: A

ORCA has opened a waiting list for investors interested in its self-select portfolio and Innovative Finance ISA (IFISA), with plans to launch both products in the first quarter of 2019.

The peer-to-peer lending analysis and investment platform, which first revealed its plans to launch a tax wrapper to Peer2Peer Finance News in October, said the Orca ISA will allow investors to hold multiple P2P loans from different providers in one tax wrapper.

It will offer interest of up to 6.5 per cent.

Transferwise – the power of partnerships (Fintech Futures), Rated: A

Cross-border payments were ripe for disruption and doing more than most to shake up things is peer-to-peer (P2P) specialist, Transferwise. Its number of partnerships with banks is multiplying while, in parallel, it is adding settlement options, most recently for direct access to the euro payment infrastructure through a euro settlement account with the Bank of Lithuania.

At present, with one notable exception, the partner banks that have been announced are challenger or other low-end players. However, it now claims over four million people around the world using its service to transfer over £3 billion each month. In the UK, global head of partnerships, Stuart Gregory, says its share of consumer international transfers is around 15%, putting in on or close to a par with some of the largest UK banks.

P2P property lending platform completes £10m investment round (AltFi), Rated: A

Peer-to-peer property lending platform BLEND Network has completed a £10m late-seed round of investing.

N26 Metal Now Available in the UK (coverageR), Rated: A

N26, the provider of mobile banking services which launched in the UK last month with a free account, is now offering N26 Metal – its first premium membership for UK customers.

For the price of £14.90 per month, Metal members get access to an exclusive partner program, dedicated customer service, and worldwide travel insurance provided by Allianz. In addition, members benefit from free ATM withdrawals in pounds, free payments in any currency, free withdrawals worldwide, and LoungeKey airport access in over 1k destinations.

This ex-Googler wants to help high street banks be more like Monzo (Yahoo! Finance), Rated: A

The head of innovation at one of Britain’s big high street banks told me earlier this year that he has a mantra when approaching a new problem: “What would Monzo do?”

Traditional banks are struggling to keep pace as Monzo pushes the boundaries. The startup sends smartphone push alerts when you spend money, knows when you’re abroad, lets you freeze your debit card if lost, and offers chatbot customer service — all through the app.

Onfido Sees 342 Pct Sales Growth In 2018 (PYMNTS), Rated: A

Onfido, the global identity verification company, announced Tuesday (Dec. 18) that it achieved 342 percent sales growth in 2018 compared with 2017 and that it has a four-year growth rate of 3,857 percent.

Starling Bank’s Megan Caywood jumps to Barclays’ ship (Fintech Futures), Rated: B

Megan Caywood, Starling Bank’s chief platform officer, is joining Barclays, as she handed in her notice a couple of weeks ago, according to TechCrunch.

China/Hong Kong

How a Chinese anti-virus software maker builds a fintech firm to wrestle with giants (TechCrunch), Rated: AAA

360 Finance,  an online consumer loan platform that spun off from China’s anti-virus service giant 360 Group, has joined a raft of Chinese fintech companies to go public in the U.S. over the last two years.

The company priced its initial public offering at $16.50 per share last Friday, raising $51 million by selling 3.1 million American depositary shares.

Source: TechCrunch

You’ve applied for a Virtual Bank license, what’s next? (Hubbis), Rated: AAA

Hong Kong is preparing for the arrival of virtual banks (VB) — pure digital players that offer banking services solely through digital channels without bricks-and-mortar branches. In an exclusive article from Synpulse we discover the challenges associated with virtual banking.

What is your differentiating proposition?

With HKMA’s recent announcement of receiving 29 applications for VB, competition is expected to be intense.

Focus on Customer Needs

Basic banking services are about fulfilling three main needs of the customer:

  • How do I pay or get paid?
  • How can I borrow?
  • How do I grow or protect my savings?

Capitalize on strong partnerships

FinTechs have traditionally excelled in one particular area (e.g.p2p lending, remittance and FX conversion).

Avoid a Pure Discount Model

VBs can leverage their lower operating costs to provide lower fees, higher deposit rates or other price incentives to attract customers. However, without a clear differentiating proposition, a pure low-cost play will not be sustainable.

