Monday March 12 2018, Daily News Digest

Funding Circle

News Comments Today’s main news: Zopa competes with tech giants, not banks, for talent. Funding Circle to use 4 big banks to prepare for IPO. Japan tours Europe to pitch Open Banking. Lending Loop expands into corporate lending. Today’s main analysis: Preqin on the PE outlook. Today’s thought-provoking articles: Banking Amazon’s moment. How a commission-free robo-advisor plans to generate […]

Funding Circle

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United States

Banking’s Amazon Moment (PeerIQ), Rated: AAA

Co-branded partnerships are not new, and banks have long partnered with retail institutions to launch co-branded credit cards. In a co-branded partnership, the financial partner deals with deposit or credit management, account servicing, and regulatory compliance, while the retail partner deals with marketing and customer acquisition. We have recently seen Barclays launch a credit card with Uber and Goldman Sachs potentially partner with Apple to finance device purchases. What is novel about this partnership is that it extends the same business model to checking accounts.

Benefits of Partnership

In the current regulatory environment, Amazon needs a partner as there is no clear regulatory swim lane for Amazon to compete head-on with the banks today. The Bank Holding Company Act demarcates commerce and banking. Partnering with JPM makes sense as it avoids Amazon having to comply with onerous banking regulations, but also makes it possible to offer products like checking accounts to its customers.

These strategic partnerships are also incredibly valuable to banks. As we pointed out in a prior newsletter, banks that do not establish a digital banking presence do not have a seat at the table. For banks, this is a battle for long-term customer relevance. Banking products are increasingly commoditized, and new generation customers want to bank with technology firms. They like the customer experience, the self-service nature, control, and value. These customers shudder at the idea of walking into a bank branch.

The customer segment that Amazon is targeting – younger generation, unbanked – generate notoriously low checking account and debit card fee-income for banks. Amazon has no legacy bank branch network, low customer acquisition cost and can make the economics work where most banks cannot. Banks also get access to a new customer acquisition channel, like Alexa where Amazon controls access and can leverage the customer data that their partner has gathered to offer better products to existing and new customers.

Significance of this Partnership

The primary motivation in the short-term is economics. Amazon pays about $250 MM in interchange fees – about 2% per transaction. Customers with an Amazon checking account can pay directly out of their checking accounts and avoid the network transaction fees. If Amazon captures even 25% of this opportunity, and adds $50 Mn to its bottom line, it would be accretive to its market capitalization by ~$10 Bn.

Amazon’s banking footprint today consists of its Visa Signature Rewards credit card issued by Chase, and Amazon Lending, a small business lender that has made ~$3 Bn in loans. It is conceivable that once Amazon’s customers sign up for a checking account, Amazon could sell them a variety of financial products like insurance and investment advice. Bain estimates that Amazon could establish a retail financial relationship with 70 Mn US customers, similar to that of Wells-Fargo.

Who might follow Amazon?

Source: PeerIQ

Amazon hiring head of newly-formed mortgage lending division (Housing Wire), Rated: A

While limited in scope, Amazon’s plans are to start with offering checking programs first, then maybe move into the debt product space after.

Well, after reporting that, we’ve received information that Amazon is currently looking to hire someone to lead their newly-formed mortgage lending division.

Due to non-disclosure agreements, we probably shouldn’t reveal their identities. After all, with Amazon planning a move into mortgage lending, it’s best we work with them and not against them. Am I right?

We can say that if you look at the top 10 HMDA lenders and pick out the nonbanks, that’s where Amazon is recruiting their talent.

How a commission-free robo-adviser plans to generate revenue (Tearsheet), Rated: AAA

Digital investment startup M1 Finance is making a big bet that no fees are the future.

The Chicago-based company, which launched its platform two years ago, decided to drop its assets under management fees to zero in December.

Investment companies can make as much as 70 percent of revenue from services that don’t involve charging customers commission, like lending and transaction fees for third parties, according to its CEO, Brian Barnes.

Source: Tearsheet

Instead of subscriptions, Barnes added that revenue from other services is more than enough to sustain a profitable business: lending to banks based on the securities it holds, interest from loans to customers who borrow from M1 using their portfolio as collateral, and transaction fees paid to the company from exchanges. While it’s free to use the platform and execute trades, M1 charges customers other miscellaneous fees for services like paper statements, transferring an account to another brokerage, and wire transfers.

THE TIPPING POINT FOR ALTERNATIVE DATA (All About Alpha), Rated: AAA

The term “alternative data” as Deloitte uses it refers to any set or sets of data that may be useful for investors but that is outside their traditional/conventional frame of reference.  In this age of “big data” that frame is going to have to expand, and the use of (say) communications metadata or satellite imagery, which might still be innovative this week, might be quite common next week, and a bare necessity for survival the week after that.

The traditional model for data analytics by IM firms (however ‘alternative’ they may be in their assets or strategies) involves as the paper puts it “structured data sets acquired from various information providers” that are then “aggregated and loaded into proprietary quantitative models.”

But the sometimes unstructured data sets on which investment managers will hereafter be expected to draw are large, heterogeneous, and would have to be processed at an extremely fast rate to be of any use. This requires machine learning and cognitive computing for the analytics.

In 2016, big data analytics (BDA) solution vendors received $3.2 billion from securities and investment services (S&IS) firms. About 15% of that (close to half a billion) originated from technologies that at least potentially support the generation of alpha.

How banks are promoting Zelle (Tearsheet), Rated: A

How banks promote Zelle is about more than television ad campaigns.

