Wednesday June 14 2017, Daily News Digest

nonprime mortgages

News Comments Today’s main news: Misys, D+H team up to launch Finastra. Fundrise intros first real estate robo-advisor. UK businesses find it harder to get a loan. Singapore Life gets insurance license. Faircent offers online lenders ‘What-If’ scenario simulations. Today’s main analysis: Does anyone remember how to make a subprime mortgage? The most up-to-date numbers for Prosper, RateSetter. Today’s thought-provoking […]

nonprime mortgages

News Comments

United States

United Kingdom

Asia

European Union

International

Australia

India

MENA

Canada

News Summary

United States

Launch of Finastra (D+H), Rated: AAA

Today Misys and D+H have joined forces to create a diversified global financial software provider, unmatched in terms of depth and breadth of solutions. Operating under the new company name Finastra (www.finastra.com), the combination will create the third largest financial services technology company in the world. The company has approximately 10,000 employees and over 9,000 customers across 130 countries, including 48 of the top 50 banks globally. This follows the acquisition of D+H by Vista Equity Partners, which already owns Misys, creating a merger of two highly complementary financial technology providers.

Finastra will be led by Nadeem Syed in the role of Chief Executive Officer. Mr. Syed was previously CEO of Misys and has over 27 years of experience leading global technology companies through transformation and growth. The company has U.S. $2.1 billion* in revenues and has offices in 42 countries around the world. It will be headquartered in London, UK, maintaining North American headquarters in Toronto, Canada.

Finastra offers the broadest set of retail banking, transaction banking, lending, and treasury and capital markets software capabilities available in the world. The company’s open architecture and approach enable financial institutions to harness the power of software ecosystems and will be delivered on premises, hosted or via the cloud. With the increased scale and geographic reach, Finastra will be able to serve customers better, regardless of their size or geographic location – from global banks, to community banks, credit unions, and corporations. Using the company’s secure and reliable solutions, customers will be empowered to accelerate growth, optimize cost, mitigate risk and continually evolve to deliver a superior customer experience, both now and in the future.

Having long pursued a progressive vision of innovation within both businesses, Finastra will strive to further unlock the potential of people and businesses by executing the product strategy of ‘Protect, Extend and Innovate’. This includes protecting our customers’ investments in all of our solutions; extending the value of our solutions by integrating new products and services; and innovating to create the best-in-class solutions. Finastra will work in partnership to help customers transform their business, and become more agile, innovative, and resilient to better meet their evolving needs.

Finastra will be privately held.

Retailpocalypse: Bank branches are closing in droves (Tearsheet), Rated: AAA

There may be no physical institution as historically revered as a bank.

Nice try. Banks these days are hardly elegant or imposing. Most have shrunk in size thanks to rising costs of real estate, and many have disappeared entirely, according to data from the Federal Deposit Insurance Corporation. Chase reduced its branch presence by 190 locations, a 3.4 percent decline, from 2012 to 2016. Wells Fargo closed 98 branches, a 1.6 percent decline in the same period. Its peers are even more aggressive. Bank of America closed 243 branches (16 percent) in that period and Citi closed 302 (28.5 percent).

Branches are consolidating locations with lower servicing volume, opening in higher growth areas and renovating existing branches and ATMs. More importantly, they’re evolving into more compact, digitally oriented spaces that incorporate new technology and help branch employees focus on improving the customer experience.

While those in the banking industry feel there will always be brick-and-mortar branches, in large part because the business of banking is grounded in trust, and in knowing the person with whom you’re working, the move to digital technologies is expected to grow exponentially.

Fundrise Revamps Service with First Ever Robo-Advisor for Real Estate (Crowdfund Insider), Rated: AAA

Fundrise, one of the leading online investment platforms for real estate, has launched the “2.0” version of their platform. Fundrise has created a Robo-Advisor focused on real estate thus providing an investing tool to match individual investor needs.

The Fundrise Robo-advisor enables individual investors to create a highly diversified real estate portfolio accessing Fundrise’s growing number of eREIT’s. The service provides an estimate based on submitted variables to extrapolate potential returns. Fundrise estimates users will save up to 40% on fees versus traditional services.

Does Anyone Remember How to Make a Subprime Mortgage? (WSJ), Rated: AAA

Brokers willing to learn the lost art of making risky mortgages are in demand again.

Mr. Boyd, a 25-year-old account executive at FundLoans in a beach town outside of San Diego, is at the cusp of efforts to bring back an army of salespeople who once powered the mortgage industry and, some say, contributed to the housing crisis.

Brokers are a key part of a mortgage chain that starts with a borrower going to a broker for a loan. The broker surveys lenders for the best loan to fit the customer. The lender then funds the borrower’s loan.

While brokers before the crisis served banks and independent lenders, today they are working largely for nonbank lenders who make up a critical part of the mortgage market.

In the first quarter, nonbank lenders accounted for about half the mortgages originated in the U.S., according to industry publication Inside Mortgage Finance.

In the first quarter, nearly a decade after the start of the housing crisis, lenders originated just $6 billion in loans to borrowers with less than stellar credit scores or who are using alternative documentation to prove income, a category now known as “nonprime,” according to Inside Mortgage Finance.

In all of 2016, they originated $22 billion in loans, according to Inside Mortgage Finance. Back in 2005, at the peak for such loans, lenders made about $1 trillion of these mortgages.

Meanwhile, the volume of loans produced by mortgage brokers dropped to $37 billion in this year’s first quarter, down about 34% from the last three months of 2016. Loans from brokers peaked at around $1.1 trillion in 2003.

‘Fintech’ startup SoFi moving into traditional banking (Seattle Times), Rated: A

NEW YORK (AP) — Online lender and financial startup SoFi has taken the first step toward competing with the nation’s biggest banks on their home turf: the checking account.

The company, however, will have back-office operations in both Delaware and Salt Lake City, Utah.

In its application to the Federal Deposit Insurance Corporation, SoFi plans to fund its new bank subsidiary with $166 million in capital.

Student Loans Are Holding Back Entrepreneurs. SoFi Is Changing That (Inc.), Rated: A

All your life, you’re told that an education will set you up to fulfill the American dream. But once you graduate, you’re faced with onerous payments that seem to hardly dent the principal. You need a steady job, stat. It’s terrifying to forgo a salary to start something new, let alone invest your assets, when you’re obligated to make monthly payments that can reach thousands of dollars.

One startup is helping its users get ahead of their debt and start the new ventures that our economy needs to thrive. SoFi (short for Social Finance) is largely known as the startup that will refinance your student loans, though it aspires to encompass its members’ entire financial lives.