Jiayin, a Top Player in P2P Lending Business, Files for $ 57.5 Million IPO on Nasdaq (Capital Watch), Rated: A

A leading individual financial marketplace, Jiayin Group Inc., is seeking to raise up to $57.5 million in an initial public offering on the Nasdaq Global Select Market in New York.

ByteDance registers fintech trademarks (Technode), Rated: A

In July, Jinri Toutiao launched a fintech product named Safe Lending. Up to 20,000 users were permitted to borrow up to RMB 200,000 (around $30,000) per person per day. The company claimed the Bank of Nanjing was one of its loan partners.

The product became the subject of investigations by the media in September. ByteDance later shuttered the online money lending service, while thousands of Chinese P2P lending companies shut down in the second half of the year.

PINTEC Partners with China National Investment & Guaranty Corporation to Develop Digital Lending Technologies (Markets Insider), Rated: B

Pintec Technology Holdings Ltd. (“PINTEC”) (NASDAQ: PT) today signed a strategic cooperation agreement with China National Investment & Guaranty Corporation (“I&G”), a leading enterprise in China’s guarantee industry. The two sides will jointly develop the next generation digital lending technologies and nurture a dynamic credit financing ecosystem for small and micro-sized enterprises in China.

European Union

Online Lender Creditshelf Partners with CrossLend to Offer First Digital Securitization of Loans (Crowdfund Insider), Rated: AAA

Germany based Fintech creditshelf Aktiengesellschaft, an SME financing platform, is launching a new partnership with CrossLend to offer the first digital securitization of SME loans in Germany.

A Visit to Crowdestor in Riga (P2P Banking), Rated: A

On invitation of Crowdestor I travelled to Riga and met the founders of Crowdestor Janis Timma and Gunars Udris. Crowdestor is a Latvian p2p lending platform for SME loans. They launched a year ago. Loans are typically for terms of up to 18 months and interest rates are quite high – the current loan offer by a transportation company seeking expansion capital carries 17% interest rate. The Crowdestor website is available in English, German and Portuguese language. Currently most investors on the platform are Germans, followed by Spanish investors.

Funding Options: From Fintech Petting Zoos To SME Lending Sanctuaries (Forbes), Rated: A

Both financial institutions and fintech startups have made serving SMEs a priority in 2018. However, despite business current accounts like Mettle being created this year, online comparison marketplace Funding Options has helped millions of firms across Europe, especially those that cannot get traditional bank lending because they are early-stage, high-growth or in difficulty, since its launch in 2012.

International

Finastra announces Eric Duffaut as President and Global Head of Field Operations (RealWire), Rated: A

Finastra has appointed Eric Duffaut as President and Global Head of Field Operations. Based at Finastra’s London Headquarters, Duffaut will take responsibility for the company’s entire go-to-market organization including global sales, services and consultancy, as well as overseeing the Finastra partner ecosystem.

Strengthening the Spread: ETHOS Now Live on Nitrogen Network (CoinTelegraph), Rated: A

Token of Ethos.io, a leading cryptocurrency wallet provider and Blockchain Financial Services (BFS) platform, has been officially listed on Nitrogen Network, a new decentralized peer-to-peer crypto lending network.

Nitrogen Network enables market participants to lend and borrow cryptocurrencies on their own terms, all while maintaining control of their holdings and private keys. This supports effective portfolio management and a diverse range of investment views across a wide variety of crypto assets.

Australia

As banks become stricter with lending, could your HELP debt get in the way of getting a home loan? (ABC.net.au), Rated: AAA

As banks rein in lending in the wake of the banking royal commission which revealed “irresponsible lending is endemic in Australia”, those who might have easily secured a home loan a few years ago now face much more stringent criteria.

Banks are looking more carefully at expenses and debts which, for 2.7 million Australians, will include a HELP (formerly HECS) debt.

India

NBFC Vivriti Capital secures Rs 200 Cr from Creation Investments in Series-A equity funding (Your Story), Rated: AAA

Vivriti Capital, a Chennai-based lending platform for corporate entities, has raised Series A equity funding of Rs 200 crores from Creation Investments, an investment management company focused on financial services.

