Tuesday February 20 2018, Daily News Digest

Loan Charge Rates

News Comments Today’s main news: Cross River Bank, PeerIQ partner on loan data.Coinbase to offer crypto payments service to compete with PayPal.Better Mortgage hits $1B in mortgage loan funding.LendingClub updates Truth in Lending Statement.Zopa to launch a credit card.Funding Circle plans IPO at $2.1B valuation.Prospa ranked #1 among high-growth firms in APAC. Today’s main analysis: […]

Loan Charge Rates

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United States

United Kingdom

China

European Union

International

Australia

India

APAC

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News Summary

United States

Fintech-friendly Cross River Bank partners with PeerIQ on loan data (American Banker), Rated: AAA

Cross River Bank in Fort Lee, N.J., has entered into a partnership with PeerIQ, a provider of consumer loan data analytics, in an effort to streamline capital sourcing between online lenders and institutional loan buyers such as small banks.

Coinbase Now Powering Payments in Digital Currency (Crowdfund Insider), Rated: AAA

Coinbase, one of the largest cryptocurrency exchanges in the world, has launched Coinbbase Commerce, a payments platform that allows merchants to accept digital currency anywhere, anytime.

Millennials SME Owners Prefer Online Alternative Lenders to Tradtional Ones (Bank Innovation), Rated: AAA

According to Mercator’s report, Business Banking Services: Keeping Up with Millennial Owners, 27% of total U.S. SMEs have used online alternative lenders (P2P lenders or marketplace lending platforms) in 2017.

Of this number, 48% of millennial owners (aged 18–34), currently have a loan from an alternative lender compared to 25% of SMEs run by owners over 35 years of age. Further, these millennial owners said they are twice as likely to use alternative lenders than their older counterparts.

Source: Bank Innovation

P2P lending soars but SMEs generally wary of finance (P2P Finance News), Rated: A

The 2018 Small Business Finance Markets report, released on Tuesday, found that P2P business lending rose by 51 per cent in 2017. In contrast, bank lending to UK small- and medium-sized enterprises (SMEs) fell to £700m in 2017 from £3bn the previous year.

Despite increased demand for alternative finance, the report found that 70 per cent of smaller businesses would rather forego growth than borrow. The BBB’s analysis found that only 1.7 per cent of small firms sought new loans over the last 10 quarters – a record low since its index began in 2011.

Less than half (43 per cent) of businesses surveyed were confident they would get a loan if they applied, even though most new loan applications (72 per cent) are approved.

Better Mortgage Hits $ 1 Billion Dollars in Mortgage Loans Funded after Launch in January 2016 (BusinessWire), Rated: AAA

Better Mortgage, a digital mortgage company focused on improving access to home financing for a new generation of homeowners, announced that it has funded over $1 billion dollars in mortgage loans to date. Better launched in January 2016, making it the third fastest online lender to reach this $1B milestone — per research published by Lend Academy in July 2017.

The Case for M&A (Why Banks Should Buy Online Lenders) (PeerIQ), Rated: AAA

Tech firms have already demonstrated they can open these markets. The largest money market fund in the world, Ant Financial’s four-year-old Yu’e Bao, was built on a sweep from the AliPay payments product. Intuit can utilize proprietary accounting and tax data to underwrite (and acquire) borrowers in novel ways. Amazon can underwrite small businesses using inventory turnover and reams of customer data.

“Big Tech” firms also have proprietary platforms and channels – in-home (think ‘Alexa’), apps, in-car, and mobile to name a few.  However, in the US – at least for now – Big Tech firms lack a regulatory “swimlane” to compete with banks in lending and payments on a national scale. Their non-bank and commercial status confines their activities to narrow forms of lending, affinity partnerships, and lead generation. Until that impediment is dissolved, “Big Tech” firms need to partner with national banks with unsecured lending capabilities to fully unlock these markets.

Our argument is that banks without an unsecured lending capability risk losing long-term customer relevance. Banks that do not have an unsecured lending business do not have a seat at the table.

Source: PeerIQ

Which Banks are the logical buyers?

Banks that have the following characteristics would make a short-list of likely acquirers:

  • Are active in lending, but have a gap in unsecured consumer loans
  • Banks with asset management or structured products arms that can package loans into new products (e.g., ABS offerings, investment vehicles, etc.). Also, banks that have aspirations to develop a robo-advisor
  • Banks that have a demonstrated history of partnering with FinTechs
Source: PeerIQ, SEC filings, bank corporate websites

We assume underwriting and loan terms similar to those today (e.g. ~700 credit score, 15% coupon, $15k principal, 3 to 5 year term). We assume annual charge-off rates of 5%. We assume a 1.5% deposit funding charge and a leverage ratio of 15%.

We find that a bank can generate 10% NIM, 2 to 3.5% ROA, 15 to 20% marginal-ROE during good times.

Update to Truth in Lending Disclosure Statement (Lending Club), Rated: AAA

As of Friday, February 23, 2018, recent updates made to the Truth in Lending disclosure statement for unsecured consumer loans will take effect. The forthcoming Truth in Lending disclosure statement is available here.

Will LendingClub Turn a Corner in 2018? (Guru Focus), Rated: A

LendingClub has a market cap of about $1.6 billion, which makes it one of the biggest players in the peer-to-peer lending market.

The company’s stock price has plunged nearly 40% over the last four months and this could continue unless the upcoming earnings call changes investor sentiment. LendingClub was valued at about $9 billion in late 2014 but it has dropped to about $1.6 billion.

Source: Guru Focus

Pricey personal loans would be outlawed by bill that would reshape state lending industry (Los Angeles Times), Rated: AAA

A bill introduced Thursday by Assemblyman Ash Kalra (D-San Jose) could dramatically reshape California’s lending industry by capping interest rates at roughly 20% for consumer loans between $2,500 and $10,000. Since rate caps were removed by the Legislature in the 1980s, there’s been no limit to the amount of interest lenders can charge on those loans.

That has led to startling growth in the market. In 2016, more than half of the loans between $2,500 and $5,000 and about 21% of larger loans charged interest rates of 100% or higher. In all, Californians in 2016 — the most recent year for which state data are available — borrowed $1.1 billion at triple-digit interest rates.