This year Chase and Wells Fargo have launched 15- and 30-second commercials advertising Zelle, the peer-to-peer payments offering built right into banks’ mobile apps. Zelle itself has even launched a couple of spots, one featuring Hamilton star Daveed Diggs.

Smaller banks that can’t afford national commercials, however, will need to promote Zelle in their existing products, their mobile banking apps, and perhaps take a page from fintech startups’ marketing playbook and design their apps in such a way that the product does the selling for them. That’s according to a new report by Javelin Strategy on Zelle’s rollout; that it emphasizes within its own mobile banking experience that a product called Zelle exists and communicates the benefits of using it and the reasons its better than competitors like Venmo or Square Cash.

Only 25 percent convey that Zelle is free or that it only requires an email or cell phone number, and only 38 percent convey that users can send it to anyone with a U.S. bank account, even if they bank at a different institution than the sender.

However, within those mobile apps, banks are positioning Zelle a little more prominently. Bank of America, Wells Fargo and USAA are all examples of different banks that have chosen to show customers they can send money with Zelle. Bank of America more clearly shows users they also have the options to split or request money. Chase has chosen to rebrand its existing peer-to-peer payment service, Chase Quick Pay, by adding the Zelle name at the end of it and offering customers the option to “QuickPay with Zelle.” SunTrust has changed platforms entirely from PopMoney to Zelle.

LESS ACTIVE ROLE IN FINANCIAL LIVES LEAVES WOMEN MAKING LESS, SACRIFICING MORE (PR Newswire), Rated: AAA

A recent study of college-educated Americans found that more than half (54%) of adults don’t think they will ever make enough money to reach their financial goals. Findings released today by national online lender Laurel Road reveal the factors fueling this pessimism, which is significantly higher in women than in men. Millennial women (64%) are significantly more stressed than their male peers (47%) about their finances, and they report starting salaries that fall more than $10,000 lower than millennial men’s, on average ($29,403 vs. $39,839).

Fiscally confident millennial male grads (94%) were significantly more likely than their female counterparts (79%) to prioritize their future earning potential over personal passions when picking a major. Of those without a degree in finance, 88% of male millennials report taking personal or business finance courses while in college, compared to only 54% of female millennials. Meanwhile, nearly one-fourth (24%) of women completed an unpaid internship, compared to just 12% of men.

Millennial women (35%) are more than three times as likely as their male peers (11%) to not have completely understood their financing options when applying to college. These stark differences have a clear trickle-down effect post-graduation. More than half of women (57%) have had to decrease nonessential spending to save money since graduation, compared to just 35% of their male peers.

76% of college-educated adults aren’t completely confident they thoroughly understood their financing options to pay for college. Accordingly, more than half (55%) of Americans with student loans report that it took them longer than expected to pay them off – and for millennials, that number rises to 66%.

However, readjusting interest rates through options like refinancing can ease the burden. But it seems Americans might not be fully aware of this option, as only about one-third (34%) of college-educated adults who have taken out student loans have refinanced their student loans. Despite having less student loan debt, millennial men (62%) are taking advantage of refinancing benefits to a far greater degree than women (39%).

Additional findings include:

Advice adverse: Just more than half (57%) of college graduates have asked for financial advice, and only 16% do so on a monthly basis.

Overlooking the basics: Surprisingly, many college-educated Americans still haven’t taken some of the most basic steps to ensuring a healthy, long-term financial plan, including:

  • 83% have not taken a personal finance course or seminar outside of college classes
  • 62% have not negotiated a higher salary at a job
  • 37% have not begun investing in a retirement account

Persisting pessimism: Nearly 2 in 3 (66%) grads are not fully confident they know the steps required to finance a home. While millennial men (42%) are more likely than their female peers (29%) to feel completely confident they know the steps required to finance a home, it seems a solid financial foundation early on is key to building a comfortable future later on down the road.

Are HNW Investors Ready for Real Estate Crowdfunding Platforms? (National Real Estate Investor), Rated: A

Cecilio is founder and CEO of San Diego-based DiversyFund Inc., which bills itself as a “vertically-integrated real estate crowdfunding platform.” Rather than acting as a middleman, DiversyFund manages all of its real estate projects from start to finish.

Accredited investors put money directly into development of commercial and residential real estate projects in Southern California, such as a multifamily development in San Diego’s Hillcrest neighborhood. Investors can place as little as $5,000 in one of DiversyFund’s deals. Today, DiversyFund claims over 30,000 investors and more than $100 million in assets under management.

For now, an accredited investor must either make at least $200,000 a month or have a net worth of at least $1 million. But DiversyFund plans to open up its online platform this spring to non-accredited investors who can put as little as $500 into a project, Cecilio says.

NY Wealth Manager to Issue Loans Against Bitcoin (CoinDesk), Rated: A

With all the ICOs that have taken place (not to mention the meteoric rise in the value of crypto assets late last year), there are a lot of entrepreneurs who fit this description, but few products that allow them to turn long-term HODLing into actionable capital.

That’s the idea behind a new subsidiary being started by Dominion Capital, a family office based in New York City. While the company has long invested in a variety of assets, Dominion’s known for helping to finance projects by backing loans.

For the entrepreneurs who are willing to bet on the strength of their holdings, there’s a strategic opportunity at play. Essentially, the service would allow individuals and projects to borrow against either their own crypto assets (or those invested by supporters) rather than converting them directly to cash.

Restaurants Outpace Other Industries Investing In Mobile Technologies in 2018 (Modern Restaurant Management), Rated: B

The new findings show an overwhelming focus on mobile technologies, with 63 percent planning to invest; a well-advised investment given nearly 85 percent of all mobile users searching for a restaurant go on to make a purchase. The total average across all industries is 51 percent. In fact, restuarants and bars are among the most bullish to invest in mobile, trumped only by accounting services (70 percent) and marketing agencies (67 percent).