Crowdfunding – A Brief Overview Of The Regulatory Framework (Mondaq), Rated: A

3. Peer-to-Peer Lending or Debt Crowdfunding: Peer-to-Peer Lending (P2P lending) is a form of crowdfunding used to raise loans which are re-paid along with interest. It can be defined as the use of an online platform that matches lenders with borrowers in order to provide unsecured loans. The borrower can either be an individual or a legal person requiring a loan. The interest rate may be set by the platform or by mutual agreement between the borrower and the lender. Fees are paid to the platform by both the lender as well as the borrower.2

4. Equity Crowdfunding:

The SEBI Consultation Paper furnishes proposals for a regulatory framework governing procedure of Security based Crowdfunding methods for Start-ups and Small and Medium Enterprises (SMEs).

The Directions define a “Non-banking financial company – Peer to Peer Lending Platform”4(NBFC-P2P) as a non-banking institution which carries on the business of a Peer-to-Peer Lending Platform. Peer-to- Peer Lending Platform5 has been defined as an intermediary providing the services of loan facilitation via online medium or otherwise, to the participants6(a person who has entered into an arrangement with an NBFC-P2P to lend on it or to avail of loan facilitation services provided by it). Non-banking institutions other than companies have been prohibited from undertaking the business of Peer-to-Peer Lending platform.7 The Directions provide the scope of activities, prudential norms (the aggregate loans taken by a borrower at any point of time, across all P2Ps, is subject to a cap of Rs.10,00,000/-), operational guidelines, inter alia other regulations.

Southeast Asia

Why the ASEAN P2P lending market will avoid the Chinese pitfalls (ASEAN Today), Rated: AAA

To say that 2018 was a rough year for peer-to-peer (P2P) lending businesses in China would be a gross understatement. It was nothing short of a bloodbath, mirroring in many ways the US sub-prime mortgage crisis of 2008-09.

China, despite its economic power, shares the following crucial features with smaller markets in South and Southeast Asia:

  • A large percentage of small-to-medium enterprises (SMEs) and individuals without access to traditional banking services
  • High mobile penetration among the population
  • Easy access to investor funds, both domestic as well as international

The Southeast Asian approach to P2P lending regulation is more proactive than the Chinese model

In the heydays of P2P platforms in China, the authorities pursued more of a “wait and watch” approach. In marked contrast, the regulatory bodies of Southeast Asian economies have adopted more pro-active steps to regulation.

Korea’s digital banks have two speeds: fast and faster (Asia Money), Rated: A

The average internet speed in South Korea is 26.7 megabits per second, faster than anywhere else in the world, according to French virtual private network developer Le VPN.

No Korean bank has ever been in the mix for this much-coveted prize. Nor did a single Korean firm appear in the latest Forbes rankings of the world’s 50 most innovative fintech companies. Indeed, it’s hard to identify a single well-known and home-grown fintech brand. There’s no Korean answer to, say, China’s Ant Financial, or Singapore-based ride-sharing-to-food-delivery service Grab.

OJK Pledges to Announce Names of Illegal Fintech Firm (Tempo), Rated: A

The Financial Services Authority (OJK) committed to monitoring legal and registered financial technology (fintech) companies of peer-to-peer lending or online loan as an effort to maintain the security for consumers.

Eurasia

Russia Is A Top Five Leader Of Digital Banking In Europe (Forbes), Rated: AAA

Because of the lack of legacy IT infrastructure within banks in Russia, the country has been listed in the top five leaders of digital banking in Europe, according to a new Deloitte and ID Finance report.

Latin America

Vitacon innovates again and launches an investment opportunity starting at USD250 with return of up to 12,8% per year (PR Newswire), Rated: AAA

Vitacon, a leading construction company that is revolutionizing the way people live in São Paulo, is launching one more investment opportunity for people seeking new options for earning income and diversifying their portfolios. The company, which for the past nine years has been incentivizing the shared economy in its residential developments, is launching the possibility for any investor to invest directly USD250 in a CD, a fixed income security issued by Banco Topázio, with a 24-month maturity, which allows for annual yields of up to 12.8%.

This new method, P2P Lending, is similar to one introduced in 2015, when Vitacon launched the first real estate crowdfunding, which surpassed expectations and created an international benchmark in the field, raising 28% above what was expected for the construction of the VN Cardoso de Melo building in a very prime location of São Paulo, scheduled for delivery next year.

Authors:

George Popescu
Allen Taylor

The post Thursday December 20 2018, Daily News Digest appeared first on Lending Times.

