The Technology Edge: How Non-Banks are Seeking to Dominate Point of Sale Lending

The Technology Edge: How Non-Banks are Seeking to Dominate Point of Sale Lending

LendIt Fintech USA 2018, April 9-11 in San Francisco, was a huge success. One of the more interesting panels was on how the non-banking sector is taking over point-of-sale (POS) lending. Kim Gerhardt, director at the San Francisco office of Edgar, Dunn and Company, moderated the panel. Other panelists included Peter Kalen, Michael Garrity, Mark […]

The Technology Edge: How Non-Banks are Seeking to Dominate Point of Sale Lending

LendIt Fintech USA 2018, April 9-11 in San Francisco, was a huge success. One of the more interesting panels was on how the non-banking sector is taking over point-of-sale (POS) lending. Kim Gerhardt, director at the San Francisco office of Edgar, Dunn and Company, moderated the panel. Other panelists included Peter Kalen, Michael Garrity, Mark Lorimer, and Camilo Concha.

Kalen is founder and CEO of Flexiti Financial, a Canadian company founded in 2013 that specializes in providing easy, instant POS financing through its award-winning mobile application process.

Garrity is co-founder, CEO, and president of a platform that has enabled merchants to facilitate consumer lending since November 2010. Financeit has processed over $2.5 billion in loan applications from thousands of merchants.

Lorimer represents LendingPoint, a lending company founded in 2014 that focuses on personal loans and debt consolidation. He is chief marketing officer. LendingPoint recently acquired LoanHero, which is in the POS lending business.

Finally, Concha is founder and CEO of LendingUSA, a company that provides innovative financing solutions with a specialization in POS lending. LendingUSA was launched in 2013 and caters to consumer finance in a variety of sectors from medical, pet care, consumer goods and services, etc.

Over the years, the POS lending industry has gained scale and seen a radical change. A convergence can be witnessed in the way payments are made and fintech lending is facilitated. The opportunity in POS financing is massive, and banks seemed to have missed the ball. Traditional banks strive to serve everyone, but when it comes to POS lending, merchants have to filter their prospective customers through a narrow funnel extending loans to a comparatively small customer base.

Flexiti Financial’s Entry in POS Lending

When Peter Kalen was asked about what brought Flexiti Financial into the business, the product that it is offering, and the level of traction it has been able to create in the market among other merchants, he articulated that Flexiti’s product is somewhat similar to what Synchrony or Alliance Data System is offering. Flexiti differs in the way transactions take place and aims to reduce the time consumed in the loan application process.

Many organizations issue private label credit cards, but application processes are long and approval rates low. With its experience and vision, Flexiti Financial has successfully introduced a 100% paperless process to offer instant POS financing. Its virtual credit card application can be downloaded from the Google Play store and the Apple store.

These private label cards speed up the loan application process, bringing the process down to three minutes. This is a win-win for retailers and customers. The platform improves the online retailer’s UX by removing the friction at the front-end.

Financeit and Point of Sale Lending

Garrity also shared his views on point of sale lending. He put emphasis on the fact that personal lending is more about new transactions and focuses less on lending. Everything in POS lending, from the technology to APIs is obsessed with enabling easy sales for merchants, improving their experience, and supporting them as they try to close more business. Merchants and customers want financing options, but they do not want to indulge in complicated programs.

Another area that Financeit targets is debt consolidation. The company has delivered a platform that makes it easy for businesses to offer powerful financing options to their customers from any device.

When asked about how they excel at delivering services to customers, Garrity said they have acquired Centah Inc, a company operating in home improvement work-flow and lead management software with joint partner and investor Goldman Sachs. The company redesigned its website to create a platform that manages the process, helps businesses connect with customers, provide dispatch scheduling systems, and represent financing options to customers throughout the process. He warnes other players that if they only focus on financing and not on the transaction, they will be missing out on an important aspect of dominating this space.

LendingUSA’s Role in POS Lending

Gerhardt asked Concha about his journey into this industry. Concha shared that LendingUSA focuses on point-of-need financing, which sits at the intersection of point of sale and fintech. He believes that businesses in today’s era are not required to be good but great if they want to be successful, and they are required to be great in all aspects, namely, marketing, technology, underwriting, and risk mitigation.

Concha started with a company called 1800mysurgeon that matched cosmetic surgeons with consumers. After starting the company, he realized the need for financing as an important part of the business. He decided to create a platform to interact with both surgery and finance to enhance the merchant’s experience.

LendingPoint’s Emergence In POS Lending

LendingPoint started as a direct consumer online lender specializing in 600-700 FICO score customers. Lorimer emphasized that the company understood very early that customer experience is crucial to POS transactions. Although the players in the market now are very good at generating products that banks like to own, they do not necessarily focus on the merchandise. LendingPoint simplifies the lending process by sharing risk and administering payment plans. LendingPoint also offers merchants risk programs to extend in-house, end-to-end services.

Marketing With Established Merchants

All the banks playing in the market are working to deliver better services to customers in different ways. The biggest players historically are Wells Fargo, Citigroup, and Synchrony Financial. They all have significant relationships.

The question is whether these big banks can be a part of this game. Concha believes that banks are an important part of the ecosystem. These banks are good for purchasing loans but are constrained by reputational risks, marketing, and other issues. Lorimer added that LendingPoint also works with some established banks. Talking of the role of hard pull and soft pull in availing credit, he shared that because a hard pull impacts the credit report of the customer, it is a cause for low approval rates. Soft pulls, on the other hand, do not affect the credit score of the credit seeker leading to a higher approval rate for loans.

Garrity shared his point of view on the tie-ups with established banks and financial institutions that become balance sheet lenders. He said they are participants in securitization, originations, and selling. He believes there is clearly an opportunity for all the stakeholder businesses to grow. Online POS lending usually operates separately considering the fact that it is complicated and technology-driven. Banks are, therefore, slow followers of fintech companies.

The Technology Edge Leads to Domination

The next important aspect analyzed was whether it is the technology that enables online POS lending businesses to dominate the lending space.

Kalen believes technology is the most important element of this space. Concha believes this space is all about keeping merchants and customers happy and building long-lasting relationships with them in the process. Lorimer questions the integration of technology among banks and whether banks will be able to adapt to complex technologies. He believes banks aren’t set up to do that, but to deliver a mass homogenous customer service. Garrity, on the other hand, believes the less you see the technology, the more attractive it is; he also thinks it is better for the merchant to focus on increasing the business close rates.

Talking about data management, Lorimer believes technology definitely provides an edge to the business on the back end. The data is the source for everything and it is analyzed and configured to improve the experience. As technology enables automation and brings security, users can access everything at one place and find it already stored in the system.

Kalen agrees that technology is a boon for backend data management. He added to the discussion saying that the more established players have an edge as they have been in business for many years. They have been able to hone their skills over a period of time.

Concha also believes that technology will work for the POS lending as it is different from other businesses. There is a major role of risk, debt, and strong relationships in POS lending, and none of these can be managed properly without technology.

The Challenges of POS Lending

Technology, scale, and partnerships:
Kalen from Flexiti views POS lending as a very different business than retail lending. Getting customers and coping with technology are major challenges. Other challenges that non-bank businesses face are focusing on the scale. It is important for the business to look at the credit cycle and beware of fraudulent practices as it increases the scale of operations.

Credit cycle:
Being on the right side of the credit cycle is crucial to every lending business. The access to credit in the credit cycle determines the risk and therefore the value of the business. Businesses must prepare their strategies, keeping the future in mind.

Regulation:
Lorimer believes this space requires more regulation since the Consumer Financial Protection Bureau (CFPB) is not very active. Poor regulation and lack of control pose a major risk to the players in the market.

Availability of capital and credit risk:
Another challenge is the availability of capital to extend lending facilities. The fear of credit facilities drying up in a day also bothers businesses.

The Takeaway

Kalen has realized that success does not come easy. The companies in this space need to understand that a lot of lending capital is required along with an understanding of the tricks of the trade.

Concha believes it is a 3-step learning process where the business is required to go through a testing phase, an education phase, and an adoption phase.

With LendingPoint’s recent acquisition of LoanHero, it is comparatively a new entrant in the market.

The crux of the entire discussion is that POS lenders must be specialized to survive in the market. The business has to endeavor to offer value added merchant services instead of being a one-stop shop to be successful. There is a lot of room for growth provided one understands the complexities of the trade.

Author:

Stephanie Vaughan is vice president at  Allen TaylorPosted on Categories Alliance Data System, alternative lending, Analysis, balance sheet lending, Banks, CFPB, Citigroup, consumer lending, Credit, credit risk, Featured, FICO, Financeit, Flexiti Financial, instant financing, LendingPoint, LendingUSA, LendIt 2018, Online Lending, point of sale financing, point of sale lending, POS financing, POS lending, Regulation, Synchrony Financial, Wells Fargo

Thursday April 12 2018, Daily News Digest

Thursday April 12 2018, Daily News Digest

News Comments Today’s main news: Upgrade to issues ABS–but when? FCA warns Funding Circle clone. Funding Circle Netherlands approved for Guarantee SME Credit Scheme Participant. Today’s main analysis: The metro areas with the most fraud alerts. Today’s thought-provoking articles: The regulation of marketplace lending (A MUST-READ REPORT). LendIt, PitchIt award winners. Is China Rapid Finance close to profit? GDPR consent […]

Thursday April 12 2018, Daily News Digest

News Comments

United States

United Kingdom

China

European Union

International

Other

News Summary

United States

Ex-LendingClub chief’s new venture set to issue ABS (GlobalCapital), Rated: AAA

Upgrade is said to have a private warehouse facility in place and is looking to debut a securitization in the coming months, according to two people familiar with the matter.

According to an April 2017 press release, Jefferies is advising the company on its capital markets strategy and is….

LendingTree Ranks Metros with the Most Fraud Alerts (PR Newswire) Rated: AAA

With millions of Americans affected by data breaches every year, such as recent revelations at Uber and Equifax, LendingTree decided to look at anonymized data from a sample of the over 7 million My LendingTree users to see where people are most likely to have asked a credit bureau to place a fraud alert on their credit report.


Key findings of the study:

  • The average rate of fraud alert requests among all cities reviewed is 6.4 percent.
  • Las Vegas and Houston tie for the highest rate of fraud alerts, at 13.6 percent.
  • Miami and New York are close behind, tied at 12.9 percent.
  • Rochester, N.Y. has the lowest rate of people requesting fraud alerts at 2 percent. Nearby Buffalo, N.Y. has 2.6 percent.

The Regulation of Marketplace Lending: A Summary of the Principal Issues (Chapman and Cutler) Rated: AAA

So-called “true lender” litigation remains one of the most significant risks facing the marketplace lending industry. These are cases involving a claim by a borrower or regulator that the “true lender” of a loan funded by a Funding Bank for a marketplace lender is the marketplace lender rather than the
Funding Bank. Often such litigation involves asking the court to look past the form of the loan transactions to their substance in order to ascertain which party, the Funding Bank or the marketplace lender, holds the predominant economic interest in the loans. The aim of true lender claims is to subject
the marketplace lender to federal and state regulation as a non-bank lender, enabling the claimant to pursue actions based on failure to comply with state lender licensing or usury laws.

Read the full report here.

LendIt Fintech Names PitchIt Competition Winners And Second Annual LendIt Industry Award Winners (PR Newswire) Rated: AAA

Out of eight PitchIt finalists, the judge’s winner was CreditStacks, a company that offers U.S. based premium credit cards to prime, new-to-credit customers. The audience winner was Narmi, a fintech company the helps credit unions and banks deliver a unified experience with modern and secure online banking, mobile banking and websites.

Below are the second annual LendIt Industry Award winners, per category:

Fintech Innovator of the Year

Affirm

Executive of the Year

Anthony Hsieh, Founder & CEO, loanDepot

Fintech Woman of the Year

Kathryn Petralia, Co-founder & COO, Kabbage

Blockchain Innovator of the Year

ConsenSys

Most Innovative Token Economy

AxiomZen

Top Consumer Lending Platform

Yirendai

Top Small Business Lending Platform

Kabbage

Top Real Estate Lending Platform

LendInvest

Emerging Lending Platform

LendingUSA

Excellence in Financial Inclusion

Oportun

Most Promising Partnership

LendingClub + Opportunity Fund

Most Successful Cross-Border Partnership

Kasisto + DBS Bank

Most Innovative Bank

Cross River

International Innovator of the Year

IrisGuard

Top Enterprise Technology Company

ThreatMetrix

Top Emerging Technology Company

MoneyLion

Top Professional Services Company

Millennium Trust

Most Innovative Mobile Technology

Juvo

Top Fintech Equity Investor

Edison Partners

Best Journalist Coverage

Tony Zerucha, Managing Editor, Bankless Times

Top Investment Bank in Fintech

FT Partners

To modernize consumer lending, it had to strip systems to the core (American Banker) Rated: A

Replacing core systems can be an expensive and risky proposition for banks, but KeyCorp has decided the time is now to replace an antiquated legacy system.

The $138 billion-asset bank announced at the Oracle Industry Connect conference in New York this week that it plans to ditch its existing lending platform in an effort to digitize and modernize the lending process.

Appeal could jeopardize CFPB win in landmark tribal sovereignty case (Reuters) Rated: A

Online lender CashCall filed a notice of appeal Tuesday in a Consumer Financial Protection Bureau enforcement action that set precedent on whether consumer lenders can evade state interest rate caps by affiliating with Native American tribes and invoking tribal sovereignty. In 2016, U.S. District Judge John Walter of Los Angeles granted partial summary judgment to the CFPB, holding that CashCall was the true lender, rather than a company owned by a member of the Cheyenne River Sioux Tribe, so state laws govern CashCall loans. The company’s notice to the 9th U.S. Circuit Court of Appeals, filed by its lawyers at Latham & Watkins and Skadden Arps Slate Meagher & Flom, indicated that CashCall will challenge the landmark summary judgment decision on tribal sovereignty, as well as other rulings by Judge Walter.

Judge Walter, however, concluded that the bureau hadn’t shown it was entitled to any restitution and that CashCall had not knowingly flouted consumer protection laws. He awarded the bureau only $10.3 million in penalties.

Optimizing Mortgage Loan Lifecycles With Fintech (the M Report) Rated: A

Integrated properly into both the trading and operational side of the mortgage lifecycle, fintech can not only increase margins but also allow for lenders to originate more loans in less time and in a more efficient and secure manner. Additionally, by using fintech throughout the mortgage lifecycle, each phase of management is enhanced and therefore produces optimized outcomes leading to better investment returns, while still providing the borrower with a great customer experience.

A “High Level” Tech-Enabled Residential Mortgage Lifecycle*

Source The M Report

*This chart is provided as a “high level” example of what types of fintech can optimize the lifecycle. It is not to be considered a complete integration or feature roadmap.

 

Big Banks Using Non-Bank Middlemen to Lend to Subprime Borrowers (Low Cards) Rated: A

If a borrower has a low credit score and needs a loan for a $12,000 vehicle, this would not be of interest to a large bank such as Wells Fargo. But it would be an option for a non-bank lender like Exeter Finance. Exeter would screen the applicant and approve the loan at their discretion. Then, Wells Fargo would extend a loan to Exeter. The bank is still profiting from a sub-prime loan, but they are giving the money to another lender.

This does not eliminate risk on Wells Fargo’s end. However, it does push the burden onto the non-bank lender, according to The Wall Street Journal.

Two’s company (Breakingviews) Rated: A

Silicon Valley is giving two of its most noted fintech outcasts a second chance. Former Social Finance boss Mike Cagney and erstwhile LendingClub Chief Executive Renaud Laplanche are each back with new loan ventures after losing their jobs to scandals.

Between them, both men created what are now the two largest fintech lenders, having originated or facilitated some $63 billion between them in the past few years.

Blockchain makes online lenders taste own medicine (Nasdaq) Rated: A

Blockchain is giving online lenders a taste of their own medicine. The likes of Prosper, Social Finance and On Deck Capital found cryptocurrency technology trying to steal the limelight at their annual get-together in San Francisco this week. It’s a case of the disruptors being disrupted.

