Friday February 9 2018, Daily News Digest

personal loans

News Comments Today’s main news: SoFi brightens startup scene in Helena, Montana. LendingTree rates Upgrade #1 personal loan. UK P2PFA gets a new head. India considering digital payments tax rebate for P2P lenders. Today’s main analysis: Why point-of-sale lending is hot. Today’s thought-provoking articles: Industrial loan company (ILC) applications may soon be seen in a positive light. P2P lending […]

personal loans

News Comments

United States

United Kingdom

European Union

International

India

Canada

Africa

News Summary

United States

Startup Fever is Catching on Everywhere (Even in this Little Montana Town) (Inc.), Rated: AAA

There is a new millennial-friendly mixed-use development with a high-end steakhouse, movie theater, and hotel. And yes, even a town of 30,000 located more than 500 miles from the closest major metropolitan areas (Salt Lake and Seattle) has an entrepreneurial ecosystem. In fact, in some ways Helena has a startup scene larger cities would be jealous of. A few years ago, SoFi, the online student loan servicer that also provides personal loans and mortgages, contracted with two local programmers to help build their platform.

One of those programmers, David Thompson, is a graduate of the University of Montana-Western, Montana Tech, and the University of Montana. David had no interest in moving to the Bay Area, and successfully convinced SoFi to locate a substantial portion of its engineering team in Helena. Today SoFi is multi-billion-dollar startup, and David is the VP of Engineering, managing more than 100 programmers and engineers out of two locations in Helena.

For the last several decades–and especially over the last few years–we’ve heard a lot about the death of small towns and middle America. However, the success of SoFi and the emerging startup scene in Helena shows the potential for tech companies to be agents of economic revitalization in small towns and cities outside of the coasts.

LendingClub Schedules Fourth Quarter 2017 Earnings Release and Conference Call (PR Newswire), Rated: AAA

LendingClub (NYSE: LC), America’s largest online marketplace connecting borrowers and investors, announced that it will report earnings for the fourth quarter of 2017 on Tuesday, February 20, 2018, after market hours. LendingClub will host a conference call to discuss the fourth quarter financial results at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) on the same day.

A live webcast of the call will be available at  under the Events & Presentations menu. To access the call please dial +1 (888) 317-6003 or outside the U.S. +1 (412) 317-6061 with conference ID 8062913 ten minutes prior to 2:00 p.m. Pacific Time (or 5:00 p.m. Eastern Time).

Elevate Credit Fourth Quarter and Full Year 2017 Earnings Release Available on Its Investor Relations Website (BusinessWire), Rated: B

Elevate Credit, Inc. (“Elevate”), a leading tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, today announced financial results for the fourth quarter and full year 2017. Elevate has posted its fourth quarter and full year earnings release to its Investor Relations webpage at 

The Company will host a conference call to discuss its fourth quarter and full year financial results on Thursday, February 8th at 4:00 p.m. Central Time / 5:00 p.m. Eastern Time. Interested parties may access the conference call live over the phone by dialing 1-877-407-0792 (domestic) or 1-201-689-8263 (international) and requesting the Elevate Fourth Quarter and Full Year 2018 Earnings Conference Call. Participants are asked to dial in a few minutes prior to the call to register for the event. The conference call will also be webcast live through Elevate’s website at 

Upgrade, Inc. Rated #1 Personal Loan by LendingTree (PR Newswire), Rated: AAA

Upgrade, Inc. (), a consumer credit platform that combines personal loans with tools that help consumers understand and monitor their credit, announced that it has been named #1 in the personal loans category for the fourth quarter of 2017 by LendingTree.

Why point-of-sale lending is hot right now (American Banker), Rated: AAA

But research conducted by banks and fintechs has found that many younger Americans are uncomfortable carrying credit card balances, partly because they saw their parents struggle with debt during the financial crisis and prefer the more certain repayment terms of installment loans.

Personal loans issued by banks — these exclude credit cards and auto and home equity loans — hit a record $807 billion at Sept. 30, according to data from the Federal Deposit Insurance Corp., up 9% from two years earlier and nearly 30% since 2012. That’s not even including the many billions of dollars of loans made by upstart online lenders that don’t end up on banks’ balance sheets.

San Francisco-based Affirm originated more than $1 billion in point-of-sale loans last year — and, increasingly, regional banks that are funding the loans, either directly or behind the scenes.

Source: American Banker

Inside Overstock.com’s financial services strategy (Tearsheet), Rated: A

For the past few months, the 19-year-old e-commerce company has been quietly building out FinanceHub, a sort of marketplace for financial services that includes existing Overstock credit cards and insurance products; loans by LendingTree, Prosper and Sofi; a robo-adviser for automated investing, as of last week — and as of Tuesday morning, a discounted trading platform.

Fintech Firms Look to Enter Banking Via Century-Old Tactic (WSJ), Rated: AAA

Financial-technology firms eager to offer banking products are eyeing a century-old model that fell out of favor during the financial crisis but could see a revival under the Trump administration.

The industrial loan company charter, available in a handful of states and particularly popular in Utah, allows nonfinancial companies to enter the banking sector without being subject to many of its restrictions, including oversight by the Federal Reserve. Companies seeking the charters must still obtain deposit insurance from the Federal Deposit Insurance Corp., which last approved insurance for an industrial loan company in 2008.

That could soon change. President Donald Trump’s pick to head the FDIC, Jelena McWilliams, suggested during Senate testimony last month that she would look favorably on new applications.

Source: The Wall Street Journal

Who Is Chris Larsen? Founder Of Ripple Tops Forbes Cryptocurrency List (International Business Times), Rated: A

According to Forbes, Larsen’s net worth is between $7.5 billion and $8 billion in cryptocurrency, in large part thanks to his massive holding of Ripple—the cryptocurrency he co-founded in 2012.

Larsen, a Stanford M.B.A. and veteran Silicon Valley player, is no stranger to the world of digital finance. Prior to his involvement in cryptocurrency, he co-founded the online mortgage lender E-Loan. The company was valued at $1 billion in 2000. In 2006, he co-founded Prosper Marketplace—the first peer-to-peer lending marketplace in the United States.

Goldman Sachs is trying to build the ultimate financial destination for the masses (Business Insider), Rated: A

Individuals looking to saddle up with the prestigious bank needed to fork over a minimum investment of $10 million for wealth management services. The typical client had more than $50 million in investable assets.

Personal Capital Launches Socially Responsible Investing (Finovate), Rated: A

Wealth tech company Personal Capital is making it easier for investors to put their money in causes that are important to them with the launch of its Socially Responsible Personal Strategy today.

Autobooks Raises $ 10M in Series A1 Funding Round (Finsmes), Rated: A

Autobooks, a Detroit, MI-based fintech startup, raised $10M in Series A1 funding.

Toyota partners with AI firm Aire to spot finance delinquency (Motor Finance), Rated: A

Toyota Financial Services (TFS) has launched an evaluation of AI software from Aire to spot customers with higher risks of delinquency.

Aire’s machine learning technology will identify which lessees have entered customer delinquency by skipping a payment, and will give TFS an estimate on how likely they are to default on further instalments.

Aire’s software has already been used by lenders, including p2p lender Zopa, in the initial credit application phase.

Confluent Continues Momentum in 2017 with 4X Subscription Growth (Digital Journal), Rated: A

Confluent, provider of the streaming platform based on Apache Kafka, today announced 2017 results, which include 4X subscription growth year over year and 98 percent customer satisfaction.

In the 2017 Apache Kafka Report, many companies reported using the distributed streaming platform for more accurate and faster decision making, reduced operating costs, improved customer experiences and reduced risk. 1 in 4 respondents work for organizations with more than $1 billion in annual sales, illustrating how quickly this technology has gained traction across large enterprises. In addition, more than 15% of respondents are processing more than a billion messages a day.

Other 2017 highlights include:

  • Raised $30 million from Sequoia, Index Ventures and Benchmark to meet global demand for streaming platforms.
  • Expanded employee base by 120 percent, added numerous offices throughout the US and extended its footprint to six additional countries.
  • Added new customers around the globe, including Alight Solutions, Capital One, Funding Circle, HomeAway and Nordea Bank.
  • Announced the general availability of Confluent Cloud, an Apache Kafka as a Service offering that empowers enterprises and developers to move faster with streaming data.
  • Surpassed 200 partners, including some of the largest Systems Integrators and Platform partners in the industry.

Fintech partnerships can work (American Banker), Rated: A

That Radius Bank in Boston would strike another fintech partnership — it announced one Wednesday with the startup Mantl, which is trying to cut down online-account openings to four minutes — is less revealing than its part in Radius’ evolving MO.

When Nathaniel Harley, CEO of Mantl, first visited Radius, he was seeking feedback on a personal financial management technology the company was working on. But he was quickly talked into changing the direction of his company.

The two companies started building an account-opening system for all digital channels in March 2017. They worked to reduce manual entry and other hassles from the account-opening process. Mantl brought in one of its own fintech partners, Alloy, to handle much of the decisions, including anti-money-laundering checks, identity verification and fraud detection. Radius and Mantl used Alloy’s workflow management tool to configure the decision-making process.

Source: The American Banker

Mulvaney can’t just kill CFPB payday rule, but here’s what he can do (American Banker), Rated: A

Banking rules cannot be rewritten overnight, and so acting Consumer Financial Protection Bureau Director Mick Mulvaney has a tall order remaking the payday loan regulation crafted under his predecessor. But observers say Mulvaney has options for altering the rule to the industry’s favor.

One option would be to refocus the rule on disclosure requirements, which would be several steps short of a repeal but more amenable to lenders than the current CFPB regulation.

Democratic senators demand answers on CFPB’s stalled Equifax data breach investigation (Housingwire), Rated: A

Did the Consumer Financial Protection Bureau kill its investigation into Equifax’s data breach that exposed the personal information of 145.5 million U.S. consumers to hackers?

On Thursday, a group of 32 Democratic senators sent a letter to the CFPB, demanding answers on the state of the bureau’s investigation into the Equifax breach.

CFPB Seeks Comment on its Enforcement Processes (The National Law Review), Rated: A

The CFPB has issued a request for information that seeks comment on how the agency can best achieve meaningful burden reduction or other improvement in the processes it uses to enforce federal consumer financial law while continuing to meet the CFPB’s statutory objectives and ensuring a fair and transparent process.  Comments on the RFI must be received no later than 60 days after the date it is published in the Federal Register, which the CFPB expects to be February 12, 2018.

In the new RFI, the CFPB now seek comment on all aspects of its enforcement processes but lists the following seven topics:

  • Communication between the CFPB and subjects of investigations, including timing and frequency of such communications and information provided by the CFPB on the status of an investigation
  • Length of CFPB investigations
  • Notice and Opportunity to Respond and Advise (NORA) process, including whether the NORA process should be mandatory rather than discretionary and the information contained in letters the CFPB may send to potential subjects of investigations pursuant to the NORA process
  • Whether subjects of potential enforcement actions should have the right to make an in-person presentation to the CFPB before the CFPB decides whether to initiate legal proceedings
  • Calculation of civil money penalties, including whether the CFPB should adopt a civil penalty matrix
  • Standard provisions in CFPB consent orders
  • Manner and extent to which the CFPB can and should coordinate enforcement activity with other federal and/or state agencies with overlapping jurisdiction

Altegris To Merge With Artivest (PR Newswire), Rated: A

Altegris, an alternative investment research and management firm, and Artivest, an alternative investment technology firm, announced today that they plan to merge under the name Artivest, pending customary corporate and regulatory conditions to closing. The joint 100-person team will service over $3 billion in client capital—immediately becoming the largest independent alternative investment technology and solutions firm for wealth managers, fund managers, and independent advisors.

SharesPost Launches Unit Focused On Initial Coin Offerings; Hedge Fund Executive John Wu To Lead Group (BusinessWire), Rated: A

Taking a next step in its mission to provide liquidity to private growth companies,SharesPost today announced the launch of its Digital Securities Group.

The Digital Securities Group will bring security token issuers and investors into the SharesPost private marketplace. Token issuers and investors will use SharesPost’s existing Alternative Trading System to invest in ICO’s and trade in digital securities in compliance with U.S. securities laws.

Lenders to allow Airbnb income on mortgage forms (MarketWatch), Rated: A

Homeowners soon will be able to count income they earn from Airbnb Inc. rentals on applications for refinance loans.

A new program — expected to be announced on Thursday by Airbnb, mortgage giant Fannie Mae and three big lenders — will allow anyone who has rented out property on Airbnb for a year or longer to count some or all of that money as income.

SEC Exams to Focus on Disclosures, Robos, Cryptocurrencies (Financial Advisor IQ), Rated: B

In 2018 the SEC’s Office of Compliance Inspections and Examinations plans to pay closer attention to matters involving retail investors, particularly when it comes to disclosures, and zero in on cryptocurrencies, initial coin offerings and secondary market trading, the regulator says in a press release.

The regulator will also continue monitoring digital advice platforms, with a special focus on their compliance programs, including algorithm oversight, investor data protection and disclosures of conflicts of interest, according to the exam priorities. The SEC has made progress in the ratio of investment advisors it examines each year, from just 8% five years ago to 15% in fiscal year 2017, the regulator says. In 2018, the SEC plans to target those advisors it has never examined before, according to the regulator.

Former Keller Williams CEO Chris Heller joins loanDepot brand family as CEO of mello Home (loanDepot), Rated: B

LD Holdings Group, LLC, parent company of loanDepot, the nation’s fifth largest retail lender, today appointed top real estate executive Chris Heller to head its recently-launched mello Home business. Combining digital simplicity and smart local advice, mello Home seamlessly connects home buying, financing, and improvement services into a single consumer experience.