The Latin American Alternative Lending Landscape

Latin American alternative lending

The alternative lending juggernaut shows no sign of slowing down and is enjoying remarkable growth all around the world. The Latin American & Caribbean (LAC) industry is also enjoying the wave; the 2017 Americas Alternative Finance Industry Report highlighted the region as a hot spot of lending growth with volumes jumping by over 200% in […]

Latin American alternative lending

The alternative lending juggernaut shows no sign of slowing down and is enjoying remarkable growth all around the world. The Latin American & Caribbean (LAC) industry is also enjoying the wave; the 2017 Americas Alternative Finance Industry Report highlighted the region as a hot spot of lending growth with volumes jumping by over 200% in the completed year 2016. The industry grew from $110 million to an estimated $342 million with business lending accounting for 57% of the total pie.

Source: 2017 Americas Altenative Finance Industry Report

Brazil: A Gold Mine for Alternative Lenders

The so-called Big 5 economies of the region are Brazil, Mexico, Argentina, Chile, and Venezuela. In total, there are 25 countries across Central America, South America, and the Caribbean. The South American market (i.e. basically ex-Mexico) in general, and specifically Brazil, has always been hampered by a lack of banking services, which has opened the floodgate for fintech startups to tap this $6.5 trillion economy. Brazil is an extreme case in point on how lucrative the market can be. 160 million adults are using some kind of banking service, but only 55 million are borrowers, as per Brazil’s central bank. Add to that almost 20 million unbanked people, and you can see the size of the opportunity for a lending startup. Moreover, 85 percent of Brazilians now live in cities; but, 40 percent are excluded from the traditional banking system as per São Paulo-based Itaú Unibanco, the largest private bank in South America.

Yet, the Brazilian population is heavily smartphone-dependent, and fintech lenders have leveraged this to offer differentiated banking and credit services. This gap seems to have been identified by leading US VCs as well. Nubank, a digital finance company that launched a no-fees credit card in Brazil, became the first investment in South America for Sequoia, DST Global, Founders Fund, and QED. It has now raised a cumulative equity and debt funding of over $377 million.

Source:

An underlying reason behind the unprecedented adoption of alternative lending has been the severe banking crisis that hindered the region for more than a decade. With the economy gaining momentum, there is huge latent credit demand, both from individuals as well as SMEs. For instance, Brazilian consumers pay an average of 190 percent a year for unsecured overdraft, credit cards, and consumer loans from banks. The Brazilian government is firmly behind these fintech startups as they look to democratize lending, and more importantly, lower borrowing costs for their voters.

ance/homebox/brazils-fintech-is-a-carnival-of-innovation-in-latin-america/

Leading Players in Brazil Fintech Lending

  • Creditas – Creditas was founded in 2012 by Sergio Furio and has a headquarters in São Paulo, Brazil. It has raised over $77 million in various rounds of funding. Formerly BankFacil, Creditas is a digital lending platform focused on secured lending. The firm funds its customer loans both through investors and financial institutions. Core products include a version of home equity and auto loans in which borrowers offer their residences or vehicles as collateral.
  • Geru – Launched in 2013, Geru is headquartered in São Paulo. A simple, fast, fair, and cost-effective online loan platform, Geru was inspired by the international model of marketplace lending and provides registration and credit rating services for people who wish to obtain a loan. It offers loans up to $10,000 with an interest rate ranging from 1.88%-5.02% per month, and terms ranging from 12 to 36 months.
  • GuiaBolso – Brazil’s leading personal finance platform, GuiaBolso has millions of users who have downloaded its finance app and consumer credit marketplace. It has raised over $60 million in funding.

Apart from the above, there are many Brazilian fintech lending startups like Simplic, Biva, and Noverde that are charting their own path in the Brazilian lending market.

Non-Brazilian Alternative Lenders

  • Credivalores-Crediservicios – Launched in 2003, Credivalores-Crediservicios is headquartered in Bogotá, Colombia. It has raised $34 million from various rounds of funding. It is a non-banking financial company that provides consumer loans for individuals and small companies. The firm also focuses on payroll-deduction loans and consumer lending collected through public utility bills as well as discounting checks and insurance policy financing to low and middle-income individuals.
  • Sempli – Sempli was started in 2016 by Esteban Velasco and Felipe Llano. Its headquarters is in Colombia. An online lending platform for small and medium enterprises in Colombia, the firm has raised $3.6 million from various rounds of funding. It offers loans ranging from $10k-$100k for working capital and/or business expansion.
  • Afluenta – Started in 2010 by Alejandro Cosentino, Afluenta is headquartered in Buenos Aires, Distrito Federal, Argentina. It has raised over $13 million in various rounds of funding. Afluenta is the first and only marketplace lending company for consumer and SME loans operating in more than one country in Latin America. Afluenta successfully launched its services in Argentina where their lender base achieved net USD yields of +20% in the last three years. It currently operates in Argentina, Mexico, and Peru with plans to expand to Colombia & Brazil. It has lent over $460 million and has granted 11,403 loans so far.

