In early October, TIME Magazine released its inaugural list of the top 50 Genius Companies, and two online lending companies, CommonBond and Oportun were included. The magazine asked its global network of editors and correspondents to nominate companies that are inventing the future. They then evaluated the candidates by such factors as originality, influence, success, […]
In early October, TIME Magazine released its inaugural list of the top 50 Genius Companies, and two online lending companies, CommonBond and Oportun were included. The magazine asked its global network of editors and correspondents to nominate companies that are inventing the future. They then evaluated the candidates by such factors as originality, influence, success, and ambition.
What they were looking for
A video titled How We Chose the 50 Most Genius Companies of 2018 includes snippets of interviews from founders and CEOs whose companies made the list. Viewing these gives us more insight into what the magazine saw as worthy of “genius” thought. Bob Igor, CEO of Walt Disney, talks about having “constant curiosity, constant desire for more knowledge about what is new.” Luis von Ahn, CEO of Duolingo, whose company’s goal is to give “equal access to education to everybody,” reminds us that it’s “OK to fail.” Anne Wojcicki, co-founder and CEO of 23andMe, says that “it’s not that taking risks is essential, it’s that being open-minded to a different way of looking at a problem is essential.” She adds: “Risk…is essential to creating a new path and making change.”
These are all revelations that the 50 companies represented have made, whether they are time-tested and proven companies or promising start-ups.
Notables on the list
The list has a good mix of both types of companies, those which are proven winners and those that are trying to make their mark by helping to better the world. Long proven household names like Apple, Disney, and Lockheed Martin are joined by newer companies that now define so much of our world, like Amazon, Netflix, Spotify, and Pinterest, and those who look to shape the future more differently than the past, like SpaceX, Slack, and Lishtot.
And then there are the two online lending standouts–Oportun and CommonBond.
Oportun and CommonBond are moving to make money more easily accessible for sectors of the population that need it. Oportun is working to make loans available to higher risk borrowers than those that have access to more traditional means of lending while CommonBond is looking to transform access to student loans.
Oportun is a Menlo Park California company that provides emergency loans for low-income consumers who can’t get a loan from a traditional bank and who don’t want to get into the vicious cycle of high fees and triple-digit interest rates of payday lenders.
Oportun began with a focus on serving the Latino community but has expanded to open borrowing to the estimated 45 million Americans who have little or no credit history. In lieu of credit scores, Oportun relies on other data to assess applicants, such as the length of time that a person has had the same job or address.
CEO Raul Vazquez says that Oportun is “committed to building a sustainable business that helps people shut out of the financial mainstream.”
Proven Track Record
To this point, the company has proven it can make a profit while providing $5.4 billion worth of loans to people who didn’t meet banks’ criteria. In so doing, the Oportun team has helped some 600,000 customers establish credit scores and open themselves to future borrowing by reporting successful payments to credit bureaus.
A CDFI (Community Development Financial Institution), Oportun issued its first securitization in June 2013, and it announced its twelfth securitization last week, issuing $275 million of three-year asset-backed bonds secured by a pool of its investment loans. Morgan Stanley and Co. LLC served as lead book-running manager, and Goldman Sachs and Co. LLC and Jefferies LLC were joint book-runners.
As of now, the company has loans available at retail locations in nine states: Arizona, California, Florida, Illinois, New Jersey, New Mexico, Nevada, Texas, and Utah. Online loans are also available in Idaho, Missouri, and Wisconsin.
Rates of Service
The company’s interest rates average about 35 percent, a reasonable rate for high-risk borrowers.
The Economist, Consumer Reports, and The Wall Street Journal are among the publications that have reviewed the company favorably. Oportun was even named one of the three finalists in The Wall Street Journal’s 2018 Financial Inclusion Challenge.
The team heading up the company has many notables, including Vazquez, who is the former CEO of Walmart.com. Chief Credit Officer, Patrick Kirscht, previously served as Senior VP of Risk Management for HSBC Card Services Inc., and Johnathon Coblentz, who serves as CFO and CAO, is the former CFO and Treasurer of MRU Holdings Inc. and was Vice-President of Fortress Investment Group LLC.
With the rising price of college tuition and the more than $1.5 trillion in active student loans in the United States today—more than car loans and credit card debt—the market is ripe for new players in the scholastic financial space. CommonBond has been working to put a new face on student loan refinancing since 2011.
