Monday June 18 2018, Daily News Digest

funding circle

News Comments Today’s main news: Opendoor secures $325M in financing. RateSetter IFISA tops 100M GBP. China Rapid Finance’s earnings call slides. Alior Bank, solarisBank, Raisin, Mastercard partner on European digital bank. Harmoney to lend through its own platform. Amazon launches lending platform in India. Today’s main analysis: Rising interest rates and inflation. Today’s thought-provoking articles: Is P2P lending dying? The economic […]

funding circle

News Comments

United States

United Kingdom

International

Australia/New Zealand

India

Other

News Summary

United States

Opendoor now has $ 325 million more. SoftBank could come next. (Recode) Rated: AAA

Opendoor has already taken out $1.5 billion in loans for home buying. And the company now says it has accepted another $325 million in new financing that values it at more than $2 billion, according to a person familiar with the matter.

Opendoor will expand to 50 cities with the $325 million round. But SoftBank, with its huge $100 billion checkbook, could help Opendoor expand to even more as soon as later this year. The Japanese investor typically invests hundreds of millions of dollars into private companies, and that sort of check would be expected here, though some of the money tends to buy out existing investors.

Rising Rates and Inflation (PeerIQ), Rated: AAA

The Fed raised interest rates for the 2nd time in 2018 and the target Federal Funds Rate now stands at 1.75% – 2%. The committee indicated that it would raise rates twice more in 2018, a departure from the previous stance of 3 rate hikes in 2018.

The Fed summarizes member views using the “dot-plot”. The dot plot consolidates every committee member’s estimates of rates at the end of 2018, 2019, 2020 and the for long-term. The green line shows the median estimate indicating that most Fed members expect rates to be between 2.25% – 2.5% at the end of 2018, and between 3% – 3.25% at the end of 2019.

Source: Federal Reserve, Bloomberg
Source: Bloomberg, PeerIQ

Forward Rates – Where do we go from here?

Source: Bloomberg, PeerIQ

Braviant Holdings Announces $ 50 Million Credit Facility with Keystone National Group (PR Newswire) Rated: A

Braviant Holdings, a provider of tech-enabled credit solutions for underserved Americans, has entered into a $50 million senior secured credit facility with institutional investment firm Keystone National Group.

The Keystone debt facility allows Braviant to expand its newly launched near prime lending platform, Chorus Credit. Chorus is Braviant’s latest offering in support of the company’s mission to promote financial inclusion for 51 million adults considered underbanked by the FDIC. While the FDIC estimates that these adults make up 19.9% of U.S. households, data from the Fair Isaac Corporation, better known as FICO, suggests that 43% of U.S. consumers have below 700 credit scores. In the traditional banking sector, a lower than average FICO score severely limits access to credit for almost half of the nation’s population. Chorus aims to close the credit gap for middle America by offering $2,500 to $10,000 personal loans that are repaid in small, affordable installments.

Is P2PLending Dying? (P2P Lending Expert) Rated: AAA

Seriously. I’m asking. Is p2plending dying? Returns have sucked the last couple of years for all investors, but especially us retail investors since the 2015 and 2016 vintages have performed so poorly. My own returns are 400-500 basis points lower than my returns on my 2013 and 2014 vintage loans were and I know some colleagues and friends who have lost money on these investments.

But can the industry survive?

Source: P2P Lending Expert

How Will the Fed’s Interest Rate Hike Impact the Average Joe? (Dough Roller) Rated: A

On Wednesday, The Federal Reserve decided it was going to increase the federal funds rate by 25 basis points, from 1.75% to 2%. This is the second rate increase already this year. In March, new chairman Jerome Powell and the Fed increased the federal funds rate from 1.5% to 1.75%. The Fed also indicated that they’d be targeting two more increases this year alone.

As I said before, when the Fed increases rates, it usually means something is going well for the economy. And all signs are pointing to that being the case. Unemployment is currently at 3.8%. In the last 50 years, unemployment has only been this low two times. That’s significant, and it means that more people are finding jobs. It may also signify a strengthening job market for you. The Fed projects unemployment will drop to 3.6 percent by the end of the year, too.

Zelle is on track to be more popular than Venmo in 2018 (Business Insider) Rated: A

Zelle is a year-old service that lets you instantly transfer money to someone else, much like Venmo or Square Cash.

But Zelle differs from either service in a major way: because it was built by seven of the largest US banks, it’s often able to integrate more seamlessly with your bank’s mobile app. While other services make you wait a few days for the money you received from friends to show up in your bank account, Zelle can transfer the money almost instantly.

For those reasons, analysts at eMarketer expect Zelle to “leapfrog” other payments services before the end of the year.

Credit Union SMB Loan Approvals Hit Record Lows (PYMNTS) Rated: A

The latest data from the monthly Biz2Credit Small Business Lending Index suggests a slump in small business lending among U.S. credit unions.

press release issued on Wednesday (June 13) detailed the May Index’s latest findings, which found that large banks with more than $10 billion in assets are approving of nearly 30 percent of small business loan applications, a two-tenths of a percent increase from April levels. That figure is also a new high for post-recession big bank lending to small businesses.

Digital-only banks grapple with integrating ‘human’ interaction into their products (Tearsheet) Rated: A

Digital-only banks cater to younger customers who don’t want to talk to bankers at brick-and-mortar branches — or bother visiting a branch at all. Or so they think.

Recent customer surveys indicate otherwise, according to research findings released this month from Celent, commissioned by Samsung. It revealed that customers want some kind of human interaction for complex issues. The study found that about half of U.S. banking customers aged 18 to 44 said they banked digitally, but prefer to resolve some matters in-person. Overall, most customers surveyed preferred dealing with humans on matters like setting up financial goals or getting investment advice. To respond to fraud, a lost or stolen card, or identity theft, a majority of those surveyed across age categories preferred to phone the contact center or address it in a physical branch.

Source: Tearsheet

Real Estate Finance Is Changing, Thanks to ‘Fintech’ Startups (The Bridge) Rated: A

If your student loan debt is larger than your salary, investing in real estate might sound like a joke. But it’s doable, said Dave Conroy of the startup Meridio, a website in beta testing that lets users invest amounts of money that you might have in your wallet right now–even $20–into specific properties. Using blockchain technology keeps each transaction cost low, said Conroy, whose company is an offshoot of Bushwick-based ConsenSys, which is building myriad applications based on the Ethereum platform.

For investors, the service would reduce transactions costs and make a real-estate portfolio more liquid. For owners, it would unlock more capital and streamline transactions. While Meridio won’t provide market intelligence about properties to invest in, prospective investors can call on their own experience, says Conroy, who previously worked for the National Association of Realtors.

Why digital banking and robo advice are pairing up (Financial Planning) Rated: A

Banks and digital wealth startups are headed toward the same goal from different starting points.

Each side is increasingly seeking to package automated investment advice with checking because customers are expressing an interest in getting both services from one provider.

Fifth Third Bancorp’s securities unit teamed up with Fidelity recently to offer automated advice, while the microinvesting app Acorns rolled out a debit card called Spend and opened up 50,000 checking accounts in two days.

Wells Fargo simplifies payments pricing to compete with Square (Payments Source) Rated: A

Wells Fargo will simplify the prices it charges small businesses to accept credit and debit card transactions as the bank responds to pressure from startups such as Jack Dorsey’s Square Inc.

The changes, which are tailored for small businesses that process $100,000 a year or less, eliminate many of the complicated pricing policies that varied from client to client, according to Danny Peltz, who leads treasury management and merchant services at the company. Business customers will also be able to apply online for payment processing capabilities with Wells Fargo, Peltz said.

New Technologies and New Customer Experiences Drive Banking Today (Lend Academy) Rated: A

American Banker’s Penny Crosman sat with Cathy Bessant, Chief Operations and Technology Officer, Bank of America to discuss the bank’s use of AI.  She described how the bank has inventors all over the world in their distributed innovation model.

Peer to Peer Micro-Credit Site Puddle Shuts Down (Crowdfund Insider) Rated: A

Puddle, an online lender that provided micro-credit in a peer to peer platform, is shutting down.

In an email circulated by the company, Puddle founders stated that after five years of operation the businesses model was “unsustainable.”

RealtyMogul, Comunidad Realty Partners Sell Dallas Area Investment Property (Herald Courier) Rated: B

RealtyMogul, a pioneer in providing private real estate to discerning investors, announced that it has sold an investment property in partnership with Comunidad Realty Partners at greater than 1.5 times its purchase price.

The property, Lodge at Main, a 208-unit multifamily apartment complex in the Dallas/Fort Worth, Texas area was acquired in 2015.

California may force online business lenders to disclose rates (American Banker) Rated: AAA

A bill pending in California aims to tame the disorderly, confusing and largely unregulated world of online small-business lending by mandating that borrowers receive standard price disclosures.

The bill, which passed the Senate without a vote to spare and has failed to garner much support from either the online lending industry or its critics, still faces a tough fight in the state Assembly. But if the measure does get enacted in California, it could serve as a blueprint for other states.

The legislation tackles the question of whether commercial lenders should be required to disclose the price of financing in a way that enables borrowers to compare multiple offers. Just as nettlesome is the question of how any such comparison metric should be calculated.

Source: American Banker

The bill would apply to small businesses that borrow $500,000 or less.

United Kingdom

RateSetter Reports IFISA Tops £100 Million in Record Time (Crowdfund Insider) Rated: AAA

UK based peer-to-peer lender RateSetter is reporting that subscriptions to its IFISA have surpassed £100 million. This milestone took four months to reach and, according to RateSetter, faster than any other P2P lender. To date, RateSetter has originated over £2.5 billion in online loans to both businesses and individuals.  RateSetter states that more than 10,000 IFISA accounts have now been opened.  The average annual return received by investors stands at 4.4% with more than £100 million in interest having been paid.

Peer-to-peer lender Ratesetter to raise £30m as London float looms (City A.M.) Rated: A

Peer-to-peer lending business Ratesetter is working on a £30m fundraising which is expected to be a prelude to a London float.

According to Sky News Ra

tesetter is working with investment bank Lazard and broker Peel Hunt to raise £30m from investors.

The funding round would value Ratesetter at about £280m.

The fundraising is expected to be a precursor to a stock market flotation which could take place as early as next year.

THE ECONOMIC IMPACT OF LENDING THROUGH FUNDING CIRCLE (Funding Circle) Rated: AAA

In the UK, where Funding Circle has been established the longest, the platform is now competing directly with banks in the small business lending market – with net lending through the platform exceeding that of the entire UK banking system for two successive quarters at the end of 2017. A survey of Funding Circle’s customers undertaken for the study suggests 89 percent of the platform’s UK small business customers would approach
Funding Circle first again in future, rather than going to a bank.

Source: Funding Circle

Read the full report here.

Funding Circle CEO on the Fintech Frenzy in Europe (Yahoo Finance) Rated: A

How the big three shaped P2P (Peer2Peer Finance) Rated: AAA

ALTHOUGH we still tend to think of peer-to-peer lending as a young sector, it is now 13 years since Zopa became the first lender in the market. It was joined five years later by Funding Circle and RateSetter and since then the big three have dominated the P2P market.

Here are some of the key moments in their journeys.

London Block Exchange To Strike Deal With UK Bank (Crypto Daily) Rated: A

London Block Exchange, a UK based crypto provider is alleged to be pairing up with a new UK based bank, ClearBank.

