Research paper for LendingCalc Date: September 19, 2017 Introduction Marketplace lending is blossoming in Asia, following the trend in China where over 2000 platforms are purportedly open for business. The majority of Asian platforms were founded in or after 2015, a few years after the Chinese boom, and are able to incorporate the lessons learned […]
Research paper for LendingCalc
Date: September 19, 2017
Marketplace lending is blossoming in Asia, following the trend in China where over 2000 platforms are purportedly open for business. The majority of Asian platforms were founded in or after 2015, a few years after the Chinese boom, and are able to incorporate the lessons learned from the Chinese market. This is also facilitated by the flow of Chinese capital into the region.
As domestic Chinese marketplace lending platforms are virtually closed to international investors by capital controls, this note will focus on South East Asia, where regulators welcome the participation of foreign institutional capital in marketplace lending, as in the United States or the United Kingdom. Nonetheless, marketplace lending assumes a different character than their Anglo-American counterparts due to divergence in regulatory regime and business environment.
The importance of regulatory regime
Platform is the putative strategy and business model of marketplace lending. Lately the word “platform” itself has taken on hallowed meaning in the fintech world, particularly since the Chief Executive Officer of Goldman Sachs proclaimed that “We’re a technology firm—we’re a platform” on Bloomberg Television.1 Unfortunately this newfound halo only obscures the reality that platforms are not equivalent across geographies, because it is their regulators and not the platform themselves that lay down the rules governing their structure.
To review the basics – A marketplace lending platform matches borrowers with lenders individually, hence also the term peer-to-peer (P2P) lending. Each loan may be matched to and funded by many lenders, hence the term crowdfunding; and each investor may match and fund many loans to diversify the investment. Exactly how the matching occurs is up to the regulator. The most relevant aspects are:
Whether balance sheet lending (and hence leverage) is allowed;
The responsibilities (and liabilities) to retail investors;
The restrictions regarding institutional investors.
In the United States, Prosper and Lending Club are governed by SEC rules, and for all practical purposes behave like broker dealers. They originate the loans and sell securities called notes backed by the loans they originate under a program prospectus. They are technically securitizations, but unlike the CDOs of old, the notes do not correspond to tranched portfolios to enhance the credit rating; and no complex derivative is involved.
As for the three aspects above, broker-dealer designation implies that (1) there is no restriction to lend with its own capital; (2) sale to retail investors is allowed but strict SEC regulation applies and (3) institutional (or accredited) investors may participate.
To illustrate the divergence in the other extreme, China does not allow platforms to lend using their own capital, forbids the participation of institutional investors in marketplace lending and forces platform accountability to retail investors not by securities regulation by through strict disclosure policies. Curiously, under Chinese regulation, marketplace lending platforms are not technically financial institutions but are designated as credit information platforms.
Divergences in regulation directly impact the sustainability of the business. While not entirely obvious, marketplace lenders do spawn credit portfolios in the process, notwithstanding that the majority of which is eventually sold. Credit portfolios come with their long tails in loss distribution. How investors cope with the long tail and how platforms share this risk matter a great deal. The economics of a lending business, after all, cannot escape the logic of risk-return and the cost of funding. Peer to peer or not, lending has been about matching loans to funds for centuries. An unstable platform structure, begotten by clumsy regulation or a clumsy reading of regulation, will vitiate the revenues of the entire business. Structural risk is in fact the single most important risk factor in Asian platforms, and sadly, often poorly understood.
Large structural issues aside, smaller nuances, in cumulative effect, also influence the behavior of platforms. Lending cap is an illustrative example. While Singapore and Malaysia do not impose lending caps, Indonesian regulators have set a cap of SGD 200,000 per borrower, at least for now. Hence Indonesian platforms that are able to acquire a large number of borrowers consistently will generate portfolios with far greater diversification benefits.
The emerging market business environment
Small businesses in Asia face significant financing gaps. Such small businesses range from sole proprietors hawking goods in street bazars to more conventional small and medium enterprises (SMEs) with national or even regional supply chains. Measuring this financing gap is no simple matter. According to a study by IFC2, some 92 million SMEs in East Asia remain unserved or underserved.
As for access to personal credit, a large segment of the population remains unbanked or under banked. Some 55% of the word’s unbanked and underbanked population resides in Asia Pacific region3. The rise of marketplace lending (and fintech in general) is often hailed as the digital age’s cure to these chronic ills. The market size is immense.
That technology shall deliver the bulk of humanity from financial penury appeals to fintech idealists, and has rallied countless entrepreneurs under the financial inclusion banner. Reality, on the other hand, remains ever so unfailingly sober. Imperfect rule of law, absence of data infrastructure and deeply entrenched business practice define the business environment of marketplace lending in Asia.
Successful platforms adapt to this reality and thrive. The characteristics of loans generated reflect these adaptations, the most significant of which are negative enforcement mechanisms and partnerships.
Many Asian countries have just started constructing credit bureaus (e.g. Indonesia) or do not enable marketplace lending platforms to provide defaulting records to credit authorities (e.g. China). In some cases, the legal procedure to enforce default to prove financial fraud is too costly or burdensome to pursue. Hence negative enforcement mechanisms that seek to create negative consequences for unpaying borrowers supersede judicial options. These mechanisms need not be brutal or violent collection practices. For example, a notification to an SME borrower’s vendors, or the mere threat of one, could generally force the borrower into repayment or negotiation. Sharing a black list with other platforms or lending entities is also effective.
The use of partnerships is often motivated by negative enforcement, since partnerships generate a specific context where borrowers cannot default with impunity. For example, a partnership with an e-commerce platform that refers merchants as borrowers and freezes merchant accounts in case of defaults offers powerful negative enforcement. An agreement of program financing with a large manufacturer for its suppliers follows a similar logic. Some fintech practitioners coin the phrase “ecosystem play” to describe these mechanisms, but in essence such agreements rely on a partner’s ability to create and implement negative enforcement mechanisms and to bolster loan growth. Partnership loans therefore often feature prominently on Asian platforms, and well executed partnerships will provide platform investors with handsome risk-return.
At this point fintech enthusiasts may feel disenchanted that terms such as big data, machine learning or analytics have not found their way into the discussion. Such concern is partially warranted. The prevalence of data analytics in developed markets have reaped the benefits of data infrastructure efforts spanning decades by the private sector and the public sector. Lending Club could “easily” declare a credit score cutoff of 600 because Fair, Isaac and Company (now known as FICO) began building statistical credit scoring models in 1956, and because US public authorities have kept orderly records social security numbers to identify unique individuals, and because the US Postal Service began introducing the five-digit zip code system in 1963 which facilitated the construction of address databases. Most Asian marketplace lending platforms (with the possible exception of those in Singapore) must cope with lesser data infrastructure at the national level.
This does not mean that data analytics efforts in Asia will wither. The data landscape in Asia is actually more complex. In some areas such as credit bureaus, insufficient default histories simply take time to build up and will lag developed markets. In other areas such as the incorporation of social media driven payment data in anti-fraud modeling and supply chain logistics, Asia may leapfrog developed markets, as China has successfully demonstrated with payment infrastructure. As Asian countries fixate their attention on data infrastructure, marketplace lending platforms must navigate the data landscape as “work in progress”, but may also position themselves to contribute to the national data infrastructure through public and private sector partnerships.
For example, in Malaysia, private credit bureaus proactively solicit default data from marketplace lending platforms. In Singapore and Indonesia, more sophisticated private sector partnerships exist to share logistics, inventory and transaction data across regional supply chains between logistics companies, manufacturers and marketplace lending platforms to facilitate invoice financing. Data does exist in Asia, but who is willing to share what with whom is equally, if not more, important. Claiming technical superiority is inconsequential if the platform cannot sign agreements to unlock key data sources. The risk-return of loans generated by “automated” underwriting is not just about technical prowess.
Conclusion: What this means for investors
Marketplace lending in Asia offers investors fixed income exposures to a region of vibrant economic growth where conventional fixed income products are hard to come by, and without the volatility of marked to market instruments. The risk-return profile can meaningfully enhance any fixed income portfolio, but only for those who know to curate these platforms properly:
Avoid platforms with structural risk.
