Monday July 2 2018, Daily News Digest

Monday July 2 2018, Daily News Digest

News Comments Today’s main news: Zopa is profitable again. Capital One limits access to alt lenders. SimpleNexus raises $20M. Funding Circle changes projected returns. Metro Bank launches digital bank in Australia. Today’s main analysis: Deep dive into Amazon. Today’s thought-provoking articles: Deep dive into Amazon. More Chinese P2P lenders fall under regulatory scrutiny. How blockchain can assist banks with consumer lending. SMBs access […]

Monday July 2 2018, Daily News Digest

News Comments

United States

United Kingdom

China

European Union

International

Other

News Summary

United States

Capital One restricts third-party data access, upsets customers (Payments Source) Rated: AAA

Capital One Financial Corp. is limiting how account data flows to outside apps for managing finances, prompting a backlash from the bank’s customers who say they have been locked out of their own information.

A technology upgrade led to the disruption, people familiar with the situation said. Plaid Technologies, whose software is used to connect banks with third parties, is unable to link with some Capital One accounts, according to the people, who requested anonymity because they weren’t authorized to speak publicly.

Slightly weak US GDP growth, Amazon Deep-Dive (PeerIQ), Rated: AAA

US Q1 GDP growth was revised slightly lower from 2.2% to 2% driven by lower-than-expected growth in services. This slowdown in growth seems to be temporary as the Atlanta Fed is projecting a blistering 4.5% GDP growth rate for Q2.

Amazon Treading Carefully with Its Financial Services Ambitions

A new report by CB Insights details Amazon’s “barreling into” the financial services sector, notably in payments and lending. Our view on Amazon is more sober.

In the absence of a clear regulatory swim lane, Amazon will continue to partner with financial institutions to provide lending services. The major lending products Amazon offers today are executed with highly regulated banking partners. Amazon for instance has developed co-brand relationships with JPM, Synchrony and AmEx.

Also, Amazon is courting major financial services institutions as customers of its cloud business so the company has a delicate balance that it needs to maintain between disrupting the financial services industry and losing its clients and partners.

Amazon’s Lending Products

Amazon has made a foray into consumer lending mainly with the help of co-branded credit cards. The company has also made ~$3 Bn in small business loans, but that standalone effort has now fallen to the wayside with the new small business lending partnership with AmEx.

Amazon’s international investments in fintech products have been concentrated in India where Amazon will finance commercial loans to Amazon’s sellers. However, unlike the model in the US where Amazon lends on its own balance sheet, Amazon will utilize a marketplace model with six participating banks at the outset. The lending program has grown 150% in the first five months of this year (total volumes are unreported).

Source: CB Insights

Digital Mortgage Platform SimpleNexus Raises $ 20M In Growth Capital (FinSmes) Rate: AAA

SimpleNexus, a Lehi, Utah-based company that brings the home mortgage process to mobile devices through a dynamic digital mortgage platform, raised $20m in growth capital.

Insight Venture Partners made the investment.

The company intends to use the funds to accelerate its continued growth and expansion.

TD Bank Teams Up With Fintech BizEquity to Enhance Commercial Customer Experience (Crowdfund Insider) Rated: A

TD Bank announced on Tuesday it has formed a new partnership with BizEquity to provide its small and mid-size business customers and prospects from Maine to Florida a no-cost comprehensive business valuation through a cutting-edge digital application.

The bank revealed that through its relationship with the Philadelphia-based fintech it now offers a service that typically costs several thousand dollars free of charge to small and mid-size companies. BizEquity delivers a detailed report with valuation information and key industry performance indicators to TD Bank relationship managers, who then share it with the business owner.

Small Businesses Access More Than $ 1 Billion of Working Capital During Non-Banking Hours through Kabbage (PR Web) Rated: A

Kabbage, Inc., a global financial services, technology and data platform serving small businesses, reports its 145,000-plus small business customers accessed over 300,000 loans during non-banking hours, reaching a record total of more than $1 billion in funding. In total, Kabbage has now provided access to more than $5 billion in funding to its customers across America. The non-banking hour analysis illustrates how Kabbage’s fully automated lending solutions remove the age-old hurdle of normal business hours by offering companies 24/7 access to working capital online.

LendingPoint Upsizes its Mezzanine Financing, Bringing it to More Than $ 50 Million (Business Wire) Rated: A

LendingPoint announced it closed an increase of its mezzanine financing, bringing the total of the facility to $52.5 million.

Paragon Outcomes Management LLC provided the financing that closed earlier this month. Paragon and LendingPoint have been building upon a successful relationship started with their first mezzanine credit facility in January 2017 of just $20 million, which was upsized just seven months later, and now has been upsized again to $52.5 million.

Amit Aggarwal: Refining A Real Estate Platform (Think Realty) Rated: A

Amit Aggarwal joined Auction.com as its chief technology officer in late 2017, but the experienced senior information technology (IT) leader had his eye on the needs of the national housing market for more than a decade before the hire. As early as 2005, Aggarwal was watching the residential real estate industry, considering the early signs of what he refers to as “cracks” in the then-booming housing ecosystem and working on a solution. By the time the market melted down in 2007, Aggarwal had been instrumental in the design and implementation of the workflow processes and platforms that served as the underpinning for the foreclosure crisis, including working closely with Fannie Mae and several of the country’s biggest banks and mortgage lenders.

Aggarwal took his passion for purifying and refining technology, processes, and real estate transactions with him when he joined Auction.com. 

Marketplace Lending: 60-Second Market Review and Insights (Credit Chronometer) Rated: AAA

Seven securitizations totaling $4.3 billion closed in Q1 2018, up 34% versus a year ago and representing the second-highest issuance in any quarter (after Q4 2017). Q1 issuances comprised $2.1 billion in student loan ABS, more than double Q1 2017 and the highest ever quarterly issuance of student deals. Total ABS issuance is expected to climb to $18 billion in 2018, up 30% from 2017.

Delinquencies increased in Q1 2018 across the consumer credit space, and reports of an influx of defaults on marketplace loans have prompted online lenders, including Lending Club and Prosper, to tighten their underwriting guidelines. The bright spot has been the student loan sector. The sector, led by SoFi which issued its largest ever student deal in Q1 at $1 billion, has been performing well, driven by refinance loans made to borrowers with strong credit profiles.

Battle for small-business customers spurs arms race at banks (American Banker) Rated: A

Surveys of small-business owners show an increasing level of confidence and commercial-and-industrial lending is up. The Small Business Administration’s 7(a) loan guarantee program seems poised for a fourth consecutive record year.

To capitalize, banks are investing in technology to make faster loan decisions. They are also hiring more lenders to better serve this segment. Now, bankers and other industry observers are hoping it all leads to increased earnings.

A retirement perk for millennials who are buried under student debt (LA Times) Rated: A

A new benefit program at Abbott means she won’t have to choose between paying down student debt and saving for the future. For any U.S.-based employee who puts at least 2% of their salary toward student loan payments, the healthcare company will contribute the equivalent of 5% of their salary into their 401(k) plan.

Abbott’s twist works around the tax penalty, because 401(k) payments are tax-free. Steve Fussell, a human resources vice president at Abbott, says the benefit also helps employees kick off their retirement savings early, which can make a huge difference over several decades of work. Only about a third of millennials are currently contributing to the company’s retirement plan, compared with 90% of the workforce overall.

Lending to Digital Natives: A Map to the Millennial Market (Credit Union Times) Rated: A

Millennials are a major demographic, yet they are not being served by credit unions. Only 32% of millennials are currently using a credit union compared to 50% of baby boomers, according to the Financial Brand.

