Thursday May 23 2019, Weekly News Digest

young credit card delinquents

News Comments Today’s main news: DBRS assigns provisional ratings to SoFi Consumer Loan Program 2019-3 Trust. KBRA assigns preliminary ratings to Prosper Marketplace Issuance Trust, Series 2019-3. Funding Circle seeds shareholder input on wind-down plans for investment trust. TransferWise valuation doubles to $3.5B. Today’s main analysis: High income, super prime borrowers take bigger share of […]

The post Thursday May 23 2019, Weekly News Digest appeared first on Lending Times.

young credit card delinquents

News Comments

United States

United Kingdom

European Union

Other

News Summary

United States

DBRS Assigns Provisional Ratings to SoFi Consumer Loan Program 2019-3 Trust (DBRS Email), Rated: AAA

DBRS, Inc. (DBRS) assigned provisional ratings to the following classes of notes (collectively, the Notes) to be issued by SoFi Consumer Loan Program 2019-3 Trust (SCLP 2019-3):

— $420,000,000 Class A Notes at AAA (sf)
— $31,100,000 Class B Notes at AA (sf)
— $62,500,000 Class C Notes at A (sf)
— $35,600,000 Class D Notes at BBB (sf)

View the full report here.

KBRA Assigns Preliminary Ratings to Prosper Marketplace Issuance Trust, Series 2019-3 (Yahoo! Finance), Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by Prosper Marketplace Issuance Trust 2019-3 (PMIT 2019-3). This is a $380.99 million consumer loan ABS transaction.

Class Rating Initial Class Principal
A A- (sf) $270,750,000
B BBB- (sf) $51,470,000
C BB- (sf) $39,720,000
D B- (sf) $19,050,000

Millennial DQs on the rise; GreenSky earnings; OCC on a fix for Madden? (PeerIQ), Rated: AAA

US consumer debt rose by 0.9% QoQ in 1Q to $13.7 Tn.

Source: Bloomberg, PeerIQ

Mixed FinTech Earnings

FinTech issuers saw growth in revenues and loans. Pace of loan growth weakened slightly as originations fell at Enova and grew by less than 10% YoY at OnDeck and OneMain. Stock price performance post earnings was mixed. Enova saw its stock price increase by 18% post earnings while OnDeck’s stock price dropped by 16%.

Source: Bloomberg, PeerIQ

High Income and Super Prime Borrowers Taking Bigger Share of Personal Loans on LendingTree Marketplace (Lending Tree), Rated: AAA

Over the past 10 years, the amount of outstanding personal loan debt has increased by 75%.

Key findings

  • The share of personal loan inquiries from those with incomes over $108,000 increased by 77% between the second quarter of 2017 and the first quarter of 2019, while the share of inquiries from people earning over $84,000 increased by 65%.
  • The share of personal loan inquiries from super prime borrowers (740 and higher) increased by 47% between the second quarter of 2017 and the first quarter of 2019, and the increase in prime and super prime borrowers (680 and higher) rose by 36%.
  • The share of personal loans closed by borrowers with incomes over $108,000 on the LendingTree marketplace increased by 38% between the second quarter of 2017 and the first quarter of 2019, and the share of borrowers earning over $84,000 increased by 26%.
  • The share of closed personal loans from super prime borrowers (740 and higher) increased by 37% between the second quarter of 2017 and the first quarter of 2019, and the increase in prime borrowers (680 and higher) rose by 19%.
  • Borrowers with incomes up to $24,000 decreased their share of closed loans by 22%, and those with incomes up to $48,000 decreased their share by 17%.
  • The share of loans closed by borrowers with scores below 560 increased by 28%, but the share of closed loans from borrowers with scores between 560 and 619 dropped by 24%.
  • The share of inquiries from people with incomes up to $24,000 dropped by 27% during the same period, while inquires from those with incomes up to $48,000 dropped by 16%.
  • The share of loan inquiries by borrowers with scores below 560 decreased by 12%, and the share of closed loans from borrowers with scores below 620 decreased by 9.2%.

For example, in the SoFi Consumer Loan Program 2017-3 LLC, securities show that the average gross income of borrowers as of May 2017, was $141,780, with an average FICO score of 731, and an average VantageScore of 682. The most recent offering, reported in February 2019, showed borrowers had an average income of $151,144, an average 753 FICO score, and a 713 VantageScore.

Job Loss and Medical Expenses Leading Causes of Bad Credit (Yahoo! Finance), Rated: AAA

Job loss and medical expenses are the leading factors causing Americans’ credit scores to drop, according to new research by Elevate’s Center for the New Middle Class (CNMC).

According to the new report, 55% of respondents cited job loss or reduction in work hours as the reason why their credit score dipped below 700. Nearly a quarter (24%) cited medical bills as the primary cause. Following these leading factors, a variety of typical, seemingly innocuous expenses follow, including repairing a car (11%), leaving home for the first time (6%), and putting a child through college (5%).

Non-prime consumers are 86% more likely to experience multiple factors that negatively affect their credit score compared to just one. For example, of the 23% who mention a medical reason, about three-quarters (75%) also experienced an income drop, severely complicating their ability to manage and cover medical expenses.

Americans Use Short-Term Loans to Pay Off Debt (Lexington Law), Rated: A

American debt is at an all-time high. How did we manage to dig ourselves into a steep $13 trillion hole? Credit card debt alone accounts for $1 trillion of this debt, with the average balance over $6,000 per capita.

  • 33% of Americans are going into debt to pay off debt
  • Generation X is most likely to incur short-term debt to pay down long-term debt
  • Women who use debt to make other debt payments tend to do so multiple times

Bernardo Martinez of Funding Circle USA (Lend Academy), Rated: A

In this podcast you will learn:

  • The knowledge that Bernardo brought with him from PayPal.
  • What he has learned in his first year on the job at Funding Circle.
  • The range of terms for their small business loans.
  • The types of investors they have on their platform today.
  • How and why 72% of their customers came to Funding Circle first.
  • How their offering compares to what is offered at banks today.
  • Who Bernardo sees as their biggest competitors.
  • How they view the SBA and their loan guarantee program.
  • How the LendingClub partnership came together.
  • Why no other online platform has reached significant scale in term loans for small business.
  • How they expanding their business into Canada.
  • Who they are hiring for their new Denver office.
  • How they are approaching their relationships with regulators in DC these days.
  • How they helped get SB-1235 passed in California.
  • How Funding Circle is monitoring their risk as it pertains to the economic cycle.
  • What is most exciting for Bernardo today at Funding Circle.

How a Silicon Valley startup is trying to rebrand payday loans (Vox), Rated: AAA

Once every few weeks, Myra Haq withdraws $100 or so from Earnin, an app that lets people borrow small sums of money.

The app lets her withdraw up to $100 a day, and never more than what she actually makes in a pay period, and then withdraws the money from her checking account once her direct deposit hits.

Unsurprisingly, payday lenders typically target low-income people — a 2013 Pew report found that 58 percent of people who use payday loans have trouble meeting monthly expenses at least half the time and usually borrow to deal with “persistent cash shortfalls rather than temporary emergencies.”

The average American household with student debt owes almost $48,000, and experts believe that student loan debt has held millennials back from major life milestones like marriage, homeownership, and having children.

How One Company Wants to Reduce or Even Eliminate Your Unpaid Medical Bills (Forbes), Rated: A

Relying on personal savings or insurance may not even be enough to pay off expensive medical bills. As a result, .

Earnin invited some community members to try HealthAid and was able to find savings for about 90% of people.

In one case, Earnin was able to get a patient’s $48,000 bill fully forgiven.

Figure Technologies loan platform secures $ 1B financing facility (CoinGeek), Rated: A

Figure Technologies looks to be profiting from increased interest in the cryptocurrency industry. Specifically, in a press release dated May 9, it was announced that the company had secured a $1 billion line of credit on the Provenance.io blockchain. The agreement also involves two other companies, Jefferies and WSFS Institutional Services, which will provide the line of credit.

LendKey’s Vince Passione on partnering with banks and credit unions and the future of lending as a service (Tearsheet), Rated: A

Vince joins us on the show to talk about his partnership model and the challenges and opportunities of working alongside banks and credit unions, which have deployed more than $2 billion in lending capital on the digital platform.

Small-business fintech launches lending platform for banks (American Banker), Rated: A

Spurred by bank interest, small-business lending platform Biz2Credit has unveiled a software-as-a-service version of its loan management, servicing and risk analytics product.

After HSBC and New York-based Popular Bank contracted with Biz2Credit to use the software, the company decided to launch the platform for all banks to use.

At a cramped desk on the 22nd floor of a downtown Manhattan office building, Gary Roth spotted a looming disaster.

An urban planner with two master’s degrees, Mr. Roth had a new job in 2010 analyzing taxi policy for the New York City government. But almost immediately, he noticed something disturbing: The price of a taxi medallion — the permit that lets a driver own a cab — had soared to nearly $700,000 from $200,000. In order to buy medallions, drivers were taking out loans they could not afford.

Prodigy Finance Aims to Bridge Healthcare Gap with New Loan Offering (University Business), Rated: A

Prodigy Finance today announces it will be supporting international students pursuing Master of Public Health (MPH) and Master of Science in Public Health (MSPH) degrees, Master of Science in Nursing (MSN) degrees, as well as those enrolling in Advanced Standing Dental programs and Select Certificate Dentistry programs in the U.S.

Crypto Lending Startup BlockFi Slashing Interest Rates on Ether Deposits (CoinDesk), Rated: A

Cryptocurrency lending startup BlockFi is almost halving the interest rates it offers on ether (ETH) deposits, while some bitcoin (BTC) rates will increase slightly.

From June 1, customers with 25–100 ETH balances in a BlockFi Interest Account (BIA) will see the interest rate drop from the current 6.2 percent annual percentage yield (APY) to 3.25 percent, the startup announced Tuesday. Those holding over 100 ETH balances will earn just 0.2 percent APY.

Some BTC balances, on the other hand, will see a slight interest rate increase – up to 2.15 percent from the current 2 percent – for deposits of over 25 BTC. Those holding 0.5–25 BTC will continue to earn 6.2 percent APY, BlockFi said.

Find the Right Loan Among 300+ Lending Partners for Credit Card Consolidation and More (CardRates), Rated: A

In a Nutshell: LoanStart helps consumers in search of a loan find a lender that suits their funding needs within just five minutes after submitting a simple, fee-free loan request form. Working securely with more than 300 trusted lending partners, including conveniently located storefront providers, the service makes finding a suitable lender easy. In today’s connected world where loan options abound, LoanStart cuts through the clutter to connect consumers in need of funds with lenders willing to provide financing.

Maxex Closes Series B Funding (FinSMEs), Rated: A

Maxex, LLC, an Atlanta, GA-based residential mortgage loan exchange, closed a Series B funding round of undisclosed amount.

CFPB Sues Debt-Collection Agency Over Deception Allegations (PYMNTS), Rated: A

The Consumer Financial Protection Bureau (CFPB) said Friday (May 17) that it has filed a lawsuit in federal court against a debt-collection agency that, the agency said, violated the Fair Debt Collection Practices Act.

The lawsuit targets Forster & Garbus, LLP, a debt-collection law firm based in New York.

Plaid gives digital banks and fintech a new tool to bypass traditional finance (CNBC), Rated: A

Start-up Plaid, recently valued at $2.7 billion, already connects bank accounts to fintech apps like Venmo, Robinhood, Coinbase and Acorns. It announced “Plaid Direct” on Wednesday, which lets users more easily connect to newer digital banks like Chime.

Capital Markets Veteran Joins PeerStreet to Manage Institutional Sales (BusinessWire), Rated: A

PeerStreet, a marketplace for investing in real estate backed loans, has announced the appointment of Deepa Salastekar as the Vice President of Institutional Sales. Ms. Salastekar joins PeerStreet to expand the company’s relationship base of institutional partners across all investment types available through PeerStreet.

Dharma now supports peer-to-peer lending in USDC to attract mainstream investors to DeFi (The Block Crypto), Rated: B

Defi startup Dharma announced Wednesday that it will start to support peer-to-peer lending of USDC, in a push to engage mainstream investors.

United Kingdom

Funding Circle investment trust asks shareholders to approve wind-down plans (P2P Finance News), Rated: AAA

FUNDING Circle is set to begin a managed wind-down of its dedicated investment trust, the Funding Circle SME Income Fund (FCIF), once it gets the green light from shareholders.

The FTSE 250-listed peer-to-peer business lender said last month that shareholders had backed plans to stop investing in new assets and begin the process of returning capital to investors.

Funding Circle Sets Hard Limit To Incentive Pay For Senior Executives (Morningstar), Rated: A

Funding Circle Holdings PLC clarified its director pay policy Wednesday following “feedback from shareholder advisory bodies”.

The small and medium enterprise loan platform said the amount granted in each year for a three year period under the company’s long-term incentive plan to can now no longer exceed GBP2.0 million and GBP1.1 million for the company’s chief executive and chief financial officer, respectively.

Span A Higher Than Span B for Funding Circle Sme Income Fund Limited (FCIF.L) (Williams Business Review), Rated: B

After a recent indicator scan, we have noted that Span A is currently higher than Span B for shares of Funding Circle Sme Income Fund Limited (FCIF.L). Traders may be paying close attention as this signal may indicate a possible bullish move.

TransferWise doubles its valuation to $ 3.5bn (Fintech Futures), Rated: AAA

UK-based international payments fintech TransferWise has doubled its value to $3.5 billion after raising $292 million in secondary funding, Jane Connolly writes.

Call for ‘credit curfew’ to help late-night borrowers (The Times), Rated: A

Banning borrowers from accessing high-cost credit websites between 11pm and 7am would ease the numbers of people spiralling into debt as activity peaks during these hours, according to researchers at Newcastle University.

Monzo hits 2m customers, adding 1m in eight months (AltFi), Rated: A

Monzo has hit 2 million current account customers in just two years since getting a banking license, and just eight months after it hit 1 million accounts.

It launched its current accounts less than 18 months ago with customers having spent £10.7bn through Monzo so far.

Arbuthnot Specialist Finance reveals offering (Bridging and Commercial), Rated: A

Arbuthnot Latham & Co has officially launched its specialist finance division.

Arbuthnot Specialist Finance will offer short-term residential finance up to 70% of market value (MV), with rates from 0.65% per month.

For this product, it will offer loans between £30,000–£3m-plus.

For commercial properties, it will offer up to 65% of MV, including interest and fees (up to 85% of the 90-day MV, or 95% of the purchase price, whichever is the lower), with rates available from 0.75%.

New peer-to-peer lender targets 7.5% return with education loans (Your Money), Rated: A

Lendwise plans to offer borrowers loans of up to £100,000, with interest rates ranging from 7.5% to 12%. Pricing will be based on a range of factors, which the peer-to-peer lender said go beyond the applicant’s financial profile and credit record. They include the specific postgraduate or professional qualification course they are taking, the length of study and the repayment period.

Finastra’s open cloud platform drives collaboration and innovation in financial services (Fintech Finance), Rated: A

Today ahead of its FusionONE developer conference, co-hosted with Microsoft, Finastra unveiled the latest developments to its FusionFabric.cloudopen platform for innovation.

The 61 new open APIs (and more than 200 Endpoints) span many of Finastra’s solutions, including retail and corporate banking (both enterprise and North American community markets), consumer lending and mortgage, payments and treasury and capital markets. These are now available in the FusionFabric.cloud API catalog for developers to harness in building financial services applications. Some of these powerful APIs are already enabling:

China

A fintech revenue surge helped Tencent smash quarterly expectations (Business Insider), Rated: AAA

Tencent posted record quarterly profits and smashed market expectations in Q1 2019, driven largely by surges in its fintech and cloud revenue, per Reuters.

Fintech and business services is now Tencent’s second largest division, responsible for a quarter of its revenue. This was the first time the tech giant broke out earnings for the unit, which brought in revenue of Rmb21.79bn ($3.2 billion), a 44% year-over-year (YoY) spike. Key in driving this growth is its payments wallet for WeChat, whose 1.11 billion users make it the largest social media platform in China, as well as its insurance services, which include a 20% stake in Aviva Hong Kong, and its cloud computing service.

Tencent’s online advertising grew 25% YoY, compared with 55% YoY in the same period last year, suggesting that China’s slowing economy and continued trade tensions with the US are hitting the firm.

Source: Business Insider Intelligence

DBS Bank Expects a Boost in Chinese P2P Lending Market from the Greater Bay Area (LearnBonds), Rated: A

Greater Bay Area could be the key to reviving the struggling P2P lending market in China, according to DBS Bank.

The Singaporean bank estimates that P2P lending will experience a 17% annual growth rate by 2030.

European Union

Identity technology and Dublin’s draw for fintech firms post-Brexit (Forbes), Rated: AAA

According to 

1 in 10 European banks to vanish by 2023 (AltFi), Rated: A

Bumper banking profits disguise an underlying weakness in traditional banks, as their per customer income has tumbled over the past decade.

That’s the finding of a report by consultants A.T. Kearney, which found data across 92 European banks revealed income per client had fallen 11% since 2008.

Australia/New Zealand

Commerce Commission’s court case against payday lender Ferratum scheduled for next year (Interest), Rated: AAA

A backlog of cases in the Auckland High Court means the next hearing in the Commerce Commission’s legal action against online payday lender Ferratum New Zealand won’t be held until June next year.

Asia

Indonesian fintech association sanctions lending platform that sets high interest rate (KrAsia), Rated: AAA

Two Indonesian lending platforms regulated under the country’s financial services authority (OJK) have been penalized by the ethics council of AFPI, the industry association for fintech lenders in Indonesia.

The organization revealed that one of the companies in question is P2P lender Do-It, which charged an interest fee rate of 1% per day.

Africa

Onefi is Expanding Carbon’s Digital Banking Services to Ghana (Technext), Rated: AAA

Nigerian digital financial platform, Carbon (formerly Paylater) is taking big steps to introduce its revamped financial services into Ghana. The online lender is looking to hire a new country manager for Ghana and this suggests the company is looking to introduce its new services like PayVest into Ghana.

Authors:

George Popescu
Allen Taylor

The post Thursday May 23 2019, Weekly News Digest appeared first on Lending Times.

Monday July 23 2018, Daily News Digest

securitization

News Comments Today’s main news: OnDeck completes two international credit facilities. Elevate launches prime credit card for non-prime customers. RateSetter backtracks on Rolling Market rate changes. China’s P2P lender are falling like dominoes. Banco BNI Europa invests in US consumer loans. Today’s main analysis: Deloitte’s survey on fintech lenders. Today’s thought-provoking articles: An inside look at SoFi-Promontory Interfinancial Network […]

securitization

News Comments

United States

United Kingdom

China/Hong Kong

International

India

Other

News Summary

United States

Elevate launches prime credit card for non-prime consumers (Bankless Times) Rated: AAA

Elevate and Capital Community Bank of Utah announced the launch of Today Card powered by Mastercard. As the first non-prime credit card with a full suite of prime features, Today Card will be issued by Capital Community Bank of Utah and will specifically help expand access to credit for members of the New Middle Class, the nearly 160 million non-prime Americans who are too often overlooked by mainstream financial institutions.

An Inside Look at Bank/Fintech Partnerships: Promontory Interfinancial Network and SoFi (Lend Academy) Rated: AAA

The recent surge in financial innovation has caused many community banks to rethink how they are serving their customers and what they can do to improve that experience. I recently spoke with two community banks about their decision to buy SoFi loans using Promontory Interfinancial Network’s service.

I spoke with Brian Plum, CEO of Blue Ridge Bank, which is a Virginia based community bank with mortgage offices in North Carolina, and Nicole Austin, Chief Lending Officer of Pioneer Bank, which is a New Mexico-based community bank.

Both banks had experience in looking at fintech partnerships before moving ahead with their decision on the SoFi program. They both said that as lending and banking changed, they needed to better understand how new technology could help their businesses.

Lowest Jobless Claims since 1969, Strong Bank and Card Issuer Earnings (PeerIQ), Rated: AAA

Blackstone is launching a $10 Bn direct lending fund focused on middle-market corporate credit opportunities. The search for yield has pushed investors into higher-yielding middle-market lending, with direct lending funds raised $54 Bn in 2017. Consumer, small-business and middle-market lending have been a consistent theme among investors starved for yield by low global interest rates.

Deloitte’s Survey on Fintech Lenders

The main take-aways from the study:

1. 7% of respondents listed cost of funding as one of the top 3 concerns, with liquidity and an inability to diversify rounding out the top 3.

Source: Deloitte, PeerIQ

PeerIQ view: Securitization remains the cheapest source of large-scale financing. MPL bonds continue to go mainstream as credit spreads tighten vs comparable consumer credit issuers. Emerging issuers continue to take efforts to build a brand in the ABS markets via repeat issuance.

Source: Deloitte, PeerIQ

3. Investors remain interested in the online lending space with $11 Bn in equity capital expected to flow into the sector in 2018. The number of startups has decreased, suggesting a maturing market and some consolidation.

Why You Should Bank Without a Branch (US News) Rated: AAA

The first online banks hit the U.S. market more than 20 years ago, attracting customers with higher interest rates and lower fees. While some early innovators are no longer operating, others have evolved. Take ING Direct, for example, which was acquired by Capital One and transformed into Capital One 360 in 2012, or Ally Bank, which is one of the most dominant names in the online banking market.

Today, however, these banking institutions face competition from new direct banks as well as traditional banks that are looking to expand using the online-only model. For instance, Finn by Chase and Marcus by Goldman Sachs bring digital banking to areas in which the companies have no physical presence.

Long-Term Business Loans Available Today (LendEDU) Rated: A

Fortunately, some lenders offer long-term small business loans, which give borrowers the opportunity to repay the loan over a longer period of time (typically up to 25 years).

Long-term business loans certainly do exist but if you’re hoping to score one, you’ll need to have an established business (i.e., no startups or new businesses) and have good business credit.

There are a variety of lending institutions, both traditional and non-traditional, that offer long-term financing, so it’s always best to review all your options, including those offered by your chosen banking institution. However, there are a few lenders that consistently top the charts, and those that follow are known to offer competitive rates, flexible terms, quick access to funds, and positive customer feedback.

Compare Long-Term Business Loans

Loan Amounts

$5,000 – $300,000

$25,000 – $500,000

Term Lengths

Up to 60 months

Up to 60 months

APR Range

10% – 35.5%

4.99% – 26.99%

Walmart’s pay-advance app Even used by 200,000 employees (American Banker) Rated: A

Walmart’s experiment with offering Even.com’s money management and pay-advance app to employees appears to be off to a good start.

The retailer launched the app to employees in December. On Thursday, Walmart and its fintech partner announced that 200,000 Walmart employees are now using it. (The retailer employs 1.5 million people in the U.S.)

About 75% of associates use the app every week and 46% use it every day.

DFS Report Indicates Increased Level Of Online Lending In New York (Mondaq) Rated: A

The New York State Department of Financial Services (“DFS”) found that online marketplace lending has increased dramatically since 2015. In the newly published report, DFS analyzed responses from a “New York Marketplace Lending Survey” along with comments from relevant stakeholders.

Based on data from 2017, DFS found that:

  • the total number of loans increased approximately 118% and the total dollar amount of all loans increased approximately 42% as compared to 2015 levels;
  • many more individuals were being served in this market than small businesses;
  • lenders generally charge a variety of fees (e.g. origination fees, closing fees, processing fees, maintenance fees, transactional fees, and penalty fees), with origination fees being the most common;
  • delinquent loans (both to individuals and businesses) represent approximately 11% of the total number of loans outstanding as of the end of 2017; and
  • respondents used “internal models with various inputs provided by the applicant such as employment history, business history, bank statements and tax records” to determine whether a borrower qualifies for a loan.

