Tuesday March 14 2017, Daily News Digest

total debt balance

News Comments Today’s main news: SoFi’s loan losses pile up as wealthy borrowers default. Charles Schwab launches hybrid human-robo financial advice. GDR adds Avant as verification network partner. Vista to acquire D+H to merge with Misys.  Today’s main analysis: Household debt edges up as auto, credit card, and student debt climb. The regulation of MPL. Today’s thought-provoking articles: Everything […]

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News Summary

United States

SoFi’s Loan Losses Pile Up as Even Wealthy Borrowers Default (Bloomberg), Rated: AAA

Social Finance Inc.’s online borrowers are defaulting at higher rates than underwriters for one of its bond deals had expected, the latest sign that an industry that hoped to upend banking is now getting tripped up by bad loans.

Losses on the company’s personal loans were high enough to breach key levels known as “triggers” last month on a bond deal issued in 2015 and backed by the loans, according to analysts at Morgan Stanley. If defaults keep rising, investors in bonds could end up missing out on expected interest payments.

Other online lenders have had similar trouble with defaults and triggers recently, which has broadly made it more expensive for the startups to fund their businesses. One pioneer in the business, CircleBack Lending Inc., stoppedmaking new loans as growing numbers of its borrowers defaulted.

Credit issues at Prosper Marketplace Inc. resulted in staff cuts at that company, and were largely the result of lending too much, too fast, and a “grow at all cost” attitude fueled by insatiable demand from investors, Prosper CEO David Kimball said at the New York conference last week.

Household Debt Edges Up as Auto, Credit Card, and Student Debt Climb (New York Fed), Rated: AAA

Aggregate household debt balances grew in the fourth quarter of 2016. As of December 31, 2016, total household indebtedness was $12.58 trillion, a $226 billion (1.8%) increase from the third quarter of 2016. Overall household debt is now 0.8% below its 2008Q3 peak of $12.68 trillion, and is 12.8% above the 2013Q2 trough.

Mortgage balances, the largest component of household debt, which stood at $8.48 trillion as of December 31, saw a $130 billion uptick from the third quarter of 2016.

Balances on home equity lines of credit (HELOC) were roughly flat, rising $1 billion to $473 billion.

Non-housing debt balances rose in the fourth quarter; with increases of $22 billion in auto loans, 32 billion in credit cards, and 31 billion in student loans.

Charles Schwab launches hybrid human-robo financial advice (WHTC), Rated: AAA

Brokerage Charles Schwab Corp on Tuesday launched a service that combines its automated investment management technology with human advisors, as financial institutions race to offer digital financial advice.

The service, called Schwab Intelligent Advisory, provides clients with a financial and investment plan, unlimited access to a human advisor via phone or video conference, and an investment portfolio of exchange-traded funds managed by computer algorithms.

The service, for clients with at least $25,000 to invest, includes an online platform that keeps track of financial goals and retirement plans, the San Francisco-based company said in a statement. It will charge a 0.28 percent fee on assets, with a quarterly maximum of $900.

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

At the outset, it may be helpful for us to briefly discuss the scope of this paper and some of the terminology we use. There is no single or universally accepted definition of “marketplace lending.” In general, though, marketplace lenders can be viewed as companies engaged in an Internet-based lending business (other than payday lending) which are not banks or savings associations or otherwise regulated as financial institutions. They may offer a wide variety of financial products, including student loans, small business loans, and real estate loans, in addition to the unsecured installment consumer loans on which the industry initially focused. However, “marketplace lenders” may or may not actually be lenders. This term is a generic term to identify participants in marketing, originating, selling, and servicing loans. They also may fund their loans through a variety of means, including equity capital, commercial lines of credit, sales of whole loans to institutional investors, securitizations, and/or pass-through note programs. In this paper we focus on the consumer lenders since they are the most heavily regulated and have the highest loan volumes. However, much of the discussion herein—outside of matters pertaining directly to consumer lending regulation—will also apply to nonconsumer lenders.

Download “The Regulation of Marketplace Lending: A Summary of the Principal Issues” here.

Global Debt Registry Adds Avant as Verification Network Partner (Yahoo! Finance), Rated: AAA

Global Debt Registry (GDR), the asset certainty company known for its loan data validation expertise, today announced it has added leading online lending platform Avant to its verification network.

Investors in loans through Avant now have turnkey access to enhanced loan due diligence services and can easily add new data insights onto portfolios of loans without having to touch sensitive personally identifiable information (PII) about borrowers.

GDR’s eValidationSM and eVerifySM asset certainty tools require no technology investment, using existing data structures and processes to streamline the flow of information from the lender to the investor. In addition to digital scanning for traditional document verification and data integrity, GDR securely analyzes the Personally Identifiable Information (PII) to ensure borrower data can be independently confirmed in compliance with the investors representations and warranties.

Kroll Bond Rating Agency Assigns Preliminary Ratings to Marlette Funding Trust 2017-1 (BusinessWire), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Marlette Funding Trust 2017-1 (MFT 2017-1). This is a $257.44 million consumer loan ABS transaction that is expected to close on March 23, 2017. This transaction represents the third securitization collateralized by unsecured consumer loans originated by Cross River Bank, under the Marlette Best Egg Platform and sold to Marlette Funding, LLC (“Marlette”) or its affiliate.

Approximately $250 – $325 million of loans are originated through the Platform per quarter. Since March 2015, over $3 billion of loans have been originated though the Platform, and as of February 2017, Marlette has over $100 million of loans on its balance sheet.

The transaction has initial credit enhancement levels of 27.45% for the Class A Notes, 17.95% for the Class B Notes, and 9.10% for the Class C Notes. Credit enhancement consists of overcollateralization, subordination (in the case of the Class A and Class B Notes) and a reserve account funded at closing.