Nevertheless, student loans are SoFi’s bread and butter, a reflection of the generation of Millennials saddled with insurmountable-feeling debt. That’s why, in addition to its unemployment support and career coaching, SoFi has an entrepreneurship program. The benefits include six months of loan deferment, mentorship resources such as connections to investors, and networking with other entrepreneur members.

Of course, SoFi can’t single-handedly revive American entrepreneurship, not least because the cohorts of accepted entrepreneurs are limited, and the types of businesses that SoFi favors skew toward scalable tech startups rather than conventional small businesses. But student loan relief has a definite impact on the participating SoFi members’ ability to launch companies.

Fundrise Offering Circular (Disclosure Quest), Rated: A

We are offering up to 5,000,000 shares of our Class B Common Stock to the public at $5.00 per share. This offering commenced on February 1, 2017 and as of May 30, 2017, we had settled approximately 2,884,129 shares of our Class B Common Stock of the 3,000,000 shares that we had previously qualified for sale. We are including in the offering an additional 2,000,000 shares of our Class B Common Stock to be sold pursuant to this offering circular.

Disruptor Alert: These 2 Companies Are Changing Banking (The Motley Fool), Rated: A

Square (NYSE:SQ) has disrupted the mobile payment market, and could still be in its early innings of growth. Over the past year, Square’s stock has more than doubled, thanks to its impressive and better-than-expected growth and optimistic forecast.

Over the past year alone, Square’s payment volume increased by 33% to over $13.6 billion, and the company is on the verge of becoming profitable. Plus, Square’s services and subscription revenue more than doubled year-over-year, and has tremendous long-term growth potential.

P2P lenders aren’t the only players in the unsecured lending space anymore — some of the biggest names in the industry are getting involved, which could certainly shake things up in the years to come.

One in particular I have my eye on is Goldman Sachs (NYSE:GS).

Goldman first announced its intention to get into the consumer lending business in 2015, and after a couple of years of development, the company recently launched Marcus (named for Marcus Goldman, one of the bank’s founders), its new lending platform that offers personal loans of up to $30,000.

According to a report by TransUnion, nearly 16 million people took out an unsecured loan in 2016, the highest on record. With an average balance of $7,640 and average interest rate of 12%, this translates into a billion-dollar revenue stream if Goldman can build its market share to just 7%.

IMAGE SOURCE: LENDING CLUB INVESTOR PRESENTATION.

Cadre Raises $ 65 Million in Series C Financing, Led by Andreessen Horowitz (BusinessWire), Rated: A

Cadre, an online investment marketplace providing access and insight into institutional quality alternative assets, today announced a $65mm Series C financing round led by Andreessen Horowitz, with additional participation from Jim Breyer of Breyer Capital, Ford Foundation, General Catalyst, Goldman Sachs, Khosla Ventures, and Thrive Capital. Cadre’s existing investors include DST, Founders Fund, SL Green, and others.

Envestnet | Yodlee Unveils Personal Financial Wellness Solution Powered by Data Intelligence (PR Newswire), Rated: A

Envestnet | Yodlee (NYSE: ENV), a data aggregation and data analytics platform powering dynamic, cloud-based innovation for digital financial services, today announced the launch of its Personal Financial Wellness Solution at the Digital Banking Summit. The Envestnet | Yodlee Personal Financial Wellness Solution is a suite of applications and APIs that leverages enriched data and artificial intelligence to move beyond organizing historical financial data, helping financial institutions and fintech developers provide actionable, financial guidance to their customers across a spectrum of devices, user interfaces and platforms.

The Envestnet | Yodlee Personal Financial Wellness Solution enables financial institutions and fintech developers to provide actionable tools to help consumers identify their projected OK to Spend balance and easily Save for a Goal. By applying Envestnet | Yodlee’s advanced data intelligence to its enriched transaction data of over 15,000 data sources, financial service providers can derive actionable information from consumers’ financial data in order to measure, guide and improve consumers’ financial health.

OK to Spend

Core to the Personal Financial Wellness Solution is OK to Spend, which synergizes predictive analytics and user feedback to deliver smart financial forecasting. OK to Spend can be consumed as a financial application or a fully RESTful API framework that enables financial service providers to create forward-looking forecasts that organize and predict recurring income and financial obligations along with personalized notifications for financial events and projected balances. OK to Spend analytics is run across the consumers’ primary spending accounts (cash and credit card) regardless of which financial institution they primarily bank with, in order to provide a holistic view of their finances.

Patent-protected machine learning and data analytics enable the OK to Spend algorithms to identify sources of recurring income and accurately predicts future income, accounting for anomalies. Similarly, OK to Spend identifies recurring and forecasted financial obligations, while accounting for fluctuations determined from historic data.

Save for a Goal

The Save for a Goal application allows consumers to easily set and track savings goals. The application facilitates money movement across different accounts at a specific time frequency and allows customers to better track their goals by allowing consumers to allocate multiple goals to a single account, or spread a single goal across multiple cash and investment accounts. Save for a Goal provides visual data and notifications such as progress bars, charts, graphs and alerts, engaging customers with the option to flex and prioritize between goals.

The First In-Depth Report of the Single Family Real Estate Investor – the Iceberg Report (Newswire), Rated: A

The role of the individual and institutional single-family residential investor is highly undervalued and tremendously under-appreciated. About 10 million individuals, businesses and institutions provide secure housing and jobs for millions of average Americans. 67 million souls live in single-family rentals, a million more properties are added each year employing millions of individuals, to buy, renovate, lease and maintain as safe housing for tenants in affordable to luxury markets.  Single-family rentals have been discovered as a low-risk passive income revenue source and a growth asset in a balanced portfolio or personal retirement plan.

Using Harris Poll, single-family real estate investors were surveyed nationwide to understand why, where, what and how they invest and manage these properties to provide stable housing and realistic returns on their personal and company investments.

The report touches several other critical components that shape this market. Key among these are how the single-family real estate investor effects the economy, how investors view their properties (as added rental income or as an intentional business goal), investor decision points, and the investor as a customer,” says Steve Murray, Founder & CEO Real Trends.

To download your free copy of the Iceberg Report Executive summary, please go to

Want to Bring More Services to Your Clients? There’s A FinTech for That (CPA Practice Advisor), Rated: A

These days, there are few “typical” CPA firms left. As they seek to diversify, differentiate and grow by offering their clients value added services, firms are engaging in a much wider range of activities.

With the rise of a new generation of B2B financial technology companies, or Fintechs, the opportunities for CPA firms to offer new services have never been better.

Fintechs are infiltrating every aspect of B2B financial services, and venture investment continues to pour in. Where people used to look to QuickBooks, Oracle and SAP, now there are cloud-based accounting and ERP options like Xero and Freshbooks and NetSuite and Workday. But you probably know about those.