By staying small and using technology to keep costs down, CommonBond seeks to offer borrowers refinancing rates lower than those of the federal government and private banks. The firm estimates that it saves borrowers on average $24,000 over the life of their loans.
CommonBond offers three types of loans (Undergrad, Graduate, and MBA) and repackages and refinances existing loans at lower rates.
The firm offers loan terms of five, 10, and 15 years, with amounts ranging from $5,000 to the cost of tuition. The loan cap for any borrower is $500,000. The company offers the customer a personalized rate before he or she applies. Loan origination fee is two percent, and the company charges no prepayment penalties. CommonBond’s late fees might be especially attractive to college-age students, who might not always get their payments in on time. The late fee is only the lesser of $10 or five percent of the monthly payment.
Being a father of school-age children, CommonBond is a company I could see myself using in five or six years, and I read the reviews of the company as a potential customer. The reviews aren’t all glowing, but they give me an overall feel that this is a firm I could do business with, if I so needed. Fast Company named CommonBond the Most Innovative Company in Education earlier this year, and thecollegeinvestor.com, despite thinking the rates could be more competitive, continuously puts the company on its Best Companies to Finance Your Student Loan list. CommonBond is also one of only three lenders the site recommends for finding the best student loans.
Double Bottom Line
Charitable work and philanthropy being so important in today’s world, it can’t hurt for a company to have a strong double bottom line. This is one area where CommonBond sets itself apart from others in the space. Every time a loan is funded, CommonBond covers the price of a child’s education through its “Social Promise.” The firm’s partnership with Pencils of Promise has provided schools, teachers, and technology to thousands of students in the developing world, and its commitment to social equality also distinguishes it as a true difference maker in the United States. Loans and restructuring are available to anyone with a degree from a not-for-profit American university regardless of citizenship, as long as the customer meets the other criteria.
Those of us in and around the online lending space can be heartened by the addition to these two companies to this list. We can also be heartened by the continued efforts of business founders to make funds available more easily and affordably for Americans just trying to navigate the business aspects of life. Both of these companies should be recommended to those who may benefit from their services.
News Comments Today’s main news: Walmart partners with Even, PayActiv on employee financial wellness. Moody’s says some consumer ABS sectors will be weaker next year. LendInvest has $1B in funds under management. Yirendai’s investment in Lion Rock amounts to $50M. LexinFintech kicked off IPO yesterday. Crowd Genie to launch ICO. Today’s main analysis: Why mortgage tech is finally taking off. Australian […]
On Wednesday, retail giant Walmart announced it has teamed up with fintech startups Even and PayActiv to provide a suite of new financial wellness services for its more than 1.4 million associates nationwide.
Goldman Sachs(NYSE:GS) and Morgan Stanley(NYSE:MS) are both trying to expand their businesses into more traditional areas of consumer banking, such as consumer loans and mortgages.
Matt Frankel: Out of all the major unsecured lending platforms — Lending Club, things like that — Marcus was the quickest one to get to $1 billion in loan volume.
The interest rates people have gotten are more competitive than the others, because they can afford to run it at slightly more compressed margins than, say, a Lending Club.
Frankel: Morgan Stanley’s robo-advisory platform just launched. So that’s one way they’re trying to branch out into more traditional areas of banking and investing.
Just to throw a couple of figures out there, Morgan Stanley’s wealth management business, which is not the highest-margin business, which is why they’re not as efficient as Goldman, their wealth management business, they’re margin has gone from 9% to 22% since 2010.
Morgan Stanley estimates that their clients still have about over $2 trillion worth of assets with other asset managers, and they’re trying to bring some of that in.
The number of Americans severely behind on payments on federal student loans reached roughly 4.6 million in the third quarter, a doubling from four years ago, despite a historically long stretch of U.S. job creation and steady economic growth.
In the third quarter alone, the count of such defaulted borrowers—defined by the government as those who haven’t made a payment in at least a year—grew by nearly 274,000, according to Education Department data released Tuesday.
The total number of defaulted borrowers represents about 22% of the Americans who were required to be paying down their federal student loans as of Sept. 30. That figure has increased from 17% four years earlier.
By the end of 2017, nearly $1.8T worth of mortgages will have been originated in the United States this year, according to government-backed mortgage lender Freddie Mac.