Traditional Advisor Business Model Will Not Last (Financial Advisor IQ), Rated: A

Several developments are creating a “perfect storm” that will revolutionize the financial advice industry and leave many advisors behind, John Lohr writes in Seeking Alpha.

First Ascent still uses real humans on its investment committee, while an independent advisor serves the client, Lohr writes. That model isn’t likely going away: even robo-advice pioneers such as Betterment now offer upgraded services that give investors unlimited interaction with a licensed advisor, he writes.

But Betterment’s annual fee for unlimited calls with an advisor is just .50%, according to Lohr. That means high-fee advisors are on the way out, he writes.

Clarity Money Marks Continued Growth with 100,000 Customers and Senior Hires (BusinessWire), Rated: B

Clarity Money, a revolutionary personal finance app that acts as the “Champion of your Money,” has reached 100,000 customers since its launch in January 2017. The app has been a “featured” personal finance app on the Apple App Store since its launch. Clarity Money was created by venture capitalist and serial entrepreneur Adam Dell.

To keep up with this growing demand, Clarity Money is pleased to announce three new additions to its team – Melissa Manne, Vice President of Product Management; Colin Kennedy, Chief Revenue Officer; and Marc Atiyeh, Chief Strategy Officer. The Clarity Money team already includes financial and technology veterans from Betterment, Google and IBM, as well as advisory board members Niall Ferguson, economic historian, and Dan Ariely, behavioral economist.

Clarity Money works by using data science and machine learning to provide personalized insights for customers. By utilizing a combination of techniques such as natural language processing, anomaly detection and spectral analysis, customers are able to take advantage of features such as: bill lowering, subscription cancellation, creating a savings accounts and providing tailored suggestions on things such as credit cards.

With the potential impact of financial deregulation and the weakening of the Consumer Financial Protection Bureau, consumers need a financial advocate now more than ever. Banks and financial institutions already have powerful tools designed to sell, market and retain customers, but consumers don’t have an equally powerful tool to level the playing field and protect against hidden fees and recurring charges. Clarity Money empowers consumers to take control of their finances, providing them with transparency, organization and actionable insights.

PeerStreet Awarded ‘Top Emerging Real Estate Platform’ by LendIt (Yahoo! Finance), Rated: A

PeerStreet, a marketplace for investing in real estate backed loans, is pleased to announce that it has been named the Top Emerging Real Estate Platform in the LendIt 2017 Awards. PeerStreet is an Andreessen Horowitz-backed platform, focused on democratizing access to investments in real estate debt.

The Top Emerging Real Estate Platform category focused on younger companies that have demonstrated the greatest potential to impact the future of real estate investing. PeerStreet stood out as the top platform with its unique model, as it is not a direct lender and brings an innovative offering to investors.

RealtyMogul.com CEO Jilliene Helman Named Fintech Woman of the Year (Yahoo! Finance), Rated: A

RealtyMogul.com CEO Jilliene Helman was named Fintech Woman of the Year at the first annual LendIt Industry Awards. Helman was honored for her “outstanding leadership, integrity, performance, and team-building support within RealtyMogul, as well as her contributions to the advancement of the industry.”

The awards, which showcased leaders from across the fintech industry, were part of the annual LendIt USA Conference held in New York City March 6 and 7th. Helman was selected by a panel of 30 industry expert judges from among a field of six leading fintech pioneers.

New fintech conference focused on branded currency comes to Omaha (siliconprairienews), Rated: A

Flourish: The Growth of Branded Currency is a fintech conference launching in Omaha this April 10 -12. The conference is focused on branded currency, and is targeting a range of retailers from those with a national presence to smaller Midwest retailers and their technology service providers.

K+H Connection is the company hosting the event. K+H is a fintech consulting firm based in Chicago, IL that focuses specifically on helping fintech companies integrate with merchants.

HG: Branded currency is actually a relatively new term. In short, it is any sort of tender that is branded and used for a specific purpose or at a specific merchant or location. It could be a gift card, promotional value you earn through a referral or loyalty program, points earned through a credit card program, prepaid mall-branded gift cards, etc. These types of products are more than just a form of tender, they incentivize spend and behavior.

We’re also focusing heavily on fraud within branded currency. Fraud has been the number one thing that people have asked us to discuss, so we are going to have a huge session on it.

Podcast 93: John Donovan of Bizfi (Lend Academy), Rated: A

Industry pioneer John Donovan talks about why he is excited to be at the helm of one of the leaders in small business lending.

LendIt USA 2017: Sessions You May Have Missed (LendIt), Rated: B

Thanks to everyone who joined us at LendIt USA 2017. Our growth surpassed our expectations and we had close to 5,900 attendees at the two-day conference.

United Kingdom

NACFB offers members ‘unrestricted’ insurance cover for peer-to-peer (Bridging&Commercial), Rated: AAA

The National Association of Commercial Finance Brokers (NACFB) has announced it will now offer members unrestricted insurance cover for peer-to-peer (P2P) lending.

Under the terms of NACFB membership, brokers must have professional indemnity insurance covering them against mis-selling claims from clients.

UK and Japanese regulators agree to cooperate on fintech (Out-Law.com), Rated: A

On Thursday, the FCA and JFSA agreed a mutual referral system which will see the regulators provide assistance to fintech businesses that wish to expand UK operations into Japan, or vice versa.

The collaboration, which was confirmed by an exchange of letters, will also facilitate information sharing between the regulators on emerging market trends and regulatory issues pertaining to fintech, as well as information concerning referrals.

European Union

CSI globalVCard Expands Globally (PR Newswire), Rated: AAA

CSI globalVCard, a leading B2B payments company specializing in secure and rewarding payments, today announced that it has expanded services to Europe and has opened a London office, its first move in a planned worldwide expansion. The company plans to roll out its services across additional continents by year’s end. CSI will use the payment issuance capacity of PrePay Solutions (PPS), a subsidiary of Edenred (70% owned by Edenred and 30% by MasterCard), worldwide leader in prepaid corporate services. PPS will bring CSI its unique payment technology to issue and process all  CSI virtual cards and wire transfers in Europe.

