Monday May 14 2018, Daily News Digest

Kabbage KABB 2017-1

News Comments Today’s main news: LendingTree to acquire Ovation Credit Services. Revolut to enter America. Flender delays UK launch. UK challenger banks test location-based P2P payments. Ant Financial raises $10B led by Carlyle Group. Today’s main analysis: KABB 2017-1 deep dive. Today’s thought-provoking articles: How the FTC knew LendingClub was allegedly hiding fees. Elevate’s Q2 earnings estimates. UK customers trust banks, […]

Kabbage KABB 2017-1

News Comments

United States

United Kingdom

China

European Union

International

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News Summary

United States

LendingTree, Inc. Announces Agreement to Acquire Ovation Credit Services (PR Newswire) Rated: AAA

LendingTree, Inc. (NASDAQ:  TREE) announced today that it has entered into a definitive agreement to acquire Ovation Credit Services, Inc., a provider of credit services with a strong customer service reputation. Ovation Credit Services utilizes a proprietary software application that facilitates the credit repair process and is integrated directly with certain credit bureaus while educating consumers on credit improvement via ongoing outreach with Ovation case advisors.

Europe’s New Fintech Unicorn, Revolut, Heads to America (Newsday) Rated: AAA

The London-based fintech start-up allows users to buy and trade cryptocurrencies, making it a direct competitor to the U.S.-based Robinhood. Revolut also sees itself as a disruptor of the traditional banking industry, as it offers checking accounts, peer-to-peer payments, and international money transfers, says Chad West, the company’s chief marketing officer.

FTC Doesn’t Hide Action Over LendingClub’s Allegedly Hidden Fees (Lexology) Rated: AAA

The FTC noted that the site did feature a small green dot (known as a tooltip) with a white question mark inside, which appeared next to the term “APR.” If a consumer clicked on the tooltip, a pop-up bubble appeared with a disclosure that read: “APR stands for Annual Percentage Rate and is a measure of the total cost of credit as an annual rate. The APR is comprised of the annual interest you pay at a rate of 6.99%—which is ultimately paid each month to the investors who enable your loan—and a one-time origination fee of 3.5% ($350.00) that is collected out of your loan proceeds.”

The complaint reminds lenders of the continued importance of accuracy and completeness in advertising and other marketing in order to avoid UDAAP claims, including under Section 5 of the FTC Act.

KABB 2017-1 Deep Dive (PeerIQ), Rated: AAA

The battle for transaction fee interchange revenue is heating up. Amazon is now encouraging smaller retailers to use its own payment processing system – Amazon Pay – in lieu of credit cards or PayPal.Amazon is willing to offer the payments at a discounted rate in exchange for growing market share and gain additional data insights from merchants.

FinTech Earnings – LendingClub and OnDeck

The market has responded well to LC’s earnings and the stock price has surged 17% post earnings.

Source: LendingClub

OnDeck’s stock price has enjoyed a 10% rise since earnings.

Source: OnDeck

Deal Deep Dive KABB 2017-1 Additional Notes

Kabbage is issuing $60 Mn in additional notes under the expandable option on its $550 Mn KABB 2017-1 deal. The additional notes classes A to D have balances of $44.4 Mn, $9.5 Mn, $3.2 Mn, and $2.9 Mn respectively. KBRA has rated the tranches A, BBB, BB, and B respectively. Kabbage issued $525 Mn in bonds originally on the KABB 2017-1 deal, and subsequently issued $25 Mn in additional notes.

KABB 2017-1 is passing all its triggers and has a weighted average yield of 42.9% and a 3-month average DQ percentage of 9.7%. The bonds are locked out from receiving principal for 36 months since issuance and the additional cashflow is used to purchase receivables that keep the weighted average receivables yield for the entire pool above 38% and individually yield at least 19%.

Source: PeerIQ, KBRA
Source: PeerIQ, KBRA

Q2 2018 Earnings Estimate for Elevate Credit (NYSE:ELVT) Issued By Jefferies Group (Macon Daily) Rated: AAA

Jefferies Group lifted their Q2 2018 earnings per share estimates for shares of Elevate Credit in a report released on Tuesday, May 1st, according to Zacks Investment Research. Jefferies Group analyst J. Hecht now forecasts that the company will earn $0.19 per share for the quarter, up from their previous estimate of $0.18. Jefferies Group also issued estimates for Elevate Credit’s FY2018 earnings at $0.83 EPS, Q1 2019 earnings at $0.37 EPS and FY2019 earnings at $1.09 EPS.

Source: Macon Daily

Renaud Laplanche: the sailor who revolutionised banking (Money Week) Rated: A

“Soft spoken and unfailingly polite”, as Forbes noted in 2015, Laplanche claimed, with some justification, to be “transforming” the banking industry – bypassing banks to link would-be borrowers with lenders online. He swiftly established his outfit as the market leader, originating some $20bn in loans and winning copious “disruptive innovator” awards. Then came the shipwreck.

