Over the last half decade, rates of account takeover have multiplied significantly. According to a PYMNTS.com report, account takeovers jumped 300% in 2017, and have been rising ever since. The trend was particularly pronounced in the lending space. Lenders lost $4 billion from account takeovers last year, according to Javelin Strategy and Research. In order […]
Over the last half decade, rates of account takeover have multiplied significantly. According to a PYMNTS.com report, account takeovers jumped 300% in 2017, and have been rising ever since. The trend was particularly pronounced in the lending space. Lenders lost $4 billion from account takeovers last year, according to Javelin Strategy and Research.
In order to combat this type of fraud with innovative technology, lenders must learn what account takeover entails.
Online Lending Fraud: What Is Account Takeover?
Account takeover is a form of financial identity fraud. It’s when a fraudster uses a victim’s identity and financial accounts to fraudulently secure a loan and then steal the funds. Fraudsters apply for a loan in the victim’s name, transfer the funds into the victim’s account, withdrawal the money, and then disappear.
Account takeover is riskier than other forms of identity fraud, but it comes with several advantages for fraudsters who want instant gratification. The fraudster does not need to build a fake identity or financial infrastructure to commit the fraud. The fraudster is essentially taking over a person’s identity, pre-existing accounts, and credit history to illicitly funnel money into a safe haven.
Account takeover is facilitated like most other kinds of identity fraud. A bad actor obtains sensitive information, such as bank account numbers, usernames and passwords, and other key credentials from personal contacts, malware, phishing, or other violations of a victim’s privacy. The fraudster takes out a loan in the victim’s name, and routes the funds into the victim’s account.
Once the funds are in the victim’s account, the fraudster moves the funds into an intermediary account by circumventing bank security protocols. These circumvention methods include SIM swaps, associating new phone numbers with the bank account, SMS-grabbing malware, cloning phone identifiers, and other methods.
After the money is in the intermediary account, the fraudster cashes out the funds by making ATM withdrawals, purchasing cryptocurrencies, transferring funds to online payment platforms, or buying e-commerce goods, among other methods. The fraudster might try to hide the origin of the money by employing “mules,” or agents who transfer illegally obtained money, either wittingly or unwittingly.
Combating Account Takeover with Technology Solutions
Account takeover poses unique challenges to online lending, but novel technologies can help lenders fight back against this form of fraud.
ThreatMetrix by LexisNexis Risk Solutions provides data that detects suspicious behavior or compromised devices before fraudsters can initiate account takeovers. ThreatMetrix’s Digital Identity Network analyzes millions of transactions across billions of devices for thousands of leading global businesses. This data allows organizations to verify that customers are who they say they are.
RSA Web Threat Protection uses behavioral analytics to separate fraudulent activity from legitimate transactions. The solution tracks a large variety of fraud threats, such as new account fraud, fraudulent money transfers, password guessing, credential harvesting, mobile and web session hijacking, and other behaviors that suggest potential account takeover attempts.
Fraud.net has an award-winning AI-powered suite of enterprise tools to manage risk for clients such as online lenders. Fraud.net’s AI, analytics, and data mining platform can quickly identify common schemes and attack methods, including account takeover. The suite’s ‘early-warning’ monitoring, powered by multi-dimensional risk analytics, helps to uncover account takeover fraud before it happens.
Account Takeover: A Manageable Issue With the Right Technology
Account takeover is one of the most expensive and fastest growing forms of online lending fraud. However, with the right solutions, lenders can combat account takeover and minimize the negative impact it has on profit margins, platform security, public image, and the customer experience.
Kevin Bartley is the content manager at Ocrolus.
Headquartered in NYC, Ocrolus is an intelligent automation platform that analyzes financial documents with over 99% accuracy. By eliminating manual reviews, Ocrolus empowers companies to reinvest human capital and automate processes with industry-leading speed and accuracy. Ocrolus services hundreds of customers in the financial sector and analyzes millions of data points every day. The company has raised over $30 million in venture capital, backed by Oak HC/FT, FinTech Collective, Bullpen Capital, and QED Investors, among others. For more information about Ocrolus, visit www.ocrolus.com.
According to Javelin Strategy & Research, account takeover fraud increased by two million new fraud victims from 2015 to 2016. That represents a 16 percent jump in new fraud cases of that kind in just one year. The problem isn’t getting better. As the alternative lending landscape grows with increased technological advancements, and the number […]
According to Javelin Strategy & Research, account takeover fraud increased by two million new fraud victims from 2015 to 2016. That represents a 16 percent jump in new fraud cases of that kind in just one year. The problem isn’t getting better.
As the alternative lending landscape grows with increased technological advancements, and the number of lenders using alternative credit data and alternative lending practices increases, so too do the number of attempted frauds. Experian’s Clarity Services is an alternative credit data provider with solutions designed to decrease default rates and flag potential fraud before it happens.
Three Distinct Types of Lending Fraud
Online lending fraud can take on any number of different characteristics, many of them quite sophisticated. But there are three general categories of lending fraud that online lenders should concern themselves with.
First-party fraud is when borrowers use some sort of deception to trick a lender into believing they are a good credit risk and get away with money they do not intend to pay back.
Second-party fraud is a type of lending fraud in which the fraudster is a friend or trusted acquaintance of the party whose name is on the application.
Third-party fraud, often called “identity theft” or “identity fraud” is when someone submits a fraudulent loan application in someone else’s name pretending to be that person. However, unlike second-party fraud, the perpetrator is unknown to the victim and probably acquired the victim’s identity illegally or in underhanded ways.
Each type of fraud presents its particular challenges and should be fought in different ways. This article will focus on first- and third-party fraud.
The Threat of First-Party Lending Fraud
First-party fraudsters are difficult to detect because they apply for loans under their own names. In many cases, the clues that they do not intend to pay back a loan are very subtle and easy to miss.
One popular type of first-party fraud is loan stacking. This is when the applicant submits multiple credit applications at different lenders on the same day hoping to be approved for several unsecured loans. They then accept the various loan offers available to them, take the cash, and never intend to pay it back. For online lenders, where credit standards are often lower than at banks and loans are approved much more quickly, it has become a real problem. Javelin Strategy & Research claims it costs lenders $340 million in annual losses.
The good news about first-party fraud is that it can be detected using powerful predictive tools, which allow online lenders easy and quick alerts to inconsistencies, fabrications, and misrepresentations in loan applications.
The Varieties of Third-Party Lending Fraud
Third-party fraud is a little more subtle. In this case, another party is applying for a loan pretending to be someone else. They’re actually using real-life facts about the victim in order to deceive the lender into giving them money. It is really difficult to detect when fraud rings get their hands on stolen identity information that allows them to apply for multiple lines of credit at several lending institutions. Again, alternative finance lenders are often easy targets.
Here are six types of third-party lending scams often perpetrated against alternative lenders:
Identity theft – Identity theft takes place when personal financial information is obtained illegally for the purpose of assuming that person’s identity. Information can be acquired in a number of ways including dumpster diving and sifting through trash bins looking for credit card bills and other account documents, hacking into databases or mobile phone apps where personal identity information is stored, or buying it on the black market.
Account takeover fraud – An individual or fraud ring gains access to digital data, usually by hacking or phishing. Then they use credit information such as credit card numbers, bank accounts, etc. to access the victim’s money in those accounts.
Information fabrication – This type of fraud relies on falsifying information about a party in such a way that it is believable. For instance, falsified pay stubs for a fictional job are often used to prove current employment.
Synthetic identity fraud – This type of identity fraud now accounts for 85 percent of all identity fraud in the U.S. Fraudsters combine real identity information with falsified information about a supposed credit applicant in order to defraud the lender.
Credit piggybacking – This sophisticated scheme involves a fraudster being added as an authorized user on a credit account in good standing in order to instantly increase the fraudster’s credit score and thus, the likelihood of a loan approval.
Loan stacking – As mentioned previously, loan stacking occurs when an individual applies for multiple loans from different lenders. Third parties can wreak havoc on a victim’s credit file and get away with a lot of cash using this fraudulent scheme.
Fraud can be quite sophisticated, targeting alternative lenders and, in many cases, the most unlikely victims. For instance, a loan stacking ring could obtain the credit information of subprime individuals, use credit piggybacking to boost their credit scores, and add some synthetic identity elements to bamboozle a small lender into approving someone who otherwise would never be approved for credit. Often, they get away with such schemes due to lack of detection and fraud prediction tools.
How to Catch a Fraudster
Experian’s Clarity Services has designed solutions specifically to detect fraud before it happens using predictive variables to look at over 250 fraud-specific attributes. Clear Fraud Insight is designed to lower alternative lender default rates and detect potential fraud before a loan is approved. Some preliminary results have shown a 60 percent increase in acceptances while defaults remained constant, and alternatively, an 11 percent reduction in defaults as acceptance rate remained unchanged.
Different lenders should expect different results. Nevertheless, isn’t it time to upgrade your risk assessment tools?
Its a good thing that everything that happens in Vegas doesn’t stay in Vegas, which is where the Seventh Annual Money20/20 Conference took place on October 19-21, 2018. With the goal to “fearlessly take on the mission of creating a simpler, fairer, faster and more inclusive financial system for individuals, businesses, and society as a whole,” the three-and-a-half […]
Its a good thing that everything that happens in Vegas doesn’t stay in Vegas, which is where the Seventh Annual Money20/20 Conference took place on October 19-21, 2018. With the goal to “fearlessly take on the mission of creating a simpler, fairer, faster and more inclusive financial system for individuals, businesses, and society as a whole,” the three-and-a-half day event included more than 500 speakers and 15 agenda themes.
Themes included :
Payments and Platforms
Banking and Personal Finance
AI and Deep Learning
Cybersecurity and Fraud
Alt Lending and Credit
Blockchain and Crypto
Digital Identity and Biometrics
And much more
While this is going to serve as a brief overview of the Conference, some of the notables who spoke, and bigger announcements, there will be special interest on Alternative lending and credit. We’ll also look at the all-important payments race.
A lot of the coverage is available on YouTube where Money20/20 has its own channel, so, if you missed the conference, you still have free access to some of the information.
Apple Co-founder Steve Wozniak is always a good bet to help you get a financial conference rolling. The business legend’s assurances that the claims that artificial intelligence (AI) and robotics, along with other forms of technology, are going to cut into human productivity are unwarranted helped to establish an ongoing theme that tech is necessary for the broader inclusiveness of our collective financial future.
Jennifer Bailey, VP Internet Services for Apple Pay, detailed some of the expansions of the new iPhone X, which include face ID security.
Other notable speakers from the first day of the conference included John Collison of Stripe, Michael Mebach, CPO of Mastercard (who spoke on how to build a seven-trillion-dollar middle class), Anand Sanwal of CB Insights, and Bill Ready of PayPal.
Day Two’s lineup of speakers was headed by none other than Virgin’s own Richard Branson, who told a remarkable story about how he created Virgin by renting a plane and selling seats to the other passengers scheduled to be on the American Airlines flight that was delayed. Sallie Krawcheck, Ellevest’s CEO and co-founder, had some valuable remarks on diversity, and Vanessa Colella, head of Citi Ventures and CIO of CitiGroup, shared some keen insights on partnerships.
Possibly the speaker from the conferences second day who made the biggest impression was Nikolay Storonsky, CEO of Revolut. The way money is moved is changing rapidly, but if Storonsky is correct in his predictions, it may change even faster. He predicts that in 10 years, two or three large fintech players will take 95 percent of banks’ business marking an industry overhaul akin to how Amazon bypassed the retail industry and Uber took on taxis.
Patrick Gauthier, VP of Amazon Pay, spoke to Tracey Davies’s central theme when he talked about the use of technology to make things simpler and more natural between the merchant and the consumer. Harley Finkelstein, CEO of Shopify, pointed out that middlemen will not be totally going away in the financial realm of the future, but they will have to “provide a disproportionate amount of value for their profit margin in the future.”
Other notable speakers included Asiff Hijri, president and COO of Coinbase, who framed the crypto world well when he spoke of the two base use cases of the space, the store of value of bitcoin and the ability to build apps on top of Ethereum, while noting that we’re still looking for that breakthrough app. His quote “Fintech before crypto, and the promise of a stablecoin…is like mobile before the iPhone came along” might be one of those “remember when” moments.