What’s more, nearly in one in four (23 percent) plan to invest in real-time analytics or big data solutions, to help analyze and identify growth opportunities.  This is an emerging opportunity for all small businesses as insights, typically available only to large corporations, are becoming increasingly more available.

U.S. Treasury Official Previews Report on FinTech Regulation (The National Law Review), Rated: B

Craig Phillips, Counselor to the Secretary of the U.S. Department of the Treasury (Treasury), recently delivered remarks at a conference held by the Institute of International Bankers in which he previewed the upcoming Treasury report about possible reforms to the laws and regulations that apply to non-bank financial institutions and FinTech companies.

Mr. Phillips reportedly signaled that the report will include a review of the regulations governing mortgage originators and servicers, marketplace lenders, payment processors and other FinTech companies, and will also cover the “regulatory asymmetries” between such institutions and more regulated institutions.

Pennsylvania judge partially dismisses action against investors of an online lending scheme (Lexology), Rated: B

On January 26, the U.S. District Court for the Eastern District of Pennsylvania partially dismissed an action brought by the Pennsylvania Attorney General against out-of-state investors of an online payday lender and the lender for violating Pennsylvania’s Corrupt Organizations Act (COA). The Attorney General alleged that an online payday lender and the investors “designed, implemented, and profited from a consumer lending scheme to circumvent the usury laws of states.” The alleged conduct, which the court referred to generally as “rent-a-bank” and “rent-a-tribe” schemes, involved the online lender partnering with an out-of-state bank and later with tribal nation to act as the nominal lenders of the loans.

Alabama Senate OKs bill to cap payday lending interest rates (Tuscaloosa News), Rated: B

Payday lending customers would have longer to repay their loan under a bill approved Thursday by the Alabama Senate, which marks the latest attempt to cap the interest rates charged with the short term loans.

The bill by Republican Sen. Arthur Orr of Decatur would give borrowers 30 days to repay a loan instead of as little as 10 days. Orr said the change would give people a better opportunity to pay off the loan. Senators approved the bill on a 20-4 vote.

Square’s Cash app now supports direct deposits for your paycheck (TechCrunch), Rated: A

Case in point, the app just rolled out support for ACH direct deposits, meaning users can now get their paycheck or other deposits put directly into their Cash app balance.

Like other features in the peer-to-peer payments app setting up direct deposits is almost too simple. After accepting a disclosure you’re given an account number and routing number, which is all an employer needs to start making direct deposits. Users get a notification when deposits hit their account, and all funds get added to their normal Cash app balance – meaning it can be sent to a friend, spent using a debit card, used to buy bitcoin or withdrawn to another account.

This feature combined with the Cash app’s debit card now means that the app can essentially provide all the basic functions of a bank account, assuming you don’t need to deposit checks or do complex things like wire transfers.

United Kingdom

Zopa is competing with tech giants not banks for talent, says CEO (P2P Finance News), Rated: AAA

ZOPA is competing with Google and Facebook for talent, not the likes of HSBC, the peer-to-peer lenders’ chief executive Jaidev Janardana (pictured) has said.

Funding Circle Picks Goldman Sachs, Morgan Stanley for IPO (Bloomberg), Rated: AAA

Funding Circle Ltd., the biggest online loan provider in Britain, named Bank of America Merrill Lynch, Goldman Sachs Group Inc., Morgan Stanley and Numis Corp. Plc to help manage its initial public offering, according to a person familiar with the deal, in a milestone for U.K. fintech.

The offering in London, planned for the second or third quarter, will probably value the eight-year-old company at between 1.5 billion pounds ($2.1 billion) and 2 billion pounds, according to the person, who asked not to be identified as the information is private. That would make it the biggest IPO by a British financial-technology startup.

Funding Circle has arranged more than 4 billion pounds in loans for small and medium-sized companies in the U.K., the U.S., Germany and the Netherlands.

 

Source: Funding Circle and Bloomberg

 

Funding Circle co-founder joins crypto-lending platform as advisor (AltFi), Rated: A

Andrew Mullinger’s LinkedIn profile reads: “currently semi-retired until I get bored”. The Funding Circle co-founder stepped back from the firm in May 2016. He has now joined a very different kind of online lender.

Lendingblock, an open exchange for cryptocurrency loans, today announced that Mullinger has joined the company as an advisor.

Augmentum Fintech raises £94m in IPO (Fine Extra), Rated A

Fintech venture firm Augmentum has raised £94 million in an initial public offering ahead of a listing on the London Stock Exchange.

Set up by venture group Augmentum Capital, Augmentum Fintech is raising the money for a new fund investing in early-stage financial technology companies in the UK and wider Europe.

The new company is acquiring Augmentum’s existing investments in a portfolio of five fintech firms, including Seedrs, Zopa, Interactive Investor, BullionVault and SRL Global.

In a rare meeting of the public and private markets, crowdfunding platform Seedrs was itself used to raise more than £500,000 towards the IPO. The management team and family members have provided £2 million in capital.

BBVA and Visa-backed banking platform solarisBank scores €56.6m in Series B raise (AltFiNews), Rated: B

solarisBank, the first banking platform to be fully regulated by the FCA with a banking license, has successfully completed a Series B investment round, gaining another €56.6m in funding. Current investors Arvato Financial Solutions and SBI Group renewed their stakes, with BBVA, Visa, Lakestar and ABN AMRO’s Digital Impact Fund (DIF) joining them.