He is now focused on “what can I learn from it, what can I do better. Upgrade has been part of that.” Last year, Upgrade raised $60m – “the biggest ever series A funding round for a US fintech start-up”, backed by “many of Lending Club’s original investors”. The market is now more crowded than ever, notes the Lending Times, and “margins have shrunk”. Still, many reckon that if anyone can steer a clear course it’s “the guy credited with creating the industry in the first place”.

 

 

 

PayPal CEO: A Cashless Society Is Possible as Mobile Payments Take Over (The Street) Rated: A

The world is rapidly digitizing. You look at every industry, whether it’s media publishing or entertainment and you are now seeing different value propositions being driven by software and mobile connectivity. Financial services is no different. I think you are going to see more changes in the financial services industry in the next five or 10 years than maybe we have seen in the last 25 or 30 years.

The world is rapidly digitizing. People are writing many less checks than they ever have before. Peer to peer lending, which once involved giving cash to a friend to split a bill at a restaurant, that’s now happening digitally.

The Most Well-Funded Tech Startup In Every US State (CB Insights), Rated: A

In our latest map of the most well-funded American tech startup in each state, some companies with the deepest pockets were found in Florida (Magic Leap, $1.89B), Virginia (OneWeb, $2.2B), Utah (Domo, $698M), and Illinois (Avant, $655M).

Source: CB Insights

Congress Votes to Erase Auto Loan Anti-Discrimination Rule (LendEDU) Rated: A

Under the authority granted by the Congressional Review Act, the House of Representatives passed a measure on May 8 to roll back an Obama-era rule on auto lending practices issued by the Consumer Financial Protection Bureau (CFPB). It should be noted that the rollback pertains to a set of administrative guidelines issued by the CFPB, not a law ratified by Congress.

The House vote was 234-175, reversing a 2013 rule established by the CFPB to stop auto lenders from charging higher fees to borrowers based on their religion, sex, race, or age. The vote follows a Senate vote in April to also repeal this measure. It will now go to President Donald Trump’s desk for his approval.

Virginia Attorney General Files Suit Against Online Lender Alleging Predatory Lending (JD Supra) Rated: B

The complaint alleges that the lender, one of the largest online lenders in Virginia, operated without a Virginia license, and misled borrowers about its licensure status in another state in order to avoid Virginia’s 12% interest rate usury cap.  Virginia Code § 6.2-303.  Specifically, the complaint alleges that the installment loan agreements’ Utah choice-of-law provisions are void, and that Virginia law, including Virginia’s usury cap, applies to the loans.  The VA Attorney General also alleges that the lender attempted to collect on loans from borrowers who were in bankruptcy and entitled to protection from debt collection.

United Kingdom

Ireland’s Flender pushes back UK launch (Peer2Peer Finance) Rated: AAA

IRISH peer-to-peer lending platform Flender has pushed back its UK launch to focus on becoming the “dominant platform” in its home country first.

UK banks are trying out location-based P2P payments (Tearsheet) Rated: AAA

On Friday, Revolut introduced a feature called “Near Me” which lets its customers find other Revolut customers using the same feature and send them money without knowing their contact details. On Monday, Monzo rolled out a capability called “Nearby Friends.”

The use cases for location-based peer-to-peer payments among consumers may not be compelling enough for providers to consider it, said Paygility Advisors partner Deborah Baxley.

Q&A With Simon Taylor, 11:FS Co-Founder (Forbes) Rated: A

However, last month’s announcement that London FinTech Revolut is now a so-called unicorn with a $1.7 billion valuation and TransferWise working with the Bank of England and launching a ‘borderless’ card that drastically slashes transaction costs, the future for the city may be companies such as these.

Another fellow London FinTech 11:FS is also making waves offering a range of FinTech services, not least being able to ‘make a challenger bank in 12 weeks’. Here company Co-Founder Simon Taylor speaks exclusively to Forbes about what these moves and also on Swedish company iZettle’s recent IPO announcement.

 

 

A new study shows UK customers trust banks but don’t engage with them (Business Insider) Rated: AAA

UK banks were trusted by 40% of consumers in 2017, up from 29% in 2015, according to a study from Accenture. This makes banks only 3% less trusted than retailers, and ahead of insurers, independent advisers, and tech companies.

Source: Business Insider

Additionally, customer satisfaction was up 5% from 65% in 2015 to 70% in 2017, suggesting banks have been doing something right in terms of customer experience in the recent years. This also brings banks ahead of life insurers and pension providers, as well as on the same level as motor insurers and home insurers, when it comes to customer satisfaction.

