We’ve all been there: Wasting too much time navigating crowded malls and waiting on countless lines in search of that perfect gift. When online shopping became mainstream, many shoppers waved goodbye to the inconvenience associated with traditional brick-and-mortar retail, and elected to make purchases over the internet. Savvy shoppers found that they can buy the […]
We’ve all been there: Wasting too much time navigating crowded malls and waiting on countless lines in search of that perfect gift. When online shopping became mainstream, many shoppers waved goodbye to the inconvenience associated with traditional brick-and-mortar retail, and elected to make purchases over the internet. Savvy shoppers found that they can buy the items they want—usually at better prices—without ever leaving the comfort of their home.
The dynamics that make online shopping a much more convenient and pleasurable experience are also impacting the way consumers apply for loans. Technology-savvy customers would prefer to avoid the hassle of driving to the branch and completing mountains of paper work when all these processes can easily be performed through a laptop, smartphone or tablet. New technology has inspired a whole universe of online lenders that are successfully tapping into consumer trends by offering easy access to consumer loans at attractive rates—all without the overhead of maintaining branches. It’s a reality that only continues to gain momentum. For example, American Banker reports that online lending grew a staggering 700 percent over the past five years. And, Chase Auto Finance just reported that 20 percent of consumers have already secured an auto loan online, and 47 percent indicated they would do so if the technology was available.
The choice is that stark. Online lending is not a trend, it is mainstream. Banks, credit unions, and finance companies face a simple choice in dealing with this competitive threat: launch their own branded online lending solution to satisfy the changing demands of customers, or don’t, and watch their customer base evaporate.
Adding online lending capabilities—and creating an optimal experience for consumers—is a necessity for any traditional lender. Implementing a program is not complicated or expensive—if you chose the right solution. It shouldn’t detract from branch activities; in fact, online lending allows financial institutions to extend core value propositions into the digital marketplace. There are just three simple rules to follow: flexibility, convenience, and security. For lenders, flexibility is essential. The freedom to change lending programs and rules in short order gives the financial institution the opportunity to aggressively compete in a crowded marketplace. Consumers, for their part, want convenience. This means expediency, simplicity, and accessibility from any device and any location. In their mind, the application is the means to an end. So, creating an online experience that enables customers to complete the application quickly and securely helps them achieve their objectives. And, all parties in the lending ecosystem require strong authentication and security tools to verify online applicants and to keep their data safe.
Lenders looking to successfully implement online lending programs must evaluate several criteria to choose the loan origination system that works best for their needs. These attributes include:
A configurable platform that allows the lender to create, change and manage all lending forms, rules, decisioning parameters and workflows, without having to resort to time-delaying IT resources
Auto-decisioning capabilities that expedite loan approval
Robust authentication technology (ID) that utilizes advanced algorithms and big data
A responsive consumer portal that is optimized for mobile devices, and securely stores customer data
Auto-save features that securely store customer data so that customers can start an application on one device, save it, and complete it on another device when they’re ready
A single sign-on that is integrated with the lender’s database, enabling all pertinent personal information to automatically transfer directly into the loan application
The ability to cross sell ancillary loan products during the approval process
Enabling consumers to open new accounts, such as a checking, within the loan application process
Facilitating upload of documents, images and other loan stipulations from scanners and camera phones
All these features and capabilities represent the bare minimum that a robust LOS platform should deliver—anything short of these will put the institution at a distinct disadvantage. On top of that, the LOS vendor should have a strong support team that is experienced in helping lenders make the transition into online lending.
There’s no better time than now for traditional financial institutions to offer their own online lending programs. The market trends are obvious; it’s time to regain market share. Online lending is straightforward, profitable, and most importantly, what the market demands.
As co-founder and president of Teledata Communications, Inc., Bill Nass is responsible for the company’s sales, marketing, product development and strategic third-party relationships. Bill has over 25 years of experience in the lending sector, and is actively involved with several industry associations. In addition, Bill serves on the American Financial Services Association’s (AFSA) Associate Advisory and E-Commerce Committee. Bill holds a B.A. from the University of Maryland.
Americans spend over $400 billion out of their pockets on hospital expenses each year. The growth in healthcare costs has far outstripped inflation. Understandably, this has led to an increase in insurance premiums. In fact, if premiums were to cover all the benefits that a patient needs, they would be unaffordable for most Americans. As […]
Americans spend over $400 billion out of their pockets on hospital expenses each year. The growth in healthcare costs has far outstripped inflation. Understandably, this has led to an increase in insurance premiums. In fact, if premiums were to cover all the benefits that a patient needs, they would be unaffordable for most Americans. As a result, benefits have decreased to make healthcare insurance more affordable. This has led to an increase in health plans with high-deductible expenses within the last five years.
According to Bankrate’s’ latest financial security index survey, 34 percent of American households experienced a major unexpected expense in the last year. Only 39 percent of survey respondents said that they would be able to cover a $1,000 setback using their savings. So an unexpected medical situation can push 60 percent of Americans into instant financial turmoil. Parasail was born out of the founder’s experience with a similar medical emergency.
How Parasail Makes Healthcare More Accessible
Parasail help patients plan, manage, and pay for medical expenses and helps healthcare providers (hospitals) collect more with zero-percent interest payment plans and financing. Patients can focus on treatment instead of payment because Parasail offers a suite of products that make medical bills affordable so that healthcare providers get paid right away. Affordable patient plans and patient financing empowers patients to make the right decisions for their health.
Hospitals collect 15 cents for every dollar spent on healthcare in the U.S. in a nation where the No. 1 reason for personal bankruptcy is hospital bills. Managing patient payments has become a major headache for hospitals. Parasail helps them secure predictable revenue so they can focus on healing and lowering default rates.
They underwrite the individual customer and ask the hospital to give a subsidy to cover the cost of capital. The startup then funds the hospital immediately and collects from the patient through an amortized schedule of payments.
The company uses both traditional and alternative data and machine learning algorithms for loan application processing. They can approve loans in 60 seconds. They have developed an in-house software that integrates with hospital systems and gives staff a dedicated suite of tools to engage better with patients and speed up results. Patients may also apply for financing from their smartphones or computers with no effect on their credit. Parasail sends an email or text invitation to patients to enroll in a payment plan and the patient gets approval for a plan they can afford. The company is also developing a white label solution for hospitals.
