Tuesday November 27 2018, Daily News Digest

Reliable Consumers for JP morgan, Citigroup, wells fargo and Bank of America

News Comments Today’s main news: LendingClub hits $1B in CLUB certificate issuance. Zopa boosts Augmentum Fintech fund returns. Monzo breaks record on crowdfunding round. Yirendai’s critical stage to regain growth. Judo gets $350M in funding. Today’s main analysis: How late-cycle expansions turn into recessions. Today’s thought-provoking articles: LendingClub does more lending during holidays. Turning LendingClub into a financial health club. Why […]

Reliable Consumers for JP morgan, Citigroup, wells fargo and Bank of America

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United States

LendingClub Reaches $ 1bn in CLUB Certificate Issuance (Lend Academy) Rated: AAA

LendingClub has seen issuance of their new CLUB Certificate reach $1bn in less than a year after first announcing the pass-through security product last December at their investor day. The CLUB Certificate was created to make it easier for institutions to invest in LendingClub originated loans.

Loan for the holidays: Lending Club loans out more during holiday shopping months (Thinknum Media) Rated: AAA

This year was a record-breaking season for holiday shopping, as online spending surged 23.6% according to Adobe Analytics.

But where is all that money coming from? While some consumers saved up for the season, others might have turned to loans, such as ones offered at Lending Club ($NYSE:LC), to pay down huge gifts or refinance debt from credit card spending.

Outside of March 2016 — a month during an unusual stretch of time right before its chief executive Renaud Laplanche stepped down and a federal subpoena came in — Lending Club typically has the most loans issued by dollar amount in the months before the holiday season, according to data tracked since 2013.

Source: Thinknum

LendingClub CEO Working to Turn It Into a Financial Health Club (Web Pro News) Rated: AAA

The CEO of LendingClub, Scott Sanborn, says that they are really looking to make membership in the club mean something and are working to take Lending Club and turn it into a ‘financial health club’ that will help people successfully manage expenses. He says that LendingClub helps by shining a spotlight on credit card debt which is the first step to doing something about it.

A Looming Crisis in People’s Overall Financial Health

We are seeing really an epidemic happening which is incomes have been stagnant for more than 20 years. All of people’s major expenses, healthcare, college, housing, is going up and it’s creating a real looming crisis in people’s overall financial health and it’s something that people just aren’t talking about. Close to half of Americans have credit card debts and they are more than twice as likely to talk about spousal infidelity than they are about the fact that they have credit card debt that they need to manage. We believe that by shining a spotlight on the problem it’s the first step to helping people do something about it.

Top fintech VCs explain how PayPal missed a golden opportunity and why they wouldn’t invest in LendingClub today (Business Insider) Rated: AAA

PayPal is arguably one of the biggest success stories to come out of Silicon Valley in the last 20 years. It launched the careers of Peter Thiel, Elon Musk, and Max Levchin and paved the way for other members of the “PayPal mafia” to make seed investments in a next generation of startups.

“OnDeck and LendingClub have scaled, strong businesses now, but you’d never invest in those companies as startups today,” Harris said. “I don’t think you would look at unsecured personal lending or small-business lending, where you have to go out and acquire customers in the wild, with no special sauce. That’s 10-year-old thinking.”

The current model many VCs advocate is for companies to find ways to offer additional services, like loans, to existing customers. Acquiring new customers can be expensive, and there’s a competitive advantage when you underwrite or target new services to existing customers, because they know more about them.

PeerIQ’s Lender Earnings Webinar; Bank Exec Comments on the Credit Cycle (Peer IQ) Rated: AAA

One of the main themes that we explored in the LEI was how late we are in the credit cycle. Most C-level executives were extremely are sanguine on the economy but are nonetheless taking precautions. PeerIQ’s view is “The good news — and the bad news — is that conditions don’t get better than they are now.” We recommend reviewing Bloomberg Julie Verhage’s “US Banks See Good Times Ahead Even as Many Prep for Downturn” for more.

Source: Peer IQ

How Late-Cycle Expansions Turn into Recessions

The current US expansion that started in June 2009 is the longest on record at over 113 months. Late expansions are characterized by low unemployment, high consumer confidence, high asset values. We currently observe a near 50-year low unemployment rate, near record high consumer confidence, and the highest level of consumer credit outstanding (although well below peak per-capita debt levels).

Ironically, it is these solid economic indicators that are responsible for the party coming to an end. In a simplified model, credit availability expands to the marginal borrower (e.g., new entrants, cov-lite corporate loans, thin-file credits, etc.) just until the marginal consumer or corporate loans creates more losses than expected. Lenders feel the pinch on credit performance and on funding due to rising rates. Lenders individually tighten lending leading to a reduction in the supply of credit on an aggregate basis.

PeerIQ’s Q4 2018 Lending Earnings Insights Report (Lend Academy) Rated: A

PeerIQ released their Q4 2018 Lending Earnings Insights Report which points to a number of themes showing the economy is strong but CEOs are striking a cautious tone. Delinquencies and defaults continue to be low as consumers have seen their wages rise and taxes drop. Lenders are increasing reserves as they anticipate credit to renormalize in the near future, saying the economy right now was too good to be true.

Read the Full Report here.

Excerpts:

Regulators are increasingly focusing on the greater role of non-banks in consumer lending.Large money center banks continue to pull-back from riskier loans such as small business and consumer lending. Large banks instead have increased their credit facility volume 6x since 2010. FDIC Chair Jelena McWilliams cites the significant role of non-banks in origination as potential for systemic risk. The FDIC is contemplating granting ILC charters to non-banks – a major shift.

Delinquencies and charge-offs in FinTech asset classes are near all-time lows, although charge-offs on prime credit are increasing. Enova (Subprime) and OnDeck (Small Biz) are seeing near cycle-low charge-offs, while LendingClub (Prime) is seeing higher delinquencies on newer vintages. The change in LendingClub’s charge-off estimates across loan grades was mixed. Charge-offs on grades B and C are estimated to be higher by 28 bps and 16 bps respectively QoQ.

Small Businesses Are Poised for Growth, but Are Lenders Ready? (Business Wire) Rated: AAA

Source Business Wire

Betterment, Merrill Edge, Fidelity’s Go Lead the Pack in Digital Advice Branding, Claims Cerulli (Financial Advisor IQ) Rated: A

Robo-advice pioneer Betterment is the pack leader in digital platform awareness among investors, a new Cerulli Associates study reveals. But Merrill Lynch and Fidelity aren’t far behind, the study shows.

Among the more than 5,500 people polled, the Betterment brand was known by 15% of respondents, Merrill Lynch’s Merrill EDGE by 13%, and Fidelity’s Go by 12%. Trailing the three frontrunners was Charles Schwab’s Intelligent Portfolios and Vanguard’s Personal Advisor Services, which were each recognized by 10% of respondents, the study reveals.

For its digital platform marketing awareness study, Cerulli polled investors under the age of 45 earning more than $125,000 annually and with more than $250,000 in investable assets.

5 Business Loans You Can Get Without Being Profitable (NAV) Rated: A

With the Bureau of Labor Statistics reporting over 415,226 startup firms less than 1 year old in 2017, it’s apparent that this category of business will need funding like never before. However, business loans are tricky. On hand, they tend to offer a larger line of credit to companies than personal loans or lines of credit. On the other hand, qualifying can be difficult and often requires you to provide at least two years of documentation that you are profitable.

For the brand new business that hasn’t managed to turn a profit (yet), what is left? How can you get a cash infusion into your business in time to expand, add employees, support a product launch, or refinance existing debt? The following loans are a bit non-traditional, but just might be exactly what you are looking for in your quest for funding during your startup years.

TD Bank Launches New Digital Mortgage Experience Powered by Roostify (Business Wire) Rated: A

Roostify, a digital lending platform provider, announced that TD Bank, America’s Most Convenient Bank®, has leveraged Roostify’s technology to provide customers with a digital mortgage offering. This digital experience combines the latest in lending technology with a human-centric approach that gives TD Bank’s customers an accelerated, low-stress path to home ownership.

The deployment now provides prospective homebuyers with useful tools to assist them in finding a loan that fits their needs and budget. Leveraging Roostify’s proprietary DecisionBuilder lead tool, TD Bank’s Digital Mortgage allows consumers to explore which loan products they qualify for, right from a simple-to-use web page. Consumers can then move on to apply for their chosen loan in minutes, and follow a streamlined, all-digital process for moving their loan through closing. With easy access to TD Bank’s expert loan team, homebuyers can enjoy both the convenience of a digital solution and reassurance of expert guidance as they navigate one of the most significant transactions of their lives.

The Lending Alternatives Hopeful Investors Should Know Inside And Out (Forbes) Rated: A

People buy real estate for many reasons — generating cash flow, a tax write-off, appreciation value. Some of the greatest profits are made when buying real estate in a down market. Seasoned investors and fortunate newcomers who purchased coastal residential property from 2012-2017 are sitting on healthy equity appreciation as well as competitive interest rates in the 3.5-5% range.

The traditional path to buy a property is to obtain financing through banks, credit unions or a mortgage company. Following the 2008 housing crisis, traditional lenders implemented more strict guidelines: Stellar credit scores from 740 and above, stable employment, a low debt-to-income ratio, six months or more of liquid reserves.

For hopeful investors unable to meet these demands, alternatives are to pay all cash or to finance the purchase using hard money financing or a private lender. By utilizing one of these two methods, buyers also do not have to be concerned with the mounds of paperwork lenders requested. There are some advantages and disadvantages by using either type of alternative financing.

How Marcus by Goldman Sachs took to the streets of New York to market its high yield savings account (Tearsheet) Rated: A

Marcus, the online consumer bank by Goldman Sachs, has been running a man-on-the-street ad campaign about recent research the company conducted. According to the survey, 60 percent of Americans with savings accounts don’t know the interest rate on their savings account, and *more than half* of Americans with savings accounts (56 percent) opened theirs without exploring other options.

Dustin Cohn, head of brand and marketing communications at Marcus, joins the podcast to talk about the survey and why Marcus chose interest rates as a differentiator. We unpack the recent advertising campaign and explore the recent acquisition and integration of personal finance app, Clarity Money.

Ross: Easy money and the rise of ‘neo banking’ (My NorthWest) Rated: A

Banks are entering a whole new era. It’s called neo banking. Because it’s so “neo.”

You just sign over your paycheck, and suddenly you can buy things with a wave of the phone. As far as I can tell, you just look romantically at what you want to buy – and it’s yours!

You can even get loans. But it’s friendlier because neo banks don’t have loan officers who look at your income statement and say “Ha ha ha, you’re kidding!”

United Kingdom

Zopa helps boost Augmentum Fintech fund returns (Peer2Peer Finance) Rated: AAA

ZOPA’S latest funding round has boosted the value of Augmentum Fintech’s portfolio, helping the fintech investment fund report net asset value growth of 5.1 per cent in its maiden financial results.

UK-listed Augmentum Fintech unveiled its first financial results on Monday since launching in December 2017. It reported that a recent £60m private fundraise by Zopa had boosted the value of its stake in the lender by £3.5m to £22m.

