Digital Lending: How Artificial Intelligence, Machine Learning Are Making a Difference

machine learning digital lending

Artificial intelligence (AI) and machine learning (ML) are ubiquitous in today’s workplace conversations. Turn on any business news channel and you’ll hear them repeated over and over. Ask any venture capitalist and they are sure to brag about several investments in these areas. Google artificial intelligence and machine learning, and you’ll find 213,000,000 hits, and […]

The post Digital Lending: How Artificial Intelligence, Machine Learning Are Making a Difference appeared first on Lending Times.

machine learning digital lending

Artificial intelligence (AI) and machine learning (ML) are ubiquitous in today’s workplace conversations. Turn on any business news channel and you’ll hear them repeated over and over. Ask any venture capitalist and they are sure to brag about several investments in these areas. Google artificial intelligence and machine learning, and you’ll find 213,000,000 hits, and rising. Overhyped? We don’t think so.

Accenture boldly claimed that AI could boost average profitability rates by 38% and lead to an economic benefit of $14 trillion by 2035. That is no small statement. Even more astonishing is the general alignment among analysts on this issue. It’s widely agreed that AI and ML hold great promise across all industries, and, specifically, in finance.

In 2019, IDC projected that banking would be the second largest global industry to invest in AI, with $5.6 billion going toward AI-enabled solutions (trailing only retail). Why? The anticipated effect on business. According to the research firm, Autonomous, the financial industry’s slice of the global AI pie represents upwards of $1 trillion in projected cost savings.

Fintech Disruptors and Underwriting

Fintech disruptors, characterized as fast-moving companies, often start-ups, focus on a particular web-based innovative financial technology or process, spanning mobile payments to lending. Fintech disruptors initially found an entry point in finance through the use of AI/ML in underwriting.

In the U.S., if the customer consents, you can gain almost unlimited data about their credit profile: how many loans they have, whether they have a mortgage, if they’re delinquent, and whether they requested credit recently. According to the Brookings Institution, “AI coupled with ML and big data, allows for far larger types of data to be factored into a credit calculation. Examples range from social media profiles, to what type of computer you are using, to what you wear, and where you buy your clothes.” Access to this type of data gave rise to the development of sophisticated algorithms to underwrite consumer credit risk. We’ve seen this across a variety of lending companies offering unsecured consumer, student, or even small business loans, particularly focused on digital lending.

Importantly, though, those employing AI must be hyperaware of data collection practices, model design, and the potential for misuse. There is an inherent obligation when using these powerful tools to avoid profit at any cost. When used responsibly, AI can promote growth and better serve consumers. To meet this goal, companies must focus on creating ecosystems that are exponentially more just and equitable than what we have today.

On the surface, the digital lending numbers seem incredible. Digital lenders have grown to $50 billion in originations per year, not including incumbents. And, the research firm Autonomous notes that the digital lender model continues to raise $5 billion in annual venture capital investment, dominated by investments in the U.S.

And, yet, that same report shows that an AI/ML-driven digitization of the lending process is not headed to zero cost. To date, the cost advantages of onboarding and ongoing servicing (up to 70% reductions) have not been able to overcome the relatively high marketing costs that have yet to effectively scale lower than $250 per loan. Moreover, capital costs can reduce efficacy relative to traditional bank competition, and, then, there are the unplanned expenses, such as legal fees or elevated product development costs, the firm reports.

So, if digital lending driven by AI/ML-powered underwriting cannot deliver a material cost advantage, is further AI/ML advancement possible? And, will it improve outcomes for the consumer? Yes, absolutely. It all boils down to operations. As the use of AI shifts beyond obvious use cases and is deployed cross-functionally across entire companies to address various operational inefficiencies, the real promise emerges.

AI/ML 2.0: Improving Outcomes for Everyone

According to Deloitte, the top 30% of financial services firms who are frontrunners are more adept at integrating AI into the core strategic business of their firms, delivering revenue and cost gains quicker than competitors. In our opinion, this is clearly the case with fintech disruptors. Those that are focused on AI integration throughout the organization will quickly pull ahead of those who limit AI deployments to chatbots, underwriting, and other AI/ML 1.0 use cases.

Fintech disruptors can offer the market’s most cost-effective solutions by dramatically curtailing operation costs. Harnessing large-scale, multi-functional AI systems across organizations, instead of simply deploying in underwriting, presents fintech disruptors the opportunity to control costs at each stage and offer quality outcomes for their customers at reduced costs – with lean workforces.

So, while these systems may not face the end customer in any way – in fact, that may not be visible at all – they are the true future of AI/ML for fintech disruptors.

Fintech disruptor leaders who understand the opportunity to use an interconnected system of AI models across their organizations will likely drive the greatest overall efficiencies, both reducing costs and boosting revenues. This enhanced efficiency can be used to drive competitive position and ultimately higher profits.

AI/ML 2.0 at Work

AI can be used to help allocate resources across a variety of functions. For instance, a lender could create an AI model used to predict which of its retail partners would see the greatest increase in usage as a result of a field visit by a partner support representative. Generally, these visits don’t have uniform outcomes. Therefore, using a model-driven approach could help to allocate resources in the most effective manner. Increasing usage obviously drives overall revenue, but also helps to amortize cost over a greater number of transactions, driving better unit economics. Further, with time, the usefulness of such a system can grow. The more data collected from previous visits, the better the algorithm can be at predicting which visits will yield increasing usage.

Or, a lender could deploy AI in the call center to optimize the efficiency of the collections support team. Outbound reach to delinquent customers could be prioritized based on an ML algorithm that evaluates the potential for a successful call and the expected dollar collection. This may sound simple, but making the “good” calls and avoiding the “bad” ones offers all the obvious advantages of more precise resource allocation.

What is less obvious, though, is how these models are interconnected. The model used in the call center complements the underwriting model. If the collections team performs better, then the underwriting model can be recalibrated to maintain the overall risk of the loan portfolio. If the model prioritizing field visits is working, then it increases usage and reduces the average costs to originate a loan. This further enables a recalibration of both the underwriting model and the collections model. The combination of these models, ultimately, increases both expected and realized returns on the loan portfolio, reducing expenses and allowing the company to pass this savings back to customers in the form of lower rates. This is a win for everyone.

Optimizing the AI/ML Ecosystem

This is the true promise of AI/ML – a robust ecosystem of interdependent models utilized to enhance cross-functional outcomes. This leads to a much broader point: inefficiencies exist in all aspects of business – including accounting, legal, operations, finance and customer experience – and negatively impact profits.

Responsibly managed AI/ML 2.0 promises to address many of these functional silos with great success, improving outcomes for everyone involved.