LendKey, Gradifi Help U.S. Employers Offer a Student Loan Refinance Benefit to Employees (Business Wire) Rated: A

Gradifi today said it is now offering access to LendKey’s nationwide network of lenders through Gradifi Refi, a student refinance program for employers seeking to help their employees save money or reduce the monthly payment on their student loans.

Gradifi Refi is one of three employee benefit solutions from Gradifi that enable employers to positively impact their employees’ financial well-being. Gradifi’s SLP Plan (Student Loan PayDown) benefit helps employees pay off their student loans faster through employer-sponsored contributions to their student loan provider. The College SaveUp benefit helps employees save for their children’s education and avoid further student debt through employer contributions to an employee’s 529 college savings plan account.

LendingTree Announces Top Customer-Rated Lenders by Loan Product for Q2 2018 (Markets Insider) Rated: B

Mortgage Category

#1 Winner:
loanDepot, LLC

Personal Loans Category

#1 Winner:
LendingClub

Home Equity Loans Category

#1 Winner:
First MidWest

P2Bi partners with Amalgamated Bank (Bankless Times) Rated: B

P2Binvestor (P2Bi), a marketplace lending platform offering crowdsourced, asset-secured lines of credit to growing companies, today announced a partnership with Amalgamated Bank, a socially responsible bank based in New York.

The P2Bi bank partnership program gives growing businesses a way to quickly access capital while allowing banks to increase their addressable market and improve their conversion rates. This particular alliance will enable Amalgamated Bank to continue to help fund emerging socially responsible businesses.

Colonial Partners with Roostify for Superior Online Mortgage Experience (PR Newswire) Rated: B

Starting today, Roostify’s online, mobile-friendly application and loan collaboration tools will be available to all of Colonial retail mortgage branches and its Home Loan Center national call center.

United Kingdom

RateSetter backtracks on Rolling Market rate changes (Peer2Peer Finance) Rated: AAA

RATESETTER has reversed its decision to stop investors setting their own rate for capital reinvesting on its Rolling Market.

The peer-to-peer lender implemented an overhaulof its popular Rolling Market product on 6 June, no longer allowing investors to set their own rate on reinvested money.

In an email to customers, the lender said feedback demonstrated how much investors valued the option to set their own rate for capital reinvesting.

Some challenger banks are challenging (The Finanser) Rated: AAA

The UK’s challenger banks are busy getting on with it. They’ve got their licences, they’ve deployed their services, they’re partnering with third parties and creating marketplaces. Much of this was cited in a report by CBInsights, comparing the features of the five most notable new ones: Atom, Starling, Monzo, Revolut and Tandem.

N26 were also included, but is not a UK start-up and their report builds on the one I blogged about last month from Optima. The thing I took from the CBInsights report is the massive numbers of users that Revolut and Monzo have already gained. At that time, it was 1.5 million for Revolut and 500,000 for Monzo.

Starling marketplace grows with Growth Street addition (FinTech Futures) Rated: A

Growth Street will be the first SME finance provider on Starling Bank’s in-app marketplace, giving users access to services like pensions, insurance and loyalty schemes.

This partnership is Growth Street’s first marketplace integration, and represents the first live use of its third-party API. The firm is a P2P platform that matches investors’ funds with growing SMEs.

MarketInvoice looks to bolster its financial crime prevention (Peer2Peer Finance) Rated: A

MARKETINVOICE is looking to bolster its financial crime prevention with the appointment of dedicated anti-money laundering (AML) officer.

All regulated firms have to have someone in the business with responsibility for AML monitoring, with some choosing existing staff and others making it a dedicated role.

The peer-to-peer business finance platform is advertising for a AML/financial crime officer to sit within its legal unit.

The IFISA Phenomenon – The New Way to Invest (Dispatch Weekly) Rated: A

There are different types of ISAs including Cash ISAs and Stock & Shares ISAs but the Innovative Finance ISA (IFISA) is fast becoming the new trend in the ISA market.

Source: The Weekly Dispatch

Home loans turned us into a hot property, says Christian Faes, founder of lendinvest (The Sunday Times) Rated: A

Christian Faes could hardly have picked a worse time to get into mortgage lending. It was 2008, financial markets were in free fall and most people were more concerned about putting food on the table than buying a house.

That did not deter Faes, a former lawyer who had moved to London from Australia’s Gold Coast 10 years earlier. He co-founded Montello Bridging Finance in a “windowless serviced office” in the City and set about cold-calling potential investors. “The idea was really sound, but it wasn’t the best moment to be setting up a mortgage lending company,” said Faes, 41.

China/Hong Kong

China’s Peer-to-Peer Lenders Are Falling Like Dominoes as Panic Spreads (Bloomberg) Rated: AAA

The shakeout in China’s $192 billion peer-to-peer lending industry is accelerating at a rapid clip.

At least 118 platforms have failed this month through early Friday, according to Shanghai-based Yingcan Group, whose tally for July stood at 57 just three days ago. The number of failures, which includes platforms that have halted operations or come under police investigation, is already the highest in two years with more than a week left in the month.

China’s clampdown on financial risk has weighed on P2P platforms for the past two years, but the pressure has intensified in recent months after the country’s credit markets tightened and the banking regulator issued an unusual warning to savers that they should be prepared to lose all their money in high-yield products. While that has triggered bouts of panic among users of smaller P2P platforms, there’s little evidence that the turmoil has spread to more systemically important parts of China’s financial sector.
Source: Bloomberg

Chinese Investors Reel as Internet Lenders Close (Wall Street Journal) Rated: AAA

A string of Chinese internet lenders have shut their doors in recent weeks, stranding investors as the economy slows and regulators tighten controls over an unruly side of the fintech sector.

Across China, more than 200 internet-based fund managers since late June have either shut down, closed parts of their operations or are reeling from cash crunches, missing executives and other problems, according to industry tracker Wangdaizhijia.

The tide began to turn against the sector as an end-of-June deadline for new stringent registration regulations approached. With a slowing economy making it difficult for some companies to pay back loans, some lenders decided to shut down, analysts said. Investors, already souring on the sector, began pulling out funds, further pinching the lending platforms.

Source: Wall Street Journal

Distributed Credit Chain wants to use blockchain to prevent the next financial crash (Tech World) Rated: A

Figures from Bloomberg Economics based on data from the People’s Bank of China indicated that three major assets of shadow banking – trust lending, entrusted loans and banks’ acceptances – increased by $555 million in 2017. Entrusted loans, for example, are when businesses loan money to each other, using banks as intermediaries. Meaning that larger (state owned) companies may lend money to smaller companies and make a profit from the differences in interest.

Micro-lending is another phenomenon that has ballooned in recent years, with a proliferation of online lending or peer-to-peer lending platforms springing up. Outstanding debts on these sites increased by 256 percent between October 2015 and October 2017, topping 1.2 trillion yuan (over $179 million).

These issues have been acknowledged by the Chinese government, with China’s top banking regulator, Guo Shuqing, promising the shadow banking industry will be ‘dismantled’.

Shanghai vows to ramp up enforcement of P2P lending platform regulations (Global Times) Rated: A

The Shanghai municipal government has announced it will soon launch a campaign to enforce compliance of financial regulations on the city’s peer-to-peer (P2P) online lending platforms, according to a report by domestic website the Shanghai Observer, in a sign that local authorities will put order into China’s troubled fintech sector.

The Shanghai Office of the Leading Group for the Special Campaign against Internet Financial Risks said that it will  investigate the local online lending industry and severely punish those committing illegal fundraising and financial fraud, as well as fugitive owners. The authorities have reasserted their support of law-abiding firms in a bid to promote a more orderly internet finance industry.

In the last 50 days, up to 163 P2P lending platforms have essentially gone out of business, stopping cash withdrawals from customers, and many have seen their owners run away and declared fugitives,  chinanews.com reported.

Jim Rogers-backed ITF to miss August deadline for virtual bank licence in Hong Kong (South China Morning Post) Rated: B

ITF, a fintech company backed by US veteran investor Jim Rogers, plans to apply for a virtual bank licence in Hong Kong, but will not rush to meet the first application deadline on August 31.

The fintech firm would prefer to wait for more details about regulations, according to its adviser Ignious Yong.

European Union

Creditshelf raises €16.5m through landmark IPO (AltFI News) Rated: AAA

German mid-market lending platform Creditshelf has successfully closed its IPO, raising €16.5m at the fixed price €80.00 per share.

In the end, the company had no need of its €15m backstop order, provided by Hevella Capital GmbH & Co. KGaA, part of a group controlled by Rolf Elgeti. But Obotritia Capital KGaA, which is also part of the group, subscribed for an additional amount of €1.5m, underlining its support for the firm.

International

OnDeck Completes Two New International Credit Facilities (PR Newswire) Rated: AAA

OnDeck (NYSE:ONDK) announced today the closing of an AUD75 million asset-backed revolving credit facility with Credit Suisse, and the closing of a CAD50 million asset-backed revolving credit facility with Crédit Agricole, to finance OnDeck originations in Australia and Canada, respectively.

The new Credit Suisse facility will be used to refinance OnDeck Australia’s current loan book at a significantly lower cost, as well as to fund future originations. The Crédit Agricole facility is the first for OnDeck Canada and provides the business with access to CAD25 million of committed capacity and an additional CAD25 million of capacity available at the discretion of the lenders.  Both facilities are floating rate and have an initial weighted average interest rate of approximately 5.6%. The Credit Suisse facility and Crédit Agricole facility are scheduled to mature in June 2020 and June 2021, respectively.

Banco BNI Europa invests in US consumer loans via Fintex and Upgrade, Inc (Fintech Finance) Rated: AAA

European challenger bank Banco BNI Europa and Fintex have entered into a strategic partnership to invest in Upgrade’s consumer loans and expand access to affordable credit to consumers in the United States. Banco BNI Europa, which is active across Europe, now invests in US consumer loans through Upgrade, one of the fastest growing platforms in the US. This loan purchase programme was implemented by Fintex Capital, which issued a bond to Banco BNI Europa backed by the portfolio and Fintex acts as asset manager for the underlying loans.

As part of the agreement, Banco BNI Europa committed an initial sum of USD 30 million. Banco BNI Europa has already invested in US consumer loans originated on platforms like Lending Club and Prosper through a third-party fund.

How the Blockchain is Helping Redefine Business Financing (Equities) Rated: A

In fact, one report by CB Insights found that about 29 percent of startups failed because they ran out of working capital, which speaks volumes about the morbid state of business financing for startups and budding businesses.

Consequently, business financing has become one of the many areas of fintech that could benefit immensely from blockchain, the decentralized ledger that has been disrupting industries for over a decade.

Here are a few ways that showcase why blockchain could change the way enterprises access funding.

Credit Rating Firm Backs $ 8 Million Fundraise for Crypto Alternative (CoinDesk) Rated: A

A startup looking to build a credit scoring protocol on top of the recently-launched Ontology blockchain has raised $8 million in seed funding.POINTS, founded in 2017, said it drew funding from a mix of traditional venture capitalists including Danhua Capital and Ceyuan Ventures, a backer of OKCoin. Other participants in the seed round include the Ontology Foundation as well as Zhong Cheng Xin Credit Technology, China’s first nationwide credit rating agency.The new capital will be used to expand the company’s engineering team in an effort to speed up its development of blockchain-based know-your-customer (KYC) and credit scoring applications. The idea is to build its protocol on top of a decentralized network and empower apps that can eliminate repetitive processes around identity.

Bitcoin Holds the Line, Salt Slumps, Dash Drives Onward (Blockonomi) Rated: A

The crypto lending platform Salt Lending just got a dose of some strange news when the company suddenly released an announcement stating the appointing of what they call an interim CEO. The former CEO ,who was essentially the face of the company and one of the cofounders, Shawn Owen, appears to have left the company.

But the circumstances under which he left are unclear.

Salt tokens (that run on Ethereum) have been on a strong downward slide for the last few months, and are currently sitting at just over one dollar each. The tokens entered the market at the three dollar range and so are down by more than 66% post ICO. It is also unclear as to whether or not Salt Lending is still operating or giving out new crypto-to-cash loans.

RAD Lending: The Future of Crypto-Assets Backed Lending (News BTC) Rated: A

The growing user base of cryptocurrency and related products has skyrocketed, with the highest number originating from countries like New Zealand, Denmark and Belgium. The community growth is expected to follow the upward trajectory to hit 100 million users soon.

RAD Lending platform might just be the push the market needs to fill the gap between crypto holdings and real-life fiat spending. The P2P lending platform from RAD will act as a matchmaker between loan requests and funding proposals.

India

Digital lending to become $ 1 tn opportunity in India over next 5 years (Money Control) Rated: AAA

A Boston Consulting Group (BCG) report suggests that digital lending in India will become a $1 trillion opportunity in the next five years.

According to the report, four fundamental drivers that pushed the space are internet giants that changed the way consumers behave, rapid growth in technological advances including the proliferation of smartphones and consequent increase in the consumption of data. Also the digital market lending prospered under supportive regulatory conditions across the globe.

Funding in Indian startups this week (16 July-21 July) (EnTrackr) Rated: AAA

This week 16 startups received funding, of which 10 received a total sum of about $228.5 million. Among them, BookMyShow raised the highest investment of $100 million, followed by Cars24 which raised about $50 million.

Meanwhile, funding for six of the total funded startups remained undisclosed.

Source: EnTrackr

Lending platform LenDenClub gets NBFC-P2P certification from RBI (MediaNama) Rated: A

P2P lending platform LenDenClub has received its NBFC-P2P certification from the Reserve Bank of India (RBI), the Economic Times said. The RBI issued those guidelines last October, to register and accredit P2P lending firms that resell loans from individuals who have money to invest.

RBI’s registry will help solve problem of credit shortage: iSpirt’s Sharad Sharma (Livemint) Rated: A

Out of the 8.8 million businesses in India that file taxes, at least 6.6 million businesses do not have access to the credit sources such as banks, non-banking financial companies (NBFCs), and upcoming online lenders. This is a problematic situation for both lenders, and for businesses (especially small businesses), looking for capital loans.

The problem of credit shortage for small businesses is daunting, but the regulators in India have already set things in motion to address the issue. According to Sharma, the revamped goods and services tax (GST) structure, the Reserve Bank of India’s (RBI’s) new public credit registry (PCR) initiative, and UPI (Unified Payments Interface) 2.0 will solve the shortage of data for lenders.

Here’s a look at some brands that are making India artificially intelligent (Business Standard) Rated: A

The rise of promising tech-startups has been successful in ushering India into a dawn of technology.

While AI is believed to revolutionize the current modus operandi and bring about fast-paced automation and efficiencies, it still remains an abstract topic, palled by a lack of nuanced understanding amongst the general public.

Here are some enterprises that are integrating AI in everyday tasks:

Faircent: Making Lending more conducive with AI & Machine Learning

If you think AI is only limited to the IT industry, think once again. Faircent, India’s largest P2P (peer-to-peer) lending platform, has been utilizing the technology to provide users with money during your financial crunch. Doing away with methodologies of conventional lenders (which can often prevent a creditworthy applicant from securing a loan,) the platform leverages Machine Learning and Artificial Intelligence to enhance the effectiveness of its credit profiling and assessment.

Ebix acquires enterprise lending software company Indus for $ 29 M (Your Story) Rated: A

Global on-demand software provider Ebix Inc on Friday announced the acquisition of Indus Software Technologies Pvt. Ltd. (Indus), a global provider of enterprise lending software solutions to financial institutions, captive auto finance and telecom companies, for approximately $29 million, including $5 million of contingent earn-out.

Further to this acquisition, key Indus business executives will become a part of the combined EbixCash senior leadership. The acquisition will increase the employee strength of Ebix in India by 900, to approximately 7,200 employees.

Canada

Fintech OnDeck Canada lines up $ 50-million credit facility from Crédit Agricole (Financial Post) Rated: AAA

OnDeck Canada, the local online arm of the U.S. headquartered OnDeck now has a $50-million asset-backed credit facility, provided by Crédit Agricole, to fund its loans. According to a recent ranking of assets, the French bank is the world’s ninth largest. Its Montreal office offers commercial and investment banking services.This is the first time that OnDeck Canada — which has originated $180 million in small business loans since 2014, all made using a “wide spectrum of data, technology and analytics” — has arranged funding from a source other than its parent.There are two parts to the three-year facility that will finance loan originations created by OnDeck Canada: a $25-million committed facility and an extra $25 million that can be drawn if needed. OnDeck provides term loans up to $250,000 and revolving lines of credit of up to $50,000 to small business.

Authors:

George Popescu
Allen Taylor

Loan Amounts

$5,000 – $300,000

$25,000 – $500,000

Term Lengths

Up to 60 months

Up to 60 months

APR Range

10% – 35.5%

4.99% – 26.99%

on LendingClub’s secure website

on Funding Circle’s secure website

Wednesday November 8 2017, Daily News Digest

Lending Club originations

News Comments Today’s main news: LendingClub’s Q3 results, rise in originations of 34%. Lending Club achieves highest revenues in company history. November review of Funding Circle. JD Finance intros Fintech-as-a-Service. Revolut seeking EU banking license. ID Finance sees 50% loan approval rate after AI fraud scoring tech rollout. Today’s main analysis: Lending Club’s Q3 earnings. Today’s thought-provoking articles: Due diligence […]

Lending Club originations

News Comments

United States

United Kingdom

China

European Union

International

India

Asia

News Summary

United States

LendingClub originations rose 34% in Q3 (American Banker), Rated: AAA

Loan originations continued to climb for LendingClub in the third quarter, yet profitability remained out of reach even as the lender continued to recover from the scandal that forced out its former CEO.

LendingClub Q3 Results: Highest Revenue in the Company’s History of $ 154.0 million (Crowdfund Insider), Rated: AAA

LendingClub (NYSE:LC), the largest marketplace lending platform in the United States, has published Q3 2017 financial results. The company delivered the best revenue in LendingClub’s history generating $154 million in top line revenue, an increase of 34% versus year prior and 10% over Q2 2017.

LendingClub Q3 2017 Earnings – Close to a Return to Profitability (Lend Academy), Rated: AAA

Last quarter we reported that LendingClub had returned to origination growth. It was a relatively small amount, compared to historical growth, at just 10%, but it was a noticeable change from the several quarters of flat originations. Today, LendingClub announced their third quarter financial results which included $2.44 billion in originations, an increase of 14% from the prior quarter ($2.15 billion).

Source: Lend Academy

The company also delivered their highest revenue to date at $154 million, up 34% year-over-year. This was on the low range of guidance for the quarter ($154 – $159 million). The company had a GAAP net loss of $6.7 million, which was better than their third quarter guidance of losses between $12 million and $8 million. Adjusted EBITDA came in at $20.9 million which was in the middle of guidance between $18 and $22 million.

Source: Lend Academy

LendingClub forecasts fourth-quarter loss, shares plummet (Reuters), Rated: A

Online lender LendingClub Corp (LC.N) forecast a fourth-quarter loss and revenue below expectations, sending its shares down sharply after the bell on Tuesday.

For the fourth quarter, the company expects net loss of $3 million-$7 million and revenue in the range of $158 million-$163 million.

LendingClub comes up short as it cuts back full-year guidance (Financial Times), Rated: A

Shares in Lending Club crashed in after-hours trading on Tuesday, as the company pared its revenue and profit guidance for the full year.

The company’s stock fell as much as 22 per cent after the closing bell, having lost about 6.6 per cent during the day.

DUE DILIGENCE REQUIRES DEEP DIVES INTO DATA (All About Alpha), Rated: AAA

The data and analysis provider eVestment has issued a new white paper on “enhancing private equity manager selection with deeper data.”

The authors of this study cite a recent paper by Daniel R. Cavagnaro, Bart Sensoy, Yingdi Wang, and Michael Weisbach.  Cavagnaro et al found (in the eVestment paraphrase) that “an investor’s skill level in fund selection is a more important driver of their returns, than luck or access to managers,” and that indeed an increase in skill of one standard deviation accounts for a 3% increase in the annual IRR.

With reference specifically to buy-out funds, eVestment says that only 19% of the funds that (a) have raised money subsequent to 2001, and (b) were a successor to a top quartile performer (by the same GP) have then repeated that top quartile performance.

The numbers for these four periods are: 33%, 33%, 25%, and 22%.

Focusing more specifically on persistence within the top quartile, the numbers drop more dramatically. They are then: 31%, 28%, 13%, and 12%.

Download and read the eVestment white paper here.

Medical residency refis may be just what the doctor ordered (Asset Securitization Report), Rated: A

When the online lender Social Finance recently unveiled its latest refinancing product, it put a spotlight on a perhaps overlooked corner of the student loan market: medical residents.

SoFi launched an offering in October designed specifically for medical school graduates who practice in a residency program at a hospital or clinic. The company is following in the footsteps of established players like Darien Rowayton Bank and several upstarts.

SoFi Launches “Refi and Relax,” Aimed at Combating Widespread Student Loan Anxiety (PR Newswire), Rated: A

On the heels of the end of most new college graduates’ student loan repayment grace period, SoFi today announced its first-ever Refi and Relax campaign, which aims to educate graduates on their refinancing options as a way to relieve the overwhelming stress that comes with carrying student debt.

Student loan debt is a large source of anxiety and stress for many young Americans. According to a recent SoFi member survey of over 1,200 respondents, eighty three percent shared that they’ve felt like they couldn’t relax due to the burden of the debt. Fifty percent of people dealing with student loan debt reported feeling anxious and/or depressed, and fifteen percent of respondents went so far as to talk with a mental health professional about the stress of their student debt.

Over a third of respondents have reported losing sleep due to student loan debt. Seventy five percent of respondents shared that they would give up social media if it meant their student loans would disappear. Forty percent of respondents said they would stay at a job that they hate because of student loan debt. Another twenty percent are willing to take even more dramatic measures by sacrificing a finger or toe in exchange for erasing their student loans.

Americans currently owe over $1.34 trillion in student loan debt, about $319 billion more than total credit card debt, according to the Federal Reserve Bank of New York’s August 2017 report.

Refi and Relax will comprise of a robust social media advertising campaign (#RefiandRelax), in addition to a members-only launch party in New York exclusively for those who recently refinanced their loans. On November 7, to give SoFi members a night off to unwind, the event will be dedicated to utmost relaxation, with manicures from GlamSquad, playtime with Socials Tees puppies, premium giveaways, and more.

There’s a gender gap in college savings, too (Mashable), Rated: A

Two studies recently found that parents save less for their daughters’ college educations than they do for their sons’. As highlighted in a Wall Street Journal story, a study by T. Rowe Price examined families who had all boys and families who had all girls.

The families who only had boys saved more for college than the families who only had girls. Fifty percent of households with boys saved money for college, compared to only 39 percent of households with girls. And 83 percent of families with boys contributed to college savings monthly, while only 70 percent of families with girls did. This all stood up no matter how many children the families had.

LendKey Forms Partnership with Allied Solutions to Offer Digital Lending & Loan Participation Solutions for Financial Institutions (Crowdfund Insider), Rated: A

LendKey, a lending-as-a-service solution for banks and credit unions, announced on Monday it has formed a partnership with Allied Solutions to offer its digital lending solutions, including unique and innovative loan participation programs, to Allied’s more than 4,000 clients.

Catching Up With LendingPoint (deBanked), Rated: A

At Money2020, we sat down with Chief Executive Officer Tom Burnside and Chief Strategy Officer Juan Tavares, both of LendingPoint, an online consumer lender we examined in the July/August magazine issue.

An interesting initiative that they’re now just ramping up, Tavares says, is partnerships with hospitals that allow patients to determine their deductible expenses and obtain credit on the spot to pay for it.