What you might not know is that Fintechs are moving into e-invoicing, expense reporting, data sharing and protection, compliance, tax management and fraud control. They’re executing specific parts of the banking value chain better, cheaper and faster, including lending, trade finance, and payments. Some are even considering becoming banks themselves.

Fintech solutions solve the whole thing– all types of payments and all the work that goes along with the payments. Companies can make 80 percent or more of their payments electronically, and that saves a lot of resources, especially if you’re a BPO writing hundreds of thousands of checks on behalf of your clients. You could be helping them get a lot more card rebates instead.

But what visibility really does is open up more opportunities for CPA or audit or BPO firms down the road. If you’re a BPO, visibility into payments could potentially help you work better with vendors.

The more you can help clients automate, the more nimble they are and the more nimble you are.

Goldman Sachs Bank Aggressively Going After Deposits (Lend Academy), Rated: A

So, I did a bit of research on what Goldman Sachs Bank is offering compared to others in the market. I looked at Bankrate and Nerdwallet to see who were the top offerings for savings accounts and CDs of various duration. What was interesting to me is that Goldman Sachs was at or near the top in every category.

For savings accounts there were a couple of small regional or local banks that had slightly higher rates but no major national banks were higher. If you look at 3-year CDs with a minimum investment of $500 (the Goldman Sachs minimum) I could not find an offering anywhere in the country that came close to matching Goldman’s 1.90% rate. In fact, the second highest rate available anywhere for a $500 3-year CD was 1.65% from Barclays.

Allstate, Marketplace Lending Association and others fly in (Politico), Rated: A

All sorts of interest groups are flying in this week to nab some time with lawmakers before the July 4 recess.

The Marketplace Lending Association, a trade group that represents digital financial and lending startups, is in town this week for its first-ever fly-in, meeting with lawmakers and regulators. “The goal is to bring Washington up to speed on the growth of the sector, as well as the emerging partnerships between the fintech member firms and banks,” according to the group. Its member companies include Lending Club, Prosper, Funding Circle, Avant, Marlette Funding and Affirm.

FINRA Establishes Innovation Outreach Initiative For FinTech (ETH News), Rated: A

On June 13, 2017, The Financial Industry Regulatory Authority (FINRA) declared the establishment of the Innovation Outreach Initiative, in order to properly assess FinTech‘s industry impact.

FINRA’s Innovation Outreach Initiative comes after the launch of its FinTech site that’s dedicated to emergent topics in the field, and literature on blockchain technology and digital investing.

The initiative will consist of program elements, such as enhancing FINRA’s processes, timely publication of regulatory technology applications, regional outreach roundtable discussions (comprised of FINRA members and nonmembers), and the creation of a FinTech Industry Committee. The committee will help to assist with ongoing discussions about how FINRA’s programs and rules will intersect with FinTech innovations.

Online Lending Policy Institute Names Board of Governors (OLPI Email), Rated: B

The Online Lending Policy Institute (OLPI), a voice for policy analysis, in-depth research, and education for the online lending industry, today announced its Board of Governors, a group of industry experts ranging from academics to lawyers to executives from twelve leading organizations. This newly elected group joins founding members of OLPI: Cross River Bank, Boston University’s Center for Finance, Law & Policy, and RocketLoans.

The Board of Governors are:

  • Frank Borchert, General Counsel, Marlette Funding/ Best Egg
  • Colin Darke, General Counsel/Chief Compliance Officer, RocketLoans
  • Dr. Michael Dooley, Chief Economist, SoFi; professor of economics UC Santa Cruz
  • Marc Franson, Managing Partner, Chapman and Cutler LLP
  • Michael Freedman, General Counsel, BorrowersFirst, Inc.
  • Gilles Gade, CEO, Cross River Bank
  • Adam Goller, Chief Credit Officer, Cross River Bank
  • Cornelius Hurley, Director, OLPI; professor Boston University
  • John Kromer, Partner, Buckley Sandler LLP
  • Robert Linderman, General Counsel, Freedom Financial Network, LLC
  • Tim Li, CEO, Kuber Inc.; professor Fintech School
  • Marshall Lux, Senior Fellow, Harvard Kennedy School
  • Marty Mitchell, Managing Director, ProBank Austin (formerly Professional Bank Services)

DiversyFund Announces New Luxury Investment With Roman James Design Build (Digital Journal), Rated: B

DiversyFund, Inc., a fast-growing full-service online real estate investment platform, announced the next ground-breaking real estate investment project that their partnership with Roman James Design Build will undertake. DiversyFund and Roman James will be building a new ultra-luxury in Hollywood Hills, one of the most exclusive neighborhoods in Los Angeles.

This investment opportunity is located at the end of Granito Drive in the prestigious Hollywood Hills community of Los Angeles, California, home to Hollywood celebrities, professional athletes and Fortune 500 CEOs.

Congressional Testimony on Fintech Innovation: “Today We Are Following Not Leading” (Crowdfund Insider), Rated: B

This past week the House Subcommittee on Digital Commerce and Consumer Protection, part of the Energy and Commerce Committee, held a hearing on Fintech innovation as part of their disruptors series.

Van Valkenburg called on Congress to “rationalize the chaos of financial regulation,” pointing to the horrifying reality there exists a byzantine environment of state and federal regulators that, well simply put, doesn’t make sense.

United Kingdom

London leads European fintech investment despite Brexit (Financial News), Rated: AAA

London-based fintech companies attracted more than three times as much capital in the first quarter as Berlin – Europe’s second largest fintech investment hub – and maintained its market share despite moves by other cities in the region to gain from the UK’s departure from the EU.

New research from data provider FinTech Global found six cities that stand out in Europe’s fintech arms race, with companies based in London, Berlin, Stockholm, Paris, Barcelona and Amsterdam raising $823m in the first three months of 2017.

Overall European investment stood at $1.2bn, with London claiming a 36% share at $421m — more than treble the $140m investment in Berlin-based companies, according to the research.

Over the previous three years, London accounted for 39% of European investment, suggesting that the impact of last year’s Brexit vote has been slight.

UK businesses looking for finance are finding it harder to get a loan (Business Matters), Rated: AAA

With the UK in the early stages of Brexit and now facing a General Election, new research conducted by RateSetter Business Finance reveals how credit conditions look to be tightening again, with over 400,000 small businesses now interested in finding an alternative to the banks for a loan.

When asked, 32 per cent of SMEs that had considered raising finance said that it was now harder than six months ago.

As banks are progressively closing their branches and cutting back on front-line staff, businesses now need to go elsewhere to benefit from face-to-face contact before borrowing money. With over a third of small businesses preferring to seek advice in person, the move to online-only offerings and the closure of physical branches is a concern.