Expansion outside of North America was sparked by CSI globalVCard’s growing demand from multi-national clients, their increased need for native currency payments, as well as customer service support across local time zones. The global payments market is estimated at $1.2 trillion, of which B2B payments account for $550 billion. Ten percent of organizations make between 20 and 50 percent of their payments to foreign suppliers, and organizations earning over $2 billion in revenue pay the largest percent of their payments to foreign suppliers.1

Canada

Vista to acquire D+H for fintech merger with Misys (Financial News), Rated: AAA

Private equity firm Vista Equity Partners has struck a deal to acquire D+H, a Canadian financial technology provider, with an eye to merging it with UK-based Misys to create a financial software company with $2.2 billion in revenues.

US-based Vista said in a statement today that it will pay C$25.50 per share in cash for D+H, including the assumption of debt, in a deal that values the Toronto-listed firm at 4.8 billion Canadian dollars.

Misys chief executive Nadeem Syed said the combination of the two companies gives them the opportunity to create a “global fintech powerhouse”.

That powerhouse would have about 10,000 employees and 9,000 customers, including 48 of the top 50 banks, the statement said.

Asia

Here’s Everything You Should Know About Alternative Lending In Asia (Forbes), Rated: AAA

Over the last 5-10 years, China, India, and Southeast Asia have leapfrogged from a cash-based society to one where mobile payments are common currency, skipping adoption of credit cards, savings accounts and other consumer financial products common in Western countries. The result: a population that’s smartphone-savvy but still largely unbanked, without the credit histories necessary to access traditional small business or personal loans. It’s a prime market for alternative lenders, who usually use alternative means to assess creditworthiness, foregoing traditional credit scores altogether.

Here is a brief taxonomy of the many types of alternative lenders currently operating in both Asia and the West.

According to Bloomberg, China has 2,200 P2P lenders alone, and its P2P lending market is valued at an estimated $100 billion.

Chinese tech giants have aggressively pursued synergies between different divisions of their sprawling businesses. For instance, Sesame Credit, Alibaba’s alternative credit scoring program, looks at the frequency and cost of a customer’s purchases on Alibaba’s mobile payments platform Alipay in order to determine creditworthiness.

Meanwhile, India’s alternative lending market is in a much earlier stage. Giant tech companies don’t yet dominate the scene, and so the balance-sheet lending landscape includes a large number of small specialists like EarlySalary (payday loans), ZestMoney (point of sale), and Buddy (targeted at students). There are only about 30 P2P lenders in the country, which is surprising for a country where nearly 40% of the population is unbanked, and therefore without access to traditional loans.

Southeast Asia has one of the fastest growing economies in the world, but the small- and medium-sized businesses (SMEs) that make it up have more limited access to financial credit than the global average.

In Singapore, the financial center of the region, the major alternative finance players in Singapore are peer-to-company (P2C) lenders: specialized P2P lenders that only provide loans for SMEs. Market leader Capital Match was founded in 2014, but says it has already paid out more than S$32m (US$22.5m) in loans.

Malaysia is doing its part to meet P2P companies like Funding Societies in the middle, having recently updated its financial guidelines to include P2P lending. Thailand has done the same, issuing a consultation paper on regulations for P2P lending last fall.

German Challenger Bank SolarisBank Goes to Asia (Fintech News), Rated: AAA

The financial services subsidiary of the Bertelsmann Group, Arvato Financial Solutions, and the Japanese investor SBI Group will invest in solarisBank in a partnership that promises significant cooperation potential across international markets. In total, the Berlin-based bank raises EUR 26.3 million in the series A financing, meanwhile seed investors FinLeap, Hegus and yabeo Capital participate as well.

As the young bank steps up its internationalisation efforts, new executives are being added to its leadership team: Roland Folz will join the Management Board as CEO, while Gerrit Seidel will take over as Supervisory Board Chairman from HitFox Group and FinLeap founder Jan Beckers.

solarisBank intends to expand its activities in European and Asian countries over the coming years, and will establish joint venture companies with the SBI Group in order to develop businesses in Asia.

Middle East

The real estate property crowdfunder with an ethical conscience (Zawya), Rated: A

As key professional in the Qatar real estate industry gather for the annual Cityscape exhibition in Doha,  MercyCrowd, a brand new type of property crowdfunding platform, will offer for the first time to people in Qatar international real estate purchases through crowdfunding.

MercyCrowd  is part of the Elite International Asset Group, an established international company promoting real estate investment in Europe with a specialty in the French and UK market.  However, what makes MercyCrowd uniquely different is the company’s core belief that sustainable growth can only stem from real assets that generate real increments and tangible benefits to a society.

Authors:

George Popescu
Allen Taylor

Friday March 3 2017, Daily News Digest

LendInvest

News Comments Today’s main news:  LendUp closes $100M credit facility, surpasses $1B in originations. Canada’s Sensibill raises $17.3M, looks at global expansion. Today’s main analysis: TD Bank infographic: New data on SBOs. Today’s thought-provoking articles: Investors play waiting game for IFISAs. 3 ways mobile money changes transaction banking. Alipay vs. WeChat Pay. Crowdfunding the skyscraper. United States LendUp closes […]

LendInvest

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  • Bahrain wants to be the next FinTech hub. GP:” Step 1: create a regulatory sand box. Step 2: enable investments. Step 3: find a way to get local companies to have access to a large market, perhaps India ?.”

United States

LendUp Closes Another $ 100 Million Credit Facility & Surpasses $ 1 Billion In Loan Originations (Yahoo! Finance), Rated: AAA

LendUp, a socially responsible lender for the emerging middle class, today announced it has closed another $100 million credit facility with investment firm Victory Park Capital (VPC) to fund future loan growth. The facility brings LendUp’s total equity and debt financing to $325 million. The firm also announced it originated more than 3.3 million loans and surpassed $1 billion in loan originations since its inception in 2012.