But Kalra’s bill would do much more than ban lenders’ priciest offerings. The bill would extend an existing set of rate caps that now apply to loans of less than $2,500 to all loans of up to $10,000. That would cap interest rates at roughly 19% for loans up to $10,000.

Had the caps been in effect in 2016, 98% of loans between $2,500 and $5,000 and 95% of loans up to $10,000 would have been outlawed. Only about $91 million of the $2.7 billion in loans made in those sizes in 2016 had rates below 20%.

BFS Capital Announces New 5 Million Credit Line (BFS Capital Email), Rated: A

BFS Capital, a leading small business financing platform, today announced it is has received a new $175 million revolving credit line provided by funds managed by Ares Management, L.P. BFS Capital will use the new facility to accelerate the growth of its lending business, following a record year where the company generated more than $300 million in originations, a new annual high.

Braviant Holdings Announces $ 7 Million Equity Raise (Braviant Email), Rated: A

Braviant Holdings, a leading fintech startup that uses advanced analytics and proprietary technology to make smarter lending decisions, has raised $5 million common equity from Loom Capital, LLC. Alongside the equity investment, Braviant has entered into an exclusive partnership with a subsidiary of Trend Capital, a tech-enabled digital marketing platform affiliated with Loom.

VPC’s portfolio sales drag on performance (P2P Finance News), Rated: A

VPC Specialty Lending Investments has reported a total net asset value (NAV) return of 3.07 per cent for 2017 – below its target return levels.

PeerStreet Review (Benzinga), Rated: A

In addition, “accredited investors” need only apply. Investors must have a net worth greater than $1 million in liquid assets (meaning the equity in your home doesn’t count) or you need to earn more than $200,000 per year or make $300,000 jointly.

PeerStreet’s minimum investment is $1,000 and account fees range from 0.25% to a 1% setup fee. The investment length ranges from six to 24 months.

Marla Blow of FS Card (Lend Academy), Rated: A

In this podcast you will learn:

  • How Marla’s time at the CFPB indirectly led to the founding of FS Card.
  • Why creating a new credit card company is so complicated and challenging.
  • What their Build card is and who is their target market.
  • How they are able to offer an secured credit card to people that banks reject.
  • The types of data they use to find stable customers in the subprime segment.
  • The typical size of the credit line they provide to these customers.
  • The profile of their target customer and how they are using the credit card.
  • How they are providing financial education to these people.
  • How FS Card is acquiring these credit card customers.
  • The percentage of their customers who have qualified for credit line increases.
  • Why improving credit scores of their customers is a key metric.
  • How they are able to issue these cards through their partner bank.
  • How FS Card makes money.
  • What regulators could be doing to help subprime consumers get more access to responsible credit.
  • What more should fintech companies be doing to help these underserved people.
  • The biggest challenges that FS Card has to overcome to become a large and successful credit card company.

How does real estate investing benefit from technology (Realty Biz), Rated: A

Buying and selling property has already become much more accessible due to technology, and this trend is only going to speed up. While historically, real estate professionals, investors, and landlords have been reluctant to pay for technology, and the data available has been spotty, the tide is turning as more wake up to the opportunities. Investment values are shooting up in many places due in a large part to technological advances, including the ability to market real estate to audiences beyond the immediate community and to close deals securely, quickly, and remotely with investors.

BBVA taps digital start-up Azlo to target US freelance market (Fintech Futures), Rated: A

BBVA has partnered with digital business account provider Azlo to target the freelance market in the US.

According to BBVA, by 2020 in the US alone, 43% of workers will be employed in freelance capacities – a trend that is expected to continue to grow.

Goldman Sachs and rivals home in on risky consumer banking (Financial Times), Rated: A

Lloyd Blankfein was a breezy opening act at a big industry event this week in Key Biscayne, Florida. On stage at the Ritz-Carlton the chairman and chief executive of Goldman Sachs was talking about Marcus, the bank’s new online savings and lending platform, which is targeting borrowers with scores as low as 660 on the 300-850 Fico scale. Goldman calls such people “creditworthy”; others call them subprime.

Banks Urged to Take On Payday Lenders With Small, Lower-Cost Loans (WRAL), Rated: A

Those who find themselves pinched for cash often turn to high-cost payday lenders. But traditional banks and credit unions could serve that role for borrowers and do it at much lower rates, according to a new proposal from the Pew Charitable Trusts.

B of A’s Moynihan: Big banks are ‘fine’ with Dodd-Frank (American Banker), Rated: A

While small and regional banks are pushing for a rollback of the Dodd-Frank Act, big banks are largely supportive of the 2010 financial reform law, Bank of America CEO Brian Moynihan said Thursday.

African-American Entrepreneur Launches Innovative Mobile Tax Refund Loan App to Revolutionize the Tax Industry (Black News), Rated: B

Good news for Americans struggling with income tax returns given the recent changes in the tax laws with the enactment of The PATH ACT. A visionary African-American entrepreneur, Marshawn Govan, has come up with an innovative mobile tax refund loan app that is all set to revolutionize the tax industry and make tax returns simpler for Americans.

Titled as MKG Tax Refund, the state of the art program is a patent pending mobile tax refund Collateral Driven Interest & Investment (SaaS) Software-as-a-Service (FOF) Fund-Of-Fund multi-manager investment application.

Add Another Bank to Fintech Roostify’s Roster of Investors (Bank Innovation), Rated: B

If there’s any question that digital mortgage firms are gaining attention from larger fintech players and investors, then look no further than venture capital firm Santander InnoVentures‘ investment in Roostify, a startup that digitalizes the mortgage application process.

French asset manager signs record deal in the Meatpacking District (The Real Deal), Rated: B

Tikehau Capital, a Paris-based firm with $15.6 billion in assets under management, signed a lease for the top two floors at Rockpoint Group’s new development at 412 West 15th Street, sources told The Real Deal.

The 11-year lease covers nearly 10,000 square feet on the top two floors of the 18-story building, which offer sweeping views of the Hudson River.

Lawmakers highlighted that H.R. 3299 — the Protecting Consumers’ Access to Credit Act of 2017 — clarifies current law to ensure innovative marketplace lending remains in-tact while simultaneously providing safe consumer protections.