Accounting software giant Intuit launches direct business loans (CNBC), Rated: A

Financial software firm Intuit is offering loans directly to businesses with a lending product called QuickBooks Capital.

The company, which makes tax-preparation and accounting software, said Tuesday it would enable firms to use its bookkeeping software to access up to $35,000 in credit, with a term between three and six months.

QuickBooks Capital uses machine learning to help small businesses demonstrate credit-worthiness.

According to a study by the Federal Reserve earlier this year, only 23 percent of businesses younger than five years get access to credit.

How banks can beat digital lenders at their own game (American Banker), Rated: A

Perhaps it’s time to start acknowledging that banks are no longer taking a back seat to pioneering online lending startups.

Many depositories have learned that if they fail to modernize their lending processes, they risk being left behind. At the same time, many startups have been stymied by certain intractable advantages held by the banking sector, the most notable being significantly lower funding costs.

Bank of America Merrill Lynch has signed on with a quant firm — and it shows where Wall Street is headed (Business Insider), Rated: A

Manoj Narang, founder of quant hedge fund MANA Partners, has launched a trading subsidiary that is developing market-testing products. One of his first clients: Bank of America Merrill Lynch.

MANA Tech is also marketing a product using similar data that allows investors to measure how much money their algorithmic strategies would have performed in past market conditions, and identifies how they could become more profitable.

“It’s much more beneficial to be a quant trading firm where technology is a profit center and not a cost center. It allows you to spend much more on your technology than you can with the traditional setup where technology is a tax on trading profits,” Narang added.

Can Cryptocurrencies Solve What Traditional Lenders Cannot? (TheStreet), Rated: A

Beyond general economic anxiety in a post-2008 world, numerous other factors contribute to small businesses’ difficulties securing credit. New companies don’t have track records showing years of rising revenue and profit. Some of the world’s most promising theaters for business growth, like Asia Pacific, are regions where many individuals typically don’t have access to banks. Women-owned businesses may be at a particular disadvantage, since women have been starting businesses at a high rate over the past decade, and therefore tend to constitute a higher proportion of young businesses.

Alternative Lenders

Immediately after 2008, most banks had their hands tied when it came to providing loans to small businesses-providing a window for alternative lenders, predominantly peer-to-peer lenders, to grow. P2P lending is still very much a nascent and emerging area – according to a recent Fundera survey, small businesses continue to look mainly to brick-and-mortar banks for financing, with only 11% of respondents opting to work through alternative lenders.
When a small business needs a loan, it shares its real transaction history from a POS terminal with the flip of a switch on WishFinance’s app.
The company’s cryptocurrency, WISH, offers an Ethereum-based tokens that investors need to build and manage loan portfolios on the platform. One token–at a cost of $1–manages one active loan, meaning a lender with 1,000 active loans would deposit 1,000 WISH tokens using one of the available cryptocurrency exchanges. Lenders can also “borrow” tokens from other lenders, sharing gains with the primary token owners. In theory, the platform takes a good first stab at making SME lending more profitable and less uncertain. If more lenders entertain using the blockchain to manage risk, we’ll see higher volumes of loans and, in turn, higher demand for tokens to manage them.

The financial services industry typically evolves at a glacial pace. The three trends outlined above – the rise in alternative lenders, crowdfunding and cryptocurrencies – represent evolution, not necessarily disruption.

CrowdStreet Gains Momentum as it Delivers on Vision of Expanding Access to Commercial Real Estate Investing (Marketwired), Rated: A

With its innovative integrated online investor marketplace and software as a service (SaaS)-based investment lifecycle management solution, CrowdStreet has increased investment dollars managed on its platform by 4x, reaching $4.2 billion in 2017, and doubled the number of investors year-over-year to more than 61,000. These results signify a major shift in confidence in online commercial real estate investing as this infographic illustrates.

In 2017, CrowdStreet’s technology platform has seen more than $745 million distributed back to investors, a 3x increase from $245 million last year. The marketplace investment run rate also grew by over 3x reaching $250 million of equity raised this year, compared to $76 million in 2016.

CrowdStreet Announces Leadership Team Expansion & Advisory Board Formation (Crowdfund Insider), Rated: B

The funding portal revealed Molly Moore, was appointed as its new Chief Marketing Officer while Rohit Colaco was named Vice President of Engineering. CrowdStreet appointed Thomas Byrne (CEO of Property Capsule Inc), Lewis G. Feldman ( CEO and Founder of Heritage Capital Ventures LLC), Christopher Keber (Currently Head of Investments and Strategy at McCourt Global), and John Witchel (President and COO of GitPrime) to its advisory board.

CrowdSeekr Takes Top Spot Among Real Estate Crowdfunding Resources (PR.com), Rated: A

CrowdSeekr is proud to announce that it is now the top data resource for real estate crowdfunding based on the number of investment opportunities in its database. CrowdSeekr is an aggregator and search engine for the real estate crowdfunding industry. The company was founded in 2015 and now features nearly 300 available real estate crowdfunding investments from dozens of platforms.

CrowdSeekr.com is a leading aggregator and search engine for real estate crowdfunding investment opportunities. It was founded in 2015 by e-commerce attorney Ashley Smith and commercial real estate professionals Tim Strange and Marylee Strange. CrowdSeekr currently lists offerings from over 30 real estate crowdfunding platforms. Over 7 billion dollars has been raised for real estate projects using crowdfunding since 2013.

The Next Frontier Of Real Estate Investor And Property Manager Technology (Forbes), Rated: A

Quietly working and collecting rent used to be the DIY real estate investor commonly known as the landlord. Then real estate investing boomed, and property management became a reported $77 billion business as real estate investors grew to an estimated 7 million people. Single and two- to four-unit buildings currently comprise an estimated 54% of the rental units available today — a market share that has turned the heads of software developers looking to service the independent DIY real estate investor market.

Over the last five to seven years, hoards of real estate investors embraced the efficiencies technology brought to the industry and to their bottom line. Owners accumulating between two and 500 units have started to look at technology solutions as a platform for controlling costs.

Most landlords are now set up in a software solution and can fill a calendar with the dates of the cycle specific to just the payment processing phase. We watched the benefits of the speed of the automatic payment options processed through electronic ACH banking unfold.

A New Horizon For Real Estate Tech

The next step is to use the information available from machine learning and AI to help landlords better manage the asset and identify consumer behavior while anticipating needs.

U.S. Fintech Investments Double (WealthManagement.com), Rated: A

Investments in U.S. fintech companies nearly doubled during the third quarter to $5 billion, up from $2.6 billion in the second quarter, according to KPMG’s recent Pulse of Fintech report. There were a total of 142 deals during the quarter, up from 125 deals in the prior year quarter and 147 deals last quarter. The automated advice platform technology was a big bet during the quarter, with hybrid models—those using a combination of humans and technology—gaining more traction over pure robo advisors, the report said.

One year after President Donald Trump defeated Hillary Clinton to become President of the United States, the stock market has risen 21.2 percent.

Source: WealthManagement.com

InvestCloud and Willis Towers Watson are partnering. The cloud-based financial services platform was selected to build a bespoke solution for the WTW Asset Management Exchange that will enable clients to better access and monitor roughly $2 billion, according to a statement.

Goldman Sachs Shuffles Leadership in Slumping Fixed-Income Unit (Bloomberg), Rated: A

Goldman Sachs Group Inc. has shaken up the leadership of its vaunted fixed income, currencies and commodities business after stumbles this year called its strategy into question.

The firm named Jim Esposito and Justin Gmelich, both 49, to newly created roles as co-chief operating officers of FICC, according to a memo Tuesday from securities division co-heads Isabelle Ealet, Pablo Salame and Ashok Varadhan. Gmelich gives up his title as global head of credit and mortgage trading, while Esposito relinquishes his role helping to run fixed-income sales, leaving John Willian with sole responsibility.

U.S. Consumer Financial Protection Bureau Sets Out Principles for Consumer-Authorized Data Sharing and Aggregation (Lexology), Rated: AAA

On October 18th, 2017 the U.S. Consumer Financial Protection Bureau (“CFPB”) outlined the principles to be followed (“Principles”) when consumers authorize third party companies to access their financial data to provide certain financial products and services.

The Principles line up quite closely with the ten Fair Information Principles that underlie Canadian federal privacy legislation (PIPEDA). Absent (or diluted) from the CFPB Principles are the Fair Informaiton Principles regarding “Limiting Use, Disclosure and Retention”, “Limiting Collection” and “Identifying Purpose”. The CFPB Principles also attempt to address many of the same issues that arise in the mandatory “Open Banking” regime in the EU and the UK, but in a much less fulsome manner.

The CFPB’s interest in consumer data (and specifically Open Banking) was telegraphed by the Director of the CFPB his remarks at the 2016 Money 20/20 conference when he stated that the CFPB was “gravely concerned” that financial institutions were limiting or shutting off access to financial data, rather than “exploring ways to make sure that such access…is safe and secure.”

The CFPB has now released its set of Consumer Protection Principles intended to reiterate the importance of consumer interests. They are, however, non-binding and not intended to alter, interpret, or otherwise provide guidance on existing statutes and regulations that apply.

  1. 1) Access
  2. 2) Data Scope and Usability
  3. 3) Control and Informed Consent
  4. 4) Authorizing Payments
  5. 5) Security
  6. 6) Access Transparency
  7. 7) Accuracy
  8. 8) Ability to Dispute and Resolve Unauthorized Access
  9. 9) Efficient and Effective Accountability Mechanisms

USATech buys Cantaloupe Systems for $ 85M (Philly.com), Rated: B

Shares of USA Technologies Inc., Malvern, hit a 10-year high of $6.75 in early trading Tuesday after the mobile- and cashless-payments company said it agreed to pay $85 million ($65 million cash, the rest in USAT shares) for a competitor, San Francisco-based Cantaloupe Systems Inc.

The 11 Most Valuable VC-Backed Fintech Companies In The US (Fintech News), Rated: B

United Kingdom

Your November Review – Insight and Analysis (Funding Circle), Rated: AAA

Last month was a global record month here at Funding Circle. In the UK alone, over £120 million was lent to businesses thanks to your continued support.

Source: Funding Circle

You’ve helped more than 8,900 small businesses access finance in the last 6 months…

Source: Funding Circle

Totalling over £630 million lent.

Assetz appoints LendInvest’s Damien Druce for intermediary expansion (P2P Finance News), Rated: A

ASSETZ Capital is looking to bolster its presence in the intermediary space as part of the next stage of its expansion.

The peer-to-peer business lender has appointed Damien Druce (pictured) to lead the move as head of intermediary sales.

He joins from LendInvest where he was northern business development manager, and has previously worked for Castle Trust and Crystal Specialist Finance.

China

JD Finance Announces JD Financial Cloud“Fintech as a Service” (Business Insider), Rated: AAA

JD Finance today announced the launch of JD Financial Cloud. The new platform uniquely combines advanced technology and big data to offer “Fintech as a Service,” a new approach that will help financial institutions solve problems and reduce costs while boosting their productivity and competitiveness.

Where precision marketing is concerned, JD Finance’s “Jingdong Laike,” analyzes a massive base of user tags based on online shopping and mobile usage patterns as well as payment history and credit risk to offer insights that can boost response rates by 25 percent while reducing customer acquisition costs by 20 percent.

Furthermore, leveraging AI and big data to recognize and analyze patterns in JD Finance’s comprehensive dataset that includes 30,000+ risk control variables, 300m+ user credit evaluations, 500+ models and 5,000 risk strategies can help institutions better evaluate credit risk.

China’s Raging Fintech Boom on Verge of Minting Two Billionaires (Bloomberg), Rated: AAA

Online consumer finance platform PPDAI Group Inc. is planning an initial public offering in the U.S. this month, giving co-founder Shaofeng Gu, who owns more than 25 percent of the business, a net worth of at least $1.3 billion, according to the Bloomberg Billionaires Index. Ning Tang owns 36 percent of U.S. listed peer-to-peer lending platform Yirendai Ltd., giving the founder and chief executive officer a net worth of about $930 million.

“In China, one billionaire is created every three weeks,” Qiong Zhang, head of wealth management for UBS Securities in China, said in an interview.

Source: Bloomberg

P2P platforms turn to US markets for funds (China.org.cn), Rated: A

Hexindai Inc became the first Chinese financial technology (fintech) company to list on the Nasdaq stock market last Friday. Priced at $10 per share, the IPO aims to raise $50 million. It was also the third Chinese fintech company that went public in the US this year.

According to the global consulting firm Oliver Wyman, the market size for consumer lending will expand to $620 billion by 2020 with a compound annual growth rate of 49 percent.

With such a rapid growth in demand, P2P lending platforms such as Hexindai have seized the growth opportunities. Credit loans accounted for 99 percent of its total loans in the second quarter of 2017, with Q2 profit soaring to 60 million yuan, far ahead of its annual profit in 2016.

According to the US Securities and Exchange Commission, Rong360 Inc, another online financial service provider, plans to raise $270 million through an initial public offering in New York.

Auto Financier Yixin Launches $ 900 Million IPO (Caixin), Rated: A

Yixin Group Ltd., an online car financing company backed by three of China’s top internet companies, is hurtling ahead with a Hong Kong IPO to raise up to nearly $900 million, as enthusiasm on a new generation of financial technology (fintech) companies starts to stall.

The company has set a price range of HK$6.60 ($0.85) to HK$7.60, with plans to issue nearly 880 million shares in Hong Kong, according to a source with direct knowledge of the deal, speaking on condition of anonymity because the matter is private. At that price range, the company would generate between $740 million and $870 million in proceeds.

Marketplace lending: where everybody wins (Enterprise Innovation), Rated: A

European Union

Revolut becomes latest UK fintech firm to seek banking license (Reuters), Rated: AAA

British financial technology firm Revolut said on Wednesday it has applied for a European banking license, as it bids to join a growing number of digital-only banks looking to win away customers from larger, traditional lenders.

Current accounts and credit will initially be available to users in Lithuania, before being rolled out to Estonia and Latvia and, as soon as possible, Britain. Next in line are France, Germany and Italy and eventually the rest of the European Union, the firm said.

Revolut to bring processing in-house (Banking Technology), Rated: A

Revolut is building its own in-house processor, following a string of outages caused by its current third party provider.

The latest issues were flagged on social media by Revolut’s users from around the world on 3 November, with their cards being declined and payments rejected.

International

AI-based fraud scoring boosts loan approval rate by 50 per cent for ID Finance (ID Finance Email), Rated: AAA

Reshaping Peer-to-peer Lending with Crypto Assets (Coinidol), Rated: A

The Bitbond, BTC Jam, and BTC POP platforms were pioneers in the market of crypto lending. From that time forward, it can be clearly seen that blockchain and crypto assets usage in p2p lending is stepping up. The congruence of the proven peer-to-peer lending business model and possibilities of blockchain seems to be a solid base for advanced financial services. What does it mean for investors and borrowers, how does it affect global economy, and how can crypto assets possibly reshape the existing peer-to-peer lending market?

Financial Inclusion

According to McKinsey research, there are still about 2 billion unbanked and underbanked people in the worldwide adult population. Blockchain-based lending services can offer microloans to a customer who has no previous credit history. While some banks in Asian countries require enormous amounts of paperwork to be done before approving a loan, cross-border lending platforms have unified rules for everyone. Not mentioning the fact that bank account penetration in developing countries hardly reaches 30%.

Globalization means equality 

It’s no secret that interest rates set by traditional banks may significantly vary by country. While the difference can be about 0.1% between loan interests in Germany and UK, interest rates in Thailand, Turkey or Latviamay be 10 times higher. Global platforms offer the same terms regardless of citizenship.

  • Lendoit is a decentralized P2P lending platform.
  • CoinLoan is a platform for lending secured with crypto-assets (cryptocurrency, tokens).
  • ETHLend offers fully decentralized P2P lending.
  • Inspeer is a P2P lending service that works with cryptocurrency and fiat.

Fintech funding round-up: 7 November 2017 (Banking Tech), Rated: A

Banking (not baking) challenger Douugh has partnered with community bank Choice Financial to launch an integrated checking account and debit card. Choice has also made an investment to “support Douugh’s roadmap”, bringing the company’s total seed funding to $2.5 million.

Mobile-only challenger bank Monzo has closed its latest fundraising round, raising £71 million from Goodwater Capital, Stripe and Michael Moritz.

Smartkarma, a provider of investment research, has closed a Series B round of financing led by Sequoia India, which brings the company’s total funding to $21 million.

9 Firms To IPO This Week (Benzinga), Rated: B

CBTX, Inc. (CBTX) will issue 2.4 million shares between $24 and $26 Wednesday on the Nasdaq. The Community Bank of Texas maintains nearly $2.94 billion in assets in 34 state branches, according to the Federal Deposit Insurance Corporation.

PPDAI Group Inc. (PPDF) will issue 17 million shares between $16 and $19 Friday on the New York Stock Exchange. The 10-year-old Shanghai company facilitates online peer-to-peer lending and reported $381 million in sales in the 12 months ending June 30.

India

The digital register is ringing loud and clear (The Hindu Business Line), Rated: AAA

According to government sources, digital transactions since demonetisation have grown manifold on a month-on-month basis. For instance, volume wise, transactions via NACH, IMPS, UPI+BHIM and Rupay have grown to ₹1,47,624 crore in September 2017, against ₹1,07,987 crore in October 2016. Similarly, transactions through debit cards, credit cards, NEFT, RTGS and mobile wallets have grown from ₹1,07,59,649 crore in October 2016 to ₹1,23,28,369 crore as of July this year.

Prime Minister Narendra Modi’s actions to digitise India has brought a momentum to the entire payment ecosystem and helped build a new framework for the digital economy.

As per reports, deposits up to ₹80 lakh were made in 10.9 million accounts in November-December last year, and over 1.48 lakh account holders deposited an average ₹3.3 lakh in their banks. The impact is seen in the number of tax filings for the period April-May 2017, which went up by 17 per cent to 27.5 lakh returns from a level of 23.5 lakh in the same period last year.

Asia

Kosdaq-listed SFC buys full stake in Korean P2P lending startup Villy (Pulse News), Rated: A

South Korea’s peer-to-peer (P2P) lending service startup Villy was acquired by Kosdaq-listed solar backsheet manufacturer SFC Co. for 11 billion won ($9.8 million), the company said Monday. It is the country’s first merger and acquisition (M&A) case for a P2P lending startup.

Founded in April 2015, Villy boasts 80.5 billion won worth cumulative loan, 36,000 cases of investment and 5,460 investors, 55.4 percent of whom are people in their 20s to 30s. Its reinvestment rate reaches 74.7 percent. Following the acquisition, Villy will be a subsidiary of SFC with its 100 percent stake owned by the latter.

Authors:

George Popescu
Allen Taylor

Derisking the Online Lending Model

Thrive and banks

According to an article in Harvard Business Review, online lenders lent an estimated $10 billion in 2016 to small and medium businesses (SMB) as compared to $300 billion by U.S. banks. A report by Morgan Stanley predicts fintech lenders will garner almost 20% of the market by 2020. The major issue facing banks is the […]

Thrive and banks

According to an article in Harvard Business Review, online lenders lent an estimated $10 billion in 2016 to small and medium businesses (SMB) as compared to $300 billion by U.S. banks. A report by Morgan Stanley predicts fintech lenders will garner almost 20% of the market by 2020. The major issue facing banks is the cost to process a loan is the same for a $100,000 note and an application for $1 million. Thus, banks have no incentive to focus on smaller loans. This led to their exodus and online lenders swarmed into the market.

The Thrive Group Inc. understands the risk-reward ratio is better in helping banks to recapture the market by getting them on the digital-first bandwagon as compared to launching a marketplace lender and struggling with credit and customer acquisition risks. Thrive describes itself as a financial technology company building a modern lending infrastructure focused on digital experiences, intelligent automation, workflow efficiencies, and real-time risk management capabilities.

Background

Founder and CEO Kunal Sehgal got his first taste of fintech when he joined Venmo (now part of PayPal), a mobile payment service in 2011. Kunal was able to understand the technological side of finance at Venmo, how it was thriving because it had married tech and user experience to make the process of transferring money frictionless. Before Venmo, Kunal worked at Rothschild in their London and New York offices as an associate in Tech M&A and debt restructuring.

Considering his entire career has revolved around amalgamating finance with technology, it was inevitable that he would launch a fintech company. Kunal joined forces with Ke Zhu, co-founder and CTO, to launch Thrive in 2015. Ke Zhu has vast experience in developing and implementing tech systems that are both maintainable and extendable. Prior to Thrive, he worked at Prosper as senior software engineer and lead developer.

The Platform

Initially, the company aimed to enter direct lending but decided against it after looking at the market where many startups were struggling to stay afloat because of high default rates, regulatory crack down, etc. Thrive pivoted and developed a platform whose main focus was to make the origination process quicker and hassle-free along with enhancing the user experience. Their first rollout focused on SMB lending and, eventually, the company will target other markets, as well. The goal is to help reduce underwriting and approval times, which will automatically slash costs associated with SMB loans, the original pain point of banks.

The Problem For Alternative Lenders

Most alternative lenders are struggling because of the high cost of capital, lack of stable flow of investment funds, and difficulty in acquiring customers. The original choice for a fintech startups used to be between becoming a balance sheet or marketplace lender. But the future is in redefining and reshaping the lending and borrowing experience. The focus has shifted to infrastructure, and fintechs partnering with banks are leveraging specialization for a win-win. The fintech focuses on borrower experience and reducing costs while the bank focuses on credit risk and customer acquisition. JP Morgan’s deal with OnDeck is a case in point.

Thrive’s First Client

Thrive was recently able to secure its first multi-year technology licensing agreement with Horizon Community Bank (HCB). Thrive will provide the bank’s cloud-based lending technology to help fast-track and complete its end-to-end small business lending process. This will cover digital applications, automated credit, ID verification, automated loan offers, and more. The bank will be able to bring down the loan processing time from weeks to days. The partnership will also open the door to acquiring customers through new digital customer acquisition channels.

This first partnership proved to be more fruitful than expected for Thrive as HCB also decided to come on board as an investor in the young startup.

Revenue Model and USP

Thrive’s first client going live is a huge validation, and the company wants to originate $5-$10 million in loans in the first year. They charge a percentage for every loan origination.

Most startups in the industry originate loans using their own platforms leaving them exposed to market vulnerabilities and risk. Thrive’s nearest competitor is Akouba, which provides SaaS solutions for community and regional banks, but the underlying difference is Akouba stops at the origination phase whereas Thrive provides the complete package right from the origination process to providing loan servicing. Servicing is integrated into the platform making it a seamless solution, and it removes the hassle of coordinating with multiple vendors. LendKey has a similar model but is focused only on student and home loans.

Conclusion

Thrive has hit upon a business and revenue model that is asset light and holds no customer acquisition or capital risk. They leverage banks’ balance sheets and use existing customer relationships for driving business. Thrive will target banks with an average size of $10-$15 billion for future growth. Mid-tier banks would find it difficult to invest resources in building a complete technology infrastructure; the only choice would be partnering with someone like Thrive to capture their SMB customer base.

Author:

Written by Heena Dhir.

Monday August 28 2017, Daily News Digest

artificial intelligence

News Comments Today’s main news: Blend lands $100M investment. Funding Circle achieves ISA manager status. Hive raises over $8M. Innovate UK invests 700K GBP in Paybase. China Life, Baidu launch $1B internet fund. Klarna’s profits increase 138 percent. Today’s main analysis: Bank of America Merrill Lynch to implement AI. Today’s thought-provoking articles: Congresswoman asks FDIC to hold public hearing on […]

artificial intelligence

News Comments

United StatesFlipkart, Amazon pose new competition for fintech lenders.