Parasail’s integration with billing companies and healthcare providers is the key component of it’s go-to-market strategy. The company integrates its offerings with its partners to offer a payment option to patients outside of the hospital’s system. Parasail ProPatient gives payment plans for the entire repayment period, and patient interest rates remain at zero percent for the entire term. Many alternative lenders offer recourse lending, but if a patient misses a payment or defaults on the loan, then the hospital has to repay what they were advanced. With Parasail, they assume the risk and therefore take the loss.
To date, the company has onboarded over 20 hospitals and has served over 20,000 patients. The product has a very high conversion rate for a consumer-lending product.
The Genesis of a Good Idea
Todd Kimmel is the company’s chairman and co-founder and came up with the idea with CEO and co-founder Adam Tibbs. Tibbs’ wife had an accident in 2014 that resulted in more than $11,000 in medical bills. The frustrations involved in paying and dealing with healtchare insurance led Tibbs and Kimmel to a groundbreaking idea. Parasail got off the ground in 2015 when they raised $7 million in seed money from Peter Thiel, Montage Ventures, and Arbor Ventures.
The company created a win-win platform that helps patients plan finances better through zero-interest loans. Parasail is focused on partnering with healthcare providers so they can help them recover a much larger percentage of their invoices.
The Size of the Market and Future Potential
The healthcare industry is a $3 trillion market. Tibbs believes $400 billion of out-of-pocket patient expenses will grow to $1 trillion in the next five years. He also predicts that consumers will ultimately be responsible for the first $5,000 of healthcare as the size of deductibles rise.
Parasail a massive opportunity and continues to scale and partner with hospitals. Its aim is to make healthcare affordable, and they are obsessed with finding a means to work directly with consumers at affordable pricing. They also plan to roll out four other products in the near future. A partnership with Lively, a Health Savings Account (HSA) platform for employers and individuals, helps patients pay off hospital bills with pre-tax dollars. Parasail has strong investors and proof of concept locking in the pole position a very lucrative healthcare financing market.
There were an estimated 1 million cyber attacks targeting online lending transactions in 2016, with total losses projected to be above $10 billion. This fear has some online lenders setting policies for new account creation that are too strict. For instance, Kabbage CEO Rob Frohwein recently shared that his company was rejecting as many as […]
There were an estimated 1 million cyber attacks targeting online lending transactions in 2016, with total losses projected to be above $10 billion. This fear has some online lenders setting policies for new account creation that are too strict. For instance, Kabbage CEO Rob Frohwein recently shared that his company was rejecting as many as 3% of its daily online loan applicants but noted that that some legitimate borrowers were likely included in the lot. Kabbage is not alone in establishing fraud policies that are too conservative; it’s become the norm for many lenders. Fundamentally, they don’t have the confidence – even after doing identity data checks – that a borrower is who they say they are. But it’s possible to be smarter about fraud without alienating potential applicants – and sacrificing the lifetime value of a good relationship.
Sophisticated online lenders are adopting more advanced fraud prevention measures that keep fraud in check without being overly conservative, and declining good borrowers. Specifically, they are refining their identity verification strategies with more mature solutions that utilize quality data, sophisticated data science, secure pipelines capable of ingesting these quality data sets and machine learning models. These evolved practices help them expedite applicant onboarding and approvals while safeguarding against fraud.
When talking about identity verification maturity with customers, I find that it’s helpful to discuss it using a progressive 4-stage scale. As companies advance up the scale, the faster they are able to move applicants through the pipeline, with confidence they are minimizing fraud. Each stage builds on the previous one, allowing organizations to ensure higher accuracy as they move forward.
The stages are broken down like this:
Stage #1: Not identity proofing yet. Most if not all online lenders have progressed past this stage and take at least some steps to verify the authenticity of applicants. However, in smaller transaction markets, or niche spaces, it’s common for organizations that have yet to be hit by fraud to do no identity proofing.
Stage #2: Verifying a single identity attribute. The first step that online lenders take to protect themselves is often rather minimal, they focus on a single factor to authenticate new borrowers. Common data points to check include the age of email (to verify its been in use for a long period of time), just an address or phone number.
Stage #3: Multiple identity attribute verification. Online lenders that verify multiple attributes are not only able to authenticate applicants more confidently, but also more readily identify good borrowers. Stage #4: Holistic identity verification. This stage involves verifying multiple identity attributes aren’t just accurate but all link back to the applicant applying for the loan. In a single search it’s possible to verify a name matches a home address, matches a phone number, matches an email and so on. When searching for linkages between the person and the address, email, phone and related people, it is a significant signal of risk if these cannot be established.
The use cases for identity linkages are broad. Take, for example, synthetic identity theft. In this scenario, a criminal combines real (often stolen) and fake information to create a new identity, which is used to open fraudulent accounts and conduct fraudulent financial transactions. Because “real” details can be verified alone, it is imperative to verify all of an applicant’s attributes connect together.
Stage 4 also unlocks a powerful new set of opportunities to leverage machine learning, sophisticated data analysis and data science that aren’t possible with simpler methods of identity verification. When a whole identity is considered, a world of networks, history and patterns can begin to be tapped for increased speed and accuracy.
Identity networks are extremely valuable to online lenders because they can see signals across millions of transactions and multiple applicants for a real time understanding of identity element velocities, transactional frequencies, and linkage histories. Machine learning and sophisticated data science can be applied to analyze these transactions to learn and adapt to patterns across different industries.
For the fastest identity verification, some identity data services are distilling the result of their sophisticated verification processes into a single number or a score for easy, real-time rule building or integration into a risk model.
Find More Borrowers Faster with Holistic Identity Verification
In an age where borrowers have so many lenders to choose from, lenders need to have a seamless onboarding process or risk losing borrowers to the competition. Key to this ability is having confidence in an applicant’s identity. One of the simplest and fastest ways to do so is holistic identity verification.
When every applicant has the potential to become a return borrower, it’s worth taking a step back and to make sure you are not too risk averse. Having a mature identity verification practice enables lenders to provide faster and more loan approvals for legitimate applicants, reduce fraud and lower good borrower rejection so they can compete and thrive.