Seek out platforms well versed in regulation – and in dealing with regulators.
Beware of platforms that boast analytics without explaining how they source data.
Study how the platform implements negative enforcements.
Look at how the platform handles partnerships, and who negotiates them.
The list is not exhaustive, but hopefully points investors in the right direction. If it reminds us of the business acumen of old, that should be no surprise. Lending is an ancient business, where risk emanates not from numbers but from human capriciousness. Those who can blend the latest analytics in capturing and measuring risk with the prudence to manage the psychology behind it will likely survive.
1 Bloomberg TV interview, June 2015
2 Closing the Credit Gap for Formal and Informal Micro, Small, and Medium Enterprises, IFC, 2013, p.8
3 See PWC DeNovo Q2 2016 FinTech ReCap and Funding ReView and datatopics.worldbank.org/financialinclusion/home
Terry Tse is a LendingCalc advisor focusing on the company’s strategic direction and global partnerships. He currently oversees global expansion at the largest B2B payment company in China, LianLian Group and serves as an adviser for the Southeast Asian P2P firm, Funding Societies. Formerly, Terry was the Chief Risk Officer at Dianrong, where he executed a ten-fold increase in loan origination for the P2P platform. Terry holds a B.S. in Mathematical and Computational Science and a M.S. in Financial Mathematics from Stanford University.
News Comments Today’s main news: Prosper closes on $50M funding round at $550M valuation. SmartBiz Loans hits $500M in SBA loans. Labour proposes debt cap that would force credit card companies to write off billions. European Central Bank considering requiring fintechs to hold more capital. RateSetter raises $10.5M. FinEX Asia’s private equity fund manager invests $50M in Prosper. Today’s main […]
Prosper closes $50M funding rounding at $550M valuation. AT: “Everyone is talking about Prosper’s 70% reduced valuation, but that may not be as negative as it seems. Lend Academy compares this with Lending Club’s decline in valuation in 2015–68%. There were some speed bumps for the industry last year, and the recent SoFi scandal will undoubtedly mar the industry this year. We’re due for market corrections, but keeping heads cool will lead to more increases down the road. Ride the waves.”
Earlier this week Prosper closed on a Series G transaction where they raised $50 million from an investment fund co-managed by FinEx Asia and LPG Capital based in Hong Kong. While Prosper would not confirm their new valuation sources said the post money valuation was $550 million. This represents a 70.5% drop in value from their high in 2015. So the rumors from last month are true.
On April 2, 2015 Lending Club was trading at $19.26 a share. Yesterday the shares closed at $6.10 which is a 68% decline in valuation. This is pretty much in line with the decrease in valuation at Prosper.
A spokesperson for Prosper told me that the money will not be used for operations but rather for new projects. Prosper is now cash flow positive with liquid assets of around $42 million as of Q2 2017. There was no dire need to get this funding round done but it will be helpful for them as they look to grow in a sustainable way.
FT Partners Advises Prosper on its $ 50,000,000 Financing Round (FT Partners Email), Rated: AAA
FT Partners is pleased to announce our role as sole strategic and financial advisor to leading marketplace lender Source: FT Partners
Download and read the full transaction announcement here.
After pocketing $50 million in a huge down round and another deal that could give an investor group a 30 percent stake in the marketplace lender, there’s really only one question for the CEO: Are you giving away the store?
SmartBiz Loans says it ranked as the leading facilitator of traditional SBA 7(a) loans under $350,000 for the 2016 fiscal year. This means SmartBiz surpassed Wells Fargo and other major banks in relation to SBA lending.
Small business loans are helpful for business owners who have no other financial options. SmartBiz Loans has announced that it surpassed $500 million in funded Small Business Administration loans. A fifth bank has joined its software platform.
According to the Buffalo News, M&T Bank leads a federal small business lending program in the Buffalo-Rochester region. The program’s overall totals have decreased from a year ago. The Small Business Administration reported 806 of the SBA 7(a) loans were originated through August. That’s down 21 percent from the previous period a year ago. Its amount of dollars were down 7 percent from last year, down to $132 million.
M&T Bank used to lead the way until August. Its number of loans dropped down to 41 percent. Its total dollars declined 11 percent to $25 million. It’s still well ahead of Wells Fargo. However, Biz2Credit, Fundera, and others have been catching up.
Matic Insurance Services (Matic), a digital insurance agency that enables borrowers to purchase homeowner’s insurance during the home-buying transaction, has forged a partnership with automated lending technology provider Roostify. The company announced the news Tuesday afternoon from the stage of TechCrunch’s Startup Battlefield, part of the TechCrunch Disrupt SF conference held in San Francisco this week. Matic was one of just six elite startups chosen to advance to the final round of the competition.
“We are interested in how companies like Y Combinator can use the blockchain to democratize access to investing,” said Sam Altman, who leads the accelerator, onstage at Disrupt yesterday. “We should try to figure that out.”
Our sources tell us YC is actually a little further along than that. Like a growing number of venture groups that are jumping into the digital currency world, the group is actively sussing out how it might use cryptocurrency to expand the investment pool.
A survey from online marketplace LendEDU found that 46 per cent of people between the ages of 18 and 34 who are saving for retirement use a financial adviser. In comparison, only 24 per cent of the 500 surveyed have used a robo-advice platform.
Around 75 per cent of respondents said they have never used an automated wealth management service, but 62 per cent of those said it was because they had never heard of robo-advice before.
Even so, millennials do not seem to trust automated wealth platforms. Of those surveyed, 51 per cent think a robo-adviser is more likely to make a mistake while managing money, while only 48 per cent think a traditional adviser is more likely to make an error.
More than 46% of respondents in a survey of 502 millennial investors saving for retirement said they had sought advice from a human advisor, according to LendEDU, a student loan refinancing company. That is almost double the 24.3% who said they had used a robo-advisor either in addition to a human advisor or exclusively, according to the survey, which was released September 19.
Angel Island Capital (“AIC”), a San Francisco-based alternative investment advisor and credit manager, today announced the appointment of Dev Gopalan as Chief Executive Officer. A seasoned financial services executive, Mr. Gopalan joins Angel Island Capital from leading global investment firm Kohlberg Kravis Roberts (“KKR”), where he served as Head of US Private Credit and was a member of the Global Private Credit Investment Committee and KKR Credit Portfolio Management Committee.
A rapidly growing peer-to-peer lender has exposed investors to a bankrupt for a second time, while a quarter of its loan book is considered to be in default, raising fresh concerns about regulation in the booming new finance market.
Sources close to Lendy Finance, which earlier this year became the title sponsor to the sailing regatta Cowes Week, spoke to The Sunday Telegraph after becoming concerned that the level of defaults revealed an ongoing weakness in underwriting checks, which is putting investors at risk to losses. The FCA is investigating how peer-to-peer lenders disclose default rates as part of a delayed consultation into the burgeoning industry.
A study of Lendy’s loan book reveals that almost 25pc of loans, worth £47.2m, are outside original terms, meaning repayments can be one day to 434 days overdue.
However, Lendy says that just 14.5pc of its loan book is “currently in default as defined by our agreements with lenders, and in line with the wider bridging and development finance market”.
What was bad, was that it became clear to me, that the interest level in combination with the non-performing loans would make it very unlikely for Bondmason to reach the projected return – at least for my portfolio. Especially with the Invoice Discounting loans there were issues.
In April 2017 Bondmason announced it would require a larger minimum investment amount of 5K (previously 1K) and raise fees for small portfolios to 1.5% (previously 1%). Dang. I was in no way interested to deposit more money. So my portfolio did not even get to celebrate 1st anniversary. In July I gave them notice to liquidate my portfolio/account. Since then I withdrew 1,013.94 GBP – only slightly more than I deposited. My account still exists as there is 20 GBP stuck in two property loans in default and also 1.41 GBP in cash.
According to the report, Starling plans to use the money to expand into other European markets, with the first of these likely to be Ireland, where it recently gained a passport — which will allow it to access EU markets after Brexit.