If this news is indeed true, this will mark the first time a lender has struck a deal with a cryptocurrency-based entity.

The UK proves its tech chops, Google’s massive diversity gap and Brexit cause business tensions (Elite Business) Rated: A

Out of Europe’s 34 unicorns, the UK has produced 13. These have a combined value of $23bn, equal to 38% of the European total. This puts the UK ahead of Germany  and France, which have six and three scaleups valued over $1bn respectively. Given the nation has already spawned success stories like Deliveroo and Funding Circle, it’s hardly surprising that VC investment is also booming in the UK. Last year British startups raised $7.9bn compared to Germany’s $3.2bn and France‘s $2.8bn.

Brexit has made UK SMEs worry about talent

Having polled companies in 11 countries, researchers revealed that UK entrepreneurs were much less confident about the conscious uncoupling than those in the EU. Overall, 57% of respondents felt that their biggest challenge was that they had too little time and that they were doing everything themselves. This was double the 24% who thought hiring the right people were their biggest worry.

Alternative finance funds see mixed success (Peer2Peer Finance) Rated: A

Over the past year, P2P Global Investments (P2PGI), VPC Specialty Lending Investments and Ranger Direct Lending (RDL) have moved away from pure P2P to boost returns and narrow their discounts, while the Funding Circle SME Income Fund (FCIF) has remained true to its roots, all with varying outcomes.

The FCIF investment trust solely backs loans originated via the Funding Circle platform and saw its net asset value (NAV) return 6.9 per cent last year, while trading on a healthy premium.

In comparison, RDL – which has recently announced its intention to close – returned 5.4 per cent, VPC – which has shifted from P2P towards balance sheet lenders – saw its NAV total return grow by 3.07 per cent, while P2PGI – which last year merged its manager MW Eaglewood with Pollen Street Capital and is focusing more on asset-backed alternative lenders – reported a NAV return of 3.03 per cent during 2017. RDL and P2PGI are both trading at double-digit discounts to NAV.

Updated Crowd2Fund app includes IFISA management tools (Peer2Peer Finance) Rated: B

PEER-TO-PEER platform Crowd2Fund has relaunched its app to include Innovative Finance ISA (IFISA) management features via their smartphones.

Digital Challenger Redwood Bank Raises £9.8 Million (Crowdfund Insider) Rated: A

Redwood is targeting the SME market. Products include mortgages for business owners and professional landlords, as well as a range of savings accounts. Redwood seeks to offer British businesses fast, simple, transparent loans and savings accounts, coupled with superlative service. They also promise that money is being invested back into British business and into the communities they are a part of. Warrington Borough Council has a 33% stake in the firm that was pegged at £30 million.

BIS wants tighter rules for funds offering credit, fintech (Reuters) Rated: A

Regulations introduced after the financial crisis a decade ago to smooth out banking booms and busts should be extended to funds that provide credit, or shadow banks, and fintech firms, the Bank for International Settlements (BIS) said on Sunday.

The introduction of “macroprudential” policy requiring banks to build up separate “countercyclical” buffers of capital if credit markets become frothy was a core crisis-era innovation.

The buffers can be released if loans begin turning sour and maintain resilience of the financial system to shocks – a departure from the traditional “microprudential” focus on the stability of individual banks.

China

China Rapid Finance 2018 Q1 – Results – Earnings Call Slides (Seeking Alpha) Rated: AAA

Source: Seeking Alpha
Source: Seeking Alpha

Chinese P2P giant Lufax dodges valuation bullet (Nasdaq) Rated: A

Lufax is wisely trying to grow up in private. The Chinese financial technology giant, which focuses on peer-to-peer lending and wealth management, plans to raise more than $1 billion at a $40 billion valuation ahead of a delayed Hong Kong flotation, says Reuters. That makes sense. Listing now could upset Beijing, and might only be achievable at a discounted price. Abundant venture capital allows the Ping An-backed startup to keep growing without a distracting market debut.

European Union

Alior Bank, solarisBank, Raisin and Mastercard to unveil European digital bank (Fintech Futures) Rated: AAA

Poland’s Alior Bank has teamed with solarisBankRaisin and Mastercard to unleash a pan-European digital bank.

The new offering, which is planned to be launched in the fourth quarter of 2018, will be built on the “strengths of all partners”.

Alior Bank will deliver multicurrency accounts with international transfers and deposits.

solarisBank will add the banking infrastructure with its technological, compliance and regulatory framework.

Raisin through its network of partner banks, is adding various savings and investment possibilities to the offering.

N26 launches a revised metal card (Tech Crunch) Rated: A

Fintech startup N26 is updating its N26  Metal product and launching it tomorrow. You might remember that the company first announced its premium card at TechCrunch Disrupt Berlin in December 2017. Shortly after the conference, the card was available in early access for existing N26 Black customers.

But the company had to go back to the drawing board and update the card design. N26 Metal customers had some complaints about the design of the card in particular.

International

Fintechs are staring down the future of banking (Financial Post) Rated: A

For instance, U.S.-based Lending Club, which has been around since 2007 and which is public, has arranged US$35 billion in consumer loans for its two million borrowers. The average loan — and it originates about US$2.4 billion a quarter — is about US$14,000.

Those themes were on full display this week in Toronto at an event organized by the KiWi Private Credit Fund, which raises capital from investors and purchases unsecured consumer loans and secured small business loans originated by established U.S.-based lending marketplaces.

“But they are not good at pricing a 9 per cent or 12 per cent risk,” he added, all of which allows entities such as his, to meet that need. It has US$27 million in assets; an average loan of almost US$14,000 and targets a return in the six- to eight-per-cent range.

Australia/New Zealand

Harmoney is to begin lending money through its own online platform (Interest) Rated: AAA

Peer to peer lending facilitator Harmoney Corp is making a number of tweaks to its operation, which will include the ability to lend its own money through its own platform.

The company has also renamed its ‘platform fee’ – recently the subject of Commerce Commission court action – as an ‘establishment fee’ and dropped the fee by $50 to $450. The company has also tweaked some of its interest rates higher (see below tables).

Harmoney will now be operating two different markets within its platform; the existing P2P facility and a new ‘wholesale market’ operated through a new subsidiary Harmoney Nominee.

Australian regulator sues Westpac for staffer’s poor financial advice (Reuters) Rated: A

An Australian regulator filed a lawsuit against No. 2 lender Westpac Banking Corp (WBC.AX) over a financial planner it alleges gave poor advice for years, upping its scrutiny of a sector already under fire amid an embarrassing public inquiry.

Australia’s A$5 billion ($3.7 billion) financial planning sector has provided some of the most damning evidence at an inquiry into finance sector misconduct, ordered by the government after a string of banking scandals including fraud.

P2P lender cuts rates (Good Returns) Rated: A

Peer to peer lender Lending Crowd has cut its borrower interest rates for all new business and personal loan applications including vehicle purchases and debt consolidations.

A1 grade personal borrowers will have a market leading rate of 6.89% pa and SME businesses will have rates available from 7.98%. Interest rates across all loan grades will range from a low of 6.89%
to a high of 18.96% (previously 7.90% to 19.75%).

Parents giving $ 10k towards kid’s first car (Finder) Rated: A

Survey shows 60% of parents are giving kids $10,594 to buy their first car.

According to research conducted by RateSetter, parents are stumping up $10k to get their child their first set of wheels.

RateSetter found that among parents who bought their child a car, 15% chose a new model, 71% opted for a used one and 14% donated their own vehicle. The majority of families could afford a car under $10,000, while 26% spent between $10,000 and $20,000. A lucky 12% of kids were gifted over $20,000 towards their ride. Parents in Victoria spend the most on their child, up to $13,386. In NSW, the average outlay was $10,404.

India

P2P lending companies change tack in bid to become NBFCs (Business Standard) Rated: AAA

Peer-to-peer (P2P) lending companies are changing their business model as they migrate to becoming (NBFCs).

RBI had created a special category called NBFC-P2P, in view of the proliferation of entities. While mandating Rs 20 million as minimum net worth, RBI had also imposed a Rs 1-mn cap for individual lending on such platforms.

So far, a couple of these entities have got an NBFC licence from RBI. Faircent says it got the licence about 20 days earlier.

Amazon launches lending platform for sellers (The Economic Times) Rated: AAA

Amazon India has launched a platform for lenders and sellers wherein sellers can choose from competitive rates and loan offers. It will also open its APIs to lenders to plug in and lend to the sellers as part of the new programme, called the seller lending network.

India will be the first geography for Amazon where it has launched such a seller platform.

Fiscal 2015 World Bank Lending Report highlights India as one of the biggest Loan Beneficiary (Digital Journal) Rated: AAA

Fintechs offer loans to individuals with low credit scores as well. For instance, in the case of Qbera, individuals with a minimum credit score of 600 can qualify for personal finance. This is not quite so in the case of private banks – individuals need to have a minimum credit score of 750 to be eligible.

Aye Finance Secures $ 21.5M in Series C Funding (Finsmes) Rated: A

Aye Finance, a Gurgaon, India-based provider of financial services to micro and small businesses, secured $21.5m in Series C funding.

Backers included CapitalG, SAIF Partners and LFT.

The company intends to use the funds to accelerate business growth.

P2P lending: Can India replicate the UK experience to achieve Sabka Saath, Sabka Vikas? (Economic Times) Rated: A

India is still struggling with a huge credit gap that is holding back the economy. Getting a bank loan is an extremely cumbersome and long-drawn process for salaried individuals and small businesses, alike. According to a study conducted jointly by ASSOCHAM and EY, around 19% of India’s population remains unserved by the traditional banking sector.

Several million MSMEs that lack a tangible financial record are thus not eligible for credit from legacy financial institutions who still use traditional credit and financial data to evaluate eligibility. For the Indian economy to achieve the next level of growth, the current gap of nearly $200 billion in credit supply to MSMEs and significant under-banked population of India needs to be addressed immediately.

Asia

FSC reins in P2P firms (Korea Joongang Daily) Rated: AAA

In Korea, P2P firms, which directly connect borrowers with investors through online platforms, are not under the direct supervision or management of financial authorities. The Financial Services Commission (FSC) only indirectly supervises them by requiring registration of P2P firms’ lending subsidiaries, which most P2P firms use to carry out the process of lending money to borrowers.

But this safeguard also has many loopholes. TheHighOneFunding, for example, had uploaded the name of a different person as CEO when it registered its lending subsidiary with government regulators.

With more investors attracted to the idea of making easy money through high interest rates on P2P lending, the cumulative amount of loans on such platforms has dramatically increased, from 37.3 billion won in late 2015 to 3.50 trillion won as of May.

MENA

Where’s the money, honey? (Gulf News) Rated: AAA

According to the Khalifa Fund for Enterprise Development, nearly 50 to 70 per cent of loan applications made by SMEs in the UAE are declined by traditional banks, while loans to SMEs account for around four to five per cent of the outstanding bank credit in the UAE.

Enter peer-to-peer lending.

Over the years, such platforms have become big business: In 2016, the size of the peer-to-peer lending market in the US, UK, the European Union, Australia and New Zealand was estimated to be more than $72 billion, according to AltFi. In China, loan originations in 2015 were estimated at $101 billion.