Tom Donlea leads the global marketing efforts of Whitepages Pro, the worldwide identity verification data provider for risk management in banking and online lending. With over ten years of online payments and risk experience, he previously was the founding executive director of the Merchant Risk Council.
News Comments Today’s main news: Patch of Land expands debt facility to $30M. Over 3,500 firms give up permission to advise on P2P agreements. Tencent leads $146M in startup called Futu. Old technology costs Australian advice industry. Today’s main analysis: May 2017 loan approval rates drop at banks, alt lenders. Today’s thought-provoking articles: Why banks are going to survive […]
Loan approval rates drop at banks, alt lenders in May 2017. AT: “The drops are slight and are about the same for big and small banks as well as alternative lenders. There was an increase for institutional lenders. This is only one month, so there’s no evidence of a trend where banks are concerned. It’s a different story for alt lenders who have seen decreases for almost a year.”
Why banks are going to survive. AT: “This is the best read of the day. I learned a new term: Platformification. Banks have it going on, and it looks like this is the future of bank-fintech partnerships.”
5 tips for real estate crowdfunding. AT: “Written for people new to RECF. I like how this article identifies two platforms for non-accredited investors, which doesn’t happen much in articles like these.”
Patch of Land, an online real estate lending marketplace using a technology-rich crowdfunding platform, has expanded its senior warehouse debt facility with SF Capital from $10 million to $30 million. SF Capital, a private investment firm with a flexible, long-term investment focus, began its lending relationship with Patch of Land in 2015.
The expanded debt facility provides Patch of Land greater flexibility in funding loans to support the company’s growing mortgage loan origination volume. It also complements the company’s robust crowdfunding network and enables Patch of Land to expand its pre-funding efforts to continue to meet the unique lending needs of real estate investors. The move is part of company initiatives designed to improve the borrowing experience for real estate entrepreneurs and, at the same time, expand access to residential and commercial real estate investing.
Loan approval rates at big banks ($10 billion-plus in assets), small banks, alternative lenders and credit unions dipped slightly in May 2017, according to the latest Biz2Credit Small Business Lending Index, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com.
Small business loan approval rates at big banks fell two-tenths of a percent from April’s 24.3% figure, a post-recession high, to 24.1% in May 2017. The drop comes after approval rates at big banks climbed for most of the year.
Loan approval rates at small banks also dropped in May to 48.8%, down from April’s 49% figure. Small banks have flirted with the 50% mark, but have not reached it since October 2014.
Institutional lenders loan approval rates in May improved slightly to 63.8%, another new high on Biz2Credit’s index. It marked the fifth time in the past six months that this category of lenders showed an increase in funding approval percentages.
Loan approval rates dropped at alternative lenders by two-tenths of a percent in May, as non-bank lenders granted 57.7% of the funding requests. This marks nearly one year of consecutive decreases for this category of lenders.
Loan approval rates at credit unions dropped one-tenth of a percent in May to 40.5%, another new low for this category of funders on Biz2Credit’s index.
In 2016 alone, global venture investment in fintech grew by 11% to $17.4 billion in 2016, according to data provided by PitchBook.
Platformification is the bundling together of multiple services onto one online platform, and provides an efficient, automated and integrated customer experience.
Why does platformification matter now?
However, 59% of banks (according to an Accenture study) are creating full-stack platforms.
Banks must effectively bundle multiple online products together and monitor how customers interact with those products to deliver a differentiated and compelling customer experience, ultimately affecting their bottom line. According to Gartner, we are just at the beginning of this trend, as it predicts that by the end of 2019, 25% of retail banks will use startup providers to replace legacy online and mobile banking systems.
LendKey is leading the movement
LendKey pioneered the “lending as a service” model back in 2009 and already works with nearly 300 banks and credit unions nationwide to create custom, white-labeled online lending platforms.
Among the hundreds of credit unions and banks using LendKey’s tailor-made platformification service are Navy Federal, WSFS Bank and McGraw-Hill Federal Credit Union. When a student decides to take out a loan on Navy Federal’s website, the customer experiences platformification without knowing it in the form of a lending portal from LendKey, an ID portal from IDology and a signing portal from DocuSign, yet all three are delivered via a seamless process.
How the industry applied platformification
Aside from LendKey, Wells Fargo has distinguished itself in the industry as being particularly open to platformification.
Now, through platformification and customer demand, SigFig allows Wells Fargo customers to build, implement and rebalance tailored portfolios online, based on responses to investing questionnaires.
Because of platformification, banking has essentially been reinvented. Banks and financial service providers are no longer constrained by slow and inconvenient systems.
Avant, for instance, successfully launched their first bank partnership in September 2016 with Birmingham-based Regions Bank, a top 20 bank with over $136 billion in assets under management.
Prosper told Bloomberg that it verifies identities and bank accounts for all of its loans, and that it has “developed some of the industry’s leading risk-mitigation controls.”
A Lending Club representative told Bloomberg that the company uses “machine learning and other techniques to build robust models that segment which borrower applications need verification and which do not.”
According to the research, 44 percent of non-prime Millennials conducted personal research about how to manage their own finances, compared with 47 percent of prime Millennials. Despite these nearly equal efforts, non-prime Millennials – those with credit scores below 700 – are twice as likely to experience significant stress due to their finances and are about half as likely to feel satisfied with their financial situations.
The root of these challenges may come from how non-prime Millennials were taught about personal finance early in their lives. The study also found that non-prime Millennials:
Didn’t benefit as widely as their prime counterparts from seeing how their parents managed their finances, with only 49 percent stating they learned from their parents’ example, as opposed to 61 percent for primes
Were less likely to be actively taught financial management skills from their parents, with 1 in 5 receiving this parental education, compared to one in three of their prime counterparts who received instruction at home
Are more likely to learn financial skills via trial and error (72 percent, compared with 41 percent of prime), which may explain how some Millennials became non-prime – learning by trial and error means non-prime Millennials likely made more mistakes that damaged their credit, as opposed to prime Millennials who may have avoided those mistakes altogether
All loans securitized in the transaction are whole loans purchased through a pro-rata allocation of the ‘near-prime’ loans originated on the platform by seven third parties unaffiliated with Lending Club, according to a Kroll presale report.