 

China

Review: The flimsy finances behind China’s miracle (Nasdaq), Rated: AAA

Since the financial crisis of 2008, China’s economic growth has depended less on exports than on rising levels of domestic investment. Capital spending is mostly directed at construction, which directly accounts for some 20 percent of China’s gross domestic product and indirectly for much more. The long construction boom has produced dozens of ghost cities – McMahon counts 50 in all – filled with empty apartment blocks. Mighty skyscrapers have sprouted up in unlikely provincial backwaters.

Increasing property supply has been accompanied by rising prices. Sky-high valuations have priced many Chinese workers out of the market, creating a nation of “mortgage slaves” and “ant tribes” – graduates forced to live in cheap properties in urban peripheries. In some super-hot markets like the southern city of Shenzhen, the price of land has exceeded the value of the properties built on it, giving rise to the expression “flour more expensive than bread.”

If China’s economy is fuelled by construction, it’s no secret what keeps the cranes swinging and the bulldozers revving. The country has been on a credit binge ever since Beijing announced the “Great Stimulus” late in 2008.

Last China P2P Company Delists Domestically, foreseeing New Tide of Listings Abroad (PRNewswire), Rated: A

China-based Jiayin Fintech, parent company to Niwodai, one of chinese largest P2P lending companies, applied delisting from National Equities Exchange and Quotations (NEEQ) in China on 7 March.

Jiayin Fintech’s main business is offering micro-finance services solution, among which, the part accounting for the largest income is tying qualified individual borrowing needs with the investing demands through Niwodai platform. So this delisting may indicate some trends of P2P industry, according to media in China.

Chinese peer-to-peer lender Golden Bull decreases proposed US IPO deal size to million (Nasdaq), Rated: A

The Shanghai, China-based company now plans to raise $7 million by offering 1.6 million shares at a price range of $4.00 to $4.50. The company had previously filed to offer 2 million shares at the same range. At the midpoint of the revised range, Golden Bull will raise -23% less in proceeds than previously anticipated.

 

International

PREQIN ON THE PE OUTLOOK (All About Alpha), Rated: AAA

Preqin has issued a report on the near term outlook for private equity based on a recent (November 2017) survey of more than 350 PE firms around the globe.

Although this isn’t new, the worries about high valuations for portfolio companies have been a factor for years now; such worries are getting more intense over time. In November 2016, 36% of respondents said pricing for portfolio companies had gotten higher over the preceding year. In November 2017, 58% said the same thing.

A majority (56%) of fund managers plan to make more exits in 2018 than they did in 2017, though only 8% said that will be “significantly” more.

Australia

Fintech Australia begins hunt for new CEO as Danielle Szetho steps down (IT Brief), Rated: A

Fintech Australia’s Danielle Szetho is stepping down from her position as CEO after nearly two years in the role.

The organisation has already begun the search for its new lead executive while appointing Sarah Worboys as interim CEO.

 

Asia

Open Banking Provides Perfect Environment for FinTech Integration in Japan (PRNewswire), Rated: AAA

With a rapidly changing, quality business environment, the Government of Japan has launched a series of events across Europe to inform and promote active discussions around the future opportunities in Japan’s lucrative and intelligent market.

On February 19, a Japan You Didnt Know roundtable event kicked off in London at the office of global management consulting firm, A.T. Kearney. Discussions at the event focused on the impact of the new wave of finance, technology, consumerization and personalization sweeping Japan, and how the country is adapting its policy and regulatory framework to welcome foreign investors to deliver predictable conditions for accelerated growth.

Japan boasts the world’s third largest economy and has seen eight straight quarters of stable macroeconomic growth. Driven by a transformation of the market by means of bedrock deregulation and international trade deals, Japan is designing an efficient and productive environment that welcomes foreign business for the coming opportunities in financial services.

Canada

 

P2P PLATFORM LENDING LOOP NOW OFFERING CORPORATE LENDING (Beta Kit), Rated: AAA

Toronto-based Lending Loop, which provides a peer-to-peer lending platform for small business loans, is now allowing corporations to invest in small business loans through its online platform.

The launch of corporate lending is expected to expand small business’ ability to access fast financing, while enabling more lenders to earn attractive returns. To date, Lending Loop says it has facilitated over $17.5 million in loans to businesses across Canada.

Som Seif’s Purpose Financial to acquire fintech lender Thinking Capital (BNN), Rated: A

Canadian ETF pioneer Som Seif’s Purpose Financial announced Friday it is acquiring Montreal-based Thinking Capital, an online lender to small businesses, for an undisclosed amount of cash and securities.

Authors:

George Popescu
Allen Taylor

Wednesday January 17 2018, Daily News Digest

European alt SME lending

News Comments Today’s main news: Wells Fargo is closing branches left and right. Repeal  of payday lending rule under consideration. Moody’s assigns provisional ratings to SoFi Professional Loan Program 2018-A-LLC. RateSetter leads in personal loans. Curve launches. Victory Park Capital looks overseas. Today’s main analysis: How Lendix blazes a trail in SME lending. Today’s thought-provoking articles: Why regulation is crucial. Wells […]

European alt SME lending

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United States

United Kingdom

China

European Union

International

Asia

Africa

Canada

News Summary

United States

Wells Fargo is getting more aggressive with branch closures (Tearsheet), Rated: AAA

Wells Fargo is charging toward its goal to cut over 800 branches by the end of 2020, it said in a presentation of its fourth quarter earnings on Friday.