United Kingdom

FCA issues warning about Funding Circle clone (Peer2Peer Finance News) Rated: AAA

THE CITY watchdog has issued a warning to consumers about a clone of peer-to-peer lender Funding Circle.

The clone, Funding Circle Loans, had set up a website purporting to be the P2P platform.

Its website, , has since been suspended.

Prestige Funds partners for Innovative Finance ISA bond (The Armchair Trader) Rated: A

Prestige Funds, a specialist direct lending manager, is partnering with UK-based Goji to launch a Renewables Lending Bond which is eligible for inclusion in an Innovative Finance ISA (IFISA). IFISAs are a new, tax-free way for investors to access investment opportunities that are not available on stock exchanges.

The Goji Renewables Lending Bond will include a yield target of between 5.5% and 6.5% over three and five year terms. Interest payments on the bond will be supported by UK government subsidies, such as Feed-in-Tariffs.

The need for speed for loan approvals and payments (Credit Strategy) Rated: A

Arguably, consumer lending has come full circle.

But today’s consumer lenders are having to contend with raised customer expectations. “Empowered borrowers,” says consultancy firm PwC, expect not only a simple, but also a fast loan process.

Consumer lending research published by PwC found that other than economic factors (interest rates and closing costs) or “having an existing relationship,” the speed of the process was the most important factor for borrowers in choosing a lender.

 

Higher salaries giving fintech sector edge over traditional banking (Finextra) Rated: B

The threat from Brexit has also called into question how Britain has – and will – deal with the country’s departure from the European Union in terms of its strong worldwide financial standing. With this in mind, Joblift has analysed and compared the UK’s Fintech and traditional banking sectors over the last 12 months. The analysis shows that traditional banking has felt the effect of the competition from Fintech and the upcoming Brexit with vacancies decreasing by 3% monthly, while Fintech seems to be flourishing, with a huge growth of 9% monthly, in the face of these challenges.

China

China Rapid Finance: Is It Close To Making A Profit? (Seeking Alpha) Rated: AAA

China Rapid Finance (XRF) went public on NYSE on April 28, 2017, as the beginning of the IPO wave for China P2P companies in 2017. The company focuses their business on meeting the credit demand for EMMAs (Emerging Middle-class Mobile Active consumer) in China.

  • China Rapid Finance (XRF) has experienced a business shift from lifestyle loans (larger in size) to consumption loans (smaller size), which will lead to bigger impact from regulatory hammer;
  • Q4 earnings results didn’t satisfy investors and stock price dropped 15% in two days after the ER release;
  • Despite of the short term concerns, operating efficiency has significantly improved in 2017, which makes the profitability outlook of the firm very positive.
Source: Seeking Alpha
European Union

Ministry of Economic Affairs and Climate Approves Funding Circle Netherlands As Guarantee SME Credit Scheme Participant (Crowdfund Insider) Rated: AAA

The Ministry of Economic Affairs and Climate (EZ) has reportedly approved Funding Circle Netherlands as a Guarantee SME Credit (BKMB) scheme participant.

According to AltFi, for participating firms, which are typically major banks, the BKMB provides guarantee of up to 75% of the loan amounts that fit within its criteria. 

GDPR and financial advice: Consent for data processing (Professional Adviser) Rated: AAA

A firm could be in trouble with the Information Commissioner’s Office (ICO) if an individual makes a complaint about being marketed to by a firm and there is no consent in place, since this constitutes a breach of the GDPR.

Article 6 – lawfulness of processing

Processing shall be lawful only if and to the extent that at least one of the following applies:

a. the data subject has given consent to the processing of his or her personal data for one or more specific purposes;

b. processing is necessary for the performance of a contract to which the data subject is party or in order to take steps at the request of the data subject prior to entering into a contract;

d. processing is necessary in order to protect the vital interests of the data subject or of another natural person;

f. processing is necessary for the purposes of the legitimate interests pursued by the controller or by a third party, except where such interests are overridden by the interests or fundamental rights and freedoms of the data subject which require protection of personal data, in particular where the data subject is a child.

International

Mega-deals continue to shape Asian market

After rounding off 2017 at a remarkable high bolstered by megadeals, Asia continued to see large deals in Q1 2018.

Global Q1 2018 key highlights

  • Global VC investment rose from US$46 billion in Q4’17 to US$49.3 billion in Q1 2018, a solid increase buoyed by five US$1 billion+ megadeals.
  • The number of global VC deals declined for the fourth straight quarter, falling from 3,286 in Q4 2017 to 2,661 in Q1 2018. The number of VC deals has dropped by half since reaching a peak of 5,480 deals in Q1’15.
  • The Americas set a new record for VC investment in Q1 2018, with US$29.4 billion raised across 1,782 deals. Asia raised US$14.6 billion across 317 deals, and Europe raised US$5.2 billion across 548 deals.
  • Corporate participation in global VC deals set a new record for the second straight quarter, rising from 18.5% in Q4 2017 to 21% in Q1 2018.
  • New and old unicorns – companies valued at over US$1 billion – attracted a significant amount of funding with US$14 billion across 32 deals. Two unicorns went public late in Q1 2018: cloud-based security provider Zscaler and cloudstorage provider Dropbox, with both companies seeing positive results to date. With Spotify set for a direct listing in April and UK-based online loan provider Funding Circle planning to go public later this year, the IPO market may be opening up.

How global fintech trends will impact your banking (Bank Rate) Rated: A

In the last few years, the U.S. has seen the launch of a whole crop of neobanks, consumer-friendly startups that are trying to change the way we manage our money. A bunch of neobanks have appeared in Europe, too (they are called challenger banks across the pond), and it seems like they are all eyeing the U.S. market.

Last year, French firm Revolut, which includes a crypto wallet and free international transfers among its features, announced its plans to expand into the U.S. Germany’s N26 recently raised $160 million from venture capital investors to fuel a U.S. expansion. Meanwhile, British startup Cleo, which is more of an AI-powered budgeting tool than a challenger bank, recently began offering its product in the U.S.

What’s Happening with P2P Lending Blockchain Startups in 2018 (Equities) Rated: A

That is why startups like Alchemy, SALT, Eth-Lend and Celsius can be game-changers not only in peer-to-peer (P2P) lending, but for the future of the American economy as well. Based on blockchain technology, these startups are committed to creating a safe, global, and accessible source of P2P lending.

The debt is then pooled into Collateralized Debt Obligations (CDO’s) which are then organized by risk and made available to purchase on the platform. This not only provides an easy and secure source of P2P funding, but creates a sustainable ecosystem and investment opportunity for anyone on the network.

Africa

The future of financial advice is tech and touch (Moneyweb) Rated: A

There is a lot of conversation around investing digitally, right now. Supporters of the idea suggest that investors should cut out their brokers or financial advisors and take their money online by investing through digital platforms. The argument goes that while an advisor might give your investments a bit of an edge in terms of growth, the fees they charge tend to negate the value that they add.

Since both financial advisors and technology have such an important role to play in supporting individuals in making the right financial decisions, and in the convenience of access to information about their spread of financial products, I recommend a “touch-and-tech” model of engagement.

MENA

Dipping Into Digital (Global Finance) Rated: AAA

The MENA fintech sector is booming, with more than $100 million raised by start-ups in the last decade. Dubai-based digital research network Wamda’s State of Fintech report released last March predicted the total for just that year would reach $50 million, an increase of 270% over 2016.

Although online payments, remittances, crowdfunding and peer-to-peer lending attracted the largest tickets, fast-growing fintech subsectors include cryptocurrencies, artificial intelligence and digital wallets.

In 2017 some of the major deals included a $20 million capital injection in Saudi Arabia’s online payment solution PayTabs; a $10 million round by three investors, including UK firm Gocompare, for Emirati price-comparison platform Souqalmal; $13 million for Emirati Cloud HR and insurance platform Bayzat; $5 million for Emirati peer-to-peer lending company Beehive; and $3.5 million for Emirati comparison website Yallacompare.

Lebanon was one of the first MENA countries to invest massively in the digital economy. Back in 2013, the central bank, Banque du Liban, issued a circular guaranteeing up to $400 million worth of investments in innovative technologies, later raising that amount to $600 million. Today, the country is home to 15 funding institutions, as well as a myriad of accelerators and start-up support programs.

New Realities, New Technologies (Global Finance) Rated: B

Surprisingly, the UAE accounts for 70% of the investments in areas such as digital banking services, cryptocurrencies, ecommerce and fintech start-up deals. For a nascent market, the growth rate is explosive, with dozens of new start-ups launching every year. So far, online payments, remittances, crowdfunding and peer-to-peer lending have attracted the largest investments. Late last year, Bahrain introduced the world’s first shariah-compliant fintech consortium.

Authors:
George Popescu
Allen Taylor

Financing Life’s Most Important Moments

LendingUSA

Camilo Concha’s experiences in building specialized online platforms taught him that there was a need to place potential clients and patients with the right professional for their situation, but there was also the need to help them finance their legal and medical bills. That’s when he started the two specialty companies mylegalloan.com and medicalfinancing.com. His […]

LendingUSA

Camilo Concha’s experiences in building specialized online platforms taught him that there was a need to place potential clients and patients with the right professional for their situation, but there was also the need to help them finance their legal and medical bills. That’s when he started the two specialty companies mylegalloan.com and medicalfinancing.com.

His ability to diagnose market needs and find viable, simple solutions brought about his latest, largest, and boldest venture yet, LendingUSA.

Prior to the 2015 founding LendingUSA, Concha attended a LendIt conference where he learned how to build a better platform. He connected with Cross River Bank, which now does all of the company’s loan licensing, and First Associates, who services the loans. He also connected with Howard Freedland. Freedland, in turn, brought Brandon Ross, CEO and founder of Direct Lending Investments, and the two partnered with online lenders to add $55M USD in debt capital to the $5M Concha had raised in equity funding. That $60M is the only funding the company has seen to date, and Concha says that it was possible to raise that amount due to the company’s $1B in loan application flows.

LendingUSA Continues Concha’s Successful Run

Simplicity is evident when we look at how LendingUSA got off the ground. “We basically built an underwriting model and started lending,” Concha said. Working with doctors and merchants at the point of sale (POS), the company has developed a strong vantage point, being able to offer their product to consumers who can’t or don’t want to do longer term financing.

Much of the client base is comprised of people who want to get elective medical procedures, such as liposuction, which are not covered by insurance. LendingUSA makes a loan to the customer but pays the amount straight to the doctor.

Loan pricing is set into the business model, and it is based on a credit profile, which includes credit score, debt-to-income ratio, and credit sought in the last six months. FICO scores are also a factor, but just one of the important things, with the company also assessing whether customers are maxed out on their credit and if they’re paying their bills. Risk assessment is measured by an algorithm, a process that allows the customer to be approved or declined on the spot.

Being a POS lender provides many benefits to the LendingUSA business model. Beginning the process with the provider, rather than the borrower, referrals come from the providers themselves, whether through an advisory role or by way of brochures available in providers’ offices. Providing loans at this point allows LendingUSA to offer financing in installment loans where other companies tend to deal in lines of credit. This allows the company to go higher on the credit scale than would be possible with lines of credit and to also go a little lower on the credit spectrum, as far as 620. Installment loans also prove more beneficial to the borrower as risk goes down every month.

The company charges a fee at the POS depending on their risk evaluation, and the merchant fee for these services usually runs about five to six percent.

LendingUSA’s Performance

During LendingUSA’s growth, the company has also acquired 30 branded websites including bridalloans.com, surgeryloans.com, petloans.com, and dentalloans.com. In all, the company currently does business with 3,700 different medical providers.

Working with customers who have an average credit rating of 682, the company currently has a loan volume in the neighborhood $225M. The average loan is $6K with an average interest rate of 22% and an annualized charge off rate of about 8-10%.

Choosing to focus on “life’s important moments,” LendingUSA focuses on “niche markets we think we can win in,” counting elective medical, dental, cosmetic surgery, chiropractic, pet loans, and funeral loans among the diverse group of industries it works in.

Competition and Customers

Concerning the competition, Concha shows another reason why he has proven successful in that he doesn’t worry himself with concerns about what other companies are doing, choosing to focus on what his is doing. “I don’t like to call it competition,” he said. “There are great companies like Care Credit, Affirm, and Green Sky that do similar things, but they work in other niche markets or do it differently by providing revolving lines of credit. We have our little niche and are a better fit for some people, [especially in that] installment loans are better for large amounts of revenue, and lines of credit better for smaller amounts.”

The typical LendingUSA customer is someone in their 40s and 50s who makes $60K to $80K a year. “We believe that a lot of people want to improve their lives,” Concha said. “Our customers are gainfully employed, but they don’t have the means to get the product they want. We make it available to them.” In doing so, the company provides a great service for their merchant partners by helping them to capture more clients and generate more revenue.

LendingUSA’s Goals and the Direction of the Industry

“Our initial goal was to reach $1B in sales in the next three to four years,” Concha said. “We’re looking to price loans better, securitize loans, and find new capital partners.”

Concha is positive about these goals as the cosmetic surgery and elective medical fields are growing every year. The growth is underscored by the fact that men are now gravitating toward cosmetic surgery, when the thought was taboo in the past. These procedures are now more generally accepted for men. He also says that fears of economic downturns, which might stunt growth in other industries, are less of a concern. “People still want to feel good about themselves; they might not buy a new house or car, but they want to look good,” Concha said.

LendingUSA’s Team and The Future

Concha considers himself fortunate enough to have built a strong team. This includes Mike Testa, the company president and the former president of Care Credit, who built a POS business in the medical industry from $80M to $6B; Sharad Shankar, the former chief risk officer of Lending Point, who now holds that title with LendingUSA; and
Jenann Shemisa, LendingUSA’s chief compliance officer, who served as a senior attorney for the enforcement division of the FDIC.

Understandably pleased with what he has built in less than three years since founding LendingUSA, Concha says the company is now focused on loan performance. “Because we’re at the POS, we’re able to compete more on service than on price. This means we can charge a little more, which allows our portfolio to perform at 500 basis points better on yield than most marketplace lenders. Everybody that advertises on LendingTree and online comparison sites is competing on price, which doesn’t help portfolio performance. By working at the POS, we get better yields because we’re not competing on price.” With this focus, the company has a goal of being number one in the markets it services.

Concha’s Past Comes Back to Reward Him

Concha came to the U.S. from Colombia with his family when he was 14. It only took him seven years to go from being a school boy who spoke little English to starting his first business, which he ran while he studied at California State University, Northridge and worked as a Spanish interpreter at the San Fernando Bar Association.

Seeing the desperate need for an attorney referral service, he founded the Attorney Search Network (ASN), which he ran out of his apartment until he could afford to pay for his first office space, a converted janitor’s closet that was so small he had to speak with clients in the hallway.

Concha then saw that he could create other companies to fulfill similar voids in different fields. This brought about the founding of 1800mysurgeon.com, created to help assist individuals who are looking for a board-certified and reputable cosmetic surgeon.

Concha now works out of one of the tallest buildings in the San Fernando Valley, employs dozens, and the two companies together have extensive databases with hundreds of doctors and lawyers from every legal and medical field. Add to that the lending businesses he has founded and he has quite the legacy. All of them are still growing strong. There’s nothing her to suggest that LendingUSA won’t maintain a similar trajectory.

Author:

Written by Paul Keenan.

Tuesday December 26 2017, Daily News Digest

cumulative loss

News Comments Today’s main news: 3 Reg CF portals no longer FINRA-approved. Zopa launching a bank. LexinFintech completes $108M IPO. European banks prep for PSD2. Australia releases second MPL survey. Today’s main analysis: PeerIQ’s MPL Loan Performance Monitor. Today’s thought-provoking articles: 2017 was a wild ride for alternative lending. Is Congress expanding credit for the poor or enabling high-interest rates? Megatrends […]

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News Comments

United States

United Kingdom

China

European Union

Australia

India

Asia

News Summary

United States

The Wild Ride In Alternative Financing In 2017 (PYMNTS), Rated: AAA

But as 2017 pulled into the station, it became clear that a decade-long era in financial services was officially drawing to a close, other than this transitional year between what was and what’s next.