Authors:

George Popescu
Allen Taylor

Thursday September 22nd 2016, Daily News Digest

Thursday September 22nd 2016, Daily News Digest

News Comments Today’s main news: Zopa’s securitization ; SoFi’s new life insurance product; New true lender decision in California. Today’s main analysis: 4 charts about emerging markets; Today’s thought-provoking : Ant Financial is worth more than Goldman Sachs. Are you paying attention yet ? ; Lemonade’s charity model to reduce fraud. United States SoFi is about to […]

Thursday September 22nd 2016, Daily News Digest

News Comments

United States

United Kingdom

New Zealand

Australia

China

News Summary

 

United States

SoFi Plans to Offer Life Insurance by End of Year, (Bloomberg Technology), Rated: AAA

The San Francisco company will soon start selling term life insurance to its base of mostly millennial customers, said people familiar with the matter. SoFi expects to roll out the product, which pays out a benefit if a customer dies during the period of time covered by the plan, before the end of the year or as soon as next month.

SoftBank Group Corp. led a $1 billion investment in the startup last year, valuing it at $4 billion, and it’s now seeking to sell an equity stake of about $500 million to help fund its rapid growth, people familiar with the matter said this month. Last year, the company issued $5 billion in loans and is on pace to double that this year, two of the people said.

SoFi could take a slice of the $159 billion in U.S. life insurance premium revenue generated last year, according to data from the National Association of Insurance Commissioners, a trade group.

People are more likely to purchase policies around certain life events, such as getting married, having children or buying a home, according to a study published last year by Deloitte LLP. SoFi may be well positioned to capitalize on that demographic thanks to its already sizable base of young customers.

Mike Cagney, SoFi’s chief executive officer, chairman, and co-founder, has said his goal is to eventually render banks obsolete.

New true lender case provides support for the bank partnership model, (Pepper Hamilton), Rated: AAA

On September 20, the U.S. District Court for the Central District of California dismissed a class action suit alleging illegally charged usurious interest rates on private student loans in violation of California law. Beechum v. Navient Solutions, Inc.

In doing so, the court rejected the plaintiff’s arguments that the defendants were the de facto “true lenders” of loans made by a national bank under a bank partnership with a non-bank partner.

The plaintiffs, in this case, obtained private student loans using loan applications that identified Stillwater National Bank and Trust Company, a national bank, as the “lender.”

The plaintiffs alleged that the “actual lenders” of the loans were the Student Loan Marketing Association (SLMA) or subsidiaries of the SML Corporation.

Under the agreement, SLMA would originate, underwrite, market and fund loans on which Stillwater would be identified as the lender and which SLMA would then purchase from Stillwater.

The court relied on two California appellate decisions in holding that courts “must look only at the face of a transaction when assessing whether it falls under a statutory exemption from the usury prohibition and not look to the intent of the parties.”

In looking “solely to the face of a transaction” in determining whether the subject loans were exempt from California’s usury prohibition, the court applied an objective standard that, unlike the highly subjective and fact-sensitive “true lender” line of reasoning, would result in consistent outcomes from one case to the next.

While this recent decision does not address the question of whether the claims were preempted by the National Bank Act, the case represents the latest “true lender” case, with a reasoned and measured approach to bank partnerships. In dismissing this case, the court rejected the idea of looking beyond the face of the transaction and into the intentions of the parties.

The Central District of California is the same court that, just three weeks prior, provided the decision in Consumer Financial Protection Bureau v. CashCall, Inc.Unlike the CashCall decision, the court did not use the “predominant economic interest” test for determining “true lender” status and acknowledged the negative effect on the secondary market of looking to the intentions of the parties instead of the transaction on its face.

Lendio and Supplier Success Partner to Improve Access to Capital for Minorities, (PR Web), Rated: A

Lendio, a marketplace for small business loans, today announced a partnership with Supplier Success, LLC, a Detroit-based company focused on providing working capital solutions, and on improving minority and women business owners’ access to capital.

Through this strategic partnership, Lendio and Supplier Success will provide minority and women business owners access to transparent lending rates and respectful business practices. Lendio recently reported facilitating more than $250 million in funding to more than 10,000 small businesses.

By joining forces with Supplier Success, we’re able to expand our capabilities to provide minority business owners easier access to financing,” said Brock Blake, CEO, and co-founder of Lendio.

P2P insurance startup Lemonade launches with charity pledge, (FinExtra), Rated: A

Lemonade raised $13 million in the biggest seed round of 2015 and, having secured a license as a full-stack insurance carrier by New York State, the firm is now inviting homeowners and renters to sign up online and through its app. Under the peer-to-peer model, Lemonade will ask customers to nominate a charity when they buy a policy.

Claims are paid out of these pools and any funds that are left at the end of the year go to the chosen charity. Policies start at $35 a month for homeowners and $5 for renters, with the entire process digitized, “replacing brokers and bureaucracy with bots and machine learning”. Lemonade takes a flat 20% fee and says that its model not only benefits charities but also customers and the company itself by reducing the incentive for fraud.

American Express Adds Its Bot to the Party, (Bank Innovation), Rated: A

When Facebook Messenger launched five (!) years ago this month, it was not immediately clear why or what it might do — messages already existed within Facebook, everyone was texting madly already, so why launch a whole new app?

A Forrester report in August warned banks off bots. Today’s bots are not ready for regulated industries that demand a certain level of user experience.

But the warning came too late — banks embraced bots, and a whole host of bots was wheeled out at Finovate. Perhaps most significantly, Kore (from the guys that brought you Kony) introduced its Smart Bot platform for banks to build their own bots. (In response to Kore’s demo a few fintech watchers at the show tweeted various versions of, “Uh oh.”)

DOL fiduciary rule to cost the securities industry $ 11 B by 2020: study, (Investment News), Rated: A

Implementing the Department of Labor’s new fiduciary rule for retirement accounts will cost the brokerage industry $11 billion in revenue over the next four years.

Hardest hit will be independent broker-dealers, who stand to lose $4 billion in revenue, or 22%, of the industry’s total, according to the study, which was released in August. IBDs are also expected to see a decline of $350 billion in client assets, or 11% of the industry’s total.

Personal Finance App MoneyLion Launches in Malaysia, (Business Wire), Rated: A

MoneyLion is headquartered in New York with offices in San Francisco and Kuala Lumpur, Malaysia.

MoneyLion’s free mobile app will help Malaysian consumers gain a 360-degree view of their finances through a suite of analytics tools that track spending and saving activity across multiple bank accounts.

RealtyMogul.com Closes $ 8.2 Million in Multifamily and Retail Transactions, (Business Wire), Rated: A

Following last month’s launch of MogulREIT I, RealtyMogul.com’s first crowdfunded real estate investment trust, the company announced today that it had closed five transactions in markets across the country. Four of the five deals were equity investments into multifamily properties, while the fifth marked the commercial real estate platform’s largest 1031-qualified transaction to date.

4 charts on banks, mobile money and financial inclusion in emerging markets, (Tradestreaming), Rated: AAA

Africa has long been touted as the continent whose specific geographical challenges and the widespread poverty of many of its inhabitants have enabled it to skip over traditional banking infrastructures into the waiting arms of cost-efficient fintech solutions.

The statistics, for those who are rooting for a cashless, bankless Africa, are encouraging. The following charts, sourced from a recent report on financial inclusion in emerging markets published by the institute of international finance, demonstrate that the economy is Africa is starting to pick up, along with mobile phone ownership.

Mobile money accounts aren’t exactly threatening the banks, even in developing countries.

According to an analysis from the Global Findex, 2.2 billion, or 95 percent, of the total 2.3 billion adults in low- and middle-income countries with a financial account held the account at a financial institution in 2014.

Moreover, contrary to popular belief, financial incumbents are major drivers of economic inclusion in developing countries.

Banks have a number of reasons aside from profitability to expand their activities in emerging markets, such as CSR and investment. Whatever the cause, the way forward for banks in developing countries will probably start with cellphones, smart or otherwise.

United Kingdom

Zopa readies £ 138 m debut securitisation, receives Aa3 rating, (AltFi News), Rated: AAA

The first securitisation of loans issued by leading consumer lending platform Zopa – “Marketplace Originated Consumer Assets 2016-1 plc” (“Moca 2016-1”) – has been provisionally rated by Moody’s. The loans that make up the £138m portfolio were funded in the first instance by P2P Global Investments, the £870m investment trust.

Deutsche Bank was heavily involved in Funding Circle‘s inaugural securitisation and is now acting as the sole arranger and lead manager for the Zopa deal.

Moody’s has assigned a rating of (P)Aa3 to the £114m senior tranche of Class A Notes. The Class B Notes, of which there are £7.5m, were rated (P)A2. The £7.5m of Class C Notes were assigned a rating of (P)Baa2. The £9m of Class D notes were rated (P)Ba3. There are also £12m of Class Z Notes which will not be rated. All Notes are due October 2024. Target Servicing Limited has been appointed as the back-up servicer of the portfolio.

We now learn that Fitch has conferred a landmark rating on the Zopa deal. Fitch rated the Class A Notes “AA-(EXP)”. This is the highest rating to have ever been assigned to a marketplace lending transaction by Fitch. There has been over $10bn in global securitisation issuance by the marketplace lending sector to date. Fitch declined to rate Funding Circle‘s SBOLT 2016-1 earlier this year.

This will be the UK marketplace lending sector’s second securitisation to date. Funding Circle’s SBOLT 2016-1, a £130m transaction, received an Aa3 rating from Moody’s in April. The Class A Notes, which were sold to KfW, came with a guarantee from the European Investment Fund attached.

Moody’s assigns provisional ratings to Marketplace Lending ABS to be issued by Marketplace Originated Consumer Assets 2016-1, (Moody’s Investor Service), Rated: AAA

The securitised portfolio as of 31 August 2016 consists of unsecured consumer loans to UK private borrowers. According to the borrower but not verified by the platform provider these loans are mainly used to finance cars (36.2%), for debt consolidation (34.0%) and for home improvements (22.3%). The portfolio consists of 27,137 contracts with a weighted average seasoning of 10 months and a maximum loan term of five years. Most borrowers are employed full-time (89.9%) and their average outstanding loan balance with Zopa is GBP 5,500.

According to Moody’s, the transaction benefits from: (i) a granular portfolio originated through the Zopa marketplace lending platform, (ii) a static structure that does not allow to buy additional receivables after closing, (iii) continuous portfolio amortization from day one, (iv) an independent cash manager and liquidity provided through two reserve funds, (v) an appointed back-up servicer at closing, and (vi) credit enhancement provided through subordination of the notes, reserve funds, and excess spread.

Moody’s notes that the transaction may be negatively impacted by: (i) misalignment of interest between the platform provider Zopa and investors who finance the loans, (ii) the fact that Zopa does not retain a direct economic interest in the securitized portfolio, (iii) the limited historical data that does not cover a full economic cycle, (iv) a higher fraud risk due to the online origination process, (v) an unrated servicer with limited financial strength, and (vi) the regulatory uncertainty due to the still developing regulation for the marketplace lending segment.