LendUp’s mission is to provide anyone with a path to better financial health. The company offers technology-enabled loans and credit cards supported by embedded financial education and a focus on improving credit. LendUp has saved borrowers more than $55 million in interest and fees in 2016, up from $16 million in 2015, and its free credit education videos have been viewed more than 1.2 million times.

The Corporation for Enterprise Development (CFED) reports that more than 56 percent of Americans are shut out of mainstream banking because of poor credit or income volatility. Leveraging technology built in-house, LendUp offers exceptional products, service and, where available, credit reporting access to help break cycles of debt and ease income volatility.  According to LendUp research:

  • 70 percent of customers report having monthly income fluctuations, with one third reporting income fluctuations of more than $200 per month; and
  • Customers who began 2015 with deep subprime credit scores and had been with LendUp for one year were 20 percent more likely to see a 50-point VantageScore increase that year vs. peers in a control group.

New Data on SBOs (TD Bank Email), Rated: AAA

In a recent survey of 300 U.S. SBOs, TD Bank found that more than a quarter of SBOs are using the same checking account for their personal and business finances. Although it may seem easier to consolidate all finances into one account, it can actually create several problems, including inaccurate cashflow reporting, miscalculated tax write offs and lack of access to credit card processing systems.

Additional data points from the survey include:

  • Majority of SBOs (69%) handle their business finances themselves – they do not outsource to an accountant or third party service
  • Female business owners are less likely to separate their checking accounts compared to their male counterparts (68% vs. 82%)
  • 16.5% of SBOs say that getting a better handle on cash flow is a top priority this year

Mambu launches Americas operations (Finextra), Rated: A

Mambu is kicking off 2017 by opening new Miami offices and appointing a regional Managing Director to meet the growing demand for their platform in North America, Canada, Latin America and the Caribbean.

The office will support Mambu’s current 32 regional clients, including Grameen America which deploys the platform in 23 cities.

Edgardo Torres has been appointed as Managing Director to lead growth, support and operations, bringing a wealth of SaaS and enterprise technology knowledge combined with regional expertise.

Lendit Announces Keynote Speakers (PR Newswire), Rated: AAA

LendIt, the world’s largest lending and FinTech conference, returns to New York City on March 6 – 7, 2017 at the Jacob Javits Convention Center for a gathering of thousands of established and emerging CEO’s. For two days, some of the world’s most prominent FinTech CEO’s will focus on the hot button topics and issues exploring the future of finance, including: digital banking, investing, insurtech, blockchain, wealth management and real estate.

A partial list of keynote speakers include:

  • Consumer Financial Protection Bureau (CFPB) Richard Cordray, Director
  • U.S. Department of the TreasuryThomas Curry, Comptroller of the Currency
  • United States CongressPatrick McHenry, Congressman
  • IBM Watson GroupBrian Walter, Global Industry Leader
  • Lantern Capital and Former Apple CEOJohn Sculley, Vice Chairman
  • Grameen American (former CEO of Avon and Board Member of Apple & GE) – Andrea Jung, CEO
  • Marcus by Goldman SachsHarit Talwar, CEO,
  • American Express – Ash Gupta, President, Global Credit Risk & Information Management
  • HSBC BankJeremy K. Balkin, Head of Innovation
  • Lending ClubScott Sanborn, President & CEO
  • OnDeckNoah Breslow, CEO
  • 10x Future Technologies and Former CEO of BarclaysAnthony Jenkins, Founder & CEO

Now in its fifth year, LendIt has grown to over 5,000 attendees from 40 countries and over 350 speakers.

Small Business Lending Partnerships Pros and Cons Between Banks, Fintech Firms Focus at Bank/Alternative Lending Summit (Military Technologies), Rated: A

Bank/Alternative Lender Strategic Partnership Summit (May 10-11 at the Princeton Club in NYC) will be narrowing the event focus to cover in-depth small business lending partnerships between banks and fintech firms for their 2017 program.

Bringing together a well thought out line-up of industry experts, the Bank/Alternative Lender Strategic Partnership Summit plans to examine the process of partnership from both sides.

Kevin Phillips, Kabbage’s head of corporate development and conference chair, believes that this year will see an uptick in bank/alternative lender partnerships.

In one-and-a-half-days, a diverse panel of senior industry executives from the American Banker’s Association, Cross River Bank, The Private Bank, along with fintech companies such as Fundation, Kabbage, LendKey, OnDeck, Orchard Platform and SmartBiz will be among key experts holding candid discussions on the opportunities, challenges, and the future of the small business lending industry in an interactive setting.

A hard look will be given to topics such as key factors for identifying an ideal partner; how to know when to walk away from a potential partnership; the ways banks and fintech companies are teaming up to improve underwriting and risk management; and, the essential steps for conducting due diligence.

Crowdfunding the skyscraper (Curbed), Rated: A

Now, he’s using the crowdfunding approach to develop real estate in New York City, one of the most valuable markets in the world, where he’s been based for 20 years. Two projects are already open, and three more are under construction. All five have been financed through crowdfunding.

So Ippolito started researching. He learned which crowdfunding sites focused on equity, where investors essentially become shareholders in a property, and which focused on debt, where investors are direct lenders to a property owner or mortgage holder. He compared the minimum investments that each site required and analyzed what kinds of returns they’d likely provide. He looked at what kinds of properties each site was offering, and how many projects they had to offer investors. After a few months, he felt confident enough to start investing. He also saw another business opportunity and launched The Real-Estate Crowdfunding Review, a website that compiles all his research and features rankings, and reviews all of the roughly 150 real estate crowdfunding websites now operating.