Author:

Dr. Tamir Hazan is a co-founder and head of Analytics at Digital Lending: How Artificial Intelligence, Machine Learning Are Making a Difference appeared first on Lending Times.

Thursday September 5 2019, Weekly News Digest

neobanks

News Comments Today’s main news: LendingPoint closes $178M personal loans securitization. OnDeck hits $879M in online financing in Texas alone. RateSetter adds three products. Funding Circle lenders face longer cash out waits. Yirendai files Form 6-K. Today’s main analysis: International P2P lending volumes for August 2019. Today’s thought-provoking articles: Silicon Valley is building a social […]

The post Thursday September 5 2019, Weekly News Digest appeared first on Lending Times.

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News Comments

United States

United Kingdom

China

International

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News Summary

United States

LendingPoint : Closes $ 178 Million Personal Loans Securitization (MarketScreener), Rated: AAA

LendingPoint, the company revolutionizing and democratizing commerce, announced today that it closed its inaugural securitization of consumer loans. LendingPoint Receivables Trust 2019-1 (“LDPT 2019-1”) issued $177.85 million of notes backed by a pool of $187.22 million of direct-to-consumer loans originated on the LendingPoint platform.

The LendingPoint Receivables Trust securitization was rated by Kroll Bond Rating Agency, Inc. and includes $117.76 million of Class A notes rated “A-“, $24.74 million of Class B notes rated “BBB-“, $23.68 million of Class C notes rated “BB-” and $10.67 million of Class D notes rated “B-.” The notes priced at a blended yield of 4.05% per annum and provided for a 95% advance rate. The transaction has a 5% overcollateralization Deposit and a 5% overcollateralization Target. The risk adjusted yield of the receivables securing the notes is expected to be 13.14% per annum.

TyMac Electric Powers Business Success with Online Financing from OnDeck (PR Newswire), Rated: AAA

OnDeck today announced that TyMac Electric of Plano, Texas is its Small Business of the Month for August, 2019.  The 30-person company serves the Dallas-Fort Worth area with high-quality, professionally managed electrical services.

Over the last two years, OnDeck has provided additional financing to TyMac Electric as the business grew to meet demand in the Dallas-Fort Worth commercial marketplace.

Overall, OnDeck has provided more than $879 million in financing online to small business owners in the State of Texas.

2019’s Best & Worst Places to Retire (WalletHub), Rated: AAA

Best Retirement Cities

Overall Rank
(1 = Best)
City Total Score ‘Affordability’ Rank ‘Activities’ Rank ‘Quality of Life’ Rank ‘Health Care’ Rank
1 Orlando, FL 60.87 9 11 68 48
2 Tampa, FL 59.06 10 19 45 95
3 Scottsdale, AZ 58.35 98 22 3 58
4 Charleston, SC 58.30 42 21 56 51
5 Miami, FL 57.21 51 5 105 74
6 Denver, CO 57.08 113 17 43 17
7 Fort Lauderdale, FL 56.58 65 18 82 56
8 Cape Coral, FL 56.50 19 51 15 109
9 Minneapolis, MN 56.46 145 3 58 5
10 Cheyenne, WY 56.06 2 142 50 33

Source: WalletHub

Silicon Valley is building a Chinese-style social credit system (Fast Company), Rated: AAA

Have you heard about China’s social credit system? It’s a technology-enabled, surveillance-based nationwide program designed to nudge citizens toward better behavior. The ultimate goal is to “allow the trustworthy to roam everywhere under heaven while making it hard for the discredited to take a single step,” according to the Chinese government.

Many Westerners are disturbed by what they read about China’s social credit system. But such systems, it turns out, are not unique to China. A parallel system is developing in the United States, in part as the result of Silicon Valley and technology-industry user policies, and in part by surveillance of social media activity by private companies.

Fundrise Opportunity Zone Fund Has Raised Over $ 22 Million (Crowdfund Insider), Rated: A

Real estate investment platform Fundrise has raised over $22 million for their Opportunity Fund. The information was revealed in a recent Form D 5o6c filing with the Securities and Exchange Commission (SEC).

Kabbage acquires Radius Intelligence, the marketing tech firm with a database of 20M small businesses (TechCrunch), Rated: A

Data is the new oil, as the saying goes, and today Kabbage — a fintech startup backed by SoftBank that has built a business around lending up to $250,000 to small and medium enterprises, using AI-based algorithms to help determine the terms of the loan — is picking up an asset to expand its own data trove as it looks to expand into further SMB financial services. The company has acquired Radius Intelligence, the marketing technology firm that has built a database of information on some 20 million small and medium businesses in the U.S.

Here is a list of the top nonbank and alternative lenders in 2019 (Business Insider), Rated: A

Nonbanks and alternative lenders have garnered attention in the banking industry due to their ability to partner with legacy banks and utilize technology to make financial transactions more efficient and convenient for users.

Source: Business Insider

Chime now has 5 million customers and introduces overdraft alternative (TechCrunch), Rated: A

Challenger bank Chime has reached 5 million customers in the U.S. The San Francisco-based startup is creating an FDIC-insured mobile bank without any physical branch. The company also promises fewer fees.

Back in March, Chime  said it had 3 million customers when it announced its $200 million Series D round. So that’s 2 million additional customers in roughly 5 months.

Zac Prince of BlockFi (Lend Academy), Rated: A

Even Financial raises $ 25 million to connect banks with channel partners (VentureBeat), Rated: A

Even Financial, a four-year-old New York-based provider of APIs for financial services search, acquisition, and monetization, today announced that it’s raised $25 million in a strategic round of investment co-led by Citi Ventures and MassMutual Ventures, with additional participation from LendingClub. Existing backers American Express Ventures, Canaan Partners, F-Prime Capital, GreatPoint Ventures, and Goldman Sachs also participated in the round, which brings the company’s total raised to $50 million.

Credit Sesame, a platform for managing loans and credit scores, picks up $ 43M en route to IPO (TechCrunch), Rated: A

Credit Sesame — which lets consumers check their credit scores and evaluate options to rebalance existing debts and loans to improve that score and thus their overall “financial health,” in the words of CEO and founder Adrian Nazari — has raised $43 million. With the company already profitable and growing revenues 90% each year for the last five, Nazari said that this round is likely to be the last round the company raises before it goes public.

Household debt in the U.S. continues to rise and as of this year now stands at nearly $14 trillion.

Fintech startup CrowdBureau closes $ 1.1 million Series A equity funding with $ 9.7M valuation (Tech Startups), Rated: A

CrowdBureau Corporation, a fintech startup and index provider, has closed $1.1 million Series A equity funding to expand its series of benchmarks and launch a pilot program for its patent-pending regulatory technology product. The round, which values the company at $9.7 million, was led by Clydagh Limited, Estuary Holdings Ltd. and Alpama Limited along with existing investors.