Time reported the average 2016 college graduate will enter the workforce with $37,172 in student loan debt. They will change jobs four times in their first decade after college and their salaries are 20% lower than those of baby boomers at the same age, according to CNN.

United Kingdom

Zopa back in black (The Times) Rated: AAA

Peer-to-peer lender Zopa scraped back into profit last year, but rising default levels have led it to crack down on who it allows to borrow, writes Rosamund Urwin. The company, which has lent out £3.3bn in total, matches borrowers with investors wanting to lend. It has applied for a banking licence and wants to launch its bank within a year. A float has been pencilled in for 2020.

Funding Circle changes projected returns (Peer2Peer Finance) Rated: A

FUNDING Circle has altered its projected returns, meaning that investors lending across the platform’s full risk spectrum are expected to earn less money and those opting for lower-risk loans could earn more.

The peer-to-peer business lender said on Friday that that its projected returns for its Balanced account – which invests in the full range of businesses across all risk bands – will now be six to seven per cent.

The target rate on the Balanced account had previously been 7.2 per cent.

Meanwhile, Funding Circle’s Conservative account – which only invests in businesses assessed as lower risk – is now offering a projected return ranging between five and 5.5 per cent.

Funding Circle fund warns on dividend as currency costs bite (Citywire) Rated: A

Shares in Funding Circle SME Income (FCIF) fell today after peer-to-peer lending fund said the rising currency costs would force it to cut its dividend.

Shares fell 2.1%, or 3p, to 102p after it reported a ‘material increase’ in the cost of hedging, or removing the impact of the investment company’s holdsin dollar-denominated loans.

As a result the company, which mainly lends to small and medium-sized businesses in the UK, would only be able to pay a fully covered annual dividend of 5p to 6p per share from the third quarter of 2018. This is down from the current annual dividend of 6.5p, a potential decline of 8%-23%.

SHARE PUNT OF THE WEEK: Recent AIM entrant Trufin is a financing business with four divisions (This is Money) Rated: A

Recent AIM entrant Trufin is a financing business with four divisions. DFC lends to firms selling motorbikes, caravans, yachts and industrial kit, areas that mainstream banks may not be willing to touch.

Oxygen Finance helps councils make savings by prompting them to pay suppliers early, and Satago helps smaller businesses manage their cash flow. Lastly, it holds a 15 per cent stake in peer-to-peer lender Zopa.

Trufin is applying for a UK banking licence, which could help lower the company’s funding costs and boost margins. Zopa has also proposed a new funding round, which could increase the value of Trufin’s stake.

Open Banking could be worth £7.2bn by 2022, report shows (London School of Business & Finance) Rated: A

A report from Big Four accountancy firm PwC has predicted that the Open Banking sector could be worth £2.8bn by the end of the year and £7.2bn by 2022.

SMEs were shown to be more aware of the effects of Open Banking than retail customers and are also willing to make use of the data-sharing scheme, with 40% saying that they would share their financial transaction information.

When it comes to what information individuals would be willing to share, just 10% cited transaction history, while 12% said that they would share information about their financial products.

Banks were also found to still be popular with businesses, with 72% favouring them over fintech companies and peer-to-peer lending firms. This was also found to be the case for 65% of individuals.

HEAVYWEIGHT INVESTOR SAYS ‘TOO MUCH MONEY’ THROWN AT TECH (Business Cloud) Rated: A

One of Britain’s most high-profile investors has expressed concerns about “too much money being chucked” at tech businesses in the UK.

Moulton has also been an active tech investor over the last three decades, having backed peer-to-peer lending marketplace Funding Circle “very early on”, and estimates that around 50 of his 120 current investments have a link to technology.

However speaking to BusinessCloud at an investment roundtable in London organised by the Lancashire Investment Readiness Programme, the 67-year-old said the return on investment in technology is is relatively “poor”, particularly in the UK, and fears that it could become worse.

China

More P2P lenders collapse amid tough regulations (Global Times) Rated: AAA

As China has been ramping up efforts to strengthen regulations on the online financial industry, an increasing number of Peer-to-Peer (P2P) lending platforms have found themselves collapsing. As such, experts have warned investors of the perils of illegal financial activities that offer lucrative rewards.

After several P2P firms such as lianbijr.com and txslicai.com.cn were investigated by police in June, another Shanghai-based online lender reportedly collapsed.

Yilongcaifu and its parent company Fuxing Group have been shut down and are under investigation by police, news site stcn.com reported on Thursday.

Another Online Lender Falls Under Investigation (Caixin Global) Rated: A

Another online peer-to-peer (P2P) lender has fallen under investigation on suspicion of illegal fundraising as the crackdown continues on China’s scandal-plagued internet finance industry.

Shanghai police have detained four senior executives of Tangxiaoseng, an online lending platform controlled by Zibang Financial Service Internet Technology Co. Ltd., since police began investigating the platform on June 16, Caixin has learned.

51 Credit Card hits road for $ 174m IPO (Global Capital) Rated: A

51 Credit Card opened books on Friday for its HK$1.4bn ($173.9m) listing in Hong Kong, with 10 firms in the syndicate.The Chinese online peer-to-peer lending platform is offering 118.7m primary shares for HK$8.5 to HK$11.5 each, which could raise between HK$1bn and HK$1.4bn.

Sponsors China Merchants Securities and Citi are leading the trade alongside CLSA, which is a global co-ordinator.

European Union

Belgian Lending Marketplace Look&Fin Partners with Insurer Atradius (Crowdfund Insider) Rated: AAA

Today June 28, Belgium-based SME lending platform Look&Fin announced that it has partnered with credit insurer Atradius to offer a 100% guarantee on the capital lent to SMEs by its retail investors. The move is dramatically closing the gap between marketplace lending and bank lending. SME borrowers will get marketplace loans at lower interest rates, closer to the banks’ and retail investors will enjoy bank-level security for their investment.

Headquartered in the Netherlands, Atradius is the second largest global credit insurance leader with operations in more than 50 countries around the globe and total revenue of more than €1.8 billion.

Azlo and Green Dot Offer New Lending Products for Gig Economy Workers (Bank Innovation) Rated: A

Azlo will begin offering lending services to small businesses and gig economy workers this fall, the company announced last week. The fintech, which is backed by BBVA Compass, will be partnering with an undisclosed “non-traditional lending platform” to originate loans. These loans will range between $10,000 and $100,000, and even less Azlo CEO Brian Hamilton told Bank Innovation.

To determine a borrower’s creditworthiness, Azlo will not be looking at FICO scores. Instead, it will look at data collected from payment tools using APIs connected to platforms like Stripe, Square, and PayPal, in an Azlo account.

Latvia Pushes Fintech Innovation (Inside Bitcoins) Rated: A

Riga-based online lending marketplace Mintos, which just turned an annual profit for the first time, is now looking for global expansion.

Alongside Mintos, some of Latvia’s most well-known fintech startups include peer-to-peer lending marketplace Twino, and micropayment app Monea.

INLOCK to Conduct Poll to Determine the Future of Its ILK Token Model (Tech Bullion) Rated: B

INLOCK(INCOME LOCKER), a blockchain and smart-contract based peer-to-peer lending platform that enables crypto assets to be used as collateral, today announced that it will be hosting a community poll to help inform the development of its ILK token model.

Amidst preparation for the initial token sale and throughout the business screening process, INLOCK found that its token model with fractals created an unnecessary inconvenience for its users, leading to an overwhelming number of requests for a token split.

Spotcap Expands C-Suite As Business Matures (Spotcap) Rated: B

Fintech business lender Spotcap recently expanded its C-Suite to include two newly created roles.