Fintech looks to the future of financial advice at T3 (InvestmentNews), Rated: B

If the theme of the 2017 T3 Conference was the fiduciary rule, 2018 was all about the future of financial advice.

Quovo launched Cue, a new alerts engine that leverages Quovo’s aggregation technology to notify financial advisers about account activity and client milestones.

MoneyGuidePro announced a new partnership with MX, a data aggregation provider, that lets advisers bring held-away assets into the financial planning software.

 

United Kingdom

UK P2P Finance Association Announces a New Leader (Lend Academy), Rated: AAA

It was through the work of the P2PFA, led by Christine Farnish, that these regulations were sensible and promoted the growth of the industry there. And while this initial regulatory framework is currently being reviewed by the FCA, today, the UK is one of the most competitive markets in the world in no small part because of these initial regulations.

Paul Smee brings more than 17 years experience in leading trade bodies in the UK. Previously, he was Director General of the Council of Mortgage Lenders for six years so he comes with experience leading finance trade bodies. He looks like a great choice to take over from Christine.

City Moves for 9 February 2018 – who’s switching jobs at Lendy, RegTek.Solutions and M&G? (City A.M.), Rated: B

Lendy, one of Europe’s leading P2P secured property platforms, is pleased to announce the appointment of Andrew Wawrzyniak as its new head of finance. Andrew was previously head of finance at Fund Partners, a leading fund manager, which specialises in the operation of collective investment schemes.

RegTek.Solutions, the market-leading control and compliance software provider for global trade and transaction reporting, has appointed Rob Bernstein as chief financial officer (CFO).

Rebuildingsociety partners with Leeds Council to support local businesses (P2P Finance News), Rated: A

PEER-TO-PEER business lender Rebuildingsociety has secured an agreement with Leeds City Council whereby the local authority funds loans through its platform.

The council will review business loan requests from companies with an LS postcode prefix, consider the industry and location of the company, and contribute to the loan amounts required by suitable applicants.

European Union

P2P Lending Is Becoming A Significant Income Source For Young Investors (Crowdfund Insider), Rated: AAA

According to Robo.cash, P2P lending is turning to a significant source of additional income for the growing number of the European investors.

The online lending platform also confirmed:

“The majority of investors are in the age groups: 25-34 years — 40%, 35-44 years — 31%, 45-60 years — 20%. The less number is the age of 18-24 years (6%) and 61 plus (3%). These figures are supported by the employment of investors: employees — 72%, entrepreneurs — 15%, students — 6%, retiree — 2%. At the same time, the most investors are just getting acquainted with P2P-services (52%) and the comparable number already has at least one-year practice: 1-3 years — 34% and over 4 years — 13%.”

Is Lithuania the most fintech-friendly destination in Europe? (Finextra), Rated: A

The country has been actively promoting itself as gateway destination to the European marketplace for non-EU firms and British startups fleeing Brexit. Registering a company takes merely three days, while getting a Payment Institution or Electronic Money Institution license takes only three months, two-to-three times faster than in other EU jurisdictions. Other perks include remote Know Your Customer (KYC) procedures, low profit tax, startup visa options and a sandbox regime for fintech startups in their first year.

The country also boasts a growing talent pool of up to 31,000 trained IT professionals with a further 8000 in the pipeline.

Lithuania Registered 35 New Fintech Companies in 2017 (Crowdfund Insider), Rated: B

This week, Invest Lithuania released the Lithuania Fintech Report 2017, which revealed that a total of 117 fintech companies were operating in the country in 2017, with 35 of them being registered last year.

International

IOU financial partners with goEBT to offer funding to network of 25,000 convenience store owners (Business Insider), Rated: AAA

IOU FINANCIAL INC. (“IOU” or “the Company”; TSX-V:IOU), an online lender to small businesses (IOUFinancial.com), is pleased to announce a strategic partnership with Marietta, GA-based c-store solutions provider goEBT (goEBT.com).  Through this strategic partnership, goEBT’s network of 25,000 convenience store owners nationwide will be able to access IOU’s fast, convenient, non-collateral funding solutions.

LENDDO AND EFL TEAM UP FOR FINANCIAL INCLUSION (#Include1Billion), Rated: A

Our companies come together united by the common vision of providing financial inclusion for more than one billion new and underserved individuals across the globe. We will together provide a suite of credit scoring and identity verification products to more than 20 emerging markets.

Our companies have individually facilitated over 5 million credit assessments since inception, allowing more than 50 financial institutions to disburse over $2 billion USD in credit to people with limited information.

The first joint product offering is already live in Asia and Latin America, with additional products and features scheduled for release in the coming months.

From #Include1Billion

Fuse Business Loans from Mynt began working with LenddoEFL to assess credit risk for its clients that were 80% unbanked.

Foxconn’s Gou said to invest in US crypto merchant bank venture (EJ Insight), Rated: A

Terry Gou, the billionaire chief of Taiwanese electronics giant Foxconn, is said to have invested in a cryptocurrency merchant bank being set up by Mike Novogratz, a former Wall Street macro hedge fund manager.

Citing a source familiar with the matter, Bloomberg reported that Novogratz has raised about US$250 million for his cryptocurrency merchant bank venture through a private placement.

India

Google search bias fine, Swiggy funding, Digital payments tax rebate & more (ET Tech), Rated: AAA

The government might consider giving tax rebates to merchants accepting payments digitally in order to promote the overall fintech sector, which is at its infancy at present but growing at a rapid pace, suggested the Reserve Bank of India.

Talking about the fintech sector the RBI has identified tech startups working in the space of peer-to-peer lending, blockchain, big data, smart contracts, robo advisors and online aggregators.

Read more.

HOW TO FUND YOUR HIGHER STUDIES (Money Today), Rated: AAA

Traditionally, one’s option was limited to getting an education loan from a public sector bank. Now that the demographics are favourable and the education loan market has the potential to grow, non-banking finance companies (NBFCs), fintech players and peer-to-peer (P2P) lenders are jockeying for a piece of the market.

Seek more funding: Education loans are part of the priority lending category, but unlike the US, there is no provision for student loan waiver in India. It means your loan will not go away until you pay it off. Try and find out if there is any other source of funding available, including financial aid, bursary and scholarship or upfront savings, which will bring down the loan amount.

What Banks Offer

Most of them offer education loans for studying medicine, engineering or management at graduate and post-graduate levels or for pursuing further studies in India and abroad. Some also provide categorised loans. For instance, State Bank of India (SBI) offers Scholar Loan for students who get admitted to premier institutions like IITs, IIMs, NITs and AIIMS, and a Global Ed-Vantage loan for studying in global counterparts. Bank of Baroda offers Baroda Scholar loan for studying abroad and Baroda Gyan loan for higher studies in India while separate schemes are available for courses conducted by the country’s top institutions.

Source: Money Today

Fintech/P2P Players

Landing an education loan may not be easy anymore, given the spurt in defaults. And that is where the new-age fintech firms and P2P lenders see a lucrative opportunity. “For those who fail to qualify for education loans from banks and NBFCs, P2P lending platforms can be an alternative way to borrow,” says Gaurav Aggarwal, Associate Director, Unsecured Loans, at Paisabazaar. In other words, aspiring students can raise personal loans from banks or fintech players like MoneyTap and LoanTap, or P2P lenders like Faircent and CreditMantri to cover their educational expenses.

What Lies Ahead For India’s Fintech Sector? (CXO Today), Rated: A

To understand what lies ahead for India’s fintech sector, it makes sense to understand the fintech growth is expected to boom in the Asia Pacific region. A Frost & Sullivan report predicts that the region is expected to grow at a CAGR of 72.5% from 2015 to 2020, reaching US$72 billion.

According to Quah Mei Lee, Industry Principal, ICT, Asia-Pacific, the mobile payments market in Singapore was estimated to be worth US$1.4 billion in 2017. The market is still small but is growing fast.

Indian digital payments industry is expected to reach $700 billion by 2022 in terms of value of transactions.

It is expected that more than 80% of the urban population in India will adopt digital payments as a part of their routine by 2022, and 70% of the retail chains will adopt the same.

Canada

A Canadian Way to Access US Small Business Lending (Stockhouse), Rated: AAA

Enter IOU Financial.  As “online lending” has become a 21st century reality, a financial niche has sprung up with online lending institutions that are prepared to cater to small businesses and provide badly needed capital, efficiently and affordably.

Compared to the above, IOU Financial provides easily manageable, working capital term loans for small business, and does so:

  • Quickly
  • Efficiently
  • Affordably

The speed of IOU’s loan application process is a big draw for small business owners.  IOU’s application generally takes roughly three to five minutes to complete.

Source: Stockhouse

 

Grounded Kitchen & Coffeehouse is OnDeck’s Small Business of the Month (PR Newswire), Rated: A

OnDeck (NYSE: ONDK), the online lender to small businesses, today announced that Grounded Kitchen & Coffeehouse, owned by Amir Rahim, has been selected as the OnDeck Small Business of the Month for February, 2018. The Ottawa-based restaurant is the first small business in Canada to earn the OnDeck spotlight award.

Africa

Glaring Ponzi Schemes In Ghana Now (Modern Ghana), Rated: A

So assuming I have $1000.00 I have no use for and would want to make a little interest on, All I have to do is go unto one of these platforms to match me with someone in need of $1000.00. These platforms because of the high risk they take (borrowers don’t provide tangible collaterals) usually charge higher interest and in return given higher interest to lenders than Treasury Bills will normally do. This idea is supposed to be easy and help people financially as there is gap between loans needed and financial institutions willing to give (“The two largest peer-to-peer (P2P) lending platforms, Prosper and LendingClub founded in 2005 and 2006 respectively, have originated over $6 Billion in loans to date. Although they have only begun to scratch the surface of the $3 trillion consumer debt market” Nav Athwal Cofounder and CEO of RealtyShares, a crowdfunding for real estate platform). Yet like most good things miscreants, hooligans and hoodlums find a way to make the system corrupt.

These swindlers promise up to a 100% interest rates within 5 working days. So they lure greedy but naïve people to roll in cash through mobile money. With a Minimal amount of GHC100.00 you get registered and paired with another person. You’re required to send the money to this person who they claim registered 5 days ago and the said day is the day of maturity.

Ways to spot financial scams and Ponzi schemes
1. If your interest is too good to be true, then its probably a lie. When you’re being offered an interest bigger than the T Bills in lending you should be wary and do due diligence.

2. They usually don’t tell the project in which your money will be invested.

3. Pressurised to respond quickly? 4. Are the contact details vague?

Authors:

George Popescu
Allen Taylor

Tuesday October 17 2017, Daily News Digest

PeerIQ IMF

News Comments Today’s main news: RateSetter receives full FCA approval. PayPal’s market value eclipses American Express’s. Lending Club files 8-K entry into material definitive agreement. Some of Zopa’s loans are up for sale by P2PGI. Hexindai sets terms for U.S. IPO. PolicyBazaar becomes most-funded insurance aggregator worldwide. Today’s main analysis: Big bank earnings, IMF global growth forecast. Betterment vs. Wealthfront. Today’s […]

PeerIQ IMF

News Comments

United States

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United States

PayPal’s Market Value Eclipses AmEx, Nears Morgan Stanley, Goldman (WSJ), Rated: AAA

PayPal Holdings Inc. PYPL +0.04% vaulted over American ExpressCo. AXP -0.20% in terms of market value this week, punctuating a rally that has pushed up the payments company’s shares by nearly 75% since the start of 2017.

Its market capitalization stands at about $83 billion, nearly double the $47 billion value it had when it spun off from eBay Inc. a little over two years ago.

PayPal is even gaining ground on Wall Street titans. Its market value is now about $6 billion less than Morgan Stanley ’s and about $10 billion less than that of Goldman Sachs Group Inc.

PayPal, which reports earnings on Thursday, now trades at a multiple of about 32 times forward earnings, according to FactSet. So although its market value is about half that of Mastercard Inc. and about two-fifths that of Visa Inc., its earnings multiple is far dearer. Visa trades around 27 times forward earnings and Mastercard is around 29 times. AmEx, meanwhile, trades just shy of 15 times.

Ron Suber: We are in the Golden Age of Fintech (Crowdfund Insider), Rated: AAA

So what exactly is the “Golden Age of Fintech”?

Ron Suber: Innovation cycles take 50 years. PayPal started it in 1998, Lending Club and Prosper accelerated it in 2006 by giving people reasons to borrow and lend online … similar to how AOL and EBay gave people reasons to go on the World Wide Web in the early internet days. And now we are in the Golden Age of Fintech which is the middle 10 years of the 50 year innovation cycle.

How does this fit with the online lending space? Can early MPL/Online Lenders remain competitive? And what do they need to do to remain competitive?

Ron Suber: Yes, The keys (KPI’s = key performance indicators) continue to be:

A) Loan Performance

B) Equilibrium between capital and borrowers

C) Committed Long term, low cost of capital

D) Unique, diversified and low cost methods of acquiring borrowers

E) Increasing Life Time Value (LTV) with multiple loans and additional products

F) Platform efficiency, customer experience and profitability

G) Scale and Brand.

What is next for you? Was Lend360 really your final appearance as the “Godfather of Fintech”? Or is this the intermission before the next act?

Ron Suber: Lend360 was my last presentation in North America … I am heading back to Australia and Southeast Asia for the remainder of the year … then to Patagonia for a Q1 vacation and then onto Africa to do some teaching about lending and entrepreneurship with Opportunity International (OI). OI provides entrepreneurs around the world with access to loans, savings, insurance and training – tools that empower them to work their way out of poverty…..a hand up, not a handout.