Some Companies Offer a New Benefit: Payroll Advances and Loans (WSJ), Rated: A

A growing number of companies are helping workers gain access to payroll advances and loans, reflecting concern over the impact money problems are having on productivity levels and worker retention.

Employers including Walmart Inc. and Pima County, Ariz., have recently added these services. The aim is to help cash-strapped employees, many with damaged credit, cover unexpected expenses without resorting to high-cost debt.

Lendingblock Launches Institutional Crypto Lending Platform (Lendingblock), Rated: A

Lendingblock, the regulated, open exchange for institutional borrowing and lending of digital assets, today announces the launch of its institutional lending platform on September 3, 2019. The lending product, which is a reinvented version of securities lending from traditional capital markets, is the first exchange fully dedicated to pure crypto lending and aims to support the needs of the broader cryptocurrency market by providing a secure and liquid venue for lending and borrowing needs of institutional market participants.

Upon launch, Lendingblock platform users will be able to borrow and lend BTC, ETH, PAX and USDT on a fully collateralized basis, for loan terms of 1, 7, 14 and 30 days, with a minimum trade size of $100,000 equivalent of a specified digital asset.

How American Express uses machine learning to detect fraud (American Banker), Rated: A


A financial planner says there’s a ‘huge opportunity’ to build wealth during a recession (Business Insider), Rated: A

As long as you have a cash safety net to fall back on should you lose your job or face an unexpected expense, there’s little reason to panic, says Lauren Anastasio, a certified financial planner at SoFi, a personal-finance company.

Are P2P Loans A Viable Investment for Your Portfolio? (Yahoo! Finance), Rated: A

Peer to peer (P2P) loans allow you to act as a bank, providing loans directly to other individuals or businesses in exchange for a return on your investment via interest payments. Investing in P2P loans, which are typically smaller than a traditional bank loan, has proven to be reliable no matter the economic climate.

Judge Rejects States’ Fintech Charter Challenge, Again (Bloomberg Law), Rated: A

The Office of the Comptroller of the Currency was able to beat back a challenge by state regulators to its proposed charter for financial technology firms for a second time, but the charter remains in limbo due to other litigation.

White Oak Global Advisors Announces Commercial Property Assessed Clean Energy (PACE) Financing Program (GlobeNewswire), Rated: B

White Oak Global Advisors, LLC (“White Oak”) is pleased to announce the California Statewide Communities Development Authority (“CSCDA”) has named White Oak as a commercial PACE Program Administrator for the CSCDA’s Open PACE Program.  As a Program Administrator, White Oak will provide up to 100% financing for energy efficiency, renewable energy, water conservation, and seismic retrofit projects on commercial real estate.

White Oak is seeking to fund projects ranging in size from $500,000 to $150 million.

United Kingdom

RateSetter revamps investment products (P2P Finance News), Rated: AAA

RATESETTER is rejigging its investment products, to boost liquidity and give the peer-to-peer lender more control over market rates.

The three new products, which will be available on 3 October, will be called Access, Plus and Max. Access will offer three per cent interest and no fees to access money; Plus will offer four per cent interest and cost 30 days’ interest to access money; and Max will offer a five per cent interest rate, with a fee of 90 days’ interest to access money.

Funding Circle Amateur Lenders Facing Longer Waits To Cash Out (Morningstar), Rated: AAA

Amateur lenders on peer-to-peer lending platform Funding Circle Holdings PLC are facing waits of 100 days to cash out of their loans, it has emerged.

Investors who provide funding for small businesses through the platform can list old loans for resale to other investors if they wish to withdraw all their money.

But the PA news agency understands that the amount of time taken to re-sell the loan parts has risen from just a few days in January to up to three months in recent transactions.

Funding Circle reveals inclusion in FTSE4Good Index Series (Funding Circle), Rated: A

Funding Circle today reveals its inclusion in the FTSE4Good Index Series, which recognises companies that demonstrate the highest standards of corporate governance and sustainability.

Woodford trust is on the FTSE 250 casualty list (The Times), Rated: B

The investment trust, which focuses on early-stage companies, was one of six companies to be relegated from the second tier of quoted stocks.

Among them is Funding Circle, the online peer-to-peer lender aimed at small and medium-sized companies, which floated at 440p a year ago. Last night its shares closed at 110¼p.

P2PGI blames writedowns and Funding Circle bad debts for poor July (P2P Finance News), Rated: A

P2P GLOBAL Investments has blamed writedowns in the value of two equity stakes and bad debts from Funding Circle for a “disappointing” performance in July.

The alternative finance-focused investment trust delivered a 0.33 per cent NAV return for the month of July, down from 0.48 per cent the previous month. This brought the trust’s year to date return to 2.88 per cent, and 23.93 per cent since inception.

Investors ‘nearly’ double IFISA holdings (AltFi), Rated: A

Small investors have parked £588m across 40,400 accounts by the end of the second quarter of this year, according to trade body the Peer-to-Peer Finance Association (P2PFA).

The compares with around £300m invested in this product 12 months ago across major platforms such as Funding Circle, Ratesetter, Zopa, said the trade body.

Lending Works targets profitability and £10m turnover in 2019 (P2P Finance News), Rated: A

The peer-to-peer consumer lender reported a loss of just over £2.1m for the year ended 31 December 2018, up from £1.41m the previous year, which chief executive Nick Harding (pictured) attributed to a larger wage bill.

There is no requirement for businesses to report revenues in small company accounts, but Harding revealed that the firm saw revenues rise to £6.2m last year and is targeting £10m this year.

Peer to Peer Lender Folk2Folk Tops £300 Million in Lending (Crowdfund Insider), Rated: A

Folk2Folk, a peer-to-peer lender for local, rural and SME businesses, has now surpassed £300 million in lending, according to a company release. Folk2Folk notes that it is the 3rd largest P2P Lender to UK businesses in terms of money lent.

P2PFA boss Paul Smee: ‘Lendy was an outlier that should not have been authorised’ (AltFi), Rated: A

The collapse of Portsmouth-based property peer-to-peer firm Lendy, with outstanding loans of more than £160m, and some £90m in default, prompted the new rules from the FCA. The watchdog is also carrying out an in-depth report into the firm’s failure, which affected with some 21,500 investors. Critics argue that Lendy under competitive pressure wrote poor quality loans to swell its balance sheet, which then turned bad.

However, the Lendy crash, taken together with the poor float of the sector’s biggest firm Funding Circle last October, which languishes 75 per cent below its 440p float price at around 112p this week, has tarnished the sector.