The current top ranking platform is PeerStreet, which primarily focuses on investments in existing private real estate loans. (Prodigy Network is ranked 19th.) Ippolito’s reviewhighlights PeerStreet’s $1,000 minimum investment as far more appealing than the field’s $10,000 average. He also notes the site’s transparency, allowing users to review the performances of all its past investments.

But in January, Ippolito reported that PeerStreet had seen the first foreclosure on one of its investments.

To do a project of this size, crowdfunding was the best option. So the developer, BD Promotores, partnered with Prodigy Network to build up a pool of people to fund the project. They fitted out a showroom to lure investors and advertised in magazines and on television. More than 3,000 individuals invested, raising roughly $145 million.

When it opens, the project will feature 457 apartments, 382 hotel rooms, 117 offices, and a three-story shopping center accessible from the street. Rents from these spaces will trickle down to the investors in the form of quarterly dividends.

The relatively low entry point and the comparative stability of physical real estate has made crowdfunding a successful development strategy in Colombia for Prodigy Network. It’s been a good way for more people to benefit financially from commercial real estate, Niño says, but it’s also a viable way for a real estate developer like Niño to get more projects built.

Those famous Financial District assets have helped enable Prodigy Network’s two completed New York projects, buildings featuring furnished apartments for short- and long-term stays that Niño calls “legal Airbnbs.”

For the crowd, the minimum investment for these projects ranges from $10,000 to $50,000; the three projects are expected to cost about $150 million. Roughly 1,200 investors from seven different countries will be co-owners, and the annual rate of return is projected to be between 12 percent and 16 percent.

eOriginal Joins Marketplace Lending Association to Support Transparency, Responsible Industry Growth (IT Business Net), Rated: A

eOriginal, Inc., the digital transaction expert, today announced that it has joined the Marketplace Lending Association (MLA), the leading industry trade group.

As a member of the MLA, eOriginal will focus on empowering industry-wide discussion on how technology can effectively enhance and enable digital transaction capabilities to more securely manage and transfer loan agreements as financial assets once completed and signed. This commitment is aligned with the company’s belief that to support industry-wide adoption, processes must also support best practices to verify and authenticate with transparency for funders, investors, custodians, rating agencies and the customers.

Urjanet Closes $ 20M Series C Round to Expand in the Fintech Arena (Hypepotamus), Rated: A

Utility data startup Urjanet raised $20 million in a Series C round led by Oak HC/FT, a health IT/FinTech venture fund, this week. The company’s data solutions help multinational companies automate their accounting and utility bill processing, lowering their environmental footprint. Now, Urjanet hopes to expand its global network of providers and launch new data applications in the FinTech area.

United Kingdom

Investors play a waiting game for Innovative Finance Isas (Financial Times), Rated: AAA

Peer-to-peer lending was always meant to shake up the traditional banking world. But investors using the UK’s biggest platforms remain frustrated that they still cannot hold their investments within a tax-free Isa wrapper.

Investors willing to lend through one of the four largest websites — Zopa, Funding Circle, RateSetter or MarketInvoice — can expect returns of more than 5 per cent a year, according to figures compiled by Liberum, the investment bank, and data provider AltFi Data. This will vary according to how much you are lending, and for how long — but looks very attractive compared to traditional savings products.

Maturity transformation — the practice of allowing borrowing for longer time periods than money was originally lent for — has also come under fire. RateSetter, one of the three largest UK lenders, ceased doing this last January.

Investors keen to put peer-to-peer loans into their Isa can still do so despite the absence of a product from the big lenders. According to the FCA, 22 smaller lenders have been granted authorisation and have, or will, apply to the tax authorities to launch Isas. However, obtaining FCA authorisation does not make this form of investing risk-free.

One fund manager with a professional interest in the peer-to-peer lending market said it was “kind of bizarre” that smaller companies with a shorter record would be able to launch an Isa before more established companies.

According to those in the industry, one of the issues the watchdog is investigating is whether peer-to-peer lenders are effectively acting like banks but with less regulation.

In the meantime, investors can use the Innovative Finance Isa wrapper to invest in “crowd bonds”, which are asset-backed bonds. Unlike peer-to-peer loans, investors will be backing one business rather multiple consumer or small business borrowers.

LendInvest responds to the UK Digital Strategy (LendInvest), Rated: A

LendInvest welcomes the publication of the UK Digital Strategy this week, a long-awaited prospectus for government support to enhance industry by the use of digital. The announcement of the strategy on 1st March underlines the zealous approach by government to secure the UK’s credentials as the global capital for innovation in tech.

The vision set out by Digital Minister Matt Hancock and Secretary of State for Culture, Media and Sport, Karen Bradley lays the foundations for a long-term strategy for FinTech, encouraging financial services firms using technology to evolve offline industries to improve services and products for everyone.

Putting investment into the UK’s emerging sectors of expertise, like artificial intelligence and cyber-security for example, will help financial services firms to scale-up and thrive.

For us at LendInvest, we are challenging the status quo in the £1.3 trillion mortgage market; exploring how technology can improve the customer experience in acquiring property finance.

European Union

WIDE Organises Women in Fintech Conference (Chronicle), Rated: A

Women in Digital Empowerment (WIDE) has organised a Women in Fintech Conference for 24 March 2017 at the RBC Investor and Treasury Services, from 16:00 until 19:00.

The purpose of this first conference, endorsed by ALFI and sponsored by RBC Investor and Treasury Services, is to provide our participants with a clear overview of the Fintech ecosystem in Luxembourg and to raise awareness of the opportunities offered to women in the Fintech Industry.

International

The three ways mobile money is changing transaction banking (The Asset), Rated: AAA

A record US$33 billion was transacted in Kenya, home of the famous M-Pesa service, in 2016, as revealed by data from the Central Bank of Kenya. According to Reportlinker, the global mobile money market is predicted to grow at a CAGR (compound annual growth rate) of around 38.9% by 2025 and reach around US$405 billion in size. Data released this week from GSMA states that there is around 500 million registered mobile money accounts globally in 2016.