Future Outlook

Even though the region has been engulfed by a recession for the last decade, the World Bank still expected the Latin American economy to grow by 1.8 percent in 2017 and 2.1 percent in 2018. The UK and US have matured as markets with leaders in almost every emerging niche. South America provides an untouched hunting ground for fintech lending expansion. The light-touch regulatory rule and implicit government banking to expand credit services should see the region emerging as a hot bed for alternative lending innovation.

Author:

Written by Heena Dhir

Alternative Lending in Mexico

alternative finance Mexico

Albeit a bit late, Latin America has finally joined the global fintech revolution and Mexico is right at the forefront. Mexico has the largest fintech ecosystem in Latin America ahead of Brazil (230 startups) as per a recent report published by IDB and Finnovista in the second quarter of 2017. Alternative lending saw 41 startups and […]

alternative finance Mexico

Albeit a bit late, Latin America has finally joined the global fintech revolution and Mexico is right at the forefront. Mexico has the largest fintech ecosystem in Latin America ahead of Brazil (230 startups) as per a recent report published by IDB and Finnovista in the second quarter of 2017. Alternative lending saw 41 startups and accounted for 17% of the total.

Source:

Mexico was the largest player in the Latin American market with a volume of $114 million in 2016. The marketplace/ p2p lending model saw a 6x growth with over $40 million in 2016 lending.

Source:

Alternative Lending Regulation in Mexico

The fintech lending industry enjoyed little to no regulatory oversight in Mexico, but path-breaking growth made it necessary to have safeguards for the burgeoning market. Hence, in the beginning of December 2017, the Senate passed a bill called “The Law to Regulate Financial Technology”, and in the beginning of 2018, it will be presented in the lower House. If passed, the bill will help enhance financial stability and bring a clear and concise legal framework to alternative lending. It will also help improve credit access to millions of Mexicans.

Opportunity for Alternative Lenders

The majority of people in Mexico use Socaps (savings and loan cooperative societies) since they live in rural areas where there are no banks. As per Condusef data, only 800 municipalities out of 2,492 have bank branches. More alarmingly, Mexico had just 1.5 bank branches per 10,000 adults compared to 4.7 in Brazil in 2016, according to the National Report on Financial Inclusion. Furthermore, only 39% above the age of 15 have bank accounts as per data from the World Bank. These numbers clearly suggest Mexicans are underserved when it comes to banking activities, which presents a huge window of opportunity to the fintech lending sector.