UK Fintech Curve fastest startup ever to reach £4m Crowdfunding on Crowdcube (Fintech Finance), Rated: B

Last month, Curve announced plans to launch a seven figure crowdfunding campaign for early September, with plans to raise £1million. However, just 42 Minutes after launching to pre-registered customers, Curve had raised four times that figure, breaking records in the process. The current overfunding amount stands at £5million.

China

Form 6-K Yirendai Ltd. For: Sep 30 (Street Insider), Rated: AAA

  • Cumulative number of investors served reached 2,185,513, representing an increase of 1% from 2,159,490 in the first quarter of 2019 and compared to 1,974,984 in the second quarter of 2018.
  • Number of active investors in the second quarter of 2019 was 671,957, representing a decrease of 13% from 768,514 in the first quarter of 2019 and compared to 928,251 in the second quarter of 2018.
  • Total assets under management (“AUM”) for Yiren Wealth was RMB 43,604.2 million (US$ 6,351.7 million) as of June 30, 2019, representing a decrease of 7% from RMB 46,663.1 million as of March 31, 2019. Average AUM per investor reached RMB 149,480 (US$ 21,774) as of June 30, 2019, representing an increase of 7% from RMB 139,473 as of March 31, 2019.
  • AUM of non-P2P products amounted to RMB 354.3 million (US$ 51.6 million) in the second quarter of 2019, representing a decrease of 23% from RMB 457.7 million in the first quarter of 2019 and compared to RMB 951.0 million in the second quarter of 2018. Non-P2P products include money market funds, mutual funds and insurance.

Consumer Credit—Yiren Credit

  • Total loan originations in the second quarter of 2019 reached RMB 9.7 billion (US$1.4 billion), representing a decrease of 12% from RMB 10.9 billion in the first quarter of 2019 and compared to RMB 18.2 billion in the second quarter of 2018.
  • Cumulative number of borrowers served reached 4,491,466, representing an increase of 2% from 4,404,812 in the first quarter of 2019 and compared to 4,027,254 in the second quarter of 2018.
  • Number of borrowers in the second quarter of 2019 was 135,246, representing a decrease of 10% from 149,715 in the first quarter of 2019 and compared to 267,628 in the second quarter of 2018.
  • The percentage of loan volume generated by repeat borrowers was 35.9% in the second quarter of 2019.
  • 52.5% of loan originations were generated online in the second quarter of 2019.
  • Remaining principal of performing loans reached RMB 58,071.3 million (US$8,459.0 million) as of June 30, 2019, representing a decrease of 8% from RMB 63,213.8 million as of March 31, 2019.

Yirendai Ltd. (YRD) Q2 2019 Earnings Call Transcript (The Motley Fool), Rated: AAA

As of September 2019, the line of credit we have obtained from our institutional partners has increased from RMB19 billion in Q1 2019 to close to RMB30 billion. We are now working with approximately 10 partners, including leading joint stock and city commercial banks. We expect loan origination funded by institutional partners to reach approximately 30% by the end of this year.

China Rapid Finance Retains China Merchants Bank New York and Pangaea Finance as Co-Financial Advisors for Recapitalization and Restructuring (Yahoo! Finance), Rated: AAA

China Rapid Finance Limited (XRF) (the “Company”) today announced that its Board of Directors has retained China Merchants Bank Co., Ltd., New York Branch (CMBNY), and Pangaea Finance as separate Co-Financial Advisors, and Pangaea Finance as Structuring Agent, to advise it for strategic alternatives, including but not limited to potential strategic partnerships, recapitalization of certain operating companies, and for a related reconfiguration of the Cayman company as a listed investment vehicle for China credit.

Central bank to include troubled P2P lending industry in credit system (Technode), Rated: A

China’s central bank will include the country’s troubled online peer-to-peer (P2P) lending platforms in its credit reference system as the clampdown on illegal financial services continues, Chinese state-run media reported on Wednesday.

China’s credit system to cover P2P lending in tightening regulation (Xinhua), Rated: A

P2P lending platforms in operation will provide certain information such as online lending interest rates to credit reference agencies such as operators of financial credit information basic databases and Baihang Credit, China’s only licensed and market-oriented personal credit agency, according to an official guideline.

China Central Bank’s Credit System to include P2P Lending Platforms amidst tightening regulations (China Knowledge), Rated: A

Credit information of P2P lending platforms will be collected, regardless of their operational status. New penalties will also be imposed on defaulting borrowers of P2P online lending. Some of the penalties include higher loan interest rates and restriction limits to loan and insurance services.

Chinese entrepreneur among 41 arrested over illegal P2P platform (CGTN), Rated: A

Property mogul and founder of a leading Shanghai contemporary art museum Dai Zhikang has turned himself into police following the collapse of a peer-to-peer lending platform, as China continues to crackdown on illegal online lending.

Shanghai police confirmed Monday that Dai, the founder and head of Zendai Group, was among 41 people being investigated over illegal fundraising through an online P2P platform called Laocaibao.

European Union

Revolut is looking to hire 400 customer support staff following compliance complaints (Business Insider), Rated: AAA

Revolut is looking to hire up to 400 staff at a new base in Portugal, a move that will increase its employee headcount by almost a third.

Source: Business Insider

German online bank N26 expands to Switzerland (Verdict), Rated: A

German online bank N26 has launched its services in Switzerland, as it continues to build up its footprint across the globe.

Binance Crypto Lending Program expansion – a bad idea for traders (FX Street), Rated: A

Binance is one of the latest entries in launching its crypto lending platform on August 28. In the first phase, it began with a short period fixed return on Binance (BNB), USDT (Tether) and Ethereum Classic (ETC). It provides an annual return of 15%, 10%, and 7% respectively, beginning with a 14-Day fixed period. Binance starts with about $30 million in crypto-lending. Moreover, the annual interest offered is higher than the return from banks.

International

International P2P Lending Volumes August 2019 (P2P-Banking), Rated: AAA

Milestones in culumulative volume lent crossed this month:

  • Bondora: 250M EUR
  • Fellow Finance: 500M EUR
  • Mintos: 3000M EUR
  • Thincats: 500M GBP

The total volume for the reported marketplaces in the table adds up to 634 million Euro. I track the development of p2p lending volumes for many markets.

Source: P2P-Banking

Fall Conference Season for Fintech Kicks Into Gear This Month (Lend Academy), Rated: AAA

ABS East

When: Sept 22-24, 2019
Where: Miami, FL
Link:  /> Discount code: LEND10

Lend360

When: Sept 25-27, 2019
Where: Dallas, TX
Link: 

LendIt Fintech Europe

When: Sept 26-27, 2019
Where: London, UK
Link: 
/> Discount code: LENDACADEMYVIP

Moneyconf

When: Nov 4-7, 2019
Where: Lisbon, Portugal
Link: 

Money2020 China

When: Dec 4-6, 2019
Where: Hangzhou, China
Link: 

I WISH I’D BOUGHT IT WITH KLARNA (The Drum), Rated: B

The Swedish ‘pay later’ service, Klarna has launched its first international campaign – ‘I wish I’d bought it with Klarna’ – with the internet sensation Celesta Barber as its leading lady.