1 – Digitize collections

India-based mobile wallet provider Paytm wallet announced late last year that it would be partnering up with insurance firms in handling some of their digital collections.

2 – Corporate payments

With physical cash payments being a manual and time consuming process, Gojek encouraged it’s over 95,000 drivers to use CIMB’s Rekening Ponsel system that linked Gojek’s cash management system to a mobile-based e-wallet with the driver’s mobile number acting as a bank account number.

3 – Support financing services

Union Bank of the Philippines, for example, partnered with Gcash Mobile Money in creating a cash management solution for TSPI (Tulay Sa Pag Unlad) a microfinance NGO. Under that partnership both companies will provide collection and disbursement services for TSPI via mobile technology allowing borrowers to receive funding remotely.

China

Infographic: Alipay vs WeChat Pay (The Asset), Rated: AAA

Is it true that everyone talks on WeChat, but makes payments using Alipay?

WeiyangX Fintech Review (Crowdfund Insider), Rated: A

As of January 20, 2017, there were 188 online lending platforms that have signed the funds custody agreement with banks, which occupies 8% of all platforms in China. However, only 99 platforms have actually finished the custody process, which accounted for 4% of the total number of platforms.

P2P online lending platform China Rapid Finance has been reported to hold an IPO in the US later this year with the aim to raise at least $100 million.

On February 25rd, China Blockchain Applied Research Center was officially launched in Shanghai.

Canada

After raising $ 17-million, Toronto fintech firm eyes global expansion (The Globe and Mail), Rated: AAA

Sensibill Inc., a Toronto-based startup that offers digital receipt technology for banks, has raised $17.3-million to supercharge its global expansion and dig deeper into artificial intelligence.

It’s one of the largest series A early-stage financing rounds for a Canadian technology startup and signals the growing quality and influence of financial technology (fintech) companies in the market.

The financing is being led by fintech-focused Information Venture Partners of Toronto, which is throwing in more than $5-million, followed by Toronto-based OpenText Enterprise Apps Fund and San Francisco-based Operative Capital, among others. Toronto-based Impression Ventures, which was a key investor when Sensibill raised $2-million in 2015, is also committing more funds to this round.

The financing will also help Sensibill improve its products using artificial intelligence (AI) and so-called “deep learning” technology, which is when algorithms can make decisions about data.

The new financing will also be used to expand Sensibill’s staff from about 50 today, to more than 100 by the end of the year, Mr. Gross says. The bulk of the jobs will continue to be based in Toronto, with sales and marketing positions in other countries where Sensibill is expanding.

Asia

Bahrain wants to be the next fintech hub (ImpactAlpha), Rated: A

The small Persian Gulf country is

George Popescu
Allen Taylor

Friday January 27 2017, Daily News Digest

LendingRobot diversification

News Comments Today’s main news: Completely automated robo-hedge-fund for online lending by LendingRobot. 17 UK P2P providers have IFISA permissions now. Today’s main analysis: Making loan data actionable. Today’s thought-provoking articles: Why can’t financial advisors and P2P lenders get along? Scott Morrison backs robo-advisors to cheap superannuation advice to retirees. United States LendingRobot launches robo hedge fund […]

LendingRobot diversification

News Comments

United States

  • LendingRobot launches robo hedge fund for online lending. GP:”The interesting part of the fund is that it’s completely automatic and uses Blockchain. I am not sold on the need to use Blockchain, seem to be mostly a PR stunt, which will likely work.” AT: “We reported on LendingRobot’s plan to launch this fund but didn’t realize it would be so soon. I’d be interested in how it performs.”
  • Making Loan Data Actionable. AT: “There is some very interesting analysis on standardizing data in this white paper, but its focus is on the Orchard methodology.”
  • $15M raised through RealtyShares for real estate in New England. GP:””We continue to see the crowd funding real estate market growth. We look forward to when it will (mostly) cover other segments beyond the short term property flippers.”
  • LendIt USA publishes 2017 agenda. AT: “If you go to one conference this year, this should be it.”

United Kingdom

European Union

Australia

United States

LendingRobot Launches Robo Hedge Fund for Online Lending (Crowdfund Insider), Rated: AAA

LendingRobot has officially launched their next big vertical: a Robo-Hedge Fund for alternative lending.

The LendingRobot Series is described as a “one-stop” solution for cloud-based, automated investing secured by Blockchain (DLT) technology. The Robo-fund uses machine learning and proprietary algorithms to hopefully provide market-beating returns.  Unlike many other hedge funds, liquidity will be facilitated and transparency is paramount.

LendingRobot describes how the Robo-fund will work. The company will manage investments across four different Series, with target maturity going from 20 to 36 months, and estimated net returns up to 9.66%. Investor’s money is converted in Units of ownership in these Series, that are issued on a weekly basis. By default, loans payments keep being re-invested and the Units value increases. LendingRobot publishes every week a detailed ledger of its holdings, down to the value and individual payments made by each note.

LendingRobot started with just two lending platforms: Lending Club and Prosper. They later added Funding Circle – available to accredited investors only.  Today they are adding LendingHome to their portfolio of their assets.

Speaking to Marot, additional lenders are definitely on the list.

Will LendingRobot expand beyond the borders of the US? Absolutely.

First, LendingRobot will accept international investors. But do not be surprised if LendingRobot shows up in another country at some point in the future.

Making Loan Data Actionable (Orchard Platform), Rated: A

There’s no equivalent to the Financial Accounting Standards Board (FASB) and Generally Accepted Accounting Principles (GAAP) or Fannie Mae and Freddie Mac and the Uniform Closing Dataset (UCD) in the world of online lending.