NBA legend Shaquille O’Neal also spoke on the third day of the conference. Now an advisor and advocate of Steady, the platform which helps Americans find work, says his partnership with these efforts is driven by recollections of a past where the only investments that paid off were those he embarked on in order to help others.
Much of what happened on Day Four is listed below, including the Uber/Barclays and the Grab/Mastercard partnerships, but the day also had some other mentionable happenings.
Marisol Menendez, head of open innovation for BBVA, introduced the overall winner of the 10th annual BBVA Open Talent competition, the reward going to Sedicii; founder Rob Leslie accepted the award. Sedicii provides a service that identifies data between two organizations without exposing the underlying data.
Also, adding some hope for the financial sector in general, Ripple’s Co-Founder and Executive Chairman Chris Larson stated that he thinks digital assets can help guard against another financial crisis by solving some of the key problems of global liquidity. He also predicts that a fluid digital asset (he thinks it will be XRP, of course) will make more fluid the trillions of dollars that are tied up due to the “clunkiness” of current systems.
Focus on Alternative Lending and Credit Cards
As instant payments and expanded remittance options gain more prominence in the world of payments and commerce, an app designed to speed up the remittance process, designed via Visa APIs, took top honors at the conference.
American Express and Amazon announced a partnership, which will produce a no-annual-fee business card. Cardholders (Amazon Prime members) will get to choose if they want to receive five percent rewards on any Amazon purchase (Whole Foods included) or 90-day payment terms, a reward that might benefit small businesses with cash flow issues.
Goldman Sachs’s Marcus Platform announced a new wealth management offering designed to make the financial market more inclusive for average Americans. The offering will focus on online savings accounts and personal lending, the end game being to educate customers on some of the ins and outs of the financial sector.
Grab Financial and M and A Mastercard announced a partnership that will make prepaid cards available to underbanked and underserved customers in Southeast Asia in order to bring them into the financial realm and allow them to conduct business globally.
Gregory Wright, CPO and SVP of Experian, touched on a common theme from the conference, that of businesses going forward by putting consumers first. He reinforced the platform’s focus on putting the consumer at the center of the lending decision by giving the consumer more control over his or her data to allow them to make a more informed lending decision. The goal is for lenders to make better decisions at lower risk while giving more consumers access to credit.
David Richter, global head of business and corporate development for Uber, joined with Curt Hess, CEO of BarclayCard US, to announce the unveiling of the Uber Visa card. A native app specifically designed for the Uber platform, the app will make it more engaging and enjoyable for Uber riders and Uber eaters to experience the platform. The card will also offer real-time notifications of rewards and balances, rather than customers having to wait a month for a statement as credit cards traditionally do.
Other Noteworthy Announcements
ViSync took the grand prize in the conference’s hackathon challenge. According to a Visa spokesperson, their entry, an app designed to help send remittance payments overseas, should make it easier for migrant workers to send money back to their home countries.
FICO announced an “Ultra” FICO rating. The new device will consider how people manage their checking accounts and will incorporate things like overdraft history to determine credit scores. The goal is to help younger people and others with little or no credit and people who are rebuilding their credit after a couple of setbacks.
Tracey Davies, president of Money20/20, also announced the Rise Up! program, the pilot of which took place at this event. Rise Up! seeks to increase inclusion into the financial sector on all levels. This pilot program, which will expand to other demographics in the future, focused on gender (women make up 50 percent of the population, but only 20 percent of leadership roles in the financial sector.). Of the 300 women who applied to the program, only 35 were selected. Those who were selected were privy to special seminars and one-on-one access to various leaders from the financial space.
The Payments Race
Knowing how we build points of sale, I wonder if the organizers of the original event knew just how apropos the payments race would be to the overall message of the Money20/20 events. Whether they did or not, the event serves to draw a good picture of how we use and interact with different forms of currency in our daily lives.
Closely resembling the scavenger hunt of the television series The Amazing Race, five participants were given six days to make it to Las Vegas for the opening day of the convention. They drew to see which host city will host most of their scavenging, and then they all have to make it to their city and then to Vegas. Along the way, they got points for things like the number of states they visited and the different modes of transportation they use.
The catch is this: Each participant was only allowed to use one form of payment; the options were
Team Credit Cards
Team Devices (Apple Pay and such)
The episodes—all of which can be seen on YouTube—show the obstacles in trying to perform these tasks with only the given form of payment.
As you can imagine, Team Checks had a hard time of it, and they had to rely on the goodness of many others to navigate their journey. Team Cash didn’t face as many obstacles, but travel required some finagling as they got deeper into the trip. Team Crypto had some transportation issues early on, but also relied on the kindness of others to make the necessary accommodations.
Team Credit seemed to have the most ease traveling—they just rented an RV and drove—and the representative from Team Devices said after it was all over that using only devices proved to be easier than she thought it was going to be; she did have to go to some pretty significant lengths to rent a car.
In all, the little series of videos showed the importance of various forms of payment and that we still haven’t gotten to the point where we can survive conveniently on one single form of payment; still, everything from the conference seems to speak to the reality that we’ll get there.
And how did the race turn out? Well, I haven’t seen an actual crowning, but Team Crypto was the first to get to the Las Vegas sign, which was basically the finish line—I haven’t seen anything that mentioned how each fared at the number of states visited or modes of transportation used. If Team Crypto did prove the winner, it was their second straight title.
The event will return to Vegas next year, the dates being October 27-30, 2019.
News Comments Today’s main news: OnDeck to add PNC to ODX platform. FICO to add alternative data to credit score. PeerStreet named to CB Insights Fintech 250 list of fastest-growing fintech startups. Lendy asks for help. Pintec Technology shoots for $41M IPO. Today’s main analysis: Zelle sees record earnings, FREED 2018-2 and UPGR 2018-1 compared. Today’s thought-provoking articles: Funding […]
It was back in December of 2015 that we first learned about OnDeck’s partnership with JPMorgan Chase. This was the first significant partnership between a large American bank and an online lending platform and it caused a lot of excitement in the industry back then.
A couple of times this year we have heard OnDeck CEO Noah Breslow hint that a second major bank was coming on as a partner soon. Today, we learned who that partner will be: PNC Bank. They are the ninth largest bank in the country, so this gives OnDeck two of the top ten largest banks as clients.
I caught up with Noah and Brian Geary, who heads up OnDeck’s new ODX division (we covered the story of ODX just last week) to talk about this new deal.
Credit scores for decades have been based mostly on borrowers’ payment histories. That is about to change.
Fair Isaac Corp., creator of the widely used FICO credit score, plans to roll out a new scoring system in early 2019 that factors in how consumers manage the cash in their checking, savings and money-market accounts. It is among the biggest shifts for credit reporting and the FICO scoring system, the bedrock of most consumer-lending decisions in the U.S. since the 1990s.
PeerStreet, a marketplace for investing in real estate backed loans, is honored to announce that it has been named to the second annual CB Insights Fintech 250 list, a prestigious group of emerging private companies working on groundbreaking financial technology. This comes on the eve of PeerStreet’s third anniversary of opening to the public. PeerStreet opened to all accredited investors on October 30th, 2016 at Money 20/20, an annual conference which is happening this week in Las Vegas. Both PeerStreet founders Brew Johnson and Brett Crosby are in attendance.
PeerStreet is being recognized as a leader in real estate investing for the platform’s innovative approach to making real estate debt an accessible asset class for retail investors. The loans offered for investment are vetted by private lenders who know their communities well, and then again by PeerStreet’s own team using big data and market research.
Bank of America – Record Earnings and Results for Zelle
BofA’s earnings were boosted by the highest Net Interest Income since 2011 delivered by its Lending business.
BofA also saw P2P payments rise on its Zelle platform increase 138%. Venmo, over the last year, has been on the defense due to increased consumer fees and leadership changes. SnapChat’s payment service was discontinued. Tech firms such as Google, Facebook, Tencent, and Ant Financial continue to test payments in overseas markets like India (where it is easier for FinTechs to utilize payments rails).
MS remains laser-focused on growing asset management and lending (secured and warehouse lending) and delivered the best stock price performance post earnings. The stock gained 5.7% post-earnings.
Freedom (FREED 2018-2) vs Upgrade (UPGR 2018-1)
Below we compare these deals on their collateral composition, bond characteristics and triggers. We note that each lender has substantially different lending programs, credit risk profiles, and history – and that shows in terms of deal structure and execution.
FREED 2018-2’s collateral pool consists of 2 types of loans – 45.5% Freedom Plus (F+) and 54.5% Consolidation Plus (C+).
F+ Loans: F+ loans are unsecured consumer loans to near prime and prime borrowers. F+ collateral has a WA age of 3 months and WA remaining term of 46 months. The WA current FICO score of the pool is 713 and the WA interest rate is 16.2%.
C+ Loans: C+ loans are offered to select qualified debt settlement clients as an option to shorten the duration of their debt settlement program by making funds available immediately to fund settlements reached by Freedom Debt Relief. C+ collateral has a WA age of 8 months and WA remaining term of 45 months. The WA current FICO score of the pool is 562 and the WA interest rate is 22.9%.
UPGR 2018-1’s collateral pool consists of unsecured consumer loans. The collateral has a WA age of 2 months and WA remaining term of 41 months. The WA current FICO score of the pool is 691 and the WA interest rate is 15.9%.
Freedom’s C+ loans have the highest weighted average coupons and original loan terms among all the pools, and Freedom’s F+ borrowers have the highest weighted average credit scores. The higher weighted average coupon on C+ loans helps the deal generate significant excess spread.
A partnership between AI-powered identity risk scoring innovator Socure and workflow management specialist Alloy has enabled Radius Bank to decrease online fraud by 50%, increase new account conversions by 30%, and make manual review nearly a process of the past – reducing it by 95%.
The joint solution marries Socure’s predictive analytics with Alloy’s decisioning engine, and adds a variety of on- and offline data sources, predictive fraud tools, and a flexible rules engine to enable real-time decisioning and onboarding for new account openings.
Plaid, a fintech company whose software is used by Silicon Valley heavyweights like Betterment, Coinbase, and Robinhood, is holding talks with potential investors about raising money that could value the firm at more than $2 billion, according to people familiar with the matter.
The fundraise is still in the early stages, the people said, and a formal deal with investors has yet to be finalized.
Today at Money20/20 in Las Vegas, Klarna, a leading global payments provider, introduced their Slice it in 4 payment option, which allows consumers to pay for purchases in installments using their own debit or credit card. In conjunction with the launch, Klarna has signed its first U.S. merchant, Rancourt & Co., premium leather shoe crafters, to use the offering.
In today’s market, 67% of U.S. millenials do not own a credit card. With Klarna’s Slice it in 4, shoppers can increase their purchasing power without the hassle of a credit agreement or long-term commitment. Four equal payments are automatically collected from the consumer’s chosen method of payment – one installment at purchase and three further payments every two weeks. The plan features no upfront costs or interest and is offered online within the merchant’s existing checkout – ensuring the purchase journey is frictionless with no redirects to other sites.
Today, LexisNexis Risk Solutions, a part of RELX Group (NYSE: RELX), released its 2018 True Cost of Fraud study on lending. The 2018 study, which surveyed 186 risk and fraud executives at various lending institutions, including mortgage companies, auto lenders, non-bank personal loan issuers, non-bank credit card issuers and finance companies, highlights the continued rise of fraud costs for U.S. lenders. According to the LexisNexis Fraud Multiplier℠, for every dollar of fraud, lenders incur $3.05 in costs, compared to $2.82 in 2017, an 8.1 percent increase. Larger digital lenders, with at least $50 million in annual revenue, are hit hardest by fraud, incurring $3.37 in costs, which is up from $3.07 in 2017.
Other key findings from the study include:
54 percent of risk and fraud executives at large digital lenders state that verification of customer identity is their largest challenge. This is especially true of verification through the online channel.
Lending firms that use a multi-layered solution approach experience a lower cost of fraud. Those who layer core + advanced identity authentication + advanced transaction / identity verification solutions have lower fraud costs than others, per fraud event ($2.63 for every $1 of fraud versus up to $3.47) and as a percent of annual revenues. They also tend to have a lower volume of false positives.