Yet, despite the size of the mortgage industry, the space still hasn’t digitized. Originating, processing, and underwriting a home loan with a large bank lender still requires faxes and snail mail and take almost as long as it did 20 years.
Driver 1: New lenders increase the competition
Non-bank lenders are becoming much bigger players in mortgages. In 2011, three banks accounted for half of new mortgage loans, according to the Washington Post. As of September 2016, that share dropped to 21%.
In 2011, just two of the top 10 biggest lenders were non-bank lenders. In 2016, non-bank lenders like Quicken Loans accounted for six of the top 10.
Driver 2: Incumbents are looking to improve their technology
At an average cost of $7,000, originating and processing a loan takes over 400 pages and more than 25 humans working hundreds of hours across 50 days. Of the total, approximately $5,000 can be attributed to human processing costs.
Driver 3: Individuals’ debt burden forces them to find alternative lenders
Eighty percent of millennial renters want to buy a single-family home or apartment, but 72% cannot afford to, according to survey data from Apartment List.
Although total US homeownership has risen to 64% as of Q3’17, when examined by age group, the percentage of homeowners under 35 years old is only 36%. This is down from 44% in 2004.
The anticipated continued expansion of the US economy into 2018 will support overall collateral performance of consumer asset-backed securities (ABS), according to Moody’s Investors Service. However, growing financial strains among some pockets of borrowers and loosening of underwriting by lenders will result in slightly weaker collateral performance for several categories of consumer ABS, including transactions backed by auto loans, credit cards and unsecured personal loans.
Amid further declines in automobile sales and used vehicle prices, Moody’s says issuers will generally maintain the steady collateral quality in their 2018 auto loan and lease deals, with incremental weakening in certain collateral attributes such as loan terms. New private student loan ABS, meanwhile, will likely continue to have strong credit quality and performance.
The Federal Communications Commission (FCC) voted today to dismantle internet “net” neutrality: a vote that determined whether the internet should be treated like a public good or service or whether it should be treated like a product.
Another consequence of dismantling net neutrality has to do with undermining financial inclusion and the impending technological revolution of financial services. An array of financial technologies—online and mobile technologies referred to by their shorthand “fintech”—is heralded with the potential to expand access to financial services to underserved households and in underserved communities.
Online and mobile banking could become less reliable if internet service companies adjust connectivity speeds. Banks are increasingly shifting their products and services online and the number of bank branches is projected to decline by 20% over the next decade.
Online lender Prosper announced the appointment of Claire Huang as a board member this week as the company looks to enhance its product offerings in 2018.
Huang’s appointment was effective as of Tuesday, according to a company statement. Prior to joining the San Francisco-based lender’s board of directors, Huang was the first ever chief marketing officer at JP Morgan Chase.
An estimated 45 million Americans don’t have a credit score and others have trouble bringing up their scores, even if they are in a better financial position than in years past.
And after facilitating 125,000 loans in three years, INSIKT is raising $50 million to expand. The round is led by Grupo Coppel, with participation from FirstMark Capital, Revolution Ventures and Colchis Capital. INSIKT has raised $100 million to date.
INSIKT has built what they believe is a better alternative to payday loans, breaking up payments into smaller installments. Its white-label loan processing service is used in over 600 banks and credit union locations across California, Texas, Illinois and Arizona.
With the economy continuing to improve and household wealth growing, total consumer debt has increased in 12 consecutive quarters and hit a record $12.8 trillion in the second quarter, according to the Federal Reserve Bank of New York. And, for the most part, consumers are staying on top of their bills. The American Bankers Association said recently that the midyear consumer delinquency rate held steady around 1.56%, which is below the 15-year average of 2.16%.
John Hancock wants to change that narrative with Twine, its robo-adviser and personal finance tool it released last month. Twine emphasizes simplicity in its look and feel — a user interface similar to many startup-developed apps out there.
John Hancock looked outside, buying San Francisco-based financial services AI startup Guide Financial in 2015.
Twine operates as a separate organizational unit based in San Francisco, while most of John Hancock’s offices are in Boston. The team of around 25 employees includes engineers, product managers, user experience designers and marketing staff. But despite being organizationally separate, Goose said the team stays in contact with the mother ship through travel and video conferencing.
But this isn’t a return to the way things used to be, said Hearts & Wallets, the Rye, N.Y.-based research firm that conducted the study of 40,000 individuals.