United Kingdom

China

European Union

International

Australia/New Zealand

India

Asia

Canada

News Summary

United States

LendingClub Hit with Lawsuit (Crowdfund Insider), Rated: AAA

LendingClub (NYSE:LC) has been hit with a lawsuit that names former CEO Renaud Laplanche alongside current and former board members and former CFO Carrie Dolan. The complaint, filed in the Court of Chancery in Delaware, states;

“Throughout the period December 11, 2014 and continuing through May 9, 2016 (the “Relevant Period”), the Individual Defendants breached their fiduciary duties to LendingClub by failing to institute adequate internal controls regarding financial disclosures, related party transactions, and data integrity and security, all while causing LendingClub to represent in the Registration Statement and a series of subsequent filings that such controls were sufficient.”

The suit has been filed by two shareholders; Kelvin Farley and Jay Fink.

Waters Calls on FDIC to Hold Public Hearing on SoFi’s Application for Bank Charter (House.gov), Rated: AAA

Today, Congresswoman Maxine Waters (D-CA), Ranking Member of the Committee on Financial Services, sent a letter to Federal Deposit Insurance Corporation (FDIC) Chairman Martin Gruenberg, calling for the FDIC to hold at least one public hearing on Social Financial, Inc.’s (SoFi) application to establish an Industrial Loan Company (ILC).

In the letter, Ranking Member Waters states that changes in the financial services industry and financial regulation necessitate a public hearing to examine the policy and legal implications of granting federal deposit insurance to ILCs generally, as well as to obtain greater input on the unique risks posed by granting it to a financial technology (fintech) company like SoFi.

I am writing to request that the Federal Deposit Insurance Corporation (“FDIC”) hold at least one public hearing on Social Finance, Incorporated’s (“SoFi”) application to establish an industrial loan company (“ILC”) to provide FDIC-insured Negotiable Order of Withdrawal (“NOW”) accounts and credit card products. As you know, because de novo ILC formations have been affected by regulatory and statutory moratoria for several years, the FDIC has not approved a deposit insurance application for a new ILC charter for some time. Since the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank Act”), changes in the financial regulatory regime and financial services industry justify a public hearing to examine the policy and legal implications of granting Federal deposit insurance to ILCs generally, as well as to obtain greater input on the unique risks posed by granting it to a financial technology (“fintech”) company like SoFi, a number of which I will discuss in more detail below.

Appropriate regulatory oversight of any ILC is an essential prerequisite to approving any application for deposit insurance backed by taxpayers. The FDIC has previously acknowledged the importance of strong oversight of any insured bank and its parent company when discussing oversight of ILCs.[1] In reaction to a number of concerns previously raised on the regulation of ILCs, the FDIC even went so far as imposing several moratoria on its ability to approve ILC applications for deposit insurance in 2006 and 2007 to, in the words of former FDIC Chairman Sheila Bair in testimony before the House Financial Services Committee, “allow the FDIC to carefully weigh the safety and soundness concerns that have been raised regarding commercially-owned ILCs. At the same time… the moratorium provides an opportunity for Congress to consider the important public policy issues regarding the ownership of ILCs by commercial companies.”[2]

While some experts have touted the possibility that fintech firms can help promote financial inclusion, others have underscored the challenges posed for our current regulatory regime to oversee these types of companies and have underscored the need for policymakers to carefully evaluate the consequences of allowing them access to deposit insurance and the Federal Reserve discount window.[11] Thus, Federal regulators have taken a varying degree of actions focused on fintech companies and services. For example, while the Office of the Comptroller of the Currency (“OCC”), under its “Responsible Innovation” initiative, has proposed a Special Purpose National Bank Charter for fintech companies (“fintech charter”)[12] questions have been raised about whether the benefits to consumers for this new charter will be widely and fairly shared, and whether there is adequate legal authority, let alone a clearly defined and modern regulatory framework, for such a fintech charter.[13] Indeed, a lawsuit has been filed by state banking regulators challenging the OCC’s authority.[14] As should be the case with the OCC and its proposal to use its authority to federally charter fintech companies, the FDIC should thoroughly consider the implications of offering access to the deposit insurance fund for ILCs that will result in expanding the type of institutions to it, like fintech firms. Fintech firms, whose operations cross state and international boundaries, and may exist entirely online, were undoubtedly beyond original congressional intent in permitting ILCs to access deposit insurance and it is appropriate for stakeholders to weigh in on whether it is appropriate for these firms to have this access without proper oversight of their parent companies.

The chartering of a fintech company as an ILC also raises a number of consumer protection concerns that the FDIC should consider. For example, the California Reinvestment Coalition (“CRC”) has opposed SoFi’s application on the basis of concerns with the institution’s Community Reinvestment Act (“CRA”) plan, as well as its intended approach to financial inclusion, fair lending, and consumer protection.[17] CRC notes that SoFi’s business model targets “students from elite universities that have strong earnings and wealth potential,” and offers products and services “designed to exclude working class households.” CRC also notes that SoFi’s CRA plan is grossly inadequate, considering that: (1) SoFi’s assessment area will be limited to areas in Utah, but the company will accept deposits and operate nationally; (2) SoFi’s current core products are not designed to serve the “convenience and needs” of low- and moderate-income (“LMI”) communities in which the bank would operate,[18] but rather are focused on serving SoFi’s members; and (3) SoFi’s CRA plan does not encompass measurable commitments to lending, investments, and services for LMI communities.

The full letter is here.

Bank of America Merrill Lynch has become the latest bank to implement AI (Business Insider), Rated: AAA

Bank of America Merrill Lynch (BAML) has 

Bo Brustkern and Emmanuel Marot (Lend Academy), Rated: A

On this episode of the Lend Academy Podcast I brought together both CEOs to talk about this merger; what it means for their respective customers as well as the industry as a whole.

In this podcast you will learn:

  • The original idea that led to the founding of both companies.
  • The strengths of both companies and why they are a complementary fit.
  • Why they decided to come together and merge companies now.
  • The scale and profitability of the combined company.
  • The unique aspects of the LendingRobot Series investment offering.
  • The platforms that the LendingRobot Series invests on.
  • The different funds that make up the Lending Robot Series.
  • The choices for non-accredited investors on the combined platform.
  • Their value proposition today for investors.
  • Who the target customer is today for the combined company.
  • How the two brands will operate going forward.
  • What the combined company will look like in 12 months time.
  • Where marketplace lending is going in the future.

LendKey, Earnest Alter Student Loan Refinancing Rates (LendEDU), Rated: A

Two student loan refinancing companies, LendKey and Earnest, have changed their student loan refinancing interest rates in recent weeks, according to LendEDU.

Effective August 10th, LendKey’s variable interest rate range for their student loan refinance product was altered slightly. LendKey, a leading lending partner of both banks and credit unions, now offers a variable rate range between 2.67 and 6.31 percent for student loan refinancing.

This new variable rates for LendKey mark an increase on both the low and high ends of the range. Previously, the online lending partner offered a variable interest rate range between 2.52 and 6.16 percent since June.

Online Mortgage Lender Blend Lands $ 100 Million Investment Led by Greylock (Crowdfund Insider), Rated: A

Blend has landed a significant funding round to the tune of $100 million. The funding was led by Greylock Partners with participation by Emergence Capital. Existing investors joined in the round as well.

Wells Fargo, U.S. Bancorp Turn to Startup to Speed Up Mortgage Applications (WSJ), Rated: A

Wells Fargo & Co. and U.S. Bancorp have signed deals with mortgage-software startup Blend Labs Inc. to move more of their loan applications online.

Ethereum-Based Invoice Finance Platform Hive Raises Over US$ 8 Million (Coin Journal), Rated: A

The Hive Project, which intends to build the world’s first cryptocurrency-based invoice financing platform, has raised 2,087 BTC, or over US$8.9 million, from 2,234 investors through its initial coin offering (ICO).

Using invoice finance, the business “sells” its outstanding invoices at a small discount to a financier. The business immediately receives up to 85% of the value of the invoice instead of having to wait the usual 30 to 90 days to get paid by customers.

Hive uses the Ethereum blockchain and smart contracts to assign a unique fingerprint to every invoice issued. These invoices are then tokenized and published on a blockchain, and made available as a shared source of liquidity for factoring and invoice financing.

Debate on Regulatory Reform (PeerIQ), Rated: A

JP Morgan CEO Jamie Dimon in his annual letter would agree that the banking system is safer and stronger today. Nevertheless, Mr. Dimon believes that economic growth and lending is below potential. For instance, JPM estimates $1 Tn in loans could have been generated in recent years generating an additional 50 bps in annual GDP growth thru regulatory reform.

The specific regulatory reform areas Mr. Dimon identified include:

  • Simplification of the annual stress-testing process
  • Release or enable banks to deploy excess capital towards small business loans, lower middle market, and near-prime mortgages
  • Rationalization of supplementary leverage ratios and operational risk capital
  • National servicing standards for the mortgage servicing market
  • Federal Housing Administration (FHA) reform
  • Complete securitization standards to encourage private capital and reduce exposure to taxpayers

Role for 3rd party risk infrastructure to strengthen markets

Large banks are increasingly playing the role of financial intermediaries that connect non-banks to the capital markets. Banks are providing liquidity facilities (“lending to the lenders”) and capital-light securitization programs. Although Yellen is right that lending continues to grow, critically, the nexus of credit formation–including for a majority of personal loans, auto loans, student re-fi loans, and even mortgages–now takes place between a consumer and a non-bank.

Under this new landscape, the soft underbelly of the credit markets has shifted from bank wholesale funding to non-bank wholesale funding. And when investor confidence seizes, the transmission mechanism connecting policy to the real economy can break down. Spreads widen, funding costs increase, and markets freeze exactly when policymakers seek to ease financial conditions.

Q&A with Head of Alternative Lending at Fintech Marqeta (Crowdfund Insider), Rated: A

Recently, Crowdfund Insider published an article about Marqeta signing a partnership with Visa on payments and loans. The marriage is designed boost innovations in commercial and consumer payments and online lending. Visa also made a strategic investment in Marqeta at that time to the tune of $25 million. Total investments in Marqeta now stand at over $70 million.

Isn’t this just all about borrowers getting a better interest rate [and investors earning more]?

Candace: Lenders are looking to increase renewals (repeat borrowers are easier to sell than new borrowers), beat out the stackers (top of wallet, top of mind) and decrease risk (new data on spending reduces risk for future loans). On the heels of 2016, these have become as important as the interest rate for the lender.

For the borrower, speed to funds has become increasingly important, and distributing loan funds to a  card allows a way to immediately spend the funds without waiting for the funds to be deposited into the borrower’s bank account.

If Credit Cards drop their rates then they can become competitive. For Visa to partner with Marqeta – isn’t it just how the debt is carried? For the consumer / business, they are indifferent?

Candace: The rates apply to the underlying loan per the agreement between the lender and the borrower, not to a prepaid card that is used to assist with making purchases. The prepaid card bears no interest charge. The terms for the loan (from which the loan proceeds are distributed to the card) continues as agreed upon between the lender and the borrower. That debt does not change.

How Riskalyze Won The Hearts Of Financial Advisors And Upgraded The Advice Industry (Benzinga), Rated: A

Ahead of Riskalyze CEO Aaron Klein’s speaking engagement at the Benzinga Fintech Summit in San Francisco, Benzinga caught up with him to learn more about how the company is upgrading financial advice.

BZ: How did you go about identifying this need for financial advisors? What kind of research did you do?

What’s interesting is that we invented a new space. There was no risk-alignment platform that helped advisors do that. There were questionnaire products that answered half the question, there were a few portfolio analysis tools that would answer the other half, but we invented the concept of the risk number. We can help advisors pinpoint the client’s risk number and then we score portfolios using that number.

Klein: I’ll talk about the two different sides of the coin. A lot of the innovation was figuring out those sides of the coin and bridging the two together. On the one hand, we took some concepts that had really never made it out of academia and into everyday use. They’re centered around the economic framework called prospect theory, which won the Nobel Prize for economics in 2002. We took prospect theory and built a bunch of proprietary technology on top of it to understand how to move up and down a client’s personal financial spectrum to understand when they prefer risk and when they prefer certainty.

Once we do that, we built a mathematical formula behind the scenes that lets advisors turn that into the client’s risk number. That’s how the client-side works.

On the flip side, we need to match that up with a portfolio. So, the inputs for that piece of the technology are largely market data. We effectively take daily pricing data for nearly a quarter-million securities — every U.S. stock, ETF, mutual fund, variable-annuity sub accounts, SMA third-party money managers, proprietary non-traded strategies, all kinds of different products. We take all the data for those, we have new data streaming into our systems every night on those securities.

 

This Week In Retail: Funding, Finance And Tech (PYMNTS), Rated: A

This week in retail, we’ve seen news coming in from multiple sides, including that of Apple’s projected increase in smartwatch salesU.K. online lender Prodigy’s funding news for expansion into the U,S.,  Walmart’s two new partnership announcements, and the news that the CFPB is ordering American Express to pay out money to those hurt by unfair practices.

American Express is in the hot seat this week as the Consumer Financial Protection Bureau (CFPB) ordered the credit card company to pay out a very large amount to consumers in Puerto Rico and the U.S. Virgin Islands. It’s being confirmed that over a 10-year period, American Express  provided inferior card offerings to people in those territories than what was being offered in the U.S.

Here are the numbers:

  • $240 million | Amount Prodigy Finance raised in its venture capital equity funding round
  • $96 million | Amount CFPB ordered American Express to pay out to affected Puerto Rico and the U.S. Virgin Islands consumers
  • $200 | Starting point for potential Walmart installment loans

5 Trends That are Changing the Millennial Economy (Huffington Post), Rated: A

According to statistics from the U.S. census bureau, Millennials make up about 83 million of the nation’s current population. The unique experiences of the Millennials will shape the way we buy and sell, forcing companies and businesses to adjust their business strategy for decades to come.

For example, a growing number of Millennials are choosing to live with their parents. They have been reluctant to buy items such as cars, music, and luxury goods. Luxuries that used to be important for previous generations are not as important for Millennials. They are reshaping the real estate market and are responsible for the growth of the sharing economy.

A recent survey of Interns conducted by Goldman Sachs in 2013, found out that 30% of millennials do not intend to purchase a car in the future. 25% said they will only buy one if there is a need for it, otherwise they are indifferent. Another 25% said buying a car is important but not a big priority. 15% said purchasing a car is extremely important. And the last 5% do not feel strongly about it.

recent report shows that student loans have increased by 84% over ten years with an average student having a loan balance of $29,000.

How to choose and switch to a better bank for you (WPXI), Rated: B

Online banks are now offering much higher rates on savings accounts — significantly higher than the current rates at traditional, bigger banks. So with that in mind, why not just move your savings to take advantage of the bigger return?

To give you some context, online bank ally recently increased the rates on its savings accounts to 1.15% — while the rate on a regular savings account at Bank of America currently sits at only 0.01%.

United Kingdom

Funding Circle receives ISA manager status (P2P Finance News), Rated: AAA

FUNDING Circle has received ISA manager status from the HMRC, Peer2Peer Finance News can reveal.

Approval was granted in July, less than two months after the platform won full FCA authorisation.

However, the platform has no immediate plans to launch its IFISA product, telling customers earlier this week that it intended to roll out the tax-free investment wrapper “before the end of the tax year.”

How Funding Circle is helping small businesses face the challenges of Brexit (Prospect Magazine), Rated: A

Fast forward to today, we’ve originated over £3.2 billion worth of loans through the platform. In the UK, that lending has helped create about 60 thousand jobs, and the £2.5 billion of loans has created about £5 billion of GDP or gross economic value added, according to an independent survey by the Centre for Economics Business Research.

In fact, we think we make up about 2 per cent of the total money that’s going to gross-lending small businesses. And if you actually look at the money going into the economy, we make up about a third of net new lending— which is the preferred Bank of England measure. We did about 300 million versus 600 million in the entire banking system in the first half of this year.

Say a small business decides to come to you: what is it they’re getting that they don’t get with a bank?

We turn around loan applications specifically within 24 hours. We are better in that we give better service; everyone can find an account manager.

We’re cheaper, in that our prices are very, very competitive, and often we’re often providing cheaper loans than businesses would be able to get at the bank. We also don’t have the overheads that banks have.

We all know that Brexit is going to shake up the financial sector. What can Funding Circle do to help businesses rise to the challenge?

Net lending by banks fell by 220 million in Q4 last year. Ours actually rose to 167 million.

On top of that, we’ve also had large insurance companies like Aegon, which is a big Dutch insurer, commit to fund £160 million in year one, but actually committed over a four-year period to purchase our loans. The fact a large foreign insurer would want to do that shows that actually, despite Brexit, there’s a vote of confidence in the UK economy, particularly in small business.

FinTech startup Paybase gets £700,000 from Innovate UK (UK Tech), Rated: AAA

London-based FinTech startup Paybase has received a grant of almost £700,000 from innovation agency Innovate UK.

Expected to launch later this year, Paybase has developed an ‘end-to-end solution for payments, compliance and risk’, which can be accessed through a unified API.

Why P2P is still the crowd despite passive lending (AltFi), Rated: A

There’s been much collective gnashing of teeth over the last few months at the evolution of peer to peer lending, as practised by ZopaRatesetter and most latterly Funding Circle. The big bone of contention has been a shift amongst all three – with FC falling into line just a matter of days ago – to a passive lending model. This means that lenders on said platforms now lend passively to a full slice of borrowers rather than picking their borrowers individually. To the critics this implies that the traditional peer to peer (P2P) model is slowly dying out. If you’re not lending to your peers, don’t you just sound like any other finance business such as a bank?

I’m not convinced by this criticism. Collectively a crowd – many peers – are still lending to another crowd, but just in a format that looks closer to a passive, collective fund basis rather than one on one. There is no bank balance sheet lurking around and the ‘crowd’ still sets the rate at which it’s happy to lend. Credit scoring has always been a feature of all the platforms, whether they be ‘pure’ P2P or passive P2P. Someone, somewhere at the centre of the online marketplace needs to set the lending criteria and make decisions about who to lend to.

What about peer to peer? (Library of Things), Rated: A

In this week’s bonus episode co-founder Emma looks at the sharing economy, peer to peer lending, and explains why Library of Things have chosen to operate from a physical space.

Listen to the podcast here.

How Risky Is Borrowing Money Online Through Peer-to-peer Lending (FX Daily Report), Rated: B

It is almost true that borrowing money from traditional financial institutions is a thing of the past.

It has been observed that P2P online lending platforms are not the source of the problem or the risk. However, it seems to be the ease with which loans are available that causes the problems.

Online P2P lenders also offer student loans. It is very important to realize that student loans these days are available everywhere. But what is ultimately the truth is that the loans are burdensome. Any student that avails of such a P2Ponline student loan emerges as a graduate burdened with a heavy debt.

If an individual wants to apply for a P2P online loan, it is best to start with checking credit reports. It is a good idea to fix any errors that may be found on these reports. Otherwise, the interest rates may be hiked up. It is also a good idea to do some research prior to applying for the loan. It is worthwhile to find out as to which lender offers a lower rate of interest even if they fall outside the ring of online P2P lenders. Never decide on which loan to pick up by looking at the monthly amount to be paid. The total amount that you are going to repay and the time period of the repayment are the more important factors to be considered. This gives the total cost of the loan.

China

Big banks strike partnerships with technology companies as part of fintech wave (South China Morning Post), Rated: AAA

Bank of Communications, the nation’s fifth biggest lender, joined with Suning Holdings and its financial affiliate Suning Finance as strategic partners last week, the latest of the big five banks to ally with internet firms.

So far, all big-five banks, accounting for more than one-third of China’s banking assets, have allied with technology giants.

Industrial and Commercial Bank of China allied with e-commerce major JD.com for cooperation in sectors including fintech, retail financing, corporate credit and asset management. Agricultural Bank of China agreed to work together with dominant search engine operator Baidu. Bank of China and Tencent Holdings jointly set up a fintech lab, focusing on cloud computing, big data, block chain and artificial intelligence.

Earlier this month, mid-sized Industrial Bank and JD.com’s financial affiliate JD Finance launched a debit card in Beijing and most cities in affluent Zhejiang province.

China Life and Baidu to launch $ 1 billion internet fund (Reuters), Rated: AAA

China Life Insurance Group Co and Baidu Inc will form a 7 billion yuan ($1 billion) private equity fund, targeting internet and other technology investments, China Life’s listed arm said on Thursday.

The Baidu Fund Partnership will be capitalized by China Life through a special partnership, which will contribute up to 5.6 billion yuan, China Life Insurance Co Ltd said in a Hong Kong Stock Exchange statement.

Baidu, the Chinese language internet search provider, will contribute as much as 1.4 billion yuan.

Ant Financial’s “TechFin” vs JD Finance’s “FinTech” (ASEAN Today), Rated: A

Alibaba’s Ant Financial Services Group and JD Finance are at loggerheads in the Chinese, and increasingly, global e-commerce scene. In 2015, JD Finance recommended the use of “FinTech.” In December 2016, Ma Yun coined the ”TechFin” as a rebuttal, and as a show of thought leadership.

Ant Financial’s unveiling of “TechFin” shows the firm’s focus on building technology rather than financial products.

Critics believe there is not much difference between TechFin and FinTech. Critics believe Ant Financial coined TechFin to gain a foothold from the conceptual standpoint; a counteroffensive to JD Finance’s aggressive marketing of FinTech. This is inevitable considering “FinTech” as a term already achieved credibility within the finance and other related industries.

Ant Financial and JD Finance are more complementary than competitive

Onlookers see Ant Financial and JD Finance as longstanding rivals. JD.com’s recent sale of JD Finance for US$2.1 billion in cash was seen part of a deal to spin off its burgeoning finance arm and raise its game against Ant Financial.

Ant Financial focuses on the traditional model of the Internet while JD Finance focuses on product innovation, for a start. Each business model has its advantages.

Ant Financial also seeks to leverage on Ant Check Later (花呗), a virtual credit card, to open up a whole new road map for credit distribution in Internet finance. In contrast, JD Finance aims to boost user’s consumption through its products. Its Jingxiaodai (京小贷) appeals to merchants who need fuss-free and almost instant access to credit.

European Union

Klarna just posted some impressive half-year figures — profits soar by 138 percent (Business Insider), Rated: AAA

The Swedish e-invoicing giant posted 2,05 billion Swedish crowns ($254,2m) in revenue for the first two quarters of 2017. Meanwhile, operating profits jumped to 228 million ($28m) from last year’s 96 million ($11,9m), reports tech site Di Digital.

Yesterday, Breakit reported that the company is teaming up with Stripeto boost growth in the U.S.

Credit Suisse Eyes 2018 Launch for Blockchain Loans Platform (Coindesk), Rated: AAA

A group of banks led by Credit Suisse is eyeing the launch of a commercial platform for blockchain-based syndicated loans, according to reports.

The group involved finished the second phase of their testing in March.

Using smart contracts to reduce those turnaround times could increase the market’s appeal to potential lenders and investors, according to Aidoo.

Worldcore Payment Institution Announces ICO (Coin Idol), Rated: A

Worldcore announces an Initial Coin Offering (ICO), as part of their wider expansion plans.

The company envisions to become a worldwide reference for the financial tomorrow, by integrating its successful payment solution into the blockchain sector of economy.

Worldcore ICO starts on October 14 of 2017. In total, a maximum supply of one billion WRC tokens at $0.10 USD each, will be available for purchase.

Corlytics named by Allen & Overy in its regtech programme (Finextra), Rated: B

Magic Circle law firm, Allen & Overy, has named Corlytics as one of the eight companies selected to move into its Fuse programme. Fuse is a newly launched innovation space where its lawyers and technology firms team up to develop legal, regulatory and deal-related improvements.