 

Wells, which has been struggling to cut costs while it continues getting hit with legal fees following its various scandals, expects to save $4 billion as a result of the plan.
Source: Tearsheet

Consumer Financial Protection Bureau considering repeal of payday lending rule (NBC News), Rated: AAA

The bureau, which came under control of the Trump administration late last year, said in a statement Tuesday that it plans to take a second look at the payday lending rules. While the bureau did not submit a proposal to repeal the rules outright, the statement opens the door for the bureau to start the process of revising or even repealing the regulations. The bureau also said it would grant waivers to companies as the first sets of regulations going into effect later this year.

Moody’s assigns provisional ratings to SoFi Professional Loan Program 2018-A LLC (Moody’s), Rated: AAA

Moody’s Investors Service has assigned provisional ratings of (P)Aaa (sf) to Class A-1 Notes, the Class A-2A Notes and the Class A-2B Notes to be issued by SoFi Professional Loan Program 2018-A LLC (SoFi 2018-A). The collateral underlying the transaction consists of SoFi’s private student loans, which are loans the government does not guarantee. Our cumulative net loss expectation for SoFi 2018-A’s loan pool is approximately 2.0%.

Issuer: SoFi Professional Loan Program 2018-A LLC

  • $55,000,000 Floating Rate Post-Graduate Loan Asset-Backed Class A-1 Notes, Assigned (P)Aaa (sf)
  • $358,500,000 Fixed Rate Post-Graduate Loan Asset-Backed Class A-2A Notes, Assigned (P)Aaa (sf)
  • $236,800,000 Fixed Rate Post-Graduate Loan Asset-Backed Class A-2B Notes, Assigned (P)Aaa (sf)

Magilla Loans Platform Surpasses $ 4.5B Loan Origination Milestone (PR Newswire), Rated: A

Magilla Loans, a search engine for loans that connects borrowers to banks without requesting personal information, announced it has surpassed $4.5 billion in aggregated loans from top banks across the U.S. The Magilla platform provides business owners with access to multiple financing options, including access to business, home and real estate loans.

UpLift Closes Financings of $ 90M (FINSMES), Rated: A

UpLift, a Sunnyvale, CA-based travel financing company, closed financings of $90m.

The company received:
– a $75m credit facility in partnership with funds managed by affiliates of Fortress Investment Group, and
– a $15m equity round which includes participation from previous investors including PAR Capital with Draper Nexus, Highgate Ventures, and former Expedia CEO Erik Blachford.

NextCapital does $ 30-million VC round with a staggering objective that’s taking shape first with John Hancock (RIABiz), Rated: A

The shoot-the-moon robo strategy of NextCapital Advisers Inc. is looking up now that John Hancock Financial Services Inc. has come out of pilot and State Street Global Advisors became a partner in going after RIAs.

The Chicago-based digital advisor, founded in 2013, announced it more than doubled its backing with $30 million of venture round led this time led by Oak HC/FT of Greenwich, Conn. See: NextCapital raises $16 million as its founder goes where Financial Engines’ 401(k) robo strategy didn’t.

All told, the firm has raised $54 million: Six million dollars in August 2014, $18 million in 2015 and, just recently, this $30-million round.

Borrowers in the Lone Star State Can Now Get a Better Mortgage (Digital Journal), Rated: A

Better Mortgage, a digital mortgage company focused on improving access to home financing for a new generation of homeowners, is now available to Texas homebuyers. Better will now be able to serve more than half of Americans who are looking to own or currently own a home. In 2017, Better expanded its footprint in major real estate markets around the country, with Texas being the latest licensed states.

Texas is Better’s 14th market. In 2018, they expect to continue their expansion, focusing on geographies that help first-time homebuyers invest in their communities by putting down roots.

Gary Lieberman of Laurel Road (Lend Academy), Rated: A

In this podcast you will learn:

  • The history of Darien Rowayton Bank.
  • Why Gary decided to buy this small community bank in 2010.
  • How the bank has grown since Gary took it over.
  • How student loan refinancing first got on his radar decades ago.
  • When DRB originated their first student loan.
  • The advantages of being a bank and a fintech platform.
  • Some of the affiliate partnerships DRB has.
  • Other verticals where DRB has offerings today.
  • Why DRB rebranded to Laurel Road in 2017.
  • The scale they are at today with student loan refinancing.
  • Their approach to securitization.
  • How their loans have been performing to date.
  • The profile of their typical borrower.
  • How they market their offerings.
  • What the future holds for Laurel Road.

Refinancing Student Loans Gets Mixed Report (247WallSt), Rated: A

More than 45 million Americans have borrowed $1.45 trillion in student loans to help pay for their post-secondary educations. Repaying those loans can be tough, especially if the loan amount is high and pay for the first job after graduation is low.

Student loan marketplace and refinancing website LendEDU has just released its second annual report on the state of the student loan refinancing market. Here are several highlights from the report:

  • Average credit score of an approved refinance applicant is 764.
  • Just over 58% of 2017 applications are denied.
  • The average interest rate on a refinanced loan is 5.56%. The average rate rose 74 basis points year over year from 4.82% in 2016.
  • The average size of a refinance loan was $66,453. The 2017 average was more than 23% higher year over year.
  • Less than half of approved applicants actually end up refinancing their loans. In 2016, just over 33% of all applicants completed the loan process.

Reliamax’s Michael VanErdewyk: ‘We’re seeing a move towards more private student loans’ (Tearsheet), Rated: A

With all the excitement around online lending, there are still some spaces that have a long growth runway. One of the most persuasive growth opportunities is private student lending. Macroeconomic and policy changes are contributing to the growth thesis but so too are the number of local lending institutions that want to move into this asset class.