Moody’s determined the portfolio lifetime expected defaults of 7.0%, expected recoveries of 5% and Aaa portfolio credit enhancement (“PCE”) of 35.0% related to the loan portfolio. The expected defaults and recoveries capture our expectations of performance considering the current economic outlook, while the PCE captures the loss we expect the portfolio to suffer in the event of a severe recession scenario. Expected defaults and PCE are parameters used by Moody’s to calibrate its lognormal portfolio default distribution curve and to associate a probability with each potential future default scenario in the ABSROM cash flow model to rate Consumer ABS.

The principal methodology used in these ratings was “Moody’s Approach to Rating Consumer Loan-Backed ABS” published in September 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

In rating consumer loan ABS, default rate and recovery rate are two key inputs that determine the transaction cash flows in the cash flow model. Parameter sensitivities for this transaction have been tested in the following manner: Moody’s tested six scenarios derived from a combination of mean default rate: 7.0% (base case), 7.5% (base case + 0.5%), 8.0% (base case + 1.0%) and recovery rate: 5.0% (base case), 0% (base case – 5%).

Bar Chain BurningNight Group Secures Over £ 500,000 Within First Week on Crowdstacker, ( Crowdfund Insider), Rated: A

BurningNight Group, a city center bar chain, successfully raised over £500,000 within the first week of its crowdfunding campaign on UK’s peer-to-peer lending platform, Crowdstacker. The company is currently offering 7% p.a. interest to those investing in the £3.5 million raise.

According to Crowdstacker, approximately half the funds raised so far have been invested through the Innovative Finance ISA.

Lendinvest announces industry first auction finance partnership is now live, ( Property Reporter), Rated: A

Last month, the two firms announced their partnership as an industry first and will see LendInvest pre-qualify lots at LOT11 auctions which fall within the lender’s criteria.  Lendinvest, the world’s first online lending business for the property, has announced today that details of the properties it has pre-qualified ahead of the next LOT11 auction are now live.

The partnership begins with LOT11’s quarterly auction on 27 September.

NeEw Zealand

New Zealand’s top five P2P lending platforms, (SMN Weekly), Rated: A

HarmoneyCorp Ltd. (www.harmoney.co.nz) – Harmoney became the first FMA-licensed P2P lending platform in mid-2014. The platform has helped match borrowers and lenders for more than $307 million in loans.

Lending Crowd Ltd. (www.lendingcrowd.co.nz) – The platform can be used by either individuals or businesses. It was the fourth P2P lending platform to obtain a license in New Zealand.

Lendme Ltd. (www.lendme.co.nz) – LendMe, New Zealand’s second authorized P2P lender, got licensed in April 2015 and commenced operations just five months later.

Pledgeme Ltd. (www.pledgeme.co.nz) –PledgeMe is a platform that combines three different crowdfunding models in one place – project (aka reward), equity, and lending (aka P2P lending) crowdfunding.

Squirrel Money Ltd. (www.squirrelmoney.co.nz) – Squirrel Money is part of the Squirrel Group, which also provides mortgage brokerage services. The platform helps people borrow funds to finance everyday needs such as renovations or buying a car, or events such as marriage or starting a family. In August 2016, the platform launched New Zealand’s first P2P secondary market, which allows loans to be on-sold to other investors.

Australia

Fintech lender aims to break $ 200 m barrier, (Australian Broker), Rated: AAA

Marketplace lender SocietyOne believes 2016 will be a breakthrough year as it aims to push past $200m in lending.

According to the lender’s latest financial update, the first week of September saw it reach the $150m lending milestone, one year after it hit the $50m mark.

The lender has also announced a significant increase in its funding available for lending, up to $75m after sitting at $20 million on 30 June.

China

Jack Ma’s Finance Business May Be Worth More Than Goldman Sachs, (Bloomberg), Rated: AAA

Leung estimates that most of Ant Financial’s value is in Alipay, China’s most popular online payment service, with a projected worth of $50 billion. Its micro loans service is probably worth another $8 billion, while Ant’s wealth management unit is given a valuation of $7 billion. The rest of Ant Financial’s valuation comes from investments and cash on hand, outstripping Goldman’s roughly $70 billion market value as of Monday.

The company could grow to $100 billion in two years, as the current valuation doesn’t include growth brought in by insurance, credit scoring, and cloud computing, Leung said.

Ant Financial is considering an initial public offering in Hong Kong in the first half of next year, people familiar with the matter said last month.

China big P2P lenders shrug off crackdown, (Morgans), Rated: A

Regulators have unveiled a series of measures to head off signs of rising risks in its fast-growing P2P market, including borrowing limits and forcing P2P platforms to use third-party banks as custodians of investor funds. The regulator’s announcement knocked 22 per cent off the New York-listed shares of Chinese P2P lender Yirendai Ltd, while Chinese stocks fell to a two-week low, weighed by banking shares on concerns over the crackdown on riskier lending practices.

But many larger P2P companies including Lufax, Yirendai, PPDAI and Dianrong.com say they already comply with many of the new requirements, so could benefit from the restrictions.

The volume of P2P loans surged more than 20 times to 656.8 billion yuan ($US98.7 billion) at the end of July from just 30.9 billion yuan in January 2014, according to industry data provider Wangdaizhijia.

Nomura estimates that could reach 880 billion yuan by the end of 2016 and 1.5 trillion yuan by the end of 2018.

Several lenders already segregate investors’ funds into custodial accounts with banks to prevent fraud, while for companies like Lufax, a typical unsecured loan would be in the 100,000 yuan to 200,000 yuan range, below the government cap.

Author:

George Popescu

August 3rd 2016, Daily News Digest

August 3rd 2016, Daily News Digest

News Comments Today’s news are focused on the monthly volume data published below. In the UK we see the 1st crowdfunding platforms slowdown in five years. And in China, we learn that P2P platforms, apparently, need to have a very tough to get bank relationship to continue doing business in 18 months. International July 2016 […]

August 3rd 2016, Daily News Digest

News Comments

  • Today’s news are focused on the monthly volume data published below. In the UK we see the 1st crowdfunding platforms slowdown in five years. And in China, we learn that P2P platforms, apparently, need to have a very tough to get bank relationship to continue doing business in 18 months.

International

  • July 2016 volume numbers are in. We made a list of companies who stand out either for good growth or major decrease. Notice : we can not guarantee the accuracy of the volume numbers.

United States

United Kingdom

Australia

New Zealand

China

International

International P2P Lending Marketplaces – Loan Volumes July 2016, (P2P-Banking), Rated: AAA

P2P Banking publishes monthly volumes for p2p lenders.  Please note that the information is not guaranteed and P2P Banking has made relatively large mistakes in the past. Example: LendInvest in May 2016 was reported as a 80% decrease from April while as it was not the case.

For July 2016: Zopa leads ahead of Funding Circle and Ratesetter. Assetz Capital and Lendinvest achieved a big surge in volume. The total volume for the reported marketplaces adds up to 341 million Euro. I track the development of p2p lending volumes for many markets. Since I already have most of the data on file I can publish statistics on the monthly loan originations for selected p2p lending services.

Comments:

Negative stand out:

  • LandBay decreased 62% 
  • Folk2Folk 38% 
  • Kokos -90% 
  • ThinCats -37% 
  • Wellesley -33% 

Positive stand out:

  • Assetz Capital +460% , 13.9m EUR/month origination last month.
  • Funding Circle +1% vs same month last year.
  • LendInvest +14% vs last year’s month.
  • Mintos +523% vs last year’s month and last month volume of 6.9m EUR
  • MoneyThing +462% and last month volume of 3.6m EUR
  • Twino 7.2m EUR last month and huge growth

 

 

 

United States

National Charter May Be the Devil Marketplace Lenders Don’t Know, (Bloomberg BNA), Rated: A

For some online marketplace lenders, the devil they know might look better than the devil they don’t when it comes to proposals for federal bank regulators to issue national charters to financial technology companies.

The issue surfaced in March, when Amy Friend, senior counsel for the Office of the Comptroller of the Currency (OCC), said at a conference in Washington that the agency had fielded inquiries from fintech companies about obtaining a national charter tailored to their needs. Since then, the concept has come up repeatedly at industry conferences and elsewhere. At an OCC-sponsored event in Washington June 23, for example, Maryann Kennedy, deputy controller for large bank supervision, said the agency was forming a committee to examine the question.

A charter for a non-bank fintech company that provides financial services would be modeled to some degree on the charters the OCC issues to banks. A key feature of the bank charters that a marketplace lender potentially would value is “pre-emption:” A national charter would establish a single set of nationwide standards that a company would have to meet, overriding the necessity of complying with an array of state standards.

The danger in a national charter is that it would effectively represent the law of the land, with little or no room for maneuvering by the lenders.

Much of the testimony at the July 12 hearing involved a separate issue agitating marketplace lenders: whether federal regulators should continue to treat loans of $100,000 or less to small businesses — loans that make up the overwhelming majority of small-business borrowing — as business loans, or to treat them as consumer loans, which are subject to many more rules on disclosure and other factors.

The OCC has not disclosed what might be regulated by a national fintech charter, nor little else about its ongoing evaluation. The agency also has not said if it will decide to offer the charters, or when it might make that decision.

Negative interest rates creating increased anxiety, (Bloomberg), Rated: AAA

Sovereign bonds are supposed to be the safest investments in the world, but according to Bill Gross, one of the best-known investors in the world, sovereign bonds are now too risky:

[Begin quote]”Sovereign bond yields at record lows aren’t worth the risk and are therefore not top of my shopping list right now; it’s too risky. Low yields mean bonds are especially vulnerable because a small increase can bring a large decline in price.”[End quote]

This was supported by a release from Fitch Ratings:

[Begin quote]”This year’s dramatic fall in yields on bonds issued by investment grade sovereigns has again raised the risk that a sudden interest rate rise could impose large market losses on fixed-income investors around the world, Fitch Ratings says. A hypothetical rapid reversion of rates to 2011 levels for $37.7 trillion worth of investment-grade sovereign bonds could drive market losses of as much as $3.8 trillion, according to our analysis.”[End quote]

Most people look at the stock market, and think that everything is rosy, but there’s a lot going on that isn’t reflected in the stock market. In 2007, it was the collapse of the real estate bubble and, more importantly, the disastrous collapse of collateralized debt obligations (CDOs) backed by subprime mortgages. The disaster had already occurred before the stock market started falling.

Bloomberg columnist Lisa Abramowicz on TV on Wednesday commented on the warnings from Bill Gross and Fitch (my transcription):

[Begin quote]”There’s a high level of concern about how sustainable all of this is – when profits are declining, when you have growth slowing, when you have stimulus efforts that are not working and that are running out of steam — how long can this last? But at the same time, it’s very hard to see what could reverse it. The only thing that people possibly can point to is inflation, or if some country decides not to pay back their debt, or just forgive it, or come up with some kind of engineering that creates a technical problem.”[End quote]

According to Abramowitz’s contacts, the only thing that can stop the current plunge in bond yields is for some country to decide not to pay back their debt — essentially to declare sovereign bankruptcy. In other words, there’s a major financial crisis coming no matter what.

Medallion Financial Corp. Reports 2016 Second Quarter Results, (Business Wire), Rated: AAA

Medallion Bank anticipates entering into a new line of business developing relationships with marketplace lending platforms.