 

P2P lenders benefit as BoE keeps interest rates low (AltFi News) Rated: A

The Bank of England’s decision to keep the interest rates at 0.5 per cent should at least make peer-to-peer lenders smile. People are tempted to look for alternative and riskier ways to increase the value of their savings, as inflation continues to hover above BoE’s target of two per cent and traditional savings accounts offer barely any interest at all.

Mike Allan, the director of operations at LendingCrowd, said that the historically lax monetary policy created an opening for P2P lending to take off.

Why commercial property could be the new buy-to-let and how to invest for better returns (This is Money) Rated: A

Over the past five or six years, investing in property through peer-to-peer and crowdfunding platforms has grown enormously in popularity. There are now lots of platforms to choose from and each offers a slightly different proposition.

Both peer-to-peer and crowdfunding platforms have different approaches, in that some allow you to put money in and spread it across a number of properties, or a portfolio run by them.

 

 

China

Jack Ma’s Ant Snags Carlyle for $ 10 Billion Funding, Sources Say (Bloomberg) Rated: AAA

Ant Financial, the Chinese payments giant controlled by Jack Ma, is expected to close a fundraising of at least $10 billion in the next few days, attracting Carlyle Group and the Canada Pension Plan Investment Board as first-time investors, according to people familiar with the matter.

The Hangzhou-based company is said to be valued at about $150 billion in this round, the people said, requesting not to be named because the matter is private. The funding will be mostly used for overseas expansion, the people said.

PBOC Bans Unauthorized APP to Access Credit Rating System (Crowdfund Insider) Rated: AAA

Recently, the People’s Bank of China (PBOC), China’s central bank, issued a document named, “Notice on Further Strengthening the Management of Credit Information Security” (Yinfa [2018] No. 102) (hereinafter referred to as “Document No. 102”), to further strengthen the management and security of credit information database. According to Document No. 102, credit reporting agencies and access agencies are strictly forbidden to query credit report without authorization, and unauthorized APP accessing to credit reporting systems is strictly prohibited. In addition, it is required to establish a leading group for credit information security work and make clear that the person in charge of the credit management work shall take the primary responsibility for related issue.

China’s online lenders reel from government clampdown (Nikkei Asian Review) Rated: A

Of 66 peer-to-peer lending platforms surveyed by FTCR, 10 said they might close because of difficulties in meeting new compliance standards and in controlling an increase in bad loans. Among the platforms, which match lenders with borrowers online, more than 40% of those in second- and third-tier cities said business had fallen in the first quarter compared with the end of last year.

P2P lending in China had grown rapidly, extending 2.8 trillion yuan ($443.3 billion) in 2017, equivalent to 20.7% of the amount lent by banks.

Antisocial networking (Breaking Views) Rated: A

A Chinese social network is finding new ways to lose friends. Renren has irked investors over plans to sell some of its assets, notably a stake in U.S. online lender SoFi, to a firm partly controlled by its chief executive.

Renren has been irritating shareholders for years. Since its initial public offering in New York in 2011 valuing it at close to $6 billion, the company has failed to live up to the hype of being China’s answer to Facebook. It is now worth just $600 million.

This latest episode also isn’t the first time boss Joe Chen has been accused of trying to enrich himself at the expense of shareholders. A non-binding 2015 bid to take Renren private for $1.4 billion never came to fruition, and the SoFi stake was a topic of dispute then, too.

European Union

Banco BNI Europa invests €15m in auto financing start-up Lendrock (Fintech Futures) Rated: AAA

Portuguese Banco BNI Europa will invest up to €15 million in Spain-based Lendrock’s online financing platform that specialises in near prime consumer auto financing.

The bank says the Iberian partnership begins with the acquisition of part of the existing loan portfolio, offering exposure to Lendrock’s loans and setting the stage for the acquisition of monthly origination volumes.

iZettle: From Swedish Fintech Success To Europe’s Biggest Fintech IPO (Forbes) Rated: AAA

Swedish fintech iZettle announced last week that they intend on selling shares and launching an IPO in order to raise SKr2bn by listing on Nasdaq Stockholm. With plans to increase revenue by 40 per cent a year, iZettle aims to also break even by 2020.

With JPMorgan and Carnegie on their side as joint global co-ordinators, iZettle would like to walk away with at least SKr10bn ($1.1 billion) by the end of this month or June.

 

International

The Top 100 Venture Capitalists (CB Insights), Rated: A

For the third year in a row, CB Insights partnered with The New York Times to provide an algorithmically-driven view into the question of who are the top VCs. Not swayed by narrative or a storied history in venture capital, the NYT-CBI rankings provide a current view into the best venture capitalists in the world at an individual and firm level.