Rising costs of higher education
The cost of education continues to increase and the number of kids in school isn’t declining. So, it’s a big opportunity. Really, we have to talk about the cost of education. The cost of higher education in the U.S. today costs over $400 billion a year. About 25 percent of that is free money (grants and scholarships). Another 25 percent is federal student loans. The remainder — about $200 billion a year — is really family contributions.

The focus on private student loans
If you look at the total outstanding student debt, there’s about $1.4 trillion in federal student loans and $100 billion in private student loans, comprising only about 7 percent of total outstanding student debt.

CreditVest starts crowdfunding advisory firm (BizJournals.com), Rated: B

Jon Mauro founded Realty Mentors with Andrea Humphrey, who is president and owner of CreditVest, to focus on individual investors who want to participate in commercial real estate crowdfunding.

Zelle is now running TV ads (Tearsheet), Rated: A

Zelle is spending “tens of millions” of dollars on a television ad campaign featuring spoken word artist Daveed Diggs.

Early Warning, the bank-owned consortium behind the peer-to-peer payments platform, aired the first ad Saturday during the National Football League’s divisional round of playoff games and will continue to run them alongside unifying cultural events like the Grammy Awards, the NBA All-Star Game and the Super Bowl pre-game show. They’ll also run during popular shows on Bravo, Comedy Central, The Discovery Channel, ESPN and MTV.

Zelle is trying to build some brand recognition for itself among its target audience, mobile users, in an effort to compete with Venmo.

An investing platform founded by a 25-year-old went free — and now it’s facing a backlash from its rivals (Business Insider), Rated: A

M1, which was founded by CEO Brian Barnes when he was 25, originally charged users 25 to 40 basis points to use its platform, which allows users to buy fractional stocks and invest in pre-built portfolios. In December, it decided to go free, and make money strictly on the backend, by selling flow to trading firms and lending out non-invested funds sitting in users’ accounts to banks. The company also plans to offer margin trading to its users.

Since going free in December, M1 has seen daily inflows hit as high as $1 million, and a 10-fold increase in the number of new accounts each day.

Still,  M1’s robo rivals aren’t convinced the strategy will work for the small company.

Tipalti Launches Payables Automation Partner Program (BusinessWire), Rated: A

Tipalti, the leading global payables automation platform, today announced the launch of its Partner Program, which will offer accounting firms, financial institutions, system integrators, ERP resellers/VARs, consultants, and partners who work with the office of the CFO, the ability for their clients to leverage Tipalti’s software to eliminate the friction, risk, and time spent on manual accounts payable operations.

Key Features of Tipalti’s Partner Program:

  • Training and support for partners as they assist their clients
  • Option to pass exclusive savings on to their clients
  • Option to receive income stream through revenue-sharing
  • Low-impact engagement with minimal investment by partner

STOCKHOLDER INSPECTION RIGHTS SURVIVE CHALLENGE IN DELAWARE (AllAboutAlpha), Rated: A

On December 29, 2017, the last business day of the expiring year, the Delaware Chancery Court, in a memorandum of opinion by Vice Chancellor Slights, upheld stockholders’ statutory books-and-records inspection rights against a defendant corporation that sought to invoke and considerably to widen the scope of the Delaware Supreme Court’s Corwin decision of 2015.

The significance of this is that Delaware, some impressions to the contrary, is not a corporate-management-always-wins state. It was not so before the Corwin decision, nor did that decision make it so.  That ought to be good news for activist investors and their counsel. There may be alpha, or at least leverage toward alpha, lurking in the right to inspect books and records.

United Kingdom

RateSetter leading the way for personal loans (RateCity), Rated: AAA

Interest rates for personal loans listed on RateCity range from as low as 3.57 per cent to as high as 48.00 per cent.

The average personal loan interest rate was 11.89 per cent at the end of December, according to an analysis of the dozens of lenders listed on RateCity.

RateSetter, a peer-to-peer lender, has a one-year unsecured personal loan with an advertised rate of 3.57 per cent and a comparison rate of 3.92 per cent.

Curve, the fintech that connects all your cards to a single card and app, gets full consumer launch (TechCrunch), Rated: AAA

Curve, the London fintech startup that offers a platform that lets you consolidate all your bank cards into a single Curve card and app to make it easier to manage your spending, is finally launching to U.K. consumers. Up until now, the service remained in beta and was only officially available to business users.

In a call with Curve founder and CEO Shachar Bialick, he described the consumer launch as a major milestone for the company, noting that 50,000 people have signed up to its waitlist, in addition to the 100,000 or so users who joined Curve in its beta phase. It’s free to join, although a premium version of the Curve card is also available for £50 that offers additional perks.

How P2P could be a financial lifeline for UK landowners (Bridging&Commercial), Rated: A

A recent study of 172 farms by the Prince’s Farm Resilience Programme found that just 16% made a profit from their farming activities over the period assessed. The analysis found that instead many farms are now reliant on alternative income streams to turn a profit, such as tourism, renewable energy and selling their products directly to consumers.

But moving into alternative areas of business requires capital. And – with the average farm in the study making a loss of more than £20,000 from its farming activities – it may be capital that landowners require to invest in their business to prevent a loss.

Folk2Folk champions local lending because we believe in creating financially and socially sustainable communities by matching local businesses with local lenders.

Robo advice platform citing AI and machine learning raises £562k on Crowdcube (AltFi), Rated: A

Marketsflow, a new digital wealth management platform closed its fully funded investment round via equity crowdfunding.