Goldman Sachs already has a mass-market offering in the US, after launching its online lender Marcus 18 months ago. Since its inception, Marcus has supervised over $1bn worth of loans to businesses.
Goldman Sachs will start taking deposits in the UK, but in the long run, the bank has plans to lend UK customers money through Marcus like in the US.
NatWest recently announced its plans to launch an online lender Esme Loans, allowing SMEs to quickly take unsecured loans of up to £150,000. Online lending is likely to become more crowded as Santander has also announced plans to incorporate digital banking in its services.
Conveyancing – the legal process of transferring ownership of land and property from one party to another – has changed considerably over the past 10 years.
Technology has so far failed to make inroads to improve the process – and no matter how slick your online lender or mortgage broker tries to be, everyone’s held to ransom by the law.
What is When you Move ?
Simon: Frustrations we’ve seen our clients navigate, in addition to our personal experiences, triggered something of an obsession to develop a tech solution for an industry deep-rooted in some of the most archaic practices still in use in modern-day business.
When You Move is an app that allows home buyers and sellers to see easily in real time where everyone is up to in the process – be that you, the lawyer, the mortgage broker, the valuer or the lender.
The survey found 65 per cent of 3,482 UK businesses have adopted at least one fintech solution, with 19 per cent making use of four services. These fintech products are helping the firms to save on average over £5,500 a year.
MarketInvoice estimates that 65 percent of 1.3m UK businesses are therefore making this average saving, meaning a total of £4.6bn is being saved thanks to fintech.
Adam Barrett, the head of institutional sales at Lloyd Banking Group has joined the exodus from banking to fintech. After more than 30 years in investment banking, at UBS, Goldman Sachs and Barclays, he’s just gone to peer to peer lending platform Invest & Fund.
Former Ryanair deputy chief executive Michael Cawley has been appointed chairman of peer-to-peer lending platform Linked Finance, which hooks up companies requiring capital with individuals and institutions looking to lend.
As of this month, it says it has 16,000 registered lenders on the site. Businesses to have availed of loans through the platform include Viking Splash Tours, the Irish Fairy Door Company and tech company Big Red Cloud.
Linked Finance has set a target to facilitate lending of up to €250 million in coming years. It says its lending was up by more than 240 per cent in the first half of this year. SMEs can borrow up to €250,000 on its platform.
By November 2016, we were engaged in a strategic pivot, actively shifting our focus from B2C to B2B, so we could offer our single-loan securitisation solution to major players on Europe’s lending stage.
The good news is that investors also stand to benefit from the opportunities inherent in CrossLend’s single-loan backed notes, and here’s how:
On September 21, 2017, blockchain software company ConsenSys announced the launch of a peer-to-peer (P2P) trading company, CarbonX, which will employ the Ethereum blockchain to tokenize carbon credits.
According to their numbers there are 214 Unicorns in the world. There are 24 countries with Unicorns and the US leads the way with 52% and China follows in second place with 23%.
E-commerce is number one and Internet Software & Services take second place. Fintech Unicorns are in 3rd place.
Fintech names like SoFi, Stripe, Credit Karma, Prosper, Kabbage, Avant, are on the list. Outside the US, Fintech names include Lu.com, ZhongAn, Saxo Bank, One 97 Communications, Klarna, Funding Circle, Transferwise are there.
Australian consumers will no longer face charges when using another bank’s cash point after the country’s four major banks dropped ATM withdrawal fees for domestic users amid greater regulatory scrutiny for the industry.
Former Commonwealth Bank chief executive David Murray says there remains a strong case for bank involvement in wealth management, despite the recent trend of lenders offloading life insurance and funds management assets.
CBA last week became the latest bank to retreat from “manufacturing” wealth products, selling its life insurance arm for $3.8 billion and saying it may spin off the investment business of Colonial First State in an initial public offering.
Woolworths customers will be able to use their iPhones to collect and redeem Woolworths Rewards points when shopping at the supermarket or its partners from next month. Find out how much you can collect and redeem here.
The Reserve Bank of India’s recent move to regulate peer-to-peer (P2P) lending platforms as non-banking financial companies (NBFCs) has created a grey area of sorts, spelling trouble for thousands of direct selling agents (DSA) or direct marketing agents (DMAs).
The Finance Industry Development Council (FIDC) says it is “very much possible” that DSAs/DMAs who have been providing loan facilitation (offline) services to retail and corporate borrowers, from banks and NBFCs (with whom they have signed a written contract) for the past many years, may also fall under the ambit of RBI’s P2P regulatory framework as NBFCs.
Since it was floated in January 2016, the government’s Rs 10,000-crore Fund-of-Funds for start-ups (FFS), launched in line with the Start-up India Action Plan of the Government, has made slow progress with only about Rs 70 crore having been disbursed to start-ups until the beginning of this month.
The 17 funds include Mumbai-based early-stage investor Kae Capital, which raised its second $30-million fund in February last year and is reported to have got a commitment of Rs 45 crore from the FFS. Kae Capital has investments in about 16 start-ups, including Truebil, a used-car marketplace owned by Paix Technology; peer-to-peer business loan marketplace startup Loanzen; second-hand products marketplace ListUp promoted by Gijutsu Solutions and shopping portal Fynd run by Shopsense Retail Technologies.
FinEX Asia is pleased to announce that its private equity fund manager closed an investment of US$50 million in Prosper Marketplace, a U.S. online marketplace lending platform for consumer loans.
“FinEX Asia is excited to complete the Series G financing into Prosper, a leader in marketplace lending in the U.S.,” said Maggie Ng, CEO of FinEX Asia. “Our team’s expertise is in fintech and consumer lending. Our investment strategy starts with the U.S. because of our strong network with online marketplace lenders. In parallel we are considering investment opportunities in other verticals globally.”
Founded earlier this year by Maggie Ng, a former Consumer Lending Head and Chief Risk Officer at Citibank, FinEX Asia aims to help Asian investors look for quality investment opportunities, both in fixed income and equity investments, by using its fintech platform and know-how. The investment made into Prosper is a good illustration of how such opportunities are welcomed by Asian investors and that FinEX Asia’s investment strategies are well recognized by the capital it represents.
Singapore-based fin-tech start-up FinMomenta, which entered the Indian online P2P (peer to peer) lending market early this year with its product called Tachyloans, will soon be lending to salaried professionals working in small and mid-size firms.
Called Corporate HR loans, FinMomenta aims to make lending easier for the working class. The loan size ranges from ₹50,000 to ₹5 lakh.
MicroMoney, a global fintech blockchain company and lending services provider, announces a private presale for its token-generating event for the early birds among funds and big contributors. This presale started on September 15th, 2017.
MicroMoney is a fast-growing company founded in 2015 with the offices in five Asian countries – Thailand, Myanmar, Indonesia, Sri Lanka, and Cambodia. The company plans to expand its presence to 5 more countries by 2018. MicroMoney was established as a company focused on micro-financing in the money lending industry, providing customers with online loans without any collateral requirements using machine learning algorithms.
There are still more than 2 billion of the unbanked in the world, especially in the emerging market.
CROWDCREDIT, a Japanese cross-border marketplace lending company which promises to fill in lending gaps by providing funds for lending and financial institutions including banks, is currently studying the market and possibility of business expansion in the Philippines.
In other countries, such as the United Kingdom, for example, banks receive loan applications more than their existing deposit or more than the loans that they can cater to. The case is opposite with Japan’s banks with more excess deposits than loans. With this, the basic concept of Crowdcredit is to provide this excess fund for loan to other countries that would need them.
Crowdcredit has a vast network of global partners which includes Mfx, Kobranzas, Fellow Finance, Savy, Cream Finance, Ovamba, Bondora, Mogo, Mintos, and Prestiamoci.
New LendingCalc White Paper Examines Opportunities in SE Asian Marketplace Lending (LendingCalc Email), Rated: A
Author Terry Tse Provides Practical Advice About How to Select Best P2P Platforms
LendingCalc, Inc., a direct investment platform providing global access to digital specialty finance for institutional investors, has released a new white paper examining the investment opportunities within the growing marketplace lending sector in Asia. The paper was written by newly appointed strategic adviser, Terry Tse, who served as Chief Risk Officer at the China-based P2P giant, Dianrong, and is currently Senior VP of International Development at the largest B2B payment company in China, Lian Lian Pay.