Australia

Ethereum lossless lottery PoolTogether is still innately flawed despite updates (finder), Rated: A

How do you encourage people to practice responsible saving? Easy. You shake it up with a dose of randomness and call it a lottery instead. This is the basic principle behind Pool Together, a lossless lottery designed in such a way that there are no losers. The idea is that everyone always gets back the price of their ticket, but one lucky person walks away with a lot more than that.

Pool Together is built on Ethereum, and utilises the Dai stablecoin in combination with the Compound crypto lending system.

India

Online lender Namaste Credit launches digital-only bank (Finextra), Rated: AAA

Online lending marketplace Namaste Credit today said that it is launching its Neobanking solutions for MSMEs, becoming a full-fledged “Digital-Only Bank” with a foundational SaaS play.

IndiaMoneyMart opens the first East-India branch for NBFC-P2P Lending (United News of India), Rated: A

Making sense of regulatory sandbox for Fintech startups (Vantage Asia), Rated: A

Over the past few years India has seen rapid development in the financial technology sector and it has the second highest number of Fintech startups in the world. According to certain estimates, India’s Fintech sector added about 1,300 startups from 2015 to 2018. According to the National Association of Software and Services Companies, India’s Fintech market is expected to be worth US$2.4 billion by 2020.

India Government Panel Pushes for Fintech, Regtech Adoption (Regulation Asia), Rated: A

The panel has also proposed the development of a marketplace model for P2P lending, and the introduction of virtual banking in India.

Why fintech panel believes P2P platforms can ease credit supply (India Times), Rated: A

While the importance of P2P lending sector in India is understood by all stakeholders, and a lot has been done over the last few years to encourage the sector, a lot more needs to be done to accelerate its growth.

APAC

Leading Southeast Asian Peer to Peer Lender Funding Societies Revamps with New Executive Team (Crowdfund Insider), Rated: AAA

Funding Societies, one of the largest peer-to-peer (P2P) lending platforms in Southeast Asia, has revamped its executive team with new hires.

Matt Lambie joins as the Chief Technical Officer, Dheeraj Chowdhry as the Chief Executive Officer and Jared Goldberg as the Chief Data Officer.

Top 10 APAC Startups Reigning the Future Finance Industry (Banking CIO Outlook), Rated: A

Africa

AlphaCode of South Africa Invests $ 1.5 Million in Three Domestic Fintech Startups (CryptoNewsZ), Rated: AAA

AlphaCode is the incubation and investment arm of Rand Merchant Investment Holdings, and in a new development, the company has decided to invest a combined $1.5 million in three separate Fintech startups in South Africa. The companies in question are Zande Africa, which is a platform meant for merchant finance, while the others are Bright On Capital, a peer to peer lending firm and Livestock Wealth, an agricultural investment startup. AlphaCode invested $655,000 each on Bright On Capital and Zande Africa, while Livestock Wealth got an injection of $131, 000.

Authors:

George Popescu
Allen Taylor

The post Thursday September 5 2019, Weekly News Digest appeared first on Lending Times.

Open Source Origination Technology Platform for Online Lenders

DigiFi lending solutions

Introduction Online lenders are fast becoming the first port of call to avail loans and have been attracting strong funding interest from VCs and PEs. This demand for a digital lending experience has also forced traditional lenders like banks and credit unions to figure out the technology which will allow them to originate loans in […]

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DigiFi lending solutions

Introduction

Online lenders are fast becoming the first port of call to avail loans and have been attracting strong funding interest from VCs and PEs. This demand for a digital lending experience has also forced traditional lenders like banks and credit unions to figure out the technology which will allow them to originate loans in a flexible yet scaleable way. They have two options: Buy or Build.

The build option can be extremely expensive and time consuming. But the buy option leads to a digital experience that is constrained, as you are dependent the features and functionalities of the vendor. Moreover, there is no way to really differentiate in the eyes of the digital customer. The solution is DigiFi: an open source tech platform which also allows you to customize along with a layer of additional services like hosting, support, platform implementation, etc.

DigiFI

DigiFi was founded by Joshua Jersey and Bradley Vanderstarren in 2014. It started its life as Promise Financial, an online lender, and raised $110 million in credit capital. It built up its own proprietary tech as there was no solution provider in 2014 offering an end-to-end loan origination platform that could automate the entire process. They sold off the tech to a large lending institution in 2017 and pivoted to DigiFi, one of the world’s first open source loan origination systems (LOS) which equips the lenders with flexible and modern tools to create unique platforms and digital experiences.

The company’s ideology is simple: That is to give other incumbent lenders, branches, credit unions, and startup digital lenders a platform where they do not struggle to build core lending capabilities from scratch. The company utilized the year 2017 and early 2018 to build up its platform, and started working with clients in late 2018. The company, with 10 people, has raised $4 million in equity to date and is based in New York.

The Market’s Pain Points and the DigiFi Solution

The ‘build or buy’ question creates a space for a platform that can bring together the qualities that fulfill the core origination requirements of the lending market and yet customize to give the client a competitive edge over other players. DigiFi empowers its clients to control the features and UI/UX so that it suits the specific needs of their unique client base. The existing tech vendors force the lenders into a rigid structure that limits flexibility to differentiate and provides the exact same experience for all sets of clients.

DigiFi gives the best of ‘buy vs. build’. Thus, DigiFi clients do not need to start from scratch and yet have the power to tailor the tech (buy and build, a win-win!). The company’s core platform is open source, and the source code can be accessed on Github. Revenue is generated from acting as a layer that provides hosting, support, platform implementation and customization services.

In crux, the platform of the company has features like complete lending CRM, decision engine for lending decisions, machine learning environment, and open-API architecture, and it can be configured for deployment across a range of lending verticals that include consumer, mortgage, small business, and commercial. DigiFi gives out the open source platform and its documentation for free.

The platform of the company is currently being leveraged by Sprout Mortgage, Mariner Finance, Constant Energy Capital, Greenwave, and Home Point Financial.

The Platform in Detail

The company provides its platform to the lenders for free and charges for additional services of configuration, setup, support, and running. Depending on the requirements of the client, DigiFi offers support plans for a monthly fee. The customization and platform implementation are charged on an hourly basis. The implementation time and cost varies. The implementation might take up to 4-8 weeks at a minimum and can take up to months if the lender needs to build out features from scratch. As compared to years and millions of dollars for building an in–house model, the DigiFi solution is usually in the 5-6 figure range.