[Editors Note: Ron has created his own “Rewirement” web site available here.

LendingClub Corporation (NYSE:LC) Files An 8-K Entry into a Material Definitive Agreement (Market Exclusive), Rated: AAA

On October 10, 2017, LendingClub Warehouse I LLC (“Warehouse”), a wholly-owned subsidiary of LendingClub Corporation (the “Company” or “Lending Club”), entered into a Warehouse Credit Agreement (the “Warehouse Agreement”) with certain lenders from time to time party thereto (the “Lenders”), a large commercial bank as administrative agent (the “Administrative Agent”), and a national banking association as the collateral trustee (in such capacity, the “Collateral Trustee”) and as paying agent. to the Warehouse Agreement, the Lenders agree to provide a $250 million secured revolving credit facility (the “Credit Facility”) to Warehouse, which Warehouse may draw upon from the Credit Facility closing date until the earlier of October 10, 2019 or another event that constitutes a “Commitment Terminate Date” under the Warehouse Agreement. Proceeds under the Credit Facility may only be used to purchase certain unsecured consumer loans from the Company and related rights and documents and pay fees and expenses related to the Credit Facility.

IMF Raises Global Growth Forecast, GS Enters Fix-and-Flip, Deep Dive on Big Bank Earnings (PeerIQ), Rated: AAA

During an unusual period of global synchronized growth, the IMF raised its Global Growth Forecast for 2017 and 2018 by 10 bps to 3.6% and 3.7%, respectively. The IMF also named nine banks that will struggle to achieve profitability.

Source: IMF

In securitization news, Marlette Funding Trust 2017-3 is expected to close at the end of October with $298 Mn in loans. MFT 2017-3 is the fifth ABS from this platform and the fourth on the MFT shelf (the first was on Citi’s CHAI shelf).

In this week’s newsletter, PeerIQ dives into the earnings and loan loss provisions for the major money center banks.

The big money center banks released earnings this week to a mixed reception although YTD stock performance is strong. FICC trading revenues were down year-over-year across the board. ROE levels for the big banks remain mired in the low double-digit area or lower.

Source: PeerIQ, Company Information

Highlights:

JP Morgan

  • JP Morgan is currently the largest US Bank ranked by total US Deposits, which has grown 9% year over year.
  • JP Morgan credit card costs were up about $200 Mn year-on-year driven by the successful Sapphire launch, and higher net charge-offs.
  • Q3 2017 provision for credit losses was $1.5 Bn, up from $1.3 Bn in the prior year. Currently at 3.3%, credit card allowance to total loans rose every quarter this year.

Citigroup

  • Citi built approximately $500 Mn in card loan loss reserves this quarter:
    • $150 Mn from regular seasoning and volume growth.
    • $50 Mn from hurricanes and other natural disasters.
    • $300 Mn attributable to forward-looking NCL expectations.
  • Citi expects NCL rate on branded cards to increase 10 bps in 2018 to 295 bps.
  • Citi shifted away from rewards oriented products and more towards value products due to heavy competition in rewards products (see Chase Sapphire Reserve). These cards typically have non-yielding promotional balances in the near term.

Bank of America

  • Quarterly profit rose 13% year over year.
  • Provision for loan losses increased by nearly 15% quarter over quarter while allowance for loan losses decreased 1.7% over the same period.
  • Allowance for loan losses as a percentage of total loans decreased to 1.15% from 1.19% last quarter and from 1.29% last year.

Wells Fargo

  • Wells Fargo was the only reporting bank that had decreasing negative returns YTD and a ROE decline YOY.
  • Revenue fell 2% year over year, and Wells is the only reporting bank to have falling revenues.
Source: PeerIQ, Company Information

It Was a Busy Quarter for Deals in Fintech (Bloomberg), Rated: AAA

Traditional Wall Street firms are keeping financial technology humming as they set their sights on developing technologies of their own. The third-quarter saw the second highest financing deal count ever, with 412 total transactions, according to a report from investment bank FT Partners.

Still, some areas are hotter than others. Banking — which includes peer-to-peer lending — and payments reported the most deals in the period. The largest was Softbank Group Corp.’s $250 million investment in online lending startup Kabbage Inc. Payments startups Toast Inc. and Raise Marketplace Inc. were also in the top 10 deals with $101 million and $60 million investments, respectively.

Robo-Advisor Teardown: How Betterment And Wealthfront Stack Up (CB Insights), Rated: AAA

In the battle for assets under management (AUM), incumbent wealth management firms have faced significant pressure from insurgent robo-advisors, as investors have poured over $1.6B into robo-advisors across 151 investments since 2013.

The two largest of these robo-advisors, Betterment and Wealthfront, have collectively raised $405M in aggregate funding to date and have both voiced the long-term goal of going public. Nearly a decade after launch, Betterment and Wealthfront together manage approximately $15.9B of assets for over 495K client accounts.

Some of the key takeaways from our analysis include:

  • Betterment continues to outpace Wealthfront in client accounts. As of Q1’17, Betterment managed approximately 330K accounts, nearly 2X as many accounts as Wealthfront (at 165K accounts).
  • Wealthfront has a higher growth rate than Betterment. As of their respective filings in Q1’17 and Q2’17, Wealthfront had added 65K accounts, representing 65% growth, while Betterment added 52K accounts and grew 19%.
  • Betterment has raised more than 2X the amount of funding as Wealthfront. Betterment has raised $275M total as of its latest investment (a $70M Series E – II round in Q3’17), while Wealthfront has raised $129.5M as of its last funding (a $64M Series D in Q3’14).
  • Betterment has taken the lead over Wealthfront for total AUM since 2015.
  • Wealthfront has consistently had a higher AUM per client. Wealthfront clients average $40.9K per account, compared to Betterment’s account average of $27.4K.

CLIENT ACCOUNTS: WEALTHFRONT COULD SURPASS BETTERMENT IN 3 YEARS

An analysis of the data shows that while Betterment leads Wealthfront in number of client accounts today, Wealthfront’s higher growth rate suggests that Wealthfront could surpass Betterment within 3 years. Wealthfront added 65K accounts in H1’17, representing 65% growth, while Betterment added 52K accounts and grew only 19% over the same period.

Comparing average AUM per client, Wealthfront has consistently had a higher AUM per client ($40.9K invested per account, vs. Betterment’s average of $27.4K), and as it continues to add additional services like PATH and the portfolio line of credit, that average could grow over time.

Source: CB Insights

 

ASSETS UNDER MANAGEMENT (AUM): BETTERMENT GROWTH SLOWS

Betterment grew AUM by approximately 13% since their last filing, their slowest quarter for growth. Again, this comes on the heels of the backlash against changes in Betterment’s fee structure in Q1’17. In contrast, Wealthfront set a new record for AUM growth in Q2’17, adding approximately $1.76B in AUM since the previous quarter. This was Wealthfront’s largest quarterly dollar increase in AUM.

Source: CB Insights

Mortgage startups blur lines between old and new capital strategies (National Mortgage News), Rated: AAA

Marketplace lending is, in many respects, an evolution of the privately funded mortgage market, which has co-existed with mainstream lenders without posing much threat for years.

Technology used by marketplace lenders offers deeper insights and transparency into transactions, while more easily connecting investors and borrowers in disparate locations.

LendingHome has raised $110 million in venture capital since it was founded in 2013 and is looking for more. It’s done six bridge-loan securitizations totaling $183 million and has a marketplace lending vehicle where accredited investors can purchase fractional interests in loans.

This suggests that the legacy of fintech and marketplace lenders will not be defined by drawing lines between this new breed of lenders and mainstream incumbents, but rather by how those lines are blurred.

Source: National Mortgage News

Income&, while reaching out directly to investors, is working to serve retirees potentially more interested in accessing the mainstream mortgage market’s lower-risk cash-flows than taking on more risk in order to reach for yield the way marketplace lenders’ investor bases tend to.

The company structures the investments through a twist on traditional securitization.

SoFi Bails On Being A Bank (PYMNTS), Rated: A

“With SoFi’s leadership in transition, we’re withdrawing our application with the FDIC for now,” SoFi spokesman Jim Prosser said in a statement to Reuters. “A bank charter remains an attractive option when the time is right. This decision does not change our plans to make deposit accounts available through partner banks in the near future.”

Barclays CEO Says Bank Must Protect Payments Business From Apple, Amazon (Bloomberg), Rated: A

Barclays Plc will need to defend its advantages in the payments business from encroachment by technology companies including Amazon.com Inc. and Apple Inc., according to Chief Executive Officer Jes Staley.

LendingHome adds $ 450 million to ramp up originations (National Mortgage News), Rated: A

A fund LendingHome began setting up earlier this year raised $100 million in commitments and established a $300 million credit facility that brings its total potential assets to $400 million.

LendingHome Opportunity Fund II is committed to buying more than $1 billion in high-yield bridge loans over a two-year period, but the company also will continue to sell loans to other investors through other existing channels.

Pefin Leverages Artificial Intelligence To Provide A Comprehensive Set Of Financial Advisory Services (Superb Crew), Rated: A

Q: Catherine, what is Pefin?

A: Pefin understands a user’s complete financial situation, including their current spending patterns, their debt and investments and their goals. An interactive chat experience helps users plan for life events that matter to them- like buying a home, having kids, sending them to college, and retiring in comfort. Pefin then incorporates the economy, markets, social security rules, federal and state taxes and much more to craft a thorough financial plan tailored to each user, showing the affordability of their plans. It provides ongoing advice on how they can save to achieve their plans, when they should repay debt, and whether investing is appropriate. If it is, Pefin also offers investment advice and portfolio management services through its SEC regulated subsidiary, Pefin Advisors. Pefin does not require that users invest through its platform, but if they choose to do so, it tailors each portfolio to help users achieve their plans.

Source: Superb Crew

Q: Who are the primary users of Pefin and what are some of the key challenges you are helping them solve?

The typical human advisor charges between $2,000 – $,5000 for a one-time financial plan and being static, it is obsolete moments after it is created. Robo-Advisors, while affordable, are unable to offer a comprehensive financial plan, instead focusing on recommending a generic portfolio (one of 10 or so static investment portfolios), primarily based on a risk level the user picks. Pefin’s AI stays on top of 2-5 million data points per user and updates plans real-time, ensuring the advice users receive is current and anything but generic. And Pefin does all this, for $10 a month. As for investments, Pefin requires no minimum investment size, and fees are 0.25% of assets under management, with the first $5,000 managed for free.

Q: Can you give us more insights into your Artificial Intelligence powered solution?

The neural network understands these financial rules and relationships, and propagates them forward in time, up to 80 years depending on the age of the client. The network starts with a user’s current finances and projects how they change over time with market conditions, inflation, taxes, government rules, and their plans. For any given user, the network evaluates anywhere from 2-5 million data points, depending on the complexity of their financial situation and financial plans are available 24/7.

BlueVine Expands Reach With up to $ 130 Million in New Debt Financing, Business Credit Line With Monthly Payments (PR Newswire), Rated: A

BlueVine is expanding its reach in online business lending with new debt financing of up to $130 million and a new additional line of credit product that allows business owners to make monthly, instead of weekly, payments, over 12 months.

BlueVine secured major funding as the company rolls out a 12-month business line of credit based on monthly payments, a new offering that would make it easier for business owners to meet their everyday funding needs.

BlueVine introduced the new product in response to client requests for a longer-term business line of credit with monthly payment plans. The new financing underscores the fintech pioneer’s commitment to innovation based on customer needs.

The new product gives business owners 12 months to repay each withdrawal in full, meaning lower payments each month.

Fintech market moves beyond lending (Financial Times), Rated: A

Goldman Sachs, arguably the world’s leading investment bank, has not been the greatest success story of recent times. After all the challenges of the 2008 financial crisis and the post-crisis regulatory glut, its profitability has declined sharply.

Today its stock market valuation, though far stronger than most banks, puts it on a so-called price-to-book valuation of 1.1 times. That is to say, its shares are worth 10 per cent more than the value of its net assets.

Compare that with the market’s view of Lending Club, the upstart peer-to-peer lender. Despite a scandal last year founded in slipshod controls, and a fall in the group’s share price from a 2015 high of more than $25 to barely a fifth of that today, it is relatively far more valuable than the Wall Street titan, with a price-to-book multiple of 2.6 times.

All that has yet to follow is a re-rating of Goldman stock — from bank to fintech. Though with barely $1bn of Goldman’s near $1tn balance sheet so far devoted to online lending, it may have a while to wait.

In a sign that the fintech business is maturing into more sophisticated areas, “regtech” is among the fastest-growing areas, accounting for a chunk of applications to the Future of Fintech awards.

Community Banks Take A Swing At FinTech Collaboration (PYMNTS), Rated: A

Community banks are typically a better bet for small businesses in search of a loan, with approval rates higher than those at larger financial institutions. But the latest data on SMB lending in the U.S. suggests a shift is ahead.

Earlier this month, Biz2Credit released its monthly Small Business Lending Index and found that approval rates at large banks increased more than they did at smaller community banks. And while community banks’ SMB loan approval rates are still higher than those at large banks (49.1 percent compared to 24.8 percent, respectively), separate analysis from the Federal Reserve, also published earlier this month, concluded that community banks are beginning to reexamine how small businesses fit into their broader loan portfolios.

The Fed found that small business lending at community banks actually declined in 2016, while SMB lending at big banks increased over the same period.