In the paper, Tse contrasts U.S. and Asian regulations and explains how the regulatory regimes in Asia impact the lending opportunities abroad. He also describes the emerging P2P business environment in Asia, which appears to be extremely well positioned for growth. In addition, Tse explains the key structural incentives Asian P2P lenders have implemented to discourage borrowers from defaulting.
The paper concludes with a number of practical suggestions to help investors navigate the socalled “Wild East” that is marketplace loan investing in Asia.
News Comments Today’s main news: SeedInvest to host live crowdfunding at LendIt Europe. Funding Circle says ‘good-bye’ to smaller brokers. DBRS upgrades SoFi Professional Loan Program Transactions. Credibly to manage BizFi’s portfolio. Fundrise re-opens Income eREIT. Laplanche to keynote at LendIt Europe. Today’s main analysis: France, Sweden scooping up bigger share of Europe’s fintech deals since Brexit. Today’s thought-provoking articles: France, […]
Funding Circle cuts off smaller brokers. AT: “This is likely an attempt to optimize and refine business efforts. If the time spent catering to smaller brokers costs Funding Circle more than it gains in business, then it’s a sound business decision.”
As Chinese globalize, banking landscapes change. AT: “The interesting thing is that U.S. and European banks are retreating into the domestic closet as Chinese banks spread outward. This will have long-range geopolitical effects if the trend continues.”
CREDIBLY SELECTED TO SERVICE BIZFI’S $ 250M PORTFOLIO (Credibly Email), Rated: AAA
Credibly, a leading findata small and medium-sized business (SMB) lending platform, announced today that the company is now servicing BizFi’s $250 million portfolio and 5,200 merchants. Since 2005, BizFi had been a leading capital provider to SMBs and in 2016 was one of nation’s top three largest originators of merchant cash advances. Numerous SMB direct lenders vied for the BizFi portfolio. Credibly was chosen due to their proprietary data science driven portfolio management strategy.
Credibly also announced that it has crossed the $500 million milestone in capital deployed to tens of thousands of SMBs across the U.S. This is separate from the $250M portfolio the company is now servicing from BizFi.
In addition to servicing the BizFi portfolio, Credibly is working with both sales partners and merchants to provide additional working capital to the businesses in BizFi’s portfolio. Credibly’s data science team has the ability to analyze BizFi’s twelve years of data and remittance history, which will allow Credibly to better service both the BizFi and Credibly portfolios. Further, BizFi’s data enhances Credibly’s risk management, scoring models, and portfolio management tools.
The Small Business Association (SBA) estimates that traditional banks still reject approximately 90 percent of SMB loan applications. Since 2010, Credibly has emerged as a proven platform that leverages data science and analytics to provide SMBs with a simple and intuitive way to access critical working capital. The company addresses the fundamental capital needs of SMB owners across a broad credit spectrum and through every stage of a business’s life cycle.
Main Street SMBs across a wide variety of industries that include restaurants, retail stores, salons, spas, dry cleaners, auto body shops, and doctors’ offices, all rely on Credibly to secure the necessary capital they need to grow.
Fundrise, the very first real estate crowdfunding platform in the US, has re-opened its Income eREIT to investors.
According to Fundrise, the Income eREIT has performed quite well, so far. The Income eREIT has generated 10% or higher in annualized dividends since Q2 of 2016. As of Q3 2017, the fund has posted a 10.5% annualized dividend which compares favorably to the FTSE NARET Composite REIT Index at 4.2%.
These bills are strongly pro-consumer. They will help ensure that consumers can continue to refinance their higher interest rate debts, saving consumers significant amounts of money through lower interest costs. Furthermore, these bills clearly cannot facilitate predatory lending because they do not change the rate or terms on which any entity in this country (regulated at the state or federal level) can lawfully lend money. The language of the bills simply reaffirms one of the fundamental principles of contract law — that valid loan contracts can be sold on the secondary market.
We have a situation created by the Second Circuit decision where responsible lending has been reduced in three states (NY, CT, VT). Demand has not been reduced in these states.
Trizic, the fintech company behind a B2B wealth management platform, has signed on as the technology provider to Fidelity National Information Servcs IncFIS 0.21%, connecting the Bay Area startup with the banking sector.
Trizic Digital Advisor — an open-API platform for registered investment advisers, enterprise clients, banks and credit unions — is a product built from the ground-up, CEO Drew Sievers told Benzinga.
The platform’s features include trading, portfolio management, cash management, billing and compliance reporting
LendingTree, Inc. (NASDAQ: TREE), operator of LendingTree.com, the nation’s leading online loan marketplace, has announced two key promotions within its leadership team. J.D. Moriarty, who joined LendingTree earlier this year as SVP of Corporate Development, has been promoted to Chief Financial Officer, and Gabe Dalporto, who previously served as the company’s Chief Financial Officer since 2015 and as LendingTree’s Chief Marketing Officer from March 2011 to June 2015, has been elected to the company’s board of directors.
Word that full implementation of the Department of Labor’s contentious fiduciary rule has been delayed for two years — until July 2019 — may not have shocked many observers but it’s still deeply significant, say industry experts on both sides of a debate that’s raged across two very different presidential administrations.
That’s if it ever even happens, grumbles Rostad, whose organization wants all financial advisors to be client-first fiduciaries as a matter of public service. He says the Trump administration and the brokerage industry despise two provisions of the DOL rule — the right for investors to sue advisors and firms for breaches of the rule, and the best interest contract exemption, which lets advisors continue receiving commissions if they agree in writing to continue acting in the client’s best interests and make a full disclosure of options other than commission-based business available. And the administration and brokerage industry will be working overtime between now and mid-2019 to get the provisions watered down or eliminated altogether, says Rostad.
Meanwhile, the Financial Services Institute, a Washington D.C.-based advocacy group for “a healthier, more business-friendly regulatory environment for our members” — mainly broker-dealers and their advisors — sees the delay as an opportunity for needed refinements.
Don’t consign personal financial management apps to the ash heap of technology just yet.
Granted, on Thursday Prosper Marketplace is discontinuing Prosper Daily, an app formerly known as BillGuard that helped users monitor their finances and credit scores. And the next day Capital One Financial is set to close the money management app Level Money.
Currently, the value of all the Bitcoin in the world is around $90 billion, much less than individual companies such as Amazon ($474.41 billion market cap), Google ($649.49 billion) and Apple ($815.39 billion). However, with the current trend, some investors predict cryptocurrencies to be worth $5 Trillion by 2022.
As cryptocurrencies are becoming more common, new blockchain powered platforms are emerging to change the way we invest. The success of these companies may create a scenario in which fintech companies like Robinhood, Fundrise, Quantopian and others – currently considered the most disruptive companies in the world – will become outdated in a few years.
Real.markets – Disrupting real estate crowdfunding
REAL is an Ethereum Smart-Contracts governed ecosystem that focuses on creating the best conditions for Real Estate investment eliminating costs due to unnecessary intermediaries, providing transparency and liquidity, alleviating tax inefficiencies and easing cross-border transactions under a unified crowdfunding platform.
NASDAQ LINQ – Trade private companies
Almost two years ago NASDAQ launched LINQ, a digital ledger technology that leverages a blockchain to facilitate the issuance, cataloging and recording of transfers of shares of privately-held companies on The NASDAQ Private Market in collaboration with Chain.
enigma – machine-based investing platform and infrastructure for crypto-assets
From 2009 to 2015 alone, the amount of assets under management (AUM) by quantitative hedge funds grew at a rate of 14% year-over-year, nearly double the 8% year-over-year growth of assets managed by traditional hedge funds.
Following the rising demand for crypto-currencies, enigmabelieves an interesting opportunity arises: algorithmic trading on crypto-assets. Many exchanges already offer the ability to place orders through RESTful APIs, permitting users to run their trading algorithms locally.