It became clear that Act I of digital era financial services was drawing to a close – and that Act II is getting warmed up backstage.

The CFPB

The CFPB has spent a year generating surprising questions – with even more surprising answers.

Moreover, there was some thought that the federal courts might render much of the discussion moot, by ruling the CFPB’s independent structure rendered it unconstitutional in the CFPB v. PHH case.

That ruling was thrown out by a three-judge panel of the D.C. Circuit court of appeals, and a final ruling is still awaited.

The Congressional Review Act (And The Fate Of The Old Rules)

The 20-year-old law, which had only been used once before 2017, has been used 15 times since January of last year to undo Obama-era rules.

The law was effectively used to bounce the CFPB’s arbitration rule from going into effect. That rule would have made it illegal for financial services companies to insert mandatory arbitration clauses into consumer contracts, thus forcing consumers to surrender their right to form class-action lawsuits.

A similar maneuver was attempted to block controversial rules the CFPB passed regarding the regulation of prepaid cards. The House approved the CRA resolution, but the bill was unable to garner majority support in the Senate. That means going forward, prepaid cards that offer overdraft protection will be regulated as though they are credit cards, as opposed to debit cards.

The Future Of Innovation Instead Of Regulation

Affirm, founded by PayPal’s Max Levchin, built a POS financing product dedicated to offering consumers an honest, transparent way to pay for items on installment.

Affirm’s mission to expand consumer access to honest financing will rev into high gear next year, on the heels of a $200 million capital raise on an estimated $1.6 billion valuation, and now with the ability for any consumer to take advantage of its credit option at any merchant.

LendUp wants to calibrate financial services to what it calls “the new average consumer” or the “emerging middle class.”

EVEN’s new partnership with Walmart is a new tool to help smooth the income volatility for its workers by allowing them to be paid in real time for the hours they have already worked, instead of having to wait for the traditional payday.

“This isn’t that people just don’t have the money to pay their bills in general, but that they are forced to make bad decisions because the money they have already earned by working is not available to them at the right time,” EVEN CEO Jon Schlossberg told Karen Webster. “That adds up to a $100 billion industry a year in payday loans and late fees. That’s crazy; we can fix that and we should fix that.”

So EVEN – now with Walmart as a partner – is fixing it, both by giving customers access to their funds early, but also by providing access to financial management software so they can better control their money.

What’s Next

Perhaps in 2018, they will even find ways to write studies that use terms properly and do not directly contradict the research of other regulators.

Millennials, she noted, tend to enter the credit system with a bang once they start having families.

MPL Loan Performance Monitor (PeerIQ), Rated: AAA

This week, we introduce our redesigned MPL Loan Performance Monitor where we track the delinquency rates, cumulative losses, and transition matrices on public marketplace lending data that is comprised of loans originated by LendingClub and Prosper.

Source: PeerIQ
Source: PeerIQ

Is Congress expanding credit for the poor or enabling payday lenders? (Salon), Rated: AAA

Ken Rees has made a fortune selling loans with triple-digit interest rates to borrowers with poor credit history or no credit history.

But in 2008, federal regulators ordered First Delaware to stop working with payday lenders — including ThinkCash — so Rees changed his company’s name to Think Finance and started striking deals with Native American tribes, which, as sovereign entities, are also exempt from state usury laws. Think Finance filed a still-pending lawsuit claiming Think Finance used the tribes as a front to make deceptive loans. Think Finance denies the charges and Rees started a new company, Elevate Credit, which operates from the same building in Fort Worth, Texas. Elevate deals in online installment loans, a cousin to payday loans, and partners with a Kentucky-based bank to offer lines of credit with effective annual interest rates much higher than would otherwise be allowed in some states.

Sponsors say the Protecting Consumers Access to Credit Act facilitates bank partnerships by ensuring third parties like debt buyers and rapidly growing financial technology firms can buy, and collect on, loans originated by federally regulated banks regardless of state laws governing interest rates. These partnerships can help make credit available to those left out of the traditional banking system, primarily low-income individuals, backers say.

“The bill covers every flavor of online lending,” said Adam Levitin, a consumer law professor at Georgetown University. “Some members of Congress have gotten snookered that they are fostering innovation, but a loan is just a loan whether you do it online or not.”

But now more payday-style lenders are moving online and donning the friendly face of a tech startup. Some, like LendUp, a lender charging more than 200 percent on some loans and counting Google Ventures among its investors, have attracted mainstream support. Like many high-interest online lenders, LendUp says it is “a better alternative to payday loans” because they use alternative data sources to determine interest rates but consumer advocates say the product, a high-interest loan that can quickly lead to a cycle of debt, is essentially the same thing.

Elevate said in an email it is committed to lowering rates further, and said its loan terms are more transparent and it doesn’t charge expensive fees associated with payday lenders.

Elevate’s installment loan called RISE is licensed in 17 states that don’t impose interest-rate caps and charges annual interest rates as high as 299 percent. Elevate says repeat borrowers can eventually qualify for interest rates as low as 36 percent on subsequent loans.

Fifteen states and the District of Columbia impose interest-rate caps, most around 36 percent, to protect consumers from high-interest loans.

This article originally appeared on publicintegrity.org.

Three Reg CF Crowdfunding Portals are No Longer FINRA Approved (Crowdfund Insider), Rated: AAA

Ufunding was the first to depart FINRAs list of approved platforms. In hindsight it is a wonder the platform was ever approved. The action by FINRA took place a little over a year ago as “potential for fraud” was evident on Ufunding as was “an almost complete failure to follow disclosure and filing requirements.”

DreamFunded Marketplace has hit the exit. We are not certain exactly why DreamFunded left but, if one speculates, it is most likely due to the fact real estate investing is better suited for Reg A+ and Reg D crowdfunding rules which allow issuers to raise more money.

The other former CF platform is Crowdboarders out of Texas. Crowdboarders appears to have pivoted to more of a promotional platform.

After the tech wake-up call… (Banking Exchange), Rated: A

Not long ago, Indiana’s Peoples Bank SB had a business prospect come in who had a loan with Kabbage, the online lender, at 20%. “We reviewed their credit, and we got them into the bank at close to 5%,” says Benjamin Bochnowski, president and CEO at the $914.2 million-assets bank.

With credit that was worthy of a rate like that, the bank asked the customer why it had gone to Kabbage in the first place—and been willing to pay nearly 15 percentage points more for credit. Simple, the new customer responded. Kabbage was easy to use and delivered the proceeds of the loan quickly.

Camilo Concha of LendingUSA (Lend Academy), Rated: A

In this podcast you will learn:

  • The founding story of LendingUSA.
  • The different verticals they operate in today.
  • How their point of sale lending process works.
  • The typical terms on these loans.
  • A profile of the typical borrower who uses LendingUSA.
  • How they do marketing outreach to the merchants offering their loans.
  • The different revenue streams they have.
  • The scale that LendingUSA is at today.
  • How their loan performance has been to date.
  • Why LendingUSA is not competing as much on price as other consumer lenders.
  • Their overall approval rate for loan applications.
  • How they approach fraud prevention.
  • Who is providing the capital for these loans.
  • Where they are on the path to profitability.
  • Why the marketplace lending challenges of 2016 did not impact LendingUSA that much.
  • Why their cost of customer acquisition is going down.
  • Their biggest challenge in getting their business to where it is today.
  • Camilo’s long term vision for LendingUSA.

P2Binvestor CEO Krista Morgan on Marketplace Lending: What to Expect in 2018 (Crowdfund Insider), Rated: A

P2Binvestor CEO Krista Morgan founded P2Binvestor in 2012 with a mission to help growing businesses succeed. Morgan is not only CEO of a fast growing Fintech, she is also the cohost of the podcast “Women Who Startup Radio”, an ardent mentor to other women entrepreneurs who speaks regularly on business finance, fundraising, and scaling a startup.

I recently connected with Morgan via email to learn her 2018 predictions for the Marketplace Lending sector and more specifically, her predictions for P2Binvestor. Her observations follow:

  • More focus will be placed on business models and profitability
  • Platform mergers and shut downs will occur as equity investors remain on the sidelines
  • Capital will start to look for shorter duration assets
  • The conversation about diversity will continue

When asked what PB2i has in store for 2018, Morgan targeted the platform’s growth in four areas:

  • More bank partnerships
  • Tech focused on portfolio monitoring
  • Tighter credit standards

Modo Creates A Payments Data Highway Between The World’s Largest Financial Institutions (Benzinga), Rated: A

Bruce Parker, Modo CEO: Modo creates interoperability in the payments industry by conducting the exchange of data between systems via our translation utility service. Modo allows clients to bring together capabilities from around the payments and commerce industry by directly solving for interoperability between different payment systems.

We’re doing this for some of the biggest names in the payments game: Bank of America Corp BACVeriFone Systems Inc PAY, FIS, Klarna, and Alliance Data Systems CorporationADS, and are proud to say that list is growing.

Who are your customers?

Banks, networks, payments providers and their partners.

PayPal CEO Dan Schulman talks Fintech on Capitol Hill with Georgetown’s Chris Brummer (MENAFN), Rated: A

Other topics touched on during the interview with Mr. Brummer included how fintech can and should improve financial inclusion—and the continued need to eradicate banking deserts—as well as the necessity to better coordinate and launch public-private partnerships. Despite PayPal’s notable profile and 210 million users, it operates in a $100 trillion industry with approximately 1% market share—and there are still nearly 2 billion people around the world who live outside financial mainstream.

Getting Smart About Thin File Student Grads and Their Credit Card Worth (PaymentsJournal), Rated: A

The CARD Act of 2009 disrupted student credit card marketing with a means test and parental approval for certain types of accounts.  The market, which used capture about 12% of total card consumer spend now only contributes a fraction.

The American Banker covered an interesting story about how BankMobile, a digitial only bank with 800 university partners, is attempting to build a model based on academic history and how they maintained their student bank accounts.

3 Real Estate Investing Trends That Gained Steam in 2017 (Realty Biz), Rated: A

In 2016, the real estate crowdfunding industry produced 3.5 billion dollars in a market that has largely gone unnoticed. It’s anticipated by 2025 that the industry is going to be valued at more than 300 billion. Three trends emerged in 2017 that can help the informed investor understand the best approach to this dynamic and explosive industry.

  1. Investors Move Toward Institutional Capital
  2. Non-Accredited Investors Gain Steam
  3. Consolidation allows for the emergence of new players

Can real estate crowdfunding help the homelessness crisis? (Curbed), Rated: A

In addition to commercial space and two market-rate residential lofts, the two-story Jolene’s complex will also contain an 11-room SRO, or single-room occupancy, a dorm-like living arrangement where each resident gets their own 100-square-foot bedroom and access to shared common space. Six of the room will be given to working homeless Portlanders, as part of a partnership with the Street Roots non-profit, while the other five will be rented out to the general population for $425 a month.

After seeing that 90 percent of the participants in Fair-Haired Dumbbell were from Portland, they experimented with a slightly different form of crowdfunding that allowed anybody in Oregon making $70,000 a year or more to invest $3,000 or more in the project (technically, it’s taking advantage of Rule 504 of Regulation D, qualified by the SEC and the Oregon Secretary of State).

EquityStat Brings Portfolio Management To The Cloud (Benzinga), Rated: A

What does your company do? What unique problem does it solve?

Karl Swierenga, founder: EquityStat is an online investment portfolio manager. It allows investors to track and manage their stocks, mutual funds and ETFs, online in the cloud. Many investors own a combination of stocks, bonds, mutual funds and ETFs.

Who are your customers?

Our customers are individual investors who own mutual funds, stocks, bonds and ETFs.

FindBob Closes $ 1.26M USD Seed Round (Business Insider), Rated: A

FindBob () announced today that its seed round is closed at over $1.25 million USD. Grinnell Mutual led the investment.

The capital will allow FindBob to grow its sales and marketing teams, expand into additional U.S. markets and execute on its multi-generational product roadmap.

FindBob champions better transition behavior among financial professionals and their firms in order to perpetuate and protect their most precious asset: their book of business. By allowing company principals to take control of their futures on a secure digital channel, FindBob helps them safely discover opportunities to buy, sell, merge, partner or address succession and to be confident in their plan for the business they worked so hard for.

Fintechs that flamed out or faded in 2017 (American Banker), Rated: A

Source: American Banker
Source: American Banker

Fintech Outlook For 2018: US Banks Look To AI (The National Law Review), Rated: B

With 2017 at a close, US banks have set out their 2018 FinTech new year resolutions. According to American Banker, US banks are likely to focus their FinTech investment in 4 major areas in 2018:

  • Artificial intelligence and machine learning
  • Open banking
  • Cybersecurity and biometrics
  • Commercial banking innovation

Anyone invest in p2p lending? (blind), Rated: B

Just found out that I can earn annual returns of 6-12% by investing in p2p lending platforms like lendingclub and prosper. Way more than the measly 1.3% I get from my savings account.

Lendio Announces New Franchise in Rochester, New York (Crowdfund Insider), Rated: B

Lendio, an online lending marketplace for small business loans, announced on Thursday the opening of a new Lendio franchise in the Rochester area.

LendingTree,Inc. (NASDAQ:TREE) Files An 8-K Departure of Directors or Certain Officers (Market Exclusive), Rated: B

On December 19, 2017, our Board of Directors and Nikul Patel mutually agreed to change Mr. Patel’s position to Chief Strategy Officer, effective January 1, 2018. He currently serves as Chief Product and Strategy Officer, a position he held since November 2016.

United Kingdom

Zopa to launch a bank (Monzo), Rated: AAA

It’s why we’re applying to launch our own next-generation bank. We’ve listened, and we’re confident that we can deliver the bank that will be the best place for your money.  

Leading comparison websites have removed potentially misleading information from their sites after a Moneywise investigation found peer-to-peer (P2P) investment products included in the same best buy tables as high street savings products.

Moneywise looked at the UK’s leading product comparison websites and found issues with the four sites which offer P2P comparisons – Go Compare, Love Money, Money.co.uk and MoneySuperMarket.

A helping hand for small businesses (Money Week), Rated: A

A decade after the credit crunch, too many small and medium-sized enterprises (SMEs) in the UK still feel their potential is being hampered by a lack of access to appropriate financing. The government’s Industrial Strategy report, published at the end of November, identified financing issues as a clear problem for SMEs that are looking to grow; surveys of sentiment continue to reveal frustration.

Research from Hitachi Capital Business Finance shows that two-thirds of SMEs with growth plans for the year ahead fear that their expansion plans could be derailed if they cannot secure appropriate finance. A third of SMEs applying for finance aren’t securing enough funding to underpin their investment plans, according to similar research from Close Brothers Group; a quarter of SMEs think funding is still too dear.

New rules clarify P2P business borrowers are not deposit takers (P2P Finance News), Rated: A

In an announcement titled ‘protecting the future of P2P lending’, the Treasury said that no P2P business borrower needs to be regulated as a ‘deposit taker’ – often referred to as a ‘banking licence’ – unless that is their core business.

This clarification will be added to the Financial Services and Markets Act 2000 (Carrying on Regulated Activities by Way of Business) Order 2001.

10 business trends to look out for in the coming year (inside.co.uk), Rated: B

“I think we will see a strong increase in the number of Scottish businesses sourcing peer to peer lending, which matches borrowers directly with lenders, in 2018,” Hardie said. “Companies such as the Lending Crowd are currently the business world’s best kept secret, but their ability to deliver speedy transactions with attractive terms are firmly establishing them as strong alternatives to the banks.”

“A European directive being implemented in January 2018 will ban businesses from charging customers extra for making payments using a debit or credit card in the EU,” said Lynne Walker, head of business advisory at Johnston Carmichael.

China

China’s LexinFintech Completes $ 108M Listing As Sixth Chinese Fintech IPO In US (China Money Network), Rated: AAA

LexinFintech Holdings Ltd. (NASDAQ:LX), a Chinese online lender previously known as Fenqile backed by investors including Matrix Partners and JD.com Inc., has completed a listing on the NASDAQ to raise US$108 million.