International

Ten Fintech Conferences to Attend This Fall (Lend Academy), Rated: AAA

FinovateFall

When: Sept 11-14, 2017
Where: New York City Hilton Midtown
Link:  /> Discount code: F17FALLLAT

LendIt Europe 2017

When: Oct 9-10, 2017
Where: London
Link:  /> Discount code: LENDACADEMYVIP

American Banker’s Digital Lending & Investing

When: November 2-3, 2017
Where: New York, NY
Link: 

AltFi Global Summit

When: November 7, 2017
Where: Amsterdam
Link: 

Marketplace Lending & Alternative Financing Summit 2017

When: December 3-5, 2017
Where: Dana Point, CA
Link: 

This event is put on by the Opal Group and is the only west coast event this fall. This is its second year and while I did not attend last year I heard it was a good event with a focus on the investor side of marketplace lending.

Digital Banking – Old Wine in New Bottle? (Fintech Weekly), Rated: A

There was a time when digital banking was perceived as synonymous with online banking and mobile banking. Financial services industry, along with other sectors, is experiencing an explosion of digitization thanks to smartphones, tablets and access to affordable high-speed internet. The number of smart phone users is expected to equal the number of bank accounts in near future as all mobile users link their bank accounts to their smart phone and get onboard with mobile-based digital wallets and savings platform.

Given this, it is imperative to take a fresh look at whether digital banking means the same as it did a decade ago – both for banks as well as customers – especially since there does not seem to be a consensus on the definition of ‘digital banking’.

Customers today do not have the patience to navigate through multiple screens. They do not want to fill the same KYC details over and over for each product. Presenting paperwork at the branch to support an online application is a big no-no. They expect to resume the application they started on Smart phone on their home computer and may want to talk to the customer care executive on phone while doing that. They do not want to be bothered with cold calls and random sales pitches; they prefer to see only personalized and contextual cross-sell offers with direct purchase links. In short, digital customer today wants one-touch, one-click, personalized and integrated user experience across channels.

On the flip side, while customers enjoy the convenience of digital banking for routine tasks, they also want to continue using the branch when they need some face time with a seamless switch between digital and personal interaction. They do not want to forego the privilege of walking into the local branch despite being able to do all their banking via the web or smartphone.

Australia/New Zealand

Fintech startup shares $ 7m of investment (NZ Adviser), Rated: AAA

Since its launch in June, fintech startup Ilumony has reported more than $7 million in financial investments. Of the $7 million, it has charged no fees for advice on $1 million worth of customer KiwiSaver money.

India

Fintech lenders have new competition: Flipkart and Amazon (The-Ken), Rated: AAA

Though Flipkart launched in 2007, it was only in 2013 that e-commerce really took off in India. That was the year Amazon entered India through a marketplace model, and Flipkart too launched its own marketplace model.

From selling smartphones, books, and apparel to customers, the two of them now started offering warehouses, packaging, and logistics to sellers.

No Flipkart or Amazon for EzCred; this startup wants to pursue offline shoppers (India Times), Rated: A

When ecommerce companies like Flipkart and Amazon wanted to expand to the nooks and corners of the country, they borrowed the idea and recently started offering “No cost EMI” option on selected products. Taking a step further, you now have many fintech companies that have lined up on ecommerce platforms to offer loans to consumers.

Launched in January 2017, EzCred is an alternate lending startup which offers loans to consumers who walk into shop at offline stores.

“Offline is a much larger play than online. A majority of transactions are still done offline,” says Maheshwari.

The startup now has plans to roll out an app for customers to enable them to apply for loans directly. The platform has a credit assessment system which enables the startup to assess the borrowers’ repayment capabilities. This involves various data sources like the borrowers’ CIBIL score, bank statements, information provided by customers, which are then matched with the credit policy of EzCred.

India’s draft data protection law to hinge on user consent; will be ready only next year (Factor Daily), Rated: A

A draft data protection law, which is at the core of the Indian government’s stance that Aadhaar does not violate citizen privacy, will have user consent as its mainstay with a few exceptions.

The draft legislation is expected to be ready in about a year.

This was revealed in interviews with a member of the committee set up by the government to come up with the draft framework — B N Srikrishna, a former Supreme Court judge who is heading it, and a second person with knowledge of the committee’s thinking.

P2P lenders may be allowed to operate offline (The Hindu BusinessLine), Rated: A

In a bid to impart vibrancy to the fledgling peer-to-peer (P2P) lending space and also further the cause of financial inclusion, the Reserve Bank of India is believed to be looking at allowing players in the sector to have an offline presence besides an online one.

On-the-ground presence may help the platforms reach out to those who are currently not being served by banks/non-banking finance companies and also help break the vice-like grip of money lenders on local lending, especially in rural areas and small towns.

Asia

Why e-commerce firms could replace banks as the region’s leading lenders (Southeast Asia Globe), Rated: A

Peer to peer lending (P2P lending) first entered the wider public’s consciousness when it rose from the ashes of the global financial crisis in 2007. By cutting out traditional intermediaries, such as banks, the lending platforms, were able to offer borrowers lower interest rates and lenders higher returns. They were populist alternatives to the casino capitalism that had brought Wall Street to its knees.

According to a 2015 report by Deloitte, in Indonesia, Malaysia, the Philippines, Singapore and Thailand there exists “a clear disparity between what SMEs want and expect from banks and what the banks can deliver”. In Indonesia, the report found as few as 6% of SMEs were able to access bank loans.

Recent statistics from the Asian Development Bank show that the situation is similar in Myanmar, which the bank says suffers from a $2 billion shortage in available credit, a shortfall that Brad Jones, CEO of Wave Money, attributes to the country’s excessively cautious banking regulations.

According to data from Singapore-based venture capital fund Dymon Asia Ventures, less than 0.1% of loans in the region currently originate from P2P lending sources, compared with 10% in China and 2-3% in the UK and US. There is, therefore, sufficient growth potential for the Southeast Asian P2P lending market.

Peer-to-peer lending bears risk of bad debt (The Jakarta Post), Rated: A

Despite the rising trend of peer-to-peer (P2P) lending in Indonesia, an economist believes that online-based businesses have increased risk of bad debt if the lenders ignore the importance of supervision.

The credit application mechanism in P2P lending is risky. There is no integrated costumer blacklist data-base like in the banking industry, said Samuel Aset Manajemen economist Lana Soelistianingsih said in Jakarta on Friday.

Moreover, she said P2P lending offered annual interest rates of up to 18.5 percent to investors, adding that such aggressive offers could increase the risk of business failure.

Canada

FLINKS PARTNERS WITH MERCHANT ADVANCE CAPITAL (Betakit), Rated: B

Flinks, a financial API for banks and credit unions, announced a partnership with Merchant Advance Capital, an online lender for small and medium-sized businesses.

Merchant Advance Capital partnered with Flinks to reduce loan approval time for its customers. Flinks will allow Merchant Advance Capital to connect its app directly with customers’ banks, allowing the company to validate account ownership, account balances, and transaction histories.

Authors:

George Popescu
Allen Taylor

Friday July 21 2017, Daily News Digest

RateSetter

News Comments Today’s main news: SoFi CEO: why Etherium is worth more than Bitcoin. Affirm has 1,000 retail partners. Wells Fargo joins digital mortgage revolution. AutoGravity has half a million users. LendInvest launches retail bond offering. N26, Lydia support Apple Pay in France. Borrowell raises $57M in Canada. Today’s main analysis: RateSetter moves to protect users. Today’s thought-provoking articles: Takeaways from […]

RateSetter

News Comments

United States

United Kingdom

China

European Union

International

Australia

India

Canada

News Summary

United States

Why Ethereum Is Much More Valuable Than Bitcoin (Fortune), Rated: AAA

As lending startup SoFi expands from student loans to full-service banking, it is also venturing into one of the trendiest areas among big Wall Street banks at the moment: blockchain.

An upstart cryptocurrency, Ethereum’s price has surged so dramatically in recent months that it now commands nearly as much market share as Bitcoin itself. Driving that rise is excitement about the way Ethereum allows its blockchain technology to be used to develop myriad other projects, as Cagney described.

In particular, SoFi, which is valued at more than $4 billion, is exploring a way to use blockchain to revolutionize title insurance, a standard requirement for many home buyers.

How SoFi is developing its financial services offerings (Tearsheet), Rated: AAA

SoFi has always been as much about culture and brand before product and tech. Now that it’s postponed its initial public offering in December (it raised $500 million in private funding shortly after) it has the luxury of time to develop its financial services offerings.

“While we run positive contribution margins around our credit products… it pales in comparison to what the lifetime value of that relationship is worth,” CEO Mike Cagney said at Fortune’s Brainstorm Tech conference in Aspen, Colorado Wednesday morning. “Not having that deposit product means that the bank, if it has that deposit product, is going to constantly try to cross sell [customers] and pull them back to the bank. That introduced this vulnerability in the business.”

There are also no branches planned for the non-bank financial services company, he confirmed, citing that in the 40 SoFi events he’s hosted and attended almost all other attendees have said they haven’t walked into a branch in the last five years, he claims.

SoFi is also in the exploratory stages of how to use alternative data like cell phone data for credit scoring as well as distributed ledger technology for title insurance.

U.S. banks are valued at between $2,000 and $100,000 per customer. SoFi currently has 250,000 members today and anticipates 500,000 by end of year. Cagney said it’s not unrealistic to get two million customers at “$25,000 to $50,000 per customer, which gets us in the $50 to $100 billion valuation range.”

Affirm now has 1,000 retail partners (TechCrunch), Rated: AAA

Today Affirm has announced it has more than 1,000 merchants signed up to offer its financing options at checkout, helping to reduce the friction around making large purchases and, by extension, increasing sales for its partners.

While promoting its most recent milestone, Affirm is also trying to get across the message of how it’s different — and frankly, better — than point-of-sale financing options of the past. As a result, the company is pushing a marketing campaign around “honest finance” to enumerate the ways in which Affirm helps consumers by providing more access and better terms for big-ticket items.

Affirm Challenges Retailers, FIs To Practice ’Honest Finance‘ (PYMNTS), Rated: AAA

“Finance is pretty broken.”

So started Affirm’s Co-Founder and CEO Max Levchin’s remarks at his firm’s first-ever AFFIRMation conference for its retail partners in San Francisco yesterday.

He’s on a mission to fix a system that he believes doesn’t really serve anyone’s long-term interest nearly as well as it could or should. When it comes to the extension of credit, Levchin says that customers often lose out, retailers end up with angry customers who frequently feel ripped off and FI’s alienate their customer base.

Broken by the Numbers

“Sixty percent of Americans fear credit cards,” Levchin noted.

“[Most consumers] think getting involved with using a card will cost them a lot more than they bargain for. A third fear they will overspend. And they are right; that’s what happens, and the industry does very little to help them create necessary guardrails.”

Bad Faith

In fact, Levchin noted, the industry doesn’t want to create guardrails, because a lot of players have literally built products that bet against the consumer.

Deferred interest — the “dirty little secret” of consumer credit that bears a retailer’s logo and accompanies those too good to be true offers — means that even one day late on a payment 59 months into a 60-month loan, means interest gets calculated back to day one.

Bad Long-Term Thinking

Last quarter, on the occasion of its one millionth consumer installment loan, Affirm reported a 75 percent increase in purchase value on purchases made using Affirm, a 20 percent lift in POS conversion and a repeat rate of 25 percent of borrowers returning.

And Affirm’s net promotor score: It’s 82, slightly trailing Starbuck’s 85, but not by much.

Affirm is looking to retailers across the country to join in pledging to abandon “predatory consumer credit practices” and has also challenged the nation’s financial institutions to do the same.

Nation’s largest lender finally hops on digital-mortgage bandwagon (Mortgage Professional America), Rated: AAA

Wells Fargo CEO Tim Sloan said that the bank expects to launch a digital mortgage application tool by the end of next year, according to a report by the Charlotte Business Journal. Sloan made the announcement during an earnings call on Friday.

Sloan told investors that Wells Fargo doesn’t currently have as many online loan products as it would like, the Charlotte Business Journal reported. He said that employees are currently testing the online mortgage tool, and that the bank plans to run a test with customers this year before a full rollout in 2018.

AutoGravity Now Has Over 500,000 Users (Crowdfund Insider), Rated: AAA

AutoGravity says it has now surpassed 500,000 in just one year. AutoGravity is an App-based online lender targeting the auto financing space. Pick the car and request a loan all on your smartphone. It’s that simple.

Additionallly, AutoGravity shares that more than $500 million in financing has been requested through the AutoGravity platform.

Fundrise Officially Announces New eFunds (Crowdfund Insider), Rated: A

Fundrise, a leading online marketplace for real estate investing, has officially announced the availability of their new eFunds.

The “featured” eFund starts with the Los Angeles market. The LA eFund aims to provide housing for the underserved millennial homebuyer.

Fundrise has also launched a DC eFund.

PayPal Completes Acquisition of TIO Networks (BusinessWire), Rated: A

PayPal Holdings, Inc. (NASDAQ:PYPL) and TIO Networks Corp. (TSXV:TNC) today announced that PayPal has completed its previously announced acquisition of TIO Networks. In accordance with the terms of the Arrangement announced on February 14, 2017, PayPal acquired all of the outstanding shares of TIO for $3.35 CDN ($2.64 USD) per share in cash or an approximate $302 million CDN ($238 million USD) equity value.

LendKey Announces Series C Funding (PR Newswire), Rated: A

LendKey, the leading lending-as-a-service solution for banks and credit unions, today announced $13 million in Series C funding, $8 million in equity and $5 million in debt financing. North Atlantic Capital, based in Portland, ME, led the round with participation from each of LendKey’s existing investors including DFJ, Updata Partners, Gotham Ventures, and TTV Capital.

The Series C funding will enable the company to expand its services and staffing. LendKey plans to grow its regional office in Cincinnati, Ohio and expand its account development and sales teams.

Mobile savings and investment service Acorns is on track to do 1 billion trades in 2017 (TechCrunch), Rated: A

The company now boasts more than 2 million investment accounts (with 600,000 opened in 2017 alone) and is on track to do 1 billion trades in 2017 through the proprietary broker-dealer that it created.

Still, the numbers were impressive enough to attract Bain Capital Ventures to commit another $35 million to the company, bringing Acorns total Series D financing to $70 million. Previous investors PayPal, Greycroft Growth Fund, e.Ventures Growth Fund, NYCA, Capital Group, Rakuten, Point72 and Ashton Kutcher’s Sound Ventures also participated in the round.

Unifund CEO Consumer Credit Caution: “Time To Stop Getting Lost In The Averages” (PYMNTS), Rated: A

Fifty years ago, when customers thought about using credit, it was in the context of buying something expensive that they really needed — a refrigerator, a washer/dryer, a car — with the intention to pay off that loan balance quickly.

Credit as a Currency

For super-prime customers — those for whom credit cards are basically payment cards because those consumers pay them in full monthly and never accrue any interest — Rosenberg said that card “borrowing” is an incentive-driven system. The customer gets cash back, rewards points, airline miles, hotel stays — and those incentives have very successfully attracted consumers to use them to buy things. Rosenberg noted that for a large segment of consumers, buying something without using a credit card is almost a foreign concept because the card offers them access to a more valuable form of currency.

But a more artificial intelligence-driven, machine learning system, Rosenberg said, will allow those customers who are locked out of the credit market today to be seen more clearly by creditors, and to be given incentives that are more explicitly tailored to their wants.

A Better Subprime Experience

The problem with the categorizations of “prime” and “sub-prime” borrower is that they are somewhat less hard and fast than people like to think they are. Rosenberg explained that there aren’t simply two classes of buyers — those who pay their bills and those who don’t.

But, Rosenberg said, the truth is most people pay bills in the order of absolute necessity, and when things get bad financially because a job was lost or an economic catastrophe has happened, that order gets very utilitarian. Car payments get paid, because car companies have no sense of humor and will repossess a car. But eviction from a house takes longer, which means a person with a more pressing need would rather skip their mortgage for a few months than not buy medication they need. And credit card bills? Those quickly fall to the bottom of a pile.

Bank of America Unveils New Mobile Capability to Apply for Business Advantage Term Loans and Credit Lines (BusinessWire), Rated: A

Bank of America today announced enhancements to its mobile app experience that add on-the-go convenience to small business banking and lending. With the suite of updates, Bank of America small business clients can now apply for a Business Advantage Term Loan or Business Advantage Credit Line from any Bank of America digital platform – including the Bank of America mobile banking app, and bankofamerica.com.

More than 1.3 million small business clients are active users of the Bank of America mobile banking app, an increase of 14 percent over the past year.

December 2016 Fed Rate Hike: Most Consumers Fared Well, But It’s a New Dynamic for Consumers and Lenders Alike (TransUnion), Rated: A

TransUnion (NYSE:TRU) released an analysis today showing that most borrowers were able to absorb their increased monthly payment obligations after the Federal Reserve Board rate hike last December.

TransUnion’s study identified these 63 million consumers because they carried debts for which the minimum monthly payment due was tied to the market interest rate, such that a rise in rates from the December rate hike could cause an increase in payments required. TransUnion used its CreditVision® aggregate excess payment (“AEP”) algorithm, which incorporates monthly payments from mortgages, credit cards and other debt obligations, to identify 10.6 million of these consumers who were at elevated risk of not having the capacity to absorb a rate increase of 0.25%.

Banks That Don’t Invest in Technology Risk Falling Behind Permanently (Forbes), Rated: A

Wack points to a new study of mortgage lending, Fintech, Regulatory Arbitrage, and the Rise of Shadow Banks, co-written by business school professors at the University of Chicago, Columbia Business School and Stanford Graduate School of Business.

The researchers found that some banks find themselves trying to play catch-up to competitors that long ago allowed borrowers to apply for mortgages online. The institutions that have been slow to adopt online applications for mortgage lending are losing market share to their competitors. Meanwhile, non-bank lenders have grabbed a substantial piece of the market; so-called “shadow banks” lend money but don’t use bank deposits to finance the transactions. They now write 38% of all home loans — almost triple their share in 2007. Further, the shadow banks now originate three-fourths of all loans to low-income borrowers insured by the Federal Housing Administration (FHA).

I’m a banker and I say let SoFi into the club (American Banker), Rated: A

As the president of a small community bank, I feel the need to respond to certain misleading comments that have been made by banking industry representatives and community activistsrecently in opposition to the Social Finance application to charter an industrial bank.

I feel the need in particular to respond to comments as reported in the press by a representative of the Independent Community Bankers of America, an industry trade association I support. In essence, this individual stated opposition to SoFi’s recent application based on his assertion that industrial banks don’t follow the same rules as other banks. This assertion is not accurate.

The banking industry is evolving. Doesn’t it make more sense to focus on how to evolve with it rather than how to reduce competition?

Ga. banks less stressed, but lending slowdown a worry (myAJC), Rated: A

Across the nation, bank lending has slowed for most types of loans since the presidential election. Business lending declined in the first quarter and is still crawling at close to its slowest pace since 2011, according to Federal Reserve data.

Overall loan growth is a bit better, but across the board, lending has slowed for debt ranging from auto loans to credit cards to financing for factories, office buildings and small businesses, according to the Fed.

That has made for stiff competition for bankers hunting for loan customers, and because interest rates are still low, banks’ profit margins on their total loan portfolios remain tight.

Last week, Columbus-based Synovus Corp., the second largest bank headquartered in the state, with $31 billion in assets, said its total loans grew by $314 million in the second quarter, up 5.2 percent compared to the first quarter. Synovus banked a $73 million profit during the quarter, 27 percent higher than a year ago.

Synovus’ consumer loans grew at a 16 percent annual pace during the recent quarter, accounting for $2 out of $3 of Synovus’ new loans.

Credit Risk Startup James Closes $ 2.7M Funding Round (Finsmes), Rated: A

James (formerly known as CrowdProcess), a New York-based credit risk startup, closed a $2.7M funding round.

The round was led by Gaël de Boissard with participation from Henry Richotte and BiG Start Ventures. As a result of this deal, Mr. de Boissard has joined James’s Board of Directors.

Investors Approach Investing Differently Across Generations (Plan Adviser), Rated: A

The Dreyfus study found that investors tend to take different approaches to investing based on age. Sixty-one percent of investors 55 years of age or older indicated they have not, or will not, reevaluate their investment approach in today’s existing investing environment. Meanwhile, 65% of Millennials, defined in the study as people between the ages of 21 and 34, had already evaluated their investment approach at the time of the survey. These actions are reflected among 51% of those between the ages of 35 and 54, as well as for 39% of those at least 55-years-old.

OCC FinTech Charter in Trump Administration Cards (JD Supra), Rated: A

In his remarks to the Exchequer Club in Washington, D.C., President Trump’s Acting Comptroller of the Currency, Keith Noreika, came strong to the mic, roundly stating the charter is a “good idea” and flatly saying “yes”, the OCC has the authority to grant the FinTech charter in the face of legal challenges by the New York Department of Financial Services and the  Conference of State Bank Supervisors.

Here are three other takeaways from the Acting Comptroller’s remarks:

  1. The FinTech charter promotes the dual banking system.
  2. The OCC is having informal meetings with interested FinTech companies.
  3. Existing OCC bank charters may be an option now.

Access Anytime, Anywhere Powers Better Consumer Lending (Blend), Rated: A

That’s why we’re harnessing the power of technology to bring consumers closer to their loan officers (LOs) and launching Blend Mobile, the first native mobile application allowing LOs to manage their businesses, including borrower requests and applications, anytime and anywhere.

Robos are offering SRI, so shouldn’t live advisers? (Investment News), Rated: A

“SRI has been one of the most consistent personalization requests we’ve had,” said Dan Egan, Betterment’s director of behavioral finance and investments. “It allows people who want to buy a better world to put their money where their mouth is.”

The nation’s largest robo adviser, Vanguard Personal Advisor Services, which has $80 billion in assets, offers clients a proprietary fund on its digital platforms that tracks a benchmark that screens companies on social, human rights and environmental criteria. Schwab Intelligent Portfolios, which has $19.4 billion in AUM, does not offer an SRI option.

Mastercard Enhances Artificial Intelligence Capability with the Acquisition of Brighterion, Inc. (BusinessWire), Rated: A

Mastercard (NYSE:MA) today announced it has entered into an agreement to acquire Brighterion, Inc., a leading software company specializing in artificial intelligence. This acquisition will further expand its suite of capabilities that deliver an enhanced customer experience and security.

Commentary on the Reintroduction of the Protecting Consumers’ Access to Credit Act (H.R. 3299) (Factory Email), Rated: B

Passing the Protecting Consumers’ Access to Credit Act into law is critical for the consumer lending industry. We are pleased that forward looking legislators aim to remove the regulatory and capital markets uncertainty caused by court cases such as Madden vs. Midland.

Lead by the Second Circuit Court’s decision, other state regulators are attempting to erode a core tenet of our federal banking system. “Both the ‘valid when made’ doctrine and the exportation of usury rate have facilitated nationwide lending for over a century by allowing the rate of interest on certain loans to remain unchanged after transfer of the loan,” said Gilles Gade, President and CEO of Cross River, an FDIC insured New Jersey State chartered bank and leader in marketplace leading origination. “The ability for banks to sell loans to non-banks is vital to the capital markets ecosystem in general, and to consumers in particular who are getting hurt as access to credit is made more difficult and more expensive. The perenniality of this tenet hinges on a healthy secondary market, increased liquidity, and the securitization of debts ranging from mortgages to credit cards, all of which help facilitate emerging innovations and provide capital that makes credit more accessible and affordable for millions of Americans. We applaud the bipartisan reintroduction of this bill and look forward to its expeditious review and passage.”

Comment by William M. Bell of Factory.