ABS investors told <i>GlobalCapital </i>they were receptive to the online platform’s decision to do ….
The new valuation tool is from LendingTree, which announced Wednesday that it is rolling out a new home valuation feature within its financial intelligence platform, My LendingTree.
According to details from the company, any of My LendingTree’s 5 million current users (or anyone else who signs up for the service) will now have the ability to get a valuation of their home within LendingTree’s system.
The company says that its home valuation tool “leverages a proprietary home valuation model that estimates home value by accessing third party data and tracking it to visualize the user’s home value data trends over time.”
According to details from the company, My LendingTree users that have a mortgage have an average home value of $310,000 and an average mortgage balance of roughly $178,000, which translates into roughly $132,000 of “untapped home equity” on average.
And the company wants to help its users “tap into” that home equity.
As seen in the image below, users are then shown the total equity they have in their home and encouraged to get a home equity loan, if they are interested.
According to LendingTree, the company “has facilitated more than 65 million loan requests” since its inception, and the company’s network currently includes more than 500 lenders offering home loans, personal loans, credit cards, student loans, business loans, home equity loans/lines of credit, auto loans and more.”
IBM has since leveraged the industry expertise of Promontory’s workforce — made up of ex-regulators and banking executives — to teach Watson all about regulation, risk, and compliance. The first batch cognitive tools covers three areas: Regulatory requirements, financial crime insights, and financial risk modeling. The Watson-powered software is available today via the IBM Cloud.
Loh was hired to launch Betterment for Business just over a year ago, and now, Betterment for Business’s management team is completely women-run. They work with over 400 companies and are growing at a fast clip.
What made you decide to make a career switch into fintech?
I spent a decade in asset management and I was considering a couple of different factors. I took a hard look at the trends going on in the industry and saw how technology was affecting finance. Then, I looked at my own experience to make sure I had utility for the next 30 years of my working career. That’s when I made the move into the tech sector.
What advice would you give to people thinking of making the switch from traditional financial services into tech?
For me, it was all about looking at the financial services industry. I would recommend reading Reid Hoffman’s ‘The Start-up of You,’ which asks you to look at your life like a startup. It makes you question things like what skills you need to acquire and where do you need to raise capital. Something I always hear from candidates is that they’re not ready to take that risk. My advice to make sure you’re thinking of risk in the right way. Staying at a big bank in the short term is secure, but in the long term, will you have a skill set that anyone wants to hire?
To invest in real estate, you can do it the old-fashioned way, buying a property with a loan or cash, then collecting rent or fixing it up to sell. Or you could invest in a real estate investment trust, a kind of fund that buys residential, commercial or industrial properties.
Or you could do it the 21st century way, with a real estate crowdfunding company, which pools investors’ funds to make loans to home flippers or to buy residential and commercial properties. Interest and rent earned on those deals is passed back to those who supplied the money.
Most platforms have been limited to “accredited investors” – people with at least $1 million in liquid assets or annual income of at least $200,000. But rules are changing fast, so stay tuned if you don’t qualify now. Realty Mogul and Fundrise allow non-accredited investors.
One of the industry’s big names, RealtyShares, currently offers a number of opportunities with handsome projected returns if all goes as planned, such as 9.5 percent on a Church’s Chicken restaurant in Huntsville, Alabama, 11 percent on a single-family home in Jacksonville, Florida, and 14 percent on a home being built in Los Altos Hills, California.
Know the rules. Most experts urge investors to consider real estate crowdfunding to be a long-term investment, since real estate holdings and debt are not as liquid as stocks, bonds or mutual funds. Equity real estate investments are considered long-term holdings, while debt investments may produce returns more quickly, but pay less in the long run.
Watch for risk.
Don’t overdo it. This is a new industry and sure to experience growing pains, so don’t bet the farm.
Don’t get greedy. As with other investments, higher returns generally come with greater risks. The real estate market could sour, rising interest rates could undermine property values, the borrower may turn out to be less competent than your site thought, especially if the project involves a fix and flip.
Know your partners. Obviously, it’s important to research the platforms you use, but also dig for information on the other investors.
Cetera Financial Group® (“Cetera”)*, a network of independent firms supporting the delivery of professional financial advice through trusted financial advisors and financial institutions, and Cetera Financial Institutions (“CFI”) today announced the launch of a new portal designed for CFI-affiliated advisors and clients to streamline and simplify the process of identifying and purchasing insurance solutions. Cetera Financial Institutions is the Cetera firm specifically focused on serving the wealth management programs of banks and credit unions.
The portal was developed in coordination with Covr Financial Technologies, an innovative technology firm that provides consumers with access, education and the ability to purchase insurance policies in conjunction with financial advisors.
CFI’s new insurance portal is designed to increase application processing speed and improve case management efficiency for advisors, among other functions. It also creates a more simplified and straightforward experience for both advisors and clients in identifying and purchasing life, long-term care, disability and other forms of insurance. The CFI-branded portal functions as an integrated offering within Cetera’s existing SmartWorks® advisor workstation, and has been custom-built to serve the needs of the full Cetera Financial Institutions insurance team — from sales to operations to case management. Cetera anticipates incorporating the insurance portal into its MoneyGuidePro® financial planning solution within the next month.
Moreover, 79% of advisors believe there will be more opportunities than challenges in the next 10 years, the survey found.
But 44% of advisors say they’re providing additional services to their clients without charging them, while 40% say they’ve been spending more time on each client but haven’t raised their fees, according to Schwab.
In addition, 24% of advisors believe that investing in technology to build scale isn’t offsetting the expense, the survey found. Nonetheless, most advisors are still confident technology will help them: 76% think technological advances will let their companies stay ahead of the competition, according to Schwab.
Global Debt Registry (GDR), the asset certainty company known for its loan validation expertise, today announced it is moving its headquarters to New York City as part of its overarching strategic growth initiative to be closer to the investor community. The Company also announced the addition of structured finance veteran, Michael Koenitzer, as Director of Business Development.
For as little as $5,000, InstaLend connects accredited investors to borrowers seeking to fund short-term residential real estate investments.