Chinese online lender LexinFintech surges in US market debut (China Economic Review), Rated: A

Chinese online lender LexinFintech Holdings Ltd’s shares surged in their US market debut on Thursday, as investors brushed aside worries about Beijing’s recent crackdown on China’s booming microlending industry.

LexinFintech’s shares jumped 53% from its IPO price, which valued the Shenzhen-based company at $4.5 billion, to reach a high of $14.88.

China IPOs In New York Rebound To 16 In 2017, Online Lender Lexin Aces Nasdaq (Forbes), Rated: A

The 16 Chinese companies in 2017 raised $3.7 billion or about 8 percent of the total $35.6 billion raised by 160 IPOs.

Chinese tech titans Tencent and Alibaba are behind some of this pick-up, as they backed recent new listers including Chinese search engine Sogou, e-book company China Literature, microlender Qudian and logistics company Best.

Squeezing in its IPO before the year, Chinese online lender LexinFintech Holdings listed on Nasdaq on Dec. 21, raising $120 million and trading upward on its opening day by 19.4 percent.

Fintech Pioneer Sees Money in the Masses (Caixin), Rated: A

China’s booming fintech sector will see growth come from small business loans, wealth management tools for the “affluent masses,” and technology that helps you sift through thousands of insurance products in minutes, according to Tang Ning, founder and CEO of financial conglomerate CreditEase.

As of September, the company’s wealth management business oversaw assets worth $20 billion for nearly 50,000 high net-worth customers in China. It also manages $1 billion through a venture fund, which is among the ten most active venture capital investors in global fintech companies, according to data provider CB Insights.

Caixin: What are the most promising fintech trends over the next decade?

Tang Ning: We see small business lending being a key area of growth. In the past 10 years, creative lending models have done a good job at serving individuals, but there is much more to be done for small businesses.

We also see the emergence of insurance tech.

How are Chinese investors’ needs changing?

We are seeing the Chinese wealth management industry go through profound changes. It is moving from fixed-income investments to equity investment, from short-term speculation to long-term investment, from China-focused investment to global opportunities, from investing into single products, single opportunity to comprehensive risk management and comprehensive asset allocation, from managing this generation’s wealth to thinking about succession planning and inheritance.

Chinese peer-to-peer lender Golden Bull sets terms for $ 9 million US IPO (NASDAQ), Rated: A

The Shanghai, China-based company plans to raise $9 million by offering 2 million shares at a price range of $4.00 to $4.50. At the midpoint of the proposed range, Golden Bull would command a market value of $64 million.

European Union

Europe’s banks brace for a huge overhaul that throws open the doors to their data (CNBC), Rated: AAA

On January 8, banks operating in the European Union will be forced to open up their customer data to third party firms — that is, when customers give consent.

Banks will be required to build application programming interfaces (APIs) — sets of code that give third parties secure access to their back-end data.

Spain’s BBVA, Denmark’s Saxo Bank, Nordic lender Nordea and Ireland’s Ulster Bank have already published open developer portals ahead of the EU legislation.

HSBC has also made early moves toward meeting the incoming rules. In October, the bank launched a beta version of an app that lets customers see all of their bank accounts — including those from competitors — on one screen.

Several small lenders set up with the aim of competing with larger institutions are hoping to take advantage of the move toward a more open data infrastructure. U.K. firms Starling and Monzo, for instance, are want to make banking more like a “marketplace,” by connecting consumers with a number of products and services — including those from other providers — within their apps.

How PSD2 will make personal lending more competitive (IT ProPortal), Rated: A

Today, banks sell few unsecured personal loans to new customers – of seven of the UKs tier one banks only two offer personal loans to new customers – instead focusing on the needs and data of their own clients. The establishing credit risk and difficulties of pricing accurately has simply made it too complex to be competitive.

Also, although many peer-to-peer lending sites now have better protection for consumers as the industry became regulated by the FCA in April 2014, it can be argued this protection is greater for savers and lenders than it is for those borrowing and that the industry is still high-risk when compared with traditional routes.

This could all be about to change with the introduction of the intertwined The Second Payment Services Directive (PSD2) and open banking regulation.

First, XS2A will significantly improve the customer experience for loan applicants.

Hive Project buzzing after ICO (Bankless Times), Rated: A

After securing $8.95 million (BTC 2,087) from 2,234 participants through an ICO in August, Hive Project has released a demo version of their platform and completed an eight-market deal.

Hive Project uses distributed ledger technology to grant every issued invoice a unique fingerprint.

“In the Russian market alone there are  5.67 million SMEs with a combined turnover of €700 billion,” Mr. Soklic said.

Australia

ASIC releases second marketplace lending survey (Lexology), Rated: AAA

ASIC has released its second survey on the marketplace lending industry, which indicates steady growth in both borrowing and lending activity in the market since the last report.

Key findings from the report are outlined below:

  • there are three new marketplace lending platforms in the industry;
  • with $300 million in loans written to consumers and SMEs, there was a doubling of activity in relation to the number of borrowers and total amount borrowed since 2015-16;
  • the average reported default rate across the respondents was 2.2%;
  • there are an additional 4,187 retail investors since 2016, representing $12 million of extra investment in the industry; and
  • loan origination fees remained the primary source of revenue for marketplace lending providers.

The True Threat to Aussie Banks (Money Morning), Rated: A

The updated code of practice brings a number of changes. Most are simple consumer protections. Making it easier to cancel credit cards online, for example, and preventing banks from soliciting customers for credit limit increases.

India

Digital payments, P2P lending among key mega-trends of the year gone by (The Hindu Business Line), Rated: AAA

It was a great year for digitalisation and digital payments in the country.

Besides reducing the merchant discount rate for debit card transactions, the Centre announced a subsidy on transactions up to ₹2,000 via debit cards to expand the digital payment ecosystem.

P2P lending boost

Also, 2017 was a milestone year for the peer-to-peer (P2P) lending industry, as the RBI issued some guidelines in October.

Other defining changes

In April 2017, five associate banks of State Bank of India and Bharatiya Mahila Bank were merged into SBI, catapulting the latter into the league of top 50 global banks.

In May, the much talked about NPA ordinance giving greater power to the RBI to handle the bad loan crisis came about.

The other key decision of the RBI this year to improve transparency in the system was the move to make it mandatory for the banks to disclose in their balance sheets the extent of divergences between the gross NPAs in their book and those determined in RBI inspection. Private sector lenders such as Axis Bank, YES Bank and ICICI Bank were found to have under-reported their bad loan assets in recent years, prompting the central bank to take this decision.

How retail lending is set to scale up in 2018 (Financial Express), Rated: A

Major factors like steady decline in lending rates, strong focus and performance on growth and credit metrics in retail lending, investor interest in the segment, P2P regulation formalising the new category, increased focus on digitisation and path-breaking initiatives towards affordable housing are helping set a strong base for retail lending. Some of the big trends I see in the New Year are:

Consumer lending

Contrary to the slowdown in credit offtake by the corporate sector, retail credit segment has registered a strong growth of around 20% this calendar year.

Mobile: India today has more than 300 million smartphone users, removing geographical constraints of access to financial products. New venture investments will drive experiments in alternate lending.

Growth in MSME lending

With around 55 million MSME units employing over 80 million people, this sector contributes about 8% to the national GDP. Around 90% of these units are classified as micro businesses.

Growth in affordable housing segment

With home loan to GDP ratio of just 9%, the Indian housing finance sector remains relatively under-penetrated when compared to its Asian peers like China (20%), Thailand (17%), and Malaysia (34%).

The P2P Lending Segment will Drive the Next Phase of Growth of the Indian Fintech industry (BW Disrupt), Rated: A

With the much-awaited legitimacy, the sector is only at growth radar and trust in the segment is developing at a much faster pace. With more and more people moving towards online payments and transactions, the P2P lending space will witness a remarkable rise in the number of borrowers as well as investors. The growth will not only arrive from the urban India but also from Tier II and Tier III cities, leading the country towards the national goal of financial inclusion.

As predicted by NASSCOM, the Indian fintech space is expected to reach $2.4 billion by 2020, 2018 will act as a major contributor towards this direction.

How can P2P lending disrupt MSME sector in India? (MENAFN), Rated: A

There are more than 5 crore MSMEs in India and their contribution to the Indian economy is quite significant. The Micro, Small and Medium Enterprises are creating massive employability i.e. up to 12 crore people which is close to 33% of Indias manufacturing output. But still MSMEs suffer from an incredible capital shortage that amounts to Rs. 32 trillion as per the International Finance Corporation.

Fintech start-ups tap small-town users (Business Standard), Rated: A

Paynear, a start-up, has more users in small towns than in the metros. The Hyderabad-based firm, which provides a platform to traders for accepting digital payments, has seen a surge in growth from small towns. Of its 50,000 merchants, two-thirds are in small towns.

Funding Galore: Indian Startup Funding Of The Week [18-23 Dec] (Inc42), Rated: B

This week 19 Indian startups raised about $41 Mn in funding altogether in the Indian startup ecosystem.

Peel-Works: The consumer focussed SaaS and big data analytics startup raised an undisclosed amount in Series B funding led by Mumbai-based Unilever Ventures and Amazon Internet Services.

Faircent: Gurugram-based P2P lending startup Faircent raised $3.9 Mn (INR 25 Cr) in a Series B round of funding.

Asia

Financial inclusion is in your hands (National Multimedia), Rated: AAA

Aside from offering new innovative financial services to their existing customers, the use of Fintech also allows banks to serve potential |customers – those considered “underbanked” and “unbanked” – who in the past did not have access to financial services due to costs, lack of credit or access. The ability for the banks to serve everyone is known as “financial inclusion.” According to the World Bank, around 2 billion people don’t use |formal financial services and over 50 per cent of adults in the poorest households are unbanked.

A report from Thailand’s Ministry of Finance in 2016 shows that 56 per cent of Thais received micro finance from special financial institutions and less than 9 per cent from commercial banks. Clearly, most Thais often turn to non-bank providers for small sums of money.

The K Plus Shop is an example of fintech for financial inclusion from KBank. It is a mobile application designed to be a one-stop solution for micro businesses such as small shops and street vendors. The app is a point of sale, sales tracking, sales reports and PR tool combined into one app that anyone can download and use free of charge on any smartphone – iOS or Android. With K Plus Shop, the vendor can receive QR payment from any customer using K Plus, other mobile banking or e-Wallet applications via the standard QR for PromptPay, as well as from WeChat Pay and Alipay.

FintruX partners with blockchain data exchange DataWallet (Cryptoninjas), Rated: A

Authors:

George Popescu
Allen Taylor

Thursday December 14 2017, Daily News Digest

online lender delinquency rates

News Comments Today’s main news: LexinFintech relaxes on IPO funding goal. Welendus exceeds Seedrs funding target. LendingTree provides 2018 guidance prior to Investor Day. Yirendai invests in Lion Rock. Mercer delivers financial advice with AI through Facebook Messenger. Today’s main analysis: Online lenders test the faith of investors. Today’s thought-provoking articles: Why Google, Amazon scare BlackRock, Fidelity. A new chapter […]

online lender delinquency rates

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United States

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

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News Summary

United States

Why Google and Amazon Keep Fidelity and BlackRock Up at Night (Bloomberg), Rated: AAA

“Alexa…will I meet my retirement goal?”

“You are not on track to meet your retirement goal,” replies Amazon.com Inc.’s voice-activated digital assistant, with not a bit of sugar-coating. Then she suggests turning over $76 a month to Fidelity Investments and its advisers.

This won’t actually happen if you try it on your Amazon Alexa device at home. It’s a demonstration put on by EMoney Advisor LLC, a company owned by Fidelity, in its offices in Radnor, Pa. Amazon provides software for third-party developers to experiment with new functions. Fidelity is trying to find ways to apply artificial intelligence, computer algorithms, and voice-­recognition software to the hidebound world of money management and investing.

Earlier this year, Boston-based Acadian Asset Management LLC struck a deal so its portfolio managers could use Microsoft Corp.’s Bing Predicts, which makes forecasts using search and social media data, to help pick stocks; that agreement later ended.

BlackRock, led by chief executive officer Larry Fink, in recent years has been buying stakes in other companies, particularly technology firms. Through these purchases, the company is pushing into new lines of business.

Fidelity bought EMoney in 2015. It sells software to investment advisers that’s designed to make it easier to interact with their customers on budgeting for weddings, college, or retirement.

Online lending platforms test investors’ faith (Financial Times), Rated: AAA

Tianqiao Chen still wants to be part of Lending Club. Last week, while shares in America’s biggest listed online lender were tumbling after another cut to profit forecasts, the chief executive of Shanda Group bought 4m more of them, further cementing his position as the company’s biggest shareholder.

Many operators are feeling the effects of a big push for market share in the latter half of 2015 and early months of 2016, says David Snitkof, chief analytics officer at Orchard. As the platforms rushed to offer new loans, credit quality suffered, and loans originated during that period are among the worst performers, with loss rates well ahead of projections.

Across the sector, valuations have fallen. Earnest, a San Francisco-based student loans specialist, sold itself in October to Navient, the loan-servicing company, for $155m, or about 40 per cent of its peak valuation. Personal lender Prosper, once a “unicorn”, saw its pricetag drop from a peak $1.9bn to $550m in a fundraising last month.

That meant platforms had to spend heavily to bring compliance and controls systems up to scratch. Lending Club’s latest quarterly filing, for example, shows it had $1.21 of operating expenses for every dollar of fee income over the first nine months — up from $1.03 at the same point two years ago.

LendingTree Introduces 2018 Guidance Ahead Of Investor Day (Business Insider), Rated: AAA

Business Outlook – 2018

  • Revenue is anticipated to be in the range of $770 – $790 million, representing growth of 27% – 30% over the high-end of full-year 2017 guidance of $608 million.
  • Variable Marketing Margin is anticipated to be $270 – $280 million.
  • Adjusted EBITDA is anticipated to be in the range of $145 – $150 million, up 28% – 33% over the high-end of full-year 2017 guidance of $113 million.

The Analyst and Investor event is being hosted in New York at the Nasdaq MarketSite in Times Square.  The presentation will begin promptly at 10:30 a.m. ET.  A live audiocast with accompanying slides will be made available on the company’s investor relations website at investors.lendingtree.com.

 

Does the ICO Open a New Chapter for RE Crowdfunding? (Lexology), Rated: AAA

An ICO is simply the initial public sale of a new type of digital “coins”, or “cryptocurrency”.

Judging from the prolific way these new cryptocurrency ICOs are popping up, like mushrooms after a spring rain, one might imagine any clever techie could spin one up at the kitchen table with little more than an internet connection and some well-caffeinated daring-do. Yes, ICOs are easier than crowdfunding, they have that special “blockchain” cachet going for them, and the “regulators talons” have not yet sunk deep.

In a real-life example, on September 29, 2017, the SEC filed a civil complaint in federal district court against ICO promoter Maksim Zaslavskiy and two companies run by Mr. Zaslavskiy. According to the complaint, between July and October Mr. Zaslavskiy and his companies raised at least $300,000 in an ICO touting a new cryptocurrency called “REcoin” — “the first ever cryptocurrency backed by real estate.” According to the SEC complaint, Mr. Zaslavskiy and his companies have been peddling unregistered securities. Furthermore, the complaint alleges, the companies never had any real operations even though Mr. Zaslavskiy told investors in REcoin they could expect sizeable returns from those company’s operations; the securities he sold weren’t backed by any real estate or other assets as he claimed they were; and no “REcoin” digital tokens ever actually existed.

ICOs and Crowdfunding

Circling back to the original crowdfunding thesis, we should also expect this disruptive new technology to begin surfacing in even more impactful nextgen “killer apps” for commercial real estate investment. That’s right, real estate crowdfunding may actually make a comeback by dint of being co-opted into the blockspace. New-age real estate crowdfunding ecosystems are already forming; for instance, the Real Estate Asset Ledger (“REAL”) is one application currently being talked up as a real estate crowdfunding network built on blockchain infrastructure.