Augmentum Fintech Sees Portfolio Rise In First Interims Since IPO (Morning Star) Rated: A

Augmentum Fintech PLC reported its first interim results Monday since listing on the London Main Market in March.

In the period from incorporation on December 19 last year to September 30, the fintech venture capital investor had a net asset value total return of 5.1%.

At September 30, Augmentum Fintech’s NAV per share was 104p. The company’s net assets at September 30 totalled GBP97.8 million.

The company’s portfolio fair value increased 62% since the company listed in March to GBP53.9 million on September 30 from GBP33.3 million on March 13.

Monzo confirms record-breaking UK fintech crowdfunding round (City AM) Rated: AAA

Digital bank Monzo has today announced it will be heading back to the crowd for the last chunk of its series E fundraising round, with a target of up to £20m.

The raise, first reported exclusively by City A.M. in August, will be the largest fintech crowdfunding round in the UK to date.

Going live on Exeter-based platform Crowdcube, existing Monzo investors will get early access to the round from 3 December. The round will then be opened up to other Monzo customers, who can invest up to £2,000.

Banking app Monzo explores expansion into high-cost loan products (The Telegraph) Rated: A

Monzo, the financial technology start-up,  is considering launching loans aimed at “the Wonga segment” of the market, its chief executive Tom Blomfield said.

Mr Blomfield said he hopes in future to offer loans to people with poor credit scores who may not be able to access more traditional loan products.

UK Competition and Markets Authority Questions PayPal Acquisition of iZettle (Crowdfund Insider) Rated: A

The UK Competition and Markets Authority (CMA) has issued a statement on the PayPal acquisition of iZettle – an event that was announced in early 2018 and closed in September. PayPal purchased Sweden based iZettle for $2.2 billion as the company seeks to gain access to iZettle’s point of purchase credit platform.

The CMA stated:

“… the CMA has found that PayPal could face insufficient competition in the UK after acquiring its market-leading rival. The finding raises concerns that the merger could result in customers, which include small and medium-sized businesses, paying higher prices or receiving a lower quality service.”

The CMA added that iZettle could have provided strong competition for PayPal if the company had not moved to take over the Fintech.

NatWest digital loan ceiling lifted to £700K (FinExtra) Rated: A

NatWest has today announced the launch of a new digital platform which will be available to all NatWest business and commercial customers allowing them to apply online for secured and unsecured loans of up to £750,000 – the largest digitally available loans in the industry.

The new platform, available to all business and commercial banking customers who use online banking, will allow applicants to complete the process in a matter of minutes, with a decision being communicated to customers usually within 24 hours, sometimes immediately. This fully digitised application process streamlines the customer experience and reinforces NatWest’s position as the UK’s leading commercial lender.

NatWest’s development underlines the bank’s commitment to further improving its digital offering and builds on the success of its ESME Loans platform, which provides loans of up to £150,000, Mettle – the standalone digital business current account, and LenderComm, the first production use of blockchain in the syndicated loan marketplace.

Arbuthnot Commercial Asset Based Lending supports acquisition of Euxton Tile Supplies Ltd (Bridging Loan Directory) Rated: B

Arbuthnot Commercial Asset Based Lending (ABL) has supported the acquisition of Euxton Tile Supplies Ltd (Euxton) by Earle Group with a £2m asset based lending facility, comprising a £1,250,000 confidential invoice discounting line and a £750,000 cash flow strip to provide the desired level of headroom in the transaction.

Wonga to automate compensation claims (TNT Magazine) Rated: A

Wonga, the payday lender that went into administration this August, plans to automate its compensation claims process – sparking fears that customers will lose out. Accounting firm Grant Thornton is in the process of winding up Wonga and is legally obliged to assess the claims of all customers who believe that they have been mis-sold loans.

The Guardian reports that in a bid to cut costs the administrators are creating an automated ‘adjudication tool’ that will decide which claims to pay out on, rather than processing each claim manually.

In its October letter to creditors, Wonga said that it had been receiving roughly 200 to 500 compensation claims every day after it went into administration on 30 August. Before that date the company had received 24,000 complaints from customers and a further 9,500 had been escalated to the Financial Ombudsman Service.

Proplend Milestone: Surpasses £50 Million in Online Lending (Crowdfund Insider) Rated: A

Less than six months after surpassing £40 million in online lending, UK based peer to peer lender in the property space, Proplend, announced on Monday it has now reached £50 million in online lending. According to the lender, all loans are commercial property backed, comprising a mix of bridging and mortgage lending risk-adjusted returns, which were funded by the lending platform’s growing band of Classic account, Pension account, and ISA “Lenders.” Proplend also revealed:

“By circumventing the traditional banking system, our Lenders have access to secured, inflation-beating fixed income returns whilst providing creditworthy commercial borrowers with an invaluable source of fast, flexible, interest only alternative funding. Having facilitated its first loan in 2014, Proplend has since accommodated over 50 commercial facilities, each loan typically funded within 24 hours by more than 100 participating Lenders. With a maximum loan term of 5 years, 20 loans have fully repaid to date with more than £15m capital returned and over £4m interest earned across the book – much of it tax-free.”

China

Yirendai Is At A Critical Stage To Regain Growth (Seeking Alpha) Rated: AAA

Yirendai Ltd (NYSE: YRD) released the third quarter 2018 earnings on November 12, with diluted Earnings per ADS of RMB2.43 (USD$0.35), decreased from USD 0.5 from second quarter. Considering the application of ASC 606, the adjusted earnings per ADS (if ASC were not adopted) is RMB 5.89 (USD 0.86), increased from RMB 4.91 in the same period from last year.

  1. The volume of newly originated loans has been decreasing, more than the loan volume decrease of the industry. We can compare YRD’s loan volume with the industry, as well as some competitors, as below.
    Source: Seeking Alpha

WeiyangX Fintech Review (Crowdfund Insider) Rated: A

Ping An Invests $47 million in Berlin-based Fintech Startup Finleap

The Ping An Insurance Group’s Global Voyager Investment Fund led a €41.5 million ($47 million) investment towards Berlin-based Fintech company Finleap.

Internet Finance Association of Jiangxi Province Issues P2P Exit Guidelines

On November 16, the Internet Finance Association of Jiangxi Province issued the “Guidelines for the Exit of Online Lending Intermediary Organizations in Jiangxi Province (Trial)”, stating that online lending institutions should put the rights of protecting lenders at the top of their exit work and minimize the loss of lenders. The guidelines specifically mention that when a P2P institution exit, it needs to take eight steps, namely:

(1) to file an application for withdrawal;

(2) to set up an exit work leading group;

(3) to issue an exit notice and close some platform functions;

(4) to prepare a business list of circumstances and formulate an exit plan;

(5) submit an exit plan and other related materials;

(6) publish relevant information such as the exit plan;

(7) implement the lender’s funds as planned, and steadily settle the stock items;

(8) completion of the exit.

European Union

Lendingblock Receives In-Principle Licence as DLT Provider in Gibraltar (Crowdfun Insider) Rated: AAA

Securities lending platform for digital assets Lendingblock has issued a statement indicating that the Gibraltar Financial Services Commission (GFSC) has made an in-principle decision to grant the firm authorization as a Distributed Ledger Technology (DLT) provider. Lendingblock adds that it continues to work closely with the GFSC as it seeks the full DLT licence.

Lendingblock says that following this decision, and the successful testing period, the Lendingblock platform is open for institutional onboarding in preparation for launch.

Market participants are now able to sign up for access and will be able to commence borrowing and lending  BTC, ETC, BCH, and LTC beginning early next year.

Digital lenders ‘must keep investing to grow’ (IBS Intelligence) Rated: A

Research from digital ID specialist Mitek has concluded that there is a huge opportunity for digital lenders to grow, if they continue to invest in digitisation.

The findings have been published as a whitepaper, authored by fintech research practice Autonomous NEXT. Titled European Digital Lenders, it looks into the state of the digital lending market in Europe.

He said the report found that venture capital investment is still flowing into the space and is set to hit $800m in Europe: “The UK alone has originations of over $6bn, and Europe-wide, the addressable market is $150bn – with current digital lender revenues estimated at $400m,” he added. “Moreover, the market shows impressive originations growth, with a 60% CAGR since 2013.”

Australia/New Zealand

Australian challenger bank Judo gets $ 350m funding boost (Fintech Futures) Rated: A

Melbourne-based challenger bank Judo Capital is edging towards a bank licence with a $350 million debt facility agreement with firm Credit Suisse.

The bank shared the news with Business Insider. David Hornery, co-founder and co-CEO of Judo, says the facility will provide further depth to Judo’s funding for Australian SMEs.

Short-term loan, long-term debt: Superloans under investigation after slew of complaints (Stuff) Rated: A

Short-term money lender Superloans has come under attack from people who say they target poor and vulnerable consumers, charge extremely high interest rates, and resort to illegal means for recouping their money.

The Commerce Commission has launched an investigation into Superloans after it received more than 20 complaints against the company since 2013 – several from financial advisors.

Copies of the complaints, obtained under the Official Information Act, reveal one complainant alleged Superloans threatened to take repayments out of a person’s pay cheque, illegally.

Another woman complained that a Superloans’ employee only looked at her bank statements before approving her loan application, and did not check her credit.

India

IvyCap Ventures makes first investment in P2P lending through Lendbox (The Ecomonic Times) Rated: AAA

Credit marketplace LendBox has secured the first investment by a large institutional investor in India’s peer-to-peer lending space, raising Rs 6 crore in a pre-series A financing round.

Major Trends Witnessed this year in Fintech (Entrepreneur) Rated: A

Online lending platforms have been quite phenomenal in filling in the credit void within our country. But how accomplished are they in doing so? MSME loans are considered as the trickiest element of lending given the sheer opacity that exists within the sector. This opacity has decreased the share of scheduled commercial banks in MSME credit from 95% to 90% between December 2015 and March 2018. The credit growth turned negative post-demonetization. During the same period, the share of loans by NBFCs (which are essentially used by online lending platforms) nearly doubled growing with an annual average of 35 per cent, largely because of cutting-edge technologies such as Artificial Intelligence and Big Data.

5 ways to reduce risk in P2P lending (The Economic Times) Rated: A

Lending money is a risky affair. However, there are ways to minimize the risk. Since peer-to-peer (P2P) lending is a relatively new concept and the RBI regulations for the P2P sector are barely about a year old, here are five effective ways in which you can reduce the risk to ensure getting your money back. Of course, with interest.

Understand the platform
You should try to understand how the online P2P model works before lending money on it. An investor should be aware how the money is lent on the platform and what are the risks involved in lending money on the platform.

Do not hesitate to ask the P2P player about the overall volume, defaults, recovery process and likely returns. You can do your own research or simply contact the P2P company through emails, chats or phone calls.

Do not go overboard
Sure, P2P platforms can offer your higher double-digit returns. But that doesn’t mean you should lend your entire in P2P lending. Choose the amount you wish to invest and then diversify,” says Raghavendra Pratap Singh, Co-Founder, i2ifunding.

Ex-Infosys CFO & Director V. Balakrishnan Joins Association of NBFC P2P Platforms as Patron Member (Indian Web) Rated: B

Within a month after the formation of NBFC-P2P industry bodyAssociation of NBFC P2P Platforms, the association today announced the joining of finance industry veteran & Former Infosys Chief Financial Officer V Balakrishnan as Patron Member.