LendingTree Announces Promotion of Sam Mischner to Chief Sales Officer and Head of Mortgage (PR Newswire), Rated: B

LendingTree® (NASDAQ: TREE), the nation’s leading online loan marketplace, today announced that Sam Mischner has been promoted to Chief Sales Officer and Head of Mortgage.  Previously, Mischner served as SVP, Sales and GM, Mortgage.

United Kingdom

Fintech lender LendInvest to launch retail bond offering (AltFi), Rated: AAA

LendInvest, a leading alternative lender in the property space, is launching a retail bond. The bond will offer investors a fixed rate of 5.25 per cent, due 2022.

It is expected to be listed on the London Stock Exchange once the subscription period closes. LendInvest is targeting an initial raise of £50m, and the company expects this to be the first of a number of bond issues over the coming years. The bond has a minimum investment amount of £2,000.

Interest from the bond will be paid semi-annually on 10 February and 10 August each year. The net proceeds will be used to fund the origination and/or purchase of loans which satisfy the company’s eligibility criteria.

RateSetter moves to protect its investors (Business Insider), Rated: AAA

UK marketplace lender RateSetter has given more details on a series of interventions it has made to protect the company’s 50,000 retail investors from adverse consequences related to its lending decisions in the last two years.

Here are the three measures RateSetter has now explained in greater detail:

  • Buying two subsidiaries in a motor finance company. 
  • Wholly buying Adpod, an advertising company. 
  • Ending its partnership with George Banco, a consumer lending platform. RateSetter is withdrawing from the partnership, remaining only as a passive investor, after reviewing the strategy more closely. RateSetter added that George Banco is still repaying its £32 million ($42 million) loan.

Monzo gently rolls out current account (Banking Tech), Rated: A

The bank, which received its full UK banking licence in April, says it’s been using the current account internally and today (17 July) is now inviting some of its customers to join and “help put it through its paces”.

Its aim is to offer a current account to all existing customers by the end of the year. Towards that goal, over the next three months it will roll out between 10,000 and 20,000 current accounts to existing customers. As you probably guessed, users can register their interest on its site. Investors get priority access.

TransferWise’s cofounders have swapped the CEO role between themselves again (Business Insider), Rated: A

Kristo Kaarmann is taking over from Taavet Hinrikus as the boss of the international money transfer business, according to a blog post on Medium that was written by Hinrikus and published on Tuesday.

Next-gen Credit Scorer Aire Raises $ 5m in Series A Funding from Deep-tech VCs (Fintech Finance), Rated: A

Aire today announces the closing of a $5m Series A funding round, led by Sunstone Capital alongside White Star who previously led Aire’s Seed round in 2016.

Aire today announces the closing of a $5m Series A funding round, led by Sunstone Capital alongside White Star who previously led Aire’s Seed round in 2016.

The Lines Are Blurring Between Alternative, Traditional SME Finance (PYMNTS), Rated: A

Alternative lending has shifted from a competitor of traditional FIs to a collaborator, often lending a digital hand to banks in need of upgrading their systems to provide faster, more agile financing to SMEs. A new report from the state-backed British Business Bank (BBB), however, suggests alternative lenders are becoming an increasingly important part of its operations in a different way, highlighting how the lines between alternative finance (AltFin) and traditional finance continue to blur.

The annual report said the BBB facilitated more than $930 million in SME loans last year, and, according to the data, every year more of that money is landing at small businesses thanks to collaboration with alternative lenders like RateSetter and Funding Circle. According to reports, in 2014 the percentage of BBB funds that went through a P2P platform was 79 percent; in 2015, it was 90 percent.

Permira Joins Payments Rush by Buying Into Sweden’s Klarna (U.S. News), Rated: A

Private equity group Permira has bought a stake of at least 10 percent in payments firm Klarna, one of Europe’s most highly valued tech startups, the companies said on Friday.

Permira will acquire the Klarna stake from existing shareholders General Atlantic and DST Global, and the Sweden-based firm’s co-founder Niklas Adalberth.

General Atlantic and DST Global will cease to be shareholders in Klarna after the deal, they added in a statement.

Bank of England opens up payments systems to spur fintech (Tribune), Rated: A

The Bank of England has widened access to Britain’s interbank payments system to increase competition from new fintech firms in the financial system, where the “Big Four” high street banks have long dominated.

The changes, which in practice will come into effect in 2018 once legislative changes have been completed, will enable such non-bank payments services providers (PSPs) to compete better with banks, the BoE said.

There is no ‘existential crisis’ challenge for banks from fintech, HSBC’s digital chief says (CNBC), Rated: A

The idea that big banks are facing an “existential crisis” from financial technology (fintech) challengers is “overblown”, the digital chief of HSBC told CNBC.

Crowdfunding: the stable option in 2017? (The C Suite), Rated: A

Research conducted by Beauhurst on 2016 UK funding deals for non-listed high-growth businesses concluded that crowdfunding outperformed private equity and venture capital. Whilst 2016 saw a decline in the total number of deals financed by equity investors, activity on the leading crowdfunding platforms increased. Crowdcube (launched in 2011) and Seedrs (launched in 2012) accounted for 21% of such equity investment in the UK last year.

According to Beauhurst’s research, Q1 of 2017 has seen a small increase of 2.7% in equity funding in non-listed, high-growth companies. However deal numbers are still 6.72% lower than the same quarter in 2016. The growth has primarily been driven by crowdfunding platforms, with an 11% growth in deal numbers.

Boost for UK fintech as Receipt Bank secures huge $ 50 million in funding (Business Insider), Rated: A

Accountancy software startup Receipt Bank has raised $50 million (£38.4 million) in a Series B funding round led by a New York venture capital firm.

Perfect storm for Scots property borrowers (Scotsman), Rated: A

By 2018, loans from alternative finance schemes such as crowdfunding, peer-to-peer lending and private debt, will be as cost competitive as the retail banks, blowing the finance market wide open for loans in the £500,000 to £10 million range.

Naturally, because alternative lenders such as Funding Circle, The Route and Folk to Folk are settling loans for higher loan-to-value (LTV) ranges (between 60 and 75 per cent), they absorb the risk by charging higher interest on both short- and medium-term loans – currently between 6 and 12 per cent a year.

LTVs in retail banking property loans are settled at around 55 to 60 per cent, but they offer lower loan costs of between 2.5 and 5 per cent. This is all set to change in 2018 – with increased availability of finance for lenders, such as innovative finance ISAs (IFIsa), the cost of capital is set to fall and this will encourage alternative lenders to reduce their interest rates.

Zopa’s Home Improvement Index Reveals: A New Kitchen Can Deliver Over 50% ROI (Crowdfund Insider), Rated: A

On Wednesday, peer-to-peer lender Zopa released its latest Home Improvement Index that indicated a quart of British homeowners looking to improve their homes this summer are choosing to renovate their kitchens and are seeing a 51% return on investment as a result. According to research, 25% of British homeowners undertaking a home improvement are opting for a new kitchen, with the renovation boosting the value of a home by an average of 10%.

Zopa noted that the research found that the average home improvement would increase the value of a home by 9% or nearly £24,000 (£23,837) – based on homeowner’s estimates. The average return on investment was 50%, based on the total amount spent by homeowners.

Opinion split on best P2P marketing techniques (P2P Finance News), Rated: B

Property P2P platform Lendy has recently announced sponsorship of the Cowes Week sailing regatta, while business lender Ablrate has been announced as a sponsor of the PGA EuroPro Tour’s £100,000 Shoot-Out competition.

Other firms such as RateSetter have used adverts on the London Underground and Crowdstacker has run adverts in print publications, while Zopa and Funding Circle have used TV campaigns.

But Frazer Fernhead, founder and chief executive of The House Crowd, prefers to invest in digital marketing.

China

Yirendai Limited: A Growth Play At Deeply Discounted Valuations (Seeking Alpha), Rated: AAA

The ADR has returned a solid 250%+ in a year and a half since then. In comparison, Alibaba stock is up by 83% while NetEase is up by 16% and JD.com has risen just 27.5%. In other words, Yirendai has been the best performing Chinese stock/ADR ever since the company was listed in the US.

Yirendai reported quarterly revenue of $148.42 million for Q1 2017, which grew 75% year-on-year. On the earnings front, the company reported earnings per ADR (EPADR) of 84 cents, a 147% improvement over 34 cents EPADR in Q1 2016. On a trailing twelve month (NYSE:TTM) timeframe, the revenue has grown from $265.2 million in Q1 2016 to $544.6 million in Q1 2017, a 105% year-on-year growth.

We believe that, based on Yirendai’s earnings history and the historical valuation multiples, the stock should easily trade in the $43.4 – $57.7 range, which represents a 65% upside at the higher end.

European Union

N26 and Lydia announce Apple Pay support in France, but major banks are still missing (TechCrunch), Rated: AAA

Apple Pay hasn’t really been a major success in France so far. France’s biggest banks still don’t plan to support Apple’s payment service. But two companies announced today that they were going to add Apple Pay support before the end of the year — Lydia and N26Crédit Mutuel Arkea’s banks also recently announced that they were working on that feature as well.

Crowdfunding and Crowdlending (Soundcloud), Rated: A

Get a unique insight into what crowdfunding and crowdlending are and find out how you can participate in it – either as an entrepreneur or as an investor. Responsible for crowdfunding in DNB, Lars Marthinsen, and CEO of Kameo, Sebastian Martens, are guests at #pengepodden .

International

Finstar commits $ 150m to fintech investment (Finextra), Rated: A

Private equity outfit Finstar Financial Group is planning to pump $150 million into fintech startups over the next five years.

The money will be used to buy stakes in promising fintech startups in Europe, Latin America, Southeast Asia and South Asia, as well as on research and development within portfolio companies.

Baloise invests in insurtech company Trov (Baloise), Rated: A

Baloise is investing in the Californian insurtech company Trov. The start-up offers on-demand insurance for personal items and has already launched in the UK and Australia, and will roll out in the U.S. later this year. For Baloise, this is the first investment arising from its partnership with Anthemis.

Baloise’s investment is part of the Series D financing secured by Trov in April 2017.

Australia

Factor in the robo-advice (The Australian), Rated: A

The disruption is well under way in the US, where two giant companies – Betterment and Wealthfront – have emerged, each with a valuation of more than $5 billion. In recent months Betterment has seemed to outpace Wealthfront in terms of size and growth. Betterment, which has cheaper services, now boasts a client list of 188,000 while Wealthfront has 90,000.

ANZ has put its $4.5 billion wealth advice unit on the block, in a move that followed UBS’s decision to sell its wealth management arm in Australia a year ago. And Platinum Asset Management, the one-time king of specialist overseas fund managers in the local market, has announced a dramatic cut in its fee charges.

In Australia, the SMSF Industry Association tacked a robo-advice questionnaire onto one of its recent surveys and found that 18 per cent of its members – higher than in the general population (13 per cent) – would be willing to try robo services.

Online Lender Prospa is NSW State Winner in 2017 Telstra Business Awards (Crowdfund Insider), Rated: B

Prospa, an online lender to Australian small business, has been awarded the 2017 Telstra New South Wales Medium Business Award in the 2017 Telstra Business Awards.

Prospa said it was the first Fintech company to be awarded the accolade.

India

How Fintech Revolution Is Making Way For A Potential $ 5 Bn Online P2P Lending Empire In India (Inc42), Rated: A

Currently, at a nascent stage, the P2P lending landscape in India is also poised to grow into a $4 Bn-$5 Bn industry by 2023. The domain’s origin actually dates back to 2012, when the first peer-to-peer lending company i-Lend was launched. At present, the P2P lending space is populated by more than 30 players including Faircent, LendBox, LenDenClub, IndiaMoneyMart, Monexo, Rupaiya Exchange, LoanBaba, CapZest, i2iFunding and many more.

One factor that has played an integral role in the rise of an alternative fintech industry is demonetisationinstated on November 8, 2016. Post the ban on INR 500 and INR 1,000 notes, bank deposits underwent a discernible slowdown. Loans to SMEs and MSMEs reached an abrupt halt, forcing many businesses to seek other methods of financing. Last year, for instance, around 34% of P2P borrowers were actually business owners looking to expand without having to rely on banks.

Singapore Based Bridge Data Centres Looks To Pour $ 500 Mn Into India (Inc42), Rated: B

Bridge Data Centres is looking to invest $500 Mn in India over the next two years. As per reports, the investment will enable the Singapore-based data centre outsourcing (DCO) company to gain a stronghold of the country’s fast-growing market for data centres.

In June 2017, Alibaba revealed plans to set up two new cloud data centres in India and Indonesia, in an attempt to strengthen the company’s computing resources in Asia. Earlier in January 2017, US-based data storage and management firm NetApp launched its Global Centre of Excellence in Bengaluru, as part of a $155 Mn (INR 1,000 Cr) investment. In December last year, Amaravati-headquartered Pi DATACENTERS raised $23 Mn from Epsilon Venture Partners. It was reported that the funds would be used to roll out state-of-the-art data centres across India.

Multinational alternative investment firm Bain Capital recently infused $10 Mn in Bengaluru-based consumer leasing startup RentoMojo has raised $10 Mn in Series B funding round led by Renaud Laplanche. Existing investors Accel Partners and IDG Ventures also participated in the round.

Because the construction and maintenance of data centres is a capital-intensive activity, an increasing number of businesses in India are  enlisting the help of data centre service providers.

Canada

Borrowell raises $ 57M in New Funding to Expand Credit Education and Lending (GlobeNewswire), Rated: AAA

Financial technology company Borrowell announced today it has secured $12 million (CAD) in equity funding and $45 million in new credit facilities. The Series A equity round is being led by Portag3 Ventures LP, Equitable Bank and White Star Capital, with participation by FirstOntario Credit Union and other new and existing investors, and brings the company’s total equity financing to $16.7 million. The credit facilities are being provided by Concentra and FirstOntario Credit Union for the purpose of funding ‘one click’ loans to prime consumers. This latest round of funding will allow Borrowell to provide free credit information and loans to more people.

More than 300,000 Canadians have a Borrowell account, with thousands more signing up each week.

Authors:

George Popescu
Allen Taylor

Tuesday April 25 2017, Daily News Digest

UK digital lending

News Comments Today’s main news: VantageScore to include trending data or excessive credit capacity. Patch Homes exits beta, raises $1.5M. Chinese industry news. Today’s main analysis: The debate over U.S. fintech regulation. UK digital lenders can grow with more tech innovation. Today’s thought-provoking articles: FC lending impact, borrower stories. United States VantageScore to include trending data or excessive […]

UK digital lending

News Comments

United States

United Kingdom

International

China

India

Asia

News Summary

United States

Major changes coming to how your credit score is calculated (CNBC), Rated: AAA

The math behind your credit score is getting an overhaul, with changes big enough that they might alter the behavior of both cautious spenders as well as riskier borrowers.

The new method is being implemented later this year by VantageScore, a company created by the credit bureaus Experian, TransUnion and Equifax. VantageScore handled 8 billion account applications last year, so if you applied for a credit card, that score was likely used to approve or deny you.

Using what’s known as trended data is the biggest change. The phrase means credit scores will take into account the trajectory of a borrower’s debts on a month-to-month basis. So a person who is paying down debt is now likely to be scored better than a person who is making minimum monthly payments but has been slowly accumulating credit card debt.

An important metric in calculating credit scores has been the portion of their available credit people are actually using. A person with $5,000 in credit card debt with a $50,000 limit across several cards could score better than someone with $2,000 in debt on a $10,000 limit because of that ratio.

But VantageScore will now mark a borrower negatively for having excessively large credit card limits, on the theory that the person could run up a high credit card debt quickly.

Taking civil judgments, medical debts and tax liens out of the equation comes after a 2015 agreement between the three credit bureaus and 31 state attorneys general.

People with those items on their credit reports now could see a bump of as much as 20 points. But it won’t help much if they also have negative marks like delinquencies and debts that have gone to collection.

Mortgages, though, won’t be affected.

An obscure regulatory debate has put the entire U.S. fintech community on edge (TechCrunch), Rated: AAA

An obscure request for comments on regulatory standards, released by the Office of the Comptroller of the Currency (OCC) last March, has since evolved into a complex turf war between the states and Washington, DC.

The debate centers around a proposal made in December by Thomas J. Curry, the Comptroller of the Currency, in which the OCC details a program for fintech companies to apply for charters as “special purpose national banks.”

Though fintech can still be thought of as a relatively young industry, it is growing quickly enough that it may soon determine how most people save, exchange and invest their money. This proposal comes at a time when the world — from the U.K. to Germany to India to Korea — is evaluating what kind of guard rails the fintech sector needs.

With this in mind, the OCC wants to take the first step to create a uniform, nationwide set of standards for fintechs. But what should have been an uncontroversial first step instead unearthed a slew of objections from a complex web of stakeholders. These parties quickly raised concerns about stifling innovation, overstepping the limits of federal authority and understanding the nuances of fintech, among many others. At the very heart of this battle is the question of what fintech really is. And as evidenced by the debate, that question is much harder to answer than it may seem.

Financial malpractice is just as pernicious today. In its first five years, from 2011 to 2016, the new Consumer Financial Protection Bureau (CFPB) received more than 900,000 consumer complaints about financial services providers.

Fintechs themselves have not been free from fraud and scandal. The publicly traded TrustBuddy, based in Sweden, was forced into bankruptcy for massive misappropriations of investor funds. Cincinnati-based SoMoLend came under similar fire for misleading investors. And China’s peer-to-peer lending sector has spent years battling its way out of the shadow of massive fraud that has tainted the industry.

Weirdly enough, fintech companies, which will arguably be the most impacted by the charter, have been relatively quiet. The strongly vocal opponents of the charter have been an alphabet soup of state regulators, who view this move as a broad overreach of federal authority:

  • New York: DFS Superintendent Maria T. Vullo in January released a stern public comment letter to the OCC. In it, she argued that banks with national charters don’t have to abide by some state lending rules, and this charter could allow payday lenders to sign up for protections meant for tech companies.
  • Florida: OFRC Commissioner Drew Breakspear called the charter a “solution to a problem that does not exist.”
  • Ohio and Oregon: Senators wrote in to the OCC saying this would complicate existing state fintech laws and initiatives.
  • California: Jan Lynn Owen, the commissioner of the CA DBO, argued that the proposal would complicate the DBO’s efforts to compile data on online marketplace lenders — such as fintech firms SoFi, Lending Club, Funding Circle and Prosper — in order to separate them from payday lenders.

Even so, to give some credit to regulators, there are still very real reasons this charter could easily hurt the not-nascent-but-not-yet-matured fintech sector in many ways:

  1. Bureaucracy: The OCC has granted only one national bank charter in the last six years. Would it move quicker to enable fintechs? It’s difficult to see how it would.

  2. One-size-fits-all: Fintechs are too diverse to be included in a charter generally drafted to legitimize deposit-holding institutions. As The Hill notes, this charter could lump together “payday lenders, marketplace lenders, and peer-to-peer payment companies” with robo-advisers, bank service providers, insurance tech, stock market apps, etc… Should they all be treated as banks?
  3. A competitive moat: Though the charter could narrow the gap between fintechs and banks, allowing fintechs to compete nationally instead of applying for state-by-state licenses, it could also lead to a “thinning of the herd” by being too cumbersome or expensive for young companies. This could easily stifle innovation.
  4. More compliance risks: Fintechs could find themselves written into a narrower and narrower regulatory box, increasing the chances they’re shut down for benign compliance missteps.
  5. Balkanized regulators: Similar to the CFPB’s “no action letter,” which promises the bureau won’t take action against companies that meet its standards, gaining a charter from the OCC still won’t shield fintechs from other regulators who may have different rules.

Predictably, it seems national regulatory agencies such as Moody’s are in favor of the charter. Credit unions, which see the charter as a way to level the playing field with fintechs, are also in favor. The Conference of State Bank Supervisors is against it. It seems everyone but fintechs themselves has an opinion on the charter.

Despite the heated pushback against the OCC’s charter plan, there are still very good reasons for centralized, consistent and national oversight of the fintech industry. As ex-Treasury Secretary Tim Geithner notes in Stress Test, his excellent memoir of the financial crisis, one of the reasons the Great Recession was so bad was that the “safeguards for traditional banks weren’t tough enough […] but what made our storm into a perfect storm was nonbanks behaving like banks without bank supervision or bank protections.”

Then what would a good set of national fintech regulations look like?

  1. It would set basic underlying consumer protections. For instance, no fintech firm should be allowed to misrepresent its fees — and this is something that shouldn’t vary by state.

  2. It would preserve state sovereignty.

  3. It would recognize the heterogeneity of fintech. Most fintechs disintermediate banking services, each tackling only one of a wide range of services. On top of that, some fintechs (Zopa, SoFi) are themselves starting to build banks, while others (Moven, Monzo, Atom) want to be “bank-lites.” A banking charter runs the risk of being too broad (and weak) or too narrow (and inflexible). Regulation should be flexible enough to encompass new fintech models as they develop, without risking losing its teeth.

  4. It would promote innovation while following the Hippocratic Oath of first doing no harm.

Like many black markets, alternative finance and shadow banking would be safer if it were brought into the light and monitored.

Patch Homes Exits Private Beta and Raises $ 1M to Revolutionize Home Equity (Patch Homes Email), Rated: AAA

Patch Homes, a home equity financing platform that creates a way for existing homeowners to cash out equity at 0% interest with no monthly payments, today announced it is coming out of private beta in California. The company recently secured $1.0 million in seed funding, led by prominent venture capital firms and fintech angel investors, including Techstars Ventures, KIMA Ventures, Eric DiBenedetto and Airbnb co-founder Nathan Blecharczyk, among others.

“There’s a problem with the current home financing market, in that 67% of homeowner wealth is trapped in home equity,” said Sahil Gupta, Co-founder of Patch Homes. “Most homeowners are asset-rich but cash-poor, and we want to help bridge that gap and solve their cash flow problems. Our model offers home equity financing without any monthly payments, allowing homeowners to tap into their home equity and use their money the way they choose, whether to pay down debt, invest in their future, or make needed home improvements. Each Patch Homes’ product should be a step toward making homeownership a more affordable, accessible and liquid investment.”

In exchange for 0% interest, Patch Homes shares in future appreciation or depreciation of the home value. The model allows customers to receive capital from investors to finance their home equity, without interest rates or monthly payments, in exchange for a fraction of future home value change. Both the homeowner and investor will see a profit when the home appreciates in value and Patch Homes will share in downside loss with homeowners, should the house decrease in value.

Each contract has a 10-year term, although homeowners have the option to exit the contract by selling or refinancing their home at any time before that, without any penalty or exit fees. In the meantime, homeowners can use the cash newly freed up from home equity however they choose.

“What’s unique about Patch Homes is that it’s solving a problem for more than 40% of US homeowner population,” said Eric DiBenedetto, an investor in Patch Homes, an early backer of Lending Club and an active real estate investor.

The company has reached several key milestones in the past year, including launching a digital financing portal for homeowners and bringing investor capital to the company platform.

“Throughout our beta program, we saw homeowners engage deeply with the product and debt-payoff was among the top reasons for cashing out equity” said Sundeep Ambati, Co-founder of Patch Homes. “We’re excited about bringing a new approach to the way Americans look at financing their homes. There is over $4.5 trillion in untapped home equity across millions of homeowners in the US. They want something that is suited to their needs and financial circumstances.”

The seed funding will enable Patch Homes to expand its team and geographical footprint, and continue to develop its innovative solution and assist with marketing efforts. Patch Homes currently serves homeowners in California, with plans to expand to additional states before the conclusion of the year.

KBRA Upgrades and Affirms Ratings on Avant Loans Funding Trust 2016-B (KBRA Email), Rated: A

Kroll Bond Rating Agency (KBRA) upgrades the rating on two classes and affirms the rating on one class of notes issued under the Avant Loans Funding Trust 2016-A (AVNT 2016-A), a consumer loan ABS transaction which closed on April 28, 2016.