Today’s investors are what the firm calls “hybrids,” who use a mix of paid and free live professional advice, digital advice and their own insights. They now account for 41% of all U.S. households, the firm said.
Blenders of digital and live advice include 68% of consumers ages 35 to 44 with investable assets between $100,000 and $250,000, and 85% of consumers under age 35 who have over $1 million in assets. In all, over 75% of consumers under age 45 with assets of over $250,000 are “hybrids,” the firm said.
In hiring Cox, the San Antonio bank, which has a longstanding reputation for being innovative, effectively agreed to restructure the entire company. She has plans to “levelize” the business and technology teams and morph them into “business technologists,” who are empathetic and understand that technology is the enabling function of their entire business — not the checking account or the insurance policy.
The new model will make USAA look more like one of the technology “greats” — the usual suspects like Apple, Amazon, Facebook and Google — instead of an old bank or insurance company, Cox said.
Comptroller of the Currency Joseph Otting has not weighed in on the fate of a fintech charter yet, but the ball is now squarely in his court.
The agency that Otting was just appointed to run scored a victory earlier week when a judge dismissed a lawsuit from the New York Department of Financial Services, which had challenged the Office of the Comptroller of the Currency’s authority to create a charter for fintech firms.
Cutting out retail P2P investors doesn’t seem to have slowed LendInvest down. The UK’s leading fintech property lender now holds £765m (approximately $1bn) under management. Its capital base has more than doubled in 2017, up 104 per cent since the start of the year.
The highest yields for landlords are in Manchester at 5.55% and the city is also top in terms of rental growth at 5.76% and has a reasonable capital gains growth at 8.34%, the buy to let index from specialist lender LendInvest.
When it comes to capital gains the top city is Colchester at 11.96%, followed by Southall at 11.09%, Hemel Hempstead at 10.27%, Slough at 10.19%, Harrow at 9.89% and Ipswich at 9.44%.
Millennials who began renting at 21-years-old and live in an average-sized property outside of London will spend an average of £110,830 in household rent before buying their first home – typically at an age of 32, according to research by peer-to-peer lending platform Landbay.
For those living in the capital – where property prices and rents are significantly higher – the amount increases to £273,210.
The value of residential mortgages written off by banks and building societies has dropped by 79% in the past year, according to the latest research.
Data from the Bank of England revealed that UK lenders wrote off £72m of residential loans in the year end 30th September 2017, 79% lower than the same period in 2015/2016 – when £348m was written off – and even lower than pre-credit crunch levels.
UK consumers looking for personal loans are increasingly shifting away from traditional banks towards digital loan providers according to Zopa, the pioneering financial services company.
Research on the price comparison sector* shows loan sales obtained via price comparison sites have doubled in the last two years.
The data highlighted by Zopa shows that over 113,000 loans were sold through price comparison sites in the 6 months to April 30 2017, representing a 139% increase compared to the same period in 2015, whereas the overall unsecured personal loan market grew only by approximately 20% in the same period.
Gibraltar’s financial services watchdog will introduce the world’s first bespoke licence for “fintech” firms using blockchain distributed ledger technology from next month in a bid to attract start-ups to the British overseas territory as it prepares for Brexit.
Twenty-two of the world’s biggest banks and fintech firm R3 have just developed an international payments system using blockchain.
Gibraltar expects firms numbering well into “double digits” to seek authorisation after the new rules come into force on January 1, Gomez said.
The Shenzhen-headquartered online micro lender, which launched the deal on Thursday, joins a flurry of other Chinese internet finance companies, including Qudian, PPDai and Hexindai, in their rush to raise capital with a New York listing…with a US share sale worth up to $132 million.
Look & Fin, the largest Belgian player in the field of crowdlending, plans to expand again in Europe.
On average, more than one million euros is invested monthly via Look & Fin. Loans vary between €50,000 euros and €1 million, with an average term of 38 months. Individuals invest on average €2,400 and can count on an average return of 7.6%.
Governments, banks and startups have been trying for years to solve the problems associated with identifying people in a digital world. The challenges are only getting harder thanks to identity thieves, data breaches that have exposed the personal information of hundreds of millions of consumers, and the fact that some folks want to avoid having to register face-to-face.
The latest entrant, a recent BBVA spinoff called Covault, is a bit different.