Initially looking to raise £210k, the fundraise has seen more than £562k of commitments from nearly 800 investors giving Marketsflow a pre-money valuation of £2.4m.

What we learned about fintech from some of the biggest brains at Clifford Chance (Legal Cheek), Rated: A

What kind of financial technology has come across your desk at Clifford Chance, then? (Here comes the educational bit.) Chapman identified four technologies driving change:

Marketplace lending: crowdfunding or peer to peer lending, with the potential for “disintermediation” of the financial institution that used act as middleman for loans.
Big data and AI: you might just have seen it in the newspapers. But it’s closer than you think: if you’ve applied for a credit card, according to Chapman, chances are that a machine took part of the decision on whether or not to approve you.
Mobile payments: forget branches, even internet banking on a web browser is old hat. Some banks, indeed, exist only as apps (I instantly thought of my Revolut app, which started out offering as a slick currency exchange platform, but is now offering credit).
Blockchain and distributed ledger: different things, but often used in combination. These are “the pieces of technology that underpin the Bitcoin phenomenon”. It’s not just media hype, either: Clifford Chance is “seeing a lot of work in this space”.

5 Top Alternative Investments in the UK (What Investment), Rated: B

1. Crowdfunding

Rather than rely on venture capital trusts and angel investors, many new businesses are using crowdfunding to get off the ground. In fact, UK platforms such as CrowdCube and Angels Den have raised over £72 million from investors this year.

5. Peer-to-peer lending

Peer-to-peer lending allows you to loan money to people through online platforms, without a bank. These agreements are arranged through peer-to-peer lending platforms such as Zopa, Prosper and Lending Works. These peer-to-peer companies are typically FCA regulated and they organise credit and ID checks as well as set interest rates, collect payments and pay your returns.

After PSD2 and GDPR, what Wayfinding Signs will guide visitors through an Open Bank? (LinkedIn), Rated: A

When branch banking was the mainstream method of service distribution in financial services, both a bank’s customers and potential business partners could follow clear signs that directed them where to go and who to contact. The first sign that a bank sent its customers and potential business partners was the geographic location of a bank branch.

One in four very-low income households are struggling to pay bills or debt, with 10 per cent spending more than a quarter of their salary on credit card repayments, a report has found.

Data from the Institute for Fiscal Studies (IFS) showed one-sixth of the poorest households in Britain were in arrears on repayments and bills.

A further 10 per cent were spending at least a quarter of their monthly income on unsecured debts, such as credit cards and payday loans.

China

‘Freedom at a Price’: Why Regulation Is Crucial to Fintech’s Future (Wharton), Rated: AAA

In recent years, financial technology, or fintech, has dramatically expanded financial inclusion in China and elsewhere in Asia. Small and midsized businesses that have been underserved by banks now have access to capital, as fintech enterprises use the internet and mobile technology to reach those borrowers; leverage data analytics to build credible and innovative risk profiles to gauge creditworthiness, and are able to scale their reach exponentially with 24/7 customer windows and without the baggage of fixed-cost overheads that typically shackle traditional banks. Not surprisingly, the unmet needs of the underserved have provided huge market potential for fintechs.

Credit China FinTech, which is listed on the Hong Kong Stock Exchange as Chong Sing Holdings FinTech Group Ltd., or CSF, provides third party payments, online investment, technology-enabled lending, and traditional loans and financing services. Today, it has more than 51 million users who generated transactions worth RMB 868 billion ($130 billion) in the first half of 2017.

At the same time, both have proved massively popular in China which accounts for roughly half of the world’s digital payments and three-quarters of global, online P2P lending volume, according to Pricewaterhouse Coopers.

For one, default rates are higher than anticipated on peer-to-peer lending platforms. Also, instead of being disrupted by the fintechs, traditional banks have entered the peer-to-peer lending space to become the dominant players, he added.

China regulator says fintech must serve real economy (Finextra), Rated: A

Jiang Yang, vice chairman of China’s Securities Regulatory Commission (CSRC) was speaking at the Asian Financial Forum to an audience of fintech entrepreneurs. The development of fintechs should benefit the real economy and not “a small group of people”, he said in comments reported by the Nikkei Financial Review.

European Union

Lendix Raises €200 Million Institutional Financing to Trailblaze European Alternative SME Finance (Crowdfund Insider), Rated: AAA

The European Investment Bank Group (EIB), CNP Assurances, Eiffel IM, Groupama, Zencap AM, Matmut and Decaux Frères Investissements are among the first investors joining to finance Lendix’s latest investment vehicle to fund unsecured loans to SMEs in France, Spain and Italy. New institutional investors from banks and asset management firms in Spain and Italy are joining. As of now, €120 million of the planned €200 million are already committed and the first loans from this fund will start rolling out as soon as February.

Source: Crowdfund Insider

As of December 2017, Lendix originated a cumulated worth of €143 million of SME loans, a 90% increase from 2016.

Online Lender Robo.Cash Shares Insight into Investor Activity (Crowdfund Insider), Rated: A

Peer to peer lender Robo.cash has shared a “financial portrait of a Robo.cash investor.”

According to their results, investors from a younger age group, 18-24 years old, usually deposit circa €200 at a time and rarely withdrew  any funds. The maximum funding size is characteristic of the older age groups: the average deposit of investors of 35-44 years old is equal to €879 and for those who are older than 45 years old is €838.

Millennials of 25-34 years of age invest about €679 on average making frequent deposits in comparison to the younger age group.

Approaching energy crowdfunding with eyes wide open (YourIS.com), Rated: A

youris.com met Sissy Windisch, from the German company Green Crowding, who published a guide for new small investors, to allow them to make the best decisions. The document was released under the EU project CrowdFundRES.