Large digital lenders with international transactions attribute nearly 40 percent of their fraud losses to their non-domestic business. Fraud that originates in Asia represents 57 percent of the total international fraud expenses for these lenders.
Large digital lenders are more likely to represent “best-in-class” thinking about the adoption of fraud mitigation solutions, as they face attacks that are more significant.
It’s easy to see why entrepreneurs are bonding with alternative lenders. What’s not so easy to see is why they’re leaving bankers out of the loop. However, with renewed trust in each other, both institutions are finding mutual benefits. What’s more — the B and B called “Business and Bankers” is finding a renewed comeback.
Say you’re a small business owner feeling the squeeze. You could turn to a traditional bank that requires loan applicants to go through a rigorous review process for a 20 percent chance of approval. Or you could apply online with a peer-to-peer firm that approves more than 60 percent of applications and receive a decision in minutes.
MoneyLion, the innovative financial platform offering consumers a better way to borrow, save, earn and invest, today officially launched America’s most powerful and rewarding financial membership to help people take control of their finances and achieve their dreams.
In support of the most powerful financial membership, MoneyLion will be launching the Financial Heartbeat as well as a comprehensive suite of premium banking products to help everyday Americans better understand and engage with their finances.
As of 2018, outstanding student loan debt in the U.S. surpassed $1.48 trillion, almost one-and-a-half times what Americans owe on credit cards.
According to a MagnifyMoney analysis of Federal Reserve data, all this debt is hampering millennials’ chances for long-term financial success.
In fact, this study revealed that the average net worth of a millennial with student loans is only 25% of the net worth for a fellow millennial without them. What’s more, the data suggest student loan debt is preventing some millennials from saving for retirement or buying homes.
Millennial households with student loan debt have…
An average net worth of $29,087, compared with $114,376 for student loan-free households.
46% less in their savings and checking accounts (median balance of $5,500 vs $10,180 for those without student loans).
$21,160 in retirement savings versus an average of $39,905 for those with no student loan debt.
HSBC is getting back into US consumer lending almost a decade after it was forced to write off $10.6bn for its last foray into that market.
The UK banking giant said on Monday that it is launching a digital lending platform for US customers in the first half of 2019. The platform will be powered by online lender Avant, which has already processed almost $5bn of loans for more than 600,000 customers.
OppLoans CEO Jared Kaplan likes to stress that a company can’t responsibly serve its customers without creating an inclusive atmosphere for its employees first.
That’s why OppLoans promotes from within and supports career development with ongoing education initiatives. We spoke with Kaplan and two other leaders at the company to learn more about what they do to ensure their team feels truly valued.
How would you describe your leadership style?
My leadership style follows a few key principles: rule by motivation, not fear; drive a high-performing culture and reward the top performers; and enable ultimate transparency. If employees are excited to come to work, see clear development paths when they perform and understand the good and bad of the business, I’ve created a great place to work.
We also ensure a workplace where everyone is encouraged to speak their minds when they see opportunities to improve the business.
Hundy Launches Mobile App Turning High Cost Payday Loans Into Low Cost Friends & Family Loans (Hundy Email) Rated: A
Hundy, a peer-to-peer micro-lender that empowers the creditworthy to benefit from their good character, announced today at Money 20/20 that it has released the latest update to its lending platform enabling friend-to-friend lending for a low 1% fee. Now, even borrowers who don’t pass a credit check, will be able to request a loan from a friend or family member utilizing all the tools of the platform including signed loan documents, SMS and email reminders, and automated payment scheduling. Hundy was designed to foster community around a marketplace of borrowers and lenders whose participants benefit from transparent terms, wide availability and low prices.
Investing in real estate has been around for centuries but it is only in the past few years that it has become possible to do this remotely and at scale. While institutional investors have had lots of options individual investors have been limited, for the most part, to buying homes in their local area.
Our next guest on the Lend Academy Podcast is Gary Beasley, the CEO and co-founder of Roofstock. Gary and his team have created the first online platform for investing in single family homes across the US. They help investors select the homes, obtain financing as well as find tenants and property managers.
The OCC is still moving forward with plans to grant Special Purpose National Bank charters to qualifying non-depository financial technology firms, notwithstanding a lawsuit challenging the move from New York state regulators and the threat of additional litigation. In response to a question following her speech at the October 9 Online Lending Policy Institute conference, Grovetta Gardineer, OCC’s senior deputy comptroller for compliance and community affairs, said the OCC will accept applications from fintech companies seeking the SPNB charter and intends to grant charters to applicants meeting the criteria. As reported in the October 8 edition of Bank Regulatory News and Trends, the New York State Department of Financial Services filed suit against the OCC, challenging the federal agency’s authority to grant the charters. The Conference of State Bank Supervisors also signaled its intention to file suit against OCC over the charters.
Princeton Alternative Income Fund’s (PAIF) latest attempt to resolve its bankruptcy dispute by appointing an independent restructuring officer was rejected by Ranger Direct Lending (RDL.L)(RDLZ:LN) last week.
The fund proposed hiring respected former United States Bankruptcy Judge Donald H. Steckroth as an independent officer to oversee the fund’s restructuring to protect all its investors. The executives at Ranger had demanded the appointment of an independent officer earlier in the bankruptcy process only to reject it this week.
CrowdOut Capital LLC, a pioneer in non-bank private lending for growing middle market companies, today announced two new additions to its management team, Christina Gustavson and Darlene Esquivel.
Gustavson will be CrowdOut’s first controller. She brings a strong accounting background having worked as a senior accountant at C3 Entertainment and at RGM Advisors, an Austin-based quantitative trading firm. A licensed CPA, Gustavson earned a Bachelor of Science in Accounting from Texas State University.
Funding Circle Holdings plc (“Funding Circle” or the “Company”), the leading small and medium enterprise (“SME”) loans platform in the UK, US, Germany and the Netherlands, today announces updates to its statistics pages for the three months ending 30 September 2018 (the “Quarter”) and selected highlights from the quarter.
The data by country included in this announcement is also available on the Company’s website at corporate.fundingcircle.com/investors/loan-performance-statistics.
A British peer-to-peer property lender has taken the unusual step of appealing to its regulator for help after one of its biggest borrowers threatened to sue the company and many of its investors.
Retail investors in Lendy are already facing tens of millions of pounds in potential losses after almost two-thirds of borrowers failed to repay their loans on time, according to a Financial Times analysis of its loanbook.
The developments threaten to trigger the first big crisis in Europe’s rapidly expanding peer-to-peer industry, at a time when the sector is fighting to convince regulators it does not need stricter regulation.
P2P lending is becoming a significant alternative source of financing for SMEs in the UK. According to Entrenching Innovation – The 4th UK alternative Finance Industry Report, published in December 2017, P2P business lending grew from £21m in 2011 to £1.23bn in 2016, generating £3.14bn over the six years. The report noted that the annual growth rate in volume from 2015 to 2016 was 40%.
The report cited data from the British Banking Association that revealed P2P business lending equated to 15% of new small businesses loans. More than a fifth of borrowers had a turnover of less than £500,000 and 23% were in the £500,000 to £1m turnover bracket. It also found that lenders were biased towards localised funding. This diversity of lending across the UK suggested that P2P business lending could become “a suitable solution to systemic geographic biases that exist in traditional and bank SME lending”.
London has cemented its standing as the capital of Europe’s billion-dollar technology startups, as surrounding cities help to push the UK forward while its companies expand internationally.
New figures released today show the UK has now created 60 so-called unicorn startups – companies with a valuation of $1bn (£769.6m) or more – since 1990, according to research prepared for Tech Nation and the government’s Digital Economy Council by Dealroom.
London houses 36 of those UK startups, representing more than a fifth of all unicorns in Europe at a total valuation of $132bn. In comparison, Berlin holds the second biggest city spot with just eight unicorn startups, worth $32bn.
Landbay has chosen Oracle NetSuite to create a more accessible buy-to-let mortgage marketplace for investors, borrowers and brokers.
Through NetSuite, Landbay will be able to process loan applications ten times faster than other lenders and enable its staff to make swifter decisions around mortgage applications and investor sign ups.
Founded in 2014, Landbay offers individual investors direct access to the lucrative mortgage lending market and offers landlords competitively priced buy-to-let mortgages, with plans to lend £1 billion to UK landlords by 2020.
OakNorth Holdings Ltd today announces the launch of a new corporate brand identity, logo and website. Its fintech platform, ACORN machine, will now be known as OakNorth Analytical Intelligence (ON AI) and we have a new domain (www.oaknorth.ai).
Rishi Khosla, co-founder of OakNorth Holdings said: “Since our founding, our mission has been to enable small and medium-sized businesses obtain the debt finance they need to grow. Our fintech platform, which we developed to address this problem, is being used by a number of leading banks globally, and by us in the UK.”
A Ministry of Business, Innovation & Employment assessment that introducing a comprehensive creditor licensing regime as part of the Government’s crackdown on loan sharks would be worse than the status quo doesn’t appear to be based on much evidence.
The recent announcement from Commerce and Consumer Affairs Minister Kris Faafoi included plans to introduce a “fit and proper person” test for lenders.
This means the fit and proper person test was chosen over two other options floated in June’s Ministry of Business, Innovation & Employment (MBIE) discussion paper aimed at increasing lender registration requirements. The other two options were expanded powers to deregister lenders and ban directors from future involvement in the credit industry, and introducing a comprehensive creditor licensing system.
The Financial Services Authority (OJK) said the non-performing loans (NPL) rate among financial technology (fintech) firms that use peer-to-peer lending (P2P) hovered around 1 percent monthly, safely below the 2 percent maximal set by the OJK.
“The NPL rate can go as low as 0.9, then rise as high as 1.3 then go down again,” said OJK fintech licensing and supervision director Hendrikus Passagi on Sunday as reported by kompas.com.
Wealth management startup Cube Wealth announced on Monday that it has raised Rs 14 crore (about $2 million) in equity funding from Singapore-based venture fund Beenext, Japan-based Asuka Holding and 500 Startups.
The company said that it will use these funds for additional asset partners, and to develop a network of premium sales and marketing partners across different countries including Mumbai, Delhi-NCR, Bengaluru, Hyderabad, Chennai, Kolkata and Pune.
Cube Wealth also plans to expand its presence across Europe and Japan, as it is looking to target non-resident Indians from these markets.
If you need a loan for a medical emergency like a surgery, it might help to turn to your peers rather than institution rather than institutions. Peer-to-peer (P2P) lending platforms say they have seen lenders willing to offer interest rates between 8% and 12% for medical emergencies on their platforms. On the contrary, if you try to raise funds as a personal loan from banks, the interest rate is likely to be between 13% and 17%. P2P technology platforms bring borrowers and lenders together, and most offer a variety of of loans, including personal loans, vehicle loans, education loans and — in some cases — even home loans. Most lenders tend to be individuals too.
P2P players like Faircent, LenDenClub, i2iFunding and LoanTap say they also process medical loans faster.
While alternative lending is currently gaining traction among borrowers, it’s also becoming a formidable asset class in its own right, with the U.S. market now accounting for an estimated $50 billion of annual origination.
Born out of peer-to-peer lending, online alternative lending has gone mainstream, presenting new opportunities for small businesses, consumers and investors.
According to Morgan Stanley Investment Management’s study, what began as “peer-to-peer” marketplaces bringing together borrowers and lenders has evolved considerably in recent years.
Alternative-lending platforms now span many categories, including unsecured consumer, small-business and other forms of specialty financing, it said.
Prospa, a mobile savings wallet for low-income earners, and Nisa Finance, an invoice financing platform, are among the eight local fintech start-ups awarded a total of R16 million in funding by AlphaCode.
AlphaCode is an incubation, acceleration and investment vehicle for early-stage financial services businesses, powered by Rand Merchant Investment (RMI).
The AlphaCode Incubate initiative, in partnership with Merrill Lynch SA and Royal Bafokeng Holdings, identifies South African financial services entrepreneurs with extraordinary ideas and businesses that could impact the financial services industry.
More than 200 start-ups applied to participate; of these, 16 made it to the final pitch evening and eight recipients were selected.