P2P lending industry players have formed association to represent the Indian NBFC-P2P industry at various national as well as at international forums. The P2P operators participating in the operations are OML P2P, Monexo, PaisaDukan, Finzy, Cashkumar, Liquiloans, Micrograam, Lendsmartp2p, Peerlend and Indiamoneymart. The association aims to establish formal lines of communication between various government and regulatory authorities on matter of compliance and to create awareness about the industry and to work towards enhancement of public trust in this sector.

Asia

HonestFund Raises $ 12.2 million (USD) in our Series B round (Honestfund Email) Rated: AAA

HonestFund is one of the largest peer-to-peer lending players in South Korea. We were founded in 2015 and currently have about USD 300 million in cumulative originated loans. We have recently raised USD 12.2 million in our Series B round from the top VC firms, IT giants, and the largest financial institutions (i.e. Shinhan Bank and Hanwha Life Insurance) in South Korea.

Canada

Unlicensed online payday lenders are operating in New Brunswick (Global Newswire) Rated: A

Unlicensed online payday lenders are targeting New Brunswickers, warns the Financial and Consumer Services Commission.

FCNB has been receiving complaints from consumers about inappropriate collection practices by payday lending businesses not licensed to operate in the province.

“We are hearing that these businesses are contacting consumers who have fallen behind in their payments at their place of employment and in some cases, threatening to seek repayment from their employer. Sometimes they are contacting them up to 50 times a day,” said Alaina Nicholson, director of Consumer Affairs at FCNB. “It is against the law for a payday lender in the province to contact you at your place of work, or to contact your employers or coworkers to collect a payday loan that is late.”

Subscribe Technologies Upgrading Lendertech With Peer To Peer Lending Service And Integrating Platform Into Gingerly Marketplace (Stockhouse) Rated: A

Subscribe Technologies Inc. is pleased to announce it is upgrading the Company’s Lendertech financial technology platform with financial service auction and matchmaking features and has begun the initial phase of integrating the technology with the Company’s flagship Gingerly small business software application marketplace.

LenderTech facilitates greater and broader access to capital for those in need, including across a number of traditional and emerging areas such as mortgages, commercial lending, auto loans, student loans, and small business loans, among others.

As intended, our development team is now integrating this money lending service into the Gingerly software application marketplace and dashboard, with the addition of new Peer-to-Peer matchmaking features, designed for SMEs to have greater and faster access to lenders in one clean and simple to use interface.

IOU Financial Inc. Joins the FINSYNC Lending Network  (PR Newswire) Rated: B

 IOU FINANCIAL INC., a leading online lender to small businesses (IOUFinancial.com), is pleased to announce its strategic partnership with FINSYNC, Inc. (“FINSYNC”).

Small businesses of all types rely on FINSYNC to visualize, manage and project cash flow and analyze loan options.  IOU’s non-collateralized financing product has been assimilated by FINSYNC, enabling users who apply for financing through FINSYNC to quickly access IOU’s affordable, flexible financing for working capital and expansion.

Africa

Nigeria’s mixed signals on fintech (Euromoney) Rated: AAA

Earlier this year, the country’s central bank and the Nigeria Inter-Bank Settlement System opened a regulatory sandbox to enable budding fintech companies to develop new products freely and securely, becoming one of the first African countries to do so.

Even before that launch, Nigeria was frequently touted as the continent’s next big fintech hub, set to compete with South Africa and Kenya.

Bitcoin exchange NairaEx, online lender KiaKia and invoicing platform Payant are just three of the firms that have made a name for themselves in short order.

Authors:

George Popescu
Allen Taylor

Wednesday June 13 2018, Daily News Digest

Financial Strain by category

News Comments Today’s main news: Money360 surpasses $750M in commercial real estate loans closed. Attorneys defend $16M LendingClub fee. Funding Circle lending unlocked 75K jobs in 2017. Westpac ends Prospa relationship. Today’s main analysis: Should financial advice be tailored along credit and gender lines? Today’s thought-provoking articles: GreenSky look fairly valued, but there are competitive risks. 4 companies driving […]

Financial Strain by category

News Comments

United States

United Kingdom

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News Summary

United States

Money360 Surpasses $ 750 Million in Commercial Real Estate Loans Closed (Globe Newswire), Rated: AAA

Money360, a technology-enabled direct lender specializing in commercial real estate loans, today announced it has surpassed $750 million in loans closed since inception. This includes $82.5 million in loans closed in May 2018.

Notable loans closed in 2018 include:

  • A $26 million bridge loan for a specialty retail center in Punta Gorda, FL, brought to Money360 by Mark Reichter at Q10 / Triad Capital Advisors, Inc.
  • A $15.6 million bridge loan for an office building in Houston, TX, brought to Money360 by Rich Perry at Churchill Commercial Capital
  • A $17.25 million bridge loan for a medical office in Newport Beach, CA, brought to Money360 by Scott Monroe at NorthMarq Capital, Inc.
  • A $7.9 million bridge loan for Raytheon’s industrial space in Albuquerque, NM, brought to Money360 by Jake Clopton at Clopton Capital
  • A $9.2 million bridge loan for a neighborhood center in Tulsa, OK, brought to Money360 by Mark Reichter at Q10 / Triad Capital Advisors, Inc.
  • A $5 million bridge loan for an office park property in South Bend, IN, brought to Money360 by Dean Giannakopoulos at Marcus & Millichap Capital Corp.
  • A $5 million bridge loan for a manufactured housing property and park in West Sacramento, CA, brought to Money360 by Jake Clopton at Clopton Capital
  • A $3 million bridge loan for a mid/high rise multifamily building in Detroit, MI, brought to Money360 by Robert Krupka at Gelt Financial
  • A $2.3 million bridge loan to a self-storage building in Panama City Beach, FL, brought to Money360 by Doug Brooks at Marcus & Millichap Capital Corporation
  • A $1.6 million bridge loan to a multifamily building in Macon, GA, brought to Money360 by Naveed Khan

Attys Defend $ 16M LendingClub Fee Bid That ‘Shocked’ Judge (Law360) Rated: AAA

Attorneys seeking $16 million for representing LendingClub Corp. investors in securities class actions against the peer-to-peer lending company defended their fee bid Monday to a California federal judge who previously said the amount “shocked” him, saying their work produced an “outstanding result under any measure.”

The 28-page motion filed by attorneys for Robbins Geller Rudman & Dowd LLP, lead counsel for the lead plaintiff, argues that the requested 13.1 percent cut of the $125 million settlement is reasonable in light of the results achieved, the risks…

GreenSky Looks Fairly Valued, But Competitive Risks Remain (Forbes) Rated: AAA

GreenSky followed through with its plans to go public within weeks of confidentially filing with the SEC last month – making it the largest fintech IPO in the country since LendingClub and OnDeck went public nearly four years ago. The company offered 38 million shares at $23 per share to raise $874 million (with the actual proceeds being $830 million after underwriting fees). The company’s shares have largely traded around this level since then. This points to a valuation of $4.4 billion for GreenSky – around the figure .

GreenSky’s role as an intermediary between lenders and potential borrowers with strong credit histories makes its overall business model a risk-averse one, as it bears negligible credit risk. At the same time, the relationships it has built with banks, home improvement companies and healthcare providers promise to drive growth at a steady pace over the foreseeable future, even as the company explores other growth segments.

Four companies driving the bank tech discussion, with only one a FAANG (American Banker) Rated: AAA

Facebook, Apple, Amazon, Netflix and Google garner so much attention that they have their own collective shorthand, FAANG. But at American Banker’s Digital Banking conference this week, a mostly different set of companies were top of mind: Call them SASA, or Starbucks, Amazon, Sears and Acorns.

More than 40% of the 55 million U.S. smartphone users will have made an in-store mobile payment through Starbucks’s app, and that just over 23 million consumers over the age of 14 will use the Starbucks app to make a point-of-sale purchase at least once every six months, according to Gavin Michael, head of technology for Citigroup’s Global Consumer Bank, citing data from research firm eMarketer.

Should financial advice be tailored along credit and gender lines? (American Banker) Rated: AAA

Women with credit scores below 700, according to an analysis conducted by Elevate’s Center for the New Middle Class, an independent research arm of the online lender.

Source: American Banker/Elevate

Fifty-six percent of women with subprime scores say their finances cause them significant stress. About 45% of men with subprime credit scores say the same, as well as only 23% of women with prime ratings and 16% of men with prime ratings.

Seventy percent of women with subprime credit scores work full time, versus 62% of women with prime scores.

The woman with subprime credit is 41% more likely to have children in her home than a prime woman. She is also 79% more likely to have an elderly parent living with her.

Only 39% of Non-Prime Women Believe They Have the Skills to Manage Their Finances (SC Now) Rated: A

Most surprisingly, only 39% of this group believe they have the skills to manage their finances, despite the fact that ongoing research from myriad sources have found women to be the primary financial stewards of their households.

Key findings in the research include:

  • Two-thirds of non-prime women live paycheck to paycheck.
  • They are 3x more likely to have lost a job in the last year compared to prime women
  • Only 34% of non-prime women hold salaried jobs
  • They are 4x more likely to have trouble predicting next month’s income compared to prime women
  • More than 4 out of 5 non-prime women admit to running out of money at least once a year
  • More than one quarter admit to running out of money every month
  • They are 24% more likely to say their finances cause them stress compared to non-prime men
  • Only 13% of non-prime women would have money on-hand to cover an emergency of $1200
  • Non-prime women are 6x more likely to have used a payday loan

But another myth persists: Seasonal businesses suffer most of all. SBA’s data doesn’t bear this out, showing companies across varied industries tend to follow similar patterns in terms of failure. Manufacturing-based businesses, for example, are no more protected from failure than seasonally driven businesses like restaurants and retail stores, meaning other factors determine companies’ likelihood of long-term success.

An Ohio State University study indicated that  of restaurants don’t make it past the first year. Another 2005 study amended that, saying that the 60 percent figure applied to the first three years.

With CB Insights finding that  of small business failures can be attributed to cash flow problems, it’s imperative that seasonal business owners find ways to “spread the wealth.”

Kabbage, for example, ties its line of credit to a small business’s live data, allowing the company to adjust lines of credit in real time to match a business’s seasonal needs.

Why Digital Lenders Are Tightening Their Lending Criteria (PYMNTS) Rated: AAA

In the early days of online lending, the big appeal was access to funds for potential borrowers with few, if any, options for securing capital.

According to recent reports, some of the largest marketplace lending players in the field — SoFi, LendingClub, AvantProsper — are being pushed by their investors to batten down their credit hatches and demand better credit scores from their borrowers, as well as shorter maturities so they can make more attractive offerings to investors as they look to repackage those loans into asset-backed securities.

According to KBRA, the weighted average of FICO credit scores of Prosper’s loans, packaged in ABS, increased to 717 in a March 2018 deal from 704 in a sale two years earlier. And they weren’t the only lender to see its average score go up — SoFi, increased the weighted average of its FICO credit scores to 744 in a sale earlier this year from 732 in a deal at the start of last year.