Some of the top movers in 2018 include:

  • Steve Anderson of Baseline Ventures who moved from 10th place to 2nd due in part to a consistent knack for investing early in winners.  His stellar track record saw another success in recently public ecommerce company Stitch Fix.
  • And Rob Hayes of First Round Capital saw the most significant jump going from 85th to 7th for leading investments in Uberand Square.

First-time appearances on the ranking include Shawn Carolan of Menlo Ventures (investor in Roku), Meyer Malka of Ribbit Capital (investor in Credit Karma), and Albert Wenger of Union Square Ventures (investor in MongoDB).

Tech firms will be regulated like banks in future (The Finanser) Rated: A

First, we have become addicted to technology. We live our lives staring at our devices rather than talking to each other or watching where we are going.

Second is privacy. Facebook and other internet giants are abusing our privacy rights in order to generate ad revenues, as demonstrated by Cambridge Analytica, but they’re not the only one.

Third is that the power of these firms is too much. When six firms – Google (Alphabet), Amazon, Facebook, Tencent, Alibaba and Baidu – have almost all the information on all the citizens of the world held digitally, it creates a backlash and a fear.

 

Bitbond’s Loan Transfers Using Bitcoin Are Becoming More Popular (BTC Manager) Rated: A

Global peer to peer marketplace for small loans, Bitbond, allows clients the option to transfer their loans by using bitcoin. The bitcoin startup has seen its popularity grow, with the startup managing around $1 million in loans per month for 100 clients.

The revelation was made in an interview by Reuters TV with Bitbond’s German founder Radoslav Albrecht. He said the rationale behind the move is that it will help reduce the foreign exchange cost for clients.

The Benzinga Global Fintech Award Finalists For The Best Under-Banked Or Emerging Market Solution (Benzinga) Rated: B

The finalists for the Best Under-banked or Emerging Market Solution category are:

Airfox
Braviant Holdings
CreditStacks
Elevate Credit
Experian MicroAnalytics
Finn.ai
Humaniq
ID Finance
LenddoEFL
MoneyLion
Oakam
Self Lender, Inc.
Teller

Australia/New Zealand

Three disruptive forces driving Aussie neobanks like volt, as fintech startups get serious (Australian Financial Review) Rated: AAA

In a significant milestone for the local fintech scene, the Australian Prudential Regulation Authority said last week volt bank would become the first recipient of a “restricted license” under its new regime, created after the federal government indicated it wants to see more competition in banking.

Here come the robots: First digital financial advice gets green light (NZ Herald) Rated: A

Already under pressure from reputational challenges, New Zealand’s human financial advisor workforce will now have to go head to head with computer-generated advice.

KiwiSaver provider Kiwi Wealth has today received the green light to be the first to offer personalised digital financial advice and will launch the service to its KiwiSaver members next month.

Kiwi Wealth, which is owned by the Government, ACC and the New Zealand Superannuation Fund, and is a sister company to Kiwibank, is the first to gain an exemption from the Financial Markets Authority.

India

Deifying big data (Business Line) Rated: A

The fusion of big data with artificial intelligence is creating this beast called ‘data capitalism’

The world is shifting from finance to data-capitalism. The man with data is the king. Data-rich markets will destroy the existing order, money will no longer be in its pre-eminent position, labour markets will be uprooted and millions of jobs endangered, firms thrown out of business, and so on.

From solving habitual tasks to affordable interior designs – your startup fix to start the week (Your Story) Rated: A

The rules of investment have changed over the years, and peer-to-peer lending is being viewed as an investment avenue that is expected to give returns to the tune of 18-22 percent, according to industry estimates. Bengaluru-based Finzy is trying to tap on to just that. Amit More’s background in finance had him excited about the credit opportunity in India. He teamed up with Abhinanadan Sangam, and the duo chose to set shop in the ripe Indian digital lending market. Finzy was incorporated in October 2016 with Bridge FinTech Solutions Pvt Ltd as the parent company.

Asia

Keeping Loan Sharks Away From Indonesia’s Fintech Archipelago (Bloomberg) Rated: AAA

Indonesia is planning to tighten regulation of its vibrant financial technology sector, imposing new rules on companies which it hopes will stand at the forefront of efforts to extend services to more of the country’s 260 million people.

Peer-to-peer lending jumped 38 percent in the first two months of 2018 from a year earlier, hitting 3.5 trillion rupiah, and OJK director Eko Ariantoro said in March that regulators “don’t want these developing fintechs to become loan shark-like businesses.”

Asia news roundup: Didi responds to passenger killing, Flipkart founder exits, and more (Tech In Asia) Rated: B

Julo raises US$5 million in series A (Indonesia). The peer-to-peer lending startup received the funding in a round led by Skystar Capital and East Ventures. Participating investors included Convergence Ventures, Provident Capital, and Central Capital Ventura, among others.

Authors:

George Popescu
Allen Taylor