From mobile payments, app based investing platforms, to online banking solutions, financial technology (FinTech) has revolutionized not only how consumers receive financial services but also how they expect to receive such services.
A recent studyshowed that 59 percent of senior financial services executives believe that we will see an increase in the use of digital solutions to improve operations, with 56 percent of executives citing technological disruption as a component of their business strategy. From an operational perspective, findings have shown that core financial institution activities including Deposits and Lending and Investment Management are expected to be radically reconfigured as a result of technological innovation. Consumers have also begun to shift their preferences towards FinTech, with statistics indicating that in 2016 a third of consumers reported regular use of financial technology services, with such use doubling from two years prior. Furthermore, more than 52 percent of consumers are expected to use FinTech services in “the near future.”
A recent study found that two-thirds of Americans cannot pass a basic financial literacy test, with the number of those who can pass such a test decreasing annually. Globally, the figures reflect similar trends; in 2015, only 35 percent of men and 30 percent of women were classified as financially literate.
Greenlight’s flagship product is a debit card for children that utilizes mobile app technology to provide parents with a customizable and monitorable solution to facilitate purchases.
TS: Greenlight is free for 30 days and then just $4.99/mo. for the whole family to use (all parents and up to 5 kids). Each child receives their own Greenlight Card with their name on it and a unique PIN. Parents use our app on either their iOS or Android smartphone, and can easily manage all of their kids’ cards from one place.
Parents can load and transfer money onto their kids cards instantly from anywhere with no additional fees. That money can be limited to specific stores or websites, or be spent anywhere depending on what parents decide. Greenlight provides real-time mobile alerts to tell parents where and when their kids are making a purchase and can even automate allowances.
Kids can also use the Greenlight app on their smartphone. They can visually see their balances, request money, and communicate what they’re purchasing with their parents. When a parent receives a funding request from one of their children, they can easily approve or decline the request in the app.
The U.S. Consumer Financial Protection Bureau has received at least 293 complaints about Coinbase Inc., according to data reviewed by Bloomberg.
More than a third of the grievances came from individuals who said they were unable to access their money when promised. Many people also complained about other transaction or service problems. Accusations of fraud represented less than 15 percent of the complaints.
LendingCalc, Inc., a direct investment platform providing global access to digital specialty finance for institutional investors, announced the appointment of Terry Tse, the former Chief Risk Officer of the leading Chinese P2P platform, Dianrong, as strategic adviser for the firm. In his role, Terry will help build LendingCalc’s global investment gateway and platform due diligence framework.
Redwood Bank, Britain’s newest business bank for SMEs (small and medium sized enterprises), has announced that just over four months after securing its initial banking licence, it has completed its “Mobilisation” phase and has now opened for business, offering secured SME mortgages for business owners, as well as for experienced commercial and residential property investors. It has also launched a competitive business deposit account.
Its speed to market is the result of a combination of factors, including having a very experienced and proven management team, and the fact that it’s the first business bank with 100% cloud- based infrastructure, which improves efficiency as well as security.
New research from Equifax Touchstone, an intermediary database provider, illustrates an enhanced focus among investment advisors on delivering consistent investment outcomes to customers.
Of 141 surveyed investment advisors, 82 per cent were found to have a centralised investment process, meaning that a consistent approach to allocation and monitoring exists for all clients.
However, 76 per cent use model portfolios, which are bespoke to a customer’s risk-reward preferences, and which are automatically rebalanced regularly to bring returns in line with expectation – even if the broader approach to investment management is the same for all clients. These model portfolios are comprised of a diversified pool of mutual funds that invest in a variety of assets, ranging from large and small stocks to REITs.
But in its shift to passive strategies, P2P is perhaps less closely aligned with investment advisors. Equifax Touchstone’s survey shows that advisors still very much value active investment vehicles. While passive investing plays a part for 82 per cent of advisors, the majority invest 25 per cent or less in passives, with11 per cent of advisors investing more than 50 per cent in them.
If you’re looking to raise finance for your business, there are a few options you can explore including secured or unsecured debt, private equity, venture capital investment, peer-to-peer (P2P) lending and crowdfunding.
Some of the more popular crowdfunding models include reward-based, donation-based, micro-lending, P2P, peer-to-business and equity.
Equity crowdfunding as an industry, over its six-year lifetime, has raised about £600m in the UK, with close to half of that having been raised by Crowdcube. Equity crowdfunding facilitates investment into start-ups, early stage businesses and growth companies in return for a pro-rata equity stake in the business.
Investments can be made from as little as £10 with no maximum in place, which typically culminates in pro-rata ownership of the company via ordinary or B investment shares.
You may have also seen the likes of BrewDog, River Cottage and Grind raise money through bonds on Crowdcube. This is where a company launches a funding round starting from at least £250,000.
BrewDog raised £10m through a bond in December 2016, offering 8% interest to the investors. Over 2,700 people backed BrewDog in three weeks and should see interest payments for the next four years; the length of the bond term.
Real estate has been booming around the world, particularly in the UK, with new housing, apartment and condo complexes being built at a phenomenal pace.
Abdullah Iqbal, Co-Founder of the Knightsbridge based start-up PropTech Crowd.
While there existed property crowdfunding companies already, Abdullah and his dad saw an obvious vacuum in the market. “None of the property crowdfunding platforms were Shariah compliant at the time, due to them being involved with interest. Our motivation was to take the banks out of the equation, enabling investors to have shares and democratising the property market for everyone, while conforming to the Islamic prohibition of interest”, emphasises Abdullah.
The company’s core mission is to revolutionise property investment through innovative crowdfunding technology, allowing everyday investors to access high-ROI opportunities that they may have been priced out of in the past.
I learned that Mufti Abdul Kader, a renowned Islamic scholar and expert in Islamic finance, is a Shariah Compliance Advisor at PropTech Crowd. His duties entail making sure that all elements of the business are Shariah compliant, visibly and consistently.
At LendInvest we have been clear that the housing market will look a lot healthier when there is less emphasis on the major developers, when we instead have a market which encourages small- and medium-sized (SME) developers to build homes too. Our studies have found that SME developers are excluded from much of the government support that exists for SMEs from other industries, something which has to change.
The Bank of England should not keep interest rates at their record low as an insurance policy against the risk of a “bumpy Brexit” and it needs to start raising borrowing costs now, BoE policymaker Michael Saunders said.
But at the same time the Brexit hit to sterling has pushed up inflation above the BoE’s 2 percent target, leading to the split among the central bank’s rate-setters.
Earlier this month, they voted 6-2 to keep rates at 0.25 percent and the BoE warned that Brexit was weighing on the economy.
We see five major key success factors for the future China fintech market:
Data abundance and application – Business models in financial services will be increasingly data-driven, and data will be at the core of the value chain.
Large customer base
Availability of proprietary and comprehensive products
Strong knowledge of financial services and risk management – A strong combined core of financial services expertise and risk management capabilities remains a prerequisite for success, allowing for more efficient identification of useful data and building of effective risk models.
“Fin plus tech” organization and culture
Niche Fintech Players should expand and perhaps transform their business models. The first and most intuitive way is to grow organically beyond a niche. Qudian, for example, has expanded beyond its legacy focus on university borrowers to develop an e-commerce ecosystem driven by a consumer finance model.
SeedInvest and LendIt, the roving Fintech conference, have partnered on live crowdfunding for the upcoming LendIt Europe event scheduled for this coming October. The live event is being billed as a European first. LendIt Europe participants will be able to invest directly in companies participating in the PitchIt portion of the event taking place in London.
SeedInvest previously powered several live investment crowdfunding events in Europe with noted success. SeedInvest’s partnership with Jason Calacanis, and his LAUNCH Festival, reportedly raised $7.5 million from 3900 individual investors. This will be the platform’s first foray beyond the US borders though and may be a sign of a strategic push for the company.
LendIt announced that Renaud Laplanche, the CEO of Upgrade and former CEO of Lending Club, will join the keynote speaker roster for LendIt Europe 2017.