SENATE DEMOCRATS CLAIM A TOP BANKING REGULATOR IS SERVING ILLEGALLY IN HIS POSITION (The Intercept), Rated: A

SIX SENATE DEMOCRATS have asked the Treasury Department’s inspector general to investigate whether Keith Noreika, head of the Office of the Comptroller of the Currency, is illegally serving in office.

Noreika planned to serve temporarily until Joseph Otting, former CEO of OneWest Bank and Trump’s nominee for the OCC, was confirmed. But that hasn’t happened yet; Otting’s nomination has sat on the Senate calendar for over a month.

Special government employees are limited to 130 days of service over a 365-day period. The OCC contends that the number only refers to business days, meaning weekends can be taken off and Noreika still has until November to go. But “business days” appears nowhere in the statute.

No, Trello Didn’t “Fail To Build A Billion Dollar Business” (Medium), Rated: A

I’ve seen a lot of folks passing around that article about how Trello failed to build a billion dollar business. It’s stunningly obtuse.

The premise is that the software that was sold for a $400m acquisition was a failure because it wasn’t worth $1b.

When Fog Creek spun Trello off as its own entity, the amount of money they raised was $10m. That was the only money they ever raised, and it was all they needed to raise.

For almost anyone with a sincere connection to reality, a $400,000,000 exit is an amazing win.

The “Trello Failed” take is not only wrong…

Really, what is the issue with an exit that large, after a fundraise that small? I believe there’s a level of unicorn fetishism at play here that’s more than a little depressing. To think that on any level a company either reaches a billion dollars or has “failed” is to denigrate the work of entrepreneurs building amazing products and achieving amazing things.

I have no real interest in billion dollar companies. I’m interested in companies that serve their customers, build amazing products and make money. If they happen to reach a billion, that’s great. But getting to a billion is not a goal that keeps me up at night.

Companies Are Owning Less And Creating More Value (Forbes), Rated: A

Although our society and culture are slow to realize it, the assets of yesterday are quickly becoming the liabilities of today. This is true in business and in our individual lives as well.

Digital technology and digital assets, rather than physical things, are giving us options that are newer, faster, cheaper, and more convenient.  It appears that today, the less you own, the more have.

By owning less and relying on a network to share the load, they operate more profitably and scale rapidly and inexpensively, trouncing big, established, asset-heavy players.

So, what are we doing in a world where less (stuff) is becoming more (valuable) and access is trumping ownership?

  • First, we are lightening our balance sheets, both personal and corporate. People are carefully considering which assets they actually need to own, and what stuff actually creates more value than its cost of ownership.
  • Second, we are using our intangible assets, like skills, ideas, technology, and particularly relationships, to serve us in ways never before possible.
  • Third, we are identifying our own professional skills and differentiators for the gig economy.

Congress Should Fix Fintech Lending Model (Competitive Enterprise Institute), Rated: A

Originally announced for markup, the Protecting Consumers’ Access to Credit Act of 2017 never made it to a vote. Yet, this is one of the most important bills Congress can pass this session, as it provides a legislative fix to a damaging U.S. Court of Appeals ruling, Madden v. Midland Funding.

Nonbank Fintech lenders are not currently chartered at the federal level. Instead, each Fintech lender is required to charter in each the state in which it originates loans. Each state sets its own regulations with regards to interest rates. Such a patchwork of different regulations means that Fintech lenders often cannot lend to customers in other states at the same interest rates that they lend to their in-state clients. This puts Fintech lenders at a competitive disadvantage, as solely state-chartered firms cannot offer consistent products nationwide that can provide benefits from economies of scale.

Source: CEI.org

Fintech’s Achilles heel: Reaching low-income consumers (American Banker), Rated: A

Over the last decade, fintech companies have launched robo-advisers, digitized lending, improved fraud detection and created virtual currencies. In short, fintech firms have helped change our understanding of what is possible in financial services.

However, the fintech revolution has largely ignored the financial needs of the bottom third of the U.S. population. For instance, fintech companies have so far failed to successfully create an alternative to credit scores for the 51% of people with subprime scores. Secondly, fintech firms have yet to help move our national savings rate in a positive direction. Thirdly, the amount of money that lower-income households have left over every month after paying their expenses is still declining despite fintech apps’ promise to help people budget. According to data from the Pew Charitable Trusts, the typical low-income household had $1,500 of income left over after expenses in 2004. In 2014, they were $2,300 in the red after expenses.

One explanation: Consumer spending dictates the preponderance of innovation and investment, and spending by 5% of households with the highest income now directs one-fifth of gross domestic product.

AI can help people save more of their paycheck

Close to half of Americans have expenses that equal or exceed their income, making every month a financial balancing act.

A fintech company could use artificial intelligence to identify patterns in someone’s past family financial behavior — both successful and unsuccessful — to recommend an easy-to-follow budget, send reminders or prompts, and eventually, say, help someone consistently lower expenditures and increase savings. Digit, for instance, is one example of a fintech company paving the way to do just that. The digital service mines someone’s checking account data to determine what he or she can afford to save and then Digit automatically transfers that amount into someone’s savings account.

Improve government-issued benefit cards

Each month, 52.2 million Americans receive government benefits — and most of them receive the benefits on a payment card. Most of these payment cards lack associated mobile apps that could make it easier for someone to check balances, track spending or fund savings. The cards also fail to let someone pay utility or phone bills directly.

Peer-to-peer platforms that enable lending between friends and family

Twenty percent of Americans have a credit score below 600 and another 19.3% of Americans are considered to be “unscored” or “credit invisible.”

Pro-consumer auto and mortgage loan calculators

In 2014, auto loans (29%) and mortgages (28%) were the second and third largest debt categories in America. In a world where visiting two additional mortgage brokers (or getting two more quotes) could save someone over $24,000 over the lifetime of their loan, the lack of clarity and understanding when people are signing their loan documents is reprehensible.

Wall Street Veteran Joins PeerStreet To Lead Capital Markets Team (BusinessWire), Rated: B

PeerStreet, an award-winning platform for investing in real estate backed loans, is excited to announce the appointment of Louis Nees as Head of Capital Markets. He will be based in the firm’s headquarters in Los Angeles, California.

In this role, Nees is responsible for leading PeerStreet’s Capital Markets team, which plays a crucial part in interfacing with the growing number of investors seeking to invest in loans on PeerStreet. The company recently surpassed half a billion in cumulative loans funded, all with zero losses to investors, and monthly origination volumes now reach above $50 million.

With his deep Wall Street background, Nees will provide key guidance on multiple and varied capital sources for PeerStreet.

Centana Growth Partners Expands Investment Team with Senior Hires (BusinessWire), Rated: B

Centana Growth Partners (Centana), a unique growth equity firm focused on the future of financial services, today announced an expansion of its investment team with the hiring of Tom Davis, Principal, and Matthew Alfieri, Vice President. Mr. Davis and Mr. Alfieri join the firm after the successful close of its $250 million fund earlier this year.

Mr. Alfieri joins Centana from Goldman Sachs where he spent nine years, most recently as a Vice President with the Principal Strategic Investments team, where he invested in financial technology and enterprise technology companies.

Kansas AG’s office targeting student loan scammers (WIBW News Now), Rated: B

Kansas Attorney General Derek Schmidt is joining the Federal Trade Commission and ten of his colleagues from other states in a coordinated crackdown against student loan scammers.

“The student loan market is the second largest debt market after mortgages,” said Schmidt. “There’s more than $1.4 trillion in outstanding student loan balances around the country.”

Around 42 million Americans have student loan debt.

United Kingdom

UK Peer-To-Peer Lender RateSetter Receives FCA Regulatory OK (The New York Times), Rated: AAA

British peer-to-peer lending platform RateSetter on Tuesday said it had received full regulatory authorisation from the country’s Financial Conduct Authority watchdog.

P2PGI puts portion of Zopa loans up for sale (P2P Finance News), Rated: AAA

PEER-TO-PEER investment trust P2P Global Investments (P2PGI) has appointed Deutsche Bank to sell off 31,153 Zopa loans in its portfolio in the latest securitisation activity in the sector.

The bank is offering the loans in three tranches worth £208.9m overall.

The average value is £7,488 with an average interest rate of 7.2 per cent and remaining term of 45.7 months, Deutsche Bank said.

Inflation hitting higher income households hardest (P2P Finance News), Rated: AAA

NEW analysis by investment and financial planning group Tilney has revealed that the wealthiest households have experienced a much higher rate of inflation over the last two decades than everyone else.

In its household inflation index report, Tilney calculated that the top 10 per cent of households – those with incomes above £78,500 a year – have seen overall inflation of 64 per cent since 1997. That’s compared to 50.7 per cent for typical households (those with incomes of £26,900 to £30,000 a year) and 53.8 per cent for the lowest income families (less than £10,400).

Inflation has grown sharply in recent months, hitting a higher-than-expected 2.9 per cent in August, making it ever more difficult to savers to find an inflation-beating return from conventional savings accounts, adding to the allure of the peer-to-peer lending market.

Payday P2P lender Welendus receives full FCA approval (P2P Finance News), Rated: A

WELENDUS, the peer-to-peer payday lender, has received full authorisation from the Financial Conduct Authority (FCA.)

The milestone comes a year after the company was formed.

The platform, which wants to shake-up the payday lending market by offering more reasonable interest rates than its competitors, launched a crowdfunding campaign on Seedrs in January to raise £300,000, but closed that campaign two weeks ago and instead started a new one to raise £100,000.

Moneyfarm is changing the face of wealth management (City A.M.), Rated: A

Moneyfarm is one of the new kids on the block. Founders Giovanni Dapra and Paolo Galvani left behind their City careers to set it up in 2011. It’s an app-based digital wealth management platform, which expanded into the UK from Italy last year. Dapra, the firm’s chief executive, is on a mission.

Since moving to London, the business has doubled its user base, now managing £260m in assets across the UK and Italy.

As well as a partnership with Allianz Global Investors, and launching separate partnerships with Uberand Revolut, Moneyfarm is in the process of launching a pension product.

Fewer people are saving into a private pension plan than at any point for the past 60 years. Auto-enrolment has gone some of the way to curing this ill, yet still there is a reluctance to think ahead.

Collaboration brings benefits to business at every level, say bosses (The Yorkshire Post), Rated: A

One banking leader said that the rise of fintech and challenger banks had forced his and other large scale banks to collaborate more widely while all assembled agreed that universities and business leaders should work together more closely for the benefit of students as well as their respective organisations.

Pete Sumners, director of corporate structure finance at Clydesdale Yorkshire Bank, said that recent innovations in disruptive lending technology has meant that the banking sector at large had had to admit it did not have the technology to offer certain services and as such was forced to work with fintech companies: “In terms of banking, not just CYBG, collaboration has been forced on us by competition.

Simon Pilling, partner at Bond Dickinson, agreed that the rise of artificial intelligence had meant professional services had needed to change their business model but that there was still a need for skilled lawyers in all ends of the process.

Future of Fintech Awards shortlist 2017 (Financial Times), Rated: A

There are two categories; the Impact Award is for larger and more established fintech companies, which are starting to have an effect on the financial services industry, while the Innovation Award is for newer fintech companies that are bringing out novel solutions.

Impact Award

Funding Circle, a direct lending platform that connects investors to borrowers, is shortlisted for the second year running for our Impact Award. With valuation of more than $1bn it is one of the UK’s “unicorns” and the largest British online “peer-to-peer” company by cumulative amount lent. More than £3bn has now been lent through the platform, with £1.1bn of that in 2016.

THE JUDGES SAID:

“The company is big enough to be making an impact in small business lending now.”

Ant Financial Services, founded in 2014, is an affiliate of Alibaba, the Chinese e-commerce company.

THE JUDGES SAID:

“This is clearly one of the most innovative and impactful fintech companies of the moment, changing the landscape completely.”

California based Ripple, founded in 2012, has grown to be one of the world’s biggest blockchain networks. It allows businesses to transfer money globally at low cost using its own cryptocurrency XRP.

THE JUDGES SAID:

“This is no longer a prototype. Ripple is actually sending blockchain payments through. Many of these are still test payments but it is further than a lot of others.”

EFL Global provides alternative credit scoring for people who have previously been outside the banking system.

THE JUDGES SAID:

“There were many credit scoring entries and we liked what many of these were doing in terms of giving more people access to finance. However, we particularly liked the way EFL went beyond traditional credit score information.”

Digital Reasoning uses cognitive computing techniques to detect rogue traders at financial services companies.

THE JUDGES SAID:

“We thought this idea was cool. Cutting rogue trader activity and fraud at banks is a serious issue with consequences beyond just the banks themselves.”

Innovation Award

Micro finance lending platform QCash Financial was founded by the Washington State Employee Credit Union as an alternative to expensive payday loans.

THE JUDGES SAID:

“We liked this because it was an alternative to payday lending and an instance of an established financial institution doing something innovative.”

Token is creating an open banking platform aimed at making it easier for people, businesses and financial institutions to move money around. Using digital identity and smart tokens it offers a way for people to give third parties access to their account details in a secure and simple way.

THE JUDGES SAID:

“This is solving the problem that PSD2 brings, where banks need to provide APIs to authorised third parties. Token simplifies the many APIs and is already integrating 10 banks into the system.

RSRCHXchange was founded in 2014 as a one-stop-shop for asset management firms to purchase research services from banks, brokers and boutique providers. It will be particularly useful in helping banks comply with the EU’s new Mifid II rules, which come into force at the start of 2018.

THE JUDGES SAID:

This is solving a problem that comes with Mifid II. A more sophisticated solution than others in the market.

Bricklane.com is an online property ISA allowing anyone to participate in the housing market with an initial investment of as little as £100.