H.R. 3299 passed through the House by a vote of 245-171 and went on over to the Senate, which received it, read the measure twice and referred to the Committee on Banking, Housing and Urban Affairs.

United Kingdom

Zopa on hiring drive to support credit card launch in 2018 (P2P Finance News), Rated: AAA

ZOPA is recruiting staff to develop its new credit card, which it plans to launch later this year as a feature of its digital bank.

Temasek-backed Funding Circle plans IPO at .1b valuation (Deal Street Asia), Rated: AAA

Funding Circle, the largest peer-to-peer (P2P) lender in the UK, is planning to list on the London Stock Exchange (LSE) that will see it float at an estimated valuation of £1.5 billion ($2.1 billion), according to a report by Britain’s Sky News.

Funding Circle set to hire Morgan Stanley to lead London flotation (P2P Finance News), Rated: A

FUNDING Circle is reportedly poised to hire Morgan Stanley to lead a flotation on the London Stock Exchange in the second half of this year.

The largest P2P platform by loan book size in the UK is expected to hire the US bank in the coming weeks, according to Sky News.

Lendy reports 224% turnover increase (Bridging&Commercial), Rated: AAA

Lendy has revealed a 224% turnover increase in 2016 (to £29.2m), compared with the previous year (2015: £9m).

The P2P lending platform has published its audited accounts for 2016, which also showed that profits before tax increased to £3.3m, compared with the £53,000 reported in 2015.

Lending Works chooses Credit Kudos to power new Open Banking initiative (Finextra), Rated: A

Credit Kudos, a challenger credit bureau, and Lending Works, a fast-growing peer-to-peer (P2P)  lending platform, are partnering to enable customers to benefit from the UK’s Open Banking  initiative, a secure way for banking customers to take control of their financial data. Credit Kudos  and Lending Works’ partnership is one of the first initiatives to use Open Banking to improve  customer experience in the finance industry.

Currently, approximately 60% of Lending Works’ borrowers are provided with  instant and automated credit decisions, whereas the remaining 40% require some manual  processes. Within the new world of Open Banking, Lending Works expects to increase that figure  to up to 90% of credit decisions being fully automated.

Small businesses look to specialist lenders for loans (Financial Times), Rated: A

British small businesses are diversifying their sources of funding away from big banks, as a growing number turn to specialist asset-backed lenders, peer-to-peer finance sites, private equity and venture capital investors.

Fewer small businesses are applying for loans than in the past five years and more of them fear that if they did they would be rejected, according to the latest report into small business finance by the British Business Bank, a government-backed development bank.

Out of the UK’s total of 5.7m small businesses, only 1.7 per cent applied for a loan or overdraft last year, the fifth consecutive year of decline since 2012.

There’s never been a better time to seek alternative finance (Belfast Telegraph), Rated: A

There are also several privately funded lenders (with a local presence in the province through brokerages) such as Atom Bank, Relendex, Thin Cats and Dunluce Capital which have all completed a number of deals in Northern Ireland from cash flow loans to property development finance.

The Access to Finance initiative supported by Invest Northern Ireland offers a variety of support including start-up funding, loans and equity investment.

WhiteRock Capital Partners manages the £50m NI Growth Loan Fund (Access to Finance) which offers loans from £50k to £1.25m to local SMEs. With an extensive network of funding partners, we work hard to deliver the most appropriate support for local businesses.

ArchOver readies for IFISA launch (P2P Finance News), Rated: A

ARCHOVER is planning to launch its Innovative Finance ISA (IFISA) in the next few weeks.

Crowdfunding Comes of Age (moneyexpert), Rated: A

Crowdfunding is gaining serious traction in the UK market, with the sector pushing past the £10 billion milestone in 2016. While, most people will probably still associate the idea of ‘crowdfunding’ with websites like Kickstarter or early stage equity investments, the reality is that 97% of the market is debt-based – either P2P lending or Crowd Bonds.

Both P2P lending and Crowd Bonds are also making big strides into the mainstream thanks to their inclusion in the new(ish) Innovative Finance ISA (IFISA), which allows investors to earn interest tax free on their investments.

It’s time to get clear on the Innovative Finance ISA (moneyexpert), Rated: A

With the birth of the Lifetime ISA (LISA) for 18-39 year olds on 6 April 2017, the Innovative Finance ISA (IFISA) is no longer the baby of the ISA family. But it is perhaps still the least well understood.

The peer-to-peer lending industry celebrates its 13th birthday this year. Has it finally grown up? (Verdict), Rated: B

Whether that’s Paypal in the US or the start of the peer-to-peer lending industry (P2P) in the UK, financial services were changing long before the global recession hit.

The P2P industry is celebrating its 13thbirthday this year. With big changes afoot in its major players such as Zopa, as well as Funding Circle, what is next for P2P lending?

China

China Gets Pushback on New Rules to Curb Lending Practices (WSJ), Rated: AAA

Chinese regulators and commercial banks are butting heads over new rules Beijing is rolling out to tackle off-the-books lending that’s compounding China’s debt woes.

Particularly targeted are practices banks use to move loans off their books by repackaging them as investments. Banks transfer the loans—mostly corporate and local government borrowings—to brokerages and other types of shadow lenders, which then peddle the rebundled investments to investors. Such maneuvers accounted for $3.5 trillion in off-balance lending as of last year.

European Union

Online Lending Market Growth Continues With Spanish Purchase (Prague Post), Rated: AAA

Wonga’s latest acquisition is Spanish company Credito Pocket, who was a lending company based in Barcelona. This is aimed to boost the visibility of their Wonga.es domain.

BinckBank and Raisin double up for Dutch savings market (Fintech Futures), Rated: A

BinckBank says it will be the first in the Dutch banking sector to offer its clients access to European savings products via its cooperation with Raisin.

Augmentum Fintech to raise £100mln to cash in on Europe’s financial disruption (Proactive Investor), Rated: A

A new trust aimed at Europe’s fast-growing fintech sector is looking to raise £100mln ahead of a float in London.

Augmentum Fintech PLC said the financial services sector is ‘ripe for disruption and disintermediation’ but, unlike other sectors such as retail and travel, this has yet to happen.