Leading Fintech Lenders

  • Kueski – Kueski was founded in 2012 by Adalberto Flores and Leonardo de la Cerda. Its headquarters is in Guadalajara, Jalisco, Mexico. Kueski is the online lender for the middle class of Mexico and Latin America. The company uses big data and advanced analytics to approve and deliver loans in a matter of minutes. The company has become the fastest growing platform of its kind in the region and has raised almost $39 million. It offers loan ranging from $1,000-$2,000 and term ranges from 1-30 days.
  • Konfio – Launched in 2013 by David Arana and Francisco Padilla, Konfio is headquartered in Mexico City. It has raised $18 million from the Accion Frontier Inclusion Fund managed by Quona Capital, QED Investors, Kaszek Ventures, and Jaguar Ventures to strengthen the platform’s operations, grow its user base, and adopt corporate practices. Konfio is an online Mexican lending platform that helps financially underserved micro-enterprises in Latin America to obtain convenient and affordable loans through a proprietary algorithm. It offers loans ranging from MXN $10,000 to $350,000 for terms ranging from 4-36 months.
  • MiMoni – MiMoni was founded in 2008 and is headquartered in Mexico City. It has raised over $15 million in various rounds of funding. MiMoni analyzes submitted loan requests and approves them enabling its users to get access to benefits provided by the platform. Members are able to ask for loans whenever they need and after when they have settled their previous loans. It allows its users to make biweekly payments based on the amounts they have received as loans. It offers three loan amounts–$4000, $5,000 and $6,000–at an annual fixed rate of 401%.
  • Kubo.Financiero was founded in 2012 by Allan Seidman, Tomas Hernandez, and Vicente Fenoll. Since its inception, it has raised over $11 million in various rounds of funding. Kubo.financiero is a Mexican P2P lending platform regulated by local authorities including The Bank of México, CNBV (equivalent to the SEC in the US) and CONDUSEF. After five years, it is now one of Mexico’s leading P2P lending platforms with over 10,000 loans providing for a total of MXP$254m (USD$14m) and around 1,000 investors funding 60%-80% of the total loan value over the last 18 months. It issues loans ranging from ~US$200 to $25,000 with payments being made weekly, bi-weekly, or monthly over 16-36 months. All borrowers have a minimum score of 620 with the Buro de Crédito (equivalent to FICO).
  • Yotepresto – Started in 2014 by Luis Chavez, Yotepresto has raised $1.2 million in various rounds of funding. It is the fastest growing Mexican-based marketplace lending platform connecting individual and institutional investors to near-prime borrowers applying for a personal loan. It has more than 130,000 registered users and has originated $75 million in loans so far. It offers loans ranging from MXN $10,000-$300,000 with terms ranging from 6-36 months with rates starting from as low as 5.9%.

Apart from these leading players, there are a few more alternative lending platforms, such as Aspiria, El Buen Socio, Credilikeme, Doopla, Finv, and Cohete. These lenders are trying to break into the untouched Mexican market.

Conclusion

With new legislation set to roll out, and leading international players like Startupbootcamp FinTech using Mexico as the launching pad to establish their foothold in the Latin American market, it is easy to conclude that Mexico is set to be the fintech hub of the LATAM region. Considering many social and economic factors support the fintech-lending ecosystem, there is no doubt VCs and investors likewise will be lining up to fund and support altermatove lending startups in the region.

Author:

Written by Heena Dhir.

2018 Predictions for MPL, SMB Lending, and Other Alternatives

Lending Club

In just over a decade, alternative lending has evolved from a niche fintech play into a hundred billion dollar industry. 2017 was somewhat of a bumpy ride. Growing competition, shrinking bottom lines, stringent regulations, and traditional banks’ willingness to take on alt-lending using their financial muscle were the key trends that emerged last year. It […]

Lending Club

In just over a decade, alternative lending has evolved from a niche fintech play into a hundred billion dollar industry. 2017 was somewhat of a bumpy ride. Growing competition, shrinking bottom lines, stringent regulations, and traditional banks’ willingness to take on alt-lending using their financial muscle were the key trends that emerged last year. It is difficult to be sure what 2018 will bring, but here is what experts and pundits are predicting.

Marketplace Lending

Ron Suber (Founder and former president, Prosper & chairman of the board, Credible) believes the marketplace lending industry has finally grown up. Companies will focus more on cash flow, profitability, and EBITDA. He encouraged online lenders to look for a lower cost of capital if they want to compete with the like of Marcus. He is also predicting the entrance of big technology companies like Amazon, Apple, Facebook, and Google.

Peter Renton (Lend Academy) believes five of the top 25 banks will launch their own platforms. He also believes Congress will pass a Madden fix and the IRS will modernize with its own API. One startling prediction he makes that one of the top online lenders (Lending Club, SoFi, Prosper, OnDeck, or Avant) will be acquired, and he believes a major platform will be hit by a cyber attack. Like everyone else, he believes the tech giants will solidify their positions in alternative lending, and more interestingly, he says messaging apps will integrate with online lending platforms.

Krista Morgan (CEO, P2Binvestor) makes predictions for MPL sector:

  • Companies will shift their focus on business models and unit profitability as hiring and spending decrease.
  • Mergers and shutdowns will continue as equity investors remain absent. She thinks it will be a tough year.
  • Investors believe the market is set for a correction; therefore, they will be looking at short duration assets for deploying their capital. Platforms will have to shift their focus to product development.
  • 2018 will be the year of increased diversity.