The Rise of the ICO (Coinlist), Rated: AAA

Zeus CrowdFunding Earns Top-Ten Ranking in Real Estate Crowdfunding Industry (PR.com), Rated: B

Zeus CrowdFunding earned high marks recently from an independent ranking and reviews portal. The Real-Estate Crowdfunding Review named Zeus CrowdFunding the #7 real estate crowdfunding site on the Web based on its “incredible volume” and other impressive advantages.

The ranking also lauded Zeus CrowdFunding’s low default rate and semi-liquidity option and guarantee and called the company “one of the few platforms offering conservative loans below 65% LTV.”

To read The Real-Estate Crowdfunding Review’s ranking and review of Zeus CrowdFunding, visit

Open Banking Trends Shift to US Market (Lend Academy), Rated: A

Open Banking is set to launch in Europe next month. As banks and fintech firms rush to ensure compliance we wanted to explore the effects on the US fintech market. Recently the CFPB set forth data sharing guidelines for banks and fintech firms to share information. There has since been a number of articles in the news pointing to frustration among fintech companies as banks have not been forthcoming with data sharing.

The current process is clumsy and requires consumers to login many times across many different services. This has also been something banks have complained about to agencies like the CFPB. Services such as Personal Capital and Mint constantly ping bank accounts for information that users have open access to. Setting up a similar initiative in the US could not only allow for a better experience but will undoubtedly be safer for the banks and fintech firms.

LendingUSA Secures $ 60m Credit Facility (Finsmes), Rated: A

LendingUSA, a Sherman Oaks, CA-based point-of-need financing company, secured a $60m credit facility.

The funding was provided by CapitalSource, a division of Pacific Western Bank, and a provider of commercial lending and banking solutions.

 

U.S. Fintech Simility Secures $ 17.5 Million During Latest Funding Round Led By Accel With Participation From PayPal (Crowdfund Insider), Rated: A

Simility, a provider of machine learning–powered adaptive fraud prevention solution, today announced it has secured $17.5 million during its latest funding round. PayPal, Inc. also participated in the round as a new strategic investor along with existing investors The Valley Fund and Trinity Ventures.

First National Bank Plans Online SMB Lending Portal (PYMNTS), Rated: A

First National Bank and Trust Company is planning the launch of a digital small business lending portal and has tapped a partner to create the solution.

The financial institution (FI) said Tuesday (Dec. 12) that it is working with FinTech firm RCGILTNER Services to deploy the digital platform, which will launch in the first quarter of 2018.

Aspiration Taps $ 47 Million for Conscientious Banking (WSJ), Rated: A

Conscientious consumption and online banking services don’t typically go hand in hand. Andrei Cherny, co-founder and chief executive of Aspiration, aims to change that.

Aspiration, which offers online banking with optional fees and no penalties, provides its customers insights on how companies treat the environment and their employees, informing spending decisions.

Aspiration now boasts more than 200,000 account holders since launching in February 2015. On Tuesday, the Los Angeles company said it raised a $47 million Series B to further fuel its ambitions.

Will 2018 Be the Year of the Bank of Amazon? Experts Weigh In (Fortune), Rated: A

Payments

Matt Harris, Bain Capital Ventures: “SoftBank buys 20 percent of Stripe for $3 billion. PayPal continues to push itself down the path of being the leading financial services company for millennials and the mass market.” Dion Lisle, Capgemini SA: “‘Alexa, buy this’ or ‘Siri, I need an Uber, pay for it with my AmEx.’ Payments are going to be activated by that voice because that’s a great security method.”

Lending

Spencer Lazar, General Catalyst Partners: “Potential changes to the Consumer Financial Protection Bureau (CFPB) under the Trump Administration will likely turn back the clock on Obama-era regulations on non-bank lenders. This will be a boon to startup lenders, making it far easier to dole out capital. The fear is that rates could potentially become predatory.”

Amazon vs. JPMorgan

Andy Weissman, Union Square Ventures: “Some combination of Amazon, Google, Facebook, Apple, etc. will move deeper into online financing of small businesses.”

M&A

Tyler Sosin, Menlo Ventures: “Stripe and Adyen will merge, forming a $20 billion plus enterprise-value business and API-driven merchant processor.”

Funding

Charles Birnbaum, Bessemer Venture Partners: “Valuations in the alternative-lending space were overly optimistic in our opinion over the prior five years, but we do feel that the pendulum has likely swung back too far in the other direction following the recent pullback” leaving the sector ripe for potential funding or M&A.

Braviant Holdings Announces Launch of Chorus Credit Personal Loans (PR Newswire), Rated: A

Braviant Holdings, a leading fintech startup that offers analytics and technology-driven credit solutions for underserved Americans, is now offering personal loans up to $10,000 in Californiathrough its Chorus Credit online lending platform. Chorus will complement Braviant’s existing installment lending business, Balance Credit, by offering higher loan amounts at lower rates to the estimated 26% of California consumers who are underserved by traditional banks.

2017 YEAR-IN-REVIEW (Wunder Capital), Rated: A

In 2017, we increased our solar project pipeline by an order of magnitude. This is due in large part to more resources dedicated to pipeline development, advancements in our lending practice, and – at a macro level – a rapidly growing solar market and commercial sector.

Source: Wunder Capital

See the full report here.

Not “ripe,” says judge dismissing N.Y. fintech charter challenge (Banking Exchange), Rated: A

Yesterday U.S. District Judge Naomi Reice Buchwald of the Southern District of New York dismissed one of those lawsuits, Vullo v. Office of the Comptroller of the Currency. The judge dismissed the suit of the New York State Department of Financial Services, headed by Maria Vullo, against OCC on the grounds that the matter is not “ripe” for a decision on the legal ability of the Comptroller’s Office to issue such specialized charters.

Indeed, at the recent RegTech Enable conference in late November, OCC’s Beth Knickerbocker, chief innovation officer, characterized the proposal as “on hold.”

Why New York’s claim isn’t ripe

Judge Buchwald’s decision recapped the history of the proposal at length. Her decision came down to this sentence: “Claims are not ripe if they depend on the occurrence of contingent future event that may never occur at all.”

She pointed out that no injury would occur if OCC never issues such a charter to a fintech company.

Vanguard, the fund giant with nearly $ 5 trillion in assets, is using blockchain to underpin its mutual funds (Business Insider), Rated: A

Vanguard is moving to use blockchain to simplify how it updates index data underlying mutual funds, executives said on Monday, an important sign of confidence for the new financial technology.

Closely-held Vanguard, the top mutual fund firm with nearly $5 trillion under management, has successfully tested blockchain to automatically update data like the names and share prices of companies in index funds, processes that must currently be closely overseen by individuals, said Warren Pennington, a principal in Vanguard’s investment management group, in Pennsylvania.

UNOPPOSED MOTION FOR LEAVE TO FILE AMICIUS CURIAE BRIEF (U.S. District Court, D.C.), Rated: A

Further, to date, the parties have not raised an important argument that this Court should consider, namely, that restricting the President’s authority over the CFPB Director’s replacement only exacerbates the serious constitutional questions currently before the D.C. Circuit with respect to the CFPB’s structure. As CUNA explains, such questions could be avoided by adopting Defendants’ position in this case. Thus, CUNA’s perspective on the central issues in this case is invaluable and unrepresented by the parties.

Read the motion in full here.

(Coindesk), Rated: A

The startup revealed today that, through an existing partnership with MicroVentures, it will begin offering services to projects seek to use the blockchain funding model.

Specifically, accredited investors purchase Simple Agreements for Future Tokens (SAFTs), with the tokens set to be delivered at a later date. The mode has been used by a number of ICOs in recent months, and according to the page on MicroVentures, $915,000 has been raised from nine investors thus far in the new ICO.

Mastercard targets millennial clients with digital money management service (American Banker), Rated: B

The payments company today announced it is launching a new service called Assemble, which it calls a “prepaid innovation hub” designed to allow Mastercard partners or issuers to provide checking, budgeting, and payment features, as well as additional money management tools.

Longfin Corp. Becomes the First Public-listed FinTech Company Under Reg A+ on Nasdaq (GlobeNewswire), Rated: B

Longfin Corp. (NASDAQ: LFIN) announces that it will be traded on the Nasdaq market for the first day after its initial public offering (IPO) under Reg A+ closing on December 8, 2017.

U.S. News & World Report Names LendingPoint One of 2017’s Best Personal Loan Companies (BusinessWire), Rated: B

LendingPoint was named one of nation’s six best personal loan companies by U.S. News & World Report.

The media company evaluated personal loan companies in five key areas, reviewing data on eligibility, loan terms, fees, repayment methods and additional features. LendingPoint was cited as 2017’s top lender for people with fair to good credit, who have merit-based qualifications beyond FICO scores that make them worthy loan candidates.

Quesnay’s Female Founders in Tech Program Awards Goalsetter First Place (PR Newswire), Rated: B

Quesnay is pleased to announce that Goalsetter is the winner of the inaugural Female Founders in Tech, spotlighting female founders that positively impact the financial services and/or insurance technology industries.

The winners represented cutting-edge businesses that were also socially conscious:
– Goalsetter – Goalsetter is a goal-based savings and gifting platform, targeting millennials.
– Marinus Analytics – Marinus uses technologies to help identify and fight crimes like human trafficking and money laundering associated with it and other illicit activities
– LENDonate – LENDonate provides a marketplace lending platform for non-profits and supporters.

Approximately 100 women-led startups registered for the program with solutions ranging from artificial intelligence to blockchain to creative financial literacy and savings solutions. Seven finalists presented in New York to a panel of judges which included industry leaders from the sponsoring organizations: John HancockMassMutualRGAxSterling National BankTD Bank and Thomson Reuters.

 

United Kingdom

Welendus exceeds Seedrs fundraising target (P2P Finance News), Rated: AAA

WELENDUS, the peer-to-peer payday loan provider, has announced that its latest crowdfunding round on Seedrs has reached over 130 per cent of its target.

The firm had been seeking £150,000 but has already raised £197,991, according to Seedrs’ website.

Welendus said on Thursday that the funding round had attracted more than 250 investors.

Investec Provides U.K. Fintech With $ 67 Million for Online Loans (Bloomberg), Rated: A

London-based MarketInvoice, which arranges loans for small companies secured by accounts receivable, will handle the underwriting for Investec customers in the partnership, according to the bank’s website. Investec will provide 50 million pounds ($67 million) in the first year to fund the loans, Anil Stocker, the startup’s co-founder and chief executive officer, said in an interview.

The rise of the payday-style business loan (City A.M.),  Rated: A

British banks have been mired in criticism for not lending as much as they could.

Many businesses have meanwhile found that alternative lenders lack the data to provide products that are tailored to their needs.

Creative credit

Rate hikes typically result in an increase in lending profitability, and so the increase often stimulates the appetite to lend.

But an increased appetite to lend doesn’t always follow an increased ability to price risks on all loan applicants, and herein lays the risk: lenders become creative with the ways in which they entice borrowers and mitigate their risks.

These loans from mainstream lenders look like the payday loans that flooded the market in the height of the recession. They take minutes to apply for, turnaround is within one day, and command interest rates of up to 23 per cent APR – five times more than some personal loans.

Data shows increase in demand for alternative finance services (Londons School of Business Finance), Rated: A

The figures showed growth across the UK’s alternative finance market, including crowdfunding, invoice trading, and marketplace lending. The date found a year-on-year rise of 43 per cent in 2016 from £3.2 billion to £4.58 billion.

Business marketplace lending grew by 28.5 per cent from £881 million in 2015 to £1,232 million in 2016, placing it ahead of consumer marketplace lending, which previously had the biggest share.

LendInvest’s Latest Buy-to-Let Index Reveals: Manchester Tops Charts & Hull is Named Biggest Climber (Crowdfund Insider), Rated: A

On Wednesday, specialist property lender LendInvest released its latest LendInvest Buy-to-Let Index report, which ranks all 105 postcode areas around England and Wales based ona combination of four metrics, which are capital gains, transaction volumes, rental yields, and rental price growth.

The Index report’s key findings include:

  • Manchester, leader of the Northern Powerhouse, takes top spot
  • Leicester breaks into the Top 10 and Birmingham climbs 8 places from #18 to #11, signaling upward mobility in the Midlands markets
  • Hull marks itself as biggest climber for 2017, rising 93 places to #6
  • Enfield tumbles from Top 10 in February to Bottom 10 in December
Source: LendInvest

Download the full report here.

One in two advisers ‘fire’ clients with less than £50,000 (Money Observer), Rated: A

Those with pot sizes of less than £50,000 are increasingly being turned away by their financial adviser. In 2014 just under a quarter of clients were shown the door, whereas in 2017 this figure rose to 50 per cent.

Artificial intelligence is guiding venture capital to start-ups (Financial Times), Rated: A

Mr Bonanzinga thought he could combine internet data and machine learning to do a better job of ferreting out prospects. It took two years and £5m in investment for InReach Ventures to create the software, which has so far trawled through 95,000 European start-ups, picking out 2,000 that Mr Bonanzinga might be interested in.

The software determines this based on the people they are hiring, the products they are developing and the traffic on their website, among other things.

Tifosy: The sports crowdfunding platform that wants to help small teams grow and big teams reconnect with fans (City A.M.), Rated: B

The company has already partnered with 15 clubs in England and Italy, raising £2.9m from “fanfunders” for a variety of different projects.

So rather than owners selling equity stakes to unfamiliar outside investors, crowdfunding solutions such as mini-bonds or equity shares have emerged as alternative solutions to many sports franchises.

Top-flight rugby clubs Harlequins and Wasps raised £15m and £35m respectively by issuing their own bonds, while Surrey County Cricket club raised £5m in seven days in 2015.

China

Chinese Online Lender LexinFintech Shrinks U.S. IPO Fundraising Goal (WSJ), Rated: AAA

LexinFintech Holdings Ltd., a Chinese online lender that is planning to go public in the U.S., scaled back its fundraising ambitions after regulatory changes in China sparked a rout in shares of similar companies.

Lexin, a four-year-old company whose backers include Chinese online-retail giant JD.com Inc., is planning to raise $120 million in an initial public offering, according to a Wednesday filing with the Securities and Exchange Commission.

JD.com-backed micro lender slashes IPO by 70pc after China’s internet finance crackdown (SCMP), Rated: A

Lexin Fintech plans to offer 12 million American depositary shares at an indicative price range of US$9 to US$11 a share, raising as much as US$132 million, the company said in an updated filing on Thursday to the US Securities and Exchange Commission.

The fundraising value is sharply down from an originally planned US$500 million, as mentioned in the IPO prospectus issued last month.

Noncompliant P2P Lenders to Be Out by Mid-2018 (Caixin), Rated: AAA

Local banking regulators have until the end of June to weed out noncompliant peer-to-peer (P2P) lenders, according to a circular issued by a special working group led by the China Banking Regulatory Commission (CBRC).

Yirendai Announces Strategic Investment in Lion Rock (Business Insider), Rated: AAA

Yirendai Ltd. (NYSE: YRD) (“Yirendai” or the “Company”), a leading fintech company in China, announced today that it has made a strategic investment in Lion Rock, a comprehensive financial services platform that is focused on global asset allocation, through Lion Rock’s Series A financing of HK$50 million.

Lion Rock is headquartered in Hong Kong and offers a wide-variety of high-quality financial products, financial news, robo-advisory services as well as asset allocation services through its online platform.

Hong Kong Fintech Start-Up Lion Rock Raises $ 6.4M Led By Marathon Venture (China Money Network), Rated: A

Lion Rock FinTech Ltd., a Hong Kong-based fintech company, has raised HK$50 million (US$6.4 million) in an equity financing led by Marathon Venture Partners.

In addition, 9F Inc., the strategic investor who backed Lion Rock’s last round of financing, continued to invest in this round.