Hive ICO – the first crypto currency invoice financing platform for SMEs (Daily Fintech), Rated: A

Hive claims it will be the first crypto currency invoice financing platform for SMEs, with its ICO opening in 4 days and closing at the end of July.

From what I can gather – and I’d say you’re best to verify this yourself – Hive tokens give holders the right to participate in the network and generate a return by funding invoices. The carrot for small business owners is the speed of execution of the financing element.

And while I was lucky enough to get a master class in person, if you haven’t yet got your head around tokens and ICO, these articles are worth a read:

Asia

OBTAINING DIRECT LIFE INSURANCE LICENSE BY SINGAPORE LIFE (Credit China Fintech Holdings Limited), Rated: AAA

This announcement is made by Credit China FinTech Holdings Limited (“Company”) on a voluntary basis.

Reference is made to the announcement of the Company dated 26 April 2017 in relation to the Investment in Singapore Life (the “Announcement”). Unless otherwise defined, the capitalised terms used herein shall have the same meaning as those defined in the Announcement.

The board of directors of the Company is pleased to announce that Singapore Life has been approved as a fully licensed direct life insurer by the Monetary Authority of Singapore.

Singapore Life will also soon offer life insurance solutions to customers through its online platform www.singlife.com and financial advisers.

European Union

French Fintech Under Macron’s Presidency One Month On (Forbes), Rated: A

On the other hand, as Grossman points out, ‘since Macron has publicly stated that innovation and disruption is key for France’s growth potential, his intention for closer integration with Europe has been broadly welcomed by the fintech industry.’ Macron seems to be pro-PSD and has invited those affected by Brexit to work in the technology sector in France, all are welcome under En Marche. The French president is also very supportive of SME growth and is interested in helping French Tech.

Macron’s initiatives so far are clearly in favour of the development of fintech in France and with billions promised for innovation, the president is returning to supporting this space, as he did with The Family in Paris, as Grossman points out.

International

What do the most up-to-date numbers in marketplace lending tell us? (AltFi), Rated: AAA

Prosper is currently lending significantly more than it is being repaid for the first time in roughly a year.

In March, the platform posted its first positive monthly net lending figure ($200k) since May of last year. April saw net lending growth to c. $15m.

 

RateSetter has posted back-to-back months of negative net lending in April and May (roughly £-700k and £-4m respectively). There are no other negative net lending months in the platform’s 6-7 year history.

Sovereign wealth funds ramp up private debt investment (AltFi), Rated: A

Gargantuan sovereign wealth portfolios are increasingly turning to private debt exposure with almost two-fifths of portfolios now actively investing in the asset class due to its potential for stable risk-adjusted returns and portfolio diversification benefit.

The report found that 39 per cent of sovereign wealth funds now invest in the asset class, an increase of five percentage points over the past 12 months. The majority of sovereign wealth funds with over $10bn in assets now allocate to the asset class, including two-thirds of those managing $250bn or more, and all of those managing $100-249bn.

Libyan Investment Authority is one such investor in private debt that allocates to the asset class as part of its private equity portfolio. The fund targets distressed debt and mezzanine funds in Europe, North America and MENA.

Mezzanine investments are the private debt fund type most appealing to sovereign wealth funds, with 70 per cent targeting the strategy over the next 12 month and direct lending is sought by 53 per cent.

Australia

Australia and Hong Kong seal fintech cooperation agreement (ZDNet), Rated: A

The Australian Securities and Investment Commission (ASIC) has signed an agreement with the Hong Kong Securities and Futures Commission (SFC) to provide mutual support to fintech businesses from Australia and Hong Kong seeking to operate in each other’s markets.

Under the agreement, ASIC and SFC will refer fintech businesses to each other for advice and support via ASIC’s Innovation Hub — aimed at helping fintech businesses navigate Australia’s regulatory framework without compromising investor and financial consumer trust — and its Hong Kong-based equivalent, SFC’s Fintech Contact Point.

India

Now online money lenders can simulate ‘What-if’ scenarios on Faircent (Techseen), Rated: AAA

India based Peer-to-Peer lending website, Faircent, has announced the launch of what it claims to be a first-of-its-kind Portfolio What-if Analysis (PWA) tool on its platform. According to the company the tool will allow lenders to simulate different loan scenarios and understand how multi-loan portfolios in peer-to-peer lending operate through a ‘What-if’ analysis.

Using the tool lenders can create a test portfolio and specify the amount they would like to invest, along with the duration, interest rates, and tenure. The Portfolio Simulator will then perform advanced algorithm-based calculations based on the input, generating projected portfolio returns by following a standardized method using the concept of Net Annualized Return (NAR).

Rupaiya Exchange Receives Award for Best Peer-to-Peer Lending Platform in India (PR Newswire), Rated: A

Rupaiya Exchange received the award for Best Peer-to-Peer Lending Platform in India in The Asian Banker Financial Peer-to-Peer Audit Awards Programme 2017. The awards ceremony was held in conjunction with the prestigious Asian Banker Future of Finance Summit 2017, the foremost annual meeting for decision makers in the financial services industry in the Asia Pacific region, held at the Asian Civilisations Museum, Singapore.

The awards evaluation criteria were based on multiple dimensions including financial performance, risk management processes, technology, innovation and strategy.

Online Peer-To-Peer Lending (BusinessWorld), Rated: A

Facilitating simple, fast, and tech-enabled banking services, the emergence of fintech is forcing banks to rethink old business models and delivery mechanisms to adopt a more technology-driven and consumer-centric approach to retail banking.

Leading this ‘uberisation’ of financial services is the online P2P (peer-to-peer) lending sector, which is driving disruption in the institutional lending space through its simplified, tech-enabled approach. What this also means is that online P2P lending will play a significant role in driving the Indian economy.

The adoption of technology means that loan approvals and disbursals can be facilitated in as little as 24 hours from the request origination, whilst digitised operations and processes allow for minimisation of overhead costs. This translates to greater benefits for all stakeholders; while borrowers pay lower interest rates and processing fees, lenders earn higher margins and returns on their investments.

MENA

MBRF, Beehive to offer start-up finance solutions (Gulf News), Rated: AAA

Dubai SME’s financial arm and peer-to-peer lending platform Beehive had signed a memorandum of understanding (MoU) to aid financing for small and medium enterprises (SMEs).

The MoU between Beehive and the Mohammad Bin Rashid Fund (MBRF) will make it easier for SME owners in Dubai to obtain loans for development and expansion at competitive rates through the Beehive Group Finance Platform.

Under the deal, MBRF would act as a guarantor for credit of up to Dh500,000 on SME financing for a period up to 36 months.