Consumer loans originated by Medallion Bank were stronger than expected. In June alone, nearly 2,500 loans were funded for over $45 million in volume
Medallion Bank’s six month’s earnings increased by 39%
Managed assets reached $1.760 billion, including $1.159 billion at Medallion Bank, both all-time highs

Man claims Marlette Funding LLC made harassing phone calls to collect alleged debt, (West Virginia Record), Rated: A

Jeffrey Warren filed a complaint on July 7 in the U.S. District Court for the Southern District of West Virginia against Marlette Funding LLC alleging violation of the West Virginia Consumer Credit and Protection Act and the Telephone Consumer Protection Act and other counts.

The plaintiff requests a trial by jury and seeks compensation for all damages, costs of litigation, attorney’s fees and such other relief as the court shall deem just and proper. He is represented by Daniel Armstrong and Benjamin Sheridan of Klein & Sheridan LC in Hurricane.

Banks are rolling out personalized customer experiences, (Tradestreaming), Rated: A

Customer satisfaction with big banks has surpassed levels with midsize banks for the first time this year.
17 percent of large banks reported implementing contextual, personalized insights and solutions to consumers.

Considering the high cost, it isn’t surprising that big regional or national banks have the lead in this arena. 17 percent of big regional or national banks reported implementing contextual, personalized insights and solutions to consumers, compared to only six percent of community banks and 2 percent of credit unions, according to Digital Banking Report’s  The Power of Personalization in Banking. More than 50 percent of each category reported having a basic level of digital prowess with plans to increase future investments in digital.

There are some estimates of ROI on digitization of banking services. McKinsey identified several areas of digitization that drive more profitability than others. These areas include product back office automation, digitization of document management, automation of credit decisions, and big data analytics applied to sales campaigns.

What brokers lost by focusing so much on the desktop experience, ( TradeStreaming), Rated: A

Sticky products build engaged audiences.

That’s why Yahoo Finance continues to get a firehouse of traffic. For those of us who built our portfolios on the site ten or more years ago, that’s enough of a reason to go back. We’ve invested enough of our time and energy into the service that leaving it becomes difficult.

The thing is, as internet usage has shifted from desktop to mobile, so should trading volumes.

It isn’t enough for a broker to just recreate a web experience on mobile, either. Today’s users don’t want non-native apps. People want to feel that an app is trustworthy and vetted through the Apple Store. According to comScore, 87 percent of all time spent on mobile in the U.S. was spent in mobile apps.

United Kingdom

Brexit blamed for fall in crowdfunding deals, (FT), Rated: AAA

Crowdfunding platforms have experienced a slowdown in deal flow for the first time in five years, in a sign that “armchair investors” are taking a more cautious approach to alternative investments.
However, the number of investments offered online fell 17 per cent in the first half of 2016, compared with levels seen in the last half of 2015, according to research company Beauhurst. The fall follows 10 consecutive half years of growth in terms of the number of deals offered to investors.

Beauhurst’s head of research Pedro Madeira said the slowdown in crowdfunding was “particularly noteworthy”.

Beauhurst’s data also show that venture capital and private equity firms slowed investment into UK start-ups and high-growth companies in the same period.

Bruce Davis, spokesman for the UK Crowdfunding Association (UKCFA), the trade body of crowdfunding platforms, said the dip in deals offered was just “a pause”. The UKCFA said it was confident deal numbers would begin to grow again.

RateSetter to close 3-year market, (Alt Fi News), Rated: AAA

RateSetter says that demand for its 5 year product is the primary impetus behind the planned closure. The 3 year market has become less and less popular ever since the platform introduced its 5 year offering, and now accounts for less than 5 per cent of new investments. The company says that investors have voted “with their wallets” and that they clearly prefer to lend in the 5 year market. The 5 year market currently pays a rate of 5.7% per annum, with the 3 year sitting at 4.0%.

TISA launches P2P forum, (Mortgage Finance Gazette), Rated: A

The Tax Incentivised Savings Association (TISA), the trade association working with the retail financial services industry, has launched a peer-to-peer lending forum to enable those in the sector to develop policy recommendations for regulators and legislators, address operational challenges and determine best practice.

Initially the peer-to-peer forum will concentrate on four key areas:

-Building an effective dialogue with the FCA, HMRC and HM Treasury

-Developing standardised terminology, operational technology, data governance principles and best -practice

-Enhancing accessibility to the sector by improving the understanding of intermediaries, discretionary managers, consumers and related parties including PI insurers

-Identifying unintended regulatory and technical blockages – for example in relation to the inclusion of P2P within SIPPs – and proposing solutions

Fintech investor joins Fidelity’s venture push, (Financial News), Rated: A

A former fintech investor at Accel Partners, who was involved in high-profile investments in WorldRemit and Funding Circle, has joined the London-based proprietary investment arm of Fidelity International as it seeks to strengthen its European business.

GLI Finance Hires Two Senior Executives, (Crowdfund Insider), Rated: B

GLI Finance Limited (LSE:GLIF) has announced the hiring of two senior executives. Russell Harte has been appointed Chief Operating Officer and Steven Simpson has been selected as the Head of Group IT.

Harte is a Chartered Accountant with extensive general management experience. His recent roles have included being Finance Director of Liberty Holdings Limited, a JSE listed long-term insurer, where he played a key role in the turnaround of that business. Most recently he was CFO of Standard Bank Jersey Limited. Simpson is currently Head of IT at one of GLI’s subsidiaries Platform Black.  He has over 25 years of experience in the design, implementation and administration of secure and highly-available enterprise and web-based solutions for corporate customers across various sectors including finance and telecoms. Russell and Steven will join the senior management team. Russell will report to the Group CEO and Steven will report to Russell.

GLI has been going through a period of change as Whelan took over the Chief Executive role at the very beginning of 2016.

Australia

Disruptive partnership forms between two Australian platforms, (Alt Fi), Rated: A

ThinCats Australia has joined forces with DomaCom, a soon to list real estate equity investment platform.

The partnership will involve using ThinCats loans in order to gear properties on the DomaCom platform. This may be the first time that a peer-to-peer lending company and real estate equity investment platform have collaborated in this way.

The ThinCats partnership may also open up future investment opportunities for investors across the two platforms. Naoumidis said: “This also provides the 350 lenders on the ThinCats platform the opportunity to gain exposure to property assets and the ability to lend funds at an attractive interest rate with a lower risk profile.”

New Zealand

Profiling the typical ‘peer-to-peer’ investor, (Stuff), Rated: A

Investor Tom Enright was the first person to invest through LendMe, a peer-to-peer property lender.

He invested $542,000 by funding a fully-secured residential mortgage loan on an Auckland property, getting a 7.84 per cent return on his money.

There are four peer-to-peer businesses: LendMe  (direct secured property lending), Harmoney  (unsecured personal loans), Squirrel Money (diversified secured property lending), and Lending Crowd (focus on secured car lending). Harmoney is by far the biggest peer-to-peer lender with $275m of loans made.

Figures from Harmoney  show most peer-to-peer lenders are 50 or under, with 41 being the average age.

REASONS TO BE A PEER-TO-PEER INVESTOR

Harmoney says people invest in peer-to-peer because:

– They are looking for an investment that could offer regular repayments over time. This includes people trying to generate income to live off

– They are spreading risk by putting a percentage of their portfolios into consumer lending.

– They understand they are taking the risk of a loan defaulting, but believe the risk is manageable and the return fair.

– They enjoy the process of lending.

China

Failing Grade: Many Chinese P2P Lenders Do Not Meet Government Requirements, (Crowdfund Insider), Rated: A

According to ECNS, the majority of P2P platforms have not yet established a relationship with a bank as a fund depository agent. Even though 149 P2P sites had signed agreements with banks “few had materialized.” Overall only 48 P2P lenders or just 2% of these online lenders have qualified, according to  Shanghai Ying Can Investment consulting.  These 48 platforms were some of the largest platforms in the country. These same platforms are poised to benefit by the additional regulatory scrutiny as undercapitalized and poorly managed P2P lenders may leave the market.

Chinese regulators are allowing a transitional period of 18 months for P2P lenders to adopt the new requirements. It will be interesting to see what happens after that.

P2P Finance in China: Why Firms Need Better Risk Controls, (Knowledge @ Wharton, UPenn), Rated: AAA

Since 2015, many P2P platforms including Ezubao, the Dada Group, the Kuailu Group, the Zhongjin Group and others have been charged with illegal fundraising, involving tens of billions of yuan. This is not confined to China. In May, the U.S. Treasury Department released a report criticizing the peer-to-peer (P2P) lending business and recommended it be more tightly regulated.

According to the industry website WDZJ.com, China’s P2P online finance industry reached 2.036 trillion yuan (about $300 billion in transaction volumes) by the end of May 2016. It took seven years to reach its first trillion yuan and just seven months to reach the second trillion.

Take the Lending Club in the U.S., for example. It originally hoped to evaluate personal risk based on data extracted from Facebook, Twitter and other social platforms. That is in America, which has much more sophisticated credit investigation and personal data systems than in China. So you can imagine a large amount of P2P business based on personal credit in China will meet trouble in operation if there is no appropriate risk control system in place.

“There is one feature of the finance industry — the one that grows the fastest, will also collapse the fastest.”

Author:

George Popescu

July 22nd 2016, Daily News Digest

News Comments United States A very interesting read. A great forward facing article showing how bank’s VC arms invest, what they invest in and what to expect. What bank’s VC arms invest in is a great indicator and instigator of what will happen in a few years. An interesting article about a Rocket Internet alumni […]

News Comments

United States

European Union

  • A must read ! N26, a fintech company in Germany, got a banking license. N26 said the license will let it offer savings, investment, credit and insurance products from partners. N26 said it plans to offer new services, including the ability for consumers to split expenses like restaurant bills directly from their phones, and that it plans to generate more revenue from credit card transactions and commissions from partners.

United Kingdom

Hong Kong

India

 

United States

Banks push the envelope of innovation, but not alone, (Tradestreaming), Rated: AAA

Looking at bank CVCs only provides part of the picture on future trends, as banks can swallow and incorporate innovative private companies through private equity arms or through mergers and acquisitions.

bank VC investment by category

h.Ds will be written about millennials and generations to come: Their mobility — geographic, in the job market, in the way they communicate, purchase and do business — is already established as one of their pivotal traits.

Banks are capitalizing on this mobility and reacting to it.

Banks can’t innovate alone. Saddled with legacy systems, heavy regulations and cumbersome workflows, banks just can’t move as fast as startups. But startups, in turn, need the banks…The future is about partnerships.

BBVA, for example, launched Innova Challenge, an initiative that promotes open and collaborative culture between the bank and developers, with the aim of including a larger community in creative and technological development. BBVA opened its platform to the developer community through an API. Citi also opened up its APIs to developers through its Citi Mobile Challenge.

“Many fintechs have succeeded but today they are still operating only at the edges of banking,” explains the Santander Group in a recently published white paper about the future of fintech, titled Fintech 2.0. “To help engineer more fundamental improvements to the banking industry, they must now be invited inside, to contribute to reinventing our industry’s core infrastructure and processes. That can succeed only as a collaborative endeavor, with banks and fintechs working together as partners.”

Funny enough, Deutsche Bank also recently published a white paper under the same title and a similar theme though focused on payments.