European Union

The Culture of p2p Investors Across the EU (FastInvest), Rated: AAA

FastInvest, a p2p fintech platform, recently studied data from over 8500 EU investors daily and came across a really unexpected finding. Highly specific traits and behaviors were driven by nationality over and above other individual factors when looking at big data.

From traditional investment metrics like risk aversion, to outside the box items like nationalistic tendencies and compulsive behaviors.  Across numerous areas, national cultural traits could be seen solely based on country to country locales.

Source: FastInvest

Poland
Even with the EU offering a bit of a more stable currency, only 1.76% of residents prefer to invest in Euro based currency loans.

Belgium
Only 2.20% of Belgian investors choose PLN (Polish) currency based loans as opposed to their own Euro.

Germany
Germans appear to be the most open minded of EU countries, with 15.73% making investments in PLN currency.

Netherlands
The Netherlands followed behind Germany in diverting from the euro, with 9.08% of investors choosing PLN based loans.

Download the full report here.

iZettle Grabs $ 47M Additional Funding, Eyes Market Expansion (PYMNTS), Rated: A

iZettle has grabbed €40 million in funding (the equivalent of $47 million) that the Stockholm-based payments firm will use to expand into new markets.

International

Disruptive Startup, Etherecash, Concludes ICO Ahead Of Schedule (Coinidol), Rated: B

Etherecash is one step closer to actualizing its vision of bridging the financial divide between the banked and the unbanked with the successful conclusion of its ICO ahead of schedule. The ICO is now scheduled to finish on 12th Dec 6:29 PM (GMT) after four impressive bonus rounds that outperformed expectations.

With over $30 million raised and 45000 registered participants, Etherecashcan now set its sight on eliminating traditional borders, intermediaries and prejudices in the way money is lent, spent, and sent.

Australia/New Zealand

MERCER LAUNCHES SUPERBOT, ARTIFICIAL INTELLIGENCE DELIVERING FINANCIAL ADVICE VIA FACEBOOK MESSENGER (Mercer), Rated: AAA

Australia’s 17 million active Facebook users spend on average 1.4 hours a day liking, commenting and sharing stories with family and friends. Moreover, with roughly 17% of the earth’s population being active users of Facebook Messenger, there is irony in the fact that the smartphone generation is spending more time engaging on Facebook rather than thinking about their future financial readiness.

Accessed through Facebook Messenger, SuperBot represents the ultimate opportunity to scale financial advice across a very large proportion of the population.

Non-bank lenders lift profit 10% in 2017 (NBR), Rated: A

Eighteen of the 25 participants in the KPMG non-bank financial institutions performance survey posted increased earnings in 2017, generating a total net profit of $216.7 million, up from $196.6 million a year earlier. Total assets grew 12 percent to $10.96 billion, with lending boosted by the nation’s strong demand for new vehicles and several non-bank institutions testing the waters in the mortgage space as the major banks become more reticent in some of their credit criteria.

HNWI financial advice demand falls (Financial Standard), Rated: A

The use of financial advice among high-net-worth investors (HNWI) has fallen to a five-year low, according to the insights, which show 435,000 millionaires own more than $1 million of investable assets.

Almost 75% of HNWIs relied on the expertise of a financial advice professional in 2013 – but this has declined to 68% in 2017.

Credit Suisse found the number of Australian millionaires rose by 200,000 in the year to June, marking the third-largest increase after the US and Germany in its global wealth ranking.

CCR to help business financing (InvestorDaily), Rated: B

Indeed, interest rates on small business loans have “remained relatively high” due to a lack of competition – leaving banks as the major provider of lending to small businesses (80 per cent).

But a CCR regime would offer lenders more information about potential borrowers’ credit history than just negative credit information, as per the current standard.

The Australian government has determined a mandatory credit reporting regime to come into effect in July 2018, but a number of financial institutions such as NAB have already announced it will roll out such a regime.

Other forms of accessing finance for smaller firms or entrepreneur were large technology firms and alternative financing platforms, such as marketplace lending and crowdfunding, he added.

India

Online loans marketplace FinBucket gets funding from Impanix Capital (VC Circle), Rated: A

FinBucket Pvt. Ltd, which runs an eponymous online marketplace for loans and investments, has raised Rs 12 crore ($1.8 million) from Delhi-based early-stage venture capital firm Impanix Capital.

The startup plans to use the funds to increase its staff strength to 200 and expand operations.

‘Fintech can help assess credit score ’ (The Hindu), Rated: A

Financial technology firms that generate credit scores based on digital footprints of individuals will have a major role to play as banks begin to focus on lending to first generation customers who do not have credit history, former Deputy Governor of Reserve Bank of India H.R. Khan said here on Wednesday.

Fintech startup CapitaWorld raises funding (VC Circle), Rated: B

Mumbai-based fintech startup CapitaWorld Platform Pvt. Ltd has raised an undisclosed amount through convertible equity from high-net-worth individuals, corporate honchos and investors from Hong Kong and the Middle East.

The investors who participated in the latest round include former chief executive of Indian Banks’ Association Mohan Tanksale, Swift India CEO Kiran Shetty, Madhu Silica’s managing director Darshak Shah and former JP Morgan executive Mandar Mhatre, the startup said in a statement.

Asia

BHSI Launches Financial Institution Professional Indemnity Insurance in Asia (Insurance Journal), Rated: A

Berkshire Hathaway Specialty Insurance Co. (BHSI) announced it has introduced Financial Institution Professional Indemnity (FIPI) insurance in Asia.

The new BHSI policy is designed to cover a range of claims, from allegations of failure to disclose information, to misleading financial advice and breach of contracts, the company said in a statement. The policy combines coverage for civil liability, pre-investigations, mitigation expenses, bail bond costs, court attendance, loss of documents, and more.

The policy is designed for medium to large financial institutions, including securities dealers, regional banks, insurance companies, reinsurance companies, diversified institutions, and financial technology (fintech) and corporate advisory firms.

South America

Brazilian fintech Nubank starts international tech talent hunt (ZDNet), Rated: B

Brazilian fintech Nubank has launched an engineering center in Berlin as part of a plan to boost its software engineering function internationally.

Nubank has expatriated four of its engineers to Berlin to kickstart the European operations. It has also already started to hire local experts such as Gavin Bell, a senior engineer who previously managed the core data infrastructure platform at Soundcloud.

Authors:

George Popescu
Allen Taylor

Tuesday December 6 2016, Daily News Digest

soe by credit rating

News Comments Today’s main news: SmartBiz Loans ranked No. 1 among SBA7(a) loans under $ 350K. Orchard Platform partners with Sandra O’Neill. MoneyLion raises $ 22.5M Today’s main analysis: How China’s offshore bond market is changing fast. Today’s thought-provoking articles: How people become nonprime. IPF shines light on RECF. Morgan Stanley, Origin Capital sign deal. United States SmartBiz Loans ranked […]

soe by credit rating

News Comments

United States

United Kingdom

European Union

  • Morgan Stanley signs deal with Origin Capital. AT: “This is a big deal. It could boost the alternative finance sector in the Republic of Ireland and might have a small effect on post-Brexit concerns in the UK, but not much.”

China

Asia

News Summary

United States

SmartBiz Loans Ranked Number One Provider of Traditional SBA 7(a) Loans Under $ 350,000 (Yahoo! Sports), Rated: AAA

SmartBiz Loans, the first SBA marketplace and bank-enabling technology platform, has ranked as the number one provider of non-Express, SBA 7(a) loans under $350,000 for the 2016 government fiscal year. SmartBiz also ranked number five among providers of under $350,000 traditional SBA 7(a) and Express 7(a) loans combined.

SmartBiz generated $200 million in funded SBA 7(a) loans through its bank lending partners, which helped them earn the top spot. The data used is based on SBA lending data released in November, reflecting its 2016 fiscal year which ended on Sept. 30. Wells Fargo Bank, which was ranked just below SmartBiz, generated $155 million in funded non-Express SBA 7(a) loans under $350,000. This is the first time a technology platform and marketplace has achieved the number one position in SBA’s ranking of 7(a) loans.

Sandler O’Neill to Partner with Orchard Platform to Provide Banking Clients with Online Lending Market Data and Analytics (Orchard Platform Email), Rated: AAA

Orchard Platform, the  technology and data provider for the online lending space, today announced that it has entered into an agreement with Sandler O’Neill + Partners, L.P., a full-service investment banking firm and broker-dealer focused on the financial services sector. Under the terms of the agreement, Sandler O’Neill will make Orchard’s full suite of products and services available to its broad group of bank and specialty finance relationships.

Orchard provides an integrated platform that empowers online loan originators and investors with access to a variety of web-enabled tools, including market data, benchmarking, investor reporting, portfolio analytics, and cash flow simulators, as well as capital markets software. Recently, banks have announced a variety of partnerships with fintech companies. By working together, Orchard and Sandler O’Neill will enable a broad range of depository institutions and specialty finance companies to evaluate and monitor the many opportunities in the online lending market today.

“Over the last 28 years, Sandler O’Neill has forged strong relationships with community banks, thrifts, and similar financial institutions by keeping them abreast of unique, compelling investment opportunities and innovative products to help them evaluate those opportunities,” said Jon Doyle, Senior Managing Principal of Sandler O’Neill. “We are excited to have the opportunity to offer our clients Orchard’s industry expertise and suite of products, which will provide them with an efficient way of evaluating the various methods of participating in online lending.”

“Partnering with Sandler O’Neill gives us the opportunity to demonstrate our unique capabilities to a broad range of depository institutions,” said Orchard’s Chief Commercial Officer Bill Ullman. “Banks are increasingly looking for ways to participate in online lending, but figuring out where to start can be a challenge. Our solutions offer a range of tools and services ideally suited to Sandler O’Neill’s clients.”

How Do People Become Nonprime? (Yahoo! Finance), Rated: AAA

Nonprime Americans are more likely to see their incomes fluctuate, have more people living in their households, and are more often focused on short-term financial planning than their prime counterparts, according to research released today by Elevate’s Center for the New Middle Class.

This latest study focuses on the factors that may lead to – or originate from – being nonprime in America, defined as having a credit score below 700. The Center concluded that one in three nonprime Americans experienced an income change by at least 25% within the last 12 months. Additional key findings include:

  • More than half of nonprime Americans report some month-to-month income volatility within the last 12 months
  • They also have more people in their households; nonprime Americans are 20% more likely to have three or more people in their households
  • They are almost twice as likely to have elderly parents in their households than prime
  • They are more than twice as likely (58% vs. 27%) to be focused on short-term financial matters than long-term ones
  • Nonprime Americans say they can go only four months with a drop in income vs. the eight months that prime respondents say they can go
  • Nonprime Americans are more likely than prime to have slipped on the economic ladder; one in three say they are worse off than when they grew up

“It’s important that policymakers, consumer advocates, media, academics and the public at large understand this group of consumers to help determine what will best serve their needs,” continued Walker. “Our hope, through research, is to shed light on unmet financial needs of The New Middle Class and provide thoughtful insights for everyone engaged.”

MoneyLion Secures $ 22.5 Million in Series A Funding Led by Edison Partners (BusinessWire), Rated: A

MoneyLion, the mobile personal finance platform that leverages machine learning analytics to enable smarter tools and credit products, today announced $22.5 million in Series A funding led by Edison Partners. The Series A financings, together with $650 million in existing debt facilities, will fuel MoneyLion’s growth and significantly expand its lending capacity. Existing investors, including FinTech Collective, Citizen.VC, Clocktower Ventures, Broadhaven Capital Partners, Montage Ventures, and prominent individual investors from the finance and technology industries, also participated in the funding round.

MoneyLion’s approach is unique in the $800 billion consumer lending industry. Personalized for each user, MoneyLion’s mobile app simplifies personal financial management, providing a single place to track spending, savings, and credit. At the heart of MoneyLion’s platform are analytical models that power recommendations to help users achieve their financial goals, ranging from building savings, improving credit health, or managing an unexpected expense with a personal loan.

MoneyLion’s loan business has been growing three-fold year-over-year in originations and volume, with over 150,000 loans originated. MoneyLion will deploy the funds from the equity round to continue investing in the technology and talent that will help the firm grow in new and existing markets.

RealtyShares Completes an Initial Close of Their Diversified Marketplace Equity Fund (Yahoo! Sports), Rated: A

RealtyShares, a leading online marketplace for real estate crowdfunding, announced today that it has closed the initial round of a first-of-its-kind diversified marketplace equity fund. The unique fund should enable investors to access a diverse portfolio of real estate investments through a single contribution.

Managed by a team of experienced real estate investment managers, this fund was created for qualified investors and institutional partners, offering the opportunity to efficiently invest in middle market real estate. Each investment is to be a part of a portfolio of 10 to 20 properties selected by RealtyShares’ team of experts. Investors can also benefit from depreciation tax benefits, a feature that can be favorable to investors looking to reduce their taxable passive income.

The fund is mandated to invest in middle market real estate transactions that are typically $50 million and smaller, encompassing deals in opportunistic pockets within primary markets (e.g. San Francisco East Bay Area) and compelling secondary markets (e.g. Austin, Texas). The RealtyShares team intends to focus investments on value-add multifamily and commercial projects in Arizona, California, Florida, Illinois, New York, North Carolina, Texas and Virginia.

Money360 Closes $ 1.9 Million Permanent Loan for Ohio Property (Marketwired), Rated: A

Money360, the leading commercial real estate marketplace lending platform, announced today that it has provided financing for a single-tenant retail building located in Dayton, Ohio.

The building, which is currently 100 percent leased to Panera Bread, is located next to the Dayton Mall and within a heavily retail-based area with tenants such as Sears, Macy’s, J.C. Penney, DSW, Office Depot, Best Buy and TJ Maxx, among others.

The $1.9 million permanent loan allowed the borrower to recoup capital previously utilized in the acquisition of the property. Additionally, the longer loan term and prepayment structure outlined in the deal provided necessary flexibility in the financing.

The recourse loan is fixed for five years at an interest rate of 4.500%, utilizing a 25-year amortization schedule and a declining pre-payment penalty.

Betterment presses Trump to keep DOL rule (Fiduciary Focus), Rated: A

Robo-adviser Betterment is reaching out to President-elect Donald Trump to keep him from gutting the Labor Department’s fiduciary rule for retirement advice.

It ran a full-page ad in Monday’s Wall Street Journal directing Mr. Trump to “stand on the side of America’s 75 million retirement savers, not the firms with deep pockets who are lobbying” to protect their interests.

Fed Outlines Approach to Monitoring Fintech (The Wall Street Journal), Rated: A

The Federal Reserve offered early clues Monday on how it plans to monitor financial innovations such as blockchain when it published a long-awaited research paper on fintech.

The Fed said the long-term impact of the technology remains unclear, urging more study on the potential risks and rewards for financial markets.

While the U.S. central bank has no direct authority over companies operating in the rapidly evolving arena of financial technology, it regulates the flow of cash through electronic payment systems that banks use to move money and is scrutinizing the new technologies’ connections to banks.

The Fed’s research document contained no firm policy conclusions, but the central bank has been visiting fintech startups to ask about their business models and is looking to shape regulatory and industry discussions, according to people familiar with the talks.

The Fed also is probing the decisions banks make after engaging with fintech startups and assessing any potential for fraud, money laundering or collusion in the chain, these people added.

LendingUSA Appoints Manoj Mathew as its New Chief Technology Officer (Yahoo! Sports), Rated: B

LendingUSA, a leading provider of point of sale financing solutions, has announced Manoj Mathew as its new Chief Technology Officer.

His previous experience includes being the co-founder and Chief Technology Officer of LendFoundry, a fintech accelerator platform for marketplace lending. He was also a co-founder and senior executive at Sigma Infosolutions, a leader in business and IT solutions for both large and small enterprises. During his time at Sigma, he was instrumental in the design and architecture of the origination platform for loanDepot, QuickBridge and the servicing system deployed for Rocketloans.

Trump Education Secretary Pick Has Indirect Stake in Student Lender (The Wall Street Journal), Rated: B

Betsy DeVos, tapped by President-elect Donald Trump to run the U.S. Department of Education, is an indirect investor in online-lending company Social Finance Inc., a startup whose fortunes hinge in part on policies crafted by the department Ms. DeVos would run.