Overlooked Millionaires: Finding A Home In The Democratized Family Office Model Of Financial Advice (Forbes) Rated: A

Over the last 20 years, the number of American investors with between $2 million and $20 million in investible assets has grown remarkably. According to 

Optimal Blue, Finastra partner for pricing integration (Mortgage Professional America) Rated: B

Optimal Blue and Finastra have announced an expansion of their relationship under which Optimal Blue will be integrated Finastra’s Fusion MortgagebotPOS product.

The new integration enables banks and credit unions to provide mortgage applicants with Optimal Blue’s live pricing searches via any point-of-sale channel. Fusion MortgagebotPOS is a web-based platform that allows lenders to receive applications through every point-of-sale channel: consumer-direct via the internet, in the branch or call center, or through professional loan officers.

Direct 1031 Exchange Launches New Online Platform for Accredited Investors (Sys-Con Media) Rated: A

A new online platform is now available for accredited investors seeking direct access to Section 1031 exchange investment opportunities with the launch of real estate investment sponsor Direct 1031 Exchange. The company provides Section 1031 exchange offerings directly to investors using the Delaware statutory trust structure under SEC Rule 506(c).

Through Direct 1031 Exchange’s online investment portal, accredited investors can participate in 506(c) DST offerings sponsored by the firm with no upfront load or commission paid by the investor.

LendStreet and Its Unique Approach to the Debt Settlement Space (Lend Academy) Rated: A

LendStreet is a lender that works with consumers who are experiencing financial difficulties. These are people who have taken on too much debt and find themselves in a hole, unable to pay it all back. But rather than declaring bankruptcy, these people want to work things out and reduce their debt through a debt settlement.

This is the point when the debt settlement companies come in. LendStreet lends only to customers whose debt is being or will be negotiated by a debt settlement company. Most of LendStreet’s customers are already enrolled with debt settlement companies before getting to LendStreet. Those who come directly to LendStreet are paired with a debt settlement company to negotiate down their debt, which will be funded by a LendStreet loan.

Chris Sugden of Edison Partners (Lend Academy) Rated: A

Chris Sugden is the Managing Partner of Edison Partners, a growth equity firm based in Princeton, New Jersey. They provide growth capital for small business doing $5 million to $20 million in annual revenue, typically based on the east coast between DC and Boston. They have never invested in a Silicon Valley startup.

In this podcast you will learn:

  • The history of Edison Partners and their unique New Jersey location.
  • The difference between East Coast and West Coast entrepreneurs.
  • The three different verticals they cover.
  • The impact that Marcus will have on the broader fintech space.
  • The shift Chris has seen with the banks as they embrace fintech.
  • The interesting fintech trends Chris is focused on right now.

Radius in Boston working with fintech firm on online business checking platform (American Banker) Rated: A

Radius Bank in Boston has lined up its next fintech project.

The $1.2 billion-asset online bank is working with a Treasury Prime, a San Francisco startup, to create a business checking account. The Tailored Checking Account will allow business owners around the country to quickly open accounts online.

SME smartphone lending set to take off (P2P Finance News), Rated: A

Fintech platform Kabbage predicts that 20 per cent of US dollars lent to SMEs will be via smartphone apps by the end of 2018.

Kabbage analysed nearly 150,000 US small businesses and found an increasing trend towards lending organised via mobile devices, with the number of loans increasing more than 300 per cent.

Online Lender Accused Of Using Tribe To Shield Illegal Loans (Law 360) Rated: A

An internet lending company and others have engaged in a plot to charge illegally high interest rates on loans while attempting to use a Michigan tribe’s sovereign immunity as a shield from suit, a group of borrowers said in a proposed class action filed in California federal court Monday.

Four plaintiffs from various states claimed in their complaint that even though Big Picture Loans LLC said it was owned and operated by the Lac Vieux Desert Band of Lake Superior Chippewa Indians, loans made in Big…

Nobel laureate Kahneman says human financial advisors are still crucial (CNBC) Rated: A

Daniel Kahneman, a Nobel Prize-winning economist, said Tuesday financial advisors still play a major role in the finance world — despite recent technological disruptions in the industry — as they act as therapists for investors.

Robo-advisors are growing at a very fast rate, surpassing $200 billion in assets under management last year, according to BackEnd Benchmarking, which releases quarterly data on robo-advisors.

Lending Express Opens Shop in Silicon Valley & Adds Moshe Kazimirsky to Team (Crowdfund Insider) Rated: B

Lending Express, an AI-powered marketplace for business loans, has opened a new Silicon Valley office in San Mateo, as well as the appointment of Moshe Kazimirsky to VP of Strategic Partnerships and Business Development to support the West Coast team. The announcement comes on the heels of Lending Express’ May $2.7 million seed funding round led by Entrée Capital, iAngels, and existing investors.

PeerStreet’s CEO Brew Johnson and Leadership Team Wins Comparably’s 2018 Culture Awards in Multiple Categories (Business Wire) Rated: B

PeerStreet, a marketplace for investing in real estate backed loans, is honored to announce that it has won Comparably’s 2018 Culture Awards in the following categories:

  • Best CEOs for Diversity
  • Best CEOs for Women
  • Best Managers
  • Best Leadership Team

Robots could replace as many as 10,000 jobs at Citi’s investment bank (Business Insider) Rated: A

Robots could replace as many as 10,000 human jobs at the banking giant Citi within five years, its president told the Financial Times.

Wells Fargo bans cryptocurrency purchases on its credit cards (Payments Source) Rated: B

Wells Fargo & Co. customers hoping to use their credit cards to buy Bitcoin will have to look elsewhere.

United Kingdom

Lending through Funding Circle unlocked 75,000 jobs in 2017 (Pr Newswire) Rated: AAA

A new report published today by Oxford Economics reveals that lending through Funding Circle, the global small business loans platform, unlocked 75,000 jobs in the United States and Europe in 2017.

Peer-to-peer lender Funding Circle to create 200 UK jobs (B Daily) Rated: A

Peer-to-peer lending platform Funding Circle is creating 200 jobs in the UK.

The London-headquartered firm has this morning (June 13) confirmed plans to take on 400 new employees in 2018, half of whom will be recruited in the UK.

LendInvest’s path from adversity to opportunity (City A.M.) Rated: A

Although the online marketplace model had been proven to work – Amazon and eBay had been established over a decade earlier – LendInvest was initially both “offline” and “pretty uninteresting”. It wasn’t until 2012, with £30m investors’ capital under management, that the founders became intrigued by the role tech could play.

The path to success is littered with unforeseen obstacles, good days can follow bad, tailwinds become headwinds. LendInvest is no exception. When the company was young, raising debt finance often felt like an uphill struggle. It took many air miles and international calls, but eventually an eastern European bank offered a £2m funding line, later increased to £6m.

Ranger Direct shares end higher after bowing to activist pressure to wind up (Financial Times) Rated: A

Ranger Direct Lending operates a £128 million investment company which has faced pressure from activist investors who own almost 30% of the company.

The board proposed yesterday of winding down the company as Ares Management withdrew itself from consideration to manage the trust. Ranger’s board also suggested shareholders vote against newly nominated directors by activist investors.

Ranger Direct Lending has struggled as defaults have crept up in the sector.

Monzo launches task automation with IFTTT (Tearsheet) Rated: A

Personal finance apps offer customers insights into their budgeting and spending habits, but U.K.-based digital bank Monzo is taking that a step further by letting its customers design their own rules on how they want to interact with their money.

Monzo’s tie-up with If This Then That, rolled out in early June, lets customers automate tasks using their financial data through personalized rules. IFTTT is a web and app-based platform to help customers get apps and devices to work together. It lets users set up “if, then” rules; for example, “if I post an Instagram, post it as a native photo on Twitter,” or “if I add a new task to an Amazon Alexa to-do list, add it to the iPhone reminders app,” and so on. IFTTT’s integration with consumer financial data lets them experiment with new use cases for financial data and lets the bank learn more about customer preferences and behavior.

Collateral investors may have to join queue of creditors (Peer2Peer Finance) Rated: A

COLLATERAL investors may end up having to recoup any unpaid interest owed as a creditor of the company, the administrator of the closed peer-to-peer lending platform has revealed.

An update from BDO said its initial view was that due to section 26 of the Financial Services and Markets Act – which deems that agreements with unregulated parties are unenforceable – investors would be treated as creditors.

This means they would have to submit documentation to BDO on what they are owed and wait to see what funds can be recouped through the administration.

European Union

B2B FinTech Could Earn Index Ventures $ 2 Billion This Year (PYMNTS) Rated: A

Venture capitalist (VC) firm Index Ventures is on its way to earn $1.6 billion from its early investments in B2B FinTech, according to Forbesreports Monday (June 11). Index Ventures’ portfolio includes iZettle and Adyen, with unconfirmed reports of a Funding Circle initial public offering (IPO) that could push Index Ventures into the $2 billion mark.

LendInvest joins Luxembourg fintech hub (Finextra) Rated: B

LendInvest, the UK’s leading online marketplace platform for property finance, has become a fellow of the Luxembourg House of Financial Technology (LHoFT), the country’s leading FinTech innovation hub.

LendInvest has had a presence in Luxembourg since 2014 when it established its first Luxembourg-domiciled fund.

Fintech threatens to eclipse banks that do not adapt digitally (Financial Times) Rated: A

Writing an opinion piece for the FT BBVA Executive Chairman Francisco Gonzalez talks about the rise of fintech and big tech in banking. He explains that banks still have an advantage when it comes to security, privacy and compliance.

A new regulatory model is needed for the new era of digital banking and data. Banks need to build on what they do best and evolve to ensure they stay relevant. He believes there is a paradigm shift occurring in banking and that banks need to find a new way to support customers and build out their assets

Australia

Westpac Ends Prospa Collaboration After IPO Postponement (PYMNTS) Rated: AAA

Days after Australian alternative lending platform Prospa delayed its Initial Public Offering (IPO) indefinitely, one of its bank partners, Westpac, announced it was ending its relationship with the FinTech.

Reports in The Australian Financial Review (AFR) on Monday (June 11) said Westpac is ending its referral program that sees small business owners rejected for a bank loan linked to the Prospa platform.

Dover Financial Group calls in outstanding debts from financial planners (Australian Financial Review) Rated: A

Dover Financial Group lured financial advisers by offering to postpone payment of annual licence fees for a year or more, but the collapsed company is now calling for immediate payments of those debts, leaving planners, who are already worried about their future, furious.

India

With Rs 35 cr in disbursals, Lendbox is creating a new asset class for investors (Your Story) Rated: AAA

Basing only 20 percent of its risk assessment engine on the CIBIL score, the platform assesses a borrower’s credit-worthiness based on their social, professional, behavioural analysis, including their salary expenditure trends and limits on credit card. The founders claim that the platform takes close to 130 data points into consideration before deciding on a suitable interest rate.

The borrowers are then classified between A1 (A2 and A3) and B3, with the rate of interest ranging from 12 to 36 percent.

Ekmeet says that close to 85 percent of loan requests are denied by the platform, and only 20 percent of their total users are from Tier II towns and cities.