The company’s platform is built on the JavaScript tech stack, and uses two well-established coding languages that are uncomplicated for clients to work with and engage. DigiFi focuses on end-to-end loan origination and concludes with onboarding onto a servicing system after funding.

The Future

As per the CEO of DigiFI, the incumbents are getting better with time as they have a lower cost of capital and existing customer base, positioning them to succeed. Getting the right tech partner on board is thus the critical piece to build a successful moat.

DigiFi offers a platform to lenders looking to tap the online lending market that not only equips them to get the best of the ‘buy vs. build’ system but also ensures full support and customization. It powers the lender with ready-made solutions, fast implementation, support and training, feature controls, unique customizations, flexible hosting options, and a contributor community. It provides the option to integrate all major data sources – Transunion, Equifax, Experian, MicroBilt, LexisNexis, etc. With over 45,000 development hours, DigiFi platform provides it clients a strong barrier to entry with complete configurability with other APIs, true scaleability with AWS, and integrated AI ML solutions.

Author:

Written by Heena Dhir.

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How Machine Learning Will Transform P2P Lending

artificial intelligence machine learning p2p lending

Artificial Intelligence, fondly known as AI, is the approach and research field of creating machines that are able to replicate human intelligence. Although we aren’t yet teeming with robots as intelligent as humans, we have managed to build: Intelligent programs that can beat reigning Go world champs Virtual assistants like Siri and Google Assistant to […]

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artificial intelligence machine learning p2p lending

Artificial Intelligence, fondly known as AI, is the approach and research field of creating machines that are able to replicate human intelligence.

Although we aren’t yet teeming with robots as intelligent as humans, we have managed to build:

With the passing of time, more and more fields are benefiting from AI and machine learning (ML). The latter is a specific form of AI that deals with devising strategies and methods for allowing a machine to learn from the available and historical data, all to find better solutions for existing problems.

Among the various markets growing by leaps and bounds with machine learning is marketplace lending. AI and machine learning have enabled this sector to automate a variety of processes, shrink operating costs, and make life easier for both lenders and borrowers.

In the past two decades, there has been a tremendous surge in people interested in learning ML as a hobby as well as a professional career choice. Before diving deeper into the subject of how machine learning will transform P2P lending in the future, let’s first get ourselves a brief understanding of ML.

The Craft of Machine Learning a.k.a. ML

Machine learning, or ML, is a subfield of artificial intelligence that follows the notion that machines can learn and adapt better from experience rather than from extensive programming.

Although machine learning is a subset of AI, there are several notable differences between AI and ML. Hence, both fields are considered to be distinct. This analogy is followed by deep learning and machine learning too, where the former is the subfield of the latter.

Today, we are surrounded by many instances of ML, varying from Apple’s Face ID and facial recognition in general to navigational and shopping recommendations generated by virtual assistants. ML also had a profound impact on the financial industry, especially the lending sector, which we are going to discuss in the upcoming sections.

The Present Impact of Machine Learning on P2P Lending

The ongoing evolution of technology and the emergence of tech innovation is having a greater impact on the financial services industry. From designing impactful business models and enhancing the customer experience to cutting costs, the benefits are many.

Fintech firms and the Internet are providing platforms to even niche products to get interested financial supporters as well as potential customers to grab their side. Peer-to-peer financing isn’t only about crowdfunding, but also includes P2P lending.

A bank offers P2P lending by allocating capital from the lending party to the borrowing party while acting as the broker, as well as the risk mitigator. The higher the risk, the higher is the imposed interest rate. Fintech organizations have made this simpler and more effective.

Several Fintech P2P lending firms like LendingClub and Prosper offer a platform where individuals gain interest by lending money to the ones who require it. These firms make money by taking a small fee for making the connection among the two parties possible.

As an alternative to submitting a traditional application, borrowers present compelling stories about why they need the capital via fintech platforms.

Other than the aforementioned, here are some of the most important benefits presently enjoyed by the P2P lending industry thanks to adding the art of machine learning to its arsenal:

1. Easy Identification of Defaulters

As the financial sector grows, so does the number of defaulters and bad loans. This has led the financial institutions to be more careful than ever to spot and avoid defaulters.

Machine learning, with its predictive analysis, can help lenders identify early the borrowers who are highly likely to default later. An early deduction of defaulters can significantly lessen the credit risks, which, in turn, reduces the total number of actual defaulter cases.

2. Hastening the Loaning Process

Of course, lending is one of the most complex business processes. This is the prominent reason why it is a long and tiresome process to accomplish. Thanks to its intuitive analysis, machine learning can remove the redundant parts and, hence, speed up the whole process.

An automated workflow offers lenders a competitive edge against the competition as there is less space for human error. Thus, lenders can process mammoth workloads in shorter time periods. This helps them not only to maximize profit, but also to better serve their clientele.

3. Lessening/Eradicating Errors

Lending involves a lot of documentation. From the very early stage of loan origination to underwriting, most of the steps involved demand preparing and verifying several documents. Doing it manually not only increases the overall time required but also makes it prone to errors.

Machine learning comes in handy here by adding automation to the process, prompting for human intervention where required the most, and thus, streamlining the complete loan cycle.

4. Reducing Operating Costs by Automating Several Aspects of the Lending Process

There are several aspects contributing to the operating costs of a financial institution. Among them, the most notable aspect is loan decisioning. In most cases, the loan arrives at a positive lending decision irrespective of the loan amount.

Machine learning is able to automate the process, consolidate the entire data, and process the same by taking into account a number of factors. Moreover, ML performs a credit check and enhances the overall experience and quality of the process while reducing the overall costs.

5. Simplifying the Whole Process

The traditional way of lending is a very complex process. Hence, it is obvious for lenders to look for options that can simplify the conventional lending workflow (i.e. decreasing the total time required, lowering the overall cost involved, and smoothing out the whole process).

Machine learning helps in simplifying the whole lending process by:

  • Automating various aspects of the business process with customizable rules engine
  • Easing the borrowing process
  • Ensuring straightforward processing of loan applications
  • Standardizing the entire process

The Upcoming Impact of Machine Learning on P2P Lending

With time, artificial intelligence and machine learning are getting bigger and better. This is evident by the fact that there’s a continuous rise in candidates interested in learning AI in general, and ML in particular.

