Thursday February 28 2019, Weekly News Digest

Annual fintech financing Singapore

News Comments Today’s main news: SoFi to roll out crypto trading with Coinbase. Walmart now offers Affirm loans. Funding Circle fund ups the ante on buyback strategy. Orca launches IFISA. LendDenClub cross 1 million borrowers, lenders milestone. Today’s main analysis: 2019 securitization update. How marketplace lending is a growing and dynamic global market. (A MUST-READ) Today’s thought-provoking articles: The 2009 […]

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Annual fintech financing Singapore

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United States

Fintech Startup SoFi to Roll Out Crypto Trading Via Partnership With Coinbase (CoinTelegraph), Rated: AAA

Fintech startup SoFi — known for its online lending services — is partnering with major United States-based crypto exchange Coinbase to roll out crypto trading support, according to a CNBC report Feb. 26.

Millennial online lender SoFi to offer zero-fee ETFs, an unexpected rival for index fund giants Vanguard, iShares (CNBC), Rated: A

The race to zero-fee exchange-traded funds has found an unlikely competitor: Online lending and personal finance platform SoFi, which has filed for two index ETFs that will waive management fees for the first year. In making the move to zero-fee ETFs, the online lender is crashing an ETF party dominated by Vanguard and BlackRock‘s iShares.

FTC orders SoFi to stop misleading consumers (MPA Mag), Rated: B

The Federal Trade Commission has ordered online lender SoFi to stop lying about how much borrowers can save by refinancing with the company.

Digital lender founded by ex-SoFi CEO raises $ 65M to fuel expansion (American Banker), Rated: A

The new company founded by Mike Cagney, the former embattled chief executive of Social Finance, plans to announce a $65 million funding round on Wednesday, bolstering firm’s expansion into other financial services, including wealth management.

With the new venture, Cagney is using some of the strategies from his tenure at SoFi — like diversification into areas typically only occupied by traditional banks. However, the new company, Figure, is focusing on different customers, and it’s taking steps to avoid scandals similar to the ones that saw Cagney step down from the SoFi helm.

Walmart teams with Affirm to offer point-of-sale loans (American Banker), Rated: AAA

Walmart will offer its customers point-of-sale loans for the first time — both on its website and in nearly 4,000 U.S. stores — under a partnership with the Silicon Valley lender Affirm.

Under the deal, Walmart shoppers will be able to get Affirm loans of three, six or 12 months to finance purchases ranging from $150 to $2,000. The loans are already being offered in Walmart stores, and they will be available to Walmart’s online shoppers in the coming weeks.

Affirm’s latest partnership brings its alternative financing to Walmart’s US stores and website (TechCrunch), Rated: A

The companies announced this morning that Affirm’s financing options would be made available in more than 4,000 Walmart Supercenters across the U.S., and will roll out to Walmart.com in the weeks ahead.

The offering will go live across Walmart Supercenters nationwide, except in Iowa, West Virginia and Puerto Rico, and will be soon available on Walmart.com.

Loan app Affirm CEO breaks down new Walmart partnership (CNBC), Rated: A

Loan app Affirm CEO breaks down new Walmart partnership from CNBC.

ABS Vegas – 2019 Securitization Update; Square Charter Status (PeerIQ), Rated: AAA

In regulatory news, Square’s ILC charter application has received opposition from 37 community groups. The groups are concerned about Square’s CRA activities and have asked the FDIC to bolster Square’s CRA requirements. Before this letter from community advocates, nearly all of the 15 letters the FDIC received were in favor of Square’s bid. Square is the furthest along the path to getting an ILC charter and its experience will determine whether other FinTechs follow its lead.

Structured Credit Investor magazine explores the challenges facing the maturing marketplace lending sector. Issuers need to distinguish between the borrower experience that they provide and manage liquidity. The article also makes the point that the sector is ripe for consolidation, although we haven’t seen any M&A yet.

2019 Securitization Update

The first two months of 2019 saw 5 securitization deals totaling $1.7 Bn in new issuance. The issuance volume represents a 23% drop over that seen in the first two months of 2018, as the market recovers from the volatility in equity and credit markets seen at the end of 2018. Total securitization issuance now stands at $46.2 Bn, with 147 deals issued to date.

Source: PeerIQ

The Housing Market’s 10 Year Challenge — Comparing The Housing Market of 2009 to Today (LendingTree), Rated: AAA

When the real estate bubble burst in late 2008, many Americans saw their home values fall drastically, but a lot has changed in the 10 years since — housing prices have rebounded from their lows during the Great Recession. And though prices are now starting to cool, in many cases, home values have even exceeded their 2006 highs.

On average, median home values have increased by nearly $50,000 across the 50 largest metros in the United States since 2009.

Metros where housing prices have recovered the most since 2009

San Jose, Calif.

Median home value 2009: $638,300
Median home value 2017: $957,700
Median home value change: $319,400
Median unemployment rate change: -6.4%
Median household income change: $32,991

San Francisco

Median home value 2009: $591,600
Median home value 2017: $849,500
Median home value change: $257,900
Median unemployment rate change: -5.4%
Median household income change: $27,889

Los Angeles

Median home value 2009: $463,600
Median home value 2017: $617,100
Median home value change: $153,500
Median unemployment rate change: -5.0%
Median household income change: $11,467

Source: LendingTree
Source: LendingTree

Gen Xers Carry the Biggest Auto Loan Burden; Study Finds (One World Herald), Rated: A

According to the loan comparison website, the median balance of Gen Xers who have auto loans is $18,741 is higher than other age groups. It is 9% more than baby boomers’ $17,185 median balance. This is higher than millennials’ $16,200 and 37 percent more than the lowest median balance of $13,666 held by Gen Z.

Personal Loan Interest Rates for February 2019 (Nerdwallet), Rated: AAA

Personal loan interest rates, whether you’re considering a loan from a bank, credit union or online lender, generally range from about 6% to 36%. The actual rate you receive depends on factors such as your credit score and history, annual income, existing debt and where you get the loan.

Online lenders offer the lowest starting interest rates on personal loans to borrowers with good to excellent credit.

Source: Nerdwallet

LightStream and Marcus both require a minimum credit score of 660. LightStream accepts joint applications, and one applicant can have a credit score lower than its minimum. SoFi has a slightly higher credit score requirement and requires at least $45,000 in annual income.

Elevate Credit (ELVT) Posts Earnings Results, Meets Expectations (Fairfield Current), Rated: A

Elevate Credit (NYSE:ELVT) announced its quarterly earnings results on Monday, February 11th. The company reported $0.09 earnings per share (EPS) for the quarter, meeting the Zacks’ consensus estimate of $0.09, Bloomberg Earnings reports. The business had revenue of $207.29 million for the quarter, compared to the consensus estimate of $212.42 million. Elevate Credit had a return on equity of 15.72% and a net margin of 1.59%. Elevate Credit updated its FY 2019 guidance to $0.55-0.65 EPS.

Source: Fairfield Current

Hunt Real Estate Capital buys RealtyMogul’s proprietary loan underwriting program (Housing Wire), Rated: A

Hunt Real Estate Capital, which offers financing for all types of commercial real estate, will soon have a new underwriting system to help it originate those loans, as the company is buying a proprietary loan underwriting system from RealtyMogul.

Elevate’s Joan Kuehl Named Dallas ORBIE CIO of the Year (The Progress), Rated: B

Elevate Credit, Inc. (“Elevate”) today announced that Executive Vice President and Chief Information Officer Joan Kuehl has been named the Large Enterprise CIO of the Year by the Dallas ORBIE CIO of the Year Awards. The award honors chief information officers who have demonstrated excellence in technology leadership.

A Recession Coming? Small Business Lending Platform Kabbage Says It’s Prepared (Forbes), Rated: A

The world is bracing for a recession, with the latest data showing  in the U.S. expect it to occur by the end of 2021

If those predictions prove true, it will be the first major economic downturn for some of the nation’s leading fintechs. Born out of the ruins of the recession, these startups have enjoyed nearly a decade of success buoyed by strong economic growth, a bull run in the stock market and low unemployment.

Here’s more on the  AJC Top Workplaces midsize companies (AJC.com), Rated: B

Kabbage has been named to the list for five consecutive years and this is its first year in the top five. The private financial technology company, founded in 2009, has 489 global employes and 367 at its U.S. headquarters in Atlanta. Flexibility at work and perks, such as a daily catered lunch and snacks, are among reasons employees appreciate working for Kabbage. Wellness benefits include fitness classes, health equipment onsite, biweekly meditation classes, CPR training, an annual flu shot clinic and sponsoring sports clubs. It also fully pays health benefits for individuals and provides annual bonuses and a 401(k) match. Through its sabbatical program, employees of five years can receive six weeks of paid time off and an additional $6,000. In 2018, Kabbage participated in the Atlanta PRIDE parade and also took a stand against gun violence after the mass shooting at Stoneman Douglas High School. Workers in 2019 will build a Habitat for Humanity home as part of its Kabbage Kares program, which also has supported PAWS Atlanta, Easter Seals and the Epilepsy Foundation.

Diversifying a Self-Directed IRA Made Simple with New Offering from CrowdStreet (The Progress), Rated: A

CrowdStreet, an online marketplace for direct equity investment in commercial real estate (CRE), today launched a streamlined, investor-friendly approach to investing qualified retirement account funds into commercial real estate offerings. This new option makes it easier than ever for individuals to access CRE investments with their self-directed IRAs (SDIRA), thus reducing their investment exposure to a volatile stock market and achieving more independence in managing their investments.

Liquid P2P and Interest Radar Announce Strategic Partnership (Liquid P2P), Rated: A

Liquid P2P and Interest Radar are pleased to announce that they have entered into a strategic partnership. The two third-party investing services for online peer-lending giant Lending Club will combine strengths under a single platform to deliver a more comprehensive automated tool with a patent-pending liquidity solution.

Direct Lending Investments Suspends Investor Withdrawals (Lend Academy), Rated: A

Earlier this month Brendan Ross, the CEO of Direct Lending Investments, Inc., sent a letter to investors notifying them that they have suspended withdrawals and redemptions effective February 8, 2019. Lend Academy was able to obtain a copy of this investor letter, dated February 11, that provides some color into what happened. The reason given was the delinquency of a large holding, VOIP Guardian, a telecom receivables factoring company.

Fintech deal will provide access to midsize businesses in U.S. (American Banker), Rated: A

Add HSBC to the list of banks partnering with commercial online lenders.

The bank on Tuesday announced a partnership with Neptune Financial, a San Francisco online lender that focuses on businesses with $10 million to $100 million in assets. The bank estimates that, with the access it will get to Neptune customers, the deal represents a $1.5 trillion opportunity.

Venmo debuted a limited-edition rainbow-colored card (Business Insider), Rated: A

Venmo, the PayPal-owned peer-to-peer (P2P) giant, debuted a limited-edition rainbow-colored version of its physical card product. The card will function the same as regular Venmo cards, allowing customers to pay wherever Mastercard is accepted, split costs and tips, withdraw funds from select ATMs, and manage their Venmo balance, but it will only be available for as long as supplies last, according to Venmo.

Source: Business Insider

Why digital identities will be so important in the next few years, according to Mastercard’s vice chairman (CNBC), Rated: A

The pace with which we are moving toward the internet of things is “very rapid” but we “can’t have the internet of everyone without the inclusion of everyone,” according to the vice chairman of payments giant Mastercard.

“You have to start focusing on how does the human get involved, and that’s going to be through having a digital identity,” Ann Cairns told CNBC’s Karen Tso on Monday at the Mobile World Congress in Barcelona.

Credit Karma’s Dana Marineau: ‘We want users to think of us as more than just free credit scores’ (Tearsheet), Rated: A

Today’s marketer on the hot seat is Dana Marineau, Credit Karma’s vice president of brand, creative and communications. People love Credit Karma for its free credit scores, but the company provides so many other free tools. Dana’s team is tasked with elevating the brand beyond just free credit scores, as a place to get help with financial decisions and achieve financial progress. She brings a 15 year experience at EA, working on many of the top sports games in the business.

Why this small bank created a separate, digital-first brand (American Banker), Rated: AAA

When Midwest BankCentre, a community bank in St. Louis, launched the digital-first Rising Bank in February, it joined the ranks of other financial companies —generally large players such as JPMorgan Chase, Wells Fargo and MUFG Union Bank — that have created separate, digital-only brands. Unlike them, the $1.9 billion-asset Midwest hopes to keep a community bank feel at the internet-only unit.