Linh Bergen-Peters joins the company as Chief Marketing Officer and Martin Gawlak as Chief People Officer. These new roles will be instrumental in ensuring Spotcap’s continued growth. The company increased its gross revenue by more than 100 percent between May 2017 and May 2018, and doubled the size of its loan book during the same time period.

Linh Bergen-Peters joins Spotcap from HID Global and will be responsible for Spotcap’s multinational marketing strategy. Linh is a highly experienced global marketer, having held senior roles in leading technology companies such as AMD and Hewlett Packard, building and marketing high-tech brands.

International

Harmonic Fund Services live with Finastra for loan servicing (Finastra) Rated: A

Harmonic Fund Services has gone live with Finastra’s Fusion Loan IQ solution. The independent fund administration and alternative asset fund servicing firm will leverage the platform — traditionally used by banks and increasingly by service providers, to service their bilateral, specialised and syndicated loan portfolios — to provide a new loan administration and agency service to its diverse alternative investment funds client base.

Blockchain can assist banks with consumer lending (Digital Journal) Rated: AAA

The finance sector has been in the lead in terms of implementing blockchain and tokenization. The next area where the technology is likely to be applied is with traditional loans.

The advantage of cryptocurrency assets as collateral lies in the efficiency the digital currency can bring into the entire lending process. For any cryptocurrency asset approved by the lender, blockchain allows for immediate validation of its authenticity, ownership and worth. This should enables anyone to get immediate backing for a loan, provided they have a verifiable means of making repayments.

The types of startups that are making in-roads in the finance space include Ripple, a real-time gross settlement system, currency exchange and remittance network. Ripple is by companies such as UniCredit, UBS and Santander. A second is the Depository Network [DEPO]. This is a multi-platform network enable lenders, including peer-to-peer lending marketplaces, banks, other credit institutions to accept digital assets as collateral.

Bitcoin Millionaires Turn to SALT for Liquidity (BTC Manager) Rated: A

SALT Lending offers a peer-to-peer lending platform that allows cryptocurrency holders to use their Bitcoin and Ethereum as collateral for loans.

A Peer-to-Peer Lending Platform

Dave Carlson, who runs a cryptocurrency mining operation in Washington, has used SALT for this very purpose. With electricity expenses running as high as $250,000 per month, Dave needed $1 million to cover operating expenses for Giga-Watt, his mining operation. However, the potential for a price surge made him reluctant to exchange his cryptocurrency for cash.  He found an alternative in SALT, which The Wall Street Journal has reported is helping Bitcoin millionaires “unleash their fortunes.”

Australia

Metro Bank founder joins digital challengers in Australia (Financial Times) Rated: AAA

Serial banking entrepreneur Anthony Thomson, co-founder of Metro Bank in the UK, is helping to set up a new digital bank in Australia that aims to shake up a market dominated by the Big Four institutions.

The bank, named 86 400 after the number of seconds in a day, is initially being funded by Cuscal, an Australia payment services company.

Asia

The magic of crowdfunding (The Manila Times) Rated: AAA

Here in the Philippines and in many countries around the world, not only is the family the basic unit of society, but it also serves as the primordial foundation for economic activity.

Crowdfunding, through its biggest platform, Kickstarter, proved to be a very effective mode of hosting linkages between entrepreneurs and investors. Since its inception in 2009, Kickstarter has successfully funded 130,000 projects having around $3.76 Billion worth of pledges on all its projects. The huge acceptance and positive reception of these crowdfunding platforms continue to grow. In fact, it is estimated that it will be a $300 Billion industry by the year 2025.

Another type is “Peer-to-Peer Lending” that enable proponents to gain funding outside the traditional banking system through the risk-taking investors who are willing to shed a buck or two towards the growth of their loan portfolios.

Bermuda

Blockchain mortgages, touted for real estate investors, get thumbs-down on security concerns (Financial Post) Rated: AAA

Blockchain advocates have long touted the technology’s ability to disrupt entrenched business models. Now, several companies want to use it for real estate crowdfunding in a bid to circumvent the banks.

Bermuda-based Viva Network wants to exploit the blockchain’s ability to store records and transfer value quickly across international borders.

Targeting Bermuda as its first market, the company would use local mortgage professionals to run “mortgage hubs” that would evaluate and underwrite mortgages. It would divide each mortgage into 100,000 FMS units that could then be listed on the company’s blockchain-based exchange. Investors would purchase an FMS using Viva’s blockchain-based VIVA tokens and would harvest principal and interest payments from the property’s owner each month.

Inventions funded by

Authors:

George Popescu
Allen Taylor

Thursday December 8 2016, Daily News Digest

europe unemployment rates

News Comments Today’s main news: Cross River Bank CEO Gilles Gade Addresses OCC FinTech Charter. Europe introduces standardized banking API. Today’s main analysis: SoFi’sWealth Management division takes a look at Europe. Today’s thought-provoking articles: Big 3 still waiting for FCA. Banks vs. third-parties. United States Cross River  CEO comments on OCC FinTech charter. GP: ” One would […]

europe unemployment rates

News Comments

United States

  • Cross River  CEO comments on OCC FinTech charter. GP: ” One would expect that the OCC Fintech Charter would take out of business banks who’s focus is on partnering with Fintechs to enable them to originate accross state boarders easily. In a surprising statement CRB comes out in support of the OCC Charter. We will not know what CRB really thinks, and nobody wants to be seen as preventing progress. Perhaps the charter is a good thing for CRB. Or perhaps not. We will find out in a few years.” AT: “CRB supports the OCC charter, and for some very good reasons.”
  • Window of opportunity closing on alternative lending salvation. AT: “This is interesting commentary although somewhat pessimistic. There might be some evidence of a bubble, but it isn’t all doom and gloom. Every industry has its ups and downs, and for nascent ones, it’s often turbulent. What we’ve seen in 2016 is just a ripple, not a tidal wave.”
  • Credit Karma to launch free tax preparation service.GP:” An interesting effort from Credit Karma to grow beyond credit and use their existing free-lead-for-sale model in other verticals. Very interesting.” AT: “This is interesting. If Credit Karma can get the word out about their free tax preparation service, it could deliver a huge blow to paid tax preparation. It would be disruptive, to say the least, and could lead to increased competition with new models of tax advice.”
  • Speakers announced for the Context alternative lending summit in Miami, FL. GP: ” A good time of the year to visit Florida for a business pretext.”
  • 1 P2P brand that took a beating and 1 FinTech brand on the rise. AT: “This isn’t breaking news, but it does allow us to see what good company two major players in FinTech run in.”
  • Winners of OnDeck contest to meet with Barbara Corcoran. AT: “These three businesses will get a lift by receiving start-up advice from Shark Tank regular Barbara Corcoran, and OnDeck gets great exposure for helping these start-ups get a leg up.”

United Kingdom

European Union

India

International

News Summary

United States

Cross River Bank CEO Gilles Gade Addresses OCC FinTech Charter (Cross River Bank Email), Rated: AAA

Cross River Bank welcomes the announcement of the OCC’s proposed fintech limited charter as a positive development for the fintech industry, and we commend Commissioner Curry on his leadership. This initiative fosters an environment of collaboration and reflection on what is in the best interest of the consumer.

We believe the OCC’s initiative will provide a great opportunity for both fintech firms and banks to engage in a constructive dialogue with regulators. This is a step in the right direction as some banking laws may need to be revisited in the process, which could benefit the entire financial services industry.