ING Diba Buys Lendico (P2P Banking), Rated: A

Bank ING Diba acquires p2p lending marketplace Lendico. According to Finanz-Szene.de the transaction was reported to the German Federal Cartel Authority last week. The bank has confirmed the acquisition.

International

Digital Identity Pioneer IdentityMind Global Lands $ 10M (Coverager), Rated: AAA

IdentityMind Global, the leader in Digital Identities You Can Trust, today announced that it has closed a $10M Series C round of financing. In addition to all existing investors, the round was co-led by Benhamou Global Ventures and Eastern Link Capital and included Hanna Ventures, Overstock.com, and Zanadu Capital Partners.

Coin-backed P2P platforms shrug off crypto volatility (P2P Finance News), Rated: A

Digital currencies such as Bitcoin and Ethereum suffered from price falls in January but many firms are still seeing the benefits of creating their own cryptocurrency to use for P2P lending. One provider, SOFIN, is currently looking to raise up to $1m (£720,000) to create a token that can be used as a tool to bypass high exchange rates so loans can be funded internationally.

FintruX’s whitelist closes in 11 days (AMBCrypto), Rated: B

The global P2P lending ecosystem, FintruX backed by Ethereum and No-Code development has reopened the Token Sale, FTX which is used to power the FintruX network and is set-up as a mean to reward or get rewarded for participating in the marketplace. The token’s minimum per transaction at present is 0.1 ETH.

Harnessing the Full Potential of the $ 600 Billion Crypto Network (NewsBTC), Rated: B

Gluwa and Aella Credit are the two fintech companies that have come together to create a blockchain based protocol that will allow investors to lend in any crypto.

These two companies plan to launch Creditcoin, which will operate across blockchains in the P2P lending market.

The Gluwa platform, to be powered by Creditcoin, will address the issues of accessibility of the crypto market by those in the fiat world by seamlessly connecting them with cryptocurrencies.

GISC LoanCoin Network (NewsBTC), Rated: B

GISC LoanCoin Network is a utility token based lending and borrowing platform that allows users to leverage their blockchain assets to secure cash loans. The network is optimal for P2P and B2B credit financing on a global scale.

iP2PGlobal Announces Its Pre-ICO Crowdsales For Its TWQ Token On Feb 19 (CoinTelegraph), Rated: B

The TWQ (Tawarruq) is an ERC20 token that confer the right to the token holder to submit an application for a personal financing based on a Commodity Tawarruq Trading program, through the iP2PGlobal platform and have it listed in the platform for prospective lenders to view and choose to finance.

10TWQs are needed to apply for a personal financing of up to 5ETH.

Australia

Australian Online Lender Prospa Ranks #1 in List of High Growth Firms in Asia Pacific (Crowdfund Insider), Rated: AAA

Prospa, a Sydney based online lender servicing the SME market, has received a nice recognition as it took the top spot for a high growth firm in Asia Pacific. According to a recent ranking of the top 1000 firms in Asia-Pacific by the FT, Prospa ranked number one having experienced revenue growth of 1600% during the time period of 2103 to 2016.

Payday lender Nimble Money up for sale, bids due this week (Financial Review), Rated: A

Privately owned personal loans company Nimble Money is on the block, with its two founders believed to be seeking an exit.

Street Talk can reveal Melbourne-based Baillieu Holst has been hired to find a buyer for the business and has been marketing the short term loans provider to financial services industry players and private equity firms in recent weeks.

Interested parties have been told Nimble Money is on track to make about $15 million in earnings this year, following significant growth in its loan book over the past 12-months.

It’s expected to be worth about $100 million.

Loans.com.au slashes variable rates for home buyers (Canstar), Rated: B

Online lender loans.com.au has cut interest rates on its variable rate home loan to just 3.52% (3.56%* comparison rate).

Comparatively, the next lowest variable home loan for owner-occpupiers at the time of writing sits at 3.54% (3.55%* comparison rate).

Over $ 11.5 million lent by payday loan alternative (finder), Rated: B

BaptistCare has approved 16 loans per week to some of Australia’s most financially vulnerable people.

The No Interest Loan Scheme (NILs), a microfinance program aimed at providing small no- and low-interest loans to financially vulnerable people, has this week announced it has surpassed $11.5 million lent in NSW. The loans are designed to help people on lower incomes purchase essential goods and services.

The loans are provided through BaptistCare with the scheme run under Good Shepherd Microfinance in partnership with NAB and the NSW Office of Fair Trading.

India

Financial services execs invest in fin-tech startup Fincash (VC Circle), Rated: AAA

Mumbai-based personal finance startup Fincash.com has raised Rs 1 crore ($150,000) in a fresh funding round from a group of angel investors from the financial services sector, a company statement said.

The startup will use this money to build its team, expand its product line, acquire customers and make its services available across more cities and towns, the statement added.

Fintech startup Aye Finance raises Rs 25 cr from Vivriti Capital (Economic Times), Rated: B

Fintech company focussed on the MSME sector Aye Finance has raised Rs 25 crore through a securitisation deal facilitated by Vivriti Capital.

APAC

Lendit’s accumulated volume of loan tops W100b (The Korea Herald), Rated: AAA

Lendit, a peer-to-peer lending platform operator in South Korea, has extended a combined 101.8 billion won ($95.4 million) in nearly 7,300 consumer loans as of Monday to midrange borrowers seeking lower interest rates, according to the fintech startup Monday.

How VC Firm Magma Partners is Tapping Into the Untapped Chilean Fintech Market (Bank Innovation), Rated: A

With government-backed initiatives and a finite business of copper export, Nathan Lustig, co-founder and managing partner at Magma Partners, saw huge potential in the Chilean fintech market.

Lustig points out that only 30% of Chileans have credit cards, while only 50% have bank accounts, “and that’s the more advanced population,” he said. Additionally, consumer experience is “pretty horrible for about 80% of this population,” he said.

One area within the fintech space that Magma has been particularly interested in is invoice-based lending, also known as factoring. In its portfolio is Portal Finance, a startup that provides SaaS for the factoring industry.

Portal Finance earns between 0.5% to 1% for every deal the bank accepts.