Qualified borrowers, such as property flippers use InstaLend to apply for flexible loan products including hybrid loans and Sub-630 FICO lending programs. All deals go through a vetting process when InstaLend underwrites the loan.
The report studies the industry for P2P Lending across the globe taking the existing industry chain, the import and export statistics in P2P Lending market & dynamics of demand and supply of P2P Lending into consideration. The ‘ P2P Lending ‘ research study covers each and every aspect of the P2P Lending market United Statesly, which starts from the definition of the P2P Lending industry and develops towards P2P Lending market segmentations. Further, every segment of the P2P Lending market is classified and analysed on the basis of product types, application, and the end-use industries of the P2P Lending market. The geographical segmentation of the P2P Lending industry has also been covered at length in this report.
Top Manufacturers Analysis Of This Research Report
A total of 3,555 firms have voluntarily given up the permission to advise on peer-to-peer agreements by cancellation or variation of permissions since April 2016.
The FCA informed B&C that around 15,000 firms were originally authorised to advise on peer-to-peer agreements.
Firms that have cancelled their permission for advising on peer-to-peer agreements include two distinct groups:
• Those which were formerly authorised to carry out the activity, but then ceased to be regulated entities by cancelling their permissions
• Firms which were formerly authorised to advise on peer-to-peer agreements, but removed the activity by varying their permissions while remaining to be authorised by the FCA for other activities.
Stephen felt there were a couple of key reasons why advisers may be slower to advise on the peer-to-peer space:
It’s a growing and complex industry with lots of operating models and different lending opportunities and risks
It’s not clear that existing professional indemnity insurance would cover advising on peer-to-peer lending, so this needs to be clarified ahead of an adviser undertaking these activities.
Unlike 19th and early 20th century evolutions, today’s technological shifts are steering us away from managerial capitalism and towards what many see as a more crowd-based iteration, Sundararajan said. Traditional hierarchical organisations and large, well-staffed companies that create goods and services are in decline. An alternative model is ascendant, one in which products are distributed not by a firm, but by a heterogeneous crowd. This economic structure blurs the lines between the personal and professional and between casual labour and full-time work.
Take Funding Circle, for example. Funding Circle provides small business loans through crowdfunded capital. Often as many as 200 people fund one loan, with some parties offering as little as £20 in exchange for a return.
Based on his research into these questions, Sundararajan believes “when we understand the evolution of trust we understand the evolution of business.” Rather than conventional handshakes and signatures, Sundararajan says that today trust develops from ‘digital cues’ — online information about individuals and organisations that we process and interpret to determine with whom to associate. Sundararajan identifies several digital cues that help us gather enough online information to inform our decisions on who to trust. These include government, third-party, or brand certification; reviews of Facebook and LinkedIn profiles; and digital peer feedback through sites like Yelp, among others.
Banks are not a panacea to the problems facing the financial advice market, David Geale has said.
The report also recommended a number of measures for the Financial Conduct Authority to take forward, aimed at giving firms the confidence to deliver streamlined advisory services focusing on specific consumer needs.
The review also highlighted the increasing role that technology can play in creating a more engaging, cost-effective advice market.
Mr Geale added that later this month the FCA would be publishing it’s baseline measures for judging whether the Financial Advice Market Review process had been a success over the next few years.
Insurance blockchain startup InsureX has announced that it will open its crowd sale on 11 July at 14:00 UTC. InsureX is building the first blockchain-based marketplace to be used for the trade and management of insurance products.
Chinese Internet giant Tencent Holdings Ltd. has led a US$145.5 million C round financing in Futu Securities, an online brokerage platform serving Chinese investors trading U.S. and Hong Kong-listed stocks.
If Li’s statement is correct, Futu Securities would become the latest addition to China Money Network’s China Unicorn Ranking, which includes 102 such companies worth a total of US$435 billion when the ranking was released in May 2017. Futu Securities would also become the first Hong Kong company to officially join the unicorn club.
Established in 2012, Futu provides an online stock trading platform enabling Chinese individual investors to trade U.S. and Hong Kong-listed stocks. Since its founding, the company has cumulatively served over 3.4 million customers who have completed over RMB500 billion (US$73 billion) worth of transactions. Annual transaction value reaching nearly RMB300 billion (US$44 billion) in 2016 alone.
How Chinese P2P lending institutional investors measure a platform (Xing Ping She Email), Rated: AAA
In China, P2P lending institutional investors usually conduct due diligence before they invest a platform. The following short report is a due diligence report of Caifuzhihui Inc. wrote by Xeenho, which briefly illustrates the procedures of the measuring method.
Caifuzhihui.cn is a P2P lending platform based in Xuzhou, Jiangsu province. The company mainly operates for car pledge, truck and real estate mortgages. Xeenho rated “BBBB” for Caifuzhihui.cn. The information of the platform is open and transparent, ready to accept due diligence from investors. The online interest rates of their loans are in high level, but there are relatively too much remaining funds in the platform.
Here are the points of Xeenho’s rating report on Caifuzhihui.cn.
Regional resource advantages and fewer counterparts in the area.
New business of truck mortgage is logic and reasonable, good security in use of funds an source of repayment.
Lack of local professional talents.
Transparent and open, ready for assault investigation.
Owing to policy support, getting better assets at lower cost.
Lack of strict verification to the mortgage of some pledged cars.
The platform has been profitable, while their qualification inspecting of partners needs to be improved, the investors cannot accurately judge the strength of them.
High level of interest rates in the industry and shorter-maturity give the platform certain investment value. However, there are too much remaining funds in the platform, investors should take into full account the idle loss.
Following years of explosive yet unchecked growth of P2P lending in China, the central government in August announced sweeping regulations to rope in the nascent sector. But Caixin reporters found that while some P2P lenders have been trying to follow the new requirements, others have managed to skirt the new rules.
In 2016, a total 2 trillion yuan in loans were made through P2P lending firms.
One area that Alibaba wants to dominate is finance for both consumers and SMEs and they are well on their way. Ant Financial, their financial services subsidiary, is executing on this vision and last week Eric Jing, CEO of Ant Financial, delivered a presentation explaining their approach.