It is our hope that this development will further stimulate innovation and economic growth by:

  • clarifying the respective roles and responsibilities of industry players;
  • encouraging regulatory agencies to provide clear and consistent guidance; and
  • providing a framework to create a regulatory environment that protects the consumer and promotes investor confidence

As the comment period advances, we look forward to hearing more details on several critical issues, including:

  • Regulatory consistency;
  • Capital requirements and the impact on participants, large and small;
  • The issue of preemption, the right of the charter, and states’ treatment alignment (exportation of home state usury laws);
  • Timeline and documentation required to obtain a charter;
  • Interplay between the limited charter and with the application of other laws such as CRA, Reg W, etc. without compromising their importance;
  • Optionality of the charter;
  • Accessibility to funds; and
  • Examination standards as well asfrequency of examination and content of examination manual.

Furthermore:

  • The FSA experience in the UK may be a good barometer of what to expect in the US.
  • We very much appreciate that there is a steep learning curve for fintech platforms as they become educated on the complexities of the banking compliance framework.
  • We identify with our partners that a change to the status quo is needed. Banks, such as CRB, are well equipped to advise and prepare the fintech applicants for a limited charter, if they so choose that route. We also believe that a top down culture of compliance is the foundation all fintech companies venturing into the charter application process must achieve. As the relationship between traditional banks and fintech companies evolves, it is important to not compromise the standards we set for ourselves and continue to work towards our common goal through a thoughtful and deliberate approach. The OCC’s proposal is the starting point of this transformative moment of our nascent industry.
  • CRB is a financial services pioneer and stands ready to help the fintech industry move forward, and we applaud the message of optimism and inclusion behind the OCC’s announcement.

The Window Of Opportunity To Save The Alternative Lending Industry Is Rapidly Closing (Forbes), Rated: A

Over the past five years, no segment of the Fintech sector has been as hot as alternative lending.

The amount of capital and attention heaped on these companies has been astonishing, with players like Lending Club, CAN Capital, and OnDeckgrowing at a breakneck pace.

Each promised to disrupt the status quo of lending, particularly in the smallbusiness space. However, I believe that the sector has failed to deliver on this promise.

Instead, plentiful capital and sky-high valuations created a bubble that only a handful of the most forward-thinking players can survive.

The competition for these sub-prime borrowers is so strong right now that companies are willing to pay up to 10% for a successfully closed lead. This is very problematic.

While specific statistics are hard to pin down, we estimate that there are approximately 1,300 companies operating in the alternative lending space today. These 1,300 organizations are competing for about 1% of the overall market, compared to about 6,500 traditional banks competing for the remaining 99%.

As a result of this race to the bottom, these lenders continue to take on ever-riskier loans.

Online lenders must shift their focus from growth to quality, with strong data analytics and monitoring taking center stage. There’s really no excuse for systemic non-performing loans anymore.

Credit Karma Launches Always-Free Online Tax Preparation Service (PR Newswire), Rated: A

Credit Karma today introduced Credit Karma Tax™, its new online self-directed tax preparation service. Credit Karma Tax provides always-free federal and state tax preparation, along with free e-filing, for its members. This announcement coincides with a new look and feel for the company.

Credit Karma Tax will launch for the 2017 tax filing season. The service will be available to U.S. consumers.

Context Summits Announces Speakers for 2017 Alternative Lending Summit (PR Newswire), Rated: A

Context Summits, the preeminent producer of investment summits for the alternative asset management industry, today announced the preliminary agenda and speaker lineup for its upcoming Alternative Lending 2017 Summit, occurring on January 30-31, 2017 at the Fontainebleau Hotel in Miami Beach, FL.

Context Summits Alternative Lending 2017 will expand its programming to two full days of keynote and panel sessions from industry leaders and investors in the sector, followed by targeted one-on-one meetings.

On the first day (January 30), Ron Suber, President of Prosper Marketplace, will deliver a morning keynote on “Current Market Environment & the Future of Alternative Lending.” This day will also feature panel sessions on securitization, transparency, portfolio stabilization, crowdfunding and small business lending.

On day two (January 31), Sam Hodges, Co-Founder of Funding Circle, will deliver a morning keynote about “The Changing Relationship with Lending Institutions & the Impact on the US Economy,” followed by several panels on capital raising, valuation methodologies, legal and regulatory risks, navigating credit risk and student loans.

Additional industry speakers include:

  • Rohit Arora, CEO of Biz2Credit
  • Stu Richards, CEO of Bredin
  • Brendan Ross, CEO of Direct Lending Investments
  • Perry Rahbar, CEO of dv01
  • Greg Zeeman, COO of Enova International
  • Sam Graziano, CEO of Fundation
  • Matthew Rodak, CEO of Fund That flip
  • Gregory Parker, CEO of Indie Crowd Funder
  • Peter Renton, Founder of Lend Academy
  • Mike Romano, Co-Founder of Lendsnap
  • Kristin Slink, Co-Founder & COO of LoanHero
  • Mark Solovy, Managing Director of Monroe Capital
  • Brew Johnson, CEO of PeerStreet
  • Clay Smudsky, Managing Director at SoFi
  • Michael Weisz, Founder & President of YieldStreet

10 Brands That Took a Beating in 2016 and 10 That Took Off (Go BankingRates), Rated: B

The peer-to-peer lending company Lending Club was on a downward path in 2016, with losses of $81.4 million in the second quarter and $36.5 million for the third quarter.

Regulators decided to gain some control over the rapidly growing online peer-to-peer lending industry, and their regulatory demands required online platforms to increase their fees. Consequently, some large investors either withdrew funds or stopped investing.

Moreover, CFO Carrie Dolan resigned, further destabilizing the company. Lending Club has eliminated high-risk borrowers and added auto loan refinancing to its mix. However, fourth-quarter predictions show an expected net loss of between $38 million to $48 million.

PayPal is on its way to world domination in global payments. The firm announced a partnership with Visa in July that allows users to pay with a Visa card, or using automated clearing house (ACH) debit payments. Also, PayPal will be available for use in physical stores where Visa contactless transactions are accepted. Such a pairing will be hard to beat. PayPal announced third-quarter revenues of $2.67 billion.

Barbara Corcoran Unveils The Winners Of Annual OnDeck Seal Of Approval Contest (Yahoo! Finance), Rated: AAA

OnDeck® (ONDK), the leader in online lending for small business, and celebrated entrepreneur Barbara Corcoran announced the three winners of the 2016 OnDeck Seal of Approval Contest —B’more Organic®, Beau & Belle Littles™, and Hardball Cider®— during a nationally televised broadcast of the Rachael Ray Show yesterday. Chosen from over 1,000 submissions, each of the winning small businesses will receive a $10,000 cash prize from OnDeck and a one-on-one coaching session with Barbara Corcoran designed to propel their businesses to the next level.

The winners of the 2016 OnDeck Seal of Approval Contest are three innovative small businesses from diverse backgrounds:

  • B’more Organic, an organic smoothie company founded by Jennifer and Andrew Buerger, promotes healthy living with a socially conscious mission. Dedicated to local, family-owned sustainable farming, B’more Organic smoothies use skyr, an Icelandic yogurt packed with protein. One percent of their sales benefit Jodi’s Climb for Hope, a non-profit dedicated to funding the development of a new viable treatment for breast cancer. The company’s biggest challenge is educating consumers about the brand while competing in the increasingly popular health food space. With Barbara’s advice and the $10,000, B’more Organic hopes to gain marketing techniques to help move more of their products off the shelf.
  • Beau & Belle Littles, maker of reusable swim diapers, started out in 2015 in Loveland, CO. What began as a few well-designed and adorable swim alternatives for Rachelle and Paul Baron’s water-loving six-month-old, Beau, quickly developed into a top-selling Amazon product – the Nageuret Swim Diaper – which grossed $250,000 in the first year. The eco-friendly diaper manufacturer also donates 5% of their profits to Compassion International to help bring children and their parents out of poverty worldwide. Leveraging Barbara’s advice, the Baron family is looking to expand their reach, develop new product lines, and pinpoint the most cost-effective way to expand.
  • Hardball Cider, driven by founder Geoffrey Dean’s passion for baseball and real hard cider, began three years ago in Mount Bethel, PA. The company’s three varieties of cider can now be found in the area’s local restaurants and, appropriately, in many of Pennsylvania’s major and minor league baseball stadiums. As an avid Shark Tank fan, Geoffrey hopes that Barbara can offer guidance on how to plan for controlled expansion across multiple market segments and to overcome his challenge of scaling production.