Although machine learning has already started revolutionizing the way P2P lending works, it will continue getting better and more beneficial for the craft. Following are some projections about how ML will impact lending in the near future:

  • Ability to self-modify with little to no requirement for human intervention
  • Better means of filtering irrelevant data from relevant data
  • Completely automating the underwriting process
  • Even faster application, approval, and funding processes
  • Helping lenders to see the bigger picture by insights drawn using efficient ML algorithms
  • Increasing the outreach of lenders and identifying potential lenders
  • Introducing younger people to the lending-borrowing culture
  • More stringent safety protocols to safeguard sensitive information
  • Offering insightful decisions with a higher probability of success
  • Providing capital to more and more honest borrowers
  • Recognize patterns in a specific dataset to help build effective business models
  • Using more number of data points to better check the likelihood of the borrower repayment and estimating the time period of the lender getting the amount back

Challenges Posed by Machine Learning Algorithms

Although machine learning provides access to a variety of avenues for financial institutions, it still needs to do the heavy lifting in some areas to further improve. Three of the most important aspects of ML requiring effort are discussed as follows:

1. Concealed and Undesired Bias

Bias is an inseparable aspect of machine learning algorithms. No ML algorithm can exist bias-free. Although a small degree of bias can be easily managed, the bigger it becomes, the more difficult it gets to fix the same.

Chances for machine learning algorithms to develop concealed and undesired biases from the same data used to train them do exist. Hence, human intervention becomes absolutely necessary to ensure that apposite suggestions or predictions are made by the ML systems.

2. Undetected Errors

Machine learning aims to minimize human interference as much as possible. Hence, it kind of makes humans dependent on machines. Most times, they are free from errors. However, there is room for some errors to slip through.

In case of errors that the machines aren’t able to correct themselves, human intervention becomes mandatory. However, manually identifying and correcting complex algorithms can be arduous and time-consuming.

As lending is an important aspect of the economy, even the smallest of errors being unintentionally passed through can propagate through the system and lead to a huge, undesirable consequence.

3. Time Requirement for Developing Precise Predictions

Machine learning algorithms rely greatly on historical data. The accuracy of the predictions developed by ML algorithms is directly proportional to the total time they spend interacting with the data. Therefore, making precise predictions instantly isn’t possible.

It is mandatory to feed historical data as well as the new data to the ML system continuously for ensuring that the predictions produced by the same are accurate and reliable.

Afternote

There is no denying the fact that the advent of artificial intelligence and machine learning has completely altered the way the lending sector works today. It has become faster, bigger, and better than ever with continuous improvement.

Borrowers and lenders, irrespective of the capital involved, aim to have as few formalities as possible. Though it seems unachievable with the traditional form of lending, the technology-backed lending strives to move as much closer to it as possible.

Fintech firms leverage the latest technological innovations to offer a quicker, smoother, and reliable experience to the lenders and borrowers. There are lots of challenges faced by the industry as of now. Developing better machine learning algorithms might be the key to solving them all.

The post How Machine Learning Will Transform P2P Lending appeared first on Lending Times.

Thursday February 21 2019, Weekly News Digest

household debt

News Comments Today’s main news: SoFi launches SoFi Invest. LendingClub forecasts bigger-than-expected Q1 loss. RateSetter ISA exceeds first-year expectations. Zopa report reveals 1 in 3 brits don’t understand Cash ISA Rate. October surpasses 100M GBP in loan repayments. Today’s main analysis: LendingClub 2018 results and 2019 guidance. Today’s thought-provoking articles: The highest seriously delinquent auto loans ever. Personal loans could […]

The post Thursday February 21 2019, Weekly News Digest appeared first on Lending Times.

household debt

News Comments

United States

United Kingdom

European Union

International

Other

News Summary

United States

SoFi launches SoFi Invest and eyes additional lending products (Business Insider), Rated: AAA

US-based online personal money management startup Social Finance (SoFi) has launched an investment product, dubbed SoFi Invest, offering both active and automated investing options at no fees, while it plans to offer additional lending products, perBloomberg, citing a company letter to investors.

SoFi Invest is already live, but the company aims to further grow and develop its related offerings this year.

Source: Business Insider Intelligence

SoFi Now Offering No-Fee Brokerage for Stock and ETF Trades (Think Advisor), Rated: A

According to Bloomberg, which obtained a copy of a letter CEO Anthony Noto wrote investors in the fourth quarter, SoFi Invest had “released an alpha version” of its new brokerage platform inviting employees and select members to “buy and sell individual stocks and ETFs with the tap of a button.”  That brokerage platform is now available to anyone using the app, for no fee.

Investors can currently trade only individual stocks and ETFs on the platform; individual bonds and mutual funds are expected to be added in the future.

LendingClub forecasts bigger-than-expected first-quarter loss (WSAU), Rated: AAA

Online lender LendingClub Corp forecast a bigger-than-expected first-quarter loss on Tuesday, and revenue that missed Wall Street estimates, sending its shares down 5 percent in after-market trading.

For the first quarter, the company expects net revenue between $162 million and $172 million, below analysts’ estimates of $181.2 million, according to IBES data from Refinitiv.

LendingClub also forecast a first-quarter loss between $20 million and $15 million, compared to Wall Street estimates of a loss of $5.14 million.

LendingClub Reports 2018 Results and Guidance for 2019 (Lend Academy), Rated: AAA

Earnings season is in full swing and today LendingClub announced their results for the 2018 year. The numbers were quite strong in most areas with the company originating $10.9 billion in new loans in 2018, up 21% year over year and a new high water work in yearly originations. For Q4 loan originations were $2.87 billion down slightly from the previous quarter but up 18% year over year.

Source: LendingClub

They lost $128 million in 2018 with a $13 million loss in Q4.

Source: LendingClub

Brismo partners with LendingClub to create ‘industry standard’ performance metrics (PR Newswire), Rated: A

Brismo, the leading international provider of lending performance data, has today announced that standardized performance metrics are available representing the performance of loans made available through LendingClub*.

Lending Performance Analytics

Brismo’s analysis includes a complete historic track record in a format that is free from distortions relating to inconsistent facilitation growth rates or default profiles.

Functions available include:

  • Gross facilitation, net lending, change in outstanding principal
  • Outbound lending rates and loan term
  • Late payments including transition matrices, defaults, recoveries, recovery performance, and net loss
  • Historic PDs and LGDs
  • Net return, loss coverage and risk adjusted return
  • Cohort analysis including return projections
  • All analysis can be segmented by facilitator, risk band, asset type etc.

Highest Auto Delinquencies (PeerIQ), Rated: AAA

The Fed’s latest report on Household Debt and Credit showed that total household debt increased by $32 Bn (0.2%) to $13.54 Tn in 4Q2018, marking the 18th consecutive quarter of growth. Total debt is now $869 Bn higher than its previous peak, although it remains below its peak on a per-capita basis.