Jing shared some hard numbers:
Alipay, their payment platform, has 520 million annual active users
Wealth management, Ant Fortune, has 330 million cumulative users with 17% year over year growth
Ant Credit Pay and Ant Cash Now have 100 million active users
Ant Insurance has 392 million users and is growing premiums at 43% year over year
Zhima Credit has 257 users and 95% year over year growth
PayPal only has 203 million active accounts. Charles Schwab has just 10.2 million accounts.
As for future growth, Ant Financial points to the fact that 30% of the adult worldwide population is underbanked, 80% of the worlds SMEs have no access to formal financial systems and 90% of the adult population in developing countries do not have a credit card.
In Q1’17, investments to European VC-backed fintech companies spiked to 73 investments worth $667M. At the current pace, total funding dollars to fintech companies based in Europe are on pace to surpass $2.6B and deals could surpass 2016’s total by 57%.
The Cambridge Centre for Alternative Finance (CCAF) at the University of Cambridge Judge Business School has launched its third European benchmarking survey and the second survey for Africa and the Middle East. The two separate research initiatives will review the emerging alternative finance markets in each of theses regions.
The CCAF defines alternative finance as innovative financial instruments and distributive channels that have emerged outside of the traditional financial system. This includes crowdfunding and peer-to-peer (P2P) lending activities.
The forthcoming surveys on Europe and Africa & the Middle East build upon their multi-year research agenda to provide the best available source of industry data on a country-by-country basis.
The survey data will be collected directly from over 350 alternative finance platforms across 90+ countries in Europe and Africa & the Middle East with the aim to capture over 90% of visible online alternative finance market.
The results of the survey will be made freely available for all in the two industry reports and are expected to be published in the third quarter of 2017.
The boss of banking software firm Misys is to take the helm of a new £1.7bn company called Finastra that has been formed from the British company’s merger with Canadian rival DH Corp.
Nadeem Syed has been named chief executive of the giant fintech business, which is owned by Vista Equity Partners and is the world’s third biggest financial software provider behind competitors FIS and Fiserv.
The majority financial advice firms are still choosing to rely on Microsoft Excel as their primary source of administrative software despite a range of financial software products coming to market, YTML said.
According to the financial technology provider’s anecdotal evidence, eight out of 10 practices are still using Microsoft Excel as a dependency in the advice process.
YTML co-founder and chief operating officer Piew Yap said this software gap is preventing advisers from taking advantage of the time and cost saving measures which updated and tailored technology solutions can provide.
One of the main barriers to taking up new technology, according to YTML director Terri Ho, is the reality that many software providers prefer to operate in silos – or “don’t talk to each other”. According to Ho, advisers are operating a number of different technology platforms to service client needs but are still having to manually enter details across all.
National Payments Corporation of India (NPCI) has revolutionised Indian Payment Industry and has removed friction. Newer payments platforms like IMPS, UPI, BBPS etc have solved payment and collection problems of all customer segments. NPCI has change the market by standardising and securing APIs across banks. UPI is classical API use case, which is simplifying mobile payments for P2P as well as Merchant Payments.
On the lines of payments, there is urgent need to revolutionize Lending in the country through technology intervention by an organisation similar to NPCI. I am calling the entity as National Lending Corporation of India (NLCI) for now.
High level flow of Lending Process (and the APIs) is given below:
Loan Request API (sent by Retail Borrower): Standard API for request for loans from a specific person (like VPA of the lender in UPI parlance) or for generic listing of loan requests. This would include the amount of loan, expected duration (range), type of loan (EMI based).
Data enrichment of Loan Request API (by NLCI) : Aggregation of critical customer credit data from CIBIL and key alternate sources for sharing with lender.
Loan Inquiry API (Retail or Institutional Lender): This entity would be able to run inquiry for a loan based on key inputs like expected Credit Score, Amount, Type of Customer etc. Incase, the loan request is sent specifically in their name (i.e. VPA), the loan request would be available in their queue for acceptance or rejection (similar to UPI collect request).
Loan Confirmation API (Retail or Institutional Lender): Lender would be able to approve the loan or reject the loan.
Loan accounts would be maintained to NLCI platform for accounting and processing.
BlueRock Wealth Management Inc., a wealth management firm that provides personalized financial advice and services, has announced that it is offering FutureVault’s Digital Collaborative Vault – called the BlueRock Vault – as an exclusive service to its executive and high-net-worth clients.
The new service will allow BlueRock clients to securely deposit, store and manage important financial, legal and personal documents. FutureVault’s patent-pending Trusted Advisors feature will enhance the sharing and fiduciary tracking of vital documents between BlueRock clients and staff in addition to a client’s external network of Trusted Advisors (i.e. lawyers, accountants, insurance brokers, etc.) providing complete transparency and new levels of trust.
News Comments Today’s main news: Small businesses hate fintech lenders more than big banks. All is not well in the world of student loans. UK equity crowdfunding investments set new record in March 2017. Lending Works registers 8.8M GBP in ISA since launch. Today’s main analysis: VC funding report. Small biz lending approval rates. Today’s thought-provoking articles: Portfolio review – […]
All is not well in the world of student loans. GP: “There are many parallels between credit crisis in general: investors wrong feel of safety is, I think, the main one. And in this case student debt can only be releaved in bankruptcy in very exceptional cases, in short, nearly never. So investors feel that student debt is safe. The same way as mortgages perhaps? I think we are far away from a crisis or bubble. However student debt is growing and questions have to be asked of where this is going and why. Brian from BlueElephant told me one day that any market that is being skewed by government intervention from its normal equilibrium should be avoided as the price doesn’t reflect the risk. Is the government skewing the student debt market? Certainly. I have no issue with the risk in the student debt market, I am worried about the price pressure from non-profit participants. ” AT: “Lenders need to get better at judging risk and cutting down on defaults.”
Small biz lending approval rates. GP: “We now see for a few quarters an improvement in small bank’s approval rate for small business loans.”AT: “Small banks and institutional investors are doing better at approving loans than big banks and alt lenders. I wonder what this means. Could be a trust issue.”