Talad platform offers SME loans based on invoice collateral (The Nation), Rated: B

Talad Invoice, a lending platform initiated by a fintech startup, is expected to grow at an exponential rate this year, following two years of peer-to-peer lending using invoices as loans collateral, said Watewiboon Pumipue, chief executive officer of D90 Capital Co, which operates the financial platform.

Finda envisions online financial marketplace (The Korea Herald), Rated: B

Finda operates an eponymous web portal that provides information about over 7,000 financial products — ranging from personal and mortgage loans, investment instruments, credit cards to insurance products — standardized in Finda‘s own format. Users can be offered easy-to-understand and up-to-date information about products online, she said.

Finda gathers information primarily from an open API by the Financial Supervisory Service, but since the FSS’ database provides data, including interest rates, of the previous months, Finda reflects updates directly from sellers — banks, insurers, credit card firms and peer-to-peer lending platforms.

Africa

Global Startups Boot Camp Coming To Rwanda (KTPress), Rated: A

Rwanda will next month host a continental Startup boot camp (SBC) that will source innovative and top startup talents in the country and across the globe.

SBC is a global family of industry-focused accelerators, which last year launched its first-ever Africa-based programme.

Canada

KiWi’s marketplace loans set for imminent Canadian debut (Financial Post), Rated: A

The next stage in the development of Canada’s first credit fund that invests in marketplace loans — unsecured consumer and small business loans provided by online lending companies — is set to play out over the next month.

The gang behind KiWi Private Credit Fund — formed last summer with $30 million of contributions from institutional and high-net-worth investors — is planning to meet the Canadian platforms.

Russia

Microfinancers warn Central Bank of return to 90s (Realnoe Vremya), Rated: A

The regulator has been fighting against expensive and very risky loans for several years already. Last July it tightened reserve requirements for MFO again: they must add 100% interest for payday loans with a delay of more than 90 days.

Firstly, the regulator is going to restrict the size of payday loans to 10,000 rubles, secondly, to reduce the biggest term of such loans to 15 days, thirdly, to reduce interest rates to 1,5% in 2018, to 1% in July 2019 a day. Now the largest payday loan is 45,000 rubles. The maximum term is 2 months, while extra payment on such loans is limited to a threefold size of a loan.

Payday loans account for 57,6% of all loans that MFOs granted in the second quarter of the last year.

Authors:

George Popescu
Allen Taylor

German Alternative Lending Market: An Overview

alternative finance

Post 2008, Peer-2-Peer lending has enjoyed a rapid rise all across the world. Quick accessibility to funds, easy processing and less paperwork means it has became the preferred choice for individuals and SMEs. The global P2P lending market was valued at US$26 billion in 2015 and is projected to reach US$460 billion by 2022; it […]

alternative finance

Post 2008, Peer-2-Peer lending has enjoyed a rapid rise all across the world. Quick accessibility to funds, easy processing and less paperwork means it has became the preferred choice for individuals and SMEs. The global P2P lending market was valued at US$26 billion in 2015 and is projected to reach US$460 billion by 2022; it is growing at a compound annual growth rate of 51.5% from 2016 to 2022, according to Research and Markets. North America is the largest P2P market in the world followed by Europe.

In 2015, the European alternative finance market grew by 92% to €5.4 billion.Though the UK is head and shoulders above the rest of Europe (representing 81% of the overall market in 2015 with a volume of €4.4 billion), continental Europe is rapidly catching up. Leading the charge for the rest of Europe are France, Germany, and Sweden.The combined market volume of the 3 countries was estimated close to 461.5 million Euros, representing roughly 74% of continental Europe’s P2P market.

Germany’s Alternative Lending Market

Post-Brexit, continental Europe has been in a frenzy as they try to attract beleaguered London-based fintech companies to establish a presence in their respective countries. Germany is trying to dethrone France from the top spot as the biggest alternative lending market in continental Europe. From 2013 to 2015, Germany’s alternative finance market volume increased from a meager €65 million to a healthy €249 million.

Source:

Most popular P2P Models

  • Peer 2 Peer consumer-lending – The most promising and fast growing model has been the consumer-lending model. From 2013-2015, this model has witnessed an average annual growth of 95%.
  • Peer 2 Peer business lending – Booming export-oriented economy and growing number of SMEs has allowed this model to witness significant growth in recent years.It grew by almost seven times in a span of one year, from a paltry €6.1 million in 2014 the transaction volume increased to € 48.2 million in 2015.
  • Equity-based crowdfunding – This is one P2P model that has endured quite a rough time lately and regulatory unrest has been the chief reason. This led to a fall from € 29.8 million in 2014 to €17.3 million in 2015.
Source:

Germany’s P2P Regulatory Environment

Though Germany is one of the biggest EU credit markets, the country has only very recently seen a surge in the alternative lending segment. The biggest factor for its slow growth stems from the stern and complex regulatory framework. Under German law (‘Kreditwesengesetz’), only banks may originate loans. To comply with this regulation, each P2P lending service has to partner with a bank that formally originates the loan and right away has to sell the rights to proceeds to the investors via the platform. This requires a complex legal (and technical) structure in which no direct contractual relationship is forged between the investor and borrower. This has also led to Germany’s P2P players being absent from the secondary loan market.

Apart from this, another challenge P2P players face is competition from traditional banks in terms of interest rates offered for unsecured installment loans. Currently, the monthly average real interest rate varies between 5.62% and 6.06 % p.a. in 2017. This hardly leaves any room for P2P lenders to compete with the banks. Use of credit cards is not as prominent as in the US or UK, so there is less opportunity to do high-interest refinancing.

But having said that, since the post-2008 financial crisis, traditional banks have lost public trust, and customers are now open to trying other financing alternatives. The rise of millennials and their reliance on smartphones and tablets is another reason the P2P market is beginning to thrive in Germany.