He will be giving the opening keynote speech on the second day of LendIt Europe where he will be giving an update on Online Lending 2.0 and discussing the US fintech market, where the online lending industry is today and how it fits into the broader fintech sector trends going forward.
Global cross-border capital flows have declined 65 per cent since 2007, and half of that is explained by a drop in cross-border lending flows. The largest global European banks, and some US ones too, are in retreat from foreign markets. But financial globalisation is far from finished — rather it is broadening and becoming more inclusive as developing economies, most notably China, step into the breach.
The eurozone has been at the forefront of the retreat from foreign markets among banks in advanced economies. The foreign claims of eurozone banks have fallen by $7.2tn, or 45 per cent, since 2007, and nearly half of that has been claims on other borrowers in the eurozone — particularly other banks, new MGI research finds. UK and Swiss banks have sharply reduced foreign assets since the crisis as well. US banks, which have always been less global than their European counterparts, have re-focused on growth at home.
In contrast, China’s four largest commercial banks have seen their foreign assets grow 12-fold since 2007 to more than $1tn. And that’s still only 9 per cent of their total assets. Foreign assets make up 20 per cent or more of the total assets in the largest banks in all advanced economies; if China’s largest banks follow that path, they could see tremendous growth in foreign lending ahead.
But as financial technologies continue to expand, legacy players have come to accept the disruptive role of fintech startups and the need to work together. In recent years, the relation between banks and fintech startups has evolved from marginal investments to closely knit collaboration and integration.
Banks are now getting involved at different levels to help fintech companies get off the ground. This includes an increasing number of buyouts, mergers and partnerships.
An example is Goldman Sachs, a banking firm that has invested more than $570 mln in fintech companies since 2012. Last year, the banking giant acquired Honest Dollar, a digital retirement savings platform, in order to expand the startup’s brilliant solution to millions of its customers. Along with Standard Charter, Goldman also helped Momo, a Vietnam-based mobile wallet and payment app, raise $34 mln in two rounds of funding. Goldman also launched its own online lending service Marcus last year, a move that is inspired by the fintech culture. The service has so far doled out more than $1 bln in loans and expects to cross $2 bln by the end of this year.
On the other end, fintech startups are helping banks adopt new technology. Ezbob, for example, is a UK-based startup that provided online lending services to SMEs before white-labeling its technology and changing its business model to a Lending as a Service (LaaS) platform. The Royal Bank of Scotland has leveraged Ezbob’s technology to launch Esme, its automated lending platform which allows small and medium-sized businesses to obtain loans quickly, even outside working hours.
Automated wealth platforms or robo-advice is not likely to find its success by just digitalising its services, says Thomas Davenport, a professor of information technology and management at Babson College. The future lies in a hybrid model that uses the efficiency of big data with the softness of personalised human advice.
Around 60 per cent of consumers would rather have a live person in charge of their finances instead of relying on automated technology, according to a survey from Legg Mason Asset Management.
A recent report added to the portfolio of MarketResearchReports.biz presents a detailed analytical account of the global market for peer to peer lending. The report, titled “Global Peer-to-peer Lending Market Size, Status and Forecast 2022,” states that the market will exhibit growth at an exponential pace over the period between 2017 and 2022.
This report presents detailed insights into the market and its expansion across the globe from 2017 to 2022.
In 2016, KPMG suggested US$24.7 billion was invested in fintech companies globally. Data accumulated by Financial Technology Partners, an investment bank focused on fintech, cites $36 billion across over 1500 funding deals from over 1700 unique investors (not taking into account M&A deals) as a more accurate figure.
As it has done throughout history, the banking and lending industry is dominating the fintech landscape, with payments and e-commerce a formidable rival.
The financial services and technology sectors are set for changes as the budget proposed a series of measures to encourage innovation in the fintech industry. This includes new legislation which, if implemented, is likely to allow crowd-sourced equity funding, tax concessions for start-ups and angel investors and fewer barriers to licensing of finance firms. The traditional banking sector could see more digital disruption arising from these changes which could subsequently create demand for top finance and technology talent.
Credit insurance provider Atradius recently launched its new digital platform ‘Atrium’, which provides customers and distribution partners with real-time data to better understand buyers, credit limits and risk. The platform is designed to drastically improve the user experience, including time efficiency – operations that used to take 15 minutes now only take three.
Then there is Lenddo, an Asia-based fintech platform that uses non-traditional data to provide credit scoring and verification to economically empower the emerging middle class around the world.
Secure payments data platform, EFTsure, recently announced a new collaboration agreement with PricewaterhouseCoopers Australia. Under the agreement, PwC can advise certain clients of EFTsure’s innovative real-time payment verification technology and best practice payee management solution to help those clients to mitigate the risk of fraudulent or erroneous electronic business payments.
Other companies making inroads include UBank, one of Australia’s leading digital-only banks, which recently unveiled RoboChat, Australia’s first virtual assistant to help potential home buyers and refinancers complete their online home loan applications.
FinTech, the abbreviated form of financial technology, is that segment of the start-up culture that deals with good old finance and banking business but through the more novel methods of crowdfunding, peer-to-peer models, mobile payments, loans and even asset management. They squarely fall under the definition of Non-Banking Financial Companies (NBFCs), and considered against the Indian banking scenario they do not meet the legal definition of a bank as is outlined in the Companies Act 2013 or even the Companies Act, 1956.
If a recent Accenture report is anything to go by, fintech that was in a near-nascent state back in 2008 globally shot up in value from $930 million to about $12 billion by the start of 2015.
The other advantages are:
Cheaper business setup and expansion costs;
Quick rolling of funding rather than the drawn out method of first talking to investors;
Cheaper cross-border transfer of money (a fine example is that of UK-based TransferWise);
Simple registration process backed by minimal documentation, sometimes not requiring any Net Worth or collateral information (as is the case with LendingKart);
Even foster efficient fraud and anti-money laundering management in real time across products, channels and customers (as IndusInd has been successfully pioneering since quite some time now).
Why FinTechs need NBFC licenses to operate?
Since NBFCs are principally in the business of providing loans and advances, insurance, acquisition of shares, debentures and stocks, leasing, hire-purchase and even receiving deposits under a set arrangement or scheme, they fulfil the popular 50-50 test and are required to obtain the ‘Commencement of Business’ certificate from RBI (as per section 45 l (a) of the RBI Act).
The 50-50 test that is the basis of the principal business conducted by an NBFC finds application when a company’s financial assets constitute more than 50 percent of the total assets and income from financial assets constitute more than 50 percent of the gross income.
At the same time, our commitment to offer alternative investment channels was reinforced when we saw how the global flow of funds and individual investors continued to cause disruptions in house prices in many major cities.
Crowdfunding and peer-to-peer lending have been touted as among potential alternative platforms that can give small developers access to funding. We saw a number of such platforms used in many countries and they helped solve some of the funding needs.
On June 18 2015, we were deeply encouraged by news that Wanda Group (one of the largest commercial developers in China or the world by now) announced that it had raised five billion yuan (RM3.4 billion) from investors online in just three days to fund the construction of three malls. Investors were able to take part in the projects by investing as little as 1,000 yuan. This is truly opening up access to real estate.
Firstly, digital tokens created on blockchains are technically very difficult to hack and all transactions and documents are transparent. Secondly, in transaction using digital tokens, especially those involving completed properties, a lot of middleman fees can be reduced. More importantly, such digital tokens can be traded much like shares are traded on stock exchanges. This makes real estate a liquid instrument.
“Data analytics offer efficient ways of analysing credit history and behaviour of a prospective borrower to make lending fast and easy on the digital platform,” says Rishi Mehra, CEO, Wishfin.com. Smartphones have made digital transactions seamless and by including a lending option, the ‘right now’ generation has it going for them like never before.
A P2P lending portal works in a way wherein lenders can make offers to fund borrower’s requirements which are accepted on first come, first served basis. Borrowers can seek to raise money from multiple lenders. A formal contract is signed by the lender and the borrower once they reach an agreement. The good news is that RBI has finalised P2P lending norms, which means there is nothing illegal or fishy about these loans. This format of lending is fast catching up, especially among the youth because many of them don’t have a credit score that will make them eligible for borrowing as soon as they start earning.