This is a different kind of crowdfunding, unlike what platforms such as Kickstarter do?
With Kickstarter you donate money, so a comic book for example can be published, or you just want an artist to keep on creating art. Instead, the type of crowdfunding we are interested in is debt-based, which means that you get your money back plus interest. If you finance a solar roof on a school for five years, you get 3% every year and at the end of five years you get your money back.

Could you tell us more about debt-based crowdfunding?
Debt-based funding is already one of the largest types of crowdfunding. I would say one of the biggest areas in terms of funding volume at the moment is real estate. I think for 2016 alone the funding was estimated at around 3.5 billion dollars.

Why can’t the traditional financial institutions, such as banks or investment firms, offer these services?
What we’ve often seen, particularly for renewables, is that banks and other traditional financial institutions often look for large projects to invest in. They prefer investing in one 50-million wind park than in 500 small photovoltaic installations.

Swaper Offers One-Click Portfolio Investing (Benzinga), Rated: B

What does your company do? What unique problem does it solve?

Swaper CEO Peteris Kisis: Swaper is a loan marketplace offering an easy investing in pre-funded consumer loans originated by its parent company Wandoo Finance Group in Poland, Georgia, Spain, Denmark and Russia. All investments offered on our marketplace start from 12 percent annual interest and are BuyBack guaranteed, meaning Swaper will compensate investors both for the invested principal and accrued interest in case the borrower is late with payments.

International

Top backer of US subprime lenders eyes overseas opportunities (Financial Times), Rated: AAA

Victory Park Capital, a Chicago-based investment firm, has been a vital source of debt capital for a string of online lenders, including Avant, Elevate and LendUp, all of which focus on borrowers in the subprime segment. Total commitments and investments come to about $6.5bn from more than 90 deals, mostly in the US.

The firm, which was founded 10 years ago, is seeking to add to a portfolio including zip Money in Australia, Kreditech in Germany and Oakam in the UK.

(The Merkle), Rated: A

Vitalik Buterin, the creator of the Ethereum Network, recently proposed a new method for decentralized fundraising called the “DAICO”. Incorporating elements of Decentralized Autonomous Organizations, or DAOs, the new model is designed to minimize the complexity and risk associated with ICOs.

Buterin outlined the new model in a post on the Ethereum Research Forum entitled “Explanation of DAICOs”. In the exposition, the Russian-Canadian programmer outlines a new model that integrates characteristics of DAOs into ICOs to create a new model he refers to as the “DAICO”.

Source: The Merkle
Asia

New Crypto Exchange and 1000 Percent Revenue Growth Could Make KPAY The Crypto Stock To Own In 2018 (Baystreet), Rated: AAA

The little-known Indonesian digital payments company KinerjaPay (KPAY) reported another blowout quarter in December with sales that topped the previous 3 month period by a whopping 1,100%!

Revenue and User-Base Growing Parabolically? +1100% in Q3

KinerjaPay is a digital payments platform in Indonesia and South Asia, and the company ha been growing at an astronomical rate in the last year. In the third fiscal quarter of 2017 ended September 30, 2017, the company posted quarterly transactional revenue of $1.76 million, an 1,183% increase over $149K in the second quarter.

User growth is accelerating as the company brings on more partners for digital payments and bill pay capabilities in a region of the world where a fraction of people have a bank account or credit/debit card. The rate at which KinerjaPay is adding customers grew 58% in the 3rd quarter; the company reported 10,962 new users compared to 6,904 new users in the same quarter of last year, demonstrating just how fast they’re adding users for a small emerging company.

Asian stocks bounce back, with Hang Seng closing at a record (MarketWatch), Rated: A

Asian equity markets on Tuesday found their footing after some initial softness, leaving Hong Kong’s benchmark at a record closing high.

The Hang Seng rose 1.8% to 31,904.75, topping the previous high set on Oct. 30, 2007.

Japanese stocks rebounded from Monday’s selloff, with a weaker yen helping the country’s exporters. The dollar gained 0.2% to ¥110.7200, pushing the Nikkei to finish up 1% at a fresh 26-year high.

Africa

Fintech startups took nearly a third of all African venture funding in 2017 (Quartz), Rated: AAA

Almost a third of funding raised by African startups in 2017 was in the fintech sector as investors bet on consumers turning to more formal financial services in a region where just 17% of the population have banking accounts. Venture funding for African startups jumped by 51% to $195 million in 2017, according to a report from Disrupt Africa.

The success of mobile money technology like M-Pesa in Kenya and across East Africa has long shown the potential for other underserved markets. M-Pesa’s success is likely also behind for the increasing presence of mobile networks in the African financial sector and the convergence of the two sectors (pdf page 11).

Nigeria, South Africa and Kenya remained the countries with highest funding raised, consistent with their record from previous years.

Canada

Still a market for short-term loans (Edmonton Journal), Rated: A

Payday loan licences in Alberta have fallen by more than one-quarter, to 165 from 230, and industry officials predict even more payday loan stores will be shuttering their doors this year.

Before then, rules around payday loans in Alberta allowed for the second-highest interest rates in Canada, with lenders being allowed to charge up to $23 for every $100 borrowed, up to a maximum of $1,500. Now, the rate is $15 per $100 — touted to be the lowest in Canada — and borrowers are allowed to repay the the loans in instalments over two months. Lenders are also no longer allowed to penalize customers for paying back loans early and must restrict the number of times a lender can make preauthorized withdrawals.

Authors:

George Popescu
Allen Taylor