Leading P2P lenders in Germany

  • Auxmoney – A financial services company that provides an online peer-to-peer loan marketplace. It has raised $198 million in various rounds of funding. It is the largest P2P platform in the country. As of January 31st, 2016, the company had originated 441 million EUR in loans since launch with a monthly loan origination volume of 10.6M. It was founded by Philip Kamp, Raffael Johnen, and Philipp Kriependorf. It offer loans up to €25,000 with loan terms ranging from 12 to 60 months. They assign a proprietary credit score to each borrower and the rate of interest is based on that score.
  • Lendico – Founded in December 2013 by the incubator and venture capitalist Rocket Internet. Lendico is a multinational company that operates a peer-to-peer lending platform. The platform links lenders and borrowers with interest rates starting at 2.99 percent. Loans are available to borrowers for amounts between $1,360 and $34,000. Loan terms range from 6 months to 60 months. It also allows German investors to lend cross-border via Spanish loan listings. Arrowgrass Capital acquired it in July this year. It also operates in Spain, the Netherlands, Austria, Poland, and South Africa.
  • Zencap – Founded in 2014 by Dr. Matthias Knecht and Christian Grobe. Zencap used to offer business loans of up to €250,000 for durations ranging from 6 months to 60 months, and at the end of 2015 it was acquired by UK-based Funding Circle. Since inception, it has originated loans worth €66 million (approx).
  • SpotCap – Founded in 2014 by Jens Woloszczak and is based in Berlin. Rocket Internet backed Spotcap offers online business loans to companies in Spain, the Netherlands, the UK, and Australia. It has secured over €100 million in funding in various rounds. It has a high-profile list of investors that includes Rocket Internet, Access Industries, Holtzbrinck Ventures, Kreos Capital, Finstar Financial Group, and Heartland Bank.
  • Smava – Smava GmbH is a Berlin-based credit broker and founded by Alexander Artope. Since its launch in 2007, more than 15,000 investors and 6,000 borrowers have done business with each other through the smava.de credit market. It has raised almost $67 million in funding.
  • Main Funders – Commerzbank also launched its own P2P platform last year under the name Main Funders. It offers SME loans ranging from EUR 200 thousand to EUR 10 million for a maximum period of 5 years. Main Funders charges 0.45% of the loan amount from the borrowers and charges 0.2% from investors.

Apart from this, players from other countries are beginning to show interest in the German market. Recently, Finnish P2P credit marketplace Fellow Finance collaborated with Wirecard AG to offer loans to consumers in Germany. Likewise Advanon, a Switzerland-based P2P player, has started operating in the German market as well.

Conclusion

Even though the German fintech market is still in its infancy, the size of the economy makes it extremely lucrative. Considering it is one of the largest markets in EU, it is quite ironical that it is still untapped. But online lenders now seem to be focusing on Germany and are aggressively investing to lure borrowers. It is safe to say that the next few years will be very interesting for the German alternative lending market.

Author:

Written by Heena Dhir.

Tuesday August 1 2017, Daily News Digest

Charge offs

News Comments Today’s main news: Ron Suber joins Credible as Executive Vice-Chairman. Prosper pulls plug on anti-theft app. FCA extends credit assessment rules for P2P platforms. Klarna launches P2P payment app. Revolut’s Seedrs campaign oversubscribed. Harmoney loses 63% revenue. UIDAI launches mAadhaar app. Today’s main analysis: Vintage Analysis on loan performance with age. Elevates Q2 2017 results. Today’s thought-provoking articles: AI and the […]

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United States

Ron Suber Joins Credible as Executive Vice-Chairman (Credible), Rated: AAA

Renowned fintech executive, advisor and investor Ron Suber has joined personal finance marketplace Credible.com as executive vice-chairman and a member of the board of directors.

“It’s been extremely exciting to see the Credible team turn a startup with a promising business model into a fast-growing company that’s respected by consumers, lenders and the industry” Suber said. “I have decided that now is the right time to help Credible seize their broader opportunity in the fintech ecosystem.”

Revisiting Vintage Analysis- How Loans Perform With Age (Orchard), Rated: AAA

The older vintages have longer lines, as they have more months of history. Using this data, we can examine how loans booked at different times compare to each other at equivalent periods in their life-cycle. This can help an investor evaluate their current portfolio and help them make comparative judgments about its performance.

Source: Orchard Platform

Factors to Consider Within Vintage Analysis

Interest Rates

Source: Orchard Platform
Source: Orchard Platform

Credit Grade

Vintage analysis can also help us to see how loans within a particular credit grade perform over time. In our prior analysis, we examined the performance of the top graded loans (A for Lending Club and AA for Prosper). However, as time has passed, these two platforms have increasingly been lending to borrowers with credit just below the top grades.

FICO Score and Debt-to-Income Ratio

From the data below we can see how loans from Lending Club charge-off over time controlling for the debt-to-income ratio of the borrower.

Source: Orchard Platform

 

ELEVATE CREDIT ANNOUNCES SECOND QUARTER 2017 RESULTS (Elevate), Rated: AAA

Second Quarter 2017 Financial Highlights

  • Nearly 20% year-over-year revenue growth: Revenues totaled $150.5 million, an 18.7% increase from $126.8 million for the prior-year period.
  • Almost 29% year-over-year growth in loans receivable: Combined loans receivable – principal, totaled $481.1 million, a 28.7% increase from $373.7 million for the prior-year period.
  • Stable credit quality: Loan loss provision was 48.0% of revenues and within our targeted range of 45%- 55%. The ending combined loan loss reserve, as a percentage of combined loans receivable, was 13.8%, lower than the 15.7% reported for the prior-year period.
  • Customer acquisition costs within targeted range: The total number of new customer loans for the quarter was approximately 66,000 with an average customer acquisition cost of $294, within our targeted range of $250-$300.
  • Second consecutive quarter of net income: Net income of $3.0 million, or $0.08 per diluted share, versus a net loss of $7.5 million, or $(0.59) per diluted share, for the second quarter of 2016.
  • Adjusted EBITDA margin: Adjusted EBITDA totaled $19.8 million, up from $7.3 million in the second quarter of 2016. The Adjusted EBITDA margin increased to 13.2% from 5.8% for the prior-year period.