Whether to power the tools investors need to conduct analysis across lenders or to allow originators to improve their businesses by providing better industry benchmarking, among other things, the creation of an industry-wide, standardized dataset will help advance the sector further. At this stage of the industry’s growth, it’s vital that we maintain focus on data quality, integrity, and transparency.

Download Orchard Platform’s white paper “Making Loan Data Actionable” here.

$ 15M Raised for New England Real Estate Through RealtyShares Ecosystem (BusinessWire), Rated: A

RealtyShares, a leading online marketplace for real estate investing, today released new data showing the wide reach the platform has established in Southern New England since inception.

Developed as a way to efficiently raise capital for real estate projects, RealtyShares has facilitated 20 deals across Massachusetts, Connecticut and Rhode Island totaling more than $15 million invested throughout the region. By leveraging technology and a network of 38,000 accredited investors, the company allows sponsors and developers to potentially raise money faster than traditional financing options.

While also a strong market for commercial opportunities, RealtyShares has focused mostly on the single-family home market in the Northeast. Along with individual properties, the company has completed ten separate portfolio deals encompassing multiple properties per listing. The largest raised $2 million dollars from more than 90 investors from across the country.

Massachusetts leads the way with 13 deals funded through the ecosystem, totaling $8.6 million across multiple cities. The majority of deals funded in the region have been residential equity offerings, giving investors a larger stake in the project with increased risks.

To date, the RealtyShares network of investors has funded upwards of $300 million across more than 550 investment opportunities on the platform, funding residential and commercial projects in 35 states.

LendIt USA 2017 AGENDA (LendIt), Rated: AAA

LendIt USA has published its full agenda for the 2017 conference on March 6 – 7. You can search panels by track (such as lending or real estate).

MARCH 6 • MONDAY

9:15am –  10:05am R OCC Limited Charter: From Theory to Practice

⑧ 1E16, 1E17 – RegTech: Policy & Regulation
  9:15am –  10:30am S Digital Marketing Channels

⑤ 1E11 – Training for Staff
  9:40am –  10:00am K If I Were To Start A Bank Today, This Is What It Would Look Like

① Special Events Hall
  9:45am –  10:35am L Financial Services Enterprise Projects

⑦ 1E14, 1E15 – The Fintech Universe
  9:45am –  10:35am G Empowering Women: The Key to Global Financial Inclusion

④ 1E10 – Financial Inclusion
  9:45am –  10:35am O China Disrupted: How Fintech is Changing the Way That 1.5 Billion People Bank

② 1E6, 1E7 – Global Perspective
  9:45am –  10:35am V Online Lending/Investing 101

⑥ 1E12, 1E13 – The Investor’s Perspective
  9:45am –  10:35am U How Banks are Coming Back to SME Lending

③ 1E8, 1E9 – Innovation in Lending
 10:00am –  10:20am K Alternative Lending is Dead, Long Live Data

① Special Events Hall
 10:10am –  10:40am R Self Regulatory Leaders

⑧ 1E16, 1E17 – RegTech: Policy & Regulation
 10:20am –  10:30am K Why Securitization and Online Lending are So Important For Each Other

MARCH 7 • TUESDAY

9:15am –  9:40am N Case Study: Using Artificial Intelligence to Improve Underwriting

④ 1E6, 1E7 – Innovation in Lending
  9:15am –  9:40am M The New Era of Buying and Selling a House

② 1E16, 1E17 – Innovation in Real Estate
  9:15am –  9:40am W AI Powered Investing

⑦ 1E14, 1E15 – The Fintech Universe
  9:15am –  9:40am P Valuation of Consumer Loans/Notes

⑥ 1E12, 1E13 – The Investor’s Perspective
  9:35am –  10:15am K Artificial Intelligence is Poised to Transform Financial Services

① Special Events Hall
  9:45am –  10:35am B Exploring Different Types of Bank Partnerships

⑧ 1E10, 1E11 – Bank Technology
  9:45am –  10:35am C Back on Track: Viewpoints from the Large Consumer Lenders

③ 1E8, 1E9 – Innovation in Lending
  9:45am –  10:35am N The New Frontier: AI, Machine Learning and Advanced Analytics

④ 1E6, 1E7 – Innovation in Lending
  9:45am –  10:35am M Bringing the Mortgage Process out of the Dark Ages

② 1E16, 1E17 – Innovation in Real Estate
  9:45am –  10:35am W The Future of Wealth Management

⑦ 1E14, 1E15 – The Fintech Universe
  9:45am –  10:35am P What it Takes to Securitize: Securitization in Marketplace Lending

⑥ 1E12, 1E13 – The Investor’s Perspective
 10:15am –  10:25am K Lang Di Fintech Announcement/China Fintech

See the full agenda here.

United Kingdom

Landbay’s broker website launch marks move on challenger bank market share (Mortgage Solutions), Rated: AAA

With an alternative funding model, the phrase attached to any form of funding which falls outside the traditional deposit-taking route or wholesale market financing, Landbay has sat on the fringes of buy-to-let lending since entering the market in 2014, but that seems about to change.

The announcement that Landbay plans to ramp up business volumes to a level which puts it neck and neck with the challenger banks seems courageous, given the buy-to-let market is currently going through one of its most turbulent periods since the financial crisis.

As an unregulated buy-to-let lender, Landbay is not required to follow the PRA’s rules, which could be seen as an unfair advantage by its regulated counterparts, but it is not an opportunity the peer-to-peer firm has chosen to exploit. “We believe the new regulatory framework is a good thing for the sector, and have chosen to fully comply with the regulator’s guidelines,” explains Goodall.

Aside from growing its mortgage lending this year, Landbay is preparing to launch its ISA in February – a first for the peer-to-peer sector, says Goodall.

Any other predictions for a fairly unpredictable market? Goodall says we could be heading for a slow down in buy-to-let remortgaging activity. “Some 50% of the buy-to-let market is remortgages. Five-year fixed rate products are exempt from the PRA’s standards so we expect to see borrowers opting for longer-term products, slowing down the speed at which people switch deals.”