Asia

Kakao Bank’s chatbot will answer up to 80% of requests (Fintech Futures) Rated: A

Kakao Bank, South Korea’s largest internet-only bank, is already showing the beta version of its customer support chatbot, which is scheduled to be launched sometime this month.

The bank says that the tech will help relieve the stress on its customer services department, which receives up to 80% of requests that could be automated.

Canada

Luge Capital goes huge with $ 75m fintech funding (Fintech Futures) Rated: AAA

Initially, $50 million of the raised capital was announced in October 2017 by the Caisse de dépôt et placement du Québec (CDPQ) and Desjardins Group, two of the fund’s major investors.

Sun Life Financial, the Fonds de Solidarité FTQ and La Capitale are also “significant” participants. Luge says it may expand the fund up to $100 million in the coming months.

Real estate crowdfunding in Canada: portal insights for 2017/18 (IT Business Blog) Rated: A

Real estate online investment or crowdfunding has been a sector that has attracted significant interest in the U.S. over the last several years, with more than 100 portals launched to serve rapidly growing developer and investor interest. In fact, industry research hub crowdsourcing.org estimates that the industry will be worth more than $300 billion USD by 2025.

Latin America

Defaults the largest driver of Brazil banking spreads -cenbank (Reuters) Rated: AAA

Credit defaults have been the main factor keeping Brazilian banks from cutting interest rates to households and companies, the central bank said on Tuesday, even as benchmark rates have fallen to all-time lows.

The average cost of credit fell 1.3 percentage points in 2017 to 21.3 percent, according to a central bank report, compared with a 6.75 percentage point decline in the benchmark Selic interest rate. Spreads fell 3.8 percentage points to 18.9 percentage points.

Defaults, which reached 3.2 percent at the end of 2017 according to a widely used metric, forced banks to keep interest rates high to account for potential losses, the central bank said.

Defaults were behind an average 37.4 percent of banking spreads in 2015-2017, the largest contributor to bumping up credit costs to consumers. Other reasons were administrative expenses, taxes and financial margins, a central bank report showed.

Authors:

George Popescu
Allen Taylor

Review of Indian Regulation on P2P market

india p2p lending regulation

Today, there are approximately 60 million small businesses in India looking for funding, out of which only 33 percent are able to access any kind of institutional credit. The situation is similarly dire in the case of individuals. Almost 80% of MSMEs self-finance themselves, 32% rely on their friends and relatives for credit, and an additional 12% […]

india p2p lending regulation

Today, there are approximately 60 million small businesses in India looking for funding, out of which only 33 percent are able to access any kind of institutional credit. The situation is similarly dire in the case of individuals. Almost 80% of MSMEs self-finance themselves, 32% rely on their friends and relatives for credit, and an additional 12% try raising funds from informal banking networks. All these numbers highlight the extent of shortcomings in the Indian lending system and the mega “bottom of the pyramid” opportunity for the young P2P sector.

P2P Market overview

The P2P lending market in India originated around 2012 when Shankar Vaddadi and his team launched the first social peer-to-peer lending platform, i-Lend. Lack of proper regulation governing the P2P ecosystem has proven to be the biggest stumbling block in the growth of this industry, but having said that, it is widely expected that the P2P lending space will grow into a $4-$5 billion industry by 2023.

The Indian P2P lending industry has approximately 63 players including Faircent, Lendbox, LenDen Club, Monexo, LoanBaba, CapZest, i2ifunding, and many more, all of which have been carving their own niche in the lending industry by serving a diversified customer base.

P2P Regulations in India

Rules and regulations in India with respect to lending have always been stringent making it difficult for new players to enter the market. India’s central bank, Reserve Bank of India (RBI), has always prioritized protecting the interests of all the stakeholders involved in the lending process (especially the borrowers). One such act, Usurious Loan Act, allows the judiciary to intervene in case the lending platform or lender is charging an unrealistically high-interest rate. The primary lenders in India, banks, are exempted from the scope of this law, but P2P lenders fall under the ambit of this regulation.

In India, even the states have the right to pass laws on regulating money lending, and 22 states have passed legislation to this effect. One such recent example is Maharashtra Money Lending Act of 2014. As per the guidelines prescribed in the Act, it is mandatory for all lenders to register and acquire a license before they start operating. Furthermore, this act can restrict the operation of money lenders to a specific district and empowers state government to decide the rate of interest to be charged.

In reality, the Indian P2P sector also benefited from a lack of government policies as it allowed them to experiment and launch multiple products without considering any repercussions of the law. This changed in 2016 when RBI released a consultation paper on P2P lending. This paper has been used as a yardstick by RBI to frame regulation to govern the P2P lending market.

The Reason Behind RBI Regulations

Although the P2P market helps in financial inclusion of the economically disenfranchised sections of the society, multi-billion dollar Ponzi schemes like Ezubao in China are too big of a risk to ignore. The main reason cited behind the Ezubao scam was “lack of enforceable regulations.” With the industry starting to spread its wings in the country, RBI stepped up its regulatory efforts in a bid to avoid such a scam in the country.

RBI initiated P2P regulations with the main motive to bring in a new age of economic reform and financial inclusion in India wherein every individual can have access to credit with better terms and transparency without risking the hard earned money of the lender on the platform.

P2P Lending: A Throw Down on RBI Regulations

RBI consultation paper clearly outlined the risk of money laundering attached with P2P lending and will also try to cap the interest rates charged at P2P platforms. The new framework will incorporate the following norms:

  • Recognition as NBFCs – All P2P lending platforms will come under the review of RBI and will be compulsorily registered as a Non-Banking Financial Corporation (NBFC).
  • Permitted Activity – P2P lenders will be permitted to serve only as mediators who would be responsible for matching and originating loan deals between lenders and borrowers. Besides that, all online portals must specify the adequate regulatory framework governing that portal and are further prohibited from giving any assured returns. To reduce the risk of money laundering, the funds must be transferred directly from the lender´s account to the borrower´s account. Under the guidelines of Foreign Exchange Management Act (FEMA), a law has been imposed on P2P lenders that strictly prohibit them from entering into cross-border transactions.
  • Prudential Regulations – RBI has mandated a capital requirement of $312,000 (INR 20 Million) for all P2P lenders. In order to avoid indiscriminate expansion, RBI will prescribe a leverage ratio and also put a limit on the contribution made by a single lender towards a particular loan.
  • Government Regulations – It was reported that RBI has made it mandatory for all P2P lending portals to adopt a company structure. As a result, this notification will render all the services provided by other organizational structures such as sole proprietorship, partnership, or LLP (Limited Liability Partnership) as non-compliant.
  • Business Continuity Plan (BCP) – In order to ensure smooth flow of operations, the platforms are required to integrate efficient risk management systems and proper backup processes. Moreover, to ensure that operations do not cease due to any event, companies should prepare a Business Continuity Plan (BCP).
  • Customer Interface – All P2P platforms must give top most priority in ensuring confidentiality of customer data and to offer complete transparency in its operations. Also, platforms must install a proper grievance handling mechanism to address complaints of lenders and borrowers.
  • Reporting Requirements – All online P2P platforms are required to submit a regular report on their financial position, loan arrangement deals, and summary of complaints, if any, filed by borrowers or lenders with RBI.

Impact of RBI Regulations

Guidelines and regulations proposed by RBI are expected to impact the P2P lending space in the following ways:

  • More at Stake for P2P Lending Platforms – The new $312,000 (approx) capital requirement will lead to small players shutting shop. This will allow serious players to emerge and restrict operations of fly-by-night operators looking to dupe the general public.
  • Opportunities for Growth – RBI guidelines would help minimize the risk of money laundering, and moreover, would help stabilize the industry by introducing streamlined and standard procedures for loan origination. Investors in such platforms would not need to worry if they are compliant with the law.
  • Higher Quality of Credit – RBI has made it compulsory for lenders to maintain a database of loan deals originated and a proper record of borrowers who failed to meet their financial commitments. This database is the first step in controlling fraud. It will also help in reducing loan stacking, a common problem plaguing the P2P industry all over the world.
  • Greater Transparency and Accountability – Platforms would need to report to RBI on a regular basis. Anyone found non-compliant would risk RBI snatching its license or face heavy penalties. This would ensure greater transparency and accountability for the entire ecosystem.

Conclusion

What once used to be a relatively small part of the fintech industry has turned into a viable option for Indian lenders as well as borrowers. The fact that RBI has framed regulations for P2P lending goes to show that the industry is ready to move to the next level of market adoption. Regulations will surely help all the stake holders involved but the biggest winner will be the underserved Indian population who can finally step on the credit ladder.

Author:

Written by Heena Dhir.

Monday April 10 2017, Daily News Digest

orchard platform key indicators

News Comments Today’s main news: FICO launches cloud-based origination solution for mid-market lenders. Monzo granted full banking license. FC SME Income Fund nearly doubles in size. Orca launches P2P comparison site. Supporting America’s Innovators Act passes. Today’s main analysis: Liberum/AltFi Financial Disruptors Index up 8.86% MoM, Yirendai down 16.06%. Today’s thought-provoking articles: How fintech is serving subprime lenders. Time to buy […]

orchard platform key indicators

News Comments

United States

United Kingdom

European Union

China

India

Asia

 

News Summary

United States

FICO Launches Cloud-Based Origination Solution to Help Mid-Market Lenders Automate Small Business Lending Decisions (Yahoo! Finance), Rated: AAA

FICO has launched FICO® Origination Manager Essentials to help smaller financial institutions make faster, smarter small business lending decisions. Delivered as a cloud service, the easy-to-use loan origination system streamlines and automates the decision process and gives smaller institutions access to the same powerful analytics in risk assessment for which FICO is known. Lenders using the solution can process small business loan applications in as little as 60 seconds, as opposed to days, which is still the average processing time for many lenders today when dealing with small business credit.

Currently, small banks and credit unions are challenged by nimble lenders who operate online and can give auto-approvals for loans in minutes. Origination Manager Essentials, delivers banks the same technical advantage so they can compete on experience and relationships rather than technology.

Orchard Weekly Online Lending Snapshot (Orchard Platform), Rated: AAA

Source: Orchard Platform

How fintech is serving subprime lenders—inside Elevate Credit’s IPO (SRN News), Rated: AAA

 

 

Should Elevate Credit IPO Worry Other Online Lenders? (NASDAQ), Rated: A

Texas-based lending company, Elevate Credit, Inc. went public on New York Stock Exchange, priced at $6.50 per share. This was the company’s second attempt to be listed after postponing its IPO in Jan 2016 due to unfavorable market conditions.

On the first day of trading, Elevate Credit’s shares increased 10.9% versus LendingClub’s gain of 1.7% and On Deck Capital’s closing at the price it opened with. But this outperformance in terms of price might not be an indication of threat for the peers.

The model of lending and customer examination used by the company have not been experienced at times of recession and the changing interest rate environment, making it a risky investment as of now. Moreover, it reported high net charge-off rates in the last few years. Hence, other lending companies might appear more lucrative to investors at present compared to Elevate Credit.

5 Metrics to Help Advisors Master Online Commercial Real Estate Investing (Think Advisor), Rated: A

According to a recent study conducted by Accenture, 90% of advisors say clients are more educated about investing than they were five years ago.