For a full summary of the contest winners, including their video submissions, visit the OnDeck blog at:

United Kingdom

Peer-to-peer platform Folk2Folk gets authorised by the regulator — but the ‘Big 3’ are still waiting (Business Insider), Rated: AAA

Zopa, Funding Circle, and RateSetter — the UK’s three biggest peer-to-peer lending platforms — are still waiting to be authorised over 2 years after the government announced that the FCA would authorise the sector. All three are operating under what is known as interim permissions and all three dwarf Folk2Folk, with over £1 billion lent over each platform.

You might assume that their sheer size means it takes longer to audit them. But several people I have spoken to close to the authorisation process say they have had little communication from the regulator over the last 6 months and little clarity from on timings.

Several industry sources have suggested that the complexity of some platforms, notably RateSetter, could also be delaying the process. RateSetter operates a provision fund, meant to cover investor losses, and offers fixed-term investment products. (FT Alphaville’s Kadhim Shubber has a good summary of RateSetter’s complexity here.)

The FCA declined to comment. However, it said in a statement from March: “How long it takes to consider an application depends on a number of factors including the completeness of the application, the complexity of the business, and the firm’s demonstrated compliance with regulatory requirements.”

Wellesley & Co. put on notice over late accounts, launches fundraise on Seedrs (altfi), Rated: A

Wellesley Group Investors Limited, the operator of secured peer-to-peer lending platform Wellesley & Co., has received a First Gazette notice for compulsory strike-off from Companies House. The notice required the firm to either file its accounts with Companies House within two months of 6 December 2016, or be struck from the register and dissolved.

Wellesley says that the filing of its accounts has been delayed for three reasons. The first is to allow time for a new chief financial officer (Alasdair Lenman) to review processes and procedures and implement a transition to IFRS accounting standards. The second is to complete a fundraising round (which we’ll come back to). The third is to prepare an annual review for publication alongside the financial statements, which will provide “further transparency on Wellesley’s business model, market opportunity and strategy”.

Wellesley has been flirting with the idea of a fundraise on equity crowdfunding site Seedrs for some time, and the campaign is now live. The firm is looking for a minimum raise of £1.5m, but with capacity to take on as much as £4m. It’s a convertible round, so the valuation of the firm is not clear at this stage.

Brexit and FinTech (Financier Worldwide), Rated: A

For example, peer-to-peer lending, which is a relatively new concept, is not regulated by an EU Directive. This means that firms operating peer-to-peer lending platforms do not need to worry about the loss of passporting rights as they continue to develop their business. However, equity-based crowdfunding, which is a popular alternative to traditional forms of fundraising, is regulated by the EU Markets in Financial Instruments Directive (MiFID) and will subsequently be regulated by MiFID II when it comes into effect in January 2018. Accordingly, for UK equity-based crowdfunding firms that have developed, or intend to develop, an EU customer base in reliance on passporting their services into the single market, the loss of passporting rights and access to the single market will be a cause for concern.

If such issuers were to lose those rights, then equity based crowdfunding platforms would not be able to offer those issuers’ securities to investors across the EU with the same level of ease that they currently enjoy.

Local alternative lending is enabling business growth outside the city (City A.M.), Rated: A

Many businesses are already accessing alternative finance. A recent report from the University of Cambridge showed that more than 12 per cent of new lending to SMEs came from the peer to peer sector – in 2015 alone, 20,000 small and medium-sized firms raised money this way country-wide.

In particular, the ascendancy of peer to peer lending at the local level will encourage business growth outside of the City, pooling resources into rural areas by connecting local business owners with local investors. What we are now seeing is a return to a formally bygone tradition of community-focused lending, a movement in which our business has its roots.

Unlike the high street banks, alternative local lenders can take a more holistic approach through their local knowledge and understanding of the reputation of the businesses in their local area. This means that businesses can access the right type of finance that suits their requirements.

Ultimately, we want to see businesses coming to alternative lenders first. Things are moving in the right direction, but it is now up to the lenders themselves to implement policies that attract more businesses, while at the same time protecting them at every level.

£4bn start-up funding gap bridged by friends and family (TaxAssist Accountants), Rated: B

More than 1.6 million people have given money to a close friend or family member, giving them the financial support to start or grow their business, according to new research from peer-to-peer lending platform, ThinCats.

It is estimated that £7.2bn has exchanged hands between friends and family, with entrepreneurs increasingly forced to rely on social networks to solve the lending gap.

European Union

Banks vs. Third Parties: Europe Unleashes Client Banking Data (Kabbage), Rated: AAA

For years, client data stored in banks was inaccessible to third parties. But with the help of technology (like “screen scraping” and “banking API”), the information that used to be proprietary is now available if the account owner gives their consent.

In the U.S., there are no official legal bans on these types of technologies. However, banks claim this procedure creates potential security risks, which has caused many banks to limit access to accounts when their systems detect unusual peaks of data traffic. Still, banks are not willing to provide official and secure APIs (data exchange channels) for third parties.

A different approach was taken by the European Union, which revised its Payment Service Directive (PSD) to include a common, standardized banking API that would allow interested companies to use client data stored in banks. Before the updated PSD directive, PSD2, each member state could treat solutions (based on screen scraping technology) at their own discretion: one would ban it, the other wouldn’t. With PSD2, third parties will gain access to banking information through an official and secure API.

The screen scraping technology can mine all data available to a user in a banking transactional system, while the API that is currently developed in accordance to PSD2 guidelines will probably be limited to a few basic operations, such as account balance checking or locking an amount of money necessary to make payment.

EUROPE AND THE U.K. LOOK STRONG – WEEK OF DEC. 7, 2016 (SoFi), Rated: AAA

We have recently reduced our overweight position in the United States and increased exposure to the United Kingdom and Eurozone. This shift is driven by the differing outlooks for monetary policy on each side of the Atlantic, by supportive valuations, and the market’s increased tolerance for political risk.

We can see in the chart below that the unemployment rate has followed a strikingly different path in the Eurozone when compared to the United States and United Kingdom.

The outlook for the ECB’s monetary policy is incredibly dovish, with rates not expected to go positive until 2018. The market expects the Bank of England (BoE) to raise rates at a similarly slow pace (albeit from a higher level).

Given lower interest rates and the expected gradual pace of hikes, you would expect higher stock valuations in the U.K. and Eurozone, all else being equal. After all, if the return on bonds is low then domestic investors can be expected to buy stocks, pushing up their price.

That has not been the case.

But, investors seem to be more comfortable with political risk. The widely touted fears of a Brexit and the surprise Trump victory affected asset prices for only a few days.

Economic and political risks certainly remain in the U.K. and Europe. However, we feel that when weighed against a more supportive monetary environment and better valuations the risks are well compensated.