The current credit enhancement levels are 86.62% for the Class A notes, 47.01% for the Class B notes, and 23.86% for the Class C notes. Credit enhancement consists of overcollateralization, subordination of junior notes, cash reserves, and excess spread. While losses are above KBRA’s base case loss expectation to date, the continued deleveraging and build in credit enhancement outweighs an increase in loss levels. The transaction has breakeven loss multiples which are sufficient for an upgrade of the rating on the Class A and Class B notes and an affirmation of the rating on the Class C notes.

Read the report here.

CommonBond Launches Student Loans for Undergraduate, Graduate Students (Yahoo! Finance), Rated: A

CommonBond, a leading financial technology company that helps students and graduates pay for higher education, today announces the launch of student loans for undergraduate and graduate students. This launch makes CommonBond the first and only company in the country to offer a full suite of student loan solutions, including loans for current students, refinance loans for graduates, and employer student loan benefits for employees.

“Since CommonBond first helped pioneer student loan refinancing nationwide, we’ve seen very little innovation in the student loan industry,” said David Klein, CEO and co-founder of CommonBond.

CommonBond’s new in-school loans provide:

  • Competitive interest rates: CommonBond’s rates are among the most competitive in the industry, with variable rates starting at 2.87% APR with autopay discount and fixed rates starting at 5.50% APR with autopay discount.
  • Flexible repayment options: CommonBond offers four different repayment options for students in school: deferment, fixed monthly payment, interest-only payment, and full monthly payment.
  • Award-winning customer service: CommonBond knows that paying for college is the first major financial decision that many students make, and provides best-in-class care for prospective and current members.
  • An industry-first social mission: CommonBond enables its members to drive social good when taking out a student loan. For every student loan funded by CommonBond, the company also funds the education of a child in need through a partnership with Pencils of Promise.

CommonBond is also introducing an interactive tool that helps students understand the financial impact over time of different student loan options, enabling them to make informed financial choices.

CommonBond has funded more than $1 billion in loans to date.

LendKey Releases State Of Student Loan Refinancing Report (PR Newswire), Rated: A

LendKey, the lending-as-a-service provider for banks and credit unions, today released its Student Loan Refinance Report, its second in a series that highlights borrower trends across banks and credit unions. This latest report focuses on the state of student refinancing including the borrower demographic, their lending preferences and loan performance. Key findings show that the student refi market is healthy for banks and credit unions, as well as borrowers, who save an average of 2.2% in annual interest expense after refinancing.

“The LendKey report found that students who refinance significantly reduced their student loan debt over the life of the loan, a substantial amount considering the average student debt is $37,000 for the class of 2016,” said Salil Mehta, SVP of Credit Risk & Analytics, LendKey. “The overall health of the student refi industry proves how beneficial such products are to financial institutions and their millennial customers.

The report leverages data from LendKey’s network of 275 bank and credit union partners nationwide, and examines a seven-year span of borrower data from 2011 – 2017. Key highlights of the report include:

  • Loan originations: LendKey’s clients totaled $770+ million in originations; outstanding loan balance was close to $620 million.
  • Borrower savings increased: Borrowers saved an average of 2.2% in annual interest expense over the life of each loan.
  • Borrower age increased: Average age of a borrower has increased slightly over the years; in 2016 the average age at the time of refinance was 28.7 years for a borrower with an undergraduate degree and 34.3 years for a borrower with a graduate degree.
  • More graduate students are refinancing: In 2016, borrowers with a graduate degree represented close to 30% of originations compared to 20% in 2011.
  • Delinquency rates have dropped: Loan performance has improved over the past seven years as delinquency and default rates have dropped. The report found that 30-89 and 90+ day delinquencies are currently 2.2% and 0.5%, respectively.

Student loan debt now exceeds $1.3 trillion and is the largest non-real estate debt among US consumers.

LendKey partners with banks and credit unions to offer a complete online lending solution, including a customized refinancing product. LendKey’s services include loan acquisition, loan origination and loan servicing through a white-labeled platform hosted by the financial institution.

To access the full report, visit: 

SmartBiz Loans Adds Five Star Bank to Technology Ecosystem (SmartBiz Loans Email), Rated: A

SmartBiz Loans, the first SBA loan marketplace and bank-enabling technology platform, today announced the addition of Five Star Bank (www.fivestarbank.com) to the Company’s unique technology ecosystem. SmartBiz Loans’ intelligent technology platform will match Northern California-based Five Star Bank to the right customers in a fraction of the time, allowing the bank to originate SBA loans more efficiently while increasing the likelihood that small business owners using SmartBiz® will receive funding.

The partnership underscores the ability for banks and fintech companies to work together in more creative and collaborative ways to better meet customer needs by combining the speed and agility of new technology with the security and infrastructure of traditional banks. SmartBiz Loans’ focus on regulatory compliance along with their deep knowledge of banks’ unique business requirements, make it an attractive partner for banks looking to expand their reach and ability to underwrite SBA loans.

SmartBiz’s full-stack, intelligent technology platform creates an environment of data stewardship in which banks’ data is protected and analyzed to the highest standard. It incorporates elements of artificial intelligence, machine learning and big data analytics to bring agility and efficiency to underwriting and originating government-backed SBA loans. By automating each bank’s underwriting criteria, SmartBiz eliminates weeks of work for banks, and allows banks to originate more loans to customers they may not have previously served while cutting banks’ processing costs by up to 70 percent. On average, 90 percent of the loan applications SmartBiz refers to its bank partners are approved.

PeerRealty Founders Shift Energy to Secondary Market Platform CFX Markets (Crowdfund Insider), Rated: A

Following the announcement that real estate crowdfunding platform PeerRealty had been sold to Brelion, founders Jordan Fishfeld and Juan Hernandez are shifting their energy to solving a pressing issue in the alternative finance space: creating a secondary market for alternative assets including securities sold on real estate crowdfunding platforms.

CFX Markets is described as an end-to-end digital marketplace that is directly integrated with alternative asset issuers, broker-dealers and transfer agents to streamline the process of secondary market trading of alternative assets.

CFX Markets is not alone in targeting this emerging opportunity. Traditional marketplaces such as OTC Markets, NASDAQ and NYSE have each expressed a certain amount of interest in providing liquidity for new asset classes.

Andy Rachleff, Co-founder and CEO, Wealthfront (Stitcher), Rated: A

Christophe Williams (MBA ’18) chats with Andy Rachleff, co-founder and CEO of Wealthfront. Andy discusses a wide range of topics in FinTech, investing, and how to grow tech companies. He goes in-depth on Wealthfront’s competitive advantages in automated investing and how he approaches product/marketing strategy to grow sustainably. Also covered are Andy’s background in venture capital, the process of founding Wealthfront, and how he sees disruptive innovation affecting financial service incumbents.

The Five Key Elements for New Lending Club and Prosper Investors (Lend Academy), Rated: A

April is officially Financial Literacy Month here in the United States so with that in mind I am providing this resource for new investors in Lending Club and Prosper.

  1. Diversify Your Investment
  2. Expect Defaults
  3. Keep Your Cash Balance Low
  4. Automate Your Investing
  5. Avoid Taxes by Investing Through an IRA

Why the future of credit could lie in ‘social vouching’ (Tearsheet), Rated: A

For Kundu and others working in the space, ‘inclusion’ is more about creating a another kind of credit system that’s based on social vouching and support. Inspirave’s platform, Kundu said, brings in the notion of a social network of friends and family that can help an individual reach their financial goals and in turn, help vouch for the individual. Instead of a formal credit score, the idea of using a social network of referees acts as a powerful counterpoint to traditional credit assessment systems that exclude millions of Americans who don’t have bank accounts or credit cards.

“We don’t think of traditional due diligence of loan underwriting, a formal business plan or technical due diligence,” said Kelly Chan of Kiva U.S., a nonprofit that’s the U.S. arm of a global online marketplace for crowd-funded small-scale loans. “We’re looking to a social community knowing you have a group of supporters to back you or vouch; for example, ‘Sally is a wonderful mother worthy of Kiva loan.’”

The notion of ‘social underwriting,’ Chan said, can create economic opportunities for Kiva’s 3,700-strong community, many of whom are small-business owners.

GAO’s Fintech Report Highlights Data Security, Lack of Clarity on Regulatory Oversight (National Law Journal), Rated: B

Other risks aside from data security cited by the GAO in fintech include:

Marketplace lending: The GAO said payment terms presented by fintech companies in this area must be transparent because “it can be difficult for small businesses to understand and compare loan terms such as the total cost of capital or the annual percentage rate.”  The study also suggests there is a risk that small business borrower protections could be overlooked.

Mobile payments: The GAO study indicates that potential risks associated with mobile payments are similar to those found with traditional payment products. The report states that if a smartphone is hacked, lost or stolen or “if a company does not sufficiently protect mobile transactions,” that could be problematic. Another concern is that consumers could deposit or send money to the wrong person with P2P payments.

Digital wealth platforms: Insufficient or incomplete information from customers could cause trouble for digital wealth platforms.

Distributed ledger technology: “The Financial Stability Oversight Council noted that market participants have limited experience working with distributed ledger systems, and it is possible that operational vulnerabilities associated with such systems may not become apparent until they are deployed at scale,” the report said.

Find out how startups are transforming real estate investing at Disrupt NY (TechCrunch), Rated: B

First up is Ryan Williams, CEO of Cadre, a company that provides a marketplace of investment opportunities for real estate investors. Founded in 2014, Cadre does all the sourcing, due diligence, decision-making and management of investments it makes available, providing a greater level of transparency and oversight to potential investors than was previously available.

Also joining us is Eddie Lim, CEO of home equity platform Point. His company enables homeowners to unlock the value of real estate they own by selling equity to investors rather than accruing debt by refinancing their homes.

Bankruptcy Atty Bruce Feinstein Speaks About The Risks of Online Lending Services (PRWeb), Rated: B

A sudden need for money, like an unexpected medical expense, can lead people to seek a quick source of cash. Online lending services have been eager to fulfill this need, offering fast loans without a credit check. But these loans often come with a slew of consequences, such as high interest rates, hidden fees, and contracts that drag out payments.

“Predatory loans like these can have APRs of over 300%,” explains Mr. Feinstein. “People end up paying several times the cost of the original loan without knowing it, leaving them with no choice but to file for bankruptcy.”

There are some protective laws in effect – for example, the Military Lending Act protects active duty members from being charged interest rates higher than 36% on most consumer loans, including payday loans.

United Kingdom

UK digital lenders can harness growth opportunities with more tech innovation (S&P Global), Rated: AAA

While the U.K. government regulates and champions these lenders, their loan origination growth has trailed that of their U.S. peers. Lower amounts of equity funding to build out technology and continued use of more human processes compared to U.S. digital lenders are some of the reasons for this divergence. Now is the time for U.K. platforms to embrace technological innovation in order to capture future growth opportunities.

A new report by S&P Global Market Intelligence estimates that as of the end of 2016, nine key digital lenders in the U.K. had originated £6.69 billion in loans since their respective inceptions. The nine largest platforms covered in our 2016 U.S. Digital Lending Landscape had originated the equivalent of £53.69 billion from their respective inceptions through the end of 2016.

Using data from venture capital database Crunchbase, we see that as of the end of 2016, nine major U.S. digital lenders, excluding Square Inc.’s digital lending platform, had received $3.49 billion in equity funding. This allowed them to invest more in costly technological build-ups, while their U.K. peers had received only $470.6 million in equity funding through the same date.

In the fourth quarter of 2011, only four of the nine lenders in our report were originating loans. Total originations for that quarter came in at just £27.2 million. Quarterly originations for these nine lenders grew 33.79% year over year to £803.6 million in the fourth quarter of 2016. During the second quarter of 2016, originations dropped due to uncertainty related to Brexit but rebounded in the third quarter and continued to grow.

Meanwhile digital lenders saw SME loan originations increase 23.9% year over year in the third quarter of 2016, followed by an 81.8% year-over-year jump to £357.5 million in the fourth quarter.

Digital lenders in the U.K. could enjoy significant growth as new account options and continued political and regulatory support boost awareness of and participation in the industry. With these prospects on the horizon, digital lenders will need to invest in technology and automate some processes that humans currently handle.

Your April Impact – Lending Impact and Borrower Stories (Funding Circle), Rated: AAA

This month we hit more than 60,000 investors, big and small, lending to businesses through Funding Circle. Together your lending is having a real impact on the UK economy. Already in 2017 you’ve helped more than 5,000 businesses access much needed finance to grow and prosper.

Firstnet create 100 new jobs in Leeds

To facilitate the launch of their new data centre, Firstnet Solutions Ltd borrowed £74,480 in October 2016.

Paralympian goes for gold with a Funding Circle loan

Husband-and-wife team Peter and Linda Norfolk are well-experienced in achieving excellence. Nicknamed ‘The Quadfather’, Peter Norfolk OBE is a double paralympic gold medal and multiple Grand Slam winning wheelchair-tennis player, while Linda was Head of Physio for the Paralympic GB team at the Athens Games.

To hire two new members of staff, Equipment for the Physically Challenged (EPC) borrowed £30,000 in 2016.

Flux wants to make paper receipts obsolete (TechCrunch), Rated: A

Flux, a London-based fintech startup founded by three early employees of foreign exchange and banking app Revolut, is on a mission to make store receipts truly digital.

The company, which is de-cloaking this week with a pilot in East London, has built a software platform that bridges the gap between the itemised receipt data captured by a merchant’s point-of-sale (POS) system and what little information typically shows up on your bank statement or mobile banking app.

To be clear, this isn’t digitising paper receipts with OCR, but — by partnering with merchants, their payment processor/POS systems, and banks — making item level receipts digital in the first place. Flux’s first live integration is with EAT and Bel-Air on the merchant side, and digital-only bank Monzo.

“We are… building a software layer that is agnostic to the financial institution or retailer that it plugs into,” Cusden-Ross says. “We connect retailers via a software plug-in to their point of sale and to the consumer via an integration to their mobile banking app. Flux automagically links receipts to your bank card as you pay. Receipts are stored in the same place your transactions live today, your bank statement. Just open up your bank app and you’ll find all the receipts as well as any loyalty right there, it’s seamless and intuitive”.

LendInvest completes its first Scottish refurbishment loan (Development Finance Today), Rated: A

Launched in February, the new product is lent against a borrower’s gross development value (GDV) to provide more leverage for the developer and reduce the capital needed up front.

Upon completion of the refurbishment, the property will be a two-storey house with three bedrooms and is expected to be sold for around £375,000.

The loan was based on 70% GDV over nine months at a rate of 1.1% per month.

International

Alternative Finance And The Rise Of The Fintech Unicorn (Forbes), Rated: A

China’s fintech sector certainly boomed last year especially after Alibaba’s payments company Ant Financial set records with a $4.5 billion funding round. The impact of Brexit is yet to be seen on the UK and Europe as a whole, but investors are still seeing the potential for financial technology  in the region, according to the report. G.P. Bullhound highlights that the UK could  be described as a standout leader because of three fintech unicorns, or companies that are valued at over $1 billion: Funding Circle, Paysafe and Transferwise.

Despite Asia’s leadership and growth in the alternative finance space, the same could be said about the European market.

Statistics revealed in the report that alternative finance is currently the most successful fintech vertical, ahead of digital payments, digital banking, insurtech and asset management. While in China eight of the 13 fintech unicorns are operating in the alternative finance field, the term ‘alternative’ is somewhat less relevant in the UK and G. P. Bullhound claim that this is because these regions are held back by traditional systems. Perhaps this is why China is forging ahead in the financial technology race?

China

Industry News-China (Xeenho Email), Rated: AAA

In China, 55 P2P lending platforms cooperating with insurance companies, accounting for 1/6 of all the platforms. Currently, the types of insurance applied in P2P are mainly surety insurance and safety insurance for personal account. However, the insurance is not unlimited. According to a drafted document from China Insurance Regulatory Commission: if the policy holder is a natural person, the maximum coverage is 1 million RMB.

China launched special rectification action on Cash Loan business

To implement the special rectification of risks of P2P Lending required by P2P Remediation Office, the first tier cities including Beijing, Shanghai, Guangzhou and Shenzhen have been starting an all-round investigation of Cash Loan. Last Thursday, the Association of Internet Finance of Shenzhen promulgated documents to asks platforms submit details of Cash Loan business monthly.

On April 18th, a Cashless Alliance led by Alipay launched in Hangzhou, China. UN Environment and Ant Financial advocate a low-carbon business together with other 15 alliance members. As one of the sponsors, the parent company of Alipay, Ant Financial announced that they will provide 6 billion RMB to help the process of cashless in two years. The efficiency of business will be promoted by 60% by using the cashless pay and data sharing. Every 3580 payment equals to the plant of a bell hammer. The existing Alliance members including: Alipay, Carrefour(China), CAH, HUAQIANG Group, OFO Inc., BESTORE etc. Now, the alliance is open for all the global businesses and organizations.

The Challenges China’s Fintech Sector Will Need To Tackle For Longterm Growth (Forbes), Rated: A

Venture capital investment in Chinese financial technology firms surpassed $6.7 billion in 2016. The reason for this is simple: China is home to the largest markets for digital payments and online lending. About 40% of consumers use new payment methods. As a result, China boasts the world’s four largest fintech “unicorns,” or startups valued at over $1 billion, including Ant Financial, Lufax, JD Finance and Qufenqi. These firms received large amounts of funding in 2016, with Ant Financial alone receiving $4.5 billion.

China Rapid Finance, a peer to peer lending company, has been approved for listing on the New York Stock Exchange and is planning to raise $100 million for its IPO. Chinese fintech firm CreditEase signed an agreement to provide up to $1.4 billion in funding to American real estate firm Tishman Speyer through sales of its wealth management products.

China’s fintech industry faces some major challenges, however. First is a shortage of skilled workers, and second are increased regulations, particularly in the digital loan sector.

Companies face difficulties in filling positions for software developers and product managers.

The China Banking Regulatory Commission published the Guidelines on Depositing and Managing Online Lending Capital in February, requiring user funds be deposited into commercial banks, transactions be approved by both borrower and lender, and clear records of transactions be recorded. This will help to curb the risky behavior of industry firms, about 60% of the roughly 5,000 which fail to comply with regulations.

Sailing Capital Leads $ 60M Round In Chinese AI Firm SenseTime (China Money Network), Rated: A

Sailing Capital International (Shanghai) Co., Ltd., a RMB-denominated investment and loan fund created under the support of the Shanghai Municipal Government, has led a US$60 million series funding round in SenseTime, a Beijing-based artificial intelligence start-up.

Founded in 2014, SenseTime says its face recognition technology has an error rate below one in 100,000. It also provides text, vehicle and image recognition to mobile Internet companies, financial services and security companies.

India

‘Fintech Disruption In Lending Space Is Very Slow Now’ (Entrepreneur India), Rated: A

The peer-to-peer (P2P) lending space is fast becoming popular in India and abroad as a viable option for borrowers and lenders. The model’s success lies in its ability to connect borrowers, who are in dire need of money with lenders, who are ready to provide for higher returns.

According to Rajat, the disruption by the fintech sector is very slow right now.

“It would be false to state that the fintech companies are eating into the role of banks and NBFC. The sector can really grow very fast. In the next five to 10 years, we will observe a lateral shift in the trend with more and more customers moving to the digital mode, especially for financial services that lend itself to the digital platform like music industry,” he added.

Asia

Visa’s new partnership to develop FinTech talent in Singapore (Human Resources Online), Rated: A

With an increased prominence of fintech in Singapore, demand for locals with the relevant knowledge and skills have gone up. In order to nurture future talent in the industry, Visa today announced a partnership with local polytechnics and Singapore FinTech Association.

According to a press statement, as part of this partnership, students from the five polytechnics in Singapore will have the opportunity to engage with payment experts from the global payments technology company.

“Through this initiative, students will attend learning sessions conducted by Visa representatives and be involved in business case challenges. We hope to inspire our young talent to join this exciting community,” she added.

Authors:

George Popescu
Allen Taylor

Wednesday October 5th 2016, Daily News Digest

Wednesday October 5th 2016, Daily News Digest

Mailbox Lending Times reviewed LendKey’s first Bellwether Report on Private Student Loans on September 14 but raised questions about the default rate graph (see page 3 of the study here). Last week, LendKey’s Salil Mehta, SVP of Credit Risk & Analytics, addressed the data in an interview with Lending Times: How does the data in LendKey’s report […]

Wednesday October 5th 2016, Daily News Digest

Mailbox

United States

United Kingdom

European Union / Switzerland

China

 

United States

Is BDC Prospect Capital looking to a tie-up with Lending Club?, (AltFi), Rated: A

Peer-to-peer and marketplace lending platforms and Business Development Companies (BDCs) have been increasingly mentioned in the same breath, now synergies may be starting to occur.

Prospect Capital, a Business Development Company (BDC) based in New York is in the process of buying Lending Club loans, according toreports.

Prospect Capital, which has a $2.9bn market capitalisation, has previously been a buyer of US platform OnDeck’s loan book. During the year ending June 30, 2016, it purchased $68.8mof small business whole loans from OnDeck.

Now, according to the reports it has entered into an arrangement with Morgan Stanley to bring a $150m book of seasoned Lending Clubloans to market.

Prospect Capital normally invests in private and mezzanine debt as well as private equity and currently has a debt to equity ratio stood at 69.5 per cent. It invests primarily in first-lien and second-lien senior loans and mezzanine debt, which in some cases include an equity component, providing capital to middle-market companies and private equity financial sponsors for re-financings, leveraged buyouts, acquisitions, recapitalisations, later-stage growth investments, and capital expenditures.

It listed on the New York Stock Exchange in 2004 and including its October 2016 distribution, assuming our current share count for upcoming distributions, has distributed $15.12 per share to initial shareholders, exceeding $2.0bn in cumulative distributions to all shareholders

Since its IPO 12 years ago, it has reported net asset value (NAV) per share of $9.62 with a current dividend yield of 12 per cent based on closing stock price of $8.48. Its last distributable income was $96.6m or $0.27 per weighted average share, exceeding dividends by $0.02 per share.

LendingClub Probe Said to Review Buyback as Laplanche Faced Loss, (Bloomberg), Rated: AAA

Wall Street’s top cop is scrutinizing whether the founder of LendingClub Corp. advocated for the company to prop up its shares without telling the board about a possible conflict of interest, according to people with knowledge of the matter.

the U.S. Securities and Exchange Commission is reviewing Renaud Laplanche’s role in a $150 million share buyback approved in February, said the people, who asked not to be named because details of the probe aren’t public. Laplanche, who was chairman and chief executive officer at the time, had pledged some of his shares as collateral for a loan and was required to put up more money if the stock slid below a certain price, the people said. As it turns out, the share rally didn’t help Laplanche. In addition, LendingClub was barred at the time from repurchasing shares until its next earnings report, the person said.

If a CEO’s personal business dealings are tied to the share price it’s “clearly the kind of thing” that should be disclosed to the board, said Jill Fisch, a corporate governance expert at University of Pennsylvania Law School.

The SEC initially opened an investigation into San Francisco-based LendingClub to review the company’s disclosures that dates on loans sold to Jefferies Group had been altered and that the board hadn’t been informed of Laplanche’s investment in a firm that posed a potential conflict. The probe has since expanded, the people said.

To avoid having to sell some of his shares to raise cash, Laplanche borrowed money from fellow director John Mack, the former chief executive officer of Morgan Stanley, according to a person familiar with the matter.

In April, LendingClub disclosed a new policy that requires executives to get approval from its general counsel and inform the board’s audit committee before pledging LendingClub securities as collateral for a loan or holding them in a margin account.