However, even in this DIY-friendly arena, financial advisors still play a pivotal role in analyzing single-asset investment opportunities and providing expert guidance. In order to do so, they must educate themselves on the following five metrics:

  1. Capitalization Rates.
  2. Cash Flow.
  3. Capital Improvements.
  4. Occupancy and Lease Rates.
  5. Leverage.

US lending agents make inroads into peer-to-peer space (Global Investor Magazine), Rated: A

Major US lending agents are continuing to move into the peer-to-peer space, bypassing traditional lines of intermediation to connect clients with end borrowers.

The growing interest in peer-to-peer, or direct lending, has been spurred by the constraints being felt by typical intermediaries, including broker-dealers, which have limited capacity to service market activity to the levels they once did.

However, this non-traditional activity appears to be growing within the framework of the traditional banking system. Banks may not act as a credit intermediary, but their infrastructure and technology is sought after.

States Oppose OCC’s proposed Fintech Charter (JD Supra), Rated: A

Because of their opposition, the states are likely to mount legal challenges to any final rule. For instance, there is a significant open question about whether OCC’s enabling statute, dating back to 1863, even conveys authority to grant such charters. States might also argue that the charter represents a violation of state sovereignty. Absent a distinct shift in Supreme Court precedent, however, this position seems dubious because such companies are almost always engaged in interstate commerce and because the benefits of state regulation are easily outweighed by the access created by a unified federal system.

Investors want a blend of digital and traditional financial advice (Investment Executive), Rated: A

A slight majority of investors don’t want to deal with either upstart robo-advisors or established, traditional financial advisors. Instead, they want a hybrid scenario that marries the best of both worlds, according to a new report from global consulting firm Accenture LLP.

Specifically, 51% of investors in the U.S. and Canada across a range of asset classes who were surveyed for the report prefer combination of face-to-face, personalized advice and access to low-cost digital tools, rather than retaining only a dedicated advisor or relying on a robo-advisory service.

That sentiment is also shared among high net-worth investors with investible assets of between $1.5 million and $10 million as 56% of them say they need more than just traditional advice.

Cohn said to support Glass-Steagall (American Banker), Rated: A

Gary Cohn, the former president of Goldman Sachs and current director of the White House National Economic Council, told federal lawmakers in a private meeting that he could support legislation to reinstate the Glass-Steagall Act, which separated commercial from investment banking. According to the Wall Street Journal, Cohn said he “could support a simple policy completely separating the two businesses” and “expressed an openness to working with” Sen. Elizabeth Warren, D-Mass., an ardent critic of big banks, on the issue.

Supporting America’s Innovators Act Passes the House of Representatives (Crowdfund Insider), Rated: A

The US House of Representatives passed the Supporting America’s Innovators Act (HR 1219) today. The bill received solid backing with a vote of 417 for and 3 against. The bill now moves to the Senate for review.

The Act amends an exemption under the Investment Company Act of 1940 increasing the investor limitation from 100 to 250 people for qualifying venture capital funds. The bill would also eliminate a significant barrier facing small businesses and startups by incentivizing venture capital funds to grow their investments in rural-state entrepreneurs, helping local economies grow and thrive.

NYCUA and SimplyCredit agree to new business partnership (CU Insight), Rated: A

A new partnership between the New York Credit Union Association and San Francisco-based fintech company, SimplyCredit, aims to help New York’s credit unions combat online disruption and accelerate lending growth. Through the partnership, SimplyCredit will enable consumers to refinance high-APR credit card balances with participating New York credit unions using a seamless mobile and web interface.

SimplyCredit’s online tools enable members to not only apply for personal lines, but to also enroll credit cards and schedule balance transfers and line payments. As a result, many members are saving $2,000 or more in interest payments a year. Combined with this service are sophisticated analytics and marketing support that have achieved application rates of nearly 6% on marketing campaigns.

United Kingdom

Monzo, a UK digital-only challenger bank, granted full banking license (TechCrunch), Rated: AAA

Monzo, one of a number of so-called “challenger” banks in the U.K. aiming to re-invent the current account, has had the “restrictions” on its banking license lifted and says it will begin rolling out full current accounts to its pre-paid card and beta app users.

This can also include being able to lend those deposits out at some point in the future, which, like rival Starling and traditional banks, forms the basis of the company’s initial business model.

Funding Circle SME Income Fund Near Doubles In Size With Placing (ALLISS) (Morningstar), Rated: AAA

Funding Circle SME Income Fund Ltd on Friday said it has raised GBP142 million in a placing of 142 million C Shares at 100 pence, nearly doubling the fund’s size.

Shares in Funding Circle SME were up 0.4% at 103.25 pence Friday.

Orca launches peer-to-peer comparison site (Bridging&Commercial), Rated: AAA

Orca – a data, research and analysis provider to the UK P2P lending market – has announced the launch of its new platform, which offers unique standardised metrics to compare P2P investments.

The platform allows users to perform in-depth due diligence on P2P investments and benchmark them in a similar manner to a traditional asset class so that they can make risk-adjusted, informed investment decisions or recommendations.

The Orca platform will also offer market data on items such as interest rates, default rates, bad debt rates and a platform’s financial standing.

Forget about banks buying fintechs — this deal happened the other way around (Yahoo! News), Rated: A

StatPro, a fintech company long before fintech was even a term, on Friday announced a deal to buy UBS’ Delta platform for €13 million (£11.1 million).

Shares in AIM-listed StatPro jumped 10% on news of the deal, which both the company and house broker Panmure Gordon called “transformational.”

Industry urges for standard default definition (P2P Finance News), Rated: A

Peer-to-peer lenders are backing calls for a standardised definition of defaults in the sector.

Although actual default rates are low, the definition of when a loan has failed is not consistent across all platforms, making it harder for investors to compare.

Members of the Peer-to-Peer Finance Association (P2PFA), such as Zopa and RateSetter, define a loan as being in arrears if repayments haven’t been met for more than 45 days. A loan is then declared as being in default, and recoveries started, if the amount owed becomes 120 days late.

MoneyThing founder Ed Pearce says the business lending platform defines a default as when a borrower fails to repay for two consecutive months.

Property lender Kuflink declares a default at three missed payments at any point in the loan period. Meanwhile, an asset-backed loan from Lendy, formerly known as Saving Stream, is in default if the amount owed is not paid within 180 days, which the platform calls a tolerance period.

Despite the differences, the P2P rules are actually slightly more definitive than those in the mainstream banking sector.

There’s a simple reason why no sector is immune from becoming obsolete (City A.M.), Rated: A

Financial institutions exist to reduce transactions costs. Without them, somebody saving money for a rainy day or for their pension would have to seek out and assess the credit worthiness of a vast number of individuals or companies before lending them money. And, without securities markets and banks providing on-demand deposits, the cost of individuals realising their investments at convenient times would be huge.

Airbnb can thrive because the internet means that those who wish to rent out rooms temporarily don’t have to group them altogether in one building in a permanent business.

Peer-to-peer lending radically simplifies the “middle-man” in credit transactions; and other innovations are on their way in finance. In China, 2,000 platforms intermediate £100bn of peer-to-peer lending. And a combination of the development of drones, the internet and modern computerised logistics means that Amazon provides services from a warehouse in Dundee to people who have never heard of Dundee.

If you want to predict major developments in business and commerce, you should look at how technology will change transactions costs.

RateSetter’s Peter Behrens joins George Banco board (P2P Finance News), Rated: B

RATESETTER’s co-founder and chief operating officer Peter Behrens has joined the directors’ board of guarantor loan provider George Banco.

The specialist lender, which provides finance to borrowers with poor or no credit history by involving a third person who can step in if the former run into repayment issues, is looking to increase its penetration into the broader consumer finance market.

European Union

4finance Group Ensures Compliance with New Anti-Money Laundering Requirements Using Cloud Solution (PR Newswire), Rated: A

Silicon Valley analytic software firm FICO today announced that consumer online lender 4finance Group is using the FICO® TONBELLER® Siron® Anti-Financial Crime Solutions to ensure anti-money laundering regulatory compliance across its global network. Supported by the FICO® Analytic Cloud and Amazon Web Services (AWS), the FICO solution has been deployed by 4finance Group in nine EU countries and in Georgia in six months, and is being rolled out across the rest of the lender’s global network.

Headquartered in Latvia, 4finance Group uses the FICO modules Siron®AML (Anti-Money Laundering) to monitor customer activity, and Siron® KYC (know your customer) to do customer due diligence, including PEP (politically exposed persons) sanctions, and known criminals screening.

Kreditech Appoints Senior Global Consumer Bankers to its Advisory Board (Kreditech), Rated: B

Consumer finance technology company Kreditech has appointed two new independent Board Members to further strengthen its Advisory Board: Michael Lenora joined as Independent Chairman, Andy Golding as Independent Board Member. These recognized experts from the consumer finance industry will support Kreditech further in its mission to provide access to credit for the underbanked.

China

The Best Low P/E Chinese Stocks to Buy in April (Madison.com), Rated: AAA

Chinese tech stocks have a reputation for being pricey and volatile stocks. But if we look closer at this market, we’ll notice that several high-growth plays are still trading at surprisingly low multiples.

YY Is a Chinese social network, powered by family of apps, which enables users to share photos and stream live videos. Revenue from YY’s live streaming business rose 42% annually to 2.22 billion yuan ($319.5 million) last quarter, which accounted for 89% of its top line.

Yirendai is basically China’s version of LendingClub (NYSE: LC), a peer-to-peer (P2P) lender which directly connects investors to lenders while cutting banks out of the loop. This is a very hot market — research firm Yingcan estimated that China’s P2P industry brokered about 982 billion yuan ($142 billion) in loans in 2015 — nearly quadruple the amount brokered in 2014.

WeiyangX Fintech Review (Crowdfund Insider), Rated: A

On March 31, Ant Financial, the finance arm of Alibaba Group Holdings, revealed its new payment service for virtual reality shopping at the Shenzhen Innovation Week.

On March 28, Shanghai Insurance Exchange (SHIE) and nine insurance institutions announced that they had successfully verified the feasibility towards applying blockchain technology to their insurance exchange.

Omni Prime, a consumer finance provider, announced that it had completed the asset-backed securitization of RMB 500 million of notes in a transaction that closed on March 28. The asset-backed securitization was carried out as a joint effort of JD Finance, Hony Capital and Omni Prime. The consumer loans, which were rated as A notes and B notes, were purchased by JD Finance and Hony Capital, and Omni Prime.

On March 28, Ant Financial and China Construction Bank signed a strategic cooperation agreement to develop a QR code payment business.

On March 27the National Internet Finance Association of China held the Third Member Conference and announced to establish the P2P Finance Association. The association would be led by the People’s Bank of China, in conjunction with China Banking Regulatory Commission, China Securities Regulatory Commission, and China Insurance Regulatory Commission etc.

On March 28, Credit Intelligence Company Yongqianbao closed on RMB 466 million ($67 million) in Series C funding led by Golden Brick Capital and CICC Alpha. Other participants in the round included Cash Capital, Source Code Capital, WeWork and GX Capital.

On April 1, Chinese online finance and lending company China Rapid Finance announced it would file for an IPO on the New York Stock Exchange with a fund-raising target of US$100 million. Morgan Stanley, Credit Suisse and Jefferies will be the underwriters.