Ms. DeVos and her husband Dick DeVos are investors in RPM Ventures, an Ann Arbor, Mich.-based venture-capital firm that was one of SoFi’s earliest backers, according to the firms’ websites.

United Kingdom

IPF report shines light on real estate crowdfunding (Property Week), Rated: AAA

In 2015, property debt and equity crowdfunding totalled $7.8bn, whereas there was $760bn invested in commercial real estate.

Real estate accounts for 5% or less of the crowdfunding markets in China and the US but it accounts for more than 20% in the UK.

The UK real estate crowdfunding market is heavily weighted towards debt, which accounts for 88% of activity. At $0.93bn, debt crowdfunding represented about 1% of all lending in the wider UK commercial real estate market in 2015.

FCA authorises peer-to-peer bridging lender (Bridging&Commercial), Rated: AAA

The buy-to-let (BTL) and bridging loans marketplace was granted regulatory approval following a 24-month application process.

LandlordInvest has now applied to HM Revenue & Customs to become an Isa manager capable of offering the Innovative Finance Individual Savings Account (IFIsa).

Only firms authorised by both regulators are permitted to offer the IFIsa product.

LandlordInvest expects to receive a green light from HMRC over the next few weeks and, if granted, will offer the IFIsa directly through its lending platform.

The firm will be looking to offer tax-free returns between 5-10% per annum.

Denheath Desserts Surpasses $ 300,000 Funding Target During PledgeMe Crowdlending Campaign (Crowdfund Insider), Rated: A

Denheath Desserts, a custard square brand from South Canterbury, has successfully secured its initial $300,000 funding target through its crowdlending campaign on PledgeMe. The company launched the initiative in late October, seeking a max of $1.2 million to accelerate its self-proclaimed “World Custard Invasion,” grow distribution and New Zealand, and start expansion plans in Hong Kong, Singapore, and New York City. 

Growth Street Will Now Accept Retail Investors on P2P Platform (Crowdfund Insider), Rated: A

Growth Street is now an FCA registered Appointed Representative.  Growth Street will now be able to accept individual investors on its peer to peer lending platform. By expanding the range of investors, Growth Street seeks to provide more businesses with a GrowthLine, its business overdraft alternative. Growth Street has partnered with Resolution Compliance to expand its activities but stated it would continue with its own direct application with the FCA.

European Union

Morgan Stanley in Origin loan push (The Times), Rated: AAA

Origin Capital, a Dublin non-bank lender, has signed a funding deal with Morgan Stanley to offer finance to the Irish commercial property market.

The partnership with one of the world’s largest investment banks is expected to target the refinancing of the tens of billions’ worth of commercial property loans purchased by investment funds such as Cerberus and Lone Star from Irish banks and Nama.

Origin will act as an origination platform for Morgan Stanley. Apart from refinancing property loans out of the so-called vulture funds, chief executive Ross Metcalfe said Origin also expected to finance companies, currently leasing, to buy properties.

China

These Charts Show How One Part of China’s Offshore Bond Market Is Changing Fast (Bloomberg), Rated: AAA

City-level borrowers are storming China’s international bond market.

The urban encroachment means that the country’s offshore bond market is moving down the credit ratings spectrum with a greater proportion of new issuance coming from junk-rated financing arms, according to data from CreditSights Inc.

City-level entities are less likely to garner investment-grade ratings due to their reliance on mere “implicit” support from the Chinese government. That means the share of junk-rated issuance has risen to 11 percent year-to-date from none in 2015, according to CreditSights.

This deterioration in the credit quality of bond issuers comes amid Beijing’s step-up in its efforts against central government support for local governments. China announced a contingency plan last month, ordering local authorities to repay their own debt and reiterating that Beijing won’t bail out regional governments.

Women in viral loan receipt nude pics mostly college students in small cities (Global Times), Rated: A

Women who used now-leaked nude pictures and intimate videos of themselves as collateral for online lending platforms are mostly college students, though the oldest is 47 years old, news site thepaper.cn reported on Monday.

Of the 161 women whose pictures and videos have spread online since November 30, the personal information of 144 has also been exposed, showing that around two-thirds are college students.

Most of the users are from third- or fourth-tier cities and live in villages. Less than 5 percent of them are from first-tier cities, said thepaper.cn.

Asia

Cradle’s private investment fund grows to RM190.2 mln (The Borneo Post), Rated: AAA

Cradle Fund Sdn Bhd (Cradle) is on track to drive more private investment participation to boost the ecosystem for Malaysian technology startups with co-investment funds of RM190.2 million, up from RM161.2 million as of June this year.

Chief executive officer, Nazrin Hassan, said the co-investment programme was one of the company’s efforts to help reduce government-linked companies’ dependence on government funding.

Cradle yesterday signed partnership agreements with RHL Ventures, TinkBig Venture, Biz Angel Network, EIX Group, Segnel Ventures and PlatCom Ventures, which will take part to fund Malaysian startups totalling RM14.5 million.

With the new partners on board, the number of partners has grown to 32 with total committed funds of RM190.2 million.

Global participation banking assets reached US $ 924 billion in 2015: EY (Zawya), Rated: A

The GCC region’s share of participation banking increased to 72%, as the size of assets in the Association of Southeast Asian Nations (ASEAN) countries declined during 2015.

Saudi Arabia, the UAE and Malaysia are the three largest participation banking markets, in terms of assets, representing 34.2%, 17.2%, 13.3% of the global market share respectively.

In the GCC region, FinTech innovations have the ability to enhance market access and profitability of banks, dramatically. A starting point for participation banks is to activate a bold strategy for the finance function – inclusive of advanced data analytics, robotic process automation, the cloud, artificial intelligence and block-chain.

Some of the key areas of FinTech innovations that are relevant for participation banks include: SME and peer-to-peer lending platforms, payment related innovations such as person-to-person payments, digital authentication and digital wealth management.

If banks were to consolidate with Fintech companies, it could propel participation banks to become mainstream across 20 promising markets by 2021, up from five markets today, representing a jump from 100 million customers to 250 million customers over the same period.

Digital-only banking could become a significant client segment for participation banks. There is a case for participation banks to evaluate collaborative ventures with FinTech firms to launch digital-only banks in their respective countries.

Authors:

George Popescu
Allen Taylor

August 9th 2016, Daily News Digest

August 9th 2016, Daily News Digest

News Comments Today’s news focus on Lending Club’s results, OnDeck’s results, and the FDIC proposing tougher hurdles for partnerships with marketplace lenders. United States Lending Club results are in my opinion really positive: Originations in Q2 2016 > Q2 2015. I did not expect that ! Yes, there is a reduction in origination vs Q1 […]

August 9th 2016, Daily News Digest

News Comments

United States

United Kingdom

Canada

Mexico

Singapore

India

News Summary

 

United States

Lending Club results reveal pain of governance scandal, (FT), Rated: AAA

Lending Club said that originations of loans between April and June came to $1.96bn in the period, down 29 per cent from the previous quarter but fractionally higher than a year ago. That came as a surprise to some analysts, who had been braced for a steeper year-on-year fall.

Despite the stronger-than-expected top line, profits at Lending Club were hit by a surge in fees to professional services firms engaged in helping it to fight back, goodwill writedowns related to a 2014 acquisition, and a host of payments to staff affected by severance and retention programmes.

The net loss for the second quarter came to $81.4m, compared to a loss of $4.1m a year earlier.

Lending Club ended the quarter with 1,499 employees and contractors, down from 1,545 at the end of March.

There had been “a gaping hole [in management], given that the two most important people in the business — the CEO and Jeff Bogan, head of capital markets, had to leave,” said Peter Renton, founder of LendIt.

Despite the $2bn or so in quarterly loan originations the survival of the company was still in doubt, said Peter Atwater, Delaware-based president of Financial Insyghts.

OnDeck Reports Second Quarter 2016 Financial Results, (PR Newswire), Rated: AAA

OnDeck® today announced second quarter 2016 financial results highlighted by strong credit performance and record levels of Loans Under Management, Originations and gross revenue.

For the three months ended June 30, 2016, OnDeck increased Loans Under Management by 47% year-over-year to $1 billion, grew Originations 41% to $590 million, and increased gross revenue by 10% to$69.5 million.

“Our leadership position and diversified funding model enabled us to produce solid results this quarter,” said Noah Breslow, OnDeck’s chief executive officer.  “Although financial comparisons continue to be affected by our planned reduction inMarketplace sales and its resulting accounting impacts, we believe that retaining a greater percentage of loans on our balance sheet is the right decision for the long-term economics of the business. To that end, our Unpaid Principal Balance grew 57% year-over-year, which will drive future gross revenue.”

Mr. Breslow continued, “In addition, we are encouraged by credit performance trends across OnDeck’s portfolio, which continued to be strong, demonstrated by both sequential and year-over-year improvements in our 15+ Day Delinquency Ratio. We will continue to prioritize responsible growth of Loans Under Management as we progress through the remainder of the year.”

Financial Highlights

  • Gross revenue was $69.5 million for the quarter, up 10% from the prior year period.
  • Net revenue was $28.9 million for the quarter, down 33% from the prior year period.
  • GAAP net loss attributable to OnDeck common stockholders was $17.9 million for the quarter, compared to net income of$5.0 million in the prior year period.
  • Adjusted EBITDA* was a loss of $12.4 million for the quarter, compared to positive $8.7 million in the prior year period.
  • Adjusted Net Loss* was $14.0 million for the quarter, compared to Adjusted Net Income* of $7.3 million in the prior year period.

Key Business Highlights

  • Origination volume increased to a record $590 million for the quarter, reflecting 41% growth over the prior year. Lifetime Originations also reached a new milestone of over $5 billion during the second quarter.
  • Loans Under Management reached $1 billion, up 47% from the prior year period.
  • Unpaid Principal Balance grew to $790 million, up 57% from the prior year period.

Gross revenue increased to $69.5 million during the second quarter of 2016, up 10% from the comparable prior year period.  The increase in gross revenue was primarily driven by higher interest income, partially offset by lower gain on sale revenue. Interest income increased to $63.9 million during the quarter, up 27%, and primarily reflected the growth of average loans, which increased 37%.  The Effective Interest Yield for the second quarter of 2016 was 33.3%, down from 35.9% in the comparable prior year period, reflecting the continued mix shift to lower cost distribution channels, an increase in average term loan length over the period, and OnDeck’s lower pricing and origination fees for repeat loan customers.

Gain on sale was $2.8 million during the second quarter of 2016, down 76% from the comparable prior year period. The decline in gain on sale primarily reflected a lower Gain on Sale Rate during the quarter and the reduction of loans sold through OnDeckMarketplace.  OnDeck sold $79.3 million1 of loans sold through OnDeck Marketplace at a 3.5% Gain on Sale Rate during the second quarter of 2016, compared to $149.7 million of loans through Marketplace at a 7.8% Gain on Sale rate in the second quarter of 2015.  Loans sold or designated as held for sale through OnDeck Marketplace represented 15.6% of term loan originations in the second quarter of 2016 compared to 32.8% of term loan originations in the comparable prior year period.

Net revenue was $28.9 million during the second quarter of 2016, down 33% from the comparable prior year period. The decline in net revenue primarily reflected the reduction of Marketplace sales in the second quarter, which led to lower gain on sale revenue, higher provision expense and higher funding costs for the period. Net revenue margin decreased to 41.5% during the second quarter of 2016 from 67.9% in the prior year period, reflecting the decline in net revenue.

Overall, credit performance in the second quarter of 2016 was strong, with the 15+ Day Delinquency Ratio decreasing to 5.3% from 8.0% in the prior year period and from 5.7% sequentially.

The Cost of Funds Rate during the second quarter of 2016 increased to 6.7% of Average Funding Debt Outstanding, up from 5.2% in the comparable prior year period. The increase primarily reflected the acceleration of $1.6 million of deferred debt issuance costs due to the early voluntary prepayment in full of our prior securitization issuance.

Operating expenses were $47.5 million during the second quarter of 2016, up 24% over the comparable prior year period as OnDeck continued investing in our technology and analytics capabilities and incurred expenses related to supporting OnDeck’s overall growth.

Total Funding Debt at the end of the second quarter of 2016 was $554 million, up 52% over the prior year period.  The increase in total funding debt reflected the growth of Unpaid Principal Balance during the period. OnDeck continues to actively explore opportunities to further strengthen its financial flexibility, including upsizing existing debt facilities, adding new debt facilities, entering into additional securitizations, increasing Marketplace sales, and increasing its corporate line of credit.  While no assurance can be given, OnDeck expects that it will continue to be able to obtain sufficient financing to maintain its current level and planned growth of originations.

At the end of the second quarter of 2016, cash and cash equivalents were $78 million, down from $160 million at December 31, 2015. The decrease in cash and cash equivalents primarily reflected the company’s increased funding of loans on balance sheet.

Third Quarter 2016

  • Gross revenue between $73 million and $76 million.
  • Adjusted EBITDA between a loss of $9 million and a loss of $11 million.

Full Year 2016

  • Gross revenue between $280 million and $290 million.
  • Adjusted EBITDA between a loss of $35 million and a loss of $43 million.

FDIC Proposes More Hurdles for Bank Partners of Marketplace Lenders, (Pepper Hamilton), Rated: AAA

On July 29, 2016, the FDIC issued FIL-50-2016, which seeks comment on proposed Guidance for Third-Party Lending for FDIC-supervised institutions when lending through a business relationship with a third party. The guidance would apply to all FDIC-supervised institutions that engage in third-party lending, regardless of asset size.

The proposed guidance defines third-party lending as an arrangement that relies on a third party to perform a significant aspect of the lending process. This includes institutions originating loans for third parties; institutions originating loans through third parties or jointly with third parties; and institutions originating loans using platforms developed by third parties. These include marketplace lending companies with bank partnerships.

Due Date for Comments

Comments are due October 27, 2016 and should be sent to thirdpartylending@fdic.gov.

Questions

The FDIC is seeking comment on the following topics:

  • the definition of third-party lending and scope of the guidance
  • potential risks arising from the use of third-party lending programs
  • elements of third-party lending risk management programs
  • supervisory considerations.
  • examination procedures.

The proposed guidance states that the FDIC would evaluate lending activities conducted through third-party relationships as though the activities were performed by the institution itself.

To manage the risks identified by the FDIC, the proposed guidance requires institutions to establish a third-party lending risk management program and compliance management system that is commensurate with the significance, complexity, risk profile, transaction volume, and number of third-party lending relationships the institution has.

This proposed guidance is another example of the FDIC continuing to raise the bar for marketplace lenders’ relationships with FDIC-insured banks. The FDIC has a negative view of the risks associated with marketplace lending, as evidenced by its November 6, 2015 Financial Institution Letter FIL-49-2015, which addressed the underwriting and credit risks associated with purchased loans and loan participations from third parties. More recently, in the February 1, 2016 issue ofSupervisory Insights, the agency discussed the specific risks that banks need to consider when dealing with marketplace lending companies, including third-party risk, compliance risk, transaction risk, servicing risk and liquidity risk, as well as specific due diligence recommendations.

Carrie Dolan Departs Lending Club as CFO, (Crowdfund Insider), Rated: A

Dolan is a highly respected executive not only at Lending Club but within the financial industry.  Last year, Dolan was named the “Most Powerful Woman in Finance” by American Banker. The same year she was also recognized as the Financial Woman of the Year by the Financial Women of San Francisco. Before coming to Lending Club, Dolan was Treasurer for the Charles Schwab Corporation.

Lending Club released a statement on her departure, alongside Q2 financial results. The company stated;

“Carrie was integral to Lending Club’s maturity and growth over the past six years,” said Scott Sanborn, CEO and President of Lending Club. “She approached us early this year about planning a transition, and in May the Board and I asked her to postpone her plans until we could navigate recent events. I and the Board want to thank her for her leadership, commitment and dedication particularly over the last several months, and wish her well in her next endeavor.”