Cryptocurrencies entered the mainstream in 2017. The million dollar fortunes made and 1,000% returns hogged the headlines. But behind all the hoopla is blockchain, the technology behind cryptocurrencies, quietly and steadily changing the business universe. The technology has myriad applications. Also called distributed ledger technology (DLT), it can reimagine entire industries in hitherto unknown ways. […]
Cryptocurrencies entered the mainstream in 2017. The million dollar fortunes made and 1,000% returns hogged the headlines. But behind all the hoopla is blockchain, the technology behind cryptocurrencies, quietly and steadily changing the business universe. The technology has myriad applications. Also called distributed ledger technology (DLT), it can reimagine entire industries in hitherto unknown ways. From issues of security to scalability and cost effectiveness, entrepreneurs are incorporating DLT to bring the benefits to the masses.
Similarly, alternative lending has changed how Americans borrow. Small business and consumer lending was hard hit when banks decamped en masse after the 2008-09 crisis. Online lending came to the fore with players like Lending Club, SoFi, OnDeck building multi-billion dollar lending platforms.
Almost 10 years since, alternative lending is growing but not at the speed which experts had imagined. Morgan Stanley had predicted Trillion Dollar funding via such platforms in the coming future. The sector is nowhere close to these figures. Aside from corporate governance issues, fraud and high default rates have been the true bane of the industry. IdentityMind, a RegTech company, reports that fraud caused 12% of losses in P2P online lending. That translates to almost 1.2% of total funding, which is also 2-3 times as compared to banks or retail cards.
Blockchain and Alternative Lending
Blockchain is an open, distributed ledger that records transactions between two parties in a verifiable and efficient manner. Putting digital assets (contracts, documents, financial data, etc.) on blockchain technology helps build a wall against unauthorized access and prevents fraud. Blockchain helps maintains transparency between entities; it could be between buyer and seller, business and employee, or customers and investor.
A World Economic Forum report predicts that, by 2025, 10% of GDP will be stored on blockchains. Amalgamating blockchain and alternative lending has not only a technical appeal but is business common sense. Online finance decentralized lending allows savers to directly fund borrowers; they took away the middlemen, traditional banks, who otherwise used to take the major benefit away from the transaction. Now, it is the alternative lending sectors’ turn to leverage the power of decentralization via blockchain.
The Benefits of a Decentralized Distributed Ledger
Currently, alternative lenders hold their complete data centrally, in either their own servers or on Amazon Web Services-type cloud structures. This is a honey pot for hackers. In 2017, an Equifax data breach collected 145.5 million users’ data. The breach was caused by a software flaw that allowed the hackers to take over the company’s website.
Lenders have access to extremely sensitive data such as bank account numbers, social security numbers, and other personal identification information. Losing control of that data can compromise the entire financial history of an individual or a business. Blockchain eliminates the risk by storing information on a decentralized ledger. So a massive data hack would never be possible because it will be practically impossible for the hackers to have access to each and every part of the distributed record.
A distributed ledger also provides transparency and allows that all transactions are recorded are on the blockchain in an immutable manner. Thus, backdating of contracts is not possible under any circumstance (Re: Lending Club backdating loans scandal). Corporate governance improves across the board, and investors and regulators can breathe easy knowing that the data they are seeing is the absolute truth.
Digital loans can be tokenized via blockchain and be constructed as a tradeable security. This, in effect, allows securitization for loans; so you don’t need to wait till you are a billion dollar fintech lender. Othera, a blockchain lending platform, is doing just that. It creates an online marketplace where lenders can tokenize their cashflow by putting the loan on the blockchain and selling it to investors.
Apart from this, blockchain technology is more user-friendly as it is open to the public with no authentication or permission issues. It is scalable and cost efficient for businesses to incorporate into their existing systems and allows for all stakeholders to easily extract relevant information about their transactions without risking the entire system’s database.
Digital identity verification
Identity theft is one of the biggest reasons for online lending fraud. That is exacerbated by the fact that the lender and the borrower usually never meet in real life. The old traditional way was to go through the lengthy and costly process of physical verification. But in the age of blockchain, by merging identity verification with decentralized blockchain principles, a tamper proof digital-id can be used as the digital signature for recording and validating all transactions.
How Blockchains Are Revolutionizing Lending
Alternate lending has seen many iterations and pivots since inception. From being a pure peer-to-peer platform, the sector has metamorphosed to one dominated by balance sheet lenders and institutional investors. Now, the era of Alt Lending 2.0 is emerging, which is going to be dominated by players who have co-opted blockchain as an integral part of their business processes.
Here is a brief description of some companies that are doing innovative work in the field.
The ERP giant is experimenting with blockchain on an enterprise level. One of its applications is focused on KYC. The distributed ledger solution is to store a customer’s ID and link it to their personal documents, which are not stored on the blockchain. Once the transaction is cleared, the link is established and the documents are accessed to prove identity and the onboarding process continues. In this, SAP provides a solution to KYC issues, with running proof of identity. Thus, there is a single source of truth for all parties.
WishFinance is a Singapore- and Honk Kong-focused lender to merchants and small businesses. It is keeping its entire loan portfolio on a public blockchain to push transparency for investors. The investors can evaluate the performance of a loan at anytime (the data is anonymized so no identifiable borrower information is shared).
SALT is reversing the model by allowing crytpocurrency holders to cash out without actually selling their crypto assets. It allows loans for Bitcoin. The borrower can redeem his crypto assets once the loan is paid.
Blockchain has the power to allow alternative lending companies to scale effortlessly and solve fraud and KYC issues haunting the industry. Lenders who are able to get their blockchain game right should see renewed investor interest and benefit from higher unit economics.
News Comments Today’s main news: OnDeck files first ABS in two years. Funding Circle opens second Denver office. LendingClub settles with Massachusetts regulator. OFF3R founder to launch personal investment assistant. China Rapid Finance reports unaudited Q4, full year results. Today’s main analysis: Strengthen your fraud prevention strategy. (A MUST-READ REPORT FROM LexisNexis) Today’s thought-provoking articles: True lender litigation is […]
OnDeck rolling out new ABS. AT: This doesn’t signal that OnDeck is out of the water yet, but it is a good sign that they are well on their way to the beach.
Funding Circle opens second office in Denver. AT: Funding Circle made big news in 2013 when it entered the U.S. market. Its growth in the market has been competitive, so this launch of a new office in Denver is confirmation of its presence as a positive sign for the U.S. lending market.
True lender litigation is on the rise. AT: This is an excellent read. JD Supra looks at several recent true lender lawsuits and explains how they impact the future of alt lender and bank relationships.
Strengthen your fraud prevention strategy. AT: A strong focus on e-commerce, but there is a lot of relevance here for the online lending segment, and this must-read report addresses concerns there, as well.
The lender filed documents with the Securities and Exchange Commission for the upcoming deal on Tuesday. Deutsche Bank, Credit Suisse and SunTrust are leading the deal, according to the deal documents.
Funding Circle today announced it is expanding its U.S. operations with a second office in Denver, Colorado. With the move Funding Circle will look to hire around 290 new employees in the Denver area over the next two years to support the company’s growth.
LendingClub has settled with the Massachusetts banking regulator to the tune of $2 million over claims that the company made unlicensed loans in the state.
The state division of banks said that the San Francisco-based LendingClub made over 46,000 loans to Massachusetts consumers without a license since 2011, when it surrendered its small loan company license as a condition of a consent order. The division also said that it found additional unlicensed lending activity at Springstone Financial, a wholly owned subsidiary of LendingClub that has its main office in Westborough, Mass.
Over the last two years the financial industry has seen an uptick in litigation and enforcement actions aimed at banks and their non-bank lending partners. These actions have primarily challenged the validity of the bank partnership model that is used by many non-bank lenders to generate consumer and small dollar business loans.
Bank and Non-Bank Lender Partnerships
Although the structure of a bank and their non-bank lending partners can take many forms, the typical relationship involves the non-bank lender identifying loan opportunities for the bank, which then originates the loan and either immediately assigns the loan to their non-bank partner or another third-party. By partnering with banks, non-bank lenders avoid certain regulatory and licensing requirements in states where their bank partners operate. In return, banks are able to utilize their relationships with their non-bank lending partners to generate leads for additional loans.
In January 2017, the Colorado’s Uniform Consumer Credit Code (“UCCC”) Administrator, Julie Meade, filed two substantially similar complaints in Colorado state court against Marlette Funding, LLC, and Avant of Colorado, LLC. The complaints alleged violations of the UCCC based on the theory that Marlette and Avant were the “true lender,” not their bank partners, in a series of loans made to Colorado consumers, which loans contained interest rates that exceeded Colorado’s usury laws.
Broad Reaching Implications
The CashCall, Madden, and other related actions threaten the traditional bank partnership model that the financial industry relies on to originate, buy, sell, and transfer loans.
Legislative Fix Coming?
There is currently at least one bill pending in the House and Senate that, if passed, would address both the “true lender” issue and the consequences of the Madden decision.
The cost of fraud is sizeable for retail, eCommerce, financial services and lending organizations. Every $1 of fraud costs organizations in these industries between $2.48 and $2.82 – that means that fraud costs them more than roughly 2 ½ times the actual loss itself. Fraud cost as a percent of revenues ranges between 1.58% and 2.39%.
The eCommerce, financial services and credit (rather than mortgage) lending sectors are getting hit somewhat harder.
The digital space, either as a transaction channel or type of good being sold, is a high risk for even more negative fraud impact. Regardless of industry segment, the percent of average monthly fraud attempts is higher for these types of organizations. For those using the online channel, this is the result of more fraudster focus on the anonymous purchasing environment, particularly leveraging the nocard-present opportunities compared to EMV chip barriers at physical points of sale.
Yet, digital channel / digital goods selling organizations are not fully leveraging the value of risk mitigation solutions. Identity verification remains a challenge and common type of fraud; there is only moderate use of advanced identity verification solutions among these organizations.
These issues will only increase as more firms adopt the mobile channel. Larger merchants / firms tend to be the pioneers of the mobile channel.
Findings show that retailers, eCommerce merchants and financial services and lending firms which layer solutions by identity and fraud transaction solutions
Oscar Health, a U.S.-based insurtech, announced last week it has raised $165 million through its latest investment round led by Brian Singerman and Founders Fund. Founded in 2013, the company stated it is focused on utilizing technology, design, and data to humanize healthcare.
The peer to peer lending term is kind of a loose term nowadays. Like Michael said, a lot of the bigger banks have started to copy this business model, so it’s not exactly peers loaning to peers anymore. But, at its heart, Prosper was actually the first mover on this. A lot of people think it was Lending Club but Prosper actually got there a little bit earlier. But, Lending Club was definitely the big one that got the banking industry on its toes in terms of peer to peer lending.
Marcus by Goldman Sachs is one of the newest ones. Goldman is getting into consumer banking a little bit. On the business side, you have companies like Funding Circle, which is a really interesting concept, because business lending is a big pain in the neck, especially in certain industries.
Lending, much like dating, has been brought online in the past decade with the aim of streamlining the process and dramatically reducing the time spent for both parties. But as the backend systems involved become more complicated to include more data and decisioning points, how do lenders continue to create a simplified customer experience that will bring good customers back for that “second date”?
So who is GreenSky exactly and what do they do? We wrote about the company earlier this year when we learned of their $200 million funding round from PIMCO which made them the most valuable company in the online lending space. The company has a unique model where they partner with merchants and contractors to offer financing at the point of sale. They view themselves as more of a tech company since they do not actually lend any money. This capital light business model has likely led to much of the success they have seen. Instead of lending their own money GreenSky has relationships with about 15 banks. On the tech side, the process is paperless and all done through a mobile device.
For South Dakota consumers, payday loans used to be available at storefronts, but since late 2016, this access and annual interest rates have been cut.
Although South Dakota limited payday lending, it didn’t outlaw it. And some borrowers are hitting online lending agencies found through Google searches under “payday loans”—a familiar option for South Dakota consumers, according to KELO. This alternative carries risks such as a lack of oversight and inconsistent regulation; however, this is a national issue with these lenders.