Why can’t financial advisors and P2P lenders get along? (altfi), Rated: A

AltFi Data’s returns index, which is fuelled by granular loan level data from Zopa, Funding Circle, RateSetter and MarketInvoice, shows that the average net return of these four platforms has hovered between 4.5 and 6.5 per cent for the entire lifetime of the industry.

And yet the fact remains: financial advisors and peer-to-peer platforms simply do not get on.

LendingWell is attempting to solve some of these problems by providing a more seamless mode of access for advisors who are interested in peer-to-peer.

One platform that might stand a chance of breaking through the IFA barrier is the recently authorised Octopus Choice – Octopus Investments’ P2P offering. The platform has matched £45m of property loans since launching in April of last year, and already has a significant amount of advised money lent out. Parent company Octopus has over 6bn in assets, and has worked with thousands of financial advisors over the past 15 years or so.

Stuart Sheppard of Octopus think that the majority of peer-to-peer lenders simply lack the experience necessary for working with IFAs.

“Advisors, quite understandably, want to be paid for their advice,” said Slesinger.

Is the UK ready for the peer-to-peer lending gold rush? (Business Zone), Rated: A

The IFISA market is yet to come into full effect because the largest platforms are unable to offer the service. At the moment, 17 P2P providers have permission, but this group is limited to relatively small, new platforms. None of the biggest six marketplaces, which stand head and shoulders above the rest of the pack, are included.

BusinessZone’s sources say this will happen in the next two weeks when a number of platforms will receive authorisation to offer the product from HMRC.

The Current and Expected Crowdfunding Regulation in the UK. (TechBullion), Rated: B

Currently, the UK does not regulate donation-based crowdfunding and rewards-based crowdfunding. However, loan-based crowdfunding and equity-based crowdfunding are under the scope of the UK law.

Equity-based crowdfunding platforms are required to obtain a license or to have regulated activities managed by authorized parties. They are also required to have a screening process in order to sort sophisticated and non-sophisticated investors.  A “non-sophisticated” investor should not be allowed to invest more than 10 percent of their net investable asset through crowdfunding platforms.

Other important regulations in crowdfunding concern the communication of the offers, the language, fairness and clarity of description used to describe the offers and the risk awareness associated with them. These rules aim to establish platforms where people are not only treated fairly but allowed to make well-informed decisions.

The FCA is expected to introduce changes to the rules around the transparency and disclosure of information by companies raising money via crowdfunding. Although the new rules will apply to all types of crowdfunding, the focus will largely be on peer-to-peer lending, which in some cases provides products or services similar to more regulated products or services offered by banks.

European Union

5 Exciting Fintech Startups (The Merkle), Rated: A

Stash wants to stand out in this regard, and they have gathered support from over 300,000 users already. By letting users invest as little as $5, the platform is open to anyone looking to diversify their portfolio.

Competing in the world of cross-border payment services is not an easy challenge, especially for fintech startups. Founded in 2012 and based out of London, Currency Cloud provides this functionality for businesses and corporations only, rather than end users.

Enter iZettle, a startup based in Stockholm, Sweden that offers free card readers to their clients, focusing on small businesses owners.

Another fintech startup focusing on competing in the payment processing market is Klarna. Instead, the payment processor allows users to place orders by entering an email address and zip code.

Peer-to-peer lending is one of the many financial sectors that will see significant disruption by fintech startups. Founded in 2005 and based out of London, Zopa is one of the companies trying to gain a foothold in this competitive market.

German P2P Lending Market – Short News (P2P Banking), Rated: A

Documents accessed by P2P-Banking.com show that the largest (by loan volume) German p2p lending marketplace Auxmoney made an operating loss of 13.1 million EUR in the year 2015 (compared to 8.48M loss in 2014). This was before receiving Series D funding in early 2016.

Funding Circle CE, Berlin, the German division of Funding Circle closed 2015 with an operating loss of 9.45 million EUR (compared to 2.83M loss in 2014).

Germany seems to be a very hard market for p2p lending companies to crack. Interest rate levels for consumer loans are very low compared to other markets. banks are competitive. And there is no significant amount of credit card debt that can be refinanced. P2P Lending marketplaces cannot offer better interest rates, they need to find other competitive advantages. And customer acquistion costs to win borrowers through online marketing channels are high in Germany.

Australia

Scott Morrison backs robo-advisers to cheap superannuation advice to retirees (Financial Review), Rated: AAA

Treasurer Scott Morrison has endorsed “robo-advisers” offering cheap automated superannuation advice as the next step in Australia’s financial industry, and urged consumers to overcome their privacy fears about business and governments sharing personal data.

The government is considering major changes to Australia’s 500 privacy and secrecy laws which could allow businesses and government to capitalise on the “enormous untapped potential of Australia’s data” by giving customers more control over their personal information and giving greater access to “anonymous government-held data”.

Mr Morrison plans to encourage more robo-adviser start-ups in Australia by giving them greater scope to test their services in the market without facing the costs of regulatory licensing.

New Digital Lender Sharing the Love (Scoop), Rated: A

Set to open its virtual doors in 2017, Nectar is leading the next wave of digital lending to hit New Zealand shores after peer-to-peer lending arrived in 2014.

“Unlike other borrowing options, Nectar offers a simple, fully-automated online application and approval process that produces a personalised loan offer in just 7 minutes, and offers a same-day transfer of funds,” explains Symon Nausbaum, Nectar’s founder. “We want Kiwis to have a simpler, faster, and more transparent way to get a loan,” he says.

Nectar uses an advanced, data-driven method for assessing credit, drawing on a wider variety of data sources, to create a personalised 360-degree profile of customers, and thus improving their chances of being able to borrow when compared with other traditional sources.

Authors:

George Popescu
Allen Taylor