Some new loan-makers are dabbling in tech to help them gauge a potential borrower’s creditworthiness.
For potential borrowers it finds here, the lender will set artificial intelligence loose on the trove of data that the booking website serves up, like how busy the applicants’ inns are.
Japan Net Bank, an online lender, also uses technology to sift through big data when screening potential borrowers. Partnering with freee, a Tokyo-based online accounting software provider, the bank recently began using AI to quickly pick up and analyze data concerning potential borrowers’ financial situations as well as how well their businesses are doing.
Where isn’t a global fintech hub these days? Count Bahrain among the multitude of claimants. The Central Bank of Bahrain (CBB) has announced the first members of its new regulatory sandbox: NOW Money and Tramonex.
Dubai-based NOW Money claims to be the first company in the Gulf region to offer a mobile banking solution to users, including accounts and a range of low-cost global money transfer options for low-income workers.
Tramonex is a business-facing solution, helping companies to process and transfer funds online. Its focus is on facilitating conversion and settlement services to automate cross-border transactions.
International law firm Simmons & Simmons continues to advise on cutting edge payment platform projects and the emerging regulation of payments. The Middle East TMT team, led by partner Raza Rizvi and senior associate Neil Westwood, advised Mercury Payments Services LLC (Mercury) on the phased roll out of an innovative payment service through cards issued by the Roads and Transport Authority of Dubai (RTA).
South Africa ranks among the highest in fintech users globally and reports one of the highest incidences of intended use, a new study finds.
At 35%, fintech adoption in South Africa beats the global average of 33% and is mostly in line with its emerging market peers, who boast large tech savvy but financially underserved populations. Domestically, 6% of fintech users use five or more services and are classified as super users.
At 41%, adoption among consumers aged 25 to 34 is highest, closely followed by those aged 35 to 44 at 40%. The largely digital native 18 to 24 year-old category lags behind at 36%, mostly due to them having less sophisticated financial needs. Adoption gradually declines from age 45 upwards.
EY found that fintech adoption is highest among South Africans who earn $50 000 to $80 000 per annum at 51%, with usage at 50% among those who earn more than $150 000 annually. Adoption of all five services – money transfer and payments, financial planning, savings and investments, borrowing and insurance – is highest among the former income bracket. Surprisingly, those that earn more than $150 000 are the highest users of borrowing services, possibly due to their ability to leverage off their earnings.
Brazil’s central bank has proposed allowing financial technology companies to lend money, without taking deposits as commercial banks do, as part of new rules for the fast-growing fintech industry in Latin America’s largest economy.
The rules,which will be assessed in public hearings over the next 2-1/2 months, should not require congressional approval, central bank director Otávio Damaso said on Wednesday. Commercial banks will be allowed to create their own fintechs once the rules are in place, he said.
News Comments Today’s main news: New York looks to further regulate FinTech lenders. BofA testing employee-less digital bank branches. Today’s main analysis: PeerIQ’s interpretation for Marketplace Lending of Trump’s Trump’s Executive Order on Core Principles for Regulation the United States Financial System Today’s thought-provoking articles: Banks look to replace ATM cards with cellphones. When will Innovative Finance Isas […]
New York to increase regulation of FinTech lenders. GP:” New York state is usually pro-finance. I am surprised of this push. This push will probably hurt the consumer more than help by limiting the credit access. Secondary, this should be cannon fodder for a federal regulation. AT: “More and more, I’m seeing states take on FinTech regulation. It’s time to prepare for the upcoming battle between the states and the federal government over who is going to be the chief regulator.”
Interview with Ram Ahluwalia of Peer IQ. GP:” I am not surprised Peer IQ pitches securitization as the source of life, the universe, and everything. Joke aside, it is important and the securitization volume growth and ongoing growth has been a good sign. “
Monexo to rope in strategic partner. GP:” I personally don’t believe in news that state getting close to signing a partnership. I would recommend announcing it after it’s signed. There are so many ways for these partnerships not to happen.”
Tucked away in the Transportation, Economic Development and Environmental Conservation Bill portion of the New York State 2018 Executive Budget is a proposed amendment to New York’s Licensed Lender Law that would “[a]llow the Department of Financial Services . . . to better regulate the business practices of online lenders.”
The Bill would make three significant changes to the Licensed Lender Law:
1. Licensing would be required for making consumer loans of $25,000 or less and business loans of $50,000 or less at any interest rate.
2. Potentially Implicate Licensing for Marketplace Lending Platforms Using a Bank Partnership Model. In a bank partnership model, platform companies may both solicit loans made by the bank partner and later purchase some of the platform loans.
3. Potentially Cover Merchant Cash Advances and Invoice Factoring. The Bill would also expand the meaning of “engaging in the business of making loans in New York” to a person that “solicits [covered] loans . . . and, in connection with such solicitation . . . purchases or . . . acquires . . . other forms of financing.”
If the bill is passed by the legislature and signed by the governor, these changes would take effect January 1, 2018.
Enter the stripped-down, employee-less branch with just an ATM and a meeting room for video conferences with bank employees. The yet-to-be-named mini-branches are part of a Bank of America pilot program, with two located in Denver and one in Minneapolis. After a senior executive mentioned the concept at an investor conference last week, rumors proliferated as to whether this was a sign that the bank branch may be going the route of the bricks-and-mortar bookstore, the CD shop or the mall. The Washington Post even suggested bank branches may become what it calls “robo-banks” – automated and impersonal.
To ensure everything goes smoothly, the bank deploys “digital ambassadors,” or customer service agents who answer customers’ questions about the technology. Pace said that the digital ambassador – a role that’s only been around for a year – is focused on making sure customers are comfortable with the technology and can use the mobile app.
Federal Reserve Governor, Daniel Tarullo, announced his plan to resign in the spring, providing Trump with a clear path to accelerate his deregulatory agenda.
Jeb Hensarling (R-TX), introduced plans to relieve banks from annual stress tests and remove key powers from the CFPB.
U.S. Representatives Ed Royce (R-CA)., Kyrsten Sinema (D-AZ)., and Terri Sewell (D-Al). reintroduced the Credit Score Competition Act. The bill seeks to end the “government-backed monopoly in credit scoring” by enabling GSEs to use competitive scoring models to FICO when underwriting mortgage loans.
Potential Impact of Trump’s Executive Order on Financial Regulation
We highlight Principle (c) in the Executive Order–concerning market failures, systematic risk, and information asymmetries–whose concerns are consistent with the spirit of several Dodd-Frank regulations.
As online lending has morphed from a novelty to the future of debt, PeerIQ has been there chronicling the growth with its deep dive analysis of securitization and portfolio monitoring.
Ram Ahluwalia: Last year highlighted that securing access to a diverse mix of low-cost capital is necessary to compete and win. Lenders that could tap many channels saw little to no slowdown in origination growth and maintained a healthy differentiation in funding cost and access to capital from their peers.
The effects we’ve seen has been tremendous. ABS issuances grew 60% in 2016 versus prior year, and virtually every major platform has established a securitization program and a bank partnership.
Ram Ahluwalia: The decline in originations is overstated and misunderstood. The third quarter saw some origination decline, particularly for a couple of originators who encountered funding crunches, but year over year originations are still up across the industry.
Ram Ahluwalia: We project securitization to continue to be a favored funding channel, with total ABS issuance volumes growing 50% in 2017.
Further, as consumer credit trends remain positive, there is a lot of demand for this ABS paper; the majority of deals remain oversubscribed.
Ram Ahluwalia: The OCC Charter is not a panacea. It does not address other financing and liquidity challenges for the industry. As a result, we believe partner funding banks such as WebBank and Cross River Bank will continue to have an important role to play.
Ram Ahluwalia: Scaling up origination operations that can compete with online lenders (who have established brands now) requires significant investment in marketing, technology, servicing, and risk management.
While there is a large opportunity here for traditional financiers (with their noted cost of capital advantages), on balance, we predict most banks will try to partner with nimble lending platforms, acquiring benefits from the partnerships, while minimizing risks associated with such a major strategic push.