Second Quarter 2017 Business Highlights

  • Elevate IPO. On April 6, Elevate began trading on the New York Stock Exchange under the “ELVT” ticker symbol.
  • $200 Million in Outstandings for Elastic. Just a year after achieving $100 million in outstandings, Elastic surpassed $200 million in total principal outstandings, with more than 120,000 open accounts.
  • Elevate Labs Launched. The Company launched Elevate Labs, including its new San Diego-based Advanced Analytics Center, underscoring its approximately $40 million annual investment in state-of-the art technology and data science.
  • RISE Enters Kansas with Line of Credit Product. Bringing additional responsible loan opportunities to non-prime consumers and expanding its product offering, RISE entered its 16th state, Kansas, the first state where RISE offers a line of credit product.
  • Savings for Customers. The average effective APR of its products for the quarter was 131%, down from 148% in the same quarter last year. The Company estimates indicate that Elevate’s products – Rise, Elastic and Sunny – saved customers approximately $304 million in the three months ended June 30, 2017 versus payday loans.
Source: Elevate release q2-2017-release

Elevate Reports Net Income of $ 3 Million on 0.5 Million in Revenue (Crowdfund Insider), Rated: A

According to the company, revenues for the quarter totaled $150.5 million – an 18.7% increase versus year prior where Elevate delivered $126.8 million in revenue. Elevate reported net income of $3.0 million, or $0.08 per diluted share, versus a net loss of $7.5 million, or $(0.59) per diluted share, for the second quarter of 2016.

Combined loans received were said to total $481.1 million, an increase of 28.7% from $373.7 from year prior quarter.

Prosper pulls plug on anti-ID-theft app (American Banker), Rated: AAA

Prosper Marketplace, one of the largest marketplace lenders, is discontinuing the Prosper Daily app.

The app, formerly known as BillGuard and a favorite of many fintech insiders, helped users protect their identities and monitor their credit scores.

The online lender said it will no longer have access to users’ financial accounts once the app is discontinued and that it will reimburse annual subscribers.

Artificial Intelligence And The Future of Digital Lending (The Financial Brand), Rated: AAA

To be a digital lender, banks and credit unions must do more than provide a digital app. Internal lending processes must be transformed to eliminate friction and unneeded steps, with artificial intelligence (AI) supporting proactive loan decisions.

According to PwC, a financial organization must initially define what is desired from both a customer experience and operational efficiency basis around consumer lending. Next, banks and credit unions must build a digital lending strategy around the following organizational competencies. The path to becoming a true digital lending organization involves five steps.

  1. User-Centric Design
  2. Data-Driven Decision Making
  3. Flexible Infrastructure
  4. Effective Development Approach
  5. Organizational Agility

Digital Borrower Expectations

The expectations of the digital borrower have increased over the past several years, mostly based on marketplace offerings and digital experiences in other industries. While the interest rate and closing costs on loans are still primary considerations, the speed, simplicity, transparency and customer service of the entire process is important.

According to the PwC report, Consumer Lending: Understanding Today’s Empowered Borrower, three out of four demographic segments prefer to be online for each phase of the lending process as opposed to traditional methods, such as in person or on the phone.

While some lender apps offer the higher-ranking features – such as the ability to calculate the loan amount that the borrower can afford and the ability to lock in an interest rate on a loan, most of the other features are still not offered by most organizations.

Being a Digital Lender is More Than Just Fewer Clicks

To become a digital bank, organizations need to think beyond ‘minimizing the number of clicks’, reducing manual data entry, and improving the speed of decisions.

The process of becoming a digital lender for the long-term moves investments from ‘digital features’ to a ‘digital mentality’ and process that can support changing digital lending options. It is a major move from investing in just digital output to investing in the digital input that works behind the scenes. It is a strategic framework for the future of digital lending.

PeerStreet Integrates with Personal Capital to Provide More Detailed Investment Overview (PeerStreet Email), Rated: A

PeerStreet, an award-winning platform for investing in real estate backed loans, has announced an integration with Personal Capital, powered by the Envestnet | Yodlee Data Aggregation Platform. Customers of both Personal Capital, an automated investment service with more than $4.8 billion assets under management, and PeerStreet can now view their PeerStreet positions within the context of their investment portfolio on Personal Capital.

Realty Mogul’s REIT Turns One (Realty Mogul Email), Rated: A

Celebrating its one year anniversary, MogulREIT I recently declared its twelfth consecutive month of 8% annualized return on investment. With ten assets across the country, MogulREIT I is a diversified portfolio of commercial real estate investments designed to provide consistent cash distributions, while protecting and returning capital contributions.

Money360 Closes $ 143M in Commercial Real Estate Loans in Q2, Marking a Record-Breaking Quarter (Markets Insider), Rated: A

Money360, a direct marketplace lender focused on commercial real estate, today announced that the company closed $143 million in loans in the second quarter, marking the lender’s best quarter to date. Money360 has now closed more than $350 million in total loans and is on pace to close more than $500 million by the end of the year. On average, the company is now closing $50 million in loans each month.

A few of the $143 million in loans closed in the second quarter include:

  • A $15.6 million bridge loan for a three-tenant medical office property in Grand Forks County, North Dakota.
  • A $11.1 million bridge loan for the acquisition of a multi-tenant retail property in Wayne County, Michigan.
  • A $9.7 million bridge loan for a two-story, 198-room hotel property in Cumberland County, North Carolina.

Read our analysis of Money360.

Wells Fargo Sued in Yet Another Public Embarrassment (Financial Advisor), Rated: A

The assault on the Wells Fargo brand continues, with a lawsuit accusing the bank of pushing almost 250,000 of its clients into delinquency by forcing them into auto insurance they didn’t need — or even ask for, Bloomberg reports.

The bank allegedly made millions of dollars off unsuspecting clients, according to the proposed class-action lawsuit filed in San Francisco federal court and cited by the newswire.

Wells Fargo allegedly didn’t check whether its clients taking out auto loans already had auto insurance, or ignored the fact that they did, Bloomberg reports.

Insurance CEOs Say Change Is Coming (CB Insights), Rated: A

Markel co-CEO Richard Whitt III on the $919M acquisition of State National

We, like a lot of people, are starting to look at the insurtech space. And State National, I think they are ideally situated to sort of be the go between the insurtech folks and sort of your standard insurance carrier types. It’s a clash of cultures there, I would say.

The insurtech folks are used to things happening lightening fast and with minimal regulatory issues and all that and that’s not insurance. So there almost needs to be a translator between insurtech folks and standard insurance folks. And that is a role that State National plays…And we see them helping us with our insurtech initiatives sort of being that translator between us and those folks.