Student Loans Putting a Hole in Retirement Savings for Millennials, (Plan Sponsor), Rated: A

For many Millennials, student loans are delaying important financial decisions. The most frequently cited include saving for retirement (38.7%), buying an automobile (44.74%), purchasing a home (45.31%) and traveling (53.27%).

When asked how much student debt affects spending ability, 30.54% answered, “Very much;” 30.40% answered, “Somewhat;” and another 14.91% said “very little.” Slightly less than one-quarter (24.15%) reported that their student loan debt had no effect on their spending habits.

LendingTree’s research also offered some insight into how Millennials would treat excess funds if student loans were hypothetically absolved. Respondents said this money will go toward saving for emergencies (53.98%), buying a home (41.76%), saving for retirement (31.68%), or travel and vacations (31.25%).

According to LendingTree’s research, the average salary for employed Millennials is $48,146. When considering factors such as taxes, Social Security payments, and insurance costs, the average Millennial is taking home 70% of gross income or $2,808 per month in this example. The study also found that student loan debt consumes about 11.3% of the average Millennial’s net monthly income.

More than half (55.9%) of those surveyed have feelings of financial regret related to their post-secondary education.

These findings are from a survey of 1,338 Millennials, defined as those born between 1980 and 1995, who enrolled in at least some post-secondary education. According to the survey, 63.3% of this group graduated or will graduate with student debt, and 46.5% currently owe student loans.

Prosper Shutting Down Secondary Market For Loans Later In October, (Pymnts), Rated: A

Comment: we have covered these news extensively. However the context is very well included in this article.

The move on the part of Prosper comes at a time when the company is exploring strategic options, having hired investment banks JPMorgan and Financial Technology Partners and having disclosed it is considering selling equity in the firm. Media reports said the privately held U.S. online lender is mulling the equity raise because, in part, the firm needs to tap markets to raise more money and strengthen balance sheet holdings. Specifically, the capital would improve funding sources. Equity sales could run the gamut between minority and majority stakes. As has been noted widely in the financial press, the industry itself has been buffeted by news that has been enough to make investors shy away from buying loans.

Should Bankruptcy Stop You From Getting A Personal Loan?, (The Global Dispatch), Rated: A

Having filed for bankruptcy doesn’t make the possibility of getting a personal loan zero.

Secured Credit Cards: The First Step in How to Get a Loan After Bankruptcy.

We have two kinds of personal loans: the secured personal loan and the unsecured personal loan. As for a secured personal loan, for those with credit issues, just relinquish your property or deposit cash to the lender.

Bad-Credit Personal Loan Lenders.  You need to provide data on your savings as well as your home and car. Whether you’re going to qualify for a secured or unsecured personal loan will depend on your credit.

The Americas alternative finance market accelerates its 3-digit growth in 2015, (SMB Weekly), Rated: A

Comment: this report was published in April during Lendit. However I find it useful to sometimes step back and look at the big picture. 

In 2015 the Americas alternative finance industry grew 212% from 2014, to reach a volume of $36.49 billion, shows a benchmarking report of the Cambridge Centre for Alternative Finance (CCAF), in partnership with KPMG and the CME Group Foundation. For comparison, in 2014 it was $11.68 billion and grew 162% from 2013.

In the period 2013-2015 the alternative lenders delivered more than $50 billion in funding to individuals and businesses, with the US having the lion’s 99% share of the total volume.

The US is also the second-largest alternative market per capita, after Mainland China, with $113.43. In comparison, China’s per capita volume was $74.54. Canada, which comes in second in the Americas market, has barely $5.82 per capita.

The Latin Americas and the Caribbean regional market is negligibly small, but nevertheless has achieved a 130% in 2015, to reach $110.46 million.

Another finding of the CCAF dwells on the entrenched institutionalization of the US loan market, in contrast to the UK alternative finance market where the lenders are predominantly retail investors. Between 2013 and 2015 more than 72% of the alternative business loans and 53% of the consumer loans were funded by institutional investors. The institutional lending is even deeper entrenched in invoice trading – 84% and real estate loans – 74%. Among the institutional lenders are mutual funds, pension funds, hedge funds, family offices, asset management firms and traditional banks.

International P2P Lending Services – Loan Volumes September 2016, (P2P-Banking), Rated: AAA

Comment: Lending Times covers broker’s volume (here is the page) as well for free. 

Funding Circle, Ratesetter and Zopa had a record month. The total volume for the reported marketplaces adds up to 424 million Euro. I track the development of p2p lending volumes for many countries. Since I already have most of the data on file I can publish statistics on the monthly loan originations for selected p2p lending services. Milestones in total volume originated since inception:

PayNet Releases MasterScore for Alternative Lending, (Email), Rated: AAA

PayNet, Inc., the nation’s small business credit expert, announces the release of the new PayNet MasterScore for Alternative Lending, the first ever pooled-data score for the Alternative Lending space. This score, which is a coming-of-age milestone for the industry, will help alternative finance lenders enhance their credit decisioning and increase profitability.

The over 25 million private U.S. companies constitute a $4 trillion credit market. Alternative lenders are becoming a more integral source of credit for small business growth providing over 100,000 loans totaling approximately $5 billion to small businesses in 2015.

This new score builds on PayNet MasterScore v2 by bringing in additional variables and by optimizing specifically on a population of Alternative Loans and Merchant Cash Advances originated by a wide range of Alternative Lenders.

Global M&A value climbs against decline in volume in Q3 2016, (Bureau Van Dijk), Rated: AAA

Global PE investment declines by volume and value Both the volume and value of private equity and venture capital (PE and VC) activity declined in the third quarter of 2016, with volume hitting its lowest ebb since Q4 2011, when 4,574 deals were announced. In all there were 4,713 deals worth USD 139,141 million in Q3 2016. This represents a weakening of 10 per cent in volume and 9 per cent by value from 5,252 deals worth USD 153,316 million in Q2 2016, while the decline was even steeper when compared to the same quarter in 2015 (Q3 2015: 6,577 deals worth USD 186,614 million).

The value of global mergers and acquisitions increased in Q3 of 2016, marking the second straight quarterly improvement. According to information from 

RealtyMogul’s Investors Snag 8% Dividend Payout on New MogulREIT I Income Fund (Email), Rated: A

RealtyMogul, the online marketplace for commercial real estate investing, has announced its MogulREIT I declared a $0.10 dividend for investors. This equates approximately an 8% return on an annualized basis at a $10 per share price, calculated for the period beginning August 15, 2016 and ending Sept. 30, 2016.

The 8% annualized return represents a significant premium over other, non-traded REITs, which on average achieve a 5.4% annualized dividend, according to a recent report from The Stanger Report™.

RealtyMogul.com launched the income fund in August with the aim of helping to democratize real estate investing. Structured as a real estate investment trust (“REIT”) with a minimum investment of $2,500, the fund is open to nearly all investors and offers the potential for consistent cash dividends and equity appreciation.

United Kingdom

FCA enlists University of Cambridge to review P2P market, (Professional Adviser), Rated: A

Together with the CCAF the FCA will seek to identify any changes to the nature of the industry, consumer expectations, and its place in the financial services landscape. They will also look at whether the area needs tougher regulation.

The regulator is planning to tighten due diligence rules for crowdfunding and P2P lending amid concerns over investor risk.

It said: “We are currently conducting a post-implementation review of the crowdfunding rules, to see whether the market has evolved in such a way that we need to consider changes to the rules.

Currently, P2P investor platforms do not have to adhere to specific levels of due diligence but are allowed to develop their own approach to researching the investments they offer.

Rhydian Lewis, CEO of Ratesetter Thinks Global, (WorldFirst), Rated: A

Yes, we exported our IP by launching RateSetter Australia in 2014. RateSetter Australia has a separate management team and balance sheet. We didn’t set out to launch there, but we were presented with a particularly compelling opportunity.

European Union / Switzerland

SwissLending launches real estate crowdlending platform, (Finextra), Rated: A

SwissLending, a new player within the FinTech ecosystem and the first crowdfunding platform in Switzerland specializing in loans for real estate professionals, is officially launched this week in Geneva.

China

Car financing a new bright spot in Chinese economy, (SCMP), Rated: A

The vehicle loan market has grown exponentially in China during the past decade. The outstanding amount jumped to 670 billion yuan last year, compared to 5 billion yuan in 2005, consultancy Forward Business and Intelligence said in a report.

The penetration of auto financing in China is still lagging far behind developed markets such as the United States where about 70 per cent of car buyers use loans to finance their purchases.

It was not until 2014 that a soaring number of mainlanders, particularly those aged between 20 and 40, started to use auto financing services to buy a car. Vehicle ownership is seen as a symbol of luxury and success in the country.

Car buyers in China now have access to loans from banks, auto financing firms and online peer-to-peer (P2P) lending platforms.

A quarter of Chinese car buyers have borrowed money to finance their purchases, and the percentage is set to top 30 per cent soon, according to vehicle information website Autohome.

P2P charges a higher interest rate, but it offers an alternative to banks and auto financing firms because some of the buyers are unable to secure a loan from those institutions,” said Steve Shi, a manager with Juchen Auto Trade, an auto service firm. “It’s inevitable that some loan defaults occur, but the bad-loan ratio seems controllable.”

ABS allows the financing firms to sell off their loans to other investors while freeing up more money that can be lent to new customers.

According to Fitch Ratings, the average cumulative default rate for Chinese auto ABS was below 1.5 per cent at the end of June, 2016.

“Overall, the performance of auto-loan ABS hasn’t seen major deterioration despite slowing economic growth,” Fitch said in a research report.

Fitch expects delinquency rates will edge up as economic growth is expected to drop to 6.5 per cent this year, the slowest pace since 1990.

China’s outstanding P2P loans hit record high in September, (ECNS), Rated: A

Outstanding peer-to-peer (P2P) loans in China soared 153.5 percent year on year to hit a record high at the end of September, a latest industry report showed.

Loans had reached 956 billion yuan (145 billion US dollars) at the end of September, according to P2P industry portal P2P001.com.

The average interest rate for P2P lending stood at 8.7 percent, unchanged from a month earlier and still near a record low.

Author:

George Popescu

Thursday September 15th 2016, Daily News Digest

Thursday September 15th 2016, Daily News Digest

News Comments Today’s main news: FastPay raises $15mil in equity; MoneyLion closes financing line with Macquarie,; 2 fintechs, Financeit and Concentra, purchase TD Bank’s (a bank’s !) home improvement financing assets. Today’s main analysis: LendKey releases student loan cohort default data, strange data. Today’s main thought provokers:  The future of Finance; UBS wealth manager tries AI; […]

Thursday September 15th 2016, Daily News Digest

News Comments

United States

United Kingdom

Canada

China

 

United States

The future of finance: Banking as a platform, (The Next Web), Rated: AAA

A new law is going into effect in 2018 called the Revised Payment Services Directive in Europe, or PSD2 for short.

This law and the possibilities new technologies bring, means the role of banking is changing and emphasizes the trend towards ‘open banking’. Financial services and banks such as Dutch bank ABN AMRO see new technologies on the horizon and are working to find the trends in which they can gravitate toward and adapt to.

PSD2 works to provide a foundation for the creation of a single-wide market for payments. It allows consumers the ability to connect their bank accounts with third party services, allowing the services through an API to access data generated by their bank accounts.

In other words, with PSD2, banks will essentially become a platform for banking with providing APIs to access data.

Entrepreneurs can use the new law of PSD2 to drive innovation and creation of new services to offer to customers, and can now use bank APIs to do it. For example, an entrepreneur can create a way for one customer to have a central dashboard that has all of their financial data in one place, regardless of the bank or how many different financial institutions they do business with.

For instance, ABN AMRO works closely together with startups and scale-ups to bring customers simple and user-friendly apps. Recently, the financial institution worked with Swedish startup Tink to develop a new app allowing customers to easily overview their earnings and expenditures.

 Acquire Real Estate Creates Liquidity for Investors in Commercial Real Estate, Facilitates First Fully Automated Secondary Market Exchange, (Email), Rated: AAA

Acquire Real Estate, a commercial real estate crowdfunding platform, has completed its first fully automated secondary market exchange between two of its real estate investors.

The investors relied on Acquire’s patent pending Investor Exchange,which facilitates a blind auction process that enables a seller to identify a buyer, establish a value and generate the required documentation and consents. The investors exchanged an interest in the DoubleTree by Hilton Dallas-Fort Worth, a 282-room, 8-story hotel located adjacent to the Dallas-Fort Worth Airport.

“We built the Investor Exchange with our investors’ need for liquidity in mind,” said Gerry Polucci, Co-Founder and CTO of Acquire Real Estate. “We also built the technology with an understanding that it had to be simple and modernize the process.”

Acquire’s technology allows the exchange process to unfold quickly without the inconveniences usually associated with such transfers. Investors can use the exchange to post all or part of an Acquire investment for exchange with any other member of the Acquire community. The seller then specifies the terms of the auction and provides up-to-date information concerning the investment. Acquire investors can then bid on the opportunity based on the terms proposed. If successful, the transaction takes place for an undisclosed amount, which could be higher or lower than the initial acquisition price.

LendKey Introduces Bellwether Report On Private Student Loans, (PR Newswire), Rated: A

LendKey, today released an inaugural industry-specific report entitled Positive Signal for Private Student Loans. This is the first in a series that aims to share summarized risk and other unique insights within data from LendKey’s 275 bank and credit union client-lenders nationwide.

To access the full report, please visit: 

Highlights of the report include:

  • Originations and portfolio balance
  • Performance of the LendKey client-lender portfolio over time
  • Cosigner statistics and geographical spread such as 90% of loans are originated with a cosigner and most are from northern states
  • Over the last seven years, defaults and charge-off rates have significantly declined
  • Statistics and growth in serial borrowing

Lenders and asset managers are partnering with LendKey to bring borrowers a powerful, white-labeled lending platform that has redefined Lending-as-a-Service—and gives financial institutions of all sizes the ability to attract new business, grow relationships, manage liquidity, and mitigate risk.

LendKey’s Key results from the report above, (See above), Rated: AAA

Improvement in default performance:

 

FastPay Secures $ 15 M in Funding, (Business Wire), Rated: A

FastPay is the market-leading provider of liquidity and financial workflow solutions to the global digital media industry. Through its proprietary technology platform, IGNITE, FastPay can dynamically assess the credit of digital media businesses and deploy payment workflow solutions for media businesses globally.

FastPay, has raised $15 million from Oak HC/FT to support FastPay’s continued growth, development of proprietary technology and acquisition of strategic new hires. The investment is the first FinTech investment from Oak HC/FT’s recently launched $500 million growth-equity fund.

Mobile Finance Platform MoneyLion Closes Portfolio Financing Line with Macquarie Group, (Email), Rated: A

Moneylion, to date, has access to $650m of debt capital from Macquarie and other institutional lenders.

To date, MoneyLion has originated over 120,000 loans from its balance sheet.  Through its website and mobile app, available on Apple and Android devices, MoneyLion offers personal finance tools and a suite of credit products designed to foster better, more informed financial decision-making across the lifetime of its growing community of users.

Orrick Launches Legal Portal for Direct Lending, (Fin Alternatives), Rated: A

Global law firm Orrick has jumped into the rapidly-growing world of private credit with the creation of what it describes as the first legal portal for the corporate direct lending community.

The site breaks new ground by offering fast, simple solutions to a wide variety of common issues that arise in direct lending transactions, Orrick said in a statement.

Lending Club will Pay New CFO Signing Bonus & $ 4.5 M Stock Grant, (Crowdfund Insider), Rated: A

According to an 8-K filed with the SEC, Lending Club will pay Thomas Casey, their newly appointed CFO, a base salary of $425,000 with a 75% bonus target plus $4.5 million in an initial equity award to vest quarterly over the next four years. On top of this, Casey will also receive a one-time signing bonus of $600,000. Casey will receive half of this bonus immediately and the other half a year from his start date (later this month).

Simultaneously, Lending Club announced the creation of a Rabbi Trust – a non-qualified retirement vehicle to help compensate senior executives.

Why Lending Club Isn’t Worth Your Money…, (Seeking Alpha), Rated: A

Earnings expectations are now expected to be negative this year and Wall Street is looking for only $0.07 in earnings per share in 2017. At this stage in its life cycle and growth, one could argue a P/E is irrelevant. Even if there were not questions about Lending Club’s future growth, we would feel uncomfortable owning this company at a P/E approaching 80x.

Looking at Enterprise Value to EBITDA, we also are not attracted to a business at roughly 60x 2017 expectations. The problems of 2016 wipe out more than a full year of growth for this early-stage business, but they also highlight a going concern issue. With its large debt balance and lingering interest costs, Lending Club needs to generate significant cash flow just to stay afloat.

Earnings can be manipulated, so we tend to focus our attention on cash flow. The cash flow statement rarely lies. Before the surprising revelations in May, Lending Club averaged nearly $50 million of cash flow from operations for three quarters straight.

Cash flow went negative last quarter and will likely stay this way for a few quarters. Will investors look to purchase Lending Club loans? Will Lending Club only draw the most risky borrowers to its platform? These are troubling questions we struggle with.

At the 2002 Berkshire Hathaway (NYSE:BRK.A) (NYSE:BRK.B) annual meeting, the legendary duo of Warren Buffett and Charlie Munger had some wonderful comments regarding investing in financials. After Munger discussed how he is often uncomfortable around most financial institutions’ lack of transparency, Buffett had this great financial quote:

“There is so much about a financial institution that you don’t know just by looking at the figures that if anything bothers you a little bit, we’re never sure whether it’s an iceberg situation”.

UBS trials artificial intelligence wealth managers, (V3), Rated: A

Wealth management firm and investment bank UBS is running artificial intelligence(AI) trials with some of its richest clients. AI applications being tested include tools designed to read facial expressions and uncover clients’ unconscious biases towards or against certain types of investment.

The aim is to help the company’s cash-rich, but time-poor, clientele to ask the right questions about their decisions, according to UBS.

RBS announced earlier this year  that the bank may replace hundreds of face-to-face customer service staff with automated services, which it claimed will free its remaining human agents to be expert advisers.

Fraud detection is another area ripe for AI applications, and companies such as Ravelin have deployed machine learning capabilities to identify online payment fraud and other pattern-based behaviour.

IBM and Aldebaran Robotics (now majority owned by Japan’s SoftBank) have been testing a robotic concierge service using IBM’s Watson service in the cloud via industry-specific datasets provided by ‘cognitive travel agent’ WayBlazer.

UK government-backed startup PingGo announced last week that its mission is to automate PR, giving rise to the real possibility that press releases may soon be produced by robots for other robots to read and disseminate as machine-readable news.

Dr Anders Sandberg, James Martin Research Fellow at Oxford University’s Future of Humanity Institute, observed earlier this year that if you can describe your job it can and will be automated.

United Kingdom

Funding Circle SME Income Fund Ltd (FCIF) to Issue Dividend Increase – GBX 1.63 Per Share, (BBNS), Rated: A

Funding Circle SME Income Fund Ltd (LON:FCIF) declared a dividend on Wednesday, September 14th. Investors of record on Thursday, September 29th will be paid a dividend of GBX 1.63 ($0.02) per share on Monday, October 31st. This represents a yield of 1.59%. The ex-dividend date is Thursday, September 29th. This is a boost from Funding Circle SME Income Fund’s previous dividend of $1.00. The official announcement can be seen at this link.

Separately, Jefferies Group started coverage on shares of Funding Circle SME Income Fund in a report on Wednesday. They issued a “hold” rating for the company.

Funding Circle SME Income Fund Limited is a United Kingdom-based closed-ended fund. The Fund’s investment objective is to provide shareholders with a level of dividend income, primarily by way of investment in credit assets, both directly through the marketplaces and indirectly. The Fund holds credit assets through maturity.

Bank of England sticks with rate cut signal despite Brexit bounce, (Reuters), Rated: AAA

The Bank of England said on Thursday it was still likely to cut interest rates to just above zero later this year, even though the initial Brexit hit to Britain’s economy was proving less severe than it expected only last month.

The Bank’s nine rate-setters voted unanimously to keep Bank Rate at its new record low of 0.25 percent, the lowest level in the BoE’s 322-year history.

They also voted 9-0 to keep the Bank’s bond-buying program target at 435 billion pounds and to continue with its new plan to buy up to 10 billion pounds’ worth of corporate bonds.

A Reuters poll of economists showed on Thursday that Britain is likely to narrowly avoid a recession.

Property Development Academy: LendInvest to Help Small Developers Build More Homes, (Crowdfund Insider), Rated: AAA

LendInvest, an online mortgage marketplace that has facilitated over £740 million in financing, has launched the “first” Property Development Academy in an attempt to boost construction of new homes.

The UK government estimates the need for additional housing in England at between 232,000 to 300,000 new units per year, a level not reached since  the late 1970s and two to three times current supply.

According to LendInvest, the Property Development Academy will be a two-day intensive programme that takes 20-25 individuals through hands-on, practical modules covering the full development project: from land valuation and acquisition, through to planning permission, supplier contracts, cost management and final sale. Sessions are led by experienced advisers. On top of education, the network of relevant contacts from their local area may become a vital resource for these aspiring developers to call upon in the future.

Canada

Financeit and Concentra acquire TD Bank Group’s indirect home improvement financing assets, (Email), Rated: A

Financeit, a cloud-based point-of-sale financing platform, and Concentra, a leading wholesale finance and trust solutions provider for Canada’s credit unions, today announced the acquisition of TD Bank Group’s indirect home improvement financing assets, with a book value of approximately $339 million.

As part of the agreement, approximately 45,000 TD loans were purchased by Concentra and over 800 merchant dealers were assigned to Financeit.

Financeit has a nationwide footprint in the home improvement industry and has increased its lending activity in this market by almost 200% since last year.

With the transaction now completed, current TD merchant partners can begin submitting loans on Financeit’s platform immediately and can take advantage of the company’s unique approach. This includes mobile-enabled technology, customer self-serve application options, paperless document signing, extended credit and 180-day approval windows. Loan origination on the TD platform will end in October 2016.

Since launching in 2011, Financeit has worked with over 6,000 home improvement, vehicle and retail businesses to process more than $1.5 billion in loans in Canada and the United States. Financeit is a private company and has raised money from a variety of investors, including a division of Goldman Sachs and FIS Global.

Concentra is a provider of national wholesale banking and trust solutions to credit unions across Canada. Concentra is serving over 80 percent of Canada’s credit unions. The company has over $37 billion in assets under administration, including over $8 billion in consolidated assets

China

Shanghai P2P Lender Raided After Failing to Make Payments, (CaixinOnline), Rated: A

Police raided the Shanghai offices of a major peer-to-peer (P2P) lending platform operator on Tuesday and arrested five people on suspicion of illegal fundraising, nearly half a year after the company stopped paying returns to its investors.

Police said they will urge the company to meet its financial obligations, but didn’t say whether criminal charges will be filed.

Kuailu is a typical case, promising investors 10 percent annualized returns, far higher than they could get from traditional banking products. Founded in 2003, the company entered P2P lending in 2014. It found a niche in lending for film production in both China and Hollywood using connections of its then-chairman, Shi Jianxiang.

In the past two years alone, Kuailu raised about 14 billion yuan ($2.1 billion) from about 260,000 investors, and poured the money into such high-profile projects as the Hollywood film The Bombing starring Bruce Willis.

But the company ran into financial difficulties and stopped paying out returns about six months ago, around the same time that Shi resigned, citing health concerns.

In June, Kuailu promised at least 600 investors, most of them elderly and in urgent need of cash, that they would receive priority in getting back 5 to 20 percent of their principal, a pledge requiring up to 100 million yuan, according to a notice on its official account on the popular WeChat mobile instant messaging platform.

Author:

George Popescu