The Future Is Plastic: Fintech Unicorn Brex Launches New Credit Card For E-Commerce Merchants (Forbes), Rated: A

Brex, a San Francisco credit card startup that reached a valuation of $1.1 billion late last year, 22 months after its founding, is launching its second product, a physical credit card for e-commerce companies. Its first card, targeted to venture-backed tech startups, has attracted more than 3,000 customers by providing higher spending limits and simplifying the application process.

YieldStreet raises $ 62M to democratise alternative investments in shipping, real estate and more (TechCrunch), Rated: A

YieldStreet — which provides a platform for making alternative investments in areas like real estate, marine/shipping, legal finance, commercial loans and other opportunities that in the past were only open to institutional investors — is today announcing that it has raised $62 million in a Series B round of funding.

Guaranteed Rate Leads Mortgage Executive Magazine’s List of Top Loan Originators in America (GlobeNewswire), Rated: A

For the seventh consecutive year, Guaranteed Rate has the most loan originators of any lender on Mortgage Executive Magazine’s annual list of the “Top 200 Mortgage Originators in America,” including the number one originator.

Guaranteed Rate led the way with 36 originators ranking within Mortgage Executive Magazine’s Top 200, including three of the top five. Shant Banosian of Boston, Mass., was named the nation’s 2018 Top Originator by funding $536 Million in total loan volume.

Americans Focus On Debt Management But Lose Focus On Retirement Savings (Forbes), Rated: A

Our minds are wired to prioritize the near-term over the long-term. We shouldn’t be surprised that a new survey by 

U.S. banking regulator fights NY lawsuit over fintech charters (Reuters), Rated: A

The U.S. Office of the Comptroller of the Currency has asked a Manhattan federal court to dismiss a lawsuit by a New York financial regulator over its plan to issue banking charters to fintech companies, saying the lawsuit is premature.

Blockchain and data protection: the main concerns (JDSupra), Rated: A

Blockchain’s usage is no longer limited to digital crypto currencies, as blockchain databases may be deployed in innumerable circumstances and scenarios, including, for instance, within the financial services and insurance sectors for money transfer, peer-to-peer lending and transfer of securities, as well as automatic execution of contracts.

LoanStreet positions for growth with new hires (LoanStreet Email), Rated: B

After the launch of LoanStreet’s commercial lending product and the announcement of their $6.5 million funding round, LoanStreet – the first fully-integrated platform that streamlines the process of sharing, managing, and originating loans – has appointed three credit union industry veterans to support LoanStreet’s aggressive growth.

These new hires include Mike Doherty, Managing Director and Head of Credit Union Sales; Tony Harter, Business Development Director; and Joe Parvin, Business Development Director.

White Oak Business Capital Hires Carol Bader Apicella to Expand Northeast and Mid-Atlantic Markets (GlobeNewswire), Rated: B

White Oak Business Capital, Inc. (“WOBC”), an affiliate of White Oak Global Advisors, LLC, has announced that Carol Apicella has joined the firm as Senior Vice President and Senior Business Development Officer. Apicella will be responsible for expanding the firm’s markets in the Northeast and Mid-Atlantic.

United Kingdom

Funding Circle fund adds firepower for buyback strategy (AltFi), Rated: AAA

The portfolio, an investment trust, of loans originated by Funding Circle lowered its dividend expectations amid lower projected returns last year prompting a discount to its net asset value.

Following a move to a more than 10 per cent discount last year it started share buybacks in a bid to narrow its discount. It has now made additional capital available from its free cash flow to be deployed into share buybacks, the fund said yesterday.

Orca Innovative Finance ISA Launches, Enables Diversified P2P Investment (Crowdfund Insider), Rated: AAA

Orca Money is finally launching its long-anticipated Innovative Finance ISA (IFISA). Orca’s spin on the savings vehicle allows investors to spread their money across multiple peer-to-peer lenders (P2P) thus providing a heightened degree of diversification. Additionally, Orca Money conducts due diligence on behalf of IFISA investors.

Currently, the Orca IFISA allows access to 5 P2P platforms: Lending Works, Assetz Capital, Landbay, Octopus Choice and Lending Crowd.

Experian, ClearScore scrap merger plans (Reuters), Rated: A

Experian Plc, the world’s biggest credit data firm, said on Wednesday that it had agreed with rival ClearScore to abandon their proposed merger, after Britain’s competition watchdog indicated that it may block the deal.

NatWest launches account aggregation as Open Banking takes hold (AltFi), Rated: A

It’s been a long time coming, but Open Banking is finally spreading through the traditional banking industry, this week with the launch of account aggregation for NatWest customers.

The RBS subsidiary becomes the UK’s 4th bank to let customers connect rival current accounts.

Will Open Banking boom in 2019? (AltFi), Rated: A

It has been over a year since the Open Banking UK initiative under the Competition and Markets Authority order and Second Payment Services Directive (PSD2) was launched and has become one of the industry’s biggest technology and regulatory shake ups in recent years. It is no surprise that the initiative’s first year has seen a relatively low consumer uptake. This has been coupled with reports that consumers’ knowledge of the scheme appears to be markedly low.

Aave Launches Platform to Pay Bills Using Crypto (Finance Magnates), Rated: A

In an attempt to bring crypto closer to the mainstream, the London-based fintech startup has announced the launch of Aave Pay.

The app will allow its users to pay their utility bills using digital coins by converting crypto into fiat in real-time using bank transfer facility. The company is claiming that the platform can be used to business expenses as well including employee salaries, income taxes, and other commercial or corporate expenses.

Investing in crowdfunded development projects – what you need to know (Property Investor Today), Rated: A

You can invest in peer to peer development loans for the short term or in an Innovative Finance ISA for a longer commitment period, but with the potential to earn tax free returns.

By comparison, a peer to peer lending platform with its own development company will have much more control over its projects and be able to give you more detailed and trustworthy updates.

Failed Lender Reaching ‘From Beyond The Grave,’ MPs Warn (Law360), Rated: A

Failed payday lender Wonga is damaging the finances of thousands of customers “from beyond the grave” because they cannot seek redress for allegedly missold loans as the company was not covered…

International

Some Bankers Are Doing Even Worse Than in 2009 (The Washington Post), Rated: AAA

It may not feel like it, but some corners of banking are suffering as badly as they did during the depths of the financial crisis. Global volumes of initial public offerings and share placings in January and February have been nearly 60 percent lower than in the same period last year. The numbers are worse than the first two months of 2009. If activity doesn’t pick up soon, it would be worrying evidence of the fragility of investor sentiment.

The hope is that the lull is temporary, and technical. The government shutdown in Washington has gummed up U.S. IPOs. Uncertainty over the U.K.’s future relationship with Europe just drags on. And the December stock-market wobble probably killed off deals that were being planned for the window that traditionally opens between January and the start of the full-year earnings season in late February.

Marketplace Lending – A Growing and Dynamic Global Market (DBRS Email), Rated: AAA

I wanted to share with you a new joint report from our U.S. and European structured finance teams. The new report, attached to this email, analyzes the growth of the marketplace lending market around the globe.

The commentary includes the following topics:

— The evolution in finance, from traditional banking to FinTech.
— FinTech’s influence on marketplace lending around the globe.
— Growth hurdles.
— Securitization considerations.

Bank on it: How Enova’s software expands credit access worldwide (Built in Chicago), Rated: A

Not all credit histories are created equal.

That’s the case for a large part of the world’s population who can’t get access to a loan from a traditional credit provider — like a bank — creating a world in which the hardest working people don’t always get access to the credit they need. Enova, however, believes it has a solution. The fintech company draws on the power of machine learning and data to offer products that expand access to credit for consumers and small businesses.

Blossom Capital scores $ 85m from Robinhood and Funding Circle backers (AltFi), Rated: A

Blossom Capital, which has already backed five startups including rental marketplace Fat Lama, today raised $85m which it will use to lead Series A rounds of between $5m and $10m in Europe.

Eight Simple Ways to Earn Bitcoin Online Legally (The Crypto Updates), Rated: B

Earn Bitcoins as the interest payments: If you have earned some Bitcoins already, you can put the Bitcoins to earn for you. Lend them out at particular interest rate. You can lend the Bitcoins directly to someone known at a greed interest rate and repayment period. You need to assess trustworthiness of borrower. Peer to peer Bitcoin lending is another way to let the earned Bitcoins earn for you. There are many peer-to-peer lending websites where the borrowers post the borrowing requests. Over these websites, you can act as a lender. It is also possible to fund the small portion of numbers of loans to reduce the risk.

European Union

Grid Finance suspends taking investments below € 100,000 (Irish Times), Rated: AAA

One of the largest providers of peer-to-peer loans in the State has shut down a key part of its business aimed at smaller investors, blaming an absence of regulation in the crowdfunding space.

Grid Finance, which is backed by Enterprise Ireland, wrote to holders of its “Brick” accounts – that facilitate the investment of up to €100,000 – in recent days stating that it would withdraw the offering from the marketplace.

China

Dragon Victory International: Exposure To The Chinese Crowdfunding Market At A Regulatory-Driven Discount (Seeking Alpha), Rated: AAA

In recent years as China winds down its industrial and manufacturing powerhouse growth, it’s looking to other developed nations to determine which platforms it should invest in and pave the way to sustained economic growth. As most other major developed nations have done over the past century, financial services and engineering have been a very profitable platform and companies in China are quick to launch their own services to capitalize on the triple-digit growth in online financial services exhibited since 2003.

Similar to Hexindai (HX), which I’ve previously covered as a leading online lender which is capitalizing on the middle class appetite for debt to finance their lives and vacations, Dragon Victory International Limited (LYL) is taking on the crowdfunding segment in the People’s Republic of China. Similar to countless other platforms around the world, the company’s services are around financing new companies and capitalizing entrepreneurs through public funding and they already have over 4.5M users who use their services, a number nearly doubling each year.

Source: Dragon Victory International F-1 filings

China Fintech Today: The P2P Boom Is Truly Over (SupChina), Rated: A

This year, the government has continued to lead a reorganization of the industry:

  • More companies will die: As of February 17, only 60 percent of online lending institutions had disclosed their operational information for January 2019, including five problematic platforms.
  • However, the current asset quality of the online lending industry has improved significantly according the data from firms that did report.
  • As of the end of January 2019, the accumulated amount of the online P2P online loan industry was about 7.78 trillion yuan ($1.16 trillion). The total loan amount in January was 91.4 billion yuan ($13.61 billion), down 55.1 percent year-on-year and down 1.3 percent from the previous month.
  • Further consolidation of industry players is certain. Some experts quoted in media reports predict that the scale of future online loans will continue to shrink because of regulation.
  • Some listed companies, such as Aoma Electric and Panda Financial Companies, have abandoned their P2P businesses.
  • Aoma Electric issued a letter of concern to the Shenzhen Stock Exchange on February 14, attributing the decision to the broader economic slowdown, and a high number of overdue loans.
  • Panda Gold Control in 2018 was also dragged down by its P2P business, and expects a net loss of 41.16 million ($6.13 million) to 57.63 million yuan ($8.58  million) in 2018. Faced with the uncertainty of the P2P sector, Panda Gold Control chose to divest.

A Crypto Project That Raised $ 20 Million Is Caught Faking Its Founding Team (CoinDesk), Rated: A

Launched on Dec. 2, BHB claims to offer an ethereum-based solution for peer-to-peer lending, but by Jan. 18, local media reports were already accusing the project of operating an illegal pyramid scheme. Now, CoinDesk is able to reveal inconsistencies in the information provided about its founding team that further suggest something may be amiss at the China-based project.

However, the image of Bobby White used in BHB’s marketing materials is identical to that of an economics professor at China’s Tsinghua University named Alexander White. Meanwhile, the image of Gregory Moss is the same as one used by a philosophy professor at The Chinese University of Hong Kong, who is also named Gregory Moss.

Tencent-backed brokerage firm downsizes US IPO amid weak market demand (Technode), Rated: A

Tencent-backed online brokerage firm Futu Securities has set the terms for its US initial public offering (IPO) to raise up to $130 million, which will value the company at more than $1 billion. The company previously set its target at as high as $300 million when it filed for the US listing in December.

Chinese tech behemoth, Tencent, owns over 38% of the company, has shown interest in purchasing up to 25% of the new shares issued.