Chubb CEO Evan Greenberg: “Change is coming”

But with that said, change is coming. And we are not alone in terms of carriers improving their capabilities, because of what technology brings that will lead that change. It’s around data, it’s around straight through process, it’s around data that improves the customer experience, while at the same time improving your ability to select risk and to do it quickly i.e. in seconds and to be able to then straight through process business.

You taking out a loan for your business and technology enables those other forms of distribution. The customer will buy it from a desktop, the customer will buy it from a mobile device, they will buy it any time anywhere and they will service it anytime anywhere.

Timothy Li of Fluid (Lend Academy), Rated: A

Into this void steps Fluid, the brainchild of Timothy Li, our next guest on the Lend Academy Podcast. He has found a unique way to provide students access to credit and consequently a way to start building their credit while they are in college. Fluid provides small loans of up to $500 at 0% interest. It is a fascinating idea that we explore in some depth on the show.

Are Technology Firms The Next Financial Service Providers? (Forbes), Rated: A

Financial system regulatory costs continue to climb in part due to it being rife with problems that led to 45% of financial intermediaries, such as money transfer services and stock exchanges, experiencing economic crime. Blockchain increases transparency and decentralizes the financial system with encrypted, unforgeable records embedded in a secure network. By reducing transaction costs and removing intermediaries, blockchain technology is poised to increase mass peer-to-peer collaboration, which could make existing financial organizations unnecessary.

Automated investment services, sometimes referred to as robo-advisors, are emerging as an easily accessible, cost-efficient solution to managing assets with 24/7 availability and annual fees of .2% to .5%, making it substantially less than typical rates.

The financial technology upsurge is bringing accessibility and availability to the forefront, making existing banking options resemble archaic institutions. With apps that let you make quick, feeless transactions (such as Venmo) and peer-to-peer lending platforms (such as Lending Club), customers and millennials are welcoming these innovative platforms. According to a 2015 report, 75% of millennials visit bank branches either once a month or less than that, and 38% of them don’t use a branch to perform banking activities.

Fintech, however, is fostering financial inclusion and building public confidence, evidenced by mobile platforms such as M-Pesa reaching 80% of households within four years.

OCC files motion to dismiss fintech charter lawsuit (American Banker), Rated: A

The Office of the Comptroller of the Currency has filed a motion to dismiss a lawsuit by state regulators challenging the agency’s fintech charter.

2020 REI Group Launches REI Data Systems With Investorwell (Digital Journal), Rated: A

Dallas- based 2020 REI Group has announced the creation of a data services and technology division to further their mission of providing products and services to real estate investors nationwide.

The new division will be labeled as REI Data Systems and will be led by Mike Inman, Vice President of Technology for 2020 REI Group.  Inman was most recently IT Manager of Application Development for the City of Grand Prairie and has a vast background in cloud based applications, GIS mapping, mobile applications, and data analytics.

The official launch for InvestorWell will be mid-August. The platform will help real estate investors find funding for their projects based on eight simple questions.

The Role of Digital in Financial Planning (Insead Knowledge), Rated: A

Long-term saving is a classic case study in behavioural biases. These must be managed and mitigated – whether it is through digital or face-to-face advice.

Inertia is one such bias. While people will generally put off taking action, research has shown that if they are intimately involved in preparing a plan, they are more likely to stick to it. The most committed planners also tend to be the most financially literate.

While robo-advisors are getting lots of press at the moment, they are mostly just a delivery mechanism. A nice user interface should not be a substitute for solid advice that ultimately addresses a key financial and behavioural problem. Digital poor advice is still poor advice.

  • Users should be asked, in non-misleading terms, whether they want a basic, average or luxury retirement lifestyle.
  • The language should be free of jargon and go to the heart of the users’ problem.
  • The tool should allow users to be actively involved in making the trade-offs based on their unique needs, wants and circumstances.

Startups want to change what you insure and how you insure it (TechCrunch), Rated: A

In the real world, however, insurance coverage hasn’t kept up with the social and economic changes of recent years. Sharing economies have gained scale. Jobs have gone from full-time to gig-based. And the vast millennial generation has entered adulthood intent on completing any complex transaction in a couple of minutes online.

So far this year, insurance-focused startups have raised more than $700 million in venture funding, according to Crunchbase data, with significant backing from both traditional VCs and large insurers. The lion’s share of investment has gone to companies pioneering and popularizing coverage categories and delivery models, with a particular focus on millennial customers.

One of the most richly funded players in this space is Trōv, which has an app for quickly insuring personal and work items like laptops, smartphones and high-end cameras. The five-year-old company raised a $45 million Series D round in April led by reinsurer Munich Re, bringing total funding to nearly $90 million.

Cover, which just closed an $8 million Series A, offers a similar service. Customers take a picture of the item they want to insure and Cover offers a policy, underwritten by a partner insurance firm.

One of the most richly funded insurance startups over the past few years is Metromile, which insures based on how much customers drive. Rack up few miles, and pay little beyond a small monthly base rate. Drive more, and it goes up. U.K.-based Cuvva, meanwhile, has raised seed funding to build out insurance offerings for short-term use of a car, for people learning to drive and for people who drive very little.

Silicon Valley-based Hippo is also marketing itself as a new kind of homeowners insurance company, with policies that offer stronger protections for common valuables like home electronics.

For short-term rentals, meanwhile, Slice Labs is partitioning off a space.

Next Insurance, founded last year, sells coverage for yoga instructors, photographers, home contractors and others whose needs don’t always fit with standard insurance policies. The Silicon Valley company raised $48 million to date from VC and insurance industry backers. Bunker, which bills itself as an insurer for freelancers and independent contractors, is also scaling up. The San Francisco company closed a $6 million Series A round in May.

One is Ladder, which has raised $16 million to build out a platform for offering direct-to-consumer term life insurance online. Another, Brooklyn-based Fabric, has raised $2.5 million for its digital platform offering instant quotes on accidental death coverage, as well as broader life insurance policies.

An Attorney’s Take On Real Estate Crowdfunding (RealCrowd), Rated: A