Dolan for her part said of the decision to leave Lending Club;

“I remain a passionate believer in this business model and this company, and it has been a deeply rewarding experience to help build Lending Club from 40 employees to over 1,500. Now that investors are re-engaged with the platform, I am excited to begin my next chapter.”

Ron Suber, President of Prosper and a marketplace lending industry advocate, told Crowdfund Insider;

“I have known and respected Carrie for many years. We wish her the very best in her next endeavors. She has played a vital role in the growth of not just Lending Club but all of marketplace lending. This industry is maturing and entering a new era.”

The announcement of Dolan’s departure comes at a time when there are rumors of tanking moral at the online lender. The all hands mentality, following the resignation of former CEO Renaud Laplanche, may have taken its toll.

Lending Club CFO Dolan steps down, (FT), Rated: AAA

Chief executive Scott Sanborn, said:

Our efforts to reengage investors are working, with fifteen of our top twenty largest investors back on the platform today.

Despite the unusual disruption to our supply of capital in May, we facilitated nearly $2 billion of loans to nearly 170,000 borrowers. While we still have a lot of work ahead, the value that we bring to borrowers and investors is stronger than ever, and we believe we have the resources and resolve to execute on our mission.

The company said on Monday that its chief financial officer Carrie Dolan had resigned to “pursue a new opportunity”. The San Francisco-based company said that Ms Dolan had approached the board earlier this year about the move but had her delay her departure until the company could “navigate recent events”. Bradley Coleman, who previously served as Controller has been named interim CFO.

News of Ms Dolan’s departure came as the company deepened its losses for the second quarter. Lending Club reported a net loss of $81.4m or 21 cents a share in the three months ended in June, compared with a loss of $4.1m or 1 cent a share in the year ago period.

Excluding one-time items, adjusted loss came in at 9 cents a share, worse than the 3 cent loss that analysts were looking for.

Revenue however climbed nearly 7 per cent to $103.4m, ahead of analysts’ forecasts for $100.6m.

Private agencies devise new credit score models for first-time loans, (LiveMint), Rated: AAA

The inability of traditional credit bureaus to assign credit scores to many loan applicants who haven’t borrowed earlier has spawned a variety of private agencies using novel techniques to fill the gap.

CreditVidya says it looks at data sources ranging from behavioural, transactional, location and social profiles to assess the risk of an individual. This could be, for instance, a check on whether a loan applicant checks office e-mail from a place where she says her office is located. The bureau says its engine runs basic searches around the Internet to verify the applicant’s employment, spending habits and cash withdrawal rates from ATMs. Consistency of a particular behaviour among these data points demonstrates stronger stability of a customer,” said Abhishek Agarwal, co-founder and chief executive officer, CreditVidya.

Hong Kong-headquartered Lenddo, another credit assessment firm, says it uses psychometric tests and application form analysis as tools to check credit risk. The company, which works in 20 countries around the world, is focusing purely on small-value loans between Rs.1 lakh toRs.8.5 lakh in India.

Experian, which started in 2010, has introduced a technique that compares a first-time customer with statistically similar customers who have borrowed before to see the trend in repayment.

According to Sumit Bali, senior executive vice-president and head-personal assets at Kotak Mahindra Bank, the main issue with using third-party services for credit assessment seems to be the issue of invasion of privacy.

Kotak Mahindra Bank has been using surrogates such as educational background, duration of employment and financial stability to assess younger customers who may not have a credit history.

For instance, LenDenClub, a P2P lender, has been looking at a customer’s income data, equated monthly instalments (EMIs) repayment record and credit bureau data and pairing it with behavioural patterns on consumer loans, family details and employer track record to take lending calls.

David Snitkof of Orchard Shares Unique Insight into Online Lending Market Dynamics, (Crowdfund Insider), Rated: AAA

Orchard Marketplace is a platform that is uniquely positioned at the intersection of institutional money and online lending.

From my perspective, the first half of 2016 has proved defining for online lending, further solidifying the fundamental truths of our industry, including broader access to credit, a better customer experience and significantly increased transparency. The unfortunate events of the past few months presented a learning moment for online lending and I’m pleased to see that many participants have taken that opportunity to set the bar even higher.

It’s not surprising that originators are trying to diversify their capital structure.

For the past couple years, originators were flush with investor demand and could compel adherence to their preferred terms.  Today, these originators are more willing to be flexible with investors who make commitments to fund their lending.

The news cycle has started to slow for many of the negative headlines of early 2016, so I expect to see the path cleared for positive developments.

In addition to continued enthusiasm from European investors, we’ve seen strong interest from Chinese Wealth Management firms to invest in U.S. credit, as evidenced by notable US-Chinese partnerships such as those between DriveWealth and CreditEase, Robinhood and Baidu, Saxo Bank, and Shanda group’s growing stake in Lending Club.

There is a common misconception that the online lending industry is not regulated, when in fact, it is.

Marketplace Update: Pre-Qual Changes, (Funding Circle Email), Rated: A

Borrower Minimum Requirement Changes
As our business grows, so does the strength of our risk models. Each loan we review provides us with more data, allowing us to continuously make improvements to the accuracy and efficiency of our assessment process.

Based on thorough statistical analysis, our Credit & Risk team have updated our minimum requirements to the following :

  1. Business Tenure – Greater than 2 years
  2. Annual Revenue – No revenue restriction
  3. Net Profit – No net profit restriction (application could be approved based on risk assessment and loan affordability)
  4. Business Type – Should not be sole proprietor
  5. Bankruptcy – Should not have happened in last 7 years
  6. Tax Lien – No auto decline due to tax lien (application could be approved based on risk assessment and paid off status)
  7. Ineligible Industries – Speculative real estate, loan brokers, non-profit, adult entertainment, weapon manufacturers and sellers, money transacting/movement businesses, gambling, marijuana producers/sellers, bail bondsmen, government entities

Elevate Hires GE Executive Director Al Comeaux as Chief Communications Officer , (Business Wire), Rated: A

Elevate, a provider of online credit solutions for non-prime consumers, announced the addition of Al Comeaux, who has assumed the role of Chief Communications Officer. Mr. Comeaux brings to the role nearly 30 years of experience leading digital and online communications strategies at leading international consumer brands.

In his role, Comeaux will focus on investor relations, corporate communications, and internal communications.

Term Sheet: August 09, 2016, (Fortune), Rated: AAA

A new study on the state of startup/corporate collaboration from MassChallenge and Imaginatik shows that not only are corporates more eager to work with startups, 23% of it see it as “mission critical, and 82% said it’s at least “somewhat important.”

Most importantly, 67% of those responded that they wanted to work with earlier stage startups.

It became trendy to launch corporate-run startup accelerator programs, which I used to mock as “innovation by osmosis.” There’s a whole new class of corporate venture arms from non-tech corporations ranging from the insurance industry toCampbell Soup. Fortune 500 companies have hired “startup scouts” and opened innovation hubs in Silicon Valley.

But lately I’ve noticed a shift in the strange, sometimes awkward relationships between corporations and startups. Corporations take startups—even very young ones—far more seriously today. Look no further than the recent Fortune 500 acquisitions of startups as proof:General Motors spent $1 billion (or around that with earn-outs) on Cruise Automotive, a 30-person autonomous vehicle startup that hasn’t even launched a product. Unilever spent $1 billion on Dollar Shave Club, a razor startup that adds just $200 million in revenue to Unilever’s €53.3 billion bottom line. And of course, yesterday Wal-Mart spent $3 billion on Jet.com

Brief: Marketplace Lender LendingUSA Names Brian Walby Vice President of Sales, (Crowdfund Insider), Rated: B

On Monday, marketplace lending platform, LendingUSA, announced it has appointed Brian Walby as its new vice president of sales. Walby previously worked as owner and managing director of RVC Consulting and has held executive and senior level positions at Experian Interactive Media and LendingTree.

United Kingdom

UK regulator responds to government questions on P2P regulations, (Business Insider), Rated: A

FCA’s response to Tyrie’s questions was published last week, the same day the UK announced its first interest rate cut in seven years. This is particularly timely, as the rate cut may end up being a driver behind new growth in the alternative finance industry, as outlined in last Friday’s briefing.

  • Responsibility f0r accuracy of information lies squarely with firms. FCA said that since October 2014 it has considered 37 cases of P2P and investment-based promotion, of which 21 were amended or withdrawn for breaking guidelines. FCA’s hard line on misleading promotions is especially important — falling interest rates will drive a decline in the interest rate paid on bank accounts, which could drive savers to explore P2P lending as an alternative way to earn interest income.
  • Firms have regulatory incentives to ensure creditworthiness of borrowers. P2P lenders must abide by the same rules as legacy lenders when it comes to assessing borrowers’ creditworthiness. Firms also voluntarily publish their loan books meaning they have a commercial incentive to ensure creditworthiness of borrowers — if books showed a default rate, potential investors would be put off, while existing investors would likely withdraw funds.
  • FCA has its own concerns about consumer understanding of risk. There is some evidence that FCA and Tyrie are right to be concerned — 37% of UK consumers who are aware of P2P lending think it is either equally risky, less risky, or are unsure of its risk relative to savings accounts. Savings accounts are covered by deposit insurance while all capital invested via P2P lending is at risk.
  • FCA admits crowdfunding is a small industry but has faith it will grow. FCA expects P2P lending and other crowdfunding models to result in a growing choice of finance providers. We think this may be optimistic and that as banks acquire new technology enabling them to compete with alternative lenders, we will actually see consolidation in the industry.

Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on fintech regulation that explains how regulators in Europe are successfully growing fintech innovation and how it’s becoming a model for regulators around the world.

Here are some of the key takeaways from the report:

  • The financial technology sector is booming, and Europe is a leading region for growth. VC-backed fintech companies in Europe raised £1 billion ($1.5 billion) in funding across 125 deals in 2015.
  • With this boom in funding comes a need to regulate the nascent industry. There are a variety of approaches — active, passive, and restrictive — that regulators can take. The EU and the UK, in particular, have taken an active approach, in order to encourage growth.
  • The regulation that will have the most impact on the European fintech market is the Second Directive on Payments Services, known as PSD2. It will force banks to open up their systems to fintechs. This will allow fintechs to act as intermediaries between banks and their customers.
  • The UK regulator is actively promoting its approach to regulation as a model for other countries to follow. Some of its innovations are already being copied by other regulators around the world.

In full, the report:

  • Examines the different approaches to fintech that regulators can take
  • Explains the key EU laws that will affect the European financial services industry in the next two years and beyond
  • Explores the potential impact of new regulations
  • Details the workings of the initiative central to the UK regulator’s approach to fintech
  • Highlights what can be achieved when regulators, governments, and fintech companies work together

What does a drop in interest rates mean for SME P2P lenders?, (Alt Fi News), Rated: A

Last week marked a historic day for the UK economy. The Bank of England announced a 0.25 per cent cut to interest rates and a raft of monetary policies to encourage growth in the wake of the referendum. A 0.25 per cent base rate is the lowest we’ve ever seen, it’s the first time the monetary policy committee MPC has cut interest rates in seven years, and the committee is not ruling out a further cut later this year.

As expected we’ve already seen banks and building societies review the savings and mortgage rates they pass on to customers but the impact is less clear in the emergent P2P sector. Inevitably, there will be some changes to the rates of return that lenders receive, but whether this will actually have a tangible effect on the appeal of P2P, is doubtful.

In reality, a 50 per cent reduction in base rate is only a 0.25 per cent fall, and that will not, in itself, make much of a difference to the industry.

By providing a steady stream of cheap money for banks to lend, there was little incentive for them to attract deposits from savers, weighing down available rates.

Even with this additional incentive for banks to lend, we’ll have to wait and see whether businesses really do benefit from the scheme.

In this environment, P2P lending has emerged as a genuine alternative to this type of intervention, producing investment income four or five times greater than bank deposits, while simultaneously providing business loans to fill the funding gap left by the banks. When all is said and done, a base rate cut won’t alone be enough to drive business-led growth in the economy and may put some downward pressure on returns, but for peer to peer lenders and the platforms they use it will be water off a duck’s back.

Canada

Asset Direct – Canada’s Marketplace for Unsecured Credit, ( News Wire Canada), Rated: A

Asset Direct of Canada Inc., is proud to announce the launch of their services to consumers inCanada.  Asset Direct is Canada’s premier loan search engine for unsecured credit.  Simple and easy to use, their free platform gives consumers the power to search multiple lenders in order to find a loan and payment plan that best suits their needs.

Asset Direct works with many lenders across Canada including: Canada Drives, Consolidated Credit, Easy Financial, Grow, LendingArch, Magical Credit, OnDeck, and Refresh Financial.  Together, Asset Direct and the above-mentioned companies are co-innovating the lending market.

Mexico

Mexican P2P Lender Kubo.Financiero Raises .5M During Series A Funding Round, (Crowdfund Insider), Rated: A

Last week, Mexican peer-to-peer lending platform, Kubo.Financiero announced it had secured $7.5 million during its Series A funding round, which was led by Bamboo Finance with participation from Endeavor Catalyst, Monex Grupo Financiero, KuE Capital, Tanant Capital, Javier Molinar, Alta Ventures Mexico Fund I, Capital Invent, Vander Capital, and Wayra.

Founder and CEO of Kubo.Financiero, Vicente Fenoll, stated this is a sign of confidence not only for the company but also for Mexico’s fintech industry.

Diego Serebrisky, managing director of Alta Ventures Mexico Fund I, Managing Partner of Dalus Capital and Board Member of Kubo, added:

“We decided to continue supporting kubo in this round of capitalization, because it is one of the leading companies in the Fintech industry in Mexico, offering a much higher financial product competition, generating huge profits for their customers. “

Singapore

Funding Societies raises .5M for its loan marketplace in Southeast Asia, (Tech Crunch), Rated: A

Look! Another notable funding round for a fintech startup in Southeast Asia, after Singapore-based Funding Societies raised a $7.5 million Series A round for its take on marketplace lending.

Fund Societies is active in Singapore and (as ‘Modalku’) Indonesia — Southeast Asia’s most developed economy and its largest economy, respectively — where it is rivaled by the likes of Capital Match and MoolahSense.

The company said it has paid out $8.7 million to date across 96 loans. It claims a 94 percent repayment rate which CEO Kelvin Teo touted as its most notable data point since it shows reliability over volume.

“We’re not the biggest in Singapore, but we have done the most term loans because we take the approach that over-lending to a person will come and bite you in terms of defaults,” he explained.

As for fine details: Funding Societies is primarily focused on working capital loans. In Singapore, the average loan size is SG$90,000 ($67,000) while that falls to SG$25,000 ($18,500) in Indonesia.

It charges a loan origination feed to the borrower (3-4 percent in Singapore, 5-6 percent in Indonesia) and a 1 percent monthly fee to the lender. It claims an approval rate of between 15-25 percent for loan applicants.

Teo told TechCrunch that the company is working to expand its service to Malaysia, where it has a handful of employees and an application to operate locally is pending regulator feedback.

Teo foresaw plenty of competition coming to market — that is why he and co-founder Reynold Wijaya launched the company in 100 days last year while they were in the U.S. completing their studies at Harvard University.

That sounds like a lot, and the company has already grown to some 70 employees, but the Funding Societies CEO insists that the company is matching startup-style growth with the responsibility that comes with providing financial products.

India

RBI governor Raghuram Rajan may unveil P2P norms as parting shot, (India Times), Rated: A

As Reserve Bank of India governor Raghuram Rajan prepares to deliver what would be his last monetary policy speech on Tuesday, speculations are rife that he will announce regulations for peer-to-peer (P2P) lending.

In April, RBI had come out with a consultation paper on P2P lending platforms and asked for public suggestions on the need to regulate them. Next step for the regulator is to come out with draft guidelines and ask for further suggestions before coming out with the real regulations.

People in the know said the buzz at the RBI is that Rajan wants to get all the innovative projects – including P2P platforms, regulations around the financial technology space and new payments procedures like Unified Payments Interface and Bharat Bill Payments – cleared before he demits office.

Author:

George Popescu