Customers who don’t want to fumble around in their wallet for their A.T.M. card — or who have misplaced it for the umpteenth time — will soon be able to unlock cash dispensers’ coffers by using their phone.
JPMorgan Chase, which has more A.T.M.s in the United States — 18,000 — than any other bank, has activated this technology on a few hundred machines in four test cities, including Miami and San Francisco. Six thousand more are already upgraded and ready to go.
For decades banks have battled “skimming,” in which criminals sabotage A.T.M.s to steal the information off a card and use it to clear out people’s accounts. The replacement of magnetic stripe cards with chip cards significantly reduced that problem, but mobile access brings in new worries.
At Bank of America, customers with compatible phones and a digital wallet app can tap their phone on the cash machine’s wireless pad to authenticate their identity. From there, customers enter their personal identification numbers and carry out transactions in the usual way.
Some banks have gone further and let customers ditch even their phones. With biometrics, a unique body part is enough to unlock cash.
At Banco Bradesco, one of Brazil’s largest banks, customers can gain access to an A.T.M. by tapping their palm on a scanner, which reads the pattern of their veins. (The system handled more than 700 million transactions without any reported fraud, according to Fujitsu, which built the technology.) Banks in Japan, India and elsewhere have used fingerprints for authentication.
A compromised bank card can be reissued. If a hacker figures out how to imitate someone’s eyeball — which has been done in laboratory settings — it can’t be replaced.
About 2.5 percent of the 425,000 A.T.M.s in the country are currently set up for cardless access, according to an estimate from Crone Consulting, which researches the payments industry. By the fall, it expects that number to rise to 25 percent.
Venmo, the digital payment system of choice for many millennials, is owned by PayPal. Giving PayPal and Venmo customers direct access to their money through A.T.M.s is not currently in the works, but it “isn’t something I would rule out,” said Chris Gardner, the product head for PayPal’s mobile wallet software.
DarcMatter is an online investment platform that provides transparent institutional-level access to private investment opportunities such as venture capital, private equity, hedge funds and commercial debt products.
DealMarket is a global online platform enabling Private Equity buyers, sellers, and advisors to maximize opportunities around the world – a one‐stop-shop for Private Equity professionals. DealMarket counts more than 15,000 users, over 3,000 deals and service providers listed on the platform.
EquityZen is a marketplace for private secondary investments in companies worth more than $50 million.
ForwardLane is a cloud-based investment advisory platform that enables investors to invest in particular hedge funds using machine intelligence software.
Orchard provides products and services for institutional investors to understand, execute and manage marketplace lending investments.
PeerIQ provides a credit risk analytics platform that helps institutional investors analyze, access and manage consumer credit risk. It aggregates P2P lending marketplace players and provides high-end analytical analysis of the player’s loan portfolio.
RealtyShares describes itself as the Lending Club for real estate. They have created a marketplace for real estate investing through which individual and institutional investors can purchase shares in pre-vetted residential and commercial real estate properties for as little as $5,000 from the convenience of a laptop or tablet. fund that provides the world’s first browser-based algorithmic trading platform.
Venovate Marketplace is an online platform that matches investment advisors, qualified purchasers, accredited investors, institutions and investing companies with a curated selection of alternative assets.
When Joanna Mathews was laid off from her job as an advertising strategist in Dallas, Texas, she called her online lender to get forbearance on her credit consolidation loan. The lender agreed, but only one condition: It would have to let it help her find a new job.
Mathews, 31, and the counselor provided by SoFi, a US online finance company, spoke at least once a week as she looked for work. She also took advantage of SoFi webinars on how to write resumes and interview. Her conversations with her coach focused on job-search strategies and, eventually, salary negotiation. With her coach’s help, she landed 15 interviews. After three months of searching, she found a position at another firm in Seattle, a city where she once lived and where was eager to return.
On Sunday evening, February 12, authorities issued evacuation orders below Oroville Dam because of a hazardous situation involving the northern California dam’s emergency spillway.
In the meantime, we would obviously avoid exposure to any loans in zip codes starting with 959. Investors without access to personal identifiable information (PII) typically view only the first 3-digits of borrowers’ zip code. Drilling down further, the 5-digit zip codes are: 95965, 95966, 95917, 95948.
Recently published figures from the Peer-to-Peer Finance Association (P2PFA) show that its eight members, including the UK’s three biggest providers, collectively lent £843.9 million in the final quarter of last year, with a total of almost £3 billion lent across the whole of 2016.
We spoke to Neil Faulkner, managing director of 4thWay, a comparison and information site devoted to peer-to-peer.
“They’re coming, they really are,” he says. “There are currently four platforms offering them: Abundance, Crowd2Fund, Crowdstacker and LandlordInvest; and there are two more coming very soon, both Lending Works and Landbay have their approval.”
Neil predicts that over the next year or so we’re likely to see a new platform a month announcing it is ready to offer Innovative Finance Isas.
Interestingly, Neil hypothesises that the reason none of the ‘big three’ P2P platforms – Zopa, RateSetter and Funding Circle – have yet been approved is that the regulator will wait until they are all ready for approval so as not to give one a competitive advantage.
P2P Global Investments (P2P +) has pinned some of the blame for its poor performance on the maturing or ‘seasoning’ of its £840 million loan portfolio.
P2P, the largest of the alternative lending investment trusts on the London Stock Exchange, saw its share price plunge 20.7% last year. This was bad news for shareholders, including star fund managers Mark Barnett and Neil Woodford, who in the previous two years pumped over £700 million into the fund, which invests in loans from peer-to-peer lending platforms.
Even including its quarterly dividends the total loss to P2P shareholders in 2016 was just over 16%.
The performance of the underlying portfolio was much better, but with a total return of just 4.1% from its assets falling short of its 6-8% dividend target, investors grew disillusioned and de-rated the shares, which now trade at a 20% discount below net asset value.
P2P’s run of sub-par monthly returns saw it make a return of only 0.67% in the last quarter of 2017.
The increase in defaults in the last three months of 2016 was largely in US consumer loans, which makes up 56% of the portfolio.
VIAINVEST is a truly customer-oriented company, and we strive to provide the most satisfying investing experience possible. Great deal of investors’ concerns are related to investment safety, so all loans listed on VIAINVEST are secured with a Buyback Guarantee. Also, to guarantee that one investor will never be 100% committed to particular loan, originators keep 5% “skin in the game” for each loan.
What ROI can investors expect?
Currently investors can choose to invest in loans originated in the Czech Republic with 12% annual ROI and Spain – up to 12,2% annual ROI depending on the loan.
VIA SMS Group is active in more countries than in Spain and the Czech Republic. Will loans from other countries be listed on the VIAINVEST marketplace soon?
This is actually the next update planned for VIAINVEST – in following weeks we will publish loans originated in Poland and Latvia, Sweden will also follow in the nearest future.
Is VIAINVEST open to international investors?
VIAINVEST is open to any investors holding a bank account within the European Union or other country to which the requirements arising from European Union legislation on the prevention of money laundering and terrorism financing apply. Currently there is no legislation in Latvia regulating operations of peer-to-peer lending platforms, but it may be developed in 2017, so VIAINVEST is already implementing existing regulations.
Equator, a leading provider of default software solutions for many of the country’s top servicers (including four of the top five largest servicers and a leading GSE), real estate agents and vendors, today released its end-of-year performance metrics. Equator’s REO, short sale and loss mitigation modules have now processed transactions totaling more than $315 billion since its inception with more than 2.2 million distressed properties sold to date.
BetaSmartz, the B2B automated investment platform for all sizes of investors, from institutional to retail, today announced it had opened offices in Hong Kong.
BetaSmartz offers ‘hybrid ‘ digital investment or ‘robo’ advice that combines automated and face-to-face financial advice. Newly appointed Managing Director Asia, Zak Allom, said this model had been well received since its launch in 2015, with several clients now live including two in the U.S.
BetaSmartz will run sales and service from the Hong Kong office, complementing its headquarters in Singapore.