THE JUDGES SAID:

“We liked this because it is creating a new product. The founders say the main competitor is cash, with most of their funds coming from people transferring their ISAs.”

Castlight Financial is aiming to prevent another credit crunch by providing a more accurate way to assess what a consumer can afford to borrow. It collects data in real time from customers’ banks accounts, including income and expenditure, and uses these to build a clear picture of a their monthly disposable income. People who may have previously been refused loans because banks had too little data about them may become eligible for credit. Castlight says it can also speed up the mortgage decision process from six weeks to 10 minutes.

THE JUDGES SAID:

“The idea of better credit scoring is attractive and it is significant that the company has made a profit from the first year and has not had to take any financing.”

SMEs are ignoring their credit score (P2P Finance News), Rated: A

ALMOST half (44 per cent) of small- and medium-sized enterprises (SMEs) have never checked their credit score, new research from RateSetter Business Finance shows.

The study, released on Monday, found that a further six per cent have opted against checking their score in the last year, while less than one in five (18 per cent) have checked the score in the last six months.

The peer-to-peer lender pointed out that credit scores are an integral part of establishing whether a business has a decent record of repaying debt, and have a significant impact on their chances of getting further finance.

Epiphany appointed by Wonga to help with brand perception (Prolific North), Rated: B

Leeds search specialist Epiphany has been appointed to help improve the brand perception of payday loan company Wonga.

Epiphany will work in partnership with Wonga’s content agency, Cedar, on brand perception and delivering a customer-first multi-channel content strategy.  The agency will also be responsible for driving traffic and enquiries from organic search.

China

Chinese peer-to-peer marketplace Hexindai sets terms for $ 58 million min-max US IPO (NASDAQ), Rated: AAA

Hexindai, a Chinese marketplace for peer-to-peer lending, announced terms for its min-max US IPO on Monday. The offering is being made on a best-efforts, min-max basis and therefore will not be included in our IPO stats.

The Beijing, China-based company plans to raise at least $30,000,000 by offering a minimum of 2.7 million ADSs and a maximum of 8.9 million ADSs at a price range of $9 to $11. At the midpoint of the proposed range, Hexindai would command a fully diluted market value of $487 million.

European Union

Credimi: four asset management funds renovate and increase the commitment up to €72.5 million (Credimi Email), Rated: AAA

Barely a year after the launch, Credimi – the digital financing platform for SMEs that makes liquid the working capital in short time at low costs – has renewed the agreement with the four primary investment funds. They committed up to 72,5M€ to purchase the entire portfolio of commercial credits originated by the fintech platform.

Credimi is a fintech company officially authorized by the Bank of Italy to the public financing activity according to the dispositions contained in the new art.106 of the Banking Consolidated Law. The company will be able to provide funding to SMEs up to €300 million in the next months .

The four partners previously involved, Anima Sgr, Anthilia Capital Partner Sgr, BG Fund Management Luxembourg S.A. and Tikehau Capital, have decided to renew the agreement. Credimi is therefore reinforcing the attractiveness of its notes, which are the among the most profitable and diversified asset class among investments with a comparable risk profile.  In fact, the notes combine an average life of the underlying invoices of less than 3 months with a spread around 450 base points and credit losses of 0.3%.  Credimi finances hundreds of SMEs with average ticket of 20,000€, creating a low risk, diversified portfolio.

The portfolio subscribed by the four noteholders is untranched and pays a quarterly  coupon. Additionally, Credimi continues to keep a stake of around 5% (as fifth noteholder alongside with the other four) to have ‘skin in the game’. This is not requested by law as the note is untranched and is ensured by Credimi to the noteholders on a voluntary basis.

Since launch on the market, Credimi has achieved outstanding results, exceeding initial expectations: €40million of loans have been delivered to Italian SMEs and more than 2.000 invoices have been financed. The same strong  results have been obtained with the Supply Chain financing: by signing deals with corporations – such as Ariston Thermo, Jab group (Jimmy Choo and Bally), Pittarosso and few others – Credimi helps large enterprises to finance their suppliers at competitive prices and with an unmatched flexibility.

International

Lenddo and EFL Team Up to Lead Financial Inclusion Revolution (Lenddo Email), Rated: A

United by the common vision of providing financial inclusion for more than one billion new and underserved individuals across the globe, Lenddo and EFL will together provide a suite of credit scoring and identity verification products to more than 20 emerging markets.

Lenddo and EFL have individually facilitated over 5 million credit assessments since inception, allowing more than 50 financial institutions to disburse over $2 billion USD in credit to people with limited information. The combined company will work directly with banks, telcos, retailers, microfinance institutions and insurers to serve individuals and small businesses.

The first joint product offering goes live in Asia and Latin America today, with additional products and features scheduled for release in the coming months.

Australia

Australian banking doesn’t need Google to be competitive (Financial Review), Rated: A

A leading member of Australia’s fintech community has backed the view of veteran bankers that technology giants will be dissuaded from setting up shop in Australia and taking on the big four. But the disrupters see different reasons for Google’s absence.

SocietyOne CEO Jason Yetton said for the tech companies with the resources it wasn’t a question of whether they could disrupt the incumbents but whether they should do so.

In Australia there is a raft of smaller companies looking to carve out their own share of the financial services market including personal loans company Ratesetter, layby purchases Afterpay and online lender Zipmoney.

Tyro is a payments and technology company that also lends to small businesses. It also has Australia’s newest banking licence and is therefore subject to the same oversight as other authorised deposit taking institutions (ADIs).

Online Lender Prospa Forms New Partnership With Retail Marketplace MyDeal (Crowdfund Insider), Rated: A

Prospa, an Australian online lender for small businesses, has formed a partnership with Gandel-backed retail marketplace MyDeal, which will allow retailers on its platform to apply for loans of up to $250,000.

Senvirtne and his MyDeal team will be receiving a 1-2% small commission for every loan that comes through the marketplace.

India

PolicyBazaar Raises $ 77M at a $ 500M Valuation (Coverager), Rated: AAA

Gurgaon-based PolicyBazaar announced it has raised $77M in a Series E round led by Wellington Management , with participation from IDG Ventures India and True North; to name two. The online insurance aggregator has raised a total of $146.6M since its inception in 2008 and is currently valued at $500M.

According to VCCiRCLE, the company plans to go public by the end of 2018 after breaking even in November 2016.

Source: Coverager

Micro-lending startup KrazyBee raises $ 8M, plans to enter payday-loan segment (YourStory), Rated: A

On Monday, Bengaluru-based micro-lending startup KrazyBee said it had raised $8 million in a Series A round led by Xiaomi Technologies and Chinese venture capital fund Shunwei Capital. The funding raised was a combination of equity and debt, with participation from Essel Group’s E-City Ventures and RK Group.

The funding announcement comes within a year of the firm raising $3 million pre-Series A round in January from Plum Ventures. Prior to this, KrazyBee had raised a seed round of $2 million in May 2016.

Until July this year, the company claimed they had disbursed 80,000 loans and processed close to 170,000 loan applications. As of October 2017, the company had disbursed close to 150,000 loans and processed above 200,000 loan applications.  The founder claims that of this number, 75,000 loans have already matured with steady settlement.

The average size of loans by KrazyBee is around Rs 15,000 with the maximum tenure being 12 months.

Lending and borrowing limits on peer-to-peer lending platforms (Livemint), Rated: B

Many lenders find P2P platforms attractive because of their potential for giving higher returns, compared to fixed and savings bank deposits. In fact, these platforms also market their services by comparing the returns from P2P lending with returns from mutual funds. It is important to note here that these platforms cannot guarantee any return.

Thus, the RBI imposed limits on how much can be lent and how much can be borrowed by individuals from these platforms—to limit the risk exposure of individuals.

If such a person was to take a personal loan from a bank, it would come at 16-17%. Through P2P lending they can get that loan at around 14%. Those with low credit scores typically go to other NBFCs, and get loans at 22-23%.

No borrower can have loans of more than Rs10 lakh, from all the P2P platforms combined; and no more than Rs50,000 from one lender. All loans through P2P platforms come with a payback period that cannot be more than 36 months.

APAC

Markel International Launches Fintech Insurance for Asian Market (Insurance Journal), Rated: A

Markel International, the specialist insurer, has unveiled a fintech policy offering comprehensive protection for businesses in the financial technology sector in Asia, having successfully launched it in the UK early last year.

Coverage also extends to the costs involved when sensitive documents or data are lost.

On top of the professional indemnity core cover, the policy offers protection for three additional perils to protect clients against their key exposures:

  • Directors’ and officers’ liability cover protects against claims of mismanagement, which could be brought by shareholders, employees, creditors or regulators.
  • Theft option covers the insured against the stealing of money or other financial instruments, through both electronic and non-electronic means, including through extortion. It will also cover the cost of rectifying computer systems following a theft.
  • Cyber liability and loss cover provides protection if the insured suffers a network security incident, such as a hack, denial of service attack, or a computer virus, and will also cover business interruption losses arising from such an incident. This section includes cover for the cost of rectifying computer systems following a network security incident.

Baker McKenzie snags top G+T partner (Australasian Lawyer), Rated: B

Baker McKenzie has snagged a top partner from Gilbert + Tobin.

In addition to his knowledge in DCM matters, McGrath brings to Baker McKenzie a practice that covers a wide range of areas, including securitisation, leveraged and general finance, peer-to-peer lending, insolvency and restructuring, blockchain, and smart contracts.

Africa

SA’s Retailer Pick n Pay Reaches 200 000 Money Transfer Users (Tech Financials), Rated: AAA

South Africa’s Pick n Pay announced on Tuesday that it has 200 000 registered money transfer customers as of 27 August 2017.

The largest online grocery business in Africa is in partnership with digital bank TymeDigital, a subsidiary of Commonwealth Bank, to deliver money transfer.

In line with its plans to launch a digital bank, TymeDigital was recently awarded a banking licence by the South African Reserve Bank, a first in 18 years.

Authors:

George Popescu
Allen Taylor

Friday February 17 2017, Daily News Digest

P2P Global Investments

News Comments Today’s main news: OnDeck Capital struggles. SoFi in talks with Silver Lake for $500M funding. UK FinTech funding bounces back Today’s main analysis: FinTech deal sizes are shrinking. The alternative income source top managers are buying. Today’s thought-provoking articles: Starling CEO says EU law is good for UK FinTech. United States OnDeck Capital struggling. GP:” […]

P2P Global Investments

News Comments

United States

United Kingdom

European Union

Asia

Africa

News Summary

United States

OnDeck Capital shares plunge on downbeat outlook (Reuters), Rated: AAA

OnDeck Capital Inc (ONDK.N) shares fell as much as 24 percent on Thursday after the online lender posted its fifth straight quarterly loss and set aside more money for future losses after determining its calculations were askew.

Like its digital lending peers, OnDeck has been struggling with investor’ concerns over the quality of its underwriting and ability to maintain a rapid pace of growth.

As a result, OnDeck’s provision for loan losses more than doubled during the fourth quarter, to $55.7 million.

Amid all the changes, OnDeck’s originations of $2.4 billion in 2016 were up 26 percent from the prior year, less than half the pace of growth it posted in 2015.

The company is taking several steps to slash costs by $20 million a year, including cutting 11 percent of its staff and reducing marketing and technology expenses, Breslow said.

SoFi Is in Talks for $ 500 Million Funding Led by Silver Lake (Bloomberg), Rated: AAA

Social Finance Inc. is close to raising about $500 million in a funding round expected to be led by private equity firm Silver Lake Partners to bolster the expansion of its online-lending businesses and personal financial services, according to people familiar with the matter.

The fundraising round values SoFi at $4.3 billion, higher than its previous valuation of $3.2 billion, one of the people said. The deal isn’t finalized and could still fall through, the people said.

Why Online Lenders Keep Disappointing (The Wall Street Journal), Rated: A

Online lenders LendingClub and On Deck Capital took some nasty tumbles in 2016. Now, just as it began to look like they had regained their footing, they are getting tripped up again.

LendingClub shares fell 4.7% on Wednesday after the company gave disappointing guidance for 2017. Then, on Thursday morning, On Deck shares tanked by around 15% on a fourth-quarter net loss that was much bigger than expected. LendingClub’s stock fell again by around 6%.

The company’s fourth-quarter results show progress on all these fronts, but also the costs. Banks, which had shied away from buying the company’s loans after last year’s revelations, have largely returned, funding 31% of loan originations in the fourth quarter, up from 13% the previous quarter.

But LendingClub still disappointed investors by forecasting a bigger-than-expected net loss in 2017. Higher expenses are one reason, with stock-based compensation rising by 35% last year to $69.2 million. This likely has to do with the need to retain and attract talent in the wake of last year’s turmoil, says KBW analyst Jefferson Harralson. The company’s loan originations also have been basically flat for three quarters in a row, making it harder to grow revenue enough to overcome the higher expenses.

ArborCrowd Announces $ 22.4 Million Commercial Real Estate Deal (Crowdfund Insider), Rated: A

ArborCrowd announced on Thursday the launch of its latest real estate investment opportunity that is open to accredited investors. According to the portal, the “Southern States Multifamily Portfolio” features three multifamily properties in both Alabama and Mississippi.

Since its debut, ArborCrowd has provided the public with exclusive multifamily investment properties in New York City.

According to ArborCrowd, the $24.4 million Southern States Multifamily Portfolio was acquired in November 2016 by Varden Capital Properties, LLC as a value-add repositioning. ArborCrowd investors have the opportunity to own a piece of a $2 million equity stake in the Portfolio with a targeted 17 percent to 20 percent Internal Rate of Return (IRR) and a targeted investment hold period of two to three years.