India

FinTech Tracker: Lendbox Joins The P2P Lending Club (Bloomberg Quint), Rated: AAA

Peer-to-peer (P2P) lending was among the first forms of fintech that Indian consumers were exposed to. In a country where access to formal credit has always been a problem, and loans from friends and family are common, P2P lending seemed like a no-brainer. And it didn’t disappoint.

Early entrants into the market like Faircent saw a strong response to their P2P lending platforms, which, in turn, has attracted newer entrants like Lendbox which launched P2P lending operations in November 2015.

At Lendbox, business has been growing at an average of 20 percent month-on-month over the past year, Bhuvan Rustagi, one of the three co-founders of Lendbox told BloombergQuint in a phone conversation. The platform currently has outstanding loans of Rs 20 crore, Rustagi said. BloombergQuint could not independently verify these claims since Lendbox is a private company.

State Bank of India to Enter Digital Fintech Era With New Brand Identity (BW Disrupt), Rated: A

State Bank of India, the nation’s largest banking and financial services provider, unveiled on 7th April, 2017, its new brand identity, designed to position SBI as a modern, progressive bank, ready to meet the financial needs of all Indians.

While the legendary SBI monogram has been the de-facto symbol of State Bank of India, combining it with the abbreviated SBI word mark was pivotal to the new identity. It made the brand more concise, modern and approachable, infusing new energy, while retaining its core values.

Asia

Here are 5 future trends that would disrupt Singapore’s real estate industry (Singapore Business Review), Rated: A

Wang said e-commerce and changing consumer habits render shopping malls obsolete.

The second trend is the utilisation of data analytics. Wang said big data and advanced analytics allows for richer insights into all types of transaction data.

There is also a growing trend in terms of green and sustainable buildings.

Wang also cited crowdfunding as a major driver, saying real estate crowdfunding brings a greater variety of quality real estate assets with lower barriers of access.

Lastly, Wang said that the most important trend that would be unfolding is towards education, where the next generation of real estate professionals must be prepared for the evolutionary challenges that technology will bring. –

Authors:

George Popescu
Allen Taylor

Wednesday September 14th 2016, Daily News Digest

Wednesday September 14th 2016, Daily News Digest

News Comments Today’s main news : Sharestates hits $1.3bil in funding capacity; MeasureOne raised $2.3 mil for student loan analytics ; Indian p2p market is growing at 30-35% per month, examples, and data; Fitch claims the Chinese structure finance market is heating up. Today’s main analysis : Moody’s SME securitization challenges ; US SME loans are […]

Wednesday September 14th 2016, Daily News Digest

News Comments

United States

Israel

China

India

 

United States

Moody’s: US small business marketplace lending securitizations encounter four key risks, (Moody’s ), Rated: AAA

The report can be found here.

In a new report, Moody’s Investors Service examines several credit risks in securitizations backed by loans to small businesses which are originated by US marketplace lenders (MPLs) that focus on lending to businesses with less than $10 million in revenues. These key risks have been recent topics of discussion and debate among sector participants. As small business MPLs originate more loans, they are likely to continue to turn to asset-backed securities (ABS) to fund their loans.

1. As a result of the short history of MPLs, the lenders often have not calibrated their proprietary credit models for a long enough period of credit history, such as a full credit cycle, to be considered dependable.

2. Lack of alignment of interest between the MPL and securitization investors could pose risks to the securitizations.

3. Moody’s says the regulatory environment with regards to small business marketplace lending is relatively new and susceptible to change.”If MPLs are negatively affected by regulatory scrutiny or changes, a weakening of their financial strength could damage their securitizations in a scenario in which that outcome leads to servicing disruptions or leaves MPLs unable to honor obligations to repurchase ineligible loans from the transactions under their representations and warranties, among other potential risks,”

4. The ability of small business MPLs to carry out servicing responsibilities through a credit downturn is a risk in small business marketplace lending transactions because MPLs have short operating histories and may be financially vulnerable in a credit downturn if loan origination volumes deteriorate significantly.

Comptroller Discusses Marketplace Lending, (OCC.gov), Rated: AAA

The speach can be found here.

I’ve been fortunate to oversee financial services, banks, and savings associations of all shapes and sizes for more than 30 years, at the federal and state levels.

Marketplace lending may use new technology or techniques, but it’s still about extending credit to borrowers—something that’s been done for more than 3,000 years. As entrepreneurs, you recognized an opportunity to deliver greater value by improving how credit is provided, making it faster, cheaper, and more convenient.

The rapid growth in marketplace lending over the past few years suggests that, as a group, you are on to something. The surging demand for this type of service has gotten investors’ attention. Whole loan sales to institutional investors have been increasing as a source of cost-effective funding, and asset-backed securities have provided an additional source of funding. In 2015, institutions originated about $6.6 billion in securities backed by marketplace loans—that’s three-fourths of the $8.2 billion in such securities originated to date.2 Maintaining strong, stable funding sources is critical to sustaining the sort of growth we’ve seen in marketplace lending.

However, the growth that we’ve witnessed has occurred under relatively positive conditions.

Long-term performance is just one thing to watch. The expansion of marketplace lending raises four other important policy and regulatory questions.

First, do new techniques, technologies, and products raise concerns about compliance with existing laws and regulations? Let’s take the example of the new algorithms for determining the creditworthiness of a consumer. While they have the potential to make credit available to more people who may not have otherwise qualified, do they raise issues of illegal bias? Does an underwriting model create a disparate impact on a particular protected class? New companies and companies deploying new technology should understand and ensure their products and services comply with existing laws, such as the Equal Credit Opportunity Act, that apply to all creditors—even those that are not banks. Lenders who operate without considering these questions may be accruing underappreciated financial risks and reputational liabilities.

Second, are existing laws and regulations adequate? I understand that earlier today, you heard from Congressman McHenry, who has been a real thought leader on these issues, about his views on the adequacy of the current statutory framework.

Third, do innovative activities, products, or services present a need for entirely new regulation or law to protect the public’s interest or prevent risk to the broader financial system?

The fourth type of policy question regarding innovation involves answering should innovation be regulated and, if so, “who” should be responsible for regulating an organization or activity. To some extent, the conversation about whether there should be a national substantive law or a federal license or charter for marketplace lenders and fintech firms is part of answering the question of “who” should regulate the activity.

We have heard voices on both sides of whether to grant federal banking charters to fintechs. Some have suggested that federal charters could ensure that fintechs engaging in banking activity receive rigorous, bank-like federal regulation and ongoing supervision. This may also provide a more level playing field for financial services offered on a national scale. Others have suggested that federal charters could help fintechs better navigate the existing regulatory landscape by consolidating oversight, reducing licensing burden, and applying a single uniform set of rules

On the other side, some have expressed concerns that, if granted a limited charter, companies might face lighter supervision or fewer consumer protections would apply. Others expressed concern that fintechs may seek federal charters to avoid consumer protections granted by state laws. The agency faced similar questions when it granted the first charter for Internet based banks in the late 1990s.

If we at the OCC do decide to grant limited-purpose charters in this area, the institutions who receive the charters will be held to the same strict standards of safety, soundness, and fairness that other federally chartered institutions must meet.

These four types of policy questions are among the many that our Innovation Framework Development Team is considering in their work to create a framework to enable the OCC to assess responsible innovation.

One. The framework will support responsible innovation.

Two. The framework will foster a culture within the OCC that is receptive.

U.S. bank overseer plans report on marketplace lending this fall, (Reuters), Rated: A

The U.S. Comptroller of the Currency said on Tuesday his agency plans to complete this autumn a framework to regulate marketplace lending, citing concerns that new financial-technology innovations may pose risks to consumers and the banking system.

Sharestates Hits the $ 1.3 Billion Mark in Funding Capacity, (PR Newswire), Rated: AAA

New York based Sharestates, one of the US online real estate crowdfunding platforms, announced today that it has surpassed $1 billion in committed capital for the purchase of loans.

Sharestates launched its full operation less than two years ago in February of 2015. Since then, the firm has originated over $150 million in loans across more than 210 projects, with an average loan size of approximately $728,000. To date, Sharestates has returned over $50 million to investors with an average return rate of 11.36% for 2016, with zero loss of principal. Sharestates’ current trajectory has it on a $25-$30 million month to month origination volume, leading it to break over $200 million in originations by years end.

This new round of financing comes a few months after Sharestates received $300 million in loan purchase commitments, driven by collaborations with Prime Meridian Capital Management and Colony American Finance.

To compete in the market, Sharestates leverages proprietary technology and a close partnership with The Atlantis Organization, which – founded by Radni Davoodi and Raymond Y. Davoodi in 2004  – has become one of the nation’s leading title agencies with over $4 billion in closed transactions.

Finding Cheap Loans Is Getting Harder For Small Businesses Around the World, (Bloomberg), Rated: AAA

Only 48 percent of small- and medium-sized businesses said they can get financing at rates below 8 percent, according to a new survey from C2FO, a financial technology startup that has created a marketplace where small- and medium-sized businesses can get paid early by the large companies they supply. The inaugural such survey, released last year, showed nearly 60 percent of respondents were able to secure funding at rates below 8 percent.

C2FO canvassed more than 1,800 small- and medium-sized businesses (SMEs) in the U.S., U.K., Germany, France, and Italy, with 80 percent of those firms having $2 million or less in gross annual revenue. It found borrowing was priciest in the U.K. and the U.S. with 42 percent and 47 percent of SMEs borrowing at a rate of below 8 percent, respectively. That compares with 52 of respondents in France, 51 percent in Germany, and 58 percent in Italy.

An apparent higher cost of capital has caused some of these firms to look at other sources, such as peer-to-peer, or marketplace, lending that involves directly matching would-be borrowers with lenders. On average, 18 percent of respondents in each country reported using peer-to-peer lending at some point.

More expensive credit in the U.S. stands somewhat at odds with the most recent survey from the National Federation for Independent Business (NFIB), which showed just 3 percent of small business owners reporting in July that their borrowing needs were not satisfied — 1 percentage point above the record low reached in September of last year. Still, the NFIB small business optimism survey has been sputtering with sentiment making little to no improvement over the last year, falling 0.2 point in August to a three-month low of 94.4.

“Uncertainty is high, expectations for better business conditions are low, and future business investments look weak,” NFIB Chief Economist Bill Dunkelberg said in a statement. “Our data indicates that there is little hope for a surge in the small business sector anytime soon.”

MeasureOne – Higher Education and Student Loan Analytics Firm – Provides Improved Insights into Student Loan Repayment and Risk, (PR Newswire), Rated: A

MeasureOne, a higher education data and analytics firm focused on the $1.4 trillion-dollar student loan market, today announced $2.3 million Seed financing led by Socratic Ventures along with Colchis Capital and University Ventures. The investment will allow MeasureOne to expand its rich data repository and analytics capabilities to help higher education institutions and lenders invest in talent, with better insights into student risk and potential.

MeasureOne specializes in data-driven insight for the higher education finance industry, and its most recent report on private student lending shows that families are effectively managing their private student loans.