Canada

Calgary-Based POS Lender LendingArch Expands into Quebec (Crowdfund Insider), Rated: A

LendingArch, a Calgary-based online and point-of-sale lending platform, announced its expansion to Quebec. LendingArch has partnered with medical clinics and home improvement contractors in Quebec to offer POS financing options, enabling LendingArch to become a fourth in-store payment method by applying online to finance products or services for up to 36 months.

Authors:

George Popescu
Allen Taylor

Thursday April 6 2017, Daily News Digest

loan originations

News Comments Today’s main news: Renaud Laplanche’s new firm Upgrade launches as a consumer platform. US MPL securitizations total $3B in Q1 2017. RateSetter targets growth in SME lending. NewOak Asset Management agreement to purchase $2bil in loans from LendingArch. Today’s main analysis: Fundrise files Reg A+ for new investment offer. Q4 Loan origination stats per market, a must […]

loan originations

News Comments

United States

  • Renaud Laplanche’s Upgrade launches as a consumer platform. GP:” With a $60mil A round from top investors and a 70-people team, Upgrade is Renaud Laplanche’s answer to being outsted from Lending Club. A very interesting nuance: Upgrade is using Blockchain to ‘enhance data integrity by creating time-stamped, immutable transaction records.’  Also they are already lining up Jefferies for securitization and the company will retain risk on balance sheet while providing whole loans for sale. I am not sure how you can sell whole loans if you retain risk. I assume the answer is that they will not retain risk on all loans. So put apart the confusion on their whole loan sale/balance sheet retained risk / what do they do with the rest of the loan-risk, it looks very promissing. I would also be curious if they plan to use direct mail for marketing or something more efficient. Their plan does include consumer tools for credit monitoring and understanding, but I wonder if that is enough to generate loan leads. Why not look into taking the lessons from Lending Club and launching a credit card business instead ?  ”   AT: “Lending Club’s Renaud Laplanche is back. And he may be bigger and better than before. A consumer credit platform for the MPL industry would be a huge boon.”
  • MPL securitizations reach $3B in Q1 2017. GP:” The full report can be found under our reports section with all charts and information. Very useful as usual.” AT: “PeerIQ’s report is a must-read.”
  • Fundrise files Reg A+. GP:” Reg A+ as our readers already know, is a mini IPO. A way to raise capital that shouldn’t be ignored.” AT: “Fundrise continues to innovate, which is probably why they’re still in front in the RECF niche. However, their shift into eREITs and eFUNDs is very telling. Where to next?”
  • Q4 slump caps off tough 2016 for US fintech lenders. GP:” Great data and summary. A must see table.” AT: “Despite major losses, Lending Club was still an industry leader in originations. I see them turning around.”
  • Lending Club is offering hardship plans for borrowers, protecting returns for lenders. GP:”Lending Club is trying to figure out a way to reduce defaults. Humans tend to game systems so I am curious how will such a program behave over time.”  AT: “Here’s the evidence, a tiny bit of it. Lending Club continues to focus on customer needs. I like this program. Hardship plans for borrowers has the potential to make a big impact on the economy and put a little confidence in everyday people.”
  • LendingHome’s investor platform hits $100M. AT: “Congratulations. Great milestone.”
  • Amazon launches Amazon Cash. AT: “As an avid Amazon shopper, I love this idea. It makes me wonder if Amazon will ever own a bank. I think they will, a digital one.”
  • OCC Fintech Charter is key first step. GP:” An article in support of the charter. In fact, most people are in support of the charter.”
  • Chase spent $600M on fintech deals in 2016. GP:” Chase has $26mil active customers on their mobile app.  Most of the spent was on mobile and digital… I wonder what else is there that is not mobile and digital.”
  • LC CEO sketches the future. GP:” A summary of the talk at Lendit. In 2016 LC lost $146mil, out of a $800 mil in cash approx. However, the 3 new initiatives look very vagues to me.”
  • Online lenders spooked by Colorado’s tough stance on interest rates. GP:” Even Upgrade, Renaud Laplanche’s new firm, doesnt’ originate in Colorado.”
  • The fintech accelerator in Little Rock.
  • Online RECF will flip industry on its head. AT: “I would say it already has. It just needs to go the next step and create more opportunities for non-accredited investors.”
  • Arizona gives legal status to blockchain-based smart contracts. AT: “I’d like to see more states draw attention to smart contracts. I see a lot of opportunity for mass acceptance.”
  • Online Lending Network to reduce fraud.
  • Goldman Sachs is bringing AI, blockchain to Columbia B-school.

United Kingdom

  • RateSetter targets growth in SME lending. GP:” An interesting move, not many personal lenders move into SME as the businesses are completely different and there isn’t much efficiency. In fact in the US Kabbage launched Karrot , moving from SME to personal lending, and last year they had announced they are shutting Karrot down.”
  • BofE still worried about personal lending. GP:” Personal lending is such a small piece of the credit markets I fail to see it as a major threat to anything at all.”
  • Bridging P2P lending’s data gap. GP: ”  ‘lack of independent research that allows investors and advisers to benchmark P2P platforms’ . There are a few options, perhaps not well know yet. Perhaps the research companies should advertise more and build real marketing arms. “
  • UK consumer slowdown underway.
  • When VCs get two bites of the apple. GP:” Participating preferred investments have been standard in the US since the VC industry existed. And yes, investors are in the investment to make money, and they will not only take participating preferred deals, but also coupons on their money, and control the budgets, key hires, force redemptions… Anybody thought investors were non profits giving money away for free?”
  • The complete guide to using Revolut for P2P lending investors.

European Union

Australia

Canada

International

News Summary

United States

Upgrade, Inc. Launches New Consumer Credit Platform (Upgrade), Rated: AAA

Upgrade, Inc. () today announced the launch of a new consumer credit platform that combines a marketplace lending approach with tools that help consumers understand and monitor their credit.

Upgrade started operations in August 2016 and closed its Series A round of financing in March, raising $60 million in equity and convertible notes from investors including Apoletto, Credit Ease, FirstMark Capital, Noah Holdings, Ribbit Capital, Sands Capital Ventures, Silicon Valley Bank, Union Square Ventures, Uprising and Vy Capital.

All loans originated through the Upgrade platform are issued by WebBank, Member FDIC. Upgrade will acquire loans from WebBank, retain a representative portion of those loans on its balance sheets and offer whole loans for sale to institutional investors.

Jefferies is advising the company on its capital markets strategy and is expected to participate in loan purchases to help establish the company’s securitization program.

Personal loans are available through the Upgrade website starting today. Credit monitoring, alerts and education features will launch in coming weeks.