Its app lets consumers store their digital identity documents, passwords and (potentially) digital currency in a secure cloud, and then share pieces of that information with others as they see fit.
Diana is the CEO and co-founder of Suade, a software platform which allows financial institutions to better understand and meet their regulatory requirements.
At SIBOS2017, Paredes encouraged financial institutions to think of regulation as being at the centre of their business. More education and research for implementation is needed, suggested Paredes in our interview. Smaller companies like startups offer more agile implementation as they are technology driven companies. Meanwhile, the big machine of a bank is becoming better at agile acceptance of new technology.
‘Regtech will prevent the next financial crisis.’
Paredes explained this quote saying that while regulation is trying to prevent another crisis, it has no implementation guide. As such, regtech will be needed to give effect to the regulation.
Celsius is a peer-to-peer (P2P) and blockchain-powered global lending and borrowing network designed to enable coin holders to earn interest.
First off, why did you decide to use the blockchain to build Celsius?
The blockchain is the first real technology threat that the large banks have faced for the past 100 years. It has the potential to spur a new financial revolution from which they cannot adjust. We decided to build Celsius using blockchain to leverage the technology’s global presence and decentralized design to extract the bank’s profits and distribute them to our members.
What was your thought process behind it?
We want to find the best way to add the next 100M crypto users to the market, and we came to the conclusion that offering coin holders 5-7% in interest on their coins would be the best way to get there.
Did you face a problem within the consumer credit industry or do you think there is a gap in the market for Celsius to fill?
Unfortunately, the continued concentration in the banking sector has allowed banks to pay people less than 2% interest but charge our credit cards 25% interest when lending us the same dollars.
A new paper from Milliman, a consultant to the insurance and financial services industries, discusses the ongoing transformation in and of the global reinsurance industry that alternative investment has created.
By the end of 2016, Milliman says, alternative capital in the catastrophe space consisted of around $76 billion, which breaks down as follows:
Collateralized reinsurance $39 billion
CAT bonds, $25 billion
Sidecars $8 billion, and
Industry loss warranties $4 billion.
As a proportion of the whole: alternative capital now represents roughly 13% of the available capital in global reinsurance.
Since 2011 the percentage of bonds with indemnity triggers has increased from 30% to roughly 70%.
The number of small business customers signing onto loans through marketplace lenders has increased more than 500% over the past year, but experts say scrutiny must be put on the alternative finance sector now to ensure smaller operators get the best deal.
In 2015-16, ASIC’s survey of the sector put the total value of loans through this kind of model at $156 million, but that figure has doubled over the past year to now sit at $300 million. Total borrowers for the year jumped from 7,448 last year to 18,746 this year.
Earlier today, the Australian Securities and Investments Commission (ASIC) published a report on the marketplace lending industry (peer to peer lending). ASIC believes that by monitoring Fintech they are better positioned to assess any risk as the industry develops.
The survey covers marketplace lending activities of 12 platforms that are regulated by ASIC – so it is not comprehensive of the entire online lending sector.
In summary, there were 353 incidents or suspected incidents of fraud , compared to 126 incidents or suspected incidents of fraud during the 2015 – 16 survey. There was one cyber security incident, compared to zero during the 2015– 16 survey. There were reports of some borrower complaints but most appeared to be minor. The average default rate was 2.2%.
Crowd Genie, a fully operational Singapore-based peer-to-peer digital lending platform licensed by the Monetary Authority of Singapore (MAS), has been selected by the token holders of the ICOS platform as the latest promising project to hold its own ICO.
Unlike most projects contemplating an ICO, Crowd Genie is not a startup but rather a debt-based lending platform that has been in operation for more than 12 months. It is one of only four P2P lending platforms licensed by the MAS. The project’s vision is to build a tokenized Pan-Asian lending exchange based on smart contracts, to ensure cost-effective, safe and efficient cashflows between lenders and borrowers.
The public ICO will begin on January 15, 2018, and will run until February 15, 2018. On offer will be 50,000,000 CGCOINs, a utility token which can be used to trade on the Crowd Genie platform.
Singapore-based fintech Canopy announced it has raised fresh funding of $3.4 million from investors including Switzerland’s second-largest bank Credit Suisse as well as Lionrock Capital.
Canopy, formerly known as Mesitis, is a Singapore-based anonymous account aggregation and analytics platform for financial institutions, wealth management professionals, and high net worth individuals.