Australia

How should accountants talk to clients about fintechs? (In the Black), Rated: A

Like the ombudsman’s office, ASIC has also made information available to educate consumers and advisers, including on its MoneySmart Borrowing Basics and Peer-to-Peer Lending sites.

Is any flexibility possible, Shiel wonders, with a peer-to-peer lending model in which the borrower likely doesn’t know who is providing the funds?

India

LenDenClub crosses 1,00,000 borrowers and lenders milestone (News Barons), Rated: AAA

LenDenClub, one of India’s fastest growing peer-to-peer (P2P) lending platforms, recently crossed an important landmark with more than 1,00,000 borrowers and lenders on its platform. The breakdown of borrowers to lenders is 83,300 and 16700, respectively. The company crossed this milestone by keeping up with latest market trends, and saw an increase in the use of its product InstaMoney, which was launched in June 2018.

Why Do Fintech Startups and Investors See a Huge Potential in Lending? (Entrepreneur), Rated: AAA

Today, thanks to the ongoing digitization, borrowing has become as easy as it can get in India. For contrast, all it takes now is the touch of a few buttons, answers to a few verification-related questions, and anyone can receive a loan in a matter of hours or days, if not minutes. And all of this is without any collateral and while enjoying the comfort of your home. Now, compare this with taking a day off to go to the bank, doing extensive paperwork, visiting frequently to check the progress of your loan application, and ultimately, getting your application rejected because of the loan officer’s misjudgement. All while wasting two months of time in the constant to and fro and taking multiple days off from your office.

It is beyond doubt that the advent of fintech startups has altered the game of lending in India. It has become both simpler and convenient to borrow using their revolutionary approaches driven by state-of-the-art technologies. Currently, more than 1,500 fintech startups (of all shapes and sizes) are catering to the Indian market, and more than half of these startups have been launched over the last 3 years. This gives us a clear picture of how lucrative the sector is becoming for our startup ecosystem. But what is essentially fuelling this trend? Let’s find out.

Banning of UDS to benefit P2P Lending Industry (Inventiva), Rated: A

The latest ordinance of the Banning of Unregulated Deposits (UDS) 2019, was passed by the government to provide a comprehensive mechanism to ban UDS as well as to protect the interest of depositors. This is in line with the Reserve Bank of India’s guidelines on the NBFC-P2P sector, issued in October 2017 to regulate the unorganized lending business in the country.

Asia

Singapore fintech investments rose two-fold to US$ 365m in 2018 (SBR.com.sg), Rated: AAA

US$102.2m of the total funds raised went to lending fintech companies such as the homegrown Funding Societies.

Fintech investments in Singapore more than doubled to US$365m in 2018 from US$180m in 2017, putting the country amongst the top five fintech markets by funds raised last year in Asia Pacific, behind China, India, Australia and Japan, according to Accenture’s analysis of CB Insights data. The number of deals in the country rose to 71 from 61 in 2017, making it the third busiest market in the region, behind only China and India.

Source:

Validus Capital raises $ 15m for SME financing (Fintech Futures), Rated: A

Validus Capital, a Singapore-based SME financing platform, has raised SGD 20.5 million ($15.2 million) in a Series B funding round, led by FMO, a Dutch public-private development bank.

Latin America

PayPal expands its small business loans initiative to Mexico (Leaprate), Rated: AAA

Online payment giant PayPal launched its Working Capital initiative in 2013 as an alternative method for business to access working capital much faster than through traditional means. Many small and medium-sized business (SMB) clients embraced the program and since then the company has advanced more than $6 billion in loans to over 170,000 businesses in the UK, US, Germany and Australia.

PayPal also recently revealed that it has partnered with Konfio, a Mexican online lender that utilizes unconventional data sources to facilitate fast credit assessments, in a deal that will allow PayPal to extend its Business loan and working capital programs to Mexican businesses.

ID Finance eyes ‘pivotal moment’ for Latam fintech as revenue in region climbs 403% (Fintech Finance), Rated: A

ID Finance, the fintech company operating in Europe and Latin America, saw revenue of $49m in 2018. This represents growth of 236% for the business, which was formally separated from its operations in Russia and CIS region last year.

The company is enjoying particularly strong growth in Latam, one of the world’s fastest growing markets for fintech adoption thanks to high mobile penetration and a sizeable underbanked population – according to the World Bank 61% of Mexico’s population is excluded from the traditional banking system, while 40% of Brazil’s 207m population are blacklisted. The company now has 141 employees in Latam and saw revenue growth of 403% in the region last year.

Challenger bank N26 expands to Brazil (Fintech Futures), Rated: A

Germany-based mobile challenger bank N26 is powering on yet again as it has revealed its plans to expand to Brazil.

Africa

How FinTech Companies Inspire Africa With Mobile Technology (PYMNTS), Rated: AAA

With the potential for rapid growth and job creation, FinTech firms in Africa have caught the attention of global investors. According to the London Stock Exchange Group’s 2019 “Companies to Inspire Africa” report, which highlights these firms, the FinTech sector has the second highest growth rate representation of technology and telecoms as well as financial services. As it stands, companies in this space represent more than a quarter of 360 featured firms from 32 different countries. Pan-African payments firm Cellulant is among the companies that appeared in the first and second editions of the report.

Authors:

George Popescu
Allen Taylor

The post Thursday February 28 2019, Weekly News Digest appeared first on Lending Times.

Thursday September 21 2018, Daily News Digest

Chinese companies surge on debut after US IPOs

News Comments Today’s main news: LendingClub spent $6.4M to relocate two executives. Funding Circle to price IPO between 420-530 pence. Funding Circle to set valuation at $2.4B after IPO. Qatar fund to invest in Lufax. X Financial completes IPO. Today’s main analysis: Fintech investors like ‘stodgy’, not ‘sexy’. Prospa has written $750M in loans. Today’s thought-provoking articles: How machine learning helps P2P […]

Chinese companies surge on debut after US IPOs

News Comments

United States

United Kingdom

China

Other

News Summary

United States

Some Companies Spend Plenty to Lure Executives Willing to Relocate (Wall Street Journal) Rated: AAA

Some businesses have gone so far as to shell out millions to move key players from miles away. LendingClub Corp. LC -2.63% spent nearly $6.4 million to bring two new top officers and their families to the San Francisco Bay Area in 2017, according to an analysis of data from company proxies by research firm Equilar Inc. That sum largely reflects $3 million in relocation bonuses for Steve Allocca, the new president, and Thomas Casey, LendingClub’s chief financial officer. Both men moved from less-costly cities in Texas.

Source: Wall Street Journal

Fintech investors like ‘stodgy more than sexy’ (Financial Planning) Rated: AAA

A good chunk of the money being invested in wealth management and banking technology is going toward funding artificial intelligence-driven tools.

But forget the popular concept of conversational, British-voiced computers, chatbots or even cute robot assistants greeting customers at branches; the applications that investors want in on are focused on improving operational efficiency.

The industry’s current methods of handling compliance issues, back-office processing, clearing and settlements, he says, are ripe for reinvention.

Source: Financial Planning

How Does Machine Learning Help Peer to Peer Online Marketplaces Succeed? (Tech Pluto) Rated: AAA

Machine learning technology brings a real ROI to peer to peer marketplace owners. Airbnb, a company known for their personalized approach to each customer has seen a significant growth in the number of bookings after they started using machine learning. Other popular P2P marketplaces such as Etsy, Uber, Lending Club also apply intelligent algorithms to increase their conversion rates and acquire a competitive advantage.

Machine learning helps leading marketplaces and companies that provide AI consulting services develop features that bring tangible value to business and consumers. So how exactly do P2P marketplace companies use this cutting-edge technology? Let’s find out.

Predicting which products a user will like is a widely adopted use case for machine learning. A variety of digital products today have recommender systems powered by this technology. In the past product recommendation systems were based on hard-coded rules. Those rules determined what item to show to a user based on some predefined scenarios. For example, if a user buys a fancy red dress, she’s likely to also buy shoes that match this dress.

SoFi’s Former Head Of Venture Strikes Out On His Own (Benzinga) Rated: A

For this installment, Benzinga interviewed an intriguing fintech venture capitalist: Logan Allin, general partner at Fin Venture Capital and former head of venture at SoFi.

Allin’s career has been largely spent “in and around” financial services, he said, including stints at SoFi, City National Bank and Invesco Ltd. IVZ. He launched Fin Venture Capital in April with a focus on the global fintech sector, greenfield areas and B2B and B2B2C players in particular.

BZ: Fintech funding rounds are getting larger, some consolidation is occurring and the space in general is maturing — is there still room for small startups to have a major impact? What verticals are ripe for disruption?

According to Pitchbook’s data, the U.S. funding environment is skewed increasingly to growth and late stage startups and is on pace to surpass $100 billion in deal value for the first time since the dot-com era.

Indeed, there was $57.5 billion of VC invested in U.S. companies through the first half of the year, and the second quarter of 2018 is higher than six of the past 10 full-year totals. Despite the volume, the deal count has remained stable due to later-stage entry points and larger round sizes, and as a result, deployment is at a slower pace than seen in 2013-2015.

You’re seeing a move toward larger fund sizes with the same investment period as they’ve always had, five years, which leads to larger check requirements per deal and thus a move downstream to growth and late-stage rounds where the valuation math and round sizes align.

Goldman Sachs nears deal to sell its fintech app – WSJ (Reuters) Rated: A

Goldman Sachs is in advanced talks with several financial companies to spin off ‘Simon’, its three-year-old app that sells financial products to retail investors, the Wall Street Journal reported on.wsj.com/2OzaWmf on Wednesday, citing people familiar with the matter.

JPMorgan Chase, Barclays, HSBC Holdings , Credit Suisse, Wells Fargo and insurer Prudential Financial have expressed interest for a stake in the business, the report said.

The deal, which would value the app at around $100 million, is likely to be finalised in the coming weeks.

Lendio Franchising Growth Soars, Doubling Amount of Loans Funded Quarter Over Quarter Since Inception (Lendio) Rated: A

LendingTree Announces Startup Innovators Program at LEND360 (PR Newswire) Rated: A

LendingTree®, the nation’s leading online loan marketplace, today announced it will sponsor a $10,000 award to be given at LEND360 to the fintech startup with the most cutting-edge solutions propelling the online lending ecosystem forward.

As the desire to enter the fintech space continues to heat up, LEND360’s Startup Innovators Program will highlight startup organizations’ crucial part of the fintech ecosystem, bringing new and innovative thinking to the industry.

LEND360 will be held October 8-10, 2018 at the Sheraton Grand Chicago.

iCapital Buys Bank of America Alt Feeder Fund Ops (Wealth Management) Rated: A

Alternative investing platform iCapital Network announced it has entered into a definitive agreement with Bank of America to acquire the bank’s alternative investment feeder fund operations. iCapital expects the volume on its platform to more than quadruple as a result, growing from $6 billion in invested capital across 14,000 underlying accounts to $25 billion across nearly 70,000 accounts.

Bank of America’s Merrill Lynch and U.S. Trust account holders and advisors will continue to use their existing interfaces and their client relationships, but the inner workings of the system will be improved, said Lawrence Calcano, CEO of iCapital.

More Americans With Low Credit Scores Buying Homes (Laredo Morning Times) Rated: A

If you have a low credit score and want to buy a home, your odds of getting a loan have improved. A study by the Fair Isaac Corporation (FICO) shows that credit scores for new mortgage originations have been dropping, suggesting that lenders are slowly relaxing the tight credit policies imposed after the housing crisis.

According to the study, new mortgage loans with credit scores less than 700 increased from 21.9% of all mortgage loans in 2009 to 29.7% in 2017. These include scores in the subprime market that can reach down into the 400s. (While the typical lower credit score limit is 620 for conforming loans and 500 for FHA loans, loans may be granted at even lower credit scores with extenuating circumstances.)

The shift in average credit scores is driven by FHA loans – as expected by the lower acceptance criteria for FHA loans. The latest Origination Insight Report from Ellie Mae shows that only 16.7% of conventional mortgage loan originations in July 2018 were associated with FICO scores less than 700.For FHA loans, over 65% of FHA loans went to borrowers with scores below 700.