Small businesses hate fintech lenders more than big banks. GP:”As a small business you have a choice to borrow money below 10% from a bank, a product you will not qualify for, or to borrow moey from MCAs and fintech at rates often above 20%, a product you will nearly always qualify for. Who do you have more? The people who have a great product they don’t want to sell to you or the ones who have an expensive product you have no choice but to buy? To me this is a huge issue for the SME fintech lending sector. This means that as soon as credit from any other institution is anywhere close to being competitive the small businesses will not use a fintech offering. The second question is why are fintechs ranked so low? My personal believe is that it’s due to the onerous terms fintech usually charge small businesses especially in comparison to banks. “AT: “This is interesting. Significant is the fact that this data comes from successful applicants, not non-borrowers. Driving this data could be the varied nature of borrower profiles. Small banks are likely lending to prime borrowers whereas online lenders are heavily weighted toward sub-prime borrower who likely expect to be treated like prime borrowers and can’t get a loan from a bank. This requires further investigation.”
VC funding report Q1 2017. GP:”Unaccredited investors had no scalable legal way to invest in private stocks before. The money inventory for unaccredited investors is fixed or at best stable given the wage stagnation, and the small inflation. And I think crowdfunding also includes more entertainment thant the stock market with the benefit of often also receiving a product. “AT: “I think it’s interesting that fewer people in the U.S. are investing in stocks? Does that mean they are investing in crowdfunding asset classes?”
Should fintech startups buy banks? GP:”If you want a bank, there is rent, buy or build. These approaches are standard business questions. The real question is should you work with a bank or not. Why not an insurance company? Why not with another deposit taking structure that is not a bank? ” AT: “I don’t see why not. The most likely targets would be community banks, if they can get there before the big banks swallow them up.”
TransferWise exec would not set up shop in London today. GP:” I believe they are exagerating. It probably isn’t as obvious a choice as last year but where else will you find the capital, people and business environment that you have in London despite Brexit? London was a financial capital of Europe beore the EU, and will remain that way thanks to the internet. “
It is clear that burdensome student debt is now holding many people back financially. Student loan debt now stands at a staggering $1.3 trillion (as of the end of 2016) an increase of 170 percent over the preceding 10 years. There are three contributing factors to this increase:
More students are taking out loans.
The loans are for larger amounts.
Borrower repayments have slowed down.
Borrowers are now leaving school with over $30,000 in student loan debt and they are defaulting more. This is particularly true of those borrowers with balances of $100,000 or more. Over 20% of borrowers who left school in 2010 or 2011 owing that amount have already defaulted on this debt (a default means they are at least 270 days past due). That is an astonishingly bad default rate.
Loan approval rates at institutional investors and small banks improved in March 2017, according to the latest Biz2Credit Small Business Lending IndexTM, the monthly analysis of more than 1,000 small business loan applications on Biz2Credit.com. Big banks’ ($10 billion-plus in assets) loan approval were stagnant in the last month, but remained at an all-time Index high. Meanwhile, loan approval rates at credit unions and alternative lenders continues to falter.
On Tuesday, the Federal Reserve Bank of New York released its 2016 small business credit survey, which gives us an idea of the experiences of over 10,000 firms across the US. As Matt highlighted yesterday, one of the things we learn from the research is that small business expectations doesn’t tell us much about the economy. But we also get some information on how small business owners view various sources of credit. The results for fintech startups, specifically online lenders, are not as great as you might expect:
So, the hype about streamlining processes and building better customer experiences is not all hype, though they do just slightly worse in terms of transparency.
But there is something going on with the cost of credit provided by online lenders, and the terms they demand. The survey defines ‘online lenders’ as “nonbank alternative and marketplace lenders, including Lending Club, OnDeck, CAN Capital, and PayPal Working Capital”, so there are potentially two things going on here.
One is that online lenders typically have a higher cost of capital than banks, and so they also charge higher interest rates, which is what drives the dissatisfaction. The second is that online lenders are targeting riskier businesses, who wouldn’t be able to borrow from a bank. That would suggest the higher level of dissatisfaction about repayment terms and interest rates arises from the fact they are lending to businesses that generally encounter high borrowing costs, no matter who they are borrowing from.
The fintech has funded more than $4 billion in loans for 1.6 million customers by using machine learning to lower fraud scores while providing quick lending decisions based on data inputs for a high-risk borrowing group.
Revenues grew 34% to $580 million last year while operating income expanded to $48 million, up from $9 million in 2015. The fintech is still losing money; that typically is a large negative in the recent IPO market, though other offerings have rallied despite large losses.
In total, Elevate sold 14.26 million shares at $6.50 including the over allotment amount. The company raised about $81 million after fees.
The company has a fully diluted market cap of only $350 million using a share count of 41 million and nearly 4 million of outstanding stock options.
The reality is that Square had a very subdued IPO similar to Elevate Credit. The initial price range target was $11 to $13 while the actual offer price dipped to only $9, though Square jumped back to that original price range trading around $12 for most of the first month as a public company.
Banks buying startups isn’t anything new. But for financial tech startups, looking for scale at any cost, perhaps the solution would actually be to buy a bank, according to a growing number of observers and experts in the industry.
There are almost 6,000 FDIC-insured banking institutions in the U.S. as of the end of 2016 and 1,541 of them have less than $100 million in assets, including a sliver of failing banks that need saving. With average common equity around $12.5 million for a healthy bank of that size, a well-established startup could pay $25 million and get fully licensed to be deposit taking.
Part of the reason startups haven’t been able to scale, at least in the retail banking world, is that so-called innovations are usually just different ways for people to interface with their banks, while core banking transactions – deposits, loans, mortgages and payments – generally remain the same on the backend. In other words, there hasn’t truly been an Uber for banking, said Pascal Bouvier, a venture partner at Santander Innoventures. Most fintech startups operate at the thin outer layer of banking.
The valuation gap between fintech startups and banks makes it difficult to structure a deal, he said. Banks tend to be valued more through historical earnings and the price of tangible book value, whereas fintech startups, because of their perceived high growth potential, often tend to have higher earnings multiples.
While loans are issued in amounts between $1,000 and $40,000, Notes can be purchased for as little as $25.
If you invested $2,500 in only one borrower and that borrower becomes late and the loan eventually charges off, you could potentially lose 100% of your total investment amount. If you invested $25 in 100 different borrowers your potential loss on any single Note would be limited to 1% of your total investment amount.