If you can’t beat ’em join ’em: Fintech and banks collaborate in online lending, (TradeStreaming), Rated: AAA

One company trying to fit into the circle around banks is Spotcap. Founded in 2014 by Toby Trebel and Jens Woloszczak, Spotcap provides lines of credit to SMBs in Spain, Australia, and the Netherlands. Incubated and backed by Rocket Internet, the Berlin-based online lender uses both technology and experience to determine an SMB’s creditworthiness; Internally-developed algorithms and smart contracts combined with a human review board determine if an SMB qualifies for a credit line.

Spotcap has only been in the Netherlands for 15 months and is still small, only underwriting $50m in the first half of 2016. Although it’s a drop in the bucket of the regional lending market, Spotcap has grown 500% year over year and has less that a 1% default rate since it started lending in the Netherlands.

What makes Spotcap different from other online lenders is its approach to incumbent financial institutions. Currently, 25% of Spotcap’s loan book is in piggyback loans with banks — where two or more lenders underwrite a loan together. For example, an SMB needs a $1 million loan, but a bank feels the maximum secured loan they can offer is $750k. The bank then contacts an unsecured lender like Spotcap, which evaluates if the SMB qualifies for the remaining $250k. If so, the bank packages the two separate loans, and the SMB pays both the bank and the unsecured lender. Banks win with piggybacked loans since they gain a new customer while staying in their lending comfort zone, and also make more money.

Unless the Armageddon or zombie apocalypse happens anytime soon, banks will likely remain the backbone of finance. Spotcap, and other innovators like it, have an opportunity to work closely with bank partners.

 Amazon Tiptoes Into Banking Business Through Student Loans, (Wall Street Journal), Rated: AAA

The online retailer has entered into a partnership with San Francisco lender Wells Fargo& Co. in which the bank’s student-lending arm will offer interest-rate discounts to select Amazon shoppers.  The discount will be offered both to students who want loans to attend college and those who want to refinance existing loans.  The offer also represents the latest effort among private student lenders to stand out by discounting in an increasingly competitive market. Many offer discounts to customers who set up recurring payments to pay back their loans automatically or for loan refinancings by graduates who are members of professional associations.

Wells Fargo, the largest U.S. bank by market value and the second-largest private student lender by origination volume, will shave a half a percentage point off the interest rate on student loans it extends to applicants who are members of Amazon’s Prime Student. The subscription-based service charges $49 a year, half the cost of Amazon Prime, and offers free two-day shipping and unlimited instant streaming of movies, among other perks.

Wells Fargo and Amazon have been in discussions for more than a year about the partnership, which is set to be announced and made available Thursday.

The companies aren’t compensating each other for what Wells Fargo describes as a multiyear agreement that will reach millions of potential borrowers.

Private student lending, which plummeted during the recession, is rising again. Five of the largest private student lenders, including SLM Corp., better known as Sallie Mae, Wells Fargo and Discover Financial Services Inc., distributed $6.46 billion in loans between July 2015 and March 2016, up 7% from the same period a year earlier–and the fifth consecutive year of increases, according to data released this month by MeasureOne, a San Francisco firm that tracks the market.

The discount could give Wells Fargo a competitive advantage to other lenders. Its interest rates are close to the interest-rate ranges Discover and Citizens Financial Group, which has been rapidly expanding into student loans over the last couple of years, charge. A half-percentage-point discount could make its loans more affordable than competitors for some borrowers.

Blackstone’s assets under management hit record high of 6bn, (Financial Times), Rated: A

Blackstone, the world’s biggest alternative investment manager, expanded its empire to record size in the second quarter as assets under its management surpassed $350bn for the first time.

Blackstone’s economic net income — a measure of earnings which includes unrealized gains on investments such as buyouts and real estate — was $520m in the three months ended in June, increasing only 2 per cent on the same period last year, the group said in results on Thursday.

But its total assets under management rose to $356bn, a 7 percent increase on the year and a new record for the group, which broke the $300bn barrier in April last year. Assets on which Blackstone earns fees for managing them rose to $266bn.

Blackstone funds have received over $130bn of net inflows since the beginning of 2015.

Blackstone’s buyout unit reported a 2.5 percent increase in the value of its stakes in private and public companies during the quarter, suggesting that the big private equity groups have begun to recover from the volatility of the year’s first half.

Blackstone’s credit investing arm posted gross returns of 9.7 per cent as its funds benefited from a rebound in debt markets in recent months, especially in loans tied to energy companies, as oil prices have increased.

Mr Schwarzman and chief operating officer Tony James both emphasized repeatedly that they “only need” to buy a few assets every year, insulating their performance, they say, from economic trends and market volatility.

European Union

Fintech Startup N26 Is Awarded Full German Banking License, (Bloomberg), Rated: AAA

N26, a Berlin startup that offers financial services directly to consumers, said Thursday it’s received a German banking license that will let it offer a fuller range of products across Europe.
The company, whose mobile app lets European consumers maintain an account, transfer money and pay by MasterCard from their smartphones, said in a statement it’s now licensed as a bank by the European Central Bank and Germany’s BaFin financial supervisory authority. The startup, which changed its name from Number26, said the license will let it offer savings, investment, credit and insurance products from partners.

N26 said it plans to offer new services, including the ability for consumers to split expenses like restaurant bills directly from their phones, and that it plans to generate more revenue from credit card transactions and commissions from partners.

The Berlin startup counts the Silicon Valley billionaire Peter Thiel among its investors, and in June landed a $40 million investment round led by Hong Kong billionaire Li Ka-Shing’s Horizon Ventures. The U.K.’s TransferWise Ltd., which offers a digital service for money wiring, also counts Thiel and billionaire Richard Branson as investors. And so-called robo-advisor Betterment LLC secured $100 million in funding this year, led by Sweden’s Investment AB Kinnevik.

United Kingdom

New FCA boss “pretty worried” about P2P, ( Alt Fi News), Rated: AAA

Under questioning from Chris Philp (MP for Croydon South), Bailey confessed that he is “pretty worried” about certain aspects of the UK’s P2P market. Bailey says that peer-to-peer lending investments are at the asset management end of the investment spectrum, the opposite end to bank deposits. But Bailey believes that the platforms’ marketing efforts do not always reflect that positioning. “I am pretty worried about some of the things that are said about these funds when they’re sold to people,” he said. “Some of the things that you read is that they get very near, but not quite there, to promising capital certainty”.

At yesterday’s meeting, Philp said that peer-to-peer lenders have an incentivisation mismatch, in that their fees are tied to transactional volume, but without taking any balance sheet risk. Philp said that this is exactly what happened with the “origination and syndication of sub-prime loans in the US in the run up to 2008”. Philp later put a question to Bailey: “Why not require the platforms to co-invest let’s say 10% of the loan value on their own balance sheet, either pari-passu or even the first loss piece? If their own money was on the line, alongside that of consumers’, that would concentrate their minds when it came to making good credit decisions”.

Footage from the treasury select committee meeting is available here. Philp’s questioning about crowdfunding begins at around 15:27:00.

Re-setting Ratesetter’s provision fund, (FT Alphaville), Rated: AAA

Is 22 per cent a big number?

That’s how much Ratesetter increased its expected future losses on Thursday, “partly to reflect greater economic uncertainty due to external events”. The online lender, which is one of the UK’s top three, added £3m to the £13.9m of expected claims on its provision fund, which serves as protection against defaults for its retail investors.

Those “external events” are presumably a reference to Brexit, but skeptical readers might also remember the higher than expected defaults on its 2014 cohort of loans. At the start of that year, Ratesetter had expected a 2.07 per cent default rate. So far, defaults on the 2014 cohort of loans have reached 2.915 per cent. It’s also worth noting that last month Ratesetter brought on board a new chief risk officer, Cyrille Sallé de Chou, who joined from Lloyd’s.

The provision fund is paid for in part by an upfront borrower payment and in part by payments spread over the lifetime of the loan. Until now those future payments were not included in the calculation of the current value of the fund, now it is.

“The value of this contractual future income is over £6 million. We have reduced this to £4 million to take into account the fact that some of this income will not be received due to borrowers paying back loans early or defaulting,” said Ratesetter in a blogpost. (Data from Ratesetter’s website suggests a higher number of £4.9m in future fees.)

Without that extra money, it appears that Ratesetter’s expected losses would have been bigger than the provisions in the fund. With the extra money, Ratesetter has around £22m to protect against £17.3m in forecast losses from £612m lent out. The company expects a 2.8 per cent default rate, up from 2.3 per cent.

If at any time, in the opinion of RateSetter, the Provision Fund does not have sufficient funds to cover current or expected borrower default (a “Negative Position”), and RateSetter reasonably believes the Negative Position is not capable of being rectified through the ordinary course of business, RateSetter may declare a “Resolution Event”. If a Resolution Event is declared, we will notify you, along with any other RateSetter Customers entitled to protection from the Provision Fund (the “Eligible Lenders”).

Star fund of funds manager Craig: Why I am buying alternative credit funds but avoiding P2P, ( Alt Fi ), Rated: AAA

The likes of the £100m Hadrian’s Wall and £150m Honey Comb investment trust are preferable as fixed income alternatives over P2P focused trusts, according to Old Mutual Global Investors’ Paul Craig.

Craig, who runs Old Mutual’s Cirilium range of multi-asset fund of funds which total about £3bn of assets under management, is a fan of the sector. The Cirilium range includes the Old Mutual Cirilium Balanced, Old Mutual Cirilium Dynamic, Old Mutual Cirilium Moderate Old Mutual Cirilium Strategic Income and Old Mutual Cirilium Conservative funds.

The manager has one of the best records of any fund of funds managers since the aftermath of the financial crisis within the Investment Association’s various multi-asset sectors. Craig launched the range back in 2008 and they were originally called the Henderson Cirilium funds having been subsequently sold to Old Mutual Global Investors in 2014 by Henderson.

He owns stakes in three alternative credit funds across the Cirilium range. They are all closed-ended trusts listed on the London Stock Exchange. These are SQN Asset Finance, Honey Comb, and most recently, Hadrian’s Wall – which is the only new investment trust to have floated this year.

Hadrian’s Wall is targeting a yield of 6 per cent and a total return of 7-8 per cent by offering exposure to loans to UK SMEs secured by underlying assets and collateral. Loans target mid-market sized firms with annual revenue between £1m-25m.

“Hadrian’s wall is a prime example. For us as multi-managers we can look at all the new issues that come to market and we don’t need to pigeonhole as to whether it is P2P or direct lending or whatever.We buy on the merits.”

“We have been somewhat absent from the P2P space not because we think it is a bad investment class but more that it is such a new class that it is not tried and tested and we just do not know how the rating will react in less certain times. The beauty of the likes of  Hadrian’s Wall versus P2P is that there is a bit more granularity and because we are running diversified portfolios we are quite happy to take that concentration of credit risk within the portfolio because we don’t need the additional diversification within the portfolio.”

“The granularity of these portfolios makes it easier to calculate the net asset value (NAV)  of these portfolios, Craig says, which he thinks will equal less discount sensitivity than from the likes of Hadrian’s Wall compared to P2P-focused trusts. Also, while it is hard to know what will happen with interest rates, as long as Hadrian’s Wall are able to make loans to good quality businesses, and that they are able to repay, then we can expect a return of close to 10 per cent per annum. For us that is very attractive because it is providing us with a return that is not dissimilar to equity but with far less risk than equity and very little in the way of interest rate risk.”