2Wheel Partners With Affirm to Offer 0% Financing (Motorcycle & Powersports News) Rated: A

Affirm Inc., a financial technology company, provides transparent alternatives to traditional credit. Customers can select the Affirm payment option at checkout and quickly and easily receive real-time approval of their loan amount. The payment terms are clearly stated with no hidden fees or compounding interest.

5 Surprising Traits of Digital Banking Winners (Financial Brand) Rated: A

Ever since JP Morgan declared itself a technology company that provides financial services — not the other way around — analysts and investors have been scrambling to discern which banking companies are doing tech well, and which are not. They know the institutions that harness the power of artificial intelligence, machine learning and big data, and more importantly, the applied business insights these technologies can generate, will be the banks that will be the winners in the long run.

“Long term I think this will determine the split between winners and losers,” one investor told the Financial Times in a story on AI and banking earlier this year.

New Research Indicates Non-Prime Hispanics Have a Leg up on Financial Health (Market Watch) Rated: A

When it comes to personal finances, Hispanics in the U.S. are more stable and optimistic than other groups studied. A newly released study from Elevate’s Center for the New Middle Class (CNMC) found that non-prime Hispanics – or those with credit scores below 700 – experience higher levels of employment and less volatile monthly income. When compared to the broader non-prime community, non-prime Hispanics in the U.S. are:

  • 65% more likely to plan for major expenses
  • 86% more likely to feel financially stable
  • 38% more likely to save money each month
  • 20% less likely to have had a vacation expense in the last 12 months
  • 23% less likely to spend on routine medical expenses
  • 50% more likely to be able to cover a $1200 unexpected expense
  • 3x more likely to regularly pay using a smartphone
  • 20% less likely to have a credit card
  • 25% less likely to have a personal retirement account
  • 2x more likely to regularly give money to a child or grandchild
  • 40% more likely to be employed

Why those high-profile bank glitches just won’t stop (American Banker) Rated: A

The glitch that left SunTrust customers without access to mobile and online banking for two days is just the latest digital snafu to afflict the banking industry. Upgrades by banks or their vendors that went haywire have resulted in multiple outages this past year.

So it begs the question: If there’s such potential for an upgrade to go wrong, why aren’t banks more prepared for the eventuality, instead of scrambling to get service back up and running?

Industry experts bear some bad news about the state of technology in banking: Banks can’t really be proactive enough to prevent the problems.

Why do state regulators want to limit consumer choice? (American Banker) Rated: A

The decision by the Office of the Comptroller of the Currency to begin accepting applications for special purpose national bank charters from fintech companies promotes innovation, gives consumers and businesses greater choice and creates economic growth and opportunity.

It is also good for America’s dual banking system, which the president of Conference of State Bank Supervisors and the superintendent of the New York Department of Financial Services ignore in their recent articles and statements.

Fed will have the say on key parts of OCC’s fintech charter (American Banker) Rated: A

The Federal Reserve is under increasing pressure to provide clarity on whether nonbank fintech firms that receive a special federal charter will have direct access to central bank lending and to the U.S. payment systems.

The Office of the Comptroller of the Currency confirmed in July that it would accept applications from fintech firms for a “special-purpose” national bank charter, although the new license has been legally challenged by state regulators.

But many experts say the OCC’s charter would lose value if the Fed did not allow direct entry to fintech firms. Those firms now, for example, can access the payments system only through bank partners.

White Oak Healthcare Finance Refinances Texas SNFs for Granite Investment Group (Digital Journal) Rated: B

White Oak Healthcare Finance, LLC (“White Oak”), today announced it acted as sole lender and administrative agent on the funding of a $33.2 million senior credit facility for Granite Investment Group (“Granite”). The funds were used to refinance a portfolio of four skilled nursing facilities in Texas.

Granite Investment Group is a privately held, real estate investment firm focused on multi-family, senior housing, and post-acute care.

AlphaFlow Continues Expansion with Launch of New York Office, Hiring of Fintech Executives Stephan Leccese and John Woodruff (PR Newswire) Rated: B

AlphaFlow, the first automated alternative investment platform for real estate, announced today the opening of a new office in New York City. The office launch and expansion operations will be helmed by recently hired fintech executive Stephan Leccese, who joins the firm as Vice President of Partnerships & Servicing.  John Woodruff, a former credit fund senior analyst, will be joining Stephan in New York, serving as Vice President of Investments.

United Kingdom

Funding Circle to price 71.4 mln IPO shares between 420-530 pence (Nasdaq) Rated: AAA

British peer-to-peer lender Funding Circle plans to sell up to 71.4 million new shares in its initial public offering for between 420 pence and 530 pence per share.

Funding Circle, which expects to list in October with a valuation of more than 1.5 billion pounds ($1.92 billion), said it plans to raise gross proceeds of about 300 million pounds.

Peer-to-peer lender Funding Circle to be valued up to $ 2.4 billion after IPO (CNBC) Rated: AAA

Peer-to-peer lending platform Funding Circle announced the pricing range for its initial public offering (IPO) on Wednesday that could value the company up to around £1.8 billion ($2.4 billion).

The British fintech firm said the price range of the offer has been set at 420 pence to 530 pence per share. The flotation will comprise a maximum of 71.4 million new shares and a secondary component to be determined.

After the completion of the IPO, the issued share capital of the company is expected to comprise between 329.7 million and 345 million shares.

Is real estate crowdfunding the investment option for you? (Born2Invest) Rated: A

Equity crowdfunding has been a great alternative investment for many, but there are other principles that branched out from it. Some investors direct their funds not only on startups that offer unique products or services as others become virtual landlords through property crowdfunding.

Platforms like LendInvest, Landbay and Lendy have risen to make real estate investing more interesting because of higher returns. Some sources suggest that peer-to-peer lending (P2P) schemes like crowdfunding in real estate allow for returns in excess of 5-6 percent compared to traditional real estate investment trusts (REITs).

There are three ways to get into real estate crowdfunding: P2P, debt crowdfunding and virtual buy-to-let.

China

China’s Online Lender Lufax Attracts Potential Investment From Qatar Fund (Gooruf) Rated: AAA

China’s online lender Shanghai Lujiazui International Financial Asset Exchange Co. (Lufax) has attracted a potential investment from sovereign wealth fund Qatar Investment Authority (QIA).

QIA has been negotiating the probable purchase of a minority stake in Lufax with an estimated price range of about US$500 million to US$1 billion, said Bloomberg citing the source.

The company has been aiming to file for an initial public offering in Hong Kong since 2017, but only to witness its flotation on ice because of Beijing’s probes into online lenders.

Fintech / Peer to Peer Lender X Financial Trades on NYSE (Crowdfund Insider) Rated: AAA

Chinese peer to peer lending platform X Financial (NYSE: XYF) completed its initial public offering (IPO) today trading shares on the New York Stock Exchange. Deutsche Bank Securities Inc. and Morgan Stanley & Co. were joint book runners on the IPO.

The IPO saw the Class A ordinary shares priced at $9.50. The offering was for 11 million American Depository Shares (ADSs) thus representing a raise of about $104.5 million. Shares initially traded much higher jumping to over $20/share at one point but are now currently hovering around $13/share.

The underwriters have been granted an option to purchase up to 1,650,000 additional ADSs at the IPO price less the underwriting discount.

X Financial on IPO: We Have Built One of the Strongest Fintech Businesses in China (Crowdfund Insider) Rated: A

Earlier today, China based X Financial (NYSE:FXE) traded on the New York Stock Exchange (NYSE) in its initial public offering raising approximately $104.5 million as 11 million shares were floated at $9.50/share. The shares quickly jumped higher in early trading and eventually closed about 25% higher than the offer price. X Financial, a peer to peer lender and Fintech platform, is part of a growing group of Chinese firms deciding to list their shares on US exchanges. In fact, this was the 9th Chinese company to list on the NYSE this year.

X Financial reports experiencing dramatic growth in the past few years. Top line revenue was approximately USD $270 million for all of 2017. As of the first six months of 2018, the company had already topped this number (USD $279.3) as it appears to be on track to double the year prior total.

Investors Love Chinese Tech Stocks (Bloomberg) Rated: AAA

Peer-to-peer online lender X Financial soared on its first day of New York trading, adding to a string of frenzied U.S. debuts by Chinese technology companies.

Source Bloomberg

Banks give China’s Web lenders a second life (The Business Times) Rated: A

China’s online lenders have found an unlikely lifeline. Investors are fleeing the country’s US$200 billion peer-to-peer (P2P) lending sector as regulators crack down. The funding squeeze has pushed many companies to team up with traditional banks that they once sought to disrupt.

Beijing is reining in the country’s non-bank lending sector. Strict rules, such as caps on loan balances for sites matching small borrowers with individual investors, have shut down hundreds of unruly upstarts. Regulators delayed a June deadline for companies to apply for licences, putting larger groups in legal limbo. New York-listed Yirendai has seen its market value more than halve to US$1 billion since the start of the year.

The stakes are huge. Chinese consumer finance – which includes credit card loans, e-commerce credit, and unsecured personal loans – is on track to top 11 trillion yuan (S$2.2 trillion) by 2020, up from four trillion yuan in 2015, according to Oliver Wyman. But banks prefer to lend to customers with credit histories, which much of the population lacks. They often spurn private corporate borrowers for similar reasons. That has opened the door for P2P operators as well as Web giants like Ant Financial.

Lending hand (Breaking Views) Rated: A

China’s online lenders have found an unlikely lifeline. Investors are fleeing the country’s $200 billion peer-to-peer (P2P) lending sector as regulators crack down. The funding squeeze has pushed many companies to team up with traditional banks that they once sought to disrupt.

Beijing is reining in the country’s non-bank lending sector. Strict rules, such as caps on loan balances for sites matching small borrowers with individual investors, have shut down hundreds of unruly upstarts. Regulators delayed a June deadline for companies to apply for licenses, putting larger groups in legal limbo. New York-listed Yirendai has seen its market value more than halve to $1 billion since the start of the year.

The stakes are huge. Chinese consumer finance – which includes credit card loans, e-commerce credit, and unsecured personal loans – is on track to top 11 trillion yuan ($1.6 trillion) by 2020, up from 4 trillion yuan in 2015, according to Oliver Wyman. But banks prefer to lend to customers with credit histories, which much of the population lacks. They often spurn private corporate borrowers for similar reasons. That has opened the door for P2P operators as well as web giants like Ant Financial.

China Rapid Finance to Participate in DBS Fintech Corporate Day (Acrofan) Rated: B

China Rapid Finance (NYSE: XRF), a leading online consumer finance platform in China, today announced that its Chief Executive Officer Zane Wang will participate in the DBS Fintech Corporate Day, to be held at the Fullerton Hotel in Singapore on Thursday, September 27, 2018.

The Company will also host investor meetings throughout the day.  Attendance at the conference is by invitation only.  Interested investors should contact your DBS sales representative to secure a meeting time.

International

Growth of Investor Numbers on P2P Lending Marketplaces (P2P Banking) Rated: AAA

The disadvantage of showing indexed numbers for growth is that it gives smaller, younger an advantage as their percentage increase of investor base is likely still higher because they come from smaller absolut numbers. An example for this effect is Peerberry where percentage growth of investors is rapid, but the absolute number as of Sep, 1st has reached only 2468 investors as it is a very young marketplace.

Source: P2P Banking

ETHLend Blockchain Crypto Lending Launches New Tech Firm Aave To Induce Innovation (Bitcoin Exchange Guide) Rated: A

Decentralized, peer-to-peer (P2P) financial marketplace, ETHLend has recently revealed the launch of a new tech firm dubbed, Aave. The reason for creating Aave is to induce consumers to come up with innovative ways to expand on “evolving and imaginative technology”. Simply put, the team is working towards bridging the gap centralized players like PayPal and Coinbase have left behind.

Aave will serve as the parent company for ETHLend and the team will remain the same. In other words, the CEO for Aave will be that of ETHLend, Stani Kulechov, Jordan Lazaro will serve as COO, Nolvia Serrano is the CMO, Mika Soyring is the CFO and Ville Valkonen is the CCO.

Australia

Fintech Prospa has now written $ 750 million in loans (Business Insider) Rated: AAA

Fintech Prospa, a lender to small business which in June postponed an ASX-listing after being pinged about unfair loans terms, says it has now written $750 million in loans.

Loans for the year to June were $367 million, a 70% increase on the previous 12 months and 9% higher than prospectus forecasts with strong momentum in the fourth quarter.