News that robo-adviser Wealthfront’s valuation dropped was read by many in the financial advice industry as the writing on the wall for direct-to-consumer digital advice startups.
Scott Smith, the director of advice relationships at research firm Cerulli Associates, said the stories surrounding Wealthfront are proof that the market is favoring a hybrid advice approach. While the number of people who want a purely digital advice platform could grow over time, the majority of assets are still held by people over the age of 40 who want human assistance with their financial decisions.
As for Betterment, the company says it isn’t experiencing any headwinds at all.
Real-time payments have landed in the U.S., but banks are still figuring out how to sell them to corporate clients. BNY Mellon, U.S. Bank, Citi, JPMorgan, PNC and SunTrust are the only banks using the Clearing House’s new real-time payments system.
One challenge is simply the legacy infrastructure on which most financial services companies today are built. Companies that provide ERP systems like SAP or Oracle have built their systems in a batch processing world and need to also become real-time.
In the age of PayPal, Venmo and Square Cash, it’s easy to forget that most transactions that take place day-to-day aren’t happening in real time. They feel like they are, but they really just move money from one PayPal user’s balance to another. Moving that balance from PayPal’s banking partner to the customer’s own bank account is still a multiday process.
U.S. banks are not that far away from ubiquitous real-time payments, according to Ward, who said he thinks 90 percent of banks will have implemented real-time payments by the middle of 2019. PNC hasn’t met too many challenges itself trying to sell RTP, Ward said, but clients are still figuring out the best way to take advantage of it and whether they prioritize the needs of customers or suppliers.
MetaBank; a wholly-owned subsidiary of Meta Financial Group, Inc. (NASDAQ: CASH) (“Meta”) today announced a new, three-year agreement with Health Credit Services (“HCS”), a technology driven, patient financing company. MetaBank will approve and originate loans for elective procedures for HCS provider offices throughout the country. HCS will work with its provider partners to market the loans, as well as provide servicing for them. Over the course of this relationship, MetaBank expects to originate at least several hundred million dollars in personal loans.
Amber Baldet, who oversaw development of JPMorgan’s permissioned blockchain platform, Quorum, is leaving the financial institution, according to an internal memo sent Monday by the bank’s head of blockchain initiatives, Umar Farooq.
The story of robo-advisers is an old one, or so thinks Lex Deak, serial entrepreneur and creator of a new breed of online wealth management tool. Deak, who was the brains behind the launch of peer-to-peer lending aggregator Off3r, is rolling out a new online service that he claims will bring web-based investment to the masses and “battle the bias and bullshit that has dogged the investment sector for decades”. The new service, called Personal Investment Assistant — or Your Pia — uses artificial intelligence to help investors sift through a range of robo-advisers, wealth management platforms and IFA networks.
Big names on the board
Todd Ruppert, the former president and chief executive of T Rowe Price — who is no stranger to backing fintech start-ups — is taking a seat on the Pia board. He will be joined by Daniel Sauva, head of creative and buzz at money transfer service TransferWise, and Nigel Webber, who was global chief investment officer at HSBC Private Banking. Gayle Schumacher, a Coutts executive, is taking a seat, too.
A new Innovative Finance Isa (IF Isa) has launched offering a whopping 7.28% annual interest rate. The easyMoney ‘Balanced’ IF Isa allows you to invest in peer-to-peer lending – where your money is lent to individuals or small businesses – within an Isa wrapper, so your returns are tax-free.
The target rate of 7.28% is a guide to what return you can expect from investing in multiple property-backed loans, all of which have a maximum 75% loan to value.
The firm offers two different IF Isas: its ‘Conservative’ IF Isa, has a 4.05% targeted annual return with a minimum investment of £1,000. It is “aimed at investors who are looking for something more than the paltry rates offered by cash ISAs”, says Mr Candole.
China Rapid Finance Limited (“China Rapid Finance” or the “Company”) (NYSE:XRF), operator of one of China’s largest consumer lending marketplaces, today reported its unaudited financial results for the fourth quarter and full year ended December 31, 2017.
Fourth Quarter 2017 Highlights:
Positive operating cash flow of $15.8 million
Total gross billings up 186% year-over-year
Facilitated 6.2 million loans with total loan volume of $1.03 billion
Added 627 thousand new borrowers, up 17% from the end of Q3 2017
Added approximately 10 thousand new investors to reach over 23 thousand investors
GAAP net loss of $3.9 million
Non-GAAP adjusted profit before income tax expense of $1.1 million
Full Year 2017 Highlights:
Year-end cash balance of $94.9 million, up from $74 million immediately after the IPO
Total gross billings up 102%
Added 2.9 million new borrowers, up 202% from the end of 2016
Facilitated over 23 million loans with total loan volume of $3.3 billion
China’s marketplace lending is bracing for regulation around “record filing” systems that kicks into effect this month (April 2018). However, said new regulations may not be addressing altogether the problem of runaway credit that is growing on the back of cash loans and microlending market.
The current most prominent methods of financial fraud are organized fraud, regional fraud, and targeted-occupation fraud. Various criminal and fraudulent organizations, including organizations developing illegal software, hacking databases for sale, and batch registration, have been working together to increase profits. However, their golden times are over now.
An insider once commented, “Certain P2P platforms only have a user retention rate of 20% following promotional events due to malicious users while the remaining 80% became inactive. Platforms spend a lot of money on marketing which has directly led to continually rising costs in customer acquisition.”
Hexindai’s risk control technology has laid a solid foundation for anti-fraud progress
Introducing new technologies to enhance anti-fraud capabilities
Small business lender OnDeck Group is hosting an event centred on SMEs and the changing lending landscape in Australia.
Taking place on 17 April, CEO Noah Breslow, will host a select group of brokers, aggregators and finance partners, with special guest Stephen Koukoulas, Managing Director of Market Economics, and Economic Advisor to illion (formerly Dun & Bradstreet).
OnDeck has now loaned over $8 billion to 80,000 small businesses across the United States, Canada and Australia, making it one of the largest online SME lenders globally.
Borrowing against cryptocurrencies is becoming a big new trend in the industry. A number of startups have sprung in crypto-backed lending space, which include SALT, CoinLoan, Ethlend, Unchained Capital and most recently Nuo Bank. Now a new startup with similar offering is eyeing the Indian market from New York. The startup, called BlockFi, offers cryptocurrency backed loans to individuals and companies both in 35 states of USA as of now. However, it’s planning to expand internationally very soon, and in that expansion it sees India as a major opportunity. This was revealed by none other than company’s CEO Zac Prince in a recent interview to Bitcoin Magazine.
Namaste Credit, a digital marketplace and technology platform for SME loans, has raised $3.8 million in a Series A investment round from Nexus Venture Partners.
The company intends to use the corpus raised to grow its geographic footprint, enhance its technology and data analytics platform, and further scale its business. The company also plans to significantly increase its channel partner program across India and further expand its technology licensing partnerships with lenders globally.
Owned by Delhi-based Opendoors Fintech Pvt Ltd, Namaste Credit is a digital platform which serves as a marketplace for borrowers and lenders. It focuses exclusively on small and medium enterprise (SME) customers.
“SME credit is seriously constrained due to lack of reach and relevant data to assess credit-worthiness of borrowers. Namaste Credit’s technology, combined with its channel partners and lender network, is already making a significant impact on facilitating credit to SMEs in a win-win manner for all,” said Anup Gupta, managing director at Nexus Venture Partners, in a statement.
Last month, state-owned banks was not up for President Joko Widodo’s (Jokowi) challenge to provide students with the option of student loans. However, companies of Fintech (technology-based financial services providers) responded positively to the president’s challenge.
Danacita and Koinworks are Fintech peer-to-peer lending companies that focus on funding the education sector. Meanwhile, Danadidik is an academic funds provider that is on crowdfunding as its main financial backing.
The three platforms also provide a long-term loan for university students with a tenor from four to six years. Each of these companies applies varying methods of repayments from 9 percent- 20 percent low installments up to profit sharing a student’s wage once they have found jobs.
News Comments Today’s main news: Prosper changes pricing. Revolut launches disposable virtual cards. OakNorth reports annual profit. Lufax delays IPO. eToro raises $100M for blockchain development. Today’s main analysis: Isas that pay up to 16%. Today’s thought-provoking articles: Is personal service getting lost in digital? What makes big data BIG? How quantum computing can change financial services. Can the blockchain prevent bank […]
Is personal service getting lost in the digital mindset? AT: “This is worth thinking about. While technology allows alternative lenders to do what they do affordably, efficiently, and at scale, it’s the personal touch that gives companies in this space an edge over big financial institutions.”
Earlier this week in anticipation of the Fed Rate hike, we discussed Prosper’s approach to portfolio pricing in a rising rate environment. Our goal with rate-setting is to deliver value for both sides of the Prosper platform by providing a fair price for borrowers and a reasonable return for investors.
In order to deliver on this objective, the borrower rates offered in our marketplace must react to rate changes in the economy at large. Today, the Federal Reserve announced a 25 basis point (bps) increase in the Fed Funds rate. In light of this development, the rates offered to borrowers through the Prosper platform are being modified.
Pricing Change Impact Simulation
The table below summarizes the simulated impact of the rate increase on the portfolio originated through the Prosper platform in March month-to-date (MTD) 2018. Overall borrower rates on the platform are increasing by 26 bps.
Profitability of digital-only businesses can be astounding because the model is so cost-efficient. Some just don’t want customers with “high maintenance” needs such as human customer support.
The best overall answer is to offer all options. Enable customers to interact solely in a digital way or with live support to guide through the process, answer questions and solve problems. Make it easy to use both, such as Amazon does. Online ordering is usually a breeze. But when a problem or concern arises, they have caring and competent live human beings to help.
Ways To Show That You’re Invested (Or Want To Be) In Human Caring
The paper argues that due to Big Data, “the innovation seen in systematic trading models over the past decade could accelerate” and (a closely related point) the “differences between what used to represent quantitative versus qualitative research” could disappear.
Not all Roses and Plush Toys, Though
The process by which the new data capabilities and principles get internalized by the swifter funds, those that want to be on the winning side of the arb plays, isn’t a painless one. There are “integration and cultural challenges” that have to be overcome. After all, the experts that an aspiring arbitrageur would hire come from “internet firms, gaming companies, the military” and consumer research. The world of asset management will be new to them, so everyone on the developing teams can “work effectively together.”
The explosive adoption of the digital channel is changing the nature of lending. Consumers are coming to expect the kind of convenience and speed that a digital experience can deliver, and lenders are increasingly looking to oblige. Although many of the consumer benefits of digital lending are clear, certain complications related to fraud arise when lending goes digital. This is a function of the degree of separation and anonymity in the digital lending process. Building on these factors, today’s fraudsters are relying on a diversified playbook of schemes and techniques to commit loan fraud in digital channels, including the use of synthetic identities, volumetric attacks, and technology designed to disguise their digital footprint. In this report, Javelin explores how these issues have come to unfold and the steps that lenders must take if they want to effectively resist this growing epidemic of digital lending fraud.
Key questions discussed in this report:
What effect has the use of digital channels had on the lending space?
How has fraud changed as a result of lending going digital?
What are the technology factors affecting the risk of lending fraud in digital channels?
What are the fraud risks specific to each type of loan product?
How are different segments of consumers affected by digital lending fraud?
What are the steps that FIs and other lenders can take to effectively prevent new account fraud?
A recent decision from a federal district court in Colorado, Colorado ex rel. Meade v. Avant, strikes another blow against many of the financial technology firms that are revolutionizing the way consumers and businesses access credit. Joining what is now a line of decisions, the court limited the valid-when-made doctrine, which provides that a loan that is valid when it is made does not become invalid (i.e., usurious) when it is sold or assigned to a third party.
A Colorado federal judge ruled Wednesday that the Federal Deposit Insurance Act doesn’t so completely preempt a state financial regulator’s claims against nonbank lender Marlette Funding LLC that they have to be heard in federal court.
U.S. District Judge Philip A. Brimmer remanded the case from Julie Ann Meade, the administrator of Colorado’s Uniform Consumer Credit Code, making it the second such “true lender” action to get kicked back to Denver state court this month.