Stuart Lunn: The developing market for SME finance, ( Scotsman), Rated: A

Since launching in 2014, Lending Crowd has facilitated loans totalling £6 million to scores of borrowers and have over 2,000 investors signed up to our platform. Deals range in size from £20,000 right up to over £1m – last year we teamed up with Diet Chef to complete one of the biggest ever peer-to-business deals seen in the UK in a £1.5m debt finance transaction.

Hong Kong

Development and Regulation of P2P Lending and Equity-based Crowdfunding in Hongkong, (P2p Banking), Rated: A

1. The recent development of online alternative finance

In order to maintain the role of international financial center, the financial authority of Hong Kong has been aware of issues relating to Fintech industry[1]. On November 13th, 2015, Stored Value Facilities Payment Systems, such as online stored payment business as PayPal, is allowed to operate by non-bank[2]. This is a milestone for Hong Kong including non-bank of operating business highly relevant to conventional bank.

2. Relevant industry background

On one hand, from viewpoints of investors, the deposit rates of savings are from 0%~0.001%[4]. Even the deposit rates of fixed deposit of 12 months are from 0.15%~0.2%[5]. Additionally, inflation rates are around 4% continuously in 2013 and 2014[6], which means the real interest rate may be negative in Hong Kong. Accordingly, there are strong incentives for investors to vitalize their capital.

On the other hand, from viewpoints of borrowers, there are two fundraising channels for loans, including banks (Licensed Banks, Restricted License Banks, Deposit-taking Companies) and Money Lenders. Since the financial authority restricted the mortgage market of banks to prevent a real-estate bubble, it is difficult for borrowers to get the loan amount they need from banks by mortgage. As a result, they turn to Money Lenders as an alternative opportunity. Although the interest rates of Money Lender are generally higher than banks, compared with banks which normally take 1-6 weeks for examining procedure, the process of Money Lender is more simplified[7].

The market scale of Money Lenders in Hong Kong is approximately 30.5 billion HKD (3.9 billion USD) and 6.6 billion HKD (852 million USD) in mortgage market in 2013[8]. And the top 10 Money Lenders share 53.9% of this market[9]. Though peer-to-peer platforms in Hong Kong are still at an initial stage, with strength of technology, they can provide relatively lower interest rates and attract more investors by Internet.

On May 7th, 2014, the financial authority[10], has issued a notice[11] regarding risks and legal compliance of crowdfunding since crowdfunding has become a widespread idea and business model in Hong Kong. The Chief Executive Officer, Securities and Futures Commission has also indicated “Parties seeking to engage in crowd-funding activities should be aware that a breach of the relevant laws could lead to serious consequences including criminal liability[12].”

Accordingly, a company operating or advertising as a lending business, such as peer-to-peer lending, may need a license in Hong Kong.

India

How fast should P2P lending grow?, ( The Economic Times), Rated: AAA

Is P2P lending in India is growing fast enough or can we grow faster? Or should we grow at breakneck speeds seen in sectors like transportation that propelled the likes of Ola and Uber into stratosphere?

The Indian P2P space, in fact continues to grow steadily and see good traction. While there are no official figures, if one has to extrapolate our figures, we have grown eight times in the last six months in our loan disbursals. In fact, this is true for the entire Fintech space. In 2015 the space exploded, but it has not shown signs of weakening. According to a Tracxn and Blume Ventures report about $103 million was raised across 22 rounds in 2015 in the Fintech space. About halfway through the year, 2016 has seen $68million being raised and if this trend continues, this year would be better than last year. Compared to 2013 when only $4 million was raised and 2014 when $18 million was raised, the sector has grown leaps and bounds. The report states that the big boys of the investing world, including the likes of Sequoia Capital, Accion, Apsada Investments, SAIF Partners, and Walden International are the most active investors in Alternative Lending in India.

P2P sector in India is still at a very early stage when compared to a country like the US and the UK.

An Economic Times report points out that for the first time since March 2011, the country’s consumer durables sector witnessed three months of consecutive double-digit growth during the festival season last year. Banks grew their personal loan portfolio by 17.3% year-on-year in August 2015 compared with 12.8% a year ago.

Another aspect of P2P loan is the borrowings made to start a business. The government’s key focus around Make in India and Startup India has meant people’s entrepreneurial ambitions have been spurred and most now dream of having their own business.

In India things are very different and I see very little chance of [cases like Lending Club or Lufax] happening. [Comment: I strongly disagree. India is a large country, not extremely centralized, where it is very hard to enforce regulation and with $1bil people, a large majority of whom are not sophisticated in finance.  I expect that India will be 2nd only behind China in the amount of fraud expected in the p2p lending sector. ]

The burgeoning equity crowdfunding and P2P lending space in India, (Your Story), Rated: A

The crowdfunding industry has witnessed a massive growth globally.

total funding volume in crowdfunding

According to the discussion paper published by RBI the proposed regulation includes:

Permitted activity

  • The role of the platform would be limited to bringing the borrower and lender together without the lending and borrowing getting reflected on its balance sheet.
  • The platforms will be prohibited from giving any assured return either directly or indirectly.
  • It will also be mandated that funds will have to necessarily move directly from the lender’s bank account to the borrower’s bank account to obviate the threat of money laundering.
  • The guidelines would also prohibit the platforms being used for any cross-border transaction in view of FEMA provisions relating to transactions between residents and non-residents.

Prudent requirements:

  • The companies must have a minimum capital of Rs 2 crore.
  • The platforms may have to adhere to a leverage ratio so that they do not expand indiscriminately.
  • Considering lenders may include uninformed individuals, prudential limits on maximum contribution by a lender to a borrower/segment of activity could also be specified.

Governance requirements

  • A reasonable proportion of board members having financial sector background could be suggested.
  • The guidelines may also require the P2P lender to have a brick-and-mortar place of business in India.

Customer interface

  • The current regulations applicable to other NBFCs will be made applicable to the P2P platforms in regard to loan recovery practice.
  • The platforms will have to guarantee confidentiality of customer data.

Author:

George Popescu
George Popescu

July 14th 2016, Daily News Digest

July 14th 2016, Daily News Digest

News Comments Dear Readers, As you are probably aware Lending Times is organizing an event in New York on Monday August 15th titled “The future of Market Place Lending – Madden and beyond”. We would like to welcome our interested readers to participate in the panel. We have 1 seat available at this time. Please […]

July 14th 2016, Daily News Digest

News Comments

  • Dear Readers,
  • As you are probably aware Lending Times is organizing an event in New York on Monday August 15th titled “The future of Market Place Lending – Madden and beyond”. We would like to welcome our interested readers to participate in the panel. We have 1 seat available at this time. Please contact us if you are interested in participating in the panel.
  • Thank you.
  • George Popescu

United States

United Kingdom

European Union

China

New Zealand

  • Lending Crowd, the 4th licensed p2p lender in NZ,  is seeking up to $5 million from financial services sector investors to help the peer-to-peer (P2P) lender build scale and grow loan volumes.  To date, Croad said Lending Crowd has received $22 million worth of loan applications and written $2.5 million worth of loans with 60% of this total comprising personal and motor vehicle loans, and 40% business loans.

 

United States

Personal loans are cheap, but can I get one?, (Bankrate.com), Rated: AAA

In Bankrate’s national survey of interest rates from banks and thrifts for July 13, 2016, the rate on personal loans remained unchanged for the 4th consecutive week at 10.94%. This week’s average rate is down four-tenths of a percentage point from its 2016 high. A year ago, interest on the average personal loan was 11.12%.

There are 3 types of places where you can look for a personal loan:

  1. Banks
  2. Credit unions
  3. Finance companies (including online lenders)

As recently as a few years ago, banks dominated this space, accounting for 40% of all personal loan originations, according to the credit bureau TransUnion.

“Even though Prosper and Avant and Lending Club to a certain extent have pulled back, there are other lenders that are filling the void,” Tarkan says. “So I don’t know if there’s going to be this massive decline in availability of credit because the marketplace lending sector is contracting.”

John Ulzheimer, a credit expert who formerly worked for FICO and Equifax, says “every mainstream lender” now issues personal loans, and there are many good options, particularly for people with good credit.

To give some examples, Wells Fargo branches throughout the country offer personal loans. In Los Angeles, the nation’s second-largest bank offers personal loans for as little as 9.25%, while Houston-based Integrity Bank — with 3 southeast Texas branches — charges 9%, according to the Bankrate survey.

Global M&A, PE and VC activity declines in the first half of 2016 after reaching record highs last year, (Bureau Van Dijk), Rated: AAA

View the full report here.

Both the volume and value of global mergers and acquisitions dropped significantly over the opening half of 2016, according to information collected by Zephyr, the leading global M&A database. Over the first six months this year, only 43,352 deals were announced for a combined $1.94 trillion. This is down nearly 20% in volume and over 40% in value compared to the 53,287 deals worth $3.27 trillion in the last half of 2015, and 52,637 deals worth $2.94 trillion in the first half of 2016.

The one exception was the Middle East and North Africa, where value climbed 23% to $15.7 billion over the six-month span, despite a small dip in volume. All other regions declined over the same time frame, with the steepest drop reserved for Central and Eastern Europe, which slipped 52% from $88.45 billion in H2 2015 to $42.58 billion this year. The top-performing countries by value for H1 2016 were the US, China, the UK, Switzerland, and Canada.

The Zephyr database also showed both the volume and value of global private equity and venture capital investment followed the same pattern as M&A in H1 2016, declining in the preceding six months and year-on-year. In all, there totaled 2,651 deals worth a combined $196 billion during H1 2016, a 20% decline in volume and 47% fall in value from the final six months of 2015.

Congressional Committee Reviews Marketplace Lending, (Crowdfund Insider), Rated: AAA

Comment: a more detailed article on the hearing from July 12th, 2 days ago.

The meeting saw the participation of several industry executives including representatives from Prosper, CAN Capital, the American Bankers Association, the law firm of O’Melveny & Myer and the National Community Reinvestment Coalition. The meeting was timely as multiple regulatory agencies are moving towards applying additional regulations on online lenders – an act that may place financial innovation at risk.

The “key takeaway” offered by the Committee was that online lending may deliver access to credit to underserved or underbanked communities. For both consumers and SMEs alike. Of course, advancement by online lenders may put traditional banks under additional pressure – something the ABA representative expressed by saying regulation should be based Rob Nichols ABAon activities – in other words, banks want similar rules to apply to online lenders.

Parris Sanz from CAN Capital struggled to explain away their avoidance of using an APR and what approximately CAN Capital was charging borrowers (Ms. Levi clarified it as 36% to 60%).

A FINRA survey of US consumer financial capability, (FINRA), Rated: AAA

The US household financial picture is improving.

Financial health

  • 18% spend more than they household income, 38% spend all their household income. ( in 2009 20% spent more than their household income)
  • 21% of households have medical debt vs 26% in 2012
  • 50% of households have no rainy-day fund , also a diminishing %
  • 26% of households have used non-bank borrowing vs 28% in 2012
  • 32% of households only pay the minimum payments on their credit cards vs 40$ in 2009
  • 9% are underwater in their home equity vs 14% in 2012

Literacy

Study participants were asked five questions covering aspects of economics and finance encountered in everyday life, such as compound interest, inflation, principles relating to risk and diversification, the relationship between bond prices and interest rates, and the impact that a shorter term can have on total interest payments over the life of a mortgage.