For the six months to June 2018, loans hit $211 million, up 16% on prospectus forecasts and up 61% on the previous corresponding period.

MENA

OurCrowd Still on Track to Top USD $ 1 Billion in Investment Crowdfunding (Crowdfund Insider) Rated: AAA

In many ways, OurCrowd epitomizes the aspirations of what investment crowdfunding has the potential to deliver for both issuers and investors. By providing access to quality deals to smaller (accredited) investors, OurCrowd has opened up an asset class previously closed off to all but the very fortunate. On OurCrowd, you can find yourself investing alongside some of the biggest names in venture capital – at the exact same terms – an important distinction. It is also important to note that OurCrowd has skin in the game for each offering it lists on the platform – thus interests are aligned: OurCrowd wants the company to succeed and it also very much wants to see a return on its own investment. These qualities make OurCrowd a compelling option for investors that are willing to shoulder an element of portfolio risk that can also drive some outsized returns.

OurCrowd is based in Israel – where many of its investments are made – but its vision is to empower investors globally and fund companies regardless of geographic borders. This is what you want to see in the digitized, internet fueled Fintech age.

Build a real estate portfolio starting with as little as $ 1000 (AME Info) Rated: A

Real estate crowdfunding comes to Dubai in the form of Smart Crowd

In the US, investors are utilizing crowdfunding sites like Realty Mogul, CrowdStreet, and Fundrise to start and/or build their portfolios, Investopedia notes.

Smart Crowd, an innovative new digital real estate investment platform that supports crowd-funding endeavors in the real estate sector, is trying to fill in a similar role in the region.

Asia

P2P operations launched in Hyderabad (Telangana Today) Rated: AAA

LenDenClub, a peer-to-peer (P2P) lending platform, launched its operations in Hyderabad. It will also expand to other cities later.

LenDenClub chose Hyderabad as the city is a major hub of the IT industry and houses a large number of young professionals, who are among the largest users of digital lending services in the country. It expects 10 per cent of its loan requests originate from Telangana in the next six months.

It is aiming to disburse loans worth Rs 100 crore in 12 months.

European Union

INLOCK Signs MoU with Institutional Lending Provider – Partners with Major CEE Crypto ATM Manufacturer to Test Its Platform (Bitcoin News) Rated: B

INLOCK, a crypto lending platform where licensed lenders can compete for borrowers who want to use their cryptocurrency as collateral for loans, announced today that it has signed a Memorandum of Understanding (MoU) with an institutional lending provider and entered a partnership with one of the Central and Eastern European Countries (CEE) region’s biggest crypto ATM manufacturers to test its Minimum Viable Product (MVP). The company launched the ICO for its ILK token on September 15, the anniversary of the Lehman Brothers collapse.

The CEE region’s crypto ATM manufacturer plans to integrate INLOCK’s services into all of its machines, enabling users to directly take out loans and receive funding in cash within hours. The crypto ATM manufacturer will act as a matching service provider by forwarding customers to INLOCK.

Authors:

George Popescu
Allen Taylor

July 20st 2016, Daily News Digest

News Comments United States A very interesting risk that has not been clearly described so far: the risk that small SMB loans end up being regulated like personal loans. A fascinating read on politics and regulators. Goldman announcing their p2p lender will be live in the fall with $16bil in lending capital from depositors. Goldman […]

News Comments

United States

United Kingdom

India

Singapore

China

  • The take away from Lendit China per Orchard and Lendit Organizer Jason Jones :
    • There continues to be strong interest from Chinese Wealth Management firms to invest in US Online Lending loans
    • Investor interest is focused on making strategic equity investments in all types of global FinTech firms within Online Lending
    • Chinese Marketplace Lenders continue to increase their focus on offering more diversified products to clients including wealth management, insurance, and other financial services
    • Implementing a robust operational infrastructure is widely understood as a necessity required to successfully invest in the US Online Lending industry
United States

Small-Biz Online Lenders Aim to Dodge Consumer-Loan ‘Nightmare’, (Bloomberg DNA), Rated: AAA

Online marketplace lenders would face significantly higher regulatory hurdles if most of their loans to small businesses were reclassified as consumer loans, as the Treasury Department has recommended, an industry representative and a legal expert told Bloomberg BNA.

Officials discussed the need for greater transparency and noted that small-business loans under $100,000 “share common characteristics with consumer loans, yet do not enjoy the same consumer protections.”

The industry is pushing hard to head off the suggestion.

“They’re very smart in being concerned about that,” said Richard Eckman, a partner at Pepper Hamilton LLP in Wilmington, Del. “There are a whole host of consumer laws that apply to loans that are for personal, family and household purposes; that’s sort of the definition of a consumer loan.”

The federal consumer protection law that ranks as the biggest concern of marketplace lenders such as CAN Capital, which cater exclusively to small businesses, is the Truth in Lending Act (TILA).

“TILA, in particular, is onerous,” Eckman, a specialist in marketplace-lending law, said in an e-mail.

On May 3, 16 members of the committee’s Republican majority and three of its minority Democrats, along with House Small Business Committee Chairman Steve Chabot (R-Ohio), sent a letter to Treasury Secretary Jack Lew sounding themes that foreshadowed Sanz’s testimony. The Treasury Department at that time was preparing its report on marketplace lending, and the House members wrote that they wished “to raise concerns with recent comments by public officials that seem to indicate a preference to regulate lending to small businesses and consumers similarly.”

“[W]e believe it is important for the Department to carefully study and understand key distinctions between commercial and consumer lending markets,” the letter said. “Mistaken efforts to conflate these categories would restrict the availability of capital to small business owners.”

“There’s no reason why small businesses shouldn’t have the same protection as consumers,” Lauren Saunders, associate director of the nonprofit National Consumer Law Center, in Washington, told Bloomberg BNA.

“The research has shown that these small-business owners who borrow smaller loans, under $100,000, are not that sophisticated and at times they really don’t understand the fine print, the hidden terms and conditions that we see in the typical fintech loans to small businesses,” she said. “These contracts are very opaque. The fees and terms are hidden in a way that really makes it impossible for the borrower to do any kind of comparison shopping.”

Goldman’s Shot Across LendingClub’s Bow, (Bloomberg), Rated: AAA

There wasn’t a ton to get excited about in Goldman Sachs’searnings report on Tuesday.

Sure, per-share earnings beat analysts’ estimates, but how excited can you get over beating an estimate that dropped like this?

However, there was a tantalizing detail or two offered on the conference call by Chief Financial Officer Harvey Schwartz about the firm’s intriguing efforts to tap into the Main Street customer base. Schwartz said that the bank would roll out its consumer lending platform this fall after surveying thousands of consumers on what they would look for in such a thing. The bank developed one product involving unsecured loans, Schwartz said as way of teaser, telling analysts to standby for more information in the fall.

This may not end up being a big enough business alone to return Goldman’s revenue to record highs, at least not in the short term. Rather, the intrigue lies in its potential to disrupt the disruptors — the online startups that have pioneered the brave new world of peer-to-peer or marketplace lending.

With 20,000 customers opening up new savings accounts on top of the $16 billion in deposits it acquired from General Electric’s online bank in the second quarter, Goldman theoretically should be able to fill in the gaps easily at times when investor demand gets skittish.

Will deposit accounts be the next wave of fintech innovation?, (DailyFintech), Rated: AAA

There’s one sector of finance that really doesn’t get a lot of airtime when it comes to fintech – deposits. Checking accounts, savings accounts, transaction accounts – while they’re the bread and butter of banking, they’ve been relatively untouched since they were first invented. You put money in, and, if you’re lucky, earn a little interest before you take the money out.

Is there an opportunity here for a fintech startup to slice away this part of a bank’s core business, by adding a little flavour to the whole deposit experience?

Serial fintech investor and entrepreneur Peter Thiel certainly thinks there are opportunity in deposits. In January of this year he invested €1M into a German fintech startup Deposit Solutions.

Deposit Solutions is the first open architecture platform for retail deposits in Europe. Among many things, it solves one of the central problems for account holders related to accessing great deposit products – it eliminates the need to switch banks. Instead, a saver requires just one master account with Deposit Solutions and can then pick and choose their deposit product of choice from the Deposit Solutions marketplace.

There are a number of other fintech startups playing in this space, either building the deposits piece from scratch or interfacing into an existing authorized deposit-taking institution. Digit,SmartyPig and Qapital are a notable few. With lending having taken most of the glory to date, opportunities here are getting thin on the ground. Maybe the humble bank account is the next big fintech play.

Bridging the Great Divide: Collaboration Considerations for Banks and Marketplace Lenders, (Lexology), Rated: A

Online Platforms as Chartered Banks

The increasingly close relationship between banks and marketplace-lending platforms, as well as the uncertainty surrounding the “rent-a-charter” model to avoid state usury limits described above, have led to speculation that marketplace lenders may ultimately obtain bank charters. A fundamental issue is whether the equity and institutional investment markets will provide a stable long-term source of funding for the industry. This issue has garnered attention in recent months as leading marketplace-lending platforms have experienced steep declines in their stock prices and as questions have been raised about how lending platforms interact with fund investors and about weak secondary-market trading of asset-backed securities. The question may acquire renewed urgency in light of the governance issues at a leading marketplace lender that recently made headlines, along with its disclosure that the DOJ is now investigating. [5]

An important prudential regulatory concern with acquisitions of bank charters by marketplace lenders is a desire to avoid making the marketplace-lending industry an attractive supplier of brokered deposits, which are an unstable source of capital and may be particularly risky where a bank has inadequate anti-money-laundering controls or is undercapitalized. Regulators also anticipate grappling with the activities of many lending platforms that may be incompatible with partner banks that have charters limiting their activities to those activities that are considered “incidental to the business of banking”—typically insurance and securities work. The edgy innovations of marketplace-lending platforms that use technology in creative ways to marry finance with social media offerings are a particular challenge in this regard.

Will Madden v Midland Disrupt Loan Sales and Platform Lending?, ( National Law Review), Rated: AAA

Although Madden v. Midland applies directly only to cases where a national bank is selling or assigning a loan, the policy underlying the decision to limit the exporting authority under the NBA might also be applied to a state bank’s rate exportation powers under Section 27 of the Federal Deposit Insurance Act (the state bank equivalent to section 85 of the National Bank Act). Secondary market participants and marketplace lenders now wait for the decision from the District Court on remand.  If the court upholds the Delaware choice of law provision, market participants may manage the impact of the Madden v. Midlanddecision by electing a favorable choice of law provision in the underlying debt contract.  That at least will provide an option for continuing to work with national banks despite the Madden case.

Unfortunately, that solution will not work for buyers and sellers of existing loans, although presumably such parties are not too inconvenienced by a limit on the post-assignment interest that can be charged on a loan after substantial interest has already accrued, particularly if they have purchased the debt at a substantial discount.   Other lenders may continue to rely on the state banks’ ability to export interest rates.  In that situation, lenders should choose state banks whose state has a generous interest rate cap and is outside the Second Circuit.

The group impacted most by the Madden v. Midland decision appear to be marketplace lenders who acquire a loan shortly after origination and therefore have essentially all accruing interest at risk of challenge.  One alternative option  adopted by one on-line marketplace lender picking up on the “substantial interest” distinction in the Madden decision, is to require the bank loan originator to maintain an on-going economic interest in all loans after sale and receive certain payments on the loans only when borrowers made payments.

What remains following the Supreme Court’s refusal to hear Madden v. Midland is an outlier Second Circuit on the issue of the “valid-when-made” rule, and the blueprint for how to apply preemption under the National Bank Act as provided by the Solicitor General in its brief, a brief that as noted above clearly considers theMadden v. Midland decision to be wrong.  Unfortunately, until such time as the right case comes along, market participants will have to make adjustments to accommodate the decision as necessary to address its impact on their particular situation.

The Outlook for Fixed Income: Stagnant Prices, Tighter Money, (Enterprising Investor), Rated: AAA

The start of a new credit cycle means that income investors will have to adjust to stagnant bond prices, and new opportunities in credit markets from peer-to-peer lending will be tested by tighter monetary policy, according to David Schawel, CFA.

Returns for fixed-income investors consist of the coupon; the shortening of the bond, known as the roll; and price appreciation. Since the 1980s, falling interest rates have caused existing bonds to appreciate, as their prices increased to match the yields of bonds issued at lower interest rates. Schawel, a portfolio manager for New River Investments, thinks interest rates are nearing a lower bound.