US MPL securitisations total $ 3bn in first quarter (P2P Finance News), Rated: AAA

SEVEN marketplace lending (MPL) securitisations took place in the US in the first quarter of 2017, with a total value of $3bn (£2.4bn), according to new research.

This is up from $2.4bn in the fourth quarter of 2016. Alternative lending research firm PeerIQ found that total issuance to date now stands at $18bn, equating to 80 US MPL deals since September 2013.

Read the full report: MPL securitization tracker for Q1 2017 from PeerIQ.

Fundrise Files Reg A+: “For Sale Housing eFUND”, New Real Estate Investment Offer (Crowdfund Insider), Rated: AAA

Fundrise is adding a new investment vehicle to its growing list of opportunities for smaller investors. This time the real estate marketplace has filed a Form 1-A with the SEC for a “Fundrise For-Sale Housing eFUND”.

Now Fundrise is looking to develop single family attached and detached homes, including condos in southern California.

For investors, the objective is to pay distributions from cash flow from operations as a partnership which means different taxation for investors (IE you receive a K-1)

As with their other Reg A+ filings, Fundrise is seeking a maximum amount of $50 million (the legal limit).

Q4 slump caps off tough 2016 for US fintech lenders (AltFi), Rated: AAA

S&P Global Market Intelligence, a research arm of major ratings agency S&P, has released 2016 origination numbers for 13 major online lenders. The data is headlined by a 14.5 per cent year over year fall in originations for the entire group in the fourth quarter.

Despite the difficult Q4, S&P estimates that the 13 lenders in question grew full-year originations in 2016 by 15 per cent. The student and SME focused lenders exhibited especially strong full-year origination growth, with 62.3 per cent and 43.0 per cent respectively.

Analysis from AltFi Data shows that originations in the UK’s marketplace lending sector grew 49 per cent in Q4 2016 on a year on year basis.

SoFi was the largest online lender by volume in the US during Q4 2016, with roughly $2.5bn lent. But Lending Club just about remained the largest player by yearly origination volume with a little over $8.5bn lent, besting SoFi by around $600m.

Offering Hardship Plans for Borrowers and Protecting Returns for Investors (Lending Club Email), Rated: AAA

We’re excited to announce that after a beta test, we will begin offering hardship plans to borrowers effective May 4, 2017. Hardship plans allow borrowers to temporarily make interest-only payments to accommodate an unexpected life event. As part of this change we are also making additional data fields related to these plans available for investors.

Our hardship plan program specifically targets borrowers who are more likely to return to repaying their loan. Under the plan, borrowers are allowed to temporarily make interest-only payments for a period of 3 months to accommodate an unexpected life event. After 3 months, regular payment terms and obligations resume. Only borrowers who fulfill specific characteristics (such as a demonstrated history of repayment) and who claim a hardship will be offered plans. Importantly, borrowers’ loans must be either current or between 1 and 30 days past due to qualify for a hardship plan.

Finally, we are adding 15 new data attributes of borrowers who utilize hardship plans to investor reports and the API. The fields will only apply for hardship plans offered as of May 4, 2017 and going forward. You can find more information on these new data fields here.

LendingHome, the leading mortgage marketplace lender, today announced that $100 million has now been invested on its platform for individual investors since the platform’s launch in January 2016.

Individual investors can access LendingHome’s marketplace with a minimum opening balance of $50,000 and a minimum investment of $2,500. Investors benefit from fractional notes backed by mortgages that yield 8.75 percent on average. They also receive immediate monthly cash flows and the ability to diversify across hundreds of investments.

In its first year of operation, more than 500 loans were fully funded through the investor platform. Currently all loans offered on the platform are short-term bridge loans for professional real estate investors who buy, renovate, and resell properties. The average loan duration is under one year.

Amazon launches Amazon Cash, a way to shop its site without a bank card (TechCrunch), Rated: A

Amazon this morning announced the launch of Amazon Cash, a new service that allows consumers to add cash to their Amazon.com balance by showing a barcode at a participating retailer, then having the cash applied immediately to their online Amazon account. The service will support adding any amount between $15 and $500 in a single transaction, Amazon says.

Amazon Cash will be available at brick-and-mortar retailers across the U.S., including CVS Pharmacy, Speedway, Sheetz, Kum & Go, D&W Fresh Market, Family Fare Supermarkets, and VG’s Grocery. Other stores will be added in the future.

The service is not all that different from a similar effort by PayPal, whose PayPal My Cash Card lets you add funds to your online PayPal account, using cash from your wallet. It also has a barcode-only service, powered by Green Dot.

The advantage to Amazon Cash is that, as soon as you checkout at the register, the funds are available in the customer’s Amazon account. There are also no fees – something that can’t be said of all the prepaid cards on the market.

The OCC Fintech Charter is a Key First Step, Not the Last Word (Crowdfund Insider), Rated: A

While Americans prize the innovations that can improve their lives, our regulatory framework today is structured in such a way that makes experimentation and greater competition in financial services expensive and difficult.  For instance, obtaining and maintaining licenses in 50 states is a major hurdle, and can impose outdated and arbitrary restrictions that are hardly even applicable to platforms that born on the internet.

This has important implications, because while the incumbent national institutions bypass all these state rules, those same traditional bricks and mortar players currently may not always deliver credit products that best meet the current needs of under-served urban and rural communities.

The recent charter proposal from the Office of the Comptroller of the Currency (OCC) strives to strike the balance of promoting greater innovation but doing so within the constructs of existing national bank laws and regulations.  As it has done with previous generations of innovative products, like credit cards, the OCC recognizes that the business of banking is not static, and the agency is working within its existing authority to create a single national regulatory option for financial technology firms.

Finally, promoting competition from the formation of innovative “de novo” banks is clearly a bipartisan priority. The OCC special purpose bank charter is a critical response to help advance this goal nationally and its associated benefits.

Chase Spent $ 600 Million on Fintech Deals in 2016 (Bank Innovation), Rated: A

$600 million of JP Morgan Chase’s $9.5 billion technology spend in 2016 went to fintech solutions, and given the company’s 2016 results, it seems like money well spent.

According to the company’s Annual Report 2016, released today, the bank’s spend on fintech included improving its mobile and digital services.

Chase ended the year with 26 million active customers on its mobile app.

It also reported 94 million transactions took place in 2016 on its P2P service, Chase QuickPay, representing a 30% increase year over year—and as Chase is one of the banks supporting Zelle, it expects further development in P2P during the course of 2017.

Lending Club CEO sketches the future (Banking Exchange), Rated: A

When Lending Club CEO Scott Sanborn spoke at the LendIt USA Conference in March the majority of the audience represented a key part of Lending Club’s funding base—institutional investors, including banks—as well as potential partners and competitors in the marketplace lending community.