In this episode listeners will learn about: – How rising household income impacts multifamily investments
– How property tax factors into decision making
– Where to access data on real estate markets
– What asset class RealSource is pursuing in this current economic climate
Approved launched its digital mortgage platform today, aimed at radically simplifying the home loan experience for lenders and borrowers nationwide. The company raised $1 Million in pre-seed funding led by Social Capital and Precursor Ventures to support the launch.
Lenders in the pilot saw an average 50% reduction in the time it took to get those documents.
Approved technology includes:
DocCast™: Automatically collect original bank statements, W2s, 1099s, 1040s and paystubs.
DocVision™ Camera Scanning: Allows borrowers to securely “scan” documents using their mobile devices.
White-labeled Dashboards: A delightful and frictionless platform for borrower and lender collaboration.
Digital Document Library: Support for all popular loan programs.
This record breaking figure smashed the previous monthly high, set back in July 2015, by over £13 Million. This made March 2017 the most successful month for the total amount raised via equity crowdfunding platforms in the young life of the asset class in the UK.
According to the data from OFF3R, equity crowdfunding had a very strong finish to 2016 but had so far had a slow start to the year.
The data revealed that March 2017 was a strong month for the sector. Just over £300 Million was lent in March via the platforms that form the P2P element of the OFF3R Index, including Zopa, Ratesetter and Funding Circle. This was marginally higher than February’s data but slightly down from January’s year to date high.
UK-based peer-to-peer lending platform Lending Works announced on Wednesday £8.8 million has been invested into the company’s Individual Savings Account (ISA) since its launch on February 8th.
Lending Works reported given that there are no limits on transfers of ISA funds accumulated in previous financial years, the largest individual investment to date within a Lending Works ISA stands at £154,190, while the average amount invested among the 815 ISA investors currently stands at £10,769.
UK POLICYMAKERS should start using peer-to-peer platforms to stimulate the economy, Funding Circle’s chief executive and co-founder Samir Desai said on Wednesday.
The head of the country’s third-largest business lender called on the government and the Bank of England to bypass the banking system and inject monetary stimulus via P2P platforms, capitalising on the direct access they provide to the real economy.
Boost Capital Secures New £15m Credit Line (Boost Capital Email), Rated: A
No end to Boost Capital’s growth spurt as the business funding specialist secures new £15m credit line to meet small business loan demand.
An extra £15m will now be available to UK small businesses, after alternative business lender Boost Capital secured a new credit line from American Investment Firm Atalaya Capital Management.
SME lending platform Growth Street has announced the appointment of a new commercial director and general counsel.
Chris Weller will serve as commercial director, having formerly held the role at Aldermore Bank from 2013-14 before becoming sales director for invoice finance until 2015.
Meanwhile, general counsel April Nardulli joins from P2P platform RateSetter, having served as senior regulatory counsel, regulatory lawyer and interim compliance manager since her appointment in 2015.
A year has passed since I last wrote about the portfolio I built on Finbee. Currently I have invested 1,027 Euro in 35 loans. 32 are current (965 Euro), 2 are late (23 Euro) and one is in default (38 Euro), but rates for this loan are paid to me by Finbee’s compensation fund. The average interest rate of my loan parts is 31%.
My self calculated yield (XIRR) is 31.5%. This is the highest I achieved on any p2p lending marketplace over a longer duration of time. Calculating the result again, this time with assuming a full write-off of the defaulted loan gives a yield of 29.4%.
Blockchain, NFC, Peer to peer lending are just a few of the options traditional banking could have fully adopted. This would have had a tremendous impact on the way we exchange transactions, do business and live our lives. However, I cannot name a big bank that has jumped on the bandwagon and delivered a fully-fledged product in this area. Just the opposite — the stories I hear are, for example, about two of the top executives of BNP Paribas in Bulgaria leaving the company to start their own Peer to peer lending platform called Klear. Why didn’t they initiate this project inside the organization?
I think there are two factors causing this:
Internal factor: Company culture in the traditional banking
External factor: The public image of banks is all about security, while innovation relates to risk.
Usually, new banking products need a lot of IT involvement — for each new type of deposit/loan you need someone to implement tens of forms and wizards.
How to enable innovation in banking
We have a good example of consortium of banks coming up with a radical move to start a joint blockchain project. This way none of the big players risks their own reputation.
Another way to announce innovative projects is by strongly focusing on the physical design and digital UX of the innovation because, believe it or not, the mass client judges how reliable something is by the external look of it.
According to Xero, 38 percent of small business owners indicate late payments cause them to delay payments to their suppliers, while 15 percent claim this often sees them delaying wage payments to staff, along with other benefits.
62 percent of businesses would not survive more than three months if all invoices went unpaid, while nearly 25 percent wouldn’t last a month.
Xero’s Live Contacts, a partnership with the local arm of credit bureau Equifax (formerly Veda) is one such data driven solution. As part of a paid-up Xero subscription, businesses can now see a credit risk indicator against a contact in their database, helping them to better assess whether to do business or not, or even risk adjust payment terms.
At the other end of the data spectrum, CreditMonk in India allows businesses to add a review of a creditor’s payment behaviour via its platform.
SINGAPORE-based Marvelstone Capital, which is a data-driven asset management company, is planning to launch its robo advisor platform for family offices in Asia in the third quarter of this year.
According to Cho, the robo advisor platform is being developed with Singaporean fintech startup Smartfolios, which is focused on building next-generation advisory and thematic investment technologies. The robo advisor will be available on desktop and mobile for Marvelstone Capital’s clients.
To give an idea of the market size of family offices in Asia, Cho cites a report that says that overall, the billionaires in the Asian market have about US$400 billion of assets at their disposal, which equates to an average of about US$3.6 billion per individual, which in turn makes all of them potential clients of family office solutions or even owners of single family offices. (Source:
Singapore-based MoolahSense, a marketplace lending platform, has added invoice financing as a new product line. The new service will allow SMEs to access financing to address short-term capital needs of up to $15,000. For investors, a nominal interest rate of up to 12% may be earned. An invoice backed loan would mature in 15 to 90 days’ time and investors would be able to receive returns in a relatively shorter period of time.