“Most likely we’re not going to be in a 30-year bull market for interest rates falling again,” Schawel told Will Ortel during a recent Take 15 interview.

Schawel cautions fixed-income investors against assuming that bonds will continue to appreciate. Instead, the coupon and the roll will drive returns from bonds. With the roll becoming more important, investors need to pay close attention to the yield curve. Much of the return from bonds will come from the roll while the bond is on the steep part of the curve. Recently, the curve has flattened, reducing the yield premium, as the US Federal Reserve moved to tighten monetary policy.

Schawel sees the rise of marketplace or peer-to-peer lending as indicative of inefficiencies in yield.

30 Best Workplaces sin Finance and Insurance, (Fortune), Rated: B

#23: OnDeck Capital

# of work sites 3
U.S. employees 625
Global employees 638

United Kingdom

Fintech MarketInvoice Attracts m In First ‘P2P Lender’ Major Fundraise Post Brexit, (Forbes), Rated: AAA

MarketInvoice, a 100-strong firm based on the edge of The City in the confines of London’s Silicon Roundabout, has just announced a multi-million investment totalling £7.2 million (c.$9.5m) led by MCI.TechVentures Fund of MCI Capital, a listed Polish private equity group. Sylwester Janik, a senior partner of MCI Capital, a multi-stage private equity group based in Warsaw with nearly two decades of expertise of investing in digital economy companies, has at the same time joined MarketInvoice’s board.

To date the platform has provided £850m (c.$1.11bn at current exchange rate) worth of funding to UK businesses, and the firm is set on path to reach the £1bn mark before the end of 2016. At present the firm provides over £1.5m (c.$2m) per day in cash flow finance to UK businesses via its platform. At present MarketInvoice has a current market share of around 13% in its P2P alternative financing segment.

MarketInvoice, which has seem 100% year-on-year growth over the last three years, typically charges between 2%-3% on invoices handled for clients depending on the amount of the invoice. Businesses can select those invoices they want to finance, unlocking tied-up cash in 24 hours.

“In the wake of Brexit, we think the coming months present a big opportunity for MarketInvoice. Recent intervention by the Bank of England suggests that we might see significant reductions in bank lending.”

Funding Circle SME Income Fund Raises GBP14.5 Million In Placing, (London South East), Rated: AAA

Funding Circle SME Income Fund Ltd on Wednesday said it has raised GBP14.5 million via a share placing.

The London-listed closed-ended fund, set up to invest in loans originated through peer-to-peer lending marketplace Funding Circle, said it had issued 14.3 million shares at 101.53 pence per share.

Shares in Funding Circle SME were untraded on Wednesday, having last traded at 98.00p.

The new funds from the share placing will be used to back investment plans.

Can it really be “business as usual”, (Alt Fi), Rated: AAA

Funding Circle co-founder James Meekings said “the process of leaving the European Union will take two years and there will be no immediate change to Funding Circle’s day to day operations”.

A few weeks ago, AltFi Data cut its projection for 2016 UK origination by 14%, after the £840m originated in Q2 2016 became the first quarterly volume figure ever to fail to eclipse the sum originated in the preceding quarter.

Matthias Knecht quit Funding Circle Continental Europe at the end of June. Knecht was a member of Funding Circle’s global leadership team and a former co-founder of Zencap, a peer-to-peer lending outfit which Funding Circle acquired in October 2015. An article in Gründerszene suggested that a conflict had arisen between Knecht and Funding Circle CEO Samir Desai over the allocation of resources.

LendInvest, the UK’s largest marketplace for real estate loans, has also been making changes. In the immediate aftermath of the Leave vote, LendInvest tightened its lending criteria for loans worth more than £3m, adjusting the cap on LTVs for these loans to 65%. The company has also temporarily paused lending on new second charge applications.

Funding Circle CEO Samir Desai described 2015 as the year in which “it looked like we were turning water into wine”. He described 2016, by contrast, as a year for getting heads down, and for getting on with building business.

Lately the Wall Street Journal has been set to attack mode. Its coverage of the US marketplace lending sector has become almost exclusively cynical. The Times, The Telegraph and This is Money covered the recent insolvency and subsequent acquisition of the business lender FundingKnight. How many other news items in the history of the peer-to-peer lending industry have enjoyed that level of attention in the national press? Not many!

Ben McLannahan, US Banking Editor at the FT, aptly summed the whole thing up when he posted on Twitter saying “#LendingClub = have we hit the trough of disillusionment?” He was referring to something called the Gartner Hype Cycle, which is an attempt to chart the typical growth trajectory of disruptive technology companies.

UK firm claims largest ever P2P loan, (Finextra), Rated: A

UK-based Nucleus Commercial Finance claims it has made the largest ever P2P loan to date following a £14.5 million financing facility offered to UK steel stockholder Industrial Metal Services (IMS). The company has lent more than £400m to date and Shah claims that 90% of this has already been pad back with just £5,800 incurred in bad debts.

P2P lender launches new website, (Bridging and Commercial), Rated: A

The new BridgeCrowd website features a fully online view of the current live and historic loan book, a loan performance update system and an E-Wallet, where investors can place capital into loans and manage their account and interest.

The BridgeCrowd has launched a new website with added features following strong growth over the last 18 months.

Bridge Crowd offers 68% LTVs across residential owner occupied and buy-to-let properties.

Zopa names Ronen Benchetrit CTO, (Finextra), Rated: B

The UK’s oldest peer-to-peer lending service Zopa, has today announced that Ronen Benchetrit will become the company’s new Chief Technology Officer (CTO) in a strategic hire for the fintech business.

Most recently, Ronen served as CTO for leading online gaming operator PokerStars. In this role, Ronen was responsible for the provision of the areas of technology and for management of the company’s product roadmap, ensuring the quality, reliability and security of external and internal systems, networks and platforms.

India

LenDenClub Launches Automated P2P Lending Platform Adhering to Proposed RBI Guidelines, (PR Newswire), Rated: A

LenDenClub has launched its new version of P2P lending platform with features such as end-to-end automation of lender-borrower transaction cycle right from registration, document verification, credit analysis, transaction matching to report generation. An algorithmic-based program, built based on artificial intelligence, will be used for reviewing borrower’s creditworthiness. For the company, the upgradation of P2P platform will accomplish a major milestone and prepare them for payment and digital signature automation to bring 100% automation in lending process through right technology for borrower identification, data collection, digital signature usage, payment automation, etc.
The company had successfully raised seed funding recently.

Singapore

Overview of the Regulatory Framework for P2P Lending and Equity-based Crowdfunding in Singapore, ( P2P Banking), Rated: AAA

From the document published by the MAS on Lending-based Crowdfunding – Frequently Asked Questions (FAQs)[11], generally, the operation of P2P lending is restricted by MAS under the Securities and Futures Act (Cap. 289) (SFA) and the Financial Advisers Act (Cap. 110) (FFA).

Specifically, the P2P lending business needs to prepare and register a prospectus with MAS in accordance with Section 239(3) of the SFA. In addition, not only the registration of the prospectus but also the P2P lending platform need to follow the licensing requirements, particularly, the P2P lending business which fall within the scope provided by MAS needs to hold a Capital Market Services (CMS) license.

From the document, MAS states in paragraph 10 that “ …Platform operators should now ensure that the participants on their platforms are aware that each lender has to lend at least $100,000 if the borrower is to fall within the Promissory Note Exclusion. Offers of consolidated promissory notes commenced after the date of these FAQs must comply with the Prospectus Requirements” This means, that the P2P lending platforms, which previously used a single promissory note issued by the borrowers, need to apply for a license, if they still want to proceed their lending business; however, as provided in the MAS document, the removal of the Promissory Note Exclusion will be effected after the amendment of SFA.

This will affect many of existing P2P lending platforms such as MoolahSense and Capital Match which have the main function to help businesses to find loan from investors because some of P2P lending platforms are using a promissory note exemption without a Capital Market Services (CMS) license; however, MAS will make it easier for licensed P2P platforms. Therefore, a small offer exemption in accordance with the aforementioned law might be used by many P2P lending platforms.

China

Orchard Platform’s Jeremy Todd Shares Lang Di Fintech Experience Highlights, (Crowdfund Insider), Rated: AAA

  • There continues to be strong interest from Chinese Wealth Management firms to invest in US Online Lending loans
  • Investor interest is focused on making strategic equity investments in all types of global FinTech firms within Online Lending
  • Chinese Marketplace Lenders continue to increase their focus on offering more diversified products to clients including wealth management, insurance, and other financial services
  • Implementing a robust operational infrastructure is widely understood as a necessity required to successfully invest in the US Online Lending industry

Increased interest in US Online Lenders from Chinese investors and notable US-Chinese partnerships such as those between DriveWealth and CreditEase, Robinhood and Baidu, and Saxo Bank and Lufax — that further emphasize the importance of this series of events.

Author:

George Popescu
George Popescu

July 5th 2016, Daily News Digest

July 5th 2016, Daily News Digest

News Comments United States According to the bond market yield-curve there is 60% chance of recession. However, the equity market doesn’t agree. Interesting times. A short survey on the different US regulators’ interaction with the marketplace lending space. New Capital Rules likely to be imposed on wall street will likely push bank-dealers to shut down […]

July 5th 2016, Daily News Digest

News Comments

United States

  • According to the bond market yield-curve there is 60% chance of recession. However, the equity market doesn’t agree. Interesting times.
  • A short survey on the different US regulators’ interaction with the marketplace lending space.
  • New Capital Rules likely to be imposed on wall street will likely push bank-dealers to shut down trading units in debt-securitization due to insufficient return on equity. This change could have a huge impact on marketplace asset backed securitization.
  • Wells Fargo continues to push FastFlex, their own quick SME financing product competing with OnDeck, Kabbage, CAN Capital and all other SME marketplace lenders.
  • Morgan Stanley is pointing out all the positive data coming out of Lending Club: higher origination than predicted in Q2 2016 and much more.
  • Lending Club’s CIO unvailing the future plans for Lending Club : Point-of-Sales, offline and a cloud-base micro-services platform.
  • CFPB’s monthly report points out the most-complained-about companies in consumer loans. It would be interesting to plot company size vs number of complaints.
  • Square analysts believe that more regulation in marketplace lending will favor Square vs its competitors.
  • Last week news, worth a reminder after the long weekend: Avant is downsizing, again.
  • Boston, feeling left behind in fintech, is launching a fintech hub initiative supported by Fidelity, Putnam, Santander Bank, U.S. Bank and Boston Private Financial.

United Kingdom

  • An interesting way to leverage your p2p investments: buying discounted P2P public fund shares at the present 20% discount, and relying on stock buy-backs to bet on up side in yield + equity appreciation.
  • Brexit: in short, fintech firms fear for staff shortages and lost EU customer access.

European Union

  • Insurer Aviva France, in partnership with Eiffel Investment Group and AG2R La Mondiale launching a €100 million fund to invest in “crowdlending SME debt” in France and elsewhere.
  • A list, without any transparency on the inclusion criteria,  of the top 11 p2p lending platforms in Europe, (Pre-Brexit), per Fintechnews.ch. And a very interesting map of relative p2p lending market size in European countries.

Australia

  • Public p2p lender DirectMoney preparing a new share issuance to finance loans as loan demand outstrips funding.”DirectMoney chief Peter Beaumont yesterday defended the fintech company’s stockmarket listing and expressed disappointment over losses worn by shareholders.”
  • OnDeck Australia and Commonwealth Bank (CBA) receiving the Fintech-Bank Collaboration of the Year Award.

India

  • P2P players are moving towards institutional capital for growth. Following in the footsteps of their US cousins, we hope the Indian p2p lenders have learned their lessons from Prosper, Lendnig Club and Avant’s experiences with institutional capital.

China

  • P2P lenders exiting office space in Shanghai have brought office space vacancies supply to a 10-year-high level.

Korea

  • Interesting data and information on one of the 1st Korean p2p lending companies we learn about.

News Summary

Unites States

Bond Markets Have a Message About the Economy That Stock Investors Might Not Want to Hear, (Bloomberg), Rated: AAA

There’s a big disagreement brewing in global markets.

There’s 60 percent chance of recession, according to a Deutsche Bank model.