Klarna-founder’s new innovation hub will combine tech and social impact (Business Insider Nordic), Rated: A

Immediately after Niklas Adalberth stepped down from Klarna last Fall – after ten years spent building Sweden’s first Fintech unicorn – he announced he wanted to work with charity and social impact, and not “die with a huge bag of money on my bank account”, according to Di Digital.

Now he has delivered on that statement, with Norrsken Foundation

The non-profit foundation’s core mission is to channel the tools and methods of entrepreneurship – like apps, product development and big data – into social impact areas, such as corruption and charity. The foundation will house and incubate both for-profit startups, as well as non-profit organizations.

Starting in January 2017, the Norrsken House will house some 200 social entrepreneurs from around the world

Among the startups taking residence will be two apps that will help immigrants find new job opportunities, called Just Arrived and Welcome App; the former with financial backing from Adalberth. Another one is Klarity, founded by Adalberth, “an Instagram for reporting corruption”, which enables the user to upload images, for example when people receive bribes.

Belgian crowdlending platform Look&Fin secures €3 million for growth (Tech.eu), Rated: B

Belgian Look&Fin, a crowdlending platform dedicated to SME financing, has completed its first funding round of €3 million. The funding comes from private Belgian and French investors.

Look&Fin will use the funds to increase the number of projects that it finances. The platform intends to spread to other countries and raise €150 million euros by the end of 2018.

India

One-stop shop for all your loan needs with Oxyloans (New Indian Express), Rated: A

Oxyloans was born from the idea of helping customers who had their loan applications rejected by traditional banks for various reasons, and those who seek a different option from private moneylenders who allegedly charge usurious interest rates coupled with harsh recovery methods.

Marking an entry into the Peer-to-Peer (P2P) world, apart from easy access to loans, Oxyloans promises high returns for investors as well, through its Peer-to-Peer Investing (P2PI) platform.

Moreover, the lending platform assures flexible loan repayment options, with the Equated Monthly Installments (EMI) being decided between the lender and the borrower.

International

The Largest Global Banks And How They Rank For Investments In Fintech Startups (CB Insights), Rated: A

VC-backed global fintech financing activity declined for the second straight quarter in Q3, with $2.4B raised across 178 deals, according to The Pulse of Fintech – Q3’16 published by KPMG and CB Insights. But banks are still finding opportunity in the sector.

Authors:

George Popescu
Allen Taylor

Thursday December 8 2016, Daily News Digest

europe unemployment rates

News Comments Today’s main news: Cross River Bank CEO Gilles Gade Addresses OCC FinTech Charter. Europe introduces standardized banking API. Today’s main analysis: SoFi’sWealth Management division takes a look at Europe. Today’s thought-provoking articles: Big 3 still waiting for FCA. Banks vs. third-parties. United States Cross River  CEO comments on OCC FinTech charter. GP: ” One would […]

europe unemployment rates

News Comments

United States

  • Cross River  CEO comments on OCC FinTech charter. GP: ” One would expect that the OCC Fintech Charter would take out of business banks who’s focus is on partnering with Fintechs to enable them to originate accross state boarders easily. In a surprising statement CRB comes out in support of the OCC Charter. We will not know what CRB really thinks, and nobody wants to be seen as preventing progress. Perhaps the charter is a good thing for CRB. Or perhaps not. We will find out in a few years.” AT: “CRB supports the OCC charter, and for some very good reasons.”
  • Window of opportunity closing on alternative lending salvation. AT: “This is interesting commentary although somewhat pessimistic. There might be some evidence of a bubble, but it isn’t all doom and gloom. Every industry has its ups and downs, and for nascent ones, it’s often turbulent. What we’ve seen in 2016 is just a ripple, not a tidal wave.”
  • Credit Karma to launch free tax preparation service.GP:” An interesting effort from Credit Karma to grow beyond credit and use their existing free-lead-for-sale model in other verticals. Very interesting.” AT: “This is interesting. If Credit Karma can get the word out about their free tax preparation service, it could deliver a huge blow to paid tax preparation. It would be disruptive, to say the least, and could lead to increased competition with new models of tax advice.”
  • Speakers announced for the Context alternative lending summit in Miami, FL. GP: ” A good time of the year to visit Florida for a business pretext.”
  • 1 P2P brand that took a beating and 1 FinTech brand on the rise. AT: “This isn’t breaking news, but it does allow us to see what good company two major players in FinTech run in.”
  • Winners of OnDeck contest to meet with Barbara Corcoran. AT: “These three businesses will get a lift by receiving start-up advice from Shark Tank regular Barbara Corcoran, and OnDeck gets great exposure for helping these start-ups get a leg up.”

United Kingdom

European Union

India

International

News Summary

United States

Cross River Bank CEO Gilles Gade Addresses OCC FinTech Charter (Cross River Bank Email), Rated: AAA

Cross River Bank welcomes the announcement of the OCC’s proposed fintech limited charter as a positive development for the fintech industry, and we commend Commissioner Curry on his leadership. This initiative fosters an environment of collaboration and reflection on what is in the best interest of the consumer.

We believe the OCC’s initiative will provide a great opportunity for both fintech firms and banks to engage in a constructive dialogue with regulators. This is a step in the right direction as some banking laws may need to be revisited in the process, which could benefit the entire financial services industry.

It is our hope that this development will further stimulate innovation and economic growth by:

  • clarifying the respective roles and responsibilities of industry players;
  • encouraging regulatory agencies to provide clear and consistent guidance; and
  • providing a framework to create a regulatory environment that protects the consumer and promotes investor confidence

As the comment period advances, we look forward to hearing more details on several critical issues, including:

  • Regulatory consistency;
  • Capital requirements and the impact on participants, large and small;
  • The issue of preemption, the right of the charter, and states’ treatment alignment (exportation of home state usury laws);
  • Timeline and documentation required to obtain a charter;
  • Interplay between the limited charter and with the application of other laws such as CRA, Reg W, etc. without compromising their importance;
  • Optionality of the charter;
  • Accessibility to funds; and
  • Examination standards as well asfrequency of examination and content of examination manual.

Furthermore:

  • The FSA experience in the UK may be a good barometer of what to expect in the US.
  • We very much appreciate that there is a steep learning curve for fintech platforms as they become educated on the complexities of the banking compliance framework.
  • We identify with our partners that a change to the status quo is needed. Banks, such as CRB, are well equipped to advise and prepare the fintech applicants for a limited charter, if they so choose that route. We also believe that a top down culture of compliance is the foundation all fintech companies venturing into the charter application process must achieve. As the relationship between traditional banks and fintech companies evolves, it is important to not compromise the standards we set for ourselves and continue to work towards our common goal through a thoughtful and deliberate approach. The OCC’s proposal is the starting point of this transformative moment of our nascent industry.
  • CRB is a financial services pioneer and stands ready to help the fintech industry move forward, and we applaud the message of optimism and inclusion behind the OCC’s announcement.

The Window Of Opportunity To Save The Alternative Lending Industry Is Rapidly Closing (Forbes), Rated: A

Over the past five years, no segment of the Fintech sector has been as hot as alternative lending.

The amount of capital and attention heaped on these companies has been astonishing, with players like Lending Club, CAN Capital, and OnDeckgrowing at a breakneck pace.

Each promised to disrupt the status quo of lending, particularly in the smallbusiness space. However, I believe that the sector has failed to deliver on this promise.

Instead, plentiful capital and sky-high valuations created a bubble that only a handful of the most forward-thinking players can survive.

The competition for these sub-prime borrowers is so strong right now that companies are willing to pay up to 10% for a successfully closed lead. This is very problematic.