In a joint annual report to Congress released Tuesday with the Federal Trade Commission about debt collection practices, the CFPB said it had initiated four enforcement actions last year, had resolved one case and has five others pending related to unlawful debt collection practices.
Acting CFPB Director Mick Mulvaney has indicated that debt collection will be a top priority for the agency. About 26% of consumers with a credit file have debt that is being collected by a third party, the CFPB said.
The CFPB recovered $577,000 in consumer relief from its enforcement actions while $78,800 was paid into the civil penalty fund, which is used to provide relief to eligible consumers who otherwise would not be compensated.
On March 14, Governor Jay Inslee of Washington signed the Washington Student Education Loan Bill of Rights. This law had been in the works since 2017 when a report, released by Attorney General Bob Ferguson in December, documented significant disparities across gender, income, age, and race in student loan borrowing and highlighted a handful of the hundreds of complaints the office received from student loan borrowers about their student loan servicers. Providing strong protections for Washington’s more than 730,000 student loan borrowers, whose debt now totals $22.9 billion, the law changes Washington’s regulatory schematic for lenders and servicers operating in the student loan marketplace in the following ways:
It creates the position of “Advocate” within the Washington Student Achievement Council to assist student education loan borrowers with student loans, akin to the position off “ombudsman” under proposed and enacted servicing bills in other states.
It requires servicers to obtain a license from the DFI.
Per this law, all student loan servicers, except those entirely exempt from the statute, are made newly subject to sundry statutory duties.
It imposes several requirements on third-parties providing student education and loan modification services.
It compels institutions of higher education to send borrower notices regarding financial aid.
It calls for the establishment, by rule, of fees sufficient to cover the costs of administering the program that it itself creates.
Lastly, the statute provides for a complete exemption for “any person doing business under, and as permitted by, any law of this state or of the United States relating to banks, savings banks, trust companies, savings and loan or building and loan associations, or credit unions.”
Upstate New York is a popular place for millennials to buy houses, according to a national survey by online lender Lending Tree. For home buyers 35 and under, Rochester ranks 16th among the nation’s 100 largest cities for home mortgage requests and offers from borrowers between Feb. 1, 2017, and Feb. 1, 2018.
LendingTree, an online lending exchange company, released a study listing the best and worst cities for a new small business, and Fresno ranked ninth for best cities to start a new small business.
Ranking at first is Sacramento.
To conduct the study, LendingTree used data from over 80,000 queries submitted by new small-business owners seeking loan offers through their small business loan marketplace to find out where businesses tend to perform the best.
The change will allow Credit.com users to get matched with personal loan offerings that can be pre-approved in real-time without leaving the site thanks to Even’s technology. Previously, users looking for personal loans on the site were referred to individual lender websites.
Roostify today announced the addition of Mark McLaughlin as the company’s Senior Vice President of Business Development. McLaughlin will be responsible for formulating the company’s overall partner strategy, creating a scalable operational model, and further developing an ecosystem of technology partners and strategic alliances.
Citigroup Inc added restrictions on firearms sales for new retail-sector clients, the Wall Street bank said on Thursday, the strongest move to date by a major U.S. lender following last month’s high school shooting in Florida.
In an emailed statement Citi said it will require those clients only sell firearms to customers who have passed a background check, restrict firearms sales for buyers under 21, and not sell so-called “bump stocks” or high-capacity magazines.
In an effort to stay one step ahead of the game at all times, digital banking app Revolut is set to launch disposable virtual cards next week to help users of its Premium service protect themselves against online card fraud.
Revolut users will be able to create disposable virtual cards for online purchases in seconds, with card details that automatically regenerate after each transaction. This will also protect users from inconveniences like chargebacks from sites on one-off purchases, as well as preventing fraudsters from tracking bank account information.
The virtual cards will work alongside existing Revolut security features, such as location-based transaction security, the familiar “freeze/unfreeze” physical card ability, as well as being able to disable swipe and contactless payments.
UK based digital bank OakNorth reported an annual profit of $149mn, becoming the first digital bank to do so; in their second year of full operations the bank has seen their loan book triple in size and deposits double in size; Rishi Khosla, OakNorth chief executive, told the Financial Times, “we build them for profit and on strong foundations so as you grow you’re scaling a real business rather than what happens to a lot of fintech where you just keep building for top-line or number of customers, but don’t necessarily have the strongest business model.”
See the table below to see what Ifisas are on the market, what industry they invest into, the minimum investment amount and what kind of returns you can expect.
Among the highest rates, FundingSecure offers up to 16% on investments from £25. However, as a peer-to-peer ‘pawnbroking platform’ borrowers are looking for urgent loans to be given within 24 hours, which are secured against their assets. Borrowers are not required to pass any credit checks. Ablrate offers variable rates up to 16%, but they’re set by the borrower and you have to decide if the return is worth the risk. Past funded loans include units for a film studio, a waste management company and a modular building company.
Where else can I find high interest rates? They may not offer 16% interest, but there are a number of current accounts that pay up to 5% – and they don’t come with the associated risks of a Ifisa.
Nationwide’s FlexDirect account offers 5% AER on balances up to £2,500 when you pay in at least £1,000 a month. This is only for the first 12 months, however.
The TSB Plus account offers 3% AER on funds up to £1,500 as long as £500 is paid in each month and you register for online and paperless banking. There’s also the opportunity to earn up to £10 cashback a month, for a limited time.
The Tesco Bank current account also offers 3% AER on balances up to £3,000. You need to pay in £750 a month and set up at least three direct debits.
From today, digital business bank Tide has been authorised by the Financial Conduct Authority (FCA) as an electronic money institution (EMI), which according to Bevis will give Tide “the option to access the same banking infrastructure as older banks”. Since the bank launched last January, 1 in 12 of all business accounts opened in the UK has been with Tide.
Now managing the accounts of over 30,000 businesses, Tide has today also launched a new vertical card and updated app design, and an integration with online accounting provider FreeAgent, which will automatically upload Tide transaction data into the software for easy expenses tracking.
Tide’s recent partnership with iwoca for business lending is also proving fruitful, with the fastest rate of service from first click to credit in the user’s account sitting at 6 minutes and 1 second.
Mark Tucker, chairman of HSBC, Britain’s largest bank, and Nigel Wilson, chief executive of Legal & General, the insurer, said that there was no room for complacency in Britain’s so-called fintech industry.
Philip Hammond, the chancellor, told an industry conference yesterday that the UK was the “global capital of fintech” and that the emerging industry contributes £7 billion to the economy.
One of China’s largest online lenders has shelved their IPO because of the regulatory crackdown on online lending; the FT reports that Lufax is waiting until the China Banking Regulatory Commission (CBRC) required online lenders to apply for a license; the current thinking is the government will approve licenses in April, though the time frame could be a bit longer; Lufax wants to ensure they get it right instead of rushing to be first.
Seventy-eight per cent of small businesses in Mainland China expect to grow in 2018 and 97.5 per cent of small business are confident that the local economy will remain the same or improve in the next 12 months. These are the best survey results for MainlandChina since 2014.
“The high rates of technology use among Mainland China’s small businesses is one of the key drivers of growth, with over 80 per cent of businesses in Mainland China earning more than 10 per cent of revenue from online sales — ranking MainlandChina at the top of the surveyed markets.
This referenced posted blog is a good question and likely the answer is ‘yes’, but also we need to wait and see how effective. Since PSD2 is a legal imperative, one key question posed by the author is whether or not end user companies (the client buying or using a particular financial services product) wishes to share actual bank or account data with the 3rd party vendors for which API-based sharing was designed to assist.
‘When it comes to new services around B2B and working capital, I believe like any good market hypotheses to test, we need to understand a basic question when it comes to corporates – will they provide third party vendors this access? I don’t know the answer to that question, but I do know it comes down to trust and value proposition. Certainly making sure vendors have the security around your bank data will be important in this age of constant hacking threats’.
Cerberus Capital Management, L.P. and its affiliates (“Cerberus”), a global leader in alternative investing, announced today that Roberto Nicastro has become a Senior Advisor to the firm. In this role, Mr. Nicastro will consult with Cerberus as it continues its focus on investment opportunities and strategic partnerships in the European financial services sector.
The raise is set to support eToro’s expansion as it heads into new markets, and continued research and development of blockchain technology and digital assets. The round brings the platform’s total capital raised to $162m, following a signficant period of growth for the business driven in part by its foray into cryptocurrency investments.
eToro added Stellar as its eighth cryptocurrency asset listed on its Crypto Copyfund in February, joining fellow cryptos Bitcoin, Bitcoin Cash, Litecoin, Ethereuem and Ripple amongst others. The trader launched its Crypto Copyfund in July 2017, which uses CFDs to enable investors to diversify across all available cryptocurrencies (weighted by market cap) with just one click.
Basically, a quantum computer doesn’t work with bits but with qubits using particles that can be in superposition (two or more quantum states added together to create another state). This is why particles can take on the value 0, or 1, or both simultaneously. The reason that this is important is that it will allow computers to process and store far more information with far less energy and far more speed than current state computers. For example, in 2016, a team of Google and Nasa scientists found a quantum computer was 100 million times faster than a conventional computer. Elsewhere, in a step towards quantum computing, researchers have guided electrons through semiconductors using incredibly short pulses of light. These extremely short, configurable pulses of light could lead to computers that operate 100,000 times faster than they do today.
This is important in banking because it could displace blockchain, ledger and digital identity developments within a decade. This is because the quantum internet would excel at sending information securely through what is known as quantum encryption. This technology enables banks and businesses to be able to send “unhackable” data over a quantum network. This is because quantum cryptography uses a mechanic called quantum key distribution (QKD), which means an encrypted message and its keys are sent separately. Tampering with such a message causes it to be automatically destroyed, with both the sender and the receiver notified of the situation.
It’s this hassle that Hnry (pronounced ‘Henry’) wants to help resolve, doing away with the need for spreadsheets, software and even costly accountants. Whether it’s income tax, GST, ACC or student loan repayments, Hnry will calculate and pay all of these for you. Same goes for your tax returns, which Hnry will complete on your behalf. It’ll also handle all your invoices, regardless of whether you work for a single client or multiple clients at the same time.
Born from a desire to change how enterprise companies and individuals interact with one another, Jrny uses AI and conversational interfaces to create more relevant, two-way channels of communication. Jrny allows businesses to handle thousands of messages instantly in an effort to build a closer relationship between company and customer.
A massive fraud that cost India’s second-largest bank at least $2 billion is highlighting concerns about vulnerabilities in institutions’ internal controls and spurring some to claim that blockchain could have prevented the crime.
In a recent incident at Punjab National Bank, a deputy branch manager and his subordinate allegedly falsified 150 letters of undertaking directing other banks to give loans to a group of jewelry companies, with PNB providing surety for those letters. Virtually all of them defaulted, causing PNB to be on the hook.
What made the fraud so difficult to detect was that, as far as its internal systems were concerned, the transactions didn’t exist. The letters of undertaking were sent using the Swift network, but none were recorded on PNB’s internal record-keeping software, which wasn’t linked to the Swift system.
That’s why some are arguing that bockchain, or distributed ledger technology, could have prevented the fraud. Because immutable records are kept on a decentralized database that multiple parties can view, it’s possible that the fraud either wouldn’t have happened or could have been detected sooner.
Naspers, the most valuable listed company in Africa, will be selling $10-billion of its shares of Chinese messaging giant Tencent to invest in fintech, classified and online food delivery businesses.
Naspers announced it will sell up to 190-million Tencent Holdings Limited shares, or 2% of Tencent’s total issued share capital. Naspers is reducing its stake in the maker of WeChat and QQ – which is worth an estimated $545-billion – from 33,2% to 31,2%.
On Tuesday, the Royal Bank of Canada (RBC) announced it has opened its very own API developer platform. According to the bank, the RBC Developers platform will allow eligible external software developers, industry “innovators,” and clients to access select RBC APIs. While sharing more details about the platform, Sumit Oberai, Senior Vice President of Digital Technology at RBC, stated: “Across other industries we’ve seen the transformational effects of APIs. By providing external developers, industry innovators, and clients with access to select RBC APIs, we have the opportunity to increase connectivity, create new tools and experience for clients, and enable open and innovative collaboration to improve the future of banking.”