While risky assets including equities have surged following the U.K. electorate’s historic vote to leave the European Union, government bonds have also rallied; two things that ought to suggest different outlooks for economic growth. Soaring bond prices have sent yields on the perceived safe havens of government debt plumbing fresh lows, even while expectations of looser monetary policy produce a burst of animal spirits in stock markets.

The flight to safety has prompted some analysts to question the durability of the rally in equities, where the S&P 500 was up 3.5 percent last week and the FTSE 100 has erased its post-referendum dip — at least, in local-currency terms. Still others say that money is pouring into stocks as lower bond yields force investors to search for returns in alternative asset classes.

The spread between the yield on 10-year and two-year U.S. Treasury notes narrowed in the immediate aftermath of the June 23rd referendum, widened briefly, and is now shrinking again as investors continue to flock to the perceived safety of U.S. government debt. A model maintained by Deutsche Bank AG’s Steven Zeng, who adjusts the spread for historically low short-term interest rates, suggests the yield curve is now signaling a 60 percent chance of a U.S. recession in the next 12 months — up from a 55 percent probability as of mid-June, and the highest implied odds since August 2008.

“This relentless flattening of the curve is worrisome,” Deutsche analysts led by Dominic Konstam said in their note on the model. “Given the historical tendency of a very flat or inverted yield curve to precede a U.S. recession, the odds of the next economic downturn are rising.”

The 10-year yield is currently at 1.44 percent, making a recession just about 40 basis points away according to this particular interpretation of the bond market’s moves.

Rundown of Regulator Interest in Marketplace Lending, (Lend Academy), Rated: AAA

U.S. Treasury

The Treasury first publicly showed interest in marketplace lending with a request for information(RFI) back in July 2015. Over 100 companies responded to the RFI and the Treasury reported on their findings in May 2016 where they shared their response in the form of a white paper. It did not provide any recommendations for new regulations and was generally quite positive on the industry.

Office of Comptroller of the Currency (OCC)

On March 31, the OCC released a white paper titled Supporting Responsible Innovation in the Federal Banking System: An OCC Perspective. More recently, the head of the OCC, Thomas Curry, reaffirmed his commitment to responsible innovation in a speech just last week. He brought up the idea of a “regulatory sandbox” – a place where fintech companies can have a conversation about what the rules of the road are for their new ideas. He also brought up the idea of a limited purpose charter for fintech firms as a possible way forward.

Federal Deposit Insurance Corporation (FDIC)

The FDIC first addressed marketplace lending in a paper titled Supervisory Insights. They are concerned about the impact on banks as well as the general risk to financial services.

Consumer Financial Protection Bureau (CFPB)

Early this year, the CFPB made two announcements impacting marketplace lending. They said that they would begin accepting complaints directly from consumers about marketplace lending companies. Around the same time they issued a new No-Action letter policy that was designed to encourage innovation in financial services.

According to the Wall Street Journal the CFPB is planning to supervise marketplace lenders and will release a proposal some time in the fall. The CFPB has not commented publicly on this news so right now it is just a possibility but it makes sense.

Securities and Exchange Commission (SEC)

SEC involvement in marketplace lending goes back to the early days of Lending Club and Prosper. In 2008 the SEC decided that the notes issued by these companies were securities and should be registered as such. The result was Lending Club and Prosper filing a S-1 registration and becoming quasi public companies with quarterly financials being filed with the SEC.

Now that Lending Club is a public company it is has more responsibilities to both equity and debt investors both of which come under the purview of the SEC. The reality is while the SEC keeps a close eye on marketplace lending it is unlikely there will be much in the way of new developments here.

Federal Trade Commission (FTC)

The FTC recently hosted a financial technology forum on marketplace lending. The forum sought to look at consumer protections in marketplace lending and fintech more broadly. According to Jessica Rich, director of the FTC’s consumer-protection bureau marketplace lenders haven’t done enough in borrower protection.

United States Congress

In May 2015, the House Small Business Committee held a hearing on Capital Hill.

In January, in the wake of the San Bernardino shooting tragedy, the House Financial Services Committee held a hearing on terrorism financing that included a discussion of marketplace lending. But no new initiatives have come yet from these hearings.

Financial Stability Oversight Council (FSOC)

The FSOC most recently included their thoughts on marketplace lending in their annual report. Although the report highlights the lower cost and efficiencies of marketplace lenders they also discuss risks and concerns. One of the main concerns listed are the new and untested underwriting models used by platforms.

Conclusion

This list is only a start of the involvement we are likely to see from regulators as it pertains to marketplace lending. Due to the attention, we’ve seen many industry associations created to ensure a productive dialogue is being undertaken in Washington with all the organizations discussed here. We sincerely hope that any new regulation to come is thoughtful and comes from a well informed view of the industry.

Capital Rules Stifling Securitized-Debt Trading Profit: JPM, (PeerIQ), Rated: AAA

New layers of regulatory capital expected to be imposed on Wall Street are likely to further pressure banks to exit trading of securitized-debt, JPMorgan analysts John Sim, Kaustub Samant, Carol Zhang wrote in client note Friday.

NOTE: Reports of dealers paring or shutting down trading units have grown; banks include Barclays, DB, MS, SocGen, Jefferies, RBS, Nomura, CS

  • There’s “no path to profitability” under current and recently released capital rules
  • JPM analysts calculated ROE (return on equity) for hypothetical RMBS portfolio based on impact from Basel’s Fundamental Review of the Trading Book
  • Concluded ROE of ~4%, “clearly not attractive enough to entice dealers to enter the space and make markets”
  • Adjusted model to various hypotheticals, such as reallocation, bid-ask, turnover rates
  • Concluded the “cumulative effect of all of these realistic and unrealistic changes would only increase the return to 7%, which is far short of our 10% to 15% ROE threshold”
  • “Running ROEs for hypothetical ABS and CMBS businesses would not result in markedly different results”
  • Primary market and business of underwriting new-issue securitizations can still be attractive, however, contingent  underwriting volumes
  • Revenue derived from underwriting fees without consuming much capital; when balanced with secondary trading, ROEs for the business can become attractive, depending on volumes
  • Liquidity will continue to be constrained for non-agency RMBS, particularly in legacy space where dealers have no commensurate underwriting
  • CRT deals will also suffer from limited trading activity relative to market size; expect limited liquidity for Jumbo RMBS and SFR deals

How Wells Fargo Aims to Satisfy ‘Need for Speed’ From Millennial Borrowers, (The Street), Rated: AAA

Known as FastFlex, the San Francisco-based bank’s product offers customers with a business checking account a one-year loan of up to $100,000. Wells Fargo is considering expanding the availability of the loan next year, Lisa Stevens, the company’s head of small business, said in an interview.

FastFlex is designed for businesses with under $5 million a year in revenue who have “quick short-term needs to do some type of expansion or cash management,” Stevens said.

Some 67% of millennials are willing to take some financial risks to grow their businesses, compared with just 54% of older owners.

The FastFlex loan is one effort to meet that demand, he said, by providing a digital service with a rapid turnaround, two of the qualities that millennials have said they value most highly in financial services products. “We wanted to design our own product that would compete well in the marketplace-lending environment,” Case said.

Lending Club Corp : Positive Updates from the Annual Meeting, (Morgan Stanley), Rated: AAA

2Q16 originations down ⅓ from 1Q equates to ~$1.8bn in originations or -4.4% YoY,vs. our $1.4bn (-25% YoY) estimate.Assuming volumes for the first five weeks in the quarter (prior to

Assuming volumes for the first five weeks in the quarter (prior to announcement of irregularities and CEO resignation) were consistent with the 1Q run rate, this suggests volumes over the remaining 8 weeks were down ~50% sequentially and 37% YoY.

LC has had dialog with hundreds of investors,and none have outrightly refused to come back as an investor on the platform. Most investors need to go through a due diligence process and LC appears confident in its ability to bring them back to prior levels of investment over the long term.

While investors from every category have returned to the platform, banks and large investors are taking longer with their audits, which is in-line with our expectations.It is unclear if 2Q represents the trough in terms of origination volumes, but management commentary on investor appetiteand conservativeapproach on origination expectations suggests 3Q and

It is unclear if 2Q represents the trough in terms of origination volumes, but management commentary on investor appetiteand conservativeapproach on origination expectations suggests 3Q and
4Q volumes should be similar to 2Q with potential for upward bias.

LC expects to incur $9mn of investor incentives (to be booked as contra-revenues) in 2Q , which are likely to continue in 3Q with a plan to eliminate these by 4Q.

LC expects to “resume revenue and EBITDA growth in 1H17” though it remains unclear to us if this comment suggests sequential or YoY growth.We expect LC to return to origination, revenue,and adjusted EBITDA growth by 2Q17, though we expect 1H17 to remain below 1H16 given tough comps on 1Q17e.

2016 Bay Area CIO of the Year Innovation/Transportation finalist: A conversation with LendingClub’s John MacIlwaine, (Silicon Valley Business Journal), Rated: AAA

How do you predict your company will be different in two years, and how do you see yourself shaping that change?

We’ll also have a wider set of financing products that will be accessible online, offline, and at point of sale, while expanding our partnerships with banks and other non-financial institutions. We’re enabling that change by building our cloud-based micro-services platform, which simplifies integration of our solution for our partners and allow us to quickly and efficiently scale our core business and expand our product set.

What do you feel has been your biggest impact/success at this company? My biggest impact on LendingClub has been building a world-class team of engineers, scaling our technology platform to support the company’s incredible growth (compound annual growth rate of 124 percent Q4 2009 to Q4 2015 and well over $16 billion in loan originations to date), and setting a clear vision for a technology platform that is flexible and adaptable enough to handle future loan origination growth, partnership integration, and regulatory compliance updates.

What are your top three priorities for 2016-2017?

  1. Transform our current technology platform into a suite of cloud-based micro-services;
  2. Move our platform hosting environments to AWS (Amazon Web Services);
  3. Double the size of our world-class technology team.

CFPB June 2016 complaint report highlights consumer loan complaints, complaints from Arkansas consumers, (JDSupra Business Advisor), Rated: AAA

The CFPB has issued its June 2016 complaint report which highlights complaints about consumer loans and complaints from consumers in Arkansas and the Little Rock metro area.

The report does not specifically identify any complaints as involving marketplace lending.  Unlike prior monthly complaint reports, the June 2016 report includes a “Sub Product spotlight” section that highlights auto lending.

  • The most-complained-about issue involved managing the loan, lease or line of credit.  Other complaint issues included problems arising when the consumer was unable to pay, such as issues relating to debt collection, bankruptcy, and default.
Source: CFPB June complaint report.

General findings include the following:

  • Complaints about student loans showed the greatest percentage increase based on a three-month average, increasing about 61 percent from the same time last year (March to May 2015 compared with March to May 2016).  As we noted in our blog posts about the April and May2016 complaint reports, rather than reflecting an increase in the number of borrowers making student loan complaints, the increase most likely reflects that in March 2016, the CFPB began accepting complaints about federal student loans.  Previously, such complaints were directed to the Department of Education.
  • Payday loan complaints showed the greatest percentage decrease based on a three-month average, decreasing about 15 percent from the same time last year (March to May 2015 compared with March to May 2016).  Complaints during those periods decreased from 479 complaints in 2015 to 405 complaints in 2016.  In the March, April, and May 2016 complaint reports, payday loan complaints also showed the greatest percentage decrease based on a three-month average.

Square Inc Better Risk Reflection Leads to Upgrade: Wedbush, (Bidness Etc), Rated: A

Helmed by Twitter CEO, Jack Dorsey, the Square’s lending business encountered a substantial obstacle in May, in the form of new and strict scrutiny from regulatory authorities. In a comprehensive study, the US Department of Treasury along with several other government agencies put forward recommendations, to safeguard the access and growth to credit through the continued developments of online marketplace lending.

Wedbush analysts believe that regulatory scrutiny is likely to increase the company’s lending business.

For the 2Q, Square projects revenue to fall between $151–156 million. Wedbush expects the company to surpass its own expectations — reporting closer to the sell-side firm’s own $168 million estimates — but foresees considerable downside to the financial services company’s shares, if it reports within its given guidance range.

Interestingly enough, in a research note published yesterday, Morgan Stanley lowered its prices target on Square stock from $12 to $10, following a meeting with the company. The sell-side firm also raised its Stock-Based Comp estimates, in light of the company’s transition from private to a public entity and higher comp to select personnel vs. prior expectations.