“Roughly 60% of our loans are to people who are paying off existing credit card debt with a lower interest fixed-payment loan from us,” Sanborn said. “On average borrowers are telling us they’re saving about 25% versus their credit cards so it’s a pretty material spread there that we’re comfortable with.”

Lending Club lost $146 million in 2016.

Sanborn likened the situation to the online retail business, where he had worked earlier. The launch of eBay and Amazon in 1995 spawned a host of dotcom competitors, many of which went away. Amazon itself was expected to close doors, first in 1999 and then in 2001, he noted. Today the behemoth has $100 billion in e-commerce sales, with Walmart a distant second. Likewise, the development of the online lending business is not a linear process, said Sanborn, but more of a cycle.

Sanborn said the good news for 2016 that didn’t get a lot of press: “Lending Club remained the number one provider of personal loans in the country. We issued $8 billion in loans last year, bringing our total [outstandings] to $25 billion.”

Sanborn spent the bulk of his speech describing three initiatives he sees shaping the online lending industry—and Lending Club—going forward.

  1. Evolving the customer experience
  2. Unleashing the platform’s potential
  3. Amplifying core innovations

Online lenders spooked by Colorado’s tough stance on interest rates (American Banker), Rated: A

The ongoing battle over the interest rates that online lenders can charge has moved to Colorado, which is taking aggressive steps to enforce its 12% rate cap for consumer loans.

Inside the fintech accelerator program in Little Rock (Tearsheet), Rated: A

A recent addition to the pool of development programs for financial technology startups is the Venture Center Fintech Accelerator based in Little Rock, Arkansas, which just graduated its first class. It is backed industry giant FIS, a banking technology company that operates in over 130 countries.

The program selects 10 entrepreneurs a year, and it covers a broad range of focus areas, including core banking services, wealth management, wearables, wallets, back office, compliance and payments. For the startups, it’s an opportunity to get honest feedback from counterparts in the banking sector. This year, organizers received 295 applications.

Grant Easterbrook, co-founder of Dream Forward, a 401(k) startup and 2016 class graduate, said the program was mix of meetings and independent work organized around a series of themes relevant to growing the business.

Each week, every company had deliverables, and the work culminated in a demonstration day for investors, bankers and other stakeholders. Bauer said that while many accelerators focus on fundraising, the FIS program zeroes in on getting the products to market, which he said can be the biggest challenge for early-stage entrepreneurs.

Online real estate crowdfunding will flip industry on its head (Daily News), Rated: A

An acronym for Jumpstart Our Business Startups, this lesser-known, but very impactful law has substantially relaxed some of the most stringent securities laws dating back to the Depression era and single-handedly created a whole new investment category known as equity crowdfunding.

And while the title of the category is equity crowdfunding, in reality both equity and debt opportunities are allowed. It is now possible to take relatively small amounts of money and purchase a small stake in a Silicon Valley startup, loan money to an established small business, and — yes — participate in real estate deals.

As an early adopter I have been participating in this space since late 2013, patriating in over 30 deals. They have almost exclusively been debt and I have had several successful exits with no loss of capital this far. My net return over this time has been a very satisfactory 11%.

While we are still in the early phases, I think that real estate crowdfunding is here to stay. From a few million dollars in 2012 to over $3 billion in 2016, we have clear evidence of growing momentum in this space.

Arizona Gives Legal Status to Blockchain Based Smart Contracts (Trustnodes), Rated: A

Ethereum’s technology has just been given the seal of approval by the State of Arizona which passed a bill giving legal status to smart contracts and blockchain based signatures, considering them as any ordinary contract or signature.

In effect, the new legislation applies current contract law to blockchain based contracts, erasing any uncertainty and making it clear that any blockchain based agreement is fully enforceable in a court of law.

The law goes further to state that blockchain based data amounts to ownership, importing current property rights to the nascent field and removing any legal ambiguity as to what may amount to theft.

Things like futures, as in you pay a farmer now for his crop at a set price with delivery at a later date, things like escrow, things like blockchain based insurance, and so on, can now be set in code with the code itself applying enforceable contractual terms where it operates as intended.

Online Lending Network to reduce fraud (Bankless Times), Rated: B

ID Analytics hopes its new Online Lending Network will reduce fraud committed against participating members.

Within a year of its inception, ID Analytics believes the Online Lending Network has gained visibility into 75 per cent of the U.S. domestic marketplace lending activity.

Goldman Sachs Is Bringing Artificial Intelligence And Blockchain To Columbia B-School (Business Because), Rated: B

New York’s Columbia Business School will host a fintech conference sponsored by Goldman Sachs, Microsoft and Deloitte — the latest example of the fintech frenzy at elite business schools.

Students at the business school run Columbia FinTech Club, an organization that aims to develop education and innovation in the field of financial technology. Columbia alumni include Jon Stein, the founder of digital wealth manager Betterment, which uses software to create a portfolio and automatically rebalance it, which is valued at $700 million.

United Kingdom

RateSetter targets growth in SME lending (P2P Finance News), Rated: AAA

RATESETTER is planning to ramp up its business lending, after working behind the scenes last year to boost its small- and medium-sized enterprise (SME) technology and grow its dedicated team.

But it sees opportunities for growth within the sector, as SMEs across the country grow increasingly hungry for working capital.

Small businesses have shrugged off Brexit, with the weak pound creating a very strong case for boosting exports, Marston said. The firm found that in the South East region alone, at least 40 per cent of small companies are looking to grow in the next six months.

Bank still worried about personal lending (BBC), Rated: AAA

The recent rapid rise in consumer borrowing is still a potential threat to the stability of the UK’s financial system, says the Bank of England.

These elements of household borrowing – known as consumer credit – are dwarfed by the amount of money that has been lent to home buyers in the form of mortgages.

But the Bank fears that lenders may have become too slack in deciding to whom they should lend.

Data from the price comparison service Moneyfacts shows that some card issuers will now offer interest-free periods of as long as 43 months.

Another area of concern, the Bank said, was that some lenders had been offering larger, unsecured, personal loans than before.

Consumer credit lending is still less than 10% of all lending by UK banks to household borrowers, and is far smaller than mortgage lending which amounts to 70% of loans to households.

Bridging P2P lending’s data gap (Professional Adviser), Rated: A

A strange thing happened in April last year, when the regulator allowed financial advisers to recommend peer-to-peer (P2P) lending to their clients. What happened was – nothing. At least not to begin with.

To an extent, this reflects a certain wariness for the P2P lending sector among some advisers, which is based on a lack of familiarity with the asset class. But there is a much bigger problem – the lack of meaningful data about the sector and a dearth of tools with which to interrogate what little information is available.