There were an estimated 1 million cyber attacks targeting online lending transactions in 2016, with total losses projected to be above $10 billion. This fear has some online lenders setting policies for new account creation that are too strict. For instance, Kabbage CEO Rob Frohwein recently shared that his company was rejecting as many as […]
There were an estimated 1 million cyber attacks targeting online lending transactions in 2016, with total losses projected to be above $10 billion. This fear has some online lenders setting policies for new account creation that are too strict. For instance, Kabbage CEO Rob Frohwein recently shared that his company was rejecting as many as 3% of its daily online loan applicants but noted that that some legitimate borrowers were likely included in the lot. Kabbage is not alone in establishing fraud policies that are too conservative; it’s become the norm for many lenders. Fundamentally, they don’t have the confidence – even after doing identity data checks – that a borrower is who they say they are. But it’s possible to be smarter about fraud without alienating potential applicants – and sacrificing the lifetime value of a good relationship.
Sophisticated online lenders are adopting more advanced fraud prevention measures that keep fraud in check without being overly conservative, and declining good borrowers. Specifically, they are refining their identity verification strategies with more mature solutions that utilize quality data, sophisticated data science, secure pipelines capable of ingesting these quality data sets and machine learning models. These evolved practices help them expedite applicant onboarding and approvals while safeguarding against fraud.
When talking about identity verification maturity with customers, I find that it’s helpful to discuss it using a progressive 4-stage scale. As companies advance up the scale, the faster they are able to move applicants through the pipeline, with confidence they are minimizing fraud. Each stage builds on the previous one, allowing organizations to ensure higher accuracy as they move forward.
The stages are broken down like this:
Stage #1: Not identity proofing yet. Most if not all online lenders have progressed past this stage and take at least some steps to verify the authenticity of applicants. However, in smaller transaction markets, or niche spaces, it’s common for organizations that have yet to be hit by fraud to do no identity proofing.
Stage #2: Verifying a single identity attribute. The first step that online lenders take to protect themselves is often rather minimal, they focus on a single factor to authenticate new borrowers. Common data points to check include the age of email (to verify its been in use for a long period of time), just an address or phone number.
Stage #3: Multiple identity attribute verification. Online lenders that verify multiple attributes are not only able to authenticate applicants more confidently, but also more readily identify good borrowers. Stage #4: Holistic identity verification. This stage involves verifying multiple identity attributes aren’t just accurate but all link back to the applicant applying for the loan. In a single search it’s possible to verify a name matches a home address, matches a phone number, matches an email and so on. When searching for linkages between the person and the address, email, phone and related people, it is a significant signal of risk if these cannot be established.
The use cases for identity linkages are broad. Take, for example, synthetic identity theft. In this scenario, a criminal combines real (often stolen) and fake information to create a new identity, which is used to open fraudulent accounts and conduct fraudulent financial transactions. Because “real” details can be verified alone, it is imperative to verify all of an applicant’s attributes connect together.
Stage 4 also unlocks a powerful new set of opportunities to leverage machine learning, sophisticated data analysis and data science that aren’t possible with simpler methods of identity verification. When a whole identity is considered, a world of networks, history and patterns can begin to be tapped for increased speed and accuracy.
Identity networks are extremely valuable to online lenders because they can see signals across millions of transactions and multiple applicants for a real time understanding of identity element velocities, transactional frequencies, and linkage histories. Machine learning and sophisticated data science can be applied to analyze these transactions to learn and adapt to patterns across different industries.
For the fastest identity verification, some identity data services are distilling the result of their sophisticated verification processes into a single number or a score for easy, real-time rule building or integration into a risk model.
Find More Borrowers Faster with Holistic Identity Verification
In an age where borrowers have so many lenders to choose from, lenders need to have a seamless onboarding process or risk losing borrowers to the competition. Key to this ability is having confidence in an applicant’s identity. One of the simplest and fastest ways to do so is holistic identity verification.
When every applicant has the potential to become a return borrower, it’s worth taking a step back and to make sure you are not too risk averse. Having a mature identity verification practice enables lenders to provide faster and more loan approvals for legitimate applicants, reduce fraud and lower good borrower rejection so they can compete and thrive.
Tom Donlea leads the global marketing efforts of Whitepages Pro, the worldwide identity verification data provider for risk management in banking and online lending. With over ten years of online payments and risk experience, he previously was the founding executive director of the Merchant Risk Council.
News Comments Today’s main news: Is Amazon about to partner with JP Morgan Chase? Elevate saves customers $3B over payday loan alternatives. LendInvest hosts a roadshow. Folk2Folk lenders provide 200M GBP to UK rural businesses. China issues first personal credit rating license. Today’s main analysis: Credit card losses surge at small banks. Today’s thought-provoking articles: FT Partners’ CEO monthly […]
How Amazon could facilitate online shopping for the unbanked. AT: “Pundits have been saying for over a year now that Amazon will get into banking. The most likely course for that is through a bank like JPMorgan Chase, which can provide Amazon credibility in the banking sector without regulatory red tape. Amazon can offer banking services without being a bank.”
An interview with Peter Renton. AT: “Renton has interesting things to say about online lending, but he goes beyond alternative lending into cryptocurrency and says some interesting things about that too.”
Credit card losse surge at small banks. AT: “Small banks can’t afford losses at this time. If it continues, we could see smaller banks getting gobbled up by larger banks, and maybe even fintechs.”
More than a quarter of U.S. households have no or limited access to checking and savings accounts. Unbanked doesn’t necessarily mean unconnected, about 6 in 10 unbanked consumers have a smartphone, according to the Pew Charitable Trusts.
New prime subscriptions flattened in the third quarter of 2017, according to analysts at Morgan Stanley. Another survey by Piper Jaffray in June said that 82 percent of U.S. households with more than $112,000 in annual income are already Prime members. Its reach is the lowest among those that make less than $41,000 a year.
In November, it announced that shoppers at 7-Eleven stores nationwide could deposit as little as $15 and as much as $500 into an Amazon account through its “Amazon cash” program. Shoppers can then use that cash to shop on Amazon. Nearly one-half of the U.S. population lives within one mile of a 7-Eleven store.
If Amazon is successful in creating a banking relationship with its vast customer base of millennials, can an investment advice platform be far behind?
Stich predicts that Amazon, a company with a $700 billion market cap, will offer three levels of investment accounts to millennials and interested customers: It could offer do-it-yourself accounts and robo-advisory accounts; and for those who want a personal advisor, Amazon could create and refer customers to a state-by-state network of select investment professionals.
More than half of consumers would be open to using an Amazon-created cryptocurrency, with Amazon Prime users even keener, according to poll findings from student loan marketplace LendEDU.
The study, which polled 1,000 consumers who had purchased a product from Amazon in the past 30 days, found 51.7% would be interested in an ‘Amazon Coin’, with the number increasing to 58.27% for Prime members, and only one in five (21.9%) saying no.
Only 17% of those polled said they would trust Amazon more than a traditional bank, compared with 23% who disagreed and 38% who said levels of trust would be about the same. Nine in 10 respondents however said that overall, they trusted Amazon to have their best interests in mind, with 52.49% answering ‘yes, very much so’ and 37.56% opting for ‘somewhat.’
Elevate Credit, Inc. (Elevate), a tech-enabled provider of innovative and responsible online credit solutions for non-prime consumers, announced on Monday its customers have saved more than $3 billion to date, versus what they would have paid for payday loans. $1.3 billion was saved in 2017 alone.
This month’s report features an exclusive interview with Keith Smith, Co-founder and CEO of Payability, a platform that provides friction-free financing to sellers operating on digital marketplaces. In our conversation with Keith, he delves into the vision behind founding Payability and the unique opportunities and strategies of lending to online marketplace sellers.
deBanked: Why did you decide to rebrand LendIt as LendItFintech?
Renton: The main reason is that we have moved beyond the online lending space.
deBanked: What about online lending? The industry has gone through a lot of changes in its relatively short history. How do you expect to see the competitive landscape change in the next year or so? What about farther out?
Renton: The online lending space has gone through a lot of changes in its short history. I feel like the biggest trend we’re seeing right now is banks launching their own platforms. Take Goldman Sachs with the Marcus online lending platform, for example. More than anything else that has happened in the history of online lending that is among the most telling for the future, I think.
deBanked: What do you see as the biggest risks for online lenders today? How can they best overcome these challenges?
Renton: As an industry, we have to focus on profitability.
Missed payments on credit cards at small banks have risen sharply over the past year, a sign that their cardholders are taking on more debt than they can handle. Their charge-off rate, or the share of outstanding card balances written off as a loss after consumers failed to pay, hit 7.2% in the fourth quarter, up from 4.5% a year ago, according to Federal Reserve data.
But they’ve especially surged at smaller banks, those outside the 100 largest by assets that have less than around $10.4 billion in assets. There, the average charge-off rate is near an eight-year high, while the 3.5% loss rate at large banks remains well below the 10.6% seen in 2010.
Buried within the tZero Offering Memorandum for its ongoing initial coin offering were several interesting items of note. The first was the fact the SEC was in the process of reviewing the offering. Another interesting bit of information was the fact tZero has acquired a majority stake in VerifyInvestor.
My next guest on the Lend Academy Podcast is Gina Harman, the CEO of the U.S. Network for Accion. They are a non-profit lender with 14 regional offices around the country focused on providing funding to underserved businesses. Accion has a very consultative approach to lending so their work often involves face to face meetings with the potential borrowers. But they are also serving the entire country through online means today.
LendingPoint, the company working to revolutionize access to consumer credit, today unveiled LendingPoint Merchant Solutions to provide merchants and other service providers a fully integrated one-stop retail financing platform to convert more consumers at the point of sale.
LendingPoint Merchant Solutions combines the LoanHero merchant onboarding, program management and reporting technology with LendingPoint’s industry-leading credit underwriting, risk management, and customer service expertise.
Vanessa C. Grainger, Beverly Kristina Miller and Lilya J. McAtee, individually and on behalf of all others similarly situated, filed a complaint on Feb. 16 in the U.S. District Court for the Middle District of North Carolina against Great Plains Lending LLC, Kenneth E. Rees, Victory Part Capitol Advisors LLC, et al. over alleged violation of the Racketeer Influenced and Corrupt Organizations Act.
“The SEC typically sends a subpoena for one of two reasons: you are either a direct target of a new or ongoing investigation or you are involved somehow with an entity or individual that is under investigation,” notes William Skelley, Co-founder of William Chris, a Dubai-based consulting firm founded by David Drake and Simon Cocking.
Clayton had stated that most ICOs need to register with SEC because, like other securities that the agency regulates, they trade coins in secondary markets. However, ICO companies have shown reluctance in subjecting themselves to SEC’s oversight despite the fact that up to $8.7 billion has been raised through ICOs, based on CoinDesk data.
Orion Advisor Services, LLC (“Orion”), the premier portfolio accounting service provider for advisors, today announced the release of its Alternative Investment Platform (“AIP”), a tool that lets Orion advisors show their clients’ private assets as easily as their public holdings at no additional cost.
AIP lets financial advisors track and maintain alternative investment data for client assets held in private equity, direct investments, venture capital, hedge funds, private real estate, REITs, and more, with ease and efficiency. AIP lets advisors aggregate and update committed capital amounts, total cash distributions, return of capital, and commitment amounts for alternative investments of all types into client reports alongside publicly-traded assets to create a cohesive picture of the client’s net worth.
The cooperation between the FCA and the CFTC will cover information sharing, referrals and learning from proofs of concept, trials or innovation competitions.
Various agencies – including the CFTC, SEC and the Financial Industry Regulatory Authority (Finra) – oversee specific segments of the market, and for a US sandbox regime to be successful there would need to be substantial collaboration and coordination between all of these agencies.
Direct lending is a new category that is reshaping the asset management and investment landscape, yet most investors see the arena as a “black box.” Shinnecock Partners, a 28-year old family office boutique with significant expertise in alternative finance and fintech, offers investors insights into the category with its recently published report: High Yield for Investors in Specialty Finance: Exploring Opportunities in Factoring and Merchant Cash Advance. Written and researched by the firm’s founding partner, Alan C. Snyder and co-author Marla Harkness, the 37-page report is a virtual blueprint for investors, RIAs, advisory firms and the new generation of innovators who have started alternative lending companies to serve a vacuum left by large banks and community banks that used to serve small and mid-size business pre-recession.