Why Online Lender Avant Is Cutting Down Its Workforce Again, (Fortune), Rated: A

After also deciding to pull back in May from new verticals such as auto loans to concentrate on its core personal loans business, Avant is now cutting its lending target for that unit by 50% to about $100 million per month, Bloomberg reported.

Avant’s problem, like much of the so-called peer-to-peer lending market, isn’t a lack of demand from potential borrowers. Instead, the company and other online lenders are having increasing difficulty raising money to lend out as hedge funds and other investors outside the usual banking circles that backed the industry have grown wary.

The company had grown quickly for the past few years, reaching $3.5 billion in total loan volume. But with less access to capital, business has slowed recently, and loan volume declined 27% in the first quarter from the fourth quarter—the first such quarter-to-quarter drop since Avant started in 2012.

LendingClub’s Negative Press Blitz Continues, (Yahoo Finance), Rated: A

An $800 million LendingClub Corp (NYSE: LC) fund that invests in the company’s online consumer loans is expected to report its first monthly loss in the past 64 months in June. According to a letter to investors from LendingClub CEO Scott Sanborn, LendingClub’s Broad Based Consumer Credit (Q) Fund’s June return “is likely to be negative.”

The fund is LendingCub’s largest and has regularly returned around 0.5 percent per month throughout its five-year history. However, default rates on the fund’s loans have begun to rise in recent months and returns have dropped, prompting a number of investor redemption requests

The Wall Street Journal’s Peter Rudegeair reported that as of June 17, LendingClub had received $442 million in redemption requests representing about 58 percent of the value of the fund. In response to the large number of redemption requests, LendingClub announced it was placing restrictions on withdrawals and would be considering winding down the fund entirely.

Group led by State Street, Putnam launches fintech initiative, (Boston Business Journal), Rated: A

The Boston Financial Services Leadership Council and the business consulting group Mass Insight have created Financial Technology Boston, under which they will host networking events and possibly job fairs involving fintech professionals from the corporate, startup, government and higher-education worlds.

In addition to State Street (NYSE: STT), Fidelity and Putnam, the BFSLC includes Santander Bank, U.S. Bank and Boston Private Financial (Nasdaq: BPFH).

Boston is already home to fintech-focused incubators FinTech Sandbox and the DCU Center of Excellence in Financial Services, as well as a monthly meetup for fintech professionals.

United Kingdom

Why investors should scoop up discounted P2P funds before putting cash into platforms, (AltFi News), Rated: AAA

Analysis by AltFi Data shows loan origination has more or less been static across the UK P2P lending industry in 2016. This somewhat contrasts with the rapid growth seen in 2015 and 2014. Any number of explanations are given for this including a broad risk-off attitude from markets as well as the ongoing fiasco at the major US platform Lending Club.

However, for professional and private investors alike who are not dissuaded from the adverse headlines, and attracted by the high yields on offer from investing in the market, there is a clear argument to avoid investing directly on platforms. While this is the normal route for many, buying shares in the investment trusts offering exposure to loans originated from the platforms that are heavily discounted at present arguably makes more sense.

Over time in addition to the 7.4 per cent yield on offer, a narrowing of this discount or perhaps even a move to a premium could significantly bolster returns.

The table below shows what will happen to the share price following a 20 per cent return in net asset value alongside changes in the discount/premium. It clearly shows that buying at a premium massively adds to the total return.

Of course there is always the risk that the discount moves out further. This could be caused by investors going off the trusts even more. Or it could be broader negative sentiment towards equity markets that sees index level selling of the FTSE 250 – in the case of P2P GI – or FTSE All Share selling in the case of VPC Specialty Lending. This would add to weakness in both trusts’ share prices, and potentially widen the discount.

However, as AltFi reported last week P2P GI has started to defend its discount by buying up its shares using spare cash. Last week it bought £2m of its shares at an average price of 827p, says Monica Tepes, analyst at Cantor Fitzgerald.

This did temporarily lower P2P GI’s discount to 17.5 per cent although it has since moved back to over 20 per cent.

Brexit: FinTech firms fear for staff shortages and lost EU customers, (Tech Republic), Rated: AAA

London is a major player in the international FinTech market, with startups in the UK capital securing more venture capital funding last year than their European counterparts.

That status won’t necessarily change after Britain leaves the EU but FinTech firms have said it will complicate the picture, particularly when it comes to their ability to sell services to Europe and attract new talent.

Controlling migration was the second most important reason for quitting the EU, according to those who voted Leave in last week’s referendum.

Access to the single market allows goods and finance to be moved between EU countries without tariffs. However, full access also requires free movement of workers between European countries, something many Leave voters oppose.

Nevertheless, for peer-to-peer (P2P) lending platform MarketInvoice, as for many other London-based FinTech firms, free movement of European labor is essential to meet its demands for skills.

“Here at MarketInvoice we have a super-diverse team from all corners of the globe. Most notably within our software-engineering and data-science teams. Many FinTech founders themselves come from outside the UK,” said Anil Stocker, CEO of MarketInvoice.

European Union

Insurer Aviva France to Lend €50 Million to SMEs Through Crowdlending Platforms, (Crowdfund Insider),Rated: AAA

Aviva France, together with two partners, alternative asset management firm Eiffel Investment Group and insurer AG2R La Mondiale, is launching an investment fund called “Prêtons Ensemble” (Lending together) dedicated to financing loans to small and medium-size enterprises (SMEs) provided through crowdlending platforms.

Starting with an initial endowment of €50 million from Aviva France and €20 million from AG2R La Mondiale, the fund is expected to quickly grow to €100 million by rallying other institutional investors around the project.

The goal is to invest in the French real economy by financing SME loans granted through regulated crowdfunding platforms. Eiffel Investment Group is a specialist with more than eight years of experience in investing on crowdlending platforms, notably in the more advanced UK and US markets. Eiffel Investment will be in charge of the due diligence on the platforms and their loan portfolios. Currently, they have identified around 100 platforms and have made contact with 50 of them. Eventually, in five years from now, the fund should be invested to 70% in lending to SMEs and minimum to 50% in France. At the onset, we’re starting with a dozen platforms, mostly, but not only from France as the market is still emerging here. The (soon-to-be published) list includes names such as Younited Credit, Finexkap and Lendix.

The fund will be diversified in terms of the platforms’ business model and of the type of credit provided to SMEs. This means that it will include both unsecured and secured loans, short-term invoice financing as well as mid-term loans. On average, the loans are expected to have a maturity of 2.5 years.

Our decision was made long before the Lending Club problems surfaced. Upon hearing about them, we conducted a thorough analysis of their actual causes and impact. We were quite reassured to find out that the scale of the financial issue was small, that it had been fixed, and that a subsequent audit did not uncover any other impropriety.

Europe’s Top 11 Peer-to-Peer Lending Platforms, (Fintech News), Rated: A

Comment: As author chose to label the article Europe’s top 11, and includes UK companies, we chose to do the same.

In Europe today, although the vast majority of the P2P lending activity is concentrated in the UK – which accounts for over 84% of the whole European market –, Germany, France and Nordic countries are experiencing strong growth and development in the P2P lending space with a number of homegrown startups starting to emerge as regional leaders.

Australia

Fintech losses blamed on rerating, (The Australian Business Review), Rated: AAA

DirectMoney, which writes personal loans, slid to 4.5c a share after coming to market last year at 20c via a backdoor listing. On Friday, the company unveiled a $5.7m non-renounceable capital raising at 4.2c a share on a one-new-share-for-every-two-held basis.

The raising, underwritten by Bell Potter, opens on July 11.

It follows a mixed ride for investors, with the stock exchange in February querying its financial position and DirectMoney subsequently unveiling a deal with Macquarie, which bought $5m of the company’s personal loans and took shares in the company in exchange for advisory services.

In May, DirectMoney revealed loan demand was outstripping funding as the company slowly gained traction for its personal loan fund for retail investors. In the interim, the company turned to two “large financial institutions” for funding facilities, signing a non-binding term sheet with one for $20m.

Part of the cash from the $5.7m raising will be used as upfront collateral for the funding facilities. “We’ve proven our ability to originate loans; that is difficult for some organisations and what we are now doing is establishing committed funding programs of sufficient size so we can leverage the assets we’ve built,” Mr Beaumont said.

DirectMoney has written $17.6m of unsecured personal loans up to $35,000 for three to five years. Revenue in the financial year to the end of May was $1.19m, compared to $435,513 in the six months to December 31.

DirectMoney chief Peter Beaumont yesterday defended the fintech company’s stockmarket listing and expressed disappointment over losses worn by shareholders, arguing there were many benefits and the sector globally had suffered a de-rating.

“We’re disappointed there were investors that came in at higher prices and have had capital losses at this point, but marketplace lending globally has experienced a resetting of valuations, whether it’s LendingClub in the US or others, since last year,” he said.

The inaugural Australian Fintech Awards regonised innovation in the finance industry, with OnDeck Australia and Commonwealth Bank (CBA) receiving the Fintech-Bank Collaboration of the Year Award. OnDeck entered the Australian market last year with CBA and online accounting software provider, MYOB, as distribution partners.

India

P2P players bank on institutional lenders for growth, (Economic Times), Rated: AAA

I-lend has stitched a partnership with Hyderabad-based non-banking finance company Star Finserve, becoming the first peer-topeer online lending platform to join hands with an institutional lender while several other players including MicroGraam, Faircent and LenDenClub are in talks for similar pacts.

“The cost of loan origination is going up steadily for NBFCs and banks, the number of successful applications is declining and through these partnerships the institutional lenders can cut down on incurring origination of loan and administration costs,” said VVSB Shankar, founder of i-lend.

Shankar said the decline in the number of applications could be attributed to several factors such as competition among institutional lenders, quality of borrowers or involvement of non-performing assets. The company’s loan book size is about `1.5 crore and lenders on the platform can opt for borrowers who pay 18-21% interest.

Peer-to-peer platforms have reported an increase in the number of high net worth individuals or HNIs they have attracted over the past six months. “HNIs and family offices are showing interest in the peer-to-peer space. Since there is a criterion for lenders to have an income of over `10 lakh, this is bound to happen. Our top lenders have invested more than `40-50 lakh each, with the highest being around Rs 60 lakh,” said Rajat Gandhi, founder of Faircent, which has a loan book size of Rs 6.5 crore.

Smaller players including LenDen-Club said they have also seen increasing interest from HNIs, specifically from Maharashtra and Gujarat, spending about Rs 15 lakh individually. Since retail investors are central to how such platforms function, the companies aim to firm up a select few partnerships with institutional lenders over the next one year.

China

Exit of P2P lenders from Shanghai office market poses a challenge, (South China Morning Post),Rated: A

The recent collapse and exodus of numerous peer-to-peer lending (P2P) companies in China after a government crackdown on fraud has rattled the Shanghai CBD office market and may “pose a challenge for landlords”, experts say.

In the second quarter of the year, supply spiked to a 10-year high, according to real estate firm Colliers International, as overall vacancy rates in the area increased 3.2 per cent quarter on quarter to 7.2 per cent.

Korea

8PERCENT: Men in 30s Major P2P Investors, (The Korea Bizwire), Rated: A

8PERCENT, a P2P (peer-to-peer) lending company, revealed on July 4 that 30-something men who live in metropolitan areas are their primary investors.

As of June 30, top P2P lending company 8PERCENT’s total accrued loans summed up to 26.6 billion won ($23 million), with a total of 8,283 investors investing 3.21 million won ($2800) on average per person.

The average age of the investors was 34.3, and more than 90 percent of the investors were between the ages of 20 and 40. 8PERCENT also revealed that 77 percent of the investors lived in metropolitan areas, and that 67.5 percent were male and 32.5 percent, female.

The largest investment made so far was 453 million won ($395,000) diversified into 1,115 different bonds.

“Until last year, 90 percent of investors were from metropolitan areas, but the portion from non-metropolitan areas increased to 23 percent this year. Investment from women also increased from the low 20s to 30 percent, and we’re seeing growth in the number of investors in their 50s as well,” said Kang Seok-hwan, chief marking officer of 8PERCENT.

Small credit loans of 24.2 billion won ($21 million) comprise more than 90 percent of the total investments. Out of the total amount, 13.4 billion won ($11 million) was loaned to individuals, and 10.8 billion won ($9.4 million) to corporations.

Besides credit loans, borrowers also obtained real estate mortgage loans of 2.4 million won ($2 million).

 

Author:

George Popescu