MeasureOne, founded in San Francisco with offices in Dallas, TX and Ahmedabad, India. MeasureOne is applying data science and industry expertise in order to increase understanding of student loans and empower student loan lending, risk assessment, repayment, capital market investments and public policy development.

Wall Street’s Insatiable Lust: Data, Data, Data, (Wall Street Journal), Rated: AAA

A new species is prowling America’s most obscure industry conferences: the data hunter.

In one recent example, Mr. Haines discovered a mobile advertising company that also collected data on the type of device someone was using when displaying an ad to them. The data helped estimate iPhone sales ahead of Apple Inc.’s announcements in 2011 and 2012, and it was lucrative for Mr. Haines’s old company, Quanton Data.

Erik Haines, head of data and analytics at New York-based Guidepoint Global LLC, trawls the globe for meaningful data to sell to hedge-fund clients.

Hedge funds and other sophisticated investors are increasingly relying on intermediaries like Mr. Haines, 35 years old, as they seek insights into a company’s sales and health that aren’t readily available from conventional sources.

Gone are the days when a hedge fund would call up a random sampling of Aéropostale stores to ask managers about sales or simply visit big-box retailers to get a feel for the traffic.

The firm struck a deal with a large insurance company to find out every day what kinds of cars received insurance policies, a possible indicator of how sales are going for automobile manufacturers. Another deal is with a company that surveys construction permits across county municipal offices, which is a “proxy for construction activity,” he said.

There are also companies set up to create exhaust. In those cases, often a person’s data is the price of a free phone application or service. For example, app provider Slice Technologies Inc. lets users track the arrival of packages to their homes in its signature Slice app or block spam through another service it owns called Unroll.me without charge. But in exchange for those services, about four million users allow the company to read their emails.  Slice, in turn, also analyzes receipts and other data in a person’s email which it packages into anonymized data for advertisers and hedge funds. It might showAmazon.com Inc. selling more of a particularly profitable item or an increase in Netflixsubscriptions, which investors can use as a factor in their trades.

Steve Schwarzman, Blackstone CEO, interview analysis, (Termsheet, Email), Rated: AAA

Dan Primack in Termsheet reports:

“Blackstone boss Steve Schwarzman was interviewed at a CNBC conference yesterday by Becky Quick, and said four things of particular interest: (1) He believes much of the hedge fund industry will deviate from 2/20 due to performance troubles; (2) When asked what Blackstone’s stock price drop over the past year is a reflection of, he replied: “That’s a reflection that investors are wrong.” (3) The Fed will eventually raise rates (in part because the media is “daring” it to do so), but he believes the only real impact will be on financial markets, not on the real economy. (4) He declined to endorse either presidential candidate, and also seemed to accept the idea of changing the tax treatment of carried interest, as part of a more comprehensive tax reform package.”

Lending Club names former WaMu exec as its new finance chief, as bid to reassure investors continues. (San Francisco Business Times), Rated: A

Comment: We covered these news yesterday. More information today.

Thomas Casey will start his term at Lending Club Sept. 19. He was the finance head at WaMu prior to its sale to J.P. Morgan Chase & Co. in 2008 and was most recently finance chief for Acelity LP Inc.

In mid-July, Lending Club appointed BlackRock Inc. veteran Patrick Dunne as its new chief capital officer, as the company continues to struggle to restore investor confidence after forcing out its former CEO amid a lending scandal. Dunne is well known in Bay Area finance circles, having formerly headed BlackRock’s S.F. office.

P2P lenders not like having money with a bank, (Bendigo Advertisers), Rated: B

A new wave of online marketplaces is offering savers, investors and those running their own super funds much higher interest rates on their cash than they can get from banks.

All use “risk-based pricing”, where borrowers with the best credit scores pay lower rates of interest than those with poorer creditworthiness.

With a bank, everyone who wants a car loan who is considered a good risk pays the same interest rate.

With P2P lenders, the investors say how much money they want to invest, the term and the interest rate they want to receive. Then it is an auction process to match-up lenders with borrowers. [Comment: To my knowledge there are very few P2P lenders who still do reverse auction if any at all ].

While P2P lenders could be a good option as part of a well-diversified portfolio, they are not like having your money with a bank. [Comment: It is in the entire industry’s interest to make sure retail investors have a realistic expectation of risk vs reward of what they are getting into. Unhappy retail investors who have the impression that fraud was committed usually attracts draconian regulation. ]

Israel

A new fintech coworking space finds big bank partners, (Tradestreaming), Rated: AAA

For banks, just keeping up with customer expectations forces them to run at breakneck speed. To do this, some institutions run hackathons or add bean bags and an open space floor plan.

A new model developed by Israeli fintech hub, The Floor, solves this problem. Four of the world’s largest banks, HSBC, Santander, RBS and Intesa SanPaolo partnered with the the coworking space, looking for better dealflow. In addition, Accenture, KMPG and Intel are also cooperating with the new program.

The Chinese Pando Group, a $250 million venture firm, is an investor in The Floor and also provides a bridge to the East Asian market, traditionally ignored by Israeli companies.

Citi and Barclays also operate fintech accelerators in Israel, but those are focused on seed stage startups and operate as any other accelerator. The Floor targets companies in growth stage that have already raised at least $1.5 million in equity. “The goal is to get these startups integrated in banks,” explained Cohen.

The banks have a final say in approving companies into the coworking space. “We are a boutique coworking space,” said Moises Cohen, one of The Floor’s founders.

The Floor targets companies in growth stage that have already raised at least $1.5 million in equity. “The goal is to get these startups integrated in banks,” explained Cohen.

The Floor’s management team uses their industry connections to dramatically shorten the time it takes a participating fintech firm to get a pilot with a major bank. In at least one case, the team managed to get a startup integrated with a partner in under 2 months.

The model has attracted 10 companies since the hub was founded early this year. The Floor plans to expand that number to 25, or 5% of the fintech firms located in Israel. The new coworking space opened in August in the Tel Aviv Stock Exchange building. Before that, the companies worked in their own spaces. One company relocated from Russia to join The Floor.

China

Fitch: Chinese Structured Finance Market Continues to Expand, (Reuters), Rated: AAA

China’s structured finance market will continue expanding in both scope and scale, with increased asset-class diversification.

A total of CNY193.4bn (USD29.8bn) of Chinese structured finance transactions were issued in 2Q16, representing a 96% yoy increase. The increase was principally driven by 242% growth in the Asset-Backed Specific Plan scheme, which is regulated by the China Securities Regulatory Commission.

Issuance under the Credit Asset Securitization (CAS) scheme, which is regulated by the People’s Bank of China and China Banking Regulatory Commission and is the leading structured finance market by size, increased 43% yoy. The increase was predominately due to residential mortgage-backed securities (RMBS) and auto-loan asset-backed securities (ABS) issuances, although limited by a significant fall in collateralised loan obligation issuance. Fitch expects both RMBS and ABS asset-classes to maintain the growth momentum in 2H16.

Highlights for 2H16 include the issuance of three non-performing loan (NPL) ABS and two asset-backed note (ABN) securitisation transactions.

The three NPL ABS deals, originated by Bank of China Ltd. (A/Stable) and China Merchants Bank (BBB/Stable) were pilot transactions, as the regulators have restricted the market during the 2008 global financial crisis.

Fitch expects more NPL ABS to be launched in the near-term, as the government has granted quotas of CNY50bn to six commercial banks to help them deal with rising NPL ratios.

The two ABN securitisation transactions adopted a special purpose trust structure similar to CAS scheme, the first time this asset-class has used this structure since inception in 2012. This type of instrument allows non-financial corporates to issue asset backed notes in China’s interbank bond market.

The opening up of the interbank securitisation market to non-financial corporates leads Fitch to expect a continued flow of ABN issuance, as it provides a deeper investor-base than the stock-exchange bond market

A full copy of the report, China Structured Finance Quarterly – 2Q16, can be found here.

 

India

P2P lending on growth trajectory ahead of RBI guidelines, (Business Standard), Rated: A

While RBI prepares the blueprint to regulate the sector, for some of the pioneers in the field, business is growing at the rate of an average 30-35 per cent on a monthly basis.

Delhi-based Faircent, which started operations around 2014, saw almost more than ten times growth in loan transactions in the last one year, according to Rajat Gandhi, founder and CEO, Faircent. So far, the company has raised close to $3.5 million, with one of the investors being Mohandas Pai, former director at Infosys. On an average, there has been an almost 35-40 per cent growth in monthly business for the company, according to Gandhi. The number of loan requests in the platform too has doubled between April-September 2016, from about 14746 in April to about 29108 in the beginning of September.

Another P2P lending platform, Lendbox, which started operations about ten months back, has already facilitated loans of around Rs 9 crore in its platform. Loan disbursements through the platform has been growing at around 30-32 per cent on a monthly basis, according to Ekmeet Singh, CEO, Lendbox. Further, the company is looking to raise around $3 million from investors.

The industry is expecting RBI to create separate category of NBFCs (non-banking finance company) for P2P lending on the lines of NBFC MFIs (Microfinance Institutions), which in turn is expected to give a strong footing to P2P facilitators.

“Since P2P platforms do not undertake lending themselves, and are mere facilitators, capital requirement of Rs 2 crore, which is at a par with NBFCs, could be too high for most P2P platforms to meet. Hence, we suggested RBI to create a separate category of NBFCs,” according to the founder of a P2P company.

“After came out with draft regulations on P2P lending, there has been an increase in interest in the sector from institutional investors as well as borrowers and lenders. We are in advanced stages of discussions for raising around $3million to fund growth,” said Singh.

Micrograam, a rural-centric P2P firm is looking to raise around Rs 10 crore from investors, said Rangan Vardan, founder, Micrograam. At present, the capital base of the company is close to Rs 2.5 crore. The company has facilitated lending of about Rs 21 crore in the last five years. In 2014, the company had roped in V Balakrishnan, former Chief Financial Officer of Infosys, as its chairman.

Hyderabad-based i-Lend, which started operations around 2013, has been going slow in lending, but is expecting a surge in business and institutional lending after comes out with final guidelines on P2P lending. The company is looking to raise around $1.5-2 million from investors.

“At present, we are growing at a rate of around 15-20 per cent on a monthly basis. We are present in three cities–Hyderabad, Chennai and Chandigarh. We are planning to expand to Bangalore soon. The sector is waiting for guidelines. Once it comes out, institutional investments are likely to increase significantly,” said Shankar Vaddadi, Founder & Director, founder and director, i-lend.

With new RBI norms, P2P lending startups are hoping to attract VCs , (Economic Times), Rated: B

There are about 40 [P2P lending] entities in the country, according to Xeler8, which tracks startup activity in the country. Mohandas Pai, who has backed Faircent, said the Reserve Bank of India’s regulatory guidelines will bring clarity, which will attract more players and intensify competition.

On the other hand, regulation may also lead to many players shutting shop if they’re unable to meet requirements such as maintenance of Rs 2-crore capital and an interest rate cap, which were published in the RBI’s discussion paper in May.

“I know of at least five startups from this space that will have to shut down once the final guidelines are out,” said Sunil Kumar, founder, Bengaluru-based P2P startup Loan-Meet, which has been bootstrapped since it started operations last year.

Author:

George Popescu