63% of individuals got 3 of fewer basic questions correct in 2015 vs 58% in 2009

Comparison

Most Americans do not compare offers or collect information from more than one company when shopping for credit cards. This practice suggests a gap in applying financial decision-making skills to real life situations.

58% of Americans do NOT compare credit card offers before choosing a credit card to use.

 Lendio Announces Support for SMART Box Initiative Focused on Enhancing Online Lending Disclosures, (Press Release), Rated: A

Lendio (www.lendio.com), a marketplace for small business loans, announced today that it will join industry leaders as an early engagement participant in supporting the model small business lending disclosure called the SMART (Straightforward Metrics Around Rate and Total cost) Box, developed by members of the Innovative Lending Platform Association (ILPA).

The SMART Box is a voluntary initiative to promote transparency through standardized pricing comparison tools and explanations, including both various total dollar cost and annual percentage rate (APR) metrics to further empower a small business to assess and compare financing options.

JPMorgan had a blowout quarter in fixed income, and it’s big news for Wall Street, (Business Insider), Rated: A

JPM had a particularly strong quarter was fixed income, currencies, and commodities, or FICC, trading, which produced revenues of $3.96 billion — up 385% from the same quarter last year. Analysts had forecast FICC revenues of $3.57 billion, according to Bloomberg estimates. Those are the highest quarterly FICC revenues for the firm since Q1 2015 ($4.1 billion). You’d have to go back to Q1 2013 to find significantly better results ($4.8 billion).

Many firms have been cutting FICC headcount, including Deutsche Bank, Credit Suisse, Goldman Sachs, and Morgan Stanley, which cut 25% of the division last year.

“We’re investing in it,” CEO Jamie Dimon said at the bank’s investor day in February. “We’re investing in it more on the technology side.”

Now the question is whether JPMorgan was the sole firm to smash expectations or whether we’ll see comparable results across the Street in the coming days.

Jefferies in June reported trading — and fixed income — revenues that were better than normal but not by much. Goldman Sachs has previously laid out a bull case for fixed income; we’ll have a window into its FICC business when that firm reports earnings on Tuesday.

OnDeck Announces Date Of Second Quarter 2016 Earnings Conference Call, (Yahoo Finance), Rated: B

.0.0.1.2.0.1.0.0.0.0.0.0.$SideTop-0-HeadComponentTitle-Proxy.$SideTop-0-HeadComponentTitle.0">OnDeck Announces Date Of Second Quarter 2016 Earnings Conference Call, (Yahoo Finance), Rated: B

OnDeck will report financial results for the second quarter ended June 30, 2016, on Monday, August 8, 2016, after the market close.

United Kingdom

How are the alternative finance industry and the .6 trillion wealth management market approaching each other?, (City A.M.), Rated: AAA

If you use an independent financial adviser or wealth manager, they’ve probably never mentioned P2P lending.

This might seem strange: there’s been a lot of talk of how the peer-to-peer industry is “moving mainstream”, and volumes reflect that. In 2015, the online alternative finance industry in the UK grew to £3.2bn – an 84 per cent increase from 2014 – and alternative finance lending accounted for around 14 per cent of new loans to small firms.

And at the same time, institutional money has flowed readily into the sector. In the last six months, according to AltFi Data, it accounted for 40 per cent of involvement in the UK market – from almost nothing prior to 2014. But most of this money comes from specialist funds, and institutional money is notoriously fickle.

Financial advisers, however, still seem reticent. “They have always been very interested, but what’s needed is conversations. When we get them in a room and speak to them – show them our processes and due diligence – they become more positive on the space. That can give them the confidence to promote P2P lending to consumers,” says James Meekings, co-founder of Funding Circle.

Most advisers will say that, while they’re not against P2P in principle – often far from it – they want to see the sector go through a cycle before seriously considering it. As wealth management veteran John Spiers says (see below), while Zopa was around during the crisis, other major players weren’t – and 2007 and 2009 were unusual anyway because the level of bankruptcies was so low, owing to interest rates being slashed so fast.

As Spiers also points out, plenty of IFAs have been burnt in the past. Now, they have to demonstrate that they’ve done a certain amount of due diligence on each product they’re recommending and, as has always been the case, they want a fee for those recommendations. As one industry analyst bluntly puts it: “if the IFA hasn’t got a product to sell, he’s not going to recommend P2P. It comes down to whether something has a metric next to it that he can understand, then he can sell it.”

For advisers “funds are the way forward,” says Meekings. They can buy stocks, shares, and funds and manage money on behalf of clients, and their existing tools mean they can buy a fund today. “It gives them diversification and global exposure – which is important, because diversifying across platforms [which can focus on just one area, like consumer credit], rather than assets, won’t necessarily do that,” he adds.

“The industry is working to create a scoring system for returns. This should be a function of the return and the shape, i.e. volatility, of that return. If advisers can study lending performance, based on meaningful and detailed data, they can begin to perform satisfactory due diligence,” says Rupert Taylor, co-founder of AltFi Data.

The Innovative Finance Isa is already giving retail investors the opportunity to hold P2P investments in the recognizable wrapper. While many investors wait for the largest platforms to get approval from the Financial Conduct Authority (currently, only three smaller platforms have been given the okay), it has enticed big players like Hargreaves Lansdown into the ring. And it’s worth noting that investors can, even without the dedicated vehicle, populate a stocks and shares Isa or a Sipp with P2P investments.

Moreover, alternative investments heavyweight Octopus Investments launched P2P product Octopus Choice in April, enabling customers to target higher interest rates than deposit accounts, but with less risk than stocks and shares.

Head of Octopus Choice Richard Wazz says that the reception from the hundreds of financial advisers introduced to the product has been “incredibly positive. Advisers are proving themselves to be not only comfortable but excited to recommend it to large numbers of their clients – seeing it as a new and welcome way of diversifying their portfolios.”

P2P body chief denies FCA delays damaged industry, (FT Adviser), Rated: A

By the time the new Isa had launched in April, just eight out of 86 peer-to-peer lending platforms had been granted the necessary permissions to offer the savings vehicle, according to the industry body. Kevin Caley, managing director of ThinCats, said he does not expect approval to happen before the end of August, adding he guessed it “may well take quite a bit longer”.

But speaking to FTAdviser, the P2P Finance Association’s chair Christine Farnish said the delays were not such a big deal because investors’ money can be put into the Isa at any point.

“It’s just a question of a small amount of time in the overall scheme of things,” she said, adding Isas are designed to be a long-term savings product.

The delays were partly a result of the FCA being made responsible for 30,000 consumer credit firms in 2014, and Ms. Farnish said the peer-to-peer sector got “put to the back of the queue”.

AngelsDen & Funding Circle’s Alum Verto Homes Launches £1M Funding Raise on Crowdcube, (Crowdfund Insider), Rated: A

Founded in 2010 by entrepreneurs, Tom Carr and Richard Pearce, Verto Homes stated it designs, builds, and sells intelligent, sustainable homes that produce and store clean energy from the sun. The company noted that none of their homes burn fossil fuels for lighting or heat and each is featured automation technology and  is controlled by a smartphone app, called Vesta, which was launched on iTunes in 2015.  The homes are available starting at £190,000.

Verto Homes, a London-based builder that creates sustainable homes, launched an equity crowdfunding campaign on Crowdcube to raise £1 million. Within just a few hours, the initiative successfully secured 41% of its targetted goal (£415,000) from 14 investors.

European Union

Leading German Crowdfunding Platform, P2P Lender Auxmoney Powers On, (Crowdfund Insider), Rated: AAA

Germany’s leading lending marketplace AuxMoney reports continued strong growth. Loan volume increased from €39.3 million in the first half of last year to €79.5 million in the first half of 2016 ‒ an increase of more than 100%.

Founded in 2007, by Raffael Johnen, Philip Kamp, and Philipp Kriependorf, Auxmoney is Germany’s largest crowdfunding platform and Continental Europe’s second largest P2P lender after French Younited Credit – with whom it is now competing neck and neck. According to research institute GfK, Auxmoney is also the most famous FinTech firm in Germany, which does not come as a surprise given its 1.5 million registered members.

In 2015, Auxmoney’s growth was fueled by a spectacular commitment by Dutch insurance company Aegon, as an Institutional Investor, to lend €150 million through the platform. As for its own capital needs, Auxmoney is backed by top venture-capital firms such as Seven Ventures, Index Ventures, Union Square, Foundation Capital and Partech.

Since its beginnings, Auxmoney has originated €268 million worth of loans, out of which nearly two-thirds were originated in the past 18 months alone. Both the number and the size of loans are increasing: the number of loans originated increased by 69% from 6,337 in the first half of 2015 to 10,688 loans in the first half of 2016; at the same time the average loan size increased from €6,196 to €7,439, a 20% increase.

China

264 Peer to Peer Lenders Shut Down in China During First Half of 2016, (Crowdfund Insider), Rated: A

During the first six months of 2016, at least 264 peer to peer lending platforms were shut down in China. This is a direct reaction to the tightening grip of Chinese regulators. The report published in ECNS, states that even tougher oversight is in store for the P2P lending industry as authorities become more vigilant in uncovering fraud and shutting down platforms that do not qualify under Chinese rules.

China published draft rules in 2015 but like many other government initiatives it was not completely clear as to how enforcement would proceed. There have been multiple high-profile P2P platforms that have collapsed. The best known is Ezubao that was described as a Ponzi-scheme months before regulators showed up to shutter the doors. Ezubao apparently fleeced investors of over $7 billion – an incredible amount. Allegedly over 95% of the projects listed in Ezubao were faked.

As of June, there were an estimated 2,349 P2P platforms in operation in China. Chinese is the largest P2P market in the world.

New Zealand

Peer-to-peer lender Lending Crowd seeking capital to help it grow, (Interest), Rated: A

Lending Crowd is seeking up to $5 million from financial services sector investors to help the peer-to-peer (P2P) lender build scale and grow loan volumes. Co-founder Wayne Croad, who majority owns Lending Crowd’s major shareholder Finance Direct, told interest.co.nz the P2P lender has hired Greg Anderson of Northington Partners to raise up to $5 million dollars through a capital raise.

Funds raised will be used to “assist with growing loan volume by extending marketing and product development initiatives.”

Lending Crowd became New Zealand’s fourth licensed P2P lender last year, receiving its license from the Financial Markets Authority. At the time Croad said Lending Crowd would facilitate secured loans of between $2,000 and $200,000 through its website for small and medium sized businesses, vehicles and personal loans for three and five-year terms.

To date, Croad said Lending Crowd has received $22 million worth of loan applications and written $2.5 million worth of loans with 60% of this total comprising personal and motor vehicle loans, and 40% business loans. He said registered non-bank deposit taker Finance Direct has participated in $900,000 of the loans on the Lending Crowd platform on equal terms with retail investors. There are 220 registered retail investors, and 165 active investors. In terms of loan security, Croad said 30% of loans are secured by cars plus a property, 50% are secured by vehicles, and 20% are secured by property only.

“The average weighted return for investors to date has been 12.50% after fees,” Croad said.

Lending Crowd has just released its first financial statements. They show fee and commission income of $18,601 up to March 31, and operating expenses of $39,748, leaving a loss of $17,450.

Author:

George Popescu