Adam Stettner (Founder and CEO, Reliant Funding) predicts a year of instability. He also believes market variables will counterbalance themselves this year. The Fed is expected to increase interest rates, which will have a ripple effect in terms of rates for various types of loans. If unemployment levels remain low, it will lead to wage inflation. So the order of the day for alternative finance and small business funding companies will be adaptability, he says.

Additionally, Stettner sees a year of increased fraud, and companies will have to invest in identification tools and fraud detection techniques.

Two more predictions he points to are increased consolidation as companies overextend themselves and more disruption from big business names entering the space.

The Motley Fool is predicting a Lending Club stock price turnaround.

Juan Tavares (LendingPoint) predicts balance sheet lenders will take over, there will be more collaboration, and payments and credit will intersect more.

Small Business Lending

Trevor Dryer (Co-founder and CEO, Mirador) made predictions on small business lending:

  • Banks will continue to increase small business lending and alternative lenders will struggle.
  • Crowdfunding got a boost last year when Title III of The Jumpstart Our Business Startups Act (JOBS Act) was implemented, opening the gates for crowdfunding. Dryer believes this sector will thrive in 2018.
  • Alternative lending has removed physical barriers that makes the lending process faster and more convenient. Alternative lending will continue to be more inclusive and encourage more people to start businesses.
  • Legislative barriers will continue to fall.
  • Alternative lenders will focus on experience and relationship building. Companies able to streamline and automate the application processes will thrive.

Alternative Lending in India

Rajesh Gupta (Founder and CEO, Cash Suvidha) made the following predictions for the Indian alternative lending market.

  • A significant increase in alternative lending market share.
  • Favorable regulations, cash benefits, ease of usage, and increased internet and smartphone penetration.
  • Investors and venture capitalists will remain optimistic about the Indian alternative lending industry since it is the second most funded segment in Indian fintech.

“2018 will witness a transformation in the Indian financial landscape, all thanks to alternative lending,” he writes.

Traditional Financial Services and Alternative Investing

Kevin McPartland (Greenwich Associates) says 2018 will be the year of digital. He believes product-agnostic investing will be huge, and passive investing will gain on active investing. 2018 will also be the year that alternative data goes mainstream, he believes while data will be more important than trading. He also believes wealth management will “come out of retirement” and, finally, a ton of innovation in the financial markets as banks focus on crypto.

Chris Skinner (The Finanser Blog) writes a lot about banking’s reaction to alternative lending. He believes 2018 will be the year of artificial intelligence for banks and that banks will continue to drive digital technology deeper into their core systems. Not surprisingly, he also predicts that banks will develop more proof-of-concept operations for distributed ledger technology. Finally, he predicts the banks will develop an Enterprise Data Architecture this year to clean up their fragmented systems.

Alexander Prokhorov (FinSight Ventures) made some general predictions for fintech that apply just as well to alternative lending:

  • Software will converge with financial products in the U.S. and Europe
  • Insurtech will be more prominent
  • Artificial intelligence will transform financial services
  • There will be a lot of innovation in emerging economies such as Africa, Latin America, and Asia
  • Wealth management will pick up speed
  • Crypo assets and blockchain will take center stage for retail investing

Mitek believes 2018 will be the year of the cyber criminal and predicts there will be 150 million attempts to set up fraud accounts this year.

Don Steinbrugge, CFA (Founder and CEO, Agecroft Partners) is predicting a banner year for the hedge fund industry. He believes hedge fund assets will reach an all-time high for the 10th straight year. He also believes there will be an increase in hedge funds shutting down. And there will be an increase in cryptocurrency funds. Strategies that will gain assets, he believes, include:

  • Asia long/short equity
  • Reinsurance
  • Those that blur the lines between private equity and hedge funds

The Lending-Times Prediction

Allen Taylor (Editor, Lending-Times) believes more U.S. platforms will open the doors to non-accredited investors. Blockchain will feature more prominently in alternative lending with more platforms focused on crypto-lending including a prominent alternative lender adding cryptocurrency to its list of core services. He also believes increased specialization will lead to platforms targeting specific industries, regions/states, and other narrow target markets.

Conclusion

2018 will surely see the alternative lending industry enter a consolidation phase to withstand the changes in market dynamics, and companies best able to cope with these headwinds would emerge bigger and stronger.

Authors:

Written by Heena Dhir and Allen Taylor.

Allen Taylor