While specific statistics are hard to pin down, we estimate that there are approximately 1,300 companies operating in the alternative lending space today. These 1,300 organizations are competing for about 1% of the overall market, compared to about 6,500 traditional banks competing for the remaining 99%.

As a result of this race to the bottom, these lenders continue to take on ever-riskier loans.

Online lenders must shift their focus from growth to quality, with strong data analytics and monitoring taking center stage. There’s really no excuse for systemic non-performing loans anymore.

Credit Karma Launches Always-Free Online Tax Preparation Service (PR Newswire), Rated: A

Credit Karma today introduced Credit Karma Tax™, its new online self-directed tax preparation service. Credit Karma Tax provides always-free federal and state tax preparation, along with free e-filing, for its members. This announcement coincides with a new look and feel for the company.

Credit Karma Tax will launch for the 2017 tax filing season. The service will be available to U.S. consumers.

Context Summits Announces Speakers for 2017 Alternative Lending Summit (PR Newswire), Rated: A

Context Summits, the preeminent producer of investment summits for the alternative asset management industry, today announced the preliminary agenda and speaker lineup for its upcoming Alternative Lending 2017 Summit, occurring on January 30-31, 2017 at the Fontainebleau Hotel in Miami Beach, FL.

Context Summits Alternative Lending 2017 will expand its programming to two full days of keynote and panel sessions from industry leaders and investors in the sector, followed by targeted one-on-one meetings.

On the first day (January 30), Ron Suber, President of Prosper Marketplace, will deliver a morning keynote on “Current Market Environment & the Future of Alternative Lending.” This day will also feature panel sessions on securitization, transparency, portfolio stabilization, crowdfunding and small business lending.

On day two (January 31), Sam Hodges, Co-Founder of Funding Circle, will deliver a morning keynote about “The Changing Relationship with Lending Institutions & the Impact on the US Economy,” followed by several panels on capital raising, valuation methodologies, legal and regulatory risks, navigating credit risk and student loans.

Additional industry speakers include:

  • Rohit Arora, CEO of Biz2Credit
  • Stu Richards, CEO of Bredin
  • Brendan Ross, CEO of Direct Lending Investments
  • Perry Rahbar, CEO of dv01
  • Greg Zeeman, COO of Enova International
  • Sam Graziano, CEO of Fundation
  • Matthew Rodak, CEO of Fund That flip
  • Gregory Parker, CEO of Indie Crowd Funder
  • Peter Renton, Founder of Lend Academy
  • Mike Romano, Co-Founder of Lendsnap
  • Kristin Slink, Co-Founder & COO of LoanHero
  • Mark Solovy, Managing Director of Monroe Capital
  • Brew Johnson, CEO of PeerStreet
  • Clay Smudsky, Managing Director at SoFi
  • Michael Weisz, Founder & President of YieldStreet

10 Brands That Took a Beating in 2016 and 10 That Took Off (Go BankingRates), Rated: B

The peer-to-peer lending company Lending Club was on a downward path in 2016, with losses of $81.4 million in the second quarter and $36.5 million for the third quarter.

Regulators decided to gain some control over the rapidly growing online peer-to-peer lending industry, and their regulatory demands required online platforms to increase their fees. Consequently, some large investors either withdrew funds or stopped investing.

Moreover, CFO Carrie Dolan resigned, further destabilizing the company. Lending Club has eliminated high-risk borrowers and added auto loan refinancing to its mix. However, fourth-quarter predictions show an expected net loss of between $38 million to $48 million.

PayPal is on its way to world domination in global payments. The firm announced a partnership with Visa in July that allows users to pay with a Visa card, or using automated clearing house (ACH) debit payments. Also, PayPal will be available for use in physical stores where Visa contactless transactions are accepted. Such a pairing will be hard to beat. PayPal announced third-quarter revenues of $2.67 billion.

Barbara Corcoran Unveils The Winners Of Annual OnDeck Seal Of Approval Contest (Yahoo! Finance), Rated: AAA

OnDeck® (ONDK), the leader in online lending for small business, and celebrated entrepreneur Barbara Corcoran announced the three winners of the 2016 OnDeck Seal of Approval Contest —B’more Organic®, Beau & Belle Littles™, and Hardball Cider®— during a nationally televised broadcast of the Rachael Ray Show yesterday. Chosen from over 1,000 submissions, each of the winning small businesses will receive a $10,000 cash prize from OnDeck and a one-on-one coaching session with Barbara Corcoran designed to propel their businesses to the next level.

The winners of the 2016 OnDeck Seal of Approval Contest are three innovative small businesses from diverse backgrounds:

  • B’more Organic, an organic smoothie company founded by Jennifer and Andrew Buerger, promotes healthy living with a socially conscious mission. Dedicated to local, family-owned sustainable farming, B’more Organic smoothies use skyr, an Icelandic yogurt packed with protein. One percent of their sales benefit Jodi’s Climb for Hope, a non-profit dedicated to funding the development of a new viable treatment for breast cancer. The company’s biggest challenge is educating consumers about the brand while competing in the increasingly popular health food space. With Barbara’s advice and the $10,000, B’more Organic hopes to gain marketing techniques to help move more of their products off the shelf.
  • Beau & Belle Littles, maker of reusable swim diapers, started out in 2015 in Loveland, CO. What began as a few well-designed and adorable swim alternatives for Rachelle and Paul Baron’s water-loving six-month-old, Beau, quickly developed into a top-selling Amazon product – the Nageuret Swim Diaper – which grossed $250,000 in the first year. The eco-friendly diaper manufacturer also donates 5% of their profits to Compassion International to help bring children and their parents out of poverty worldwide. Leveraging Barbara’s advice, the Baron family is looking to expand their reach, develop new product lines, and pinpoint the most cost-effective way to expand.
  • Hardball Cider, driven by founder Geoffrey Dean’s passion for baseball and real hard cider, began three years ago in Mount Bethel, PA. The company’s three varieties of cider can now be found in the area’s local restaurants and, appropriately, in many of Pennsylvania’s major and minor league baseball stadiums. As an avid Shark Tank fan, Geoffrey hopes that Barbara can offer guidance on how to plan for controlled expansion across multiple market segments and to overcome his challenge of scaling production.

For a full summary of the contest winners, including their video submissions, visit the OnDeck blog at:

United Kingdom

Peer-to-peer platform Folk2Folk gets authorised by the regulator — but the ‘Big 3’ are still waiting (Business Insider), Rated: AAA

Zopa, Funding Circle, and RateSetter — the UK’s three biggest peer-to-peer lending platforms — are still waiting to be authorised over 2 years after the government announced that the FCA would authorise the sector. All three are operating under what is known as interim permissions and all three dwarf Folk2Folk, with over £1 billion lent over each platform.

You might assume that their sheer size means it takes longer to audit them. But several people I have spoken to close to the authorisation process say they have had little communication from the regulator over the last 6 months and little clarity from on timings.

Several industry sources have suggested that the complexity of some platforms, notably RateSetter, could also be delaying the process. RateSetter operates a provision fund, meant to cover investor losses, and offers fixed-term investment products. (FT Alphaville’s Kadhim Shubber has a good summary of RateSetter’s complexity here.)

The FCA declined to comment. However, it said in a statement from March: “How long it takes to consider an application depends on a number of factors including the completeness of the application, the complexity of the business, and the firm’s demonstrated compliance with regulatory requirements.”

Wellesley & Co. put on notice over late accounts, launches fundraise on Seedrs (altfi), Rated: A

Wellesley Group Investors Limited, the operator of secured peer-to-peer lending platform Wellesley & Co., has received a First Gazette notice for compulsory strike-off from Companies House. The notice required the firm to either file its accounts with Companies House within two months of 6 December 2016, or be struck from the register and dissolved.