Fintech deal sizes are shrinking (Business Insider), Rated: A

Global VC-backed fintech funding reached $12.7 billion in 2016, down 13% year-over-year (YoY) from $14.6 billion in 2015. However, deal numbers held firm at 836, down just 1% YoY from 848 in 2015. That suggests the decline in funding was the result of smaller deal sizes, and that’s backed up by a couple of other key pieces of data.

  • Fewer mega-rounds. There were 38 mega-rounds ($50 million+) in 2016, down from 63 in 2015.
  • Two deals in China accounted for $2.2 billion. Lending platform LU.com raised $1.2 billion, while JD Finance, a subsidiary of e-commerce giant JD.com, raised $1.0 billion.

OCC fintech charter: Something Ds and Rs can both love (American Banker), Rated: A

As the Office of the Comptroller of the Currency moves forward to grant national bank charters to fintech companies, unity of purpose could be achieved by stepping back to consider the broad policy goals that Democrats and Republicans typically seek in regulating and supervising financial services markets and businesses.

Both Democrats and Republicans want to address the financial needs of smaller Main Street businesses. Both parties understand that small and midsize businesses are the ones creating the jobs of the future. Both Republicans and Democrats prefer simplicity over complexity.

Concern for abuse of this charter by unscrupulous actors is legitimate and is best addressed by continuing to allow state regulators and attorneys general to enforce civil and criminal laws against fraud and unfair and deceptive practices, while consolidating supervision in a single strong agency at the federal level.

A charter is a perfect example of retaining significant state authority made possible by clear and simple federal rules. This federal-state partnership will produce strong governance and controls on a national scale through the supervisory process. It is the only way to achieve uniform requirements across all 50 states. Maintaining a costly, complex and time-consuming state licensing process while at the same time requiring companies to satisfy federal mandates will kill off a job-creating pro-consumer innovation.

US regulatory environment threatens the rise of fintech (TechCrunch), Rated: A

Fintech companies earned approximately ₤6.6 ($8.15) billion in revenue globally in 2015, according to a report commissioned by the Treasury of the U.K. government. Recent data on the sector from KPMG shows that while North America has fallen behind Asia in terms of regional investments in fintech, companies in North America still received $900 million of $2.4 billion, or more than 37.5 percent of funds, in the third quarter of 2016. KPMG notes that both the number of deals and total amount invested in American fintech companies has dropped significantly, while Asia continues to see growth in fintech investments.

The U.S. is producing many fintech startups attractive to investors — just not as attractive as the less numerous Asian startups. The third quarter of 2016 was the second of the year in which Asian fintech companies attracted more venture capital funding than North America, and pending fourth quarter results, total investment for the year by venture capital in Asian fintech outstrips that in North American fintech $4.7 billion to $4.5 billion. America remains a fintech leader, but its position is being challenged.

Not just the Treasury report, but investors themselves, as well as founders, have identified regulation as a main concern, and European regulators have responded by overhauling EU laws related to payment services to benefit fintech startups. In Asia, numerous countries have already adjusted regulations to promote fintech growth, including the largest consumer markets, China and India.

The problem with fintech regulation in the U.S. is not just what those regulations are, but persistent confusion about what those regulations are, and deep uncertainty about how they are evolving.

Marketplace Lending, The Crowdfunding Alternative? (GlobeSt.com), Rated: A

We sat down with Gary Bechtel, president of Money360, to talk about the growth in the market and the acceptance of marketplace lending platforms.

GlobeSt.com: What are the benefits of marketplace lending?

Bechtel: Speed, flexibility and creativity are huge competitive advantages, especially in the bridge lending arena, where the ability to react and close loans quickly is key. The ability to operate under reasonable regulatory oversight, and without the multiple layers of approvals and regulation that govern more traditional lenders, helps us speed up the process dramatically.

GlobeSt.com: What opportunities has this created for Money 360?  

Bechtel: We are seeing more and more transactions that otherwise would have gone to traditional lending sources because of our ability to react quickly and be more creative with deal structures. We have grown to accommodate larger transactions, filling a void left by banks, credit unions, life companies and CMBS lenders. We see this opportunity as an ongoing trend and are building our business accordingly.

The Whaley Report: Peer-to-peer pressure (Market Intelligence Center), Rated: A

I read an article last week, “How Investors Can Earn 7% Returns in a 2.5% World” and  I’m convinced it’s the beginning of the end for some unsuspecting investors.

The author, Stephen McBride, discusses the benefits of peer to peer lending as an asset class for investors who want to enhance the yield on their portfolios in light of the current low yield environment.

P2P lending may not wipe out wealth like a good old fashioned financial crisis but there are certainly less risky situations. Bungee jumping in Mexico or “investing” your paycheck in lottery scratchers comes to mind.

Size Matters

First, the average loan amount on various P2P platforms, like Lending Club, is $25. Let’s be conservative and say that you have decided to “invest” $20K of your hard-earned shekels in P2P lending to enhance your investment yield. Your $20K would be lent out to approximately 800 people, to fund everything from movie screenplays to food trucks specializing in cuisine from New Caledonia.

Fees

Just like any other investment opportunity, you pay to play. Lending club charges 1% on all monthly payments that you receive from your peers to whom you’ve lent money. They also take a healthy amount of fees for any collections process they go through for delinquent payments. On that basis alone, if your return starts out at 7%, like this article suggests, you are already down to a 6% net return before you ever transfer the money to your bank account.

Loan Shark Says What?

This is going to shock you but not all 800 of your peers are going to repay you the $25 you lent them to start their new Cat Tattoo Parlor. Based on data from Lending Club, the default risk of your peer group is not to be trifled with.

Similar to corporate bond ratings, people seeking to borrow money through a P2P platform are rated from “A” to “G.” An “A” rating is lower risk and a “G” is the guy who has 10 credit cards maxed out, no income but somehow manages to buy lottery scratchers every week.

No rational person is carving out a percentage of their portfolio for peer to peer lending. The risk-adjusted reward of this type of investing just doesn’t warrant it.

5 Common Misconceptions About Alternative Lending (Business2Community), Rated: B

Today, businesses have learned that alternative lending, which includes commercial business loans, factoring, peer-to-peer lending and crowdfunding, can solve many problems quickly and efficiently without a lot of the delay and paperwork associated with bank loans.

Only bank-rejects apply to alternative lenders:

While it’s true that many businesses find it easier to qualify for a loan from an alternative source than from a bank, many owners prefer dealing with alternative lenders, as they tend to be more flexible, less judgmental and faster to respond. Many alternative lenders do not require collateral, can process an application in a few hours, and fund a loan within a day or two.

You have to be desperate to seek an alternative loan:

Alternative lenders assess the risk of each loan and assign an interest rate that makes sense. Any good alternative lender wants to see its borrowers succeed, not fail, and will usually work with business owners to come up with solutions with the right fit.

You can hurt your credit score by borrowing from an alternative lender:

If you pay back your loan responsibly, your business’ credit score should increase.

You need high margins to make alternative loans work:

IOU Financial has only four funding requirements, and none have anything to do with margins. We require that you own and operate your own business, have been in business for at least a year, make 10 or more deposits per month and have average daily balance of $3,000 per month.

Alternative lending is unregulated:

The business model and cost structure of alternative lenders are much different from those of banks. Nonetheless, alternative lenders must adhere to federal and state lending regulations that require truthfulness and disclosure. There is also the whole area of contract law that governs alternative loans.

SoFi hires Condé Nast’s Danika Owsley for consumer comms (PR Week), Rated: B

Financial technology company SoFi has hired media specialist Danika Owsley as its first director of consumer comms.

Owsley will report to SoFi’s comms leader, VP of communications and policy Jim Prosser, when she starts in the role on February 28.

The San Francisco-based company hired Owsley to work in New York, home to most media outlets that are relevant to SoFi’s operations. SoFi bills itself as a “modern finance company” and many of its services are focused on millennials.

United Kingdom

P2P Lender Folk2Folk Joins Peer to Peer Finance Association (Crowdfund Insider), Rated: AAA

Peer to peer lender Folk2Folk has joined the UK Peer to Peer Finance Association (P2PFA).  The P2PFA is acknowledged as a stamp of quality operations as members are held to a high standard and required to follow certain transparency guidelines.

Founded in 2011 as a self-regulatory entity for the sector, the largest UK peer to peer lending platforms are members of the P2PFA and represent more than 75% of the UK P2P lending market. P2PFA members operate a diverse range of business models within this segment of finance and collectively lent almost £3 billion during 2016.

The alternative income source the top managers are buying (Trustnet), Rated: AAA

Industry powerhouses Invesco, Woodford, M&G, Aviva and AXA are among those turning to peer-to-peer lending for alternative streams of income, according to industry experts.

Indeed, over the past 18 months, UK gilts have performed particularly strongly, returning 8.59 per cent – though this has fallen back from highs in August 2016 where the index was up 17.23 per cent.

In fact, if not for a strong run for UK equities at the start of the year, gilts would still be outperforming the FTSE 100, which has returned 14.51 per cent over the period.

The industry brings a stable pool of capital to an industry that craves that stability of capital as knowing that the lender is there enables a much more attractive and reliable borrowing rhetoric, he adds.

His company runs the £682m P2P Global Investments PLC trust, which buys higher-quality loans (grade A, B and C) from the platform providers from across the market cap spectrum, though it currently focuses on the developed markets only.

Since its launch in 2014, the fund has grown its dividend in each year and currently pays out 5.48 per cent.

Over its lifetime, had an investors paid in £10,000 on the day of its launch, the trust would have paid £1,158, according to FE Analytics.

However, Sachin Patel, chief capital officer at peer-to-peer platform provider Funding Circle says delinquency rates are currently at historic lows.

While the sector will likely be hit by a financial crisis – such as the one seen in 2008 – as borrowers will be more likely to default, he says they are not seeing any signs of stress among their borrowers.

Indeed, with delinquency rates so low, the platform released the SME Income fund at the end of 2015 with the aim of giving investors a passive option to the asset class.

UK FinTech Funding Bounces Back in Q4 2016 (Cryptocoins News), Rated: A

U.K. FinTech startups raised $173 million across 16 deals in Q4 2016, an increase of $95 million from Q3, according to a report from CB Insights.

Despite an increase in U.K. financial technology investment during Q4 2016, across the whole year the amount raised only amounted to $494 million compared to $962 million in 2015. During Q4 2015, U.K. FinTech funding reached $275 million.

CB Insights found that in 2016, European venture capital funding reached $1.2 billion across 179 deals, down from $1.6 billion during 2015.

Uber launching financial advice sessions and appeals panel for UK workers (Belfast Telegraph), Rated: A

Uber is offering English courses, financial advice and introducing an appeals panel for its UK workers after facing criticism over lack of support and rights for its drivers.

It is now launching earnings advice sessions on how to best take advantage of the app, flexible pay options that allow drivers to cash out their fares before the end of the week and discounted online investment advice for products like ISAs and pensions.

European Union

The CEO of startup bank Starling says EU law is ‘important and good’ for UK fintech (Business Insider), Rated: A

The founder and CEO of digital-only, startup bank Starling says EU law has been good for fostering Britain’s flourishing fintech — financial technology — sector and says she fears Brexit may set it back.

However, Boden is worried that Brexit will cause the UK to miss out on laws such as the Payment Service Directive Two (PSD2), which forces banks to open up their data to new entrants. This will allow third parties to help people manage their accounts and loosen banks’ stranglehold of customer relationships. PSD2 comes into force in 2018.

Boden, a former executive of Allied Irish Bank, told the FT it is “disappointing” that Starling will be unable to launch across Europe using passporting rules. Theresa May has made clear that her government plans to sacrifice EU passporting rules, which let financial firms sell services across the EU from London, in order to regain control over immigration.

Starling has yet to launch but has gained its banking licence.

REAL ESTATE LESS THAN 10.000 EUROS, IT IS POSSIBLE! (The Quebec Telegram), Rated: A

Note: it is possible to lodge the shares in a PEA, to erase taxation. “However, we advise against investing below 5,000 euros, because the tax savings will be absorbed by bank charges , ” says Cyril Benchimol, CEO of Immovesting.

Asia

Experian Partners With Lenddo to use its Solution in Financial Inclusion efforts (Benzinga), Rated: AAA

Experian, the leader in global information services, will partner with Lenddo, a leader in non-traditional data solutions, as part of Experian’s Consumer Financial Inclusion Indexing platform in Indonesia and Vietnam.Using Experian’s global expertise and knowledge, the introduction of Lenddo’s technology into Experian’s platform will provide financial firms with more information to offer appropriate financial services. Consumers who are unbanked or underserved by major financial institutions will gain access to a gamut of financial services including remittances, savings, credit and wealth management services.

Southeast Asia is poised to remain one of the fastest groups of economies in the world, with an unbanked population of about 438 million people. With the wealth of alternative data and innovative technology available, financial access for the unbanked has seen a rapid rise and many opportunities created to serve this new and underserved market.

Africa

Investment group buys into SA peer-to-peer lending firm RainFin (BusinessTech), Rated: AAA

RainFin and the LeBashe Investment Group have concluded a transaction for the latter to acquire a 30% stake in RainFin, for an undisclosed amount.

Barclays Africa (Absa) originally acquired a 49% stake in the peer-to-peer lending firm in 2014, however, in late 2016, the company’s founders and directors said that they would buy that stake back.