In short, there has been a lack of independent research that allows investors and advisers to benchmark P2P platforms. Independently assessed default and return rates have been hard to find – as have been industry-wide figures on subjects such as the total size of the market.

This matters increasingly as the P2P scene grows ever larger. There are now more than 50 P2P platforms and, in the three years from 2014 to 2016 alone, lending grew from £1.25bn to £3.13bn, providing credit to both consumers and businesses. Currently, just over 177,000 retail investors are active in this space. By 2020, it is estimated 2.7 million people will be investing in P2P lending.

They will need independent data, analysis and insight to guide their decisions.

UK consumer slowdown underway, caution needed on rates-Bank of England’s Vlieghe (Arab News), Rated: A

Bank of England rate-setter Gertjan Vlieghe said on Wednesday a consumer slowdown was already underway in Britain and was likely to worsen, underscoring the need for caution on interest rates.

Vlieghe, who is considered one of the central bank’s most dovish policymakers, repeated his view that a premature rate hike was more dangerous than one that came too late.

The BoE is widely expected to keep interest rates at their record low throughout this year and possibly until 2019 as it steers the British economy through the uncertainty linked to the exit from the EU.

However, one rate-setter — Kristin Forbes — voted last month for a rate hike and others said they might follow suit soon if there were signs of inflation picking up by more than expected or that economy was maintaining its momentum of 2016.

When VCs get two bites of the apple (Financial Times), Rated: A

But this is finance and that means things inevitably get even more complicated. This time we’re going to look at the way venture capitalists have structured their investments in two of the UK’s rising fintech stars: Funding Circle and Transferwise.

Transferwise, a payments business, has raised just over $100m from investors including Index Ventures, Peter Thiel’s Valar Ventures, Andreessen Horowitz, and Baillie Gifford, according to Crunchbase.

Funding Circle, a lender to small businesses, has raised $370m from the likes of Index Ventures, Accel Partners, BlackRock, Baillie Gifford, and others, also according to Crunchbase.

Funding Circle, on the other hand, seems to have a more complicated setup called a “participating preferred” structure. This means the investors get their money back in a sale, ahead of anyone else, and they get a share of the cash that’s left over.

The Complete Guide to Using Revolut for P2P Lending Investors (P2P-Banking), Rated: B

The important fact is that with the own account number it is possible to use that for withdrawals from UK marketplaces as no reference is needed for the transfer. I have done this a couple of times now and it takes only a few hours for the money to arrive and get credited.

Entering the recipients bank details on a smartphone is a bit cumbersome, but it needs to be done only once, as the details are stored and can be reused for future transfers.

Note to UK investors: You cannot use the Revolut app likewise for transfering funds from on p2p lending platform in the Eurozone to another p2p lending platform in the Eurozone.

And when I did a comparison of exchange rates at the time of writing this article, I found that actually Revolut offers a much better exchange rate. This is what I got when I compared:

  • Revolut: 238 Euro gets 206.12 GBP
  • Transferwise: 238 Euro gets 204.92 GBP
  • Currencyfair: 238 Euro gets 202.91 GBP

Important tip: Never exchange money on Revolut on a weekend, as Revolut will charge a 1% fee then.

European Union

Deutsche Bank acquires stake in FinTech TrustBills (Deutsche Bank), Rated: A

Deutsche Bank AG today announced the acquisition of a 12.5 percent share interest in the receivables auction platform TrustBills. Founded in 2015, the Germany based FinTech TrustBills is an electronic True Sale marketplace for national and international trade receivables. TrustBill’s goal is to become an international receivables market place for companies of all sizes. Terms of the agreement are not being disclosed.

GRANT SUPPORTS DELIVERY OF NEXT GEN FINTECH FOR SPEAKERBUS (Speakerbus), Rated: B

Speakerbus today announced a milestone in its TRADECOM European Union funded project with the successful submission of its scheduled phase 1 reports. The European Commission’s innovation in SME’s programme (Horizon2020), awarded Speakerbus an innovation grant to advance the commercialisation of its vTurret; itself a prototype developed from a UK Government Innovation Grant, a grant specifically awarded to showcase and fast-track technological innovation in technology.

The partly funded project demonstrates Speakerbus commitment to Software as a Service (SaaS), cost pressures, scalability, redundancy, VoIP, compliance, access to an advance API and multi-vendor collaboration, as the project matures.

Australia

Fintech all talk no action in bank competition race (Fiancial Review), Rated: A

One theme often overlooked in the debate around the role of the major banks and home lending is competition, or lack of it. Australia’s banking sector is one of the most highly concentrated in the world and the much-hyped arrival of digital disruption has hardly shifted the dial.

Sims makes no bones about the fact that he thinks the market share of the big banks, along with their profits, are too high. He notes that their earnings have increased over the past 15 years as their share of the lending market continues to rise.

The hype around the changes digital technology was going to have on the industry has also failed to materially affect the competitive landscape, although it has forced the existing players to compete with each other with better payments systems and smartphone apps. The biggest competitive shift has been the rise of mortgage brokers, although they will be impacted the most from the banking regulator’s latest crackdown on interest-only loans.

Canada

NewOak Asset Management Partners with LendingArch to Purchase up to Billion in Consumer Loans (LendingArch Email), Rated: AAA

Today LendingArch, the Calgary-based online and point-of-sale lending platform, announced a partnership with NewOak Asset Management LLC, a New York-based asset management and institutional advisory firm who have advised on over $5.5 trillion in assets on behalf of the world’s top banks, institutions, law firms and regulators. This partnership gives NewOak the ability to purchase up to $2 billion worth of loans originated through LendingArch’s platform over the next three years, the largest deal of its kind for a Canadian consumer lending platform.

NewOak will also be taking on an advisory role with LendingArch, providing insight on capital markets, credit, growth, and additional business opportunities as the company further expands its point-of-sale lending platform.

The NewOak partnership is LendingArch’s first of many institutional-based deals that they are looking to strike in North America and internationally, and means that the company can continue to provide high-quality, low-cost loans across a range of verticals, giving Canadians a viable alternative to banks for consumer lending.

International

CFA challenges investment industry: transform or be disintermediated (The Asset), Rated: A

CFA Institute, the investment management industry’s global think-tank and lobby group, has come out with a very strong challenge to the industry to “transform” itself or risk being “disintermediated” in the face of industry difficulties.

Among the significant trends that the study cited are:
• Uncertainties brought about by geopolitical developments such as Brexit, Trump’s election, regulatory reform, etc;
• Disruptions brought about by fast-paced developments in the financial technology (fintech) sector;
• The persistent low-yield environment and the resulting shift from passive to active management.

 

Authors:

George Popescu
Allen Taylor