The paper covers:
In-depth descriptions of both factoring and merchant cash advance (MCA) loan originators
Insider lingo, so investors are up to speed when reviewing documents
Fintech firms and units of larger companies accounted for roughly 877,000 square feet of Manhattan office leasing last year, according to JLL data reported by the Wall Street Journal. That’s almost triple the sector’s total for 2014.
Venture capital funding for fintech firms has roughly doubled from 2014 to $2.2 billion in 2017, according to PricewaterhouseCoopers.
LendInvest Limited, the specialist mortgage provider, announces that it has mandated Peel Hunt to arrange a series of meetings with fixed income investors in the UK and Channel Islands, commencing the week of 5 March 2018, to discuss a possible second issue of sterling denominated bonds.
Folk2Folk, a peer-to-peer (P2P0 lending platform for local and rural businesses, announced on Monday it has now lent £200 million, providing a valuable source of capital to hundreds of local businesses across the UK. According to the online lending, this milestone demonstrates the strong demand in the company’s Local Lending Movement as Lenders and Borrowers are attracted by Folk2Folk’s platform, providing a fair exchange that sees no difference between what Borrowers repay and Lenders receive on a monthly basis.
Folk2Folk’s lending milestone was reached thanks to a growing community of local Lenders who have placed £20,000 or above on the lender’s platform. The average lent per Lender now exceeds £65,000. Lenders receive 6.5%pa interest which is paid monthly, helping them achieve their financial goals, whether it be an additional income for retirement or funding a life event like a once in a lifetime holiday.
Lendingblock is an outstanding representative of the “picks and shovel” business of the crypto economy. The recent announcement of an ICO by this company raises an important issue: can these followers of Gold Rush traditions achieve the same success?
Lendingblock is an open exchange platform for both borrowers and lenders of crypto currencies. The platform enables owners of digital assets to earn passive, low risk interest income, while borrowers get an opportunity get assets needed to support trading, hedging and working capital needs.
A little-known pawnbroking and property-backed peer-to-peer lending platform named Collateral has gone into administration, according to reports. Its investors are in limbo, unable to access their money or even view their accounts.
Be The Lender folded in August 2014. It was a tiny peer-to-peer platform with a focus on lending to small businesses.
GraduRates was a very small peer-to-peer lender specialising in loans to post-graduate students. In 2014, with a new regulatory regime for P2P firms looming, its founder Jonathan Webb decided to close down operations.
TrustBuddy was a peer-to-peer firm specialising in short-term loans for consumers. It is perhaps the best-known example of a P2P blow-up because it was the first big platform to go belly-up.
Finally, the complete comedy that was the Ezubao blow-up. There are many, many examples of failed Chinese P2P platforms, but Ezubao takes the biscuit.
BondMason boss warns that recent FSCS fines are likely make SIPP providers extra cautious in reviewing non-standard investments.
An estimated one million people are said to have taken up a SIPP (self-investment pension plan) since the wrapper was first introduced as part of the government’s Pension Freedom Reforms in April 2015. But squeezing non-standard investments into the still relatively-new tax wrapper hasn’t been easy.
The peer-to-peer business lender is turning dissenters into directors with its latest hire, after hitting £60m in lending.
ArchOver, the p2p business lending platform, has announced it will be appointing Bill Johnston to its board as a non-executive director. Johnston previously was an outspoken critic of p2p lending and alternative finance in general, but says he has been swayed after seeing ArchOver succeed.
A FORMER Morgan Stanley banker turned beauty marketplace founder is among two appointments to the board of a new peer-to-peer lending platform aiming to become the “Goldman Sachs of P2P”.
Roxana Mohammadian-Molina, a former Morgan Stanley vice president and founder of Zeebba – which arranges at-home beauty services – has joined asset-backed property lender Blend Network as business development manager.
On February 22, the People’s Bank of China published an announcement about setting up personal credit rating agencies. According to the document, Baihang Credit Rating Co., Ltd., was granted the first personal credit rating license in China, and the qualifications of its management team (including board member, supervisors and senior management) has all received approval.
A New Ransomware Virus Could Steal All Your Alipay Balance
Recently, a ransomware virus called “unicorn 2.1” raged online. It spreads through QQ and other Instant Messengers.
Once the virus hacks the computer, it will lock all the files in the computer and requires the victim to pay ¥3 yuan by scanning with his / her Alipay. As long as the victim scans the QR code, the hacker will be able to get access to the Alipay account and steal all the balance.
Maliyya, a fintech company engaged in development of a P2P lending and borrowing platform, has just closed the first seed investment round of USD$1.3 million from Ground1 Ventures, a private investment firm based out of UK.
Targeting to become a primary P2P lending and borrowing platform for the Middle East, North African and Asian Region, Maliyya is working on to roll out its MVP in the coming months.
What if you lent money to someone who used it to finance an act of terrorism? Or to disguise the proceeds of drug dealing. How would this make you feel and what would it mean for the reputation of your growing business?
Today’s generation of FinTechs however, face huge technology and operational challenges – they interface with banks and therefore need ‘bank-grade’ solutions for KYC/AML but existing technology solutions struggle to fit with their unique needs. Increasingly, they are looking to new technology to help them comply with global KYC/AML standards, maintain banking relationships and ultimately fight financial crime.
What are the financial crime risks for lenders and FinTechs?
Lenders spend billions of dollars a year on compliance solutions trying to combat their financial crime risk, which broadly fall into two categories: anti-money laundering / terrorist financing (AML/CTF) risk and fraud.
Centralized, “off-chain” cryptocurrency exchanges, including Bitfinex and Poloniex, support margin-lending. Although limited to certain customer groups, and a limited number of assets, they generally fit the definition of money markets. The downside is that investors have to trust that the exchange won’t get hacked or abscond with assets. That’s a big risk. The recent $530 million heist from the Japanese exchange, Coincheck, isn’t likely to be the last, and many customers feel that the incremental returns aren’t worth the risk. That may change as exchanges move toward adoption by the existing financial system.
Peer to peer lending protocols, including ETHLend and Lendroid, eliminate the risk of centralization by allowing users to lend to each other directly. But to an outside observer, they hardly resemble money markets with a uniform interest rate.
Peer to peer lending protocols, including ETHLend and Lendroid, eliminate the risk of centralization by allowing users to lend to each other directly. But to an outside observer, they hardly resemble money markets with a uniform interest rate.
The company today has a presence in Europe, the Middle East, America, Asia and Africa, throughout those regions delivering innovative solutions to both start-ups and established banking and finance institutions, through direct communication or a reliable partners network.
Profile’s leading platform, Axia is an omnichannel wealth management platform covering all aspects of the investment operations that modularly, and with flexibility, embrace the whole spectrum of portfolio management, with continuous updates on client onboarding, online trading, compliance issues (such as MiFID II), instruments, custodian links and bank interfaces, financial planning, and so forth. The investment management solution also supports operations in insurance firms, private banking, custody, brokerage needs and more, with a successful track record.
Post-2008 financial crisis, the alternative lending industry flourished providing access to quick funds to individuals and SMEs left in the lurch by their banks. Behind it’s unprecedented growth was also a weak regulatory framework and a risky business plan that sometimes involved circumventing states’ usury laws. Think Finance is the latest addition to the list […]
Post-2008 financial crisis, the alternative lending industry flourished providing access to quick funds to individuals and SMEs left in the lurch by their banks. Behind it’s unprecedented growth was also a weak regulatory framework and a risky business plan that sometimes involved circumventing states’ usury laws. Think Finance is the latest addition to the list of high-flying fintech startups that got crushed due to their inability to navigate lending laws and/or placate their principal backers over their performance.
Think Finance was started in 2001 by Ken Rees in Fort Worth, Texas. It raised $60 million in venture capital from Sequoia Capital and others, and secured a $90 million credit facility from Victory Park Capital Advisors in 2010.
Think Finance is an online provider of software technology, analytics, loan servicing, and marketing services. Working with other companies, the offer and service lines of credit and installment loans over the internet throughout the United States. In 2013, with revenues of over $500 million, Think Finance was ranked #2 on the Forbes list of America’s Most Promising Companies. In 2014, the company did a strategic restructuring, resulting in the spinoff of a new independent company called Elevate, which became a five-time honoree on the Inc. 5000 List of Fastest Growing Companies (2010-2015).
Founder and CEO
Think Finance founder and former CEO Ken Rees is a serial entrepreneur, innovator, and veteran of the financial services industry. In 2001, he founded CashWorks Inc., a non-bank financial technology company in Dallas, served as CEO and president, and, in 2014, sold it to GE. After that, he founded Payday, one of the first online payday lenders. He moved on to head Elevate after the restructuring. Martin Wong, a financial industry veteran, with stints in Citigroup, Western Union, and Cigna, now leads the company.
Trouble in the “Think Finance” Paradise: Filing for Bankruptcy
Privately held Think Finance and five affiliated debtors filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Northern District of Texas, lead case number 17-33964, on October 23, 2017. The company is represented by Gregory G. Hesse of Hunton & Williams.
According to documents filed with the court, “While Think Finance had intended to leverage its successful track-record and explore opportunities for continued growth and innovation in the fast-moving fintech industry, it has been forced to seek bankruptcy protection because of a liquidity crisis caused by hedge fund Victory Park Capital Advisors, LLC (‘Victory Park’). Victory Park has caused GPL Servicing, Ltd. (‘GPLS’) – an entity that owes Think Finance and its subsidiaries tens of millions of dollars – to stop paying Think Finance for its services and Victory Park has raided GPLS’s bank accounts. The scheduled payments from GPLS that Victory Park has intercepted represent a major component of Think Finance’s near-term cash flow. Without these funds, Think Finance soon could be forced to cease or substantially curtail its operations.”
Think Finance’s Chapter 11 petition indicates total assets greater than $100 million.
The debtors intend to continue in the possession of their respective properties and the management of their respective businesses as debtors in possession pursuant to sections 1107 and 1108 of the Bankruptcy Code.
What Caused This Meltdown?
Think Finance has been accused of being a predatory lender in multiple federal lawsuits. Along with the Chicago Hedge Fund, Victory Park Capital Advisors, the company was alleged to be running a “rent-a-tribe” scheme under which they were running investors’ money through a web of shell companies to make it look like legally-exempt Native Americans are making short-term, high-interest loans to needy borrowers.
Many lenders have used Native Tribes to dodge the usury law. The law targets the practice of charging excessively high rates on loans by setting caps on the maximum amount of interest that can be levied. But trouble brewed when Victory Park cut off Think Finance’s access to funds. Pennsylvania Attorney General has accused both of being active participants in this scheme.
Both parties are contesting the case on the grounds they do not fall under the scope of a “lender.” Think Finance is portraying itself as a financial technology provider, and Victory Park stated it merely provided money through “commercial transactions” that was used to make the online loans. Bankruptcy should help clear the air on how these transactions were actually structured. But for now, the company’s future looks bleak.
The two main grounds for these accusations against Think Finance are:
Think Finance allegedly conned consumers into making payments for a debt they did not owe – Usury laws void a loan if the rate charged exceeds the interest rate allowed by the state. Think Finance allegedly duped its customers into paying for the debt even though those loan agreements were void under the state’s usury laws. Moreover, ThinkFinance was allegedly unlicensed in some states thus rendering those loans void, as well.
Think Finance allegedly collected loan payments that consumers did not owe – Think Finance, without the knowledge of its customers, allegedly transferred loan installments electronically from customer bank accounts and allegedly sent letters to customers asking for payments that they were not obligated to pay.
Therefore, the CFPB is seeking monetary relief for consumers, civil money penalties, and injunctive relief, including a prohibition on Think Finance’s collecting on void loans.
It is safe to say that Think Finance is in an extreme legal quagmire. In the bigger scheme of things, this situation throws light on the “shortcuts” used by fintech companies to grow their lending books. Think Finance’s bankruptcy feels like a tip of the iceberg. With regulations getting more stringent, more such cases are expected to pop up in the future.