Authors:

George Popescu
Allen Taylor

Friday February 17 2017, Daily News Digest

P2P Global Investments

News Comments Today’s main news: OnDeck Capital struggles. SoFi in talks with Silver Lake for $500M funding. UK FinTech funding bounces back Today’s main analysis: FinTech deal sizes are shrinking. The alternative income source top managers are buying. Today’s thought-provoking articles: Starling CEO says EU law is good for UK FinTech. United States OnDeck Capital struggling. GP:” […]

P2P Global Investments

News Comments

United States

United Kingdom

European Union

Asia

Africa

News Summary

United States

OnDeck Capital shares plunge on downbeat outlook (Reuters), Rated: AAA

OnDeck Capital Inc (ONDK.N) shares fell as much as 24 percent on Thursday after the online lender posted its fifth straight quarterly loss and set aside more money for future losses after determining its calculations were askew.

Like its digital lending peers, OnDeck has been struggling with investor’ concerns over the quality of its underwriting and ability to maintain a rapid pace of growth.

As a result, OnDeck’s provision for loan losses more than doubled during the fourth quarter, to $55.7 million.

Amid all the changes, OnDeck’s originations of $2.4 billion in 2016 were up 26 percent from the prior year, less than half the pace of growth it posted in 2015.

The company is taking several steps to slash costs by $20 million a year, including cutting 11 percent of its staff and reducing marketing and technology expenses, Breslow said.

SoFi Is in Talks for $ 500 Million Funding Led by Silver Lake (Bloomberg), Rated: AAA

Social Finance Inc. is close to raising about $500 million in a funding round expected to be led by private equity firm Silver Lake Partners to bolster the expansion of its online-lending businesses and personal financial services, according to people familiar with the matter.

The fundraising round values SoFi at $4.3 billion, higher than its previous valuation of $3.2 billion, one of the people said. The deal isn’t finalized and could still fall through, the people said.

Why Online Lenders Keep Disappointing (The Wall Street Journal), Rated: A

Online lenders LendingClub and On Deck Capital took some nasty tumbles in 2016. Now, just as it began to look like they had regained their footing, they are getting tripped up again.

LendingClub shares fell 4.7% on Wednesday after the company gave disappointing guidance for 2017. Then, on Thursday morning, On Deck shares tanked by around 15% on a fourth-quarter net loss that was much bigger than expected. LendingClub’s stock fell again by around 6%.

The company’s fourth-quarter results show progress on all these fronts, but also the costs. Banks, which had shied away from buying the company’s loans after last year’s revelations, have largely returned, funding 31% of loan originations in the fourth quarter, up from 13% the previous quarter.

But LendingClub still disappointed investors by forecasting a bigger-than-expected net loss in 2017. Higher expenses are one reason, with stock-based compensation rising by 35% last year to $69.2 million. This likely has to do with the need to retain and attract talent in the wake of last year’s turmoil, says KBW analyst Jefferson Harralson. The company’s loan originations also have been basically flat for three quarters in a row, making it harder to grow revenue enough to overcome the higher expenses.

ArborCrowd Announces $ 22.4 Million Commercial Real Estate Deal (Crowdfund Insider), Rated: A

ArborCrowd announced on Thursday the launch of its latest real estate investment opportunity that is open to accredited investors. According to the portal, the “Southern States Multifamily Portfolio” features three multifamily properties in both Alabama and Mississippi.

Since its debut, ArborCrowd has provided the public with exclusive multifamily investment properties in New York City.

According to ArborCrowd, the $24.4 million Southern States Multifamily Portfolio was acquired in November 2016 by Varden Capital Properties, LLC as a value-add repositioning. ArborCrowd investors have the opportunity to own a piece of a $2 million equity stake in the Portfolio with a targeted 17 percent to 20 percent Internal Rate of Return (IRR) and a targeted investment hold period of two to three years.

Fintech deal sizes are shrinking (Business Insider), Rated: A

Global VC-backed fintech funding reached $12.7 billion in 2016, down 13% year-over-year (YoY) from $14.6 billion in 2015. However, deal numbers held firm at 836, down just 1% YoY from 848 in 2015. That suggests the decline in funding was the result of smaller deal sizes, and that’s backed up by a couple of other key pieces of data.

  • Fewer mega-rounds. There were 38 mega-rounds ($50 million+) in 2016, down from 63 in 2015.
  • Two deals in China accounted for $2.2 billion. Lending platform LU.com raised $1.2 billion, while JD Finance, a subsidiary of e-commerce giant JD.com, raised $1.0 billion.

OCC fintech charter: Something Ds and Rs can both love (American Banker), Rated: A

As the Office of the Comptroller of the Currency moves forward to grant national bank charters to fintech companies, unity of purpose could be achieved by stepping back to consider the broad policy goals that Democrats and Republicans typically seek in regulating and supervising financial services markets and businesses.

Both Democrats and Republicans want to address the financial needs of smaller Main Street businesses. Both parties understand that small and midsize businesses are the ones creating the jobs of the future. Both Republicans and Democrats prefer simplicity over complexity.

Concern for abuse of this charter by unscrupulous actors is legitimate and is best addressed by continuing to allow state regulators and attorneys general to enforce civil and criminal laws against fraud and unfair and deceptive practices, while consolidating supervision in a single strong agency at the federal level.

A charter is a perfect example of retaining significant state authority made possible by clear and simple federal rules. This federal-state partnership will produce strong governance and controls on a national scale through the supervisory process. It is the only way to achieve uniform requirements across all 50 states. Maintaining a costly, complex and time-consuming state licensing process while at the same time requiring companies to satisfy federal mandates will kill off a job-creating pro-consumer innovation.

US regulatory environment threatens the rise of fintech (TechCrunch), Rated: A

Fintech companies earned approximately ₤6.6 ($8.15) billion in revenue globally in 2015, according to a report commissioned by the Treasury of the U.K. government. Recent data on the sector from KPMG shows that while North America has fallen behind Asia in terms of regional investments in fintech, companies in North America still received $900 million of $2.4 billion, or more than 37.5 percent of funds, in the third quarter of 2016. KPMG notes that both the number of deals and total amount invested in American fintech companies has dropped significantly, while Asia continues to see growth in fintech investments.

The U.S. is producing many fintech startups attractive to investors — just not as attractive as the less numerous Asian startups. The third quarter of 2016 was the second of the year in which Asian fintech companies attracted more venture capital funding than North America, and pending fourth quarter results, total investment for the year by venture capital in Asian fintech outstrips that in North American fintech $4.7 billion to $4.5 billion. America remains a fintech leader, but its position is being challenged.

Not just the Treasury report, but investors themselves, as well as founders, have identified regulation as a main concern, and European regulators have responded by overhauling EU laws related to payment services to benefit fintech startups. In Asia, numerous countries have already adjusted regulations to promote fintech growth, including the largest consumer markets, China and India.

The problem with fintech regulation in the U.S. is not just what those regulations are, but persistent confusion about what those regulations are, and deep uncertainty about how they are evolving.

Marketplace Lending, The Crowdfunding Alternative? (GlobeSt.com), Rated: A

We sat down with Gary Bechtel, president of Money360, to talk about the growth in the market and the acceptance of marketplace lending platforms.

GlobeSt.com: What are the benefits of marketplace lending?

Bechtel: Speed, flexibility and creativity are huge competitive advantages, especially in the bridge lending arena, where the ability to react and close loans quickly is key. The ability to operate under reasonable regulatory oversight, and without the multiple layers of approvals and regulation that govern more traditional lenders, helps us speed up the process dramatically.

GlobeSt.com: What opportunities has this created for Money 360?  

Bechtel: We are seeing more and more transactions that otherwise would have gone to traditional lending sources because of our ability to react quickly and be more creative with deal structures. We have grown to accommodate larger transactions, filling a void left by banks, credit unions, life companies and CMBS lenders. We see this opportunity as an ongoing trend and are building our business accordingly.

The Whaley Report: Peer-to-peer pressure (Market Intelligence Center), Rated: A

I read an article last week, “How Investors Can Earn 7% Returns in a 2.5% World” and  I’m convinced it’s the beginning of the end for some unsuspecting investors.

The author, Stephen McBride, discusses the benefits of peer to peer lending as an asset class for investors who want to enhance the yield on their portfolios in light of the current low yield environment.

P2P lending may not wipe out wealth like a good old fashioned financial crisis but there are certainly less risky situations. Bungee jumping in Mexico or “investing” your paycheck in lottery scratchers comes to mind.

Size Matters

First, the average loan amount on various P2P platforms, like Lending Club, is $25. Let’s be conservative and say that you have decided to “invest” $20K of your hard-earned shekels in P2P lending to enhance your investment yield. Your $20K would be lent out to approximately 800 people, to fund everything from movie screenplays to food trucks specializing in cuisine from New Caledonia.

Fees

Just like any other investment opportunity, you pay to play. Lending club charges 1% on all monthly payments that you receive from your peers to whom you’ve lent money. They also take a healthy amount of fees for any collections process they go through for delinquent payments. On that basis alone, if your return starts out at 7%, like this article suggests, you are already down to a 6% net return before you ever transfer the money to your bank account.

Loan Shark Says What?

This is going to shock you but not all 800 of your peers are going to repay you the $25 you lent them to start their new Cat Tattoo Parlor. Based on data from Lending Club, the default risk of your peer group is not to be trifled with.

Similar to corporate bond ratings, people seeking to borrow money through a P2P platform are rated from “A” to “G.” An “A” rating is lower risk and a “G” is the guy who has 10 credit cards maxed out, no income but somehow manages to buy lottery scratchers every week.

No rational person is carving out a percentage of their portfolio for peer to peer lending. The risk-adjusted reward of this type of investing just doesn’t warrant it.

5 Common Misconceptions About Alternative Lending (Business2Community), Rated: B

Today, businesses have learned that alternative lending, which includes commercial business loans, factoring, peer-to-peer lending and crowdfunding, can solve many problems quickly and efficiently without a lot of the delay and paperwork associated with bank loans.

Only bank-rejects apply to alternative lenders:

While it’s true that many businesses find it easier to qualify for a loan from an alternative source than from a bank, many owners prefer dealing with alternative lenders, as they tend to be more flexible, less judgmental and faster to respond. Many alternative lenders do not require collateral, can process an application in a few hours, and fund a loan within a day or two.

You have to be desperate to seek an alternative loan:

Alternative lenders assess the risk of each loan and assign an interest rate that makes sense. Any good alternative lender wants to see its borrowers succeed, not fail, and will usually work with business owners to come up with solutions with the right fit.

You can hurt your credit score by borrowing from an alternative lender:

If you pay back your loan responsibly, your business’ credit score should increase.

You need high margins to make alternative loans work:

IOU Financial has only four funding requirements, and none have anything to do with margins. We require that you own and operate your own business, have been in business for at least a year, make 10 or more deposits per month and have average daily balance of $3,000 per month.

Alternative lending is unregulated:

The business model and cost structure of alternative lenders are much different from those of banks. Nonetheless, alternative lenders must adhere to federal and state lending regulations that require truthfulness and disclosure. There is also the whole area of contract law that governs alternative loans.

SoFi hires Condé Nast’s Danika Owsley for consumer comms (PR Week), Rated: B

Financial technology company SoFi has hired media specialist Danika Owsley as its first director of consumer comms.

Owsley will report to SoFi’s comms leader, VP of communications and policy Jim Prosser, when she starts in the role on February 28.

The San Francisco-based company hired Owsley to work in New York, home to most media outlets that are relevant to SoFi’s operations. SoFi bills itself as a “modern finance company” and many of its services are focused on millennials.

United Kingdom

P2P Lender Folk2Folk Joins Peer to Peer Finance Association (Crowdfund Insider), Rated: AAA

Peer to peer lender Folk2Folk has joined the UK Peer to Peer Finance Association (P2PFA).  The P2PFA is acknowledged as a stamp of quality operations as members are held to a high standard and required to follow certain transparency guidelines.

Founded in 2011 as a self-regulatory entity for the sector, the largest UK peer to peer lending platforms are members of the P2PFA and represent more than 75% of the UK P2P lending market. P2PFA members operate a diverse range of business models within this segment of finance and collectively lent almost £3 billion during 2016.

The alternative income source the top managers are buying (Trustnet), Rated: AAA

Industry powerhouses Invesco, Woodford, M&G, Aviva and AXA are among those turning to peer-to-peer lending for alternative streams of income, according to industry experts.

Indeed, over the past 18 months, UK gilts have performed particularly strongly, returning 8.59 per cent – though this has fallen back from highs in August 2016 where the index was up 17.23 per cent.

In fact, if not for a strong run for UK equities at the start of the year, gilts would still be outperforming the FTSE 100, which has returned 14.51 per cent over the period.

The industry brings a stable pool of capital to an industry that craves that stability of capital as knowing that the lender is there enables a much more attractive and reliable borrowing rhetoric, he adds.

His company runs the £682m P2P Global Investments PLC trust, which buys higher-quality loans (grade A, B and C) from the platform providers from across the market cap spectrum, though it currently focuses on the developed markets only.

Since its launch in 2014, the fund has grown its dividend in each year and currently pays out 5.48 per cent.

Over its lifetime, had an investors paid in £10,000 on the day of its launch, the trust would have paid £1,158, according to FE Analytics.

However, Sachin Patel, chief capital officer at peer-to-peer platform provider Funding Circle says delinquency rates are currently at historic lows.

While the sector will likely be hit by a financial crisis – such as the one seen in 2008 – as borrowers will be more likely to default, he says they are not seeing any signs of stress among their borrowers.

Indeed, with delinquency rates so low, the platform released the SME Income fund at the end of 2015 with the aim of giving investors a passive option to the asset class.