Wellesley says that the filing of its accounts has been delayed for three reasons. The first is to allow time for a new chief financial officer (Alasdair Lenman) to review processes and procedures and implement a transition to IFRS accounting standards. The second is to complete a fundraising round (which we’ll come back to). The third is to prepare an annual review for publication alongside the financial statements, which will provide “further transparency on Wellesley’s business model, market opportunity and strategy”.

Wellesley has been flirting with the idea of a fundraise on equity crowdfunding site Seedrs for some time, and the campaign is now live. The firm is looking for a minimum raise of £1.5m, but with capacity to take on as much as £4m. It’s a convertible round, so the valuation of the firm is not clear at this stage.

Brexit and FinTech (Financier Worldwide), Rated: A

For example, peer-to-peer lending, which is a relatively new concept, is not regulated by an EU Directive. This means that firms operating peer-to-peer lending platforms do not need to worry about the loss of passporting rights as they continue to develop their business. However, equity-based crowdfunding, which is a popular alternative to traditional forms of fundraising, is regulated by the EU Markets in Financial Instruments Directive (MiFID) and will subsequently be regulated by MiFID II when it comes into effect in January 2018. Accordingly, for UK equity-based crowdfunding firms that have developed, or intend to develop, an EU customer base in reliance on passporting their services into the single market, the loss of passporting rights and access to the single market will be a cause for concern.

If such issuers were to lose those rights, then equity based crowdfunding platforms would not be able to offer those issuers’ securities to investors across the EU with the same level of ease that they currently enjoy.

Local alternative lending is enabling business growth outside the city (City A.M.), Rated: A

Many businesses are already accessing alternative finance. A recent report from the University of Cambridge showed that more than 12 per cent of new lending to SMEs came from the peer to peer sector – in 2015 alone, 20,000 small and medium-sized firms raised money this way country-wide.

In particular, the ascendancy of peer to peer lending at the local level will encourage business growth outside of the City, pooling resources into rural areas by connecting local business owners with local investors. What we are now seeing is a return to a formally bygone tradition of community-focused lending, a movement in which our business has its roots.

Unlike the high street banks, alternative local lenders can take a more holistic approach through their local knowledge and understanding of the reputation of the businesses in their local area. This means that businesses can access the right type of finance that suits their requirements.

Ultimately, we want to see businesses coming to alternative lenders first. Things are moving in the right direction, but it is now up to the lenders themselves to implement policies that attract more businesses, while at the same time protecting them at every level.

£4bn start-up funding gap bridged by friends and family (TaxAssist Accountants), Rated: B

More than 1.6 million people have given money to a close friend or family member, giving them the financial support to start or grow their business, according to new research from peer-to-peer lending platform, ThinCats.

It is estimated that £7.2bn has exchanged hands between friends and family, with entrepreneurs increasingly forced to rely on social networks to solve the lending gap.

European Union

Banks vs. Third Parties: Europe Unleashes Client Banking Data (Kabbage), Rated: AAA

For years, client data stored in banks was inaccessible to third parties. But with the help of technology (like “screen scraping” and “banking API”), the information that used to be proprietary is now available if the account owner gives their consent.

In the U.S., there are no official legal bans on these types of technologies. However, banks claim this procedure creates potential security risks, which has caused many banks to limit access to accounts when their systems detect unusual peaks of data traffic. Still, banks are not willing to provide official and secure APIs (data exchange channels) for third parties.

A different approach was taken by the European Union, which revised its Payment Service Directive (PSD) to include a common, standardized banking API that would allow interested companies to use client data stored in banks. Before the updated PSD directive, PSD2, each member state could treat solutions (based on screen scraping technology) at their own discretion: one would ban it, the other wouldn’t. With PSD2, third parties will gain access to banking information through an official and secure API.

The screen scraping technology can mine all data available to a user in a banking transactional system, while the API that is currently developed in accordance to PSD2 guidelines will probably be limited to a few basic operations, such as account balance checking or locking an amount of money necessary to make payment.

EUROPE AND THE U.K. LOOK STRONG – WEEK OF DEC. 7, 2016 (SoFi), Rated: AAA

We have recently reduced our overweight position in the United States and increased exposure to the United Kingdom and Eurozone. This shift is driven by the differing outlooks for monetary policy on each side of the Atlantic, by supportive valuations, and the market’s increased tolerance for political risk.

We can see in the chart below that the unemployment rate has followed a strikingly different path in the Eurozone when compared to the United States and United Kingdom.

The outlook for the ECB’s monetary policy is incredibly dovish, with rates not expected to go positive until 2018. The market expects the Bank of England (BoE) to raise rates at a similarly slow pace (albeit from a higher level).

Given lower interest rates and the expected gradual pace of hikes, you would expect higher stock valuations in the U.K. and Eurozone, all else being equal. After all, if the return on bonds is low then domestic investors can be expected to buy stocks, pushing up their price.

That has not been the case.

But, investors seem to be more comfortable with political risk. The widely touted fears of a Brexit and the surprise Trump victory affected asset prices for only a few days.

Economic and political risks certainly remain in the U.K. and Europe. However, we feel that when weighed against a more supportive monetary environment and better valuations the risks are well compensated.

Klarna-founder’s new innovation hub will combine tech and social impact (Business Insider Nordic), Rated: A

Immediately after Niklas Adalberth stepped down from Klarna last Fall – after ten years spent building Sweden’s first Fintech unicorn – he announced he wanted to work with charity and social impact, and not “die with a huge bag of money on my bank account”, according to Di Digital.

Now he has delivered on that statement, with Norrsken Foundation

The non-profit foundation’s core mission is to channel the tools and methods of entrepreneurship – like apps, product development and big data – into social impact areas, such as corruption and charity. The foundation will house and incubate both for-profit startups, as well as non-profit organizations.

Starting in January 2017, the Norrsken House will house some 200 social entrepreneurs from around the world

Among the startups taking residence will be two apps that will help immigrants find new job opportunities, called Just Arrived and Welcome App; the former with financial backing from Adalberth. Another one is Klarity, founded by Adalberth, “an Instagram for reporting corruption”, which enables the user to upload images, for example when people receive bribes.

Belgian crowdlending platform Look&Fin secures €3 million for growth (Tech.eu), Rated: B

Belgian Look&Fin, a crowdlending platform dedicated to SME financing, has completed its first funding round of €3 million. The funding comes from private Belgian and French investors.

Look&Fin will use the funds to increase the number of projects that it finances. The platform intends to spread to other countries and raise €150 million euros by the end of 2018.

India

One-stop shop for all your loan needs with Oxyloans (New Indian Express), Rated: A

Oxyloans was born from the idea of helping customers who had their loan applications rejected by traditional banks for various reasons, and those who seek a different option from private moneylenders who allegedly charge usurious interest rates coupled with harsh recovery methods.

Marking an entry into the Peer-to-Peer (P2P) world, apart from easy access to loans, Oxyloans promises high returns for investors as well, through its Peer-to-Peer Investing (P2PI) platform.

Moreover, the lending platform assures flexible loan repayment options, with the Equated Monthly Installments (EMI) being decided between the lender and the borrower.

International

The Largest Global Banks And How They Rank For Investments In Fintech Startups (CB Insights), Rated: A

VC-backed global fintech financing activity declined for the second straight quarter in Q3, with $2.4B raised across 178 deals, according to The Pulse of Fintech – Q3’16 published by KPMG and CB Insights. But banks are still finding opportunity in the sector.

Authors:

George Popescu
Allen Taylor