UK FinTech Funding Bounces Back in Q4 2016 (Cryptocoins News), Rated: A

U.K. FinTech startups raised $173 million across 16 deals in Q4 2016, an increase of $95 million from Q3, according to a report from CB Insights.

Despite an increase in U.K. financial technology investment during Q4 2016, across the whole year the amount raised only amounted to $494 million compared to $962 million in 2015. During Q4 2015, U.K. FinTech funding reached $275 million.

CB Insights found that in 2016, European venture capital funding reached $1.2 billion across 179 deals, down from $1.6 billion during 2015.

Uber launching financial advice sessions and appeals panel for UK workers (Belfast Telegraph), Rated: A

Uber is offering English courses, financial advice and introducing an appeals panel for its UK workers after facing criticism over lack of support and rights for its drivers.

It is now launching earnings advice sessions on how to best take advantage of the app, flexible pay options that allow drivers to cash out their fares before the end of the week and discounted online investment advice for products like ISAs and pensions.

European Union

The CEO of startup bank Starling says EU law is ‘important and good’ for UK fintech (Business Insider), Rated: A

The founder and CEO of digital-only, startup bank Starling says EU law has been good for fostering Britain’s flourishing fintech — financial technology — sector and says she fears Brexit may set it back.

However, Boden is worried that Brexit will cause the UK to miss out on laws such as the Payment Service Directive Two (PSD2), which forces banks to open up their data to new entrants. This will allow third parties to help people manage their accounts and loosen banks’ stranglehold of customer relationships. PSD2 comes into force in 2018.

Boden, a former executive of Allied Irish Bank, told the FT it is “disappointing” that Starling will be unable to launch across Europe using passporting rules. Theresa May has made clear that her government plans to sacrifice EU passporting rules, which let financial firms sell services across the EU from London, in order to regain control over immigration.

Starling has yet to launch but has gained its banking licence.

REAL ESTATE LESS THAN 10.000 EUROS, IT IS POSSIBLE! (The Quebec Telegram), Rated: A

Note: it is possible to lodge the shares in a PEA, to erase taxation. “However, we advise against investing below 5,000 euros, because the tax savings will be absorbed by bank charges , ” says Cyril Benchimol, CEO of Immovesting.

Asia

Experian Partners With Lenddo to use its Solution in Financial Inclusion efforts (Benzinga), Rated: AAA

Experian, the leader in global information services, will partner with Lenddo, a leader in non-traditional data solutions, as part of Experian’s Consumer Financial Inclusion Indexing platform in Indonesia and Vietnam.Using Experian’s global expertise and knowledge, the introduction of Lenddo’s technology into Experian’s platform will provide financial firms with more information to offer appropriate financial services. Consumers who are unbanked or underserved by major financial institutions will gain access to a gamut of financial services including remittances, savings, credit and wealth management services.

Southeast Asia is poised to remain one of the fastest groups of economies in the world, with an unbanked population of about 438 million people. With the wealth of alternative data and innovative technology available, financial access for the unbanked has seen a rapid rise and many opportunities created to serve this new and underserved market.

Africa

Investment group buys into SA peer-to-peer lending firm RainFin (BusinessTech), Rated: AAA

RainFin and the LeBashe Investment Group have concluded a transaction for the latter to acquire a 30% stake in RainFin, for an undisclosed amount.

Barclays Africa (Absa) originally acquired a 49% stake in the peer-to-peer lending firm in 2014, however, in late 2016, the company’s founders and directors said that they would buy that stake back.

Authors:

George Popescu
Allen Taylor

Monday October 3rd 2016, Daily News Digest

Monday October 3rd 2016, Daily News Digest

News Comments Today’s main news: Smava raises $34m; Lenddo partners with FICO in India. Today’s main analysis : PeerIQ’s analysis of securitization and pricing. Today’s thought-provoking articles: Blackston’s “now is the most difficult period ever“. Lendup has 29% of non-performing-loans. United States Amazing info and data from PeerIQ on the securitization market and loan pricing. […]

Monday October 3rd 2016, Daily News Digest

News Comments

United States

United Kingdom

European Union

China

India

 

United States

Weekly Industry update from PeerIQ, (PeerIQ email), Rated: A

Several marketplace lending ABS deals are coming to market amidst favorable market conditions and impeding risk retention rules.
P2P Global Investments, a UK UCIT investing in marketplace lending loans, sold £114 M ($167.36 MM) of rated notes backed by Zopa loans. The senior bond of the deal—Marketplace Originated Consumer Assets (MOCA 2016-1)—was rated Aa3/AA by Moody’s and Fitch respectively.
Noteworthy is that the deal is the highest rating afforded to any marketplace lending transaction from Fitch. Moody’s assigned a cumulative loss estimate of 7% and expected recoveries of 5%. We show deal structure and pricing below:
The MCOA 2016-1 senior bond priced 75 bps better than April SBOLT 2016-1 deal consisting of Funding Circle loans. Investors noted the quality of the data as a factor explaining the price difference as well as market conditions. PeerIQ also notes the substantial variation in agency provided cumulative loss and recovery estimates on SBOLT 2016-1 in our PeerIQ expects this trend to grow particularly as originators incentivize contributed collateral “club deals” to achieve standardization while also providing a quarterly path to liquidity for whole loan investors.
Sophisticated loan-level analytics are required to accurately value seasoned loans contributed to the collateral pool. Aged portfolios offer greater clarity to loan performance. However, there are other analytical considerations. The average conditional default rates (CDRs) are lower in the first twelve months of consumer loan pool than CDRs in the pool seasoned beyond twelve months. Therefore, seasoned unsecured consumer loans pool tend to have higher cumulative net losses as a percentage of deal balance. As the loans season, the conditional prepayment rates (CPR) tend to be elevated as well.
The price of a seasoned loan is the present value of projected loss-adjusted cashflow for the remaining balance of the loan, discounted at an appropriate rate. We show below the price behavior of a typical 60-month loan over its life while holding the discount factor constant:
As losses ramp up, the loan price drops; and then price exceeds par as risky loans approach maturity. This behavior results from positive survival bias of a loan given its remaining principal balance.
Specifically, in the early life of a loan, the credit loss projection ramps up and dominates the loan coupon—the loan price drops below par. As the loan seasons and survives over time, the credit risk on the remaining principal balance decreases. This survival bias of the credit risk profile leads to certain high credit risk loans valued above par.
For a higher coupon loan, the interest return or carry of the loan dominates loan pricing—the loan price exceeds par. At maturity, if the loan has not experienced any credit impairment, the price of the loan will be par; this leads to a “pull-to-par” profile.

Securitization Tracker Update
We look forward to releasing the Q3 securitization tracker this week. As origination volumes have slowed in certain areas, and as ABS markets started with a slow Q1, readers are asking what is the state of the ABS market? You may be surprised.

Stay tuned as we share volumes, pricings, and our outlook this week.

Funding Circle CEO says it’s a ‘golden age’ for marketplace lending as revenue jumps 144%, (Business Insider), Rated: AAA

The CEO of marketplace lender Funding Circle says the industry is going through a “golden age” despite troubles for platforms like Lending Club this year.

Funding Circle is the UK’s biggest marketplace lender, worth over $1 billion.

Funding Circle CEO Samir Desai told Business Insider: “It was certainly a tough first half of the year with various things going on with Lending Club, which caused investors to take another look, and then the stuff with Brexit. But actually, what I’ve always said is I think we’re in this golden age for our industry.”

So why does Desai think we’re in a golden age? “If you look at the net returns that have been generated by marketplace lending platforms, they have been the highest of any asset class over the last 5 years with the lowest levels of volatility. If you look on the borrower side, borrowers flock in their droves to this kind of customer experience.

Here are the key numbers from 2015:

  • Loan origination up 132% to £727 million;
  • Revenue up 144% to £31.9 million;
  • Loss up 114% to £36.9 million;
  • Loss margin reduced from 132% to 116%.

Funding Circle acquired Zencap last year, a deal that took the peer-to-peer lending platform into Germany, Spain, and the Netherlands.

As a result, Funding Circle doesn’t expect to make a profit this year. As I pointed out recently, the UK’s two biggest marketplace lenders — Funding Circle and Zopa — have lost a combined £50 million over the last decade and Funding Circle has yet to make a profit.

Funding Circle raised £97 million in April last year, taking its total funding to over £200 million.

Le Luel, Funding Circle’s chief risk officer, recently shared the fact that the company dialled back loan volumes in the US after loan performance went off track.

“There are periods where we will bring down origination if we’re not happy about things, that’s a key part of our business model.”

Orchard Weekly Report, (Orchard Platform), Rated: A

Blackstone’s Top Dealmaker Says Now Is The Most Difficult Period He’s Ever Experienced, (Bloomberg), Rated: A

“For any professional investor, this is the most difficult period we’ve ever experienced,” Baratta, Blackstone’s global head of private equity, said Tuesday, speaking at the WSJ Pro Private Equity Analyst Conference in New York. “You have historically high multiples of cash flows, low yields. I’ve never seen it in my career. It’s the most treacherous moment.”

The firm is still selling more assets than it’s buying, according to President Tony James.

Blackstone finished gathering $18 billion for its latest private equity fund last year. The firm also has an energy private equity vehicle, which finished raising $4.5 billion last year.

Blackstone, founded by Schwarzman and Peter G. Peterson in 1985, managed $356 billion in private equity holdings, real estate, credit assets and hedge funds as of June 30.

Fintech Upstart LendUp Fined by CFPB, California Regulator, (Wall Street Journal), Rated: A

LendUp extended nearly 75,200 installment loans in California last year, up about 110% from a year prior, according to the California DBO. The amount lent out on these loans last year surpassed $22 million, up 225%.

Missed payments are also high. Some 29%, or 5,921, of the unsecured installment loans outstanding at the end of last year were 30 or more days past due, according to a report from the California DBO.

United Kingdom

Landbay follows Zoopla pairing with new rental comparison tool, (BDaily), Rated: A

Peer-to-peer (P2P) lending platform Landbay has launched a new comparison tool that will help tenants and landlords to compare their rents against the prevailing market rate as rental values continue to spiral.

The ‘Rent Check’ facility, which has launched today (Monday), utilises data from the P2P lender’s monthly rental index and allows users to compare rental movements for specific property types to check that rents are tracking the wider market.

“Together, Landbay’s Rental Index and the Rent Check tool will give both tenants and landlords a simple way of accessing data from across the UK, not only providing an in depth view of the market, but helping inform their next move.”

Zoopla invested £500k in the startup earlier in the year which guaranteed it exclusivity for new Landbay products that will be rolled out across its network of property websites Zoopla and PrimeLocation.com.

European Union

Smava clinches $ 34m in Series C, (AltFi), Rated: AAA

Smava, a leading marketplace lender in Germany, has clinched $34m in a round led by Runa Capital, with additional participation from Verdane Capital, mojo.capital and a gaggle of existing investors. Runa is an active investor in the alternative finance sector, having already invested in consumer lender Zopa and gateway platforms Lending Robot and Lendio. Verdane is a Scandinavian private equity firm with a track record of investing across the consumer internet space.

Alexander Artopé, CEO and co-founder of smava, said that the $34m will allow the company to expand its customer base, hire additional talent and to enhance its credit scoring technology.

Paschi Said Nearing Deal for Sale of Bad-Loans Platform, (Bloomberg), Rated: A

Investors including Cerved Credit Management SpA and a venture between KKR & Co. and Varde Partners LP submitted non-binding offers on Friday for Banca Monte dei Paschi di Siena SpA’s non-performing loans platform, according to people with knowledge of the matter.

As part of the deal, the lender will also transfer management of an 8.6-billion euro ($9.6 billion) loan portfolio to the platform’s buyer, along with the exclusive management of a portion of Monte Paschi’s future bad loans, the people said, asking not to be identified because the process is private. Monte Paschi, which is being advised by Mediobanca SpA, plans to complete the sale by the end of the year, the people said.

China

No bail-outs in shadow banking, warns China regulator, (Financial Review), Rated: A

China’s banking regulator has indicated that the government would not bail out failed firms in the shadow banking sector despite a string of recent collapses which have triggered protests across the country from disgruntled investors.

Wang Shengbang, a senior official at the China Banking Regulatory Commission, said investors putting their savings into high-yield debt products should be aware of the risks.

Among the most troubled have been peer-to-peer (P2P) online lending platforms. The collapsed Ezubao, which raised more than 74 billion yuan ($A14.5 billion) from nearly a million investors across the country, is being investigated over claims it ran a Ponzi scheme. Some 21 people from the P2P firm were arrested earlier this year.

He said only around 17 per cent of shadow banking products, or around 3.2 trillion yuan ($A640 billion) were held in riskier high-yield products, which is around 1.5 per cent of China’s overall banking assets.

In a recent report, Moody’s said P2P lending did “not pose systemic risks given its small size” at about 1 per cent of total shadow banking assets.

Liu Li-Gang, chief China economist at Citi, said while (NPLs) were higher than official figures indicate, the level was still manageable.

India

FICO and Lenddo Partner to Extend Credit Reach in India, (PR Newswire), Rated: A

FICO, the world leader in credit scoring, has today announced a new partnership with Lenddo, a specialist in credit and verification technologies. Together, the companies plan to develop a credit risk score for consumers in India who have a limited or no formal credit history.

Lenddo was founded in 2011 to improve financial inclusion for 1 billion people around the world, enabling financial service providers to access and serve new and underserved markets using its disruptive technology and leveraging new sources of digital data, such as mobile-social digital footprints.

Author:

George Popescu