The report also showed that more than 7 Mn auto loans are delinquent for more than 90 days. This is the highest number of seriously delinquent auto loans ever and is driven mainly by subprime borrowers. Over 8% of subprime borrowers are seriously delinquent on their auto loans, but this percentage is still well below its peak of 9.7% seen in 2010.

Source: PeerIQ

In FinTech financing news, Nav a small-business lending marketplace, raised $45 Mn from GS Principal Strategic Investments among others. Nav will use the funds to expand its platform and to support more funding partners.

CommonBond, an online student loan refinancer, has raised a $750 Mn credit line from GS, Citi among others. CommonBond will use this credit facility to expand its lending operations.

Personal Loans May Increase Credit Scores of Most Borrowers (LendingTree), Rated: AAA

Americans are increasingly turning to personal loans as another option for their ongoing debt and credit needs. There are many uses for personal loans, and the most prominent are to consolidate existing debt and pay down credit cards, which often carry higher interest rates.

Key findings

  • About 62% of borrowers see their credit scores go up the month after they take out a personal loan.
  • After 12 months, around 45% of borrowers still have higher scores than they did in the month of loan origination.
  • People with lower scores are more likely to see a credit score bump: 68% of those who started with scores under 620 saw their scores increase in one month, 71% had higher scores after three and six months, and 58% had higher scores after a year.
  • People with scores under 620 saw a 20 point, or 3.4%, boost after one month. They also saw a 10 point, or 1.8%, boost after 12 months, on average.
  • On the other end of the spectrum, borrowers who started with higher scores are less likely to see a credit score bump. 57% of people with scores of 750 or higher see their scores increase after a month, and about 39% have higher scores after a year.

FinTechs Continue to Drive Personal Loan Growth (GlobeNewswire), Rated: AAA

The FinTech revolution has propelled unsecured personal loans to another record-breaking quarter. TransUnion’s (NYSE: TRU) Q4 2018 Industry Insights Reportfound that personal loan balances increased $21 billion in the last year to close 2018 at a record high of $138 billion. Much of this growth was driven by online loans originated by FinTechs.

FinTech loans now comprise 38% of all unsecured personal loan balances, the largest market share compared to banks, credit unions and traditional finance companies. Five years ago, FinTechs accounted for just 5% of outstanding balances. As a result of FinTech entry to the market, bank balance share decreased to 28% from 40% in 2013, while credit union share has declined from 31% to 21% during this time.

TransUnion also found that FinTechs are competitive with banks, with both lenders issuing loans averaging in the $10,000 range, compared to $5,300 for credit unions. Across all risk tiers and lender types, the average unsecured personal loan debt per borrower was $8,402 as of Q4 2018.

Source: TransUnion

Personal loan originations increased 22% during Q3 2018, marking the fourth consecutive quarter of 20%+ annual origination increases. While the subprime risk tier grew the fastest, prime and above originations (those with a VantageScore 3.0 of 661 or higher) represented 36% of all originations. More than 19 million consumers now have a personal loan ­product, an increase of two million from a year earlier in Q4 2017 and the highest level ever observed.

Source: TransUnion

LoanStreet’s New Commercial Lending Solution Combines Automation and Networking for Financial Institutions (PR Newswire), Rated: A

LoanStreet Inc., the first fully integrated platform that streamlines the process of sharing, managing and originating loans, now offers a new, powerful commercial loan origination and administration solution for any size financial institution, loan or deal volume. LoanStreet uniquely combines the power of networking financial institutions together with world-class lending technology that automates administrative tasks to drive growth, diversify risk, and enable lenders to better serve their customers.

Leading Small Business Lending into a Digital and Data Driven Age (LendIt), Rated: A

Small business lending contributed to 24% of the loans originated by US Banks in 2018, accounting for 600 billion last year. Small business lending by large banks remains in legacy mode with deeply entrenched manual processes, a siloed experience and a lack of customization to help meet the unique needs of small business owners.

How a $ 1.3 Billion Institution Launched Its Own Digital Bank (The Financial Brand), Rated: AAA

When IncredibleBank, the online banking division of Wisconsin-based River Valley Bank, made the list of “Top 10 Online Banks”  at GoBankingRates.com, it found itself in good company, right alongside Ally Bank, CIT Bank, Discover Bank, and Synchrony.

While not the only community bank on the list, it’s a significant accomplishment for an institution with only $1.3 billion in assets. And equally noteworthy, IncredibleBank is the only digital-first bank offering loans for luxury RVs. These motor coaches — the ones the size of a tour bus with slide-outs that turn them into 1,200 square foot homes — run upwards of $2 million.

The challenger banks catering to gig-economy workers (American Banker), Rated: AAA

Qwil

Reinsch’s startup, Qwil, focuses on providing working capital for the freelancer who has trouble, like he did, getting paid on time.

Source: American Banker

Qwil’s underwriting technology assesses the payor’s likelihood of paying. It captures information about the approval status of the invoice: Is it definitively approved, is it likely to be approved or is it simply booked and not approved? It conducts identity verification and fraud checks on each freelancer. Qwil charges a flat fee for the advance, such as 1% of the amount. No interest rate or late fees are charged. And it never goes after the freelancer or small- business person to collect.

Oxygen

Online lenders like OnDeck, Kabbage, Fundbox and Bluevine all look at accounting software data and bank account data to analyze the cash flow of and qualify small business applicants. But the freelancer graphic designer working in a Starbucks or contract copy writer can’t get this type of loan, Ahmed said.

Oxygen’s banking and lending services are bundled into a membership with a flat monthly fee of $29.99.

Ahmed wouldn’t say how many users Oxygen has. The company, which started in a Y Combinator incubator, has been in production since September has been growing users at an 80% monthly rate.

Cogni

Cogni will offer a checking account and debit card, as well as up to 12% cash back at restaurants and retailers. It will provide “curated financial and lifestyle services” in an app designed for millennials, freelancers and side hustlers.

Joust

This month, Joust started a partnership with the Freelancers Union, which has 425,000 members. In a survey, the union found that 71% of its members have trouble getting paid. It also announced an Android version of its app (it had only iOS before).

For a 1% fee it offers a guarantee the payment will be made within 30 days. For a 6% fee it will instantly fund the invoice. Users can also take out PayArmour loans when they are out of work. Eventually Joust plans to provide gap financing for those in-between times.

When Considering Banks, New Survey Finds That Millennials Prefer Technology To Human Touch (Marqeta Email), Rated: A

Millennials are unattached to traditional banks, with only 17% of them expressing firm commitment to their current banking provider,  according to new survey data from Marqeta, whose advanced payments infrastructure and open-API platform has pioneered a new standard for modern card issuing. In this research, Millennials (18-34 year olds) were 50% less likely than Baby Boomers (50-65 years old) to say that they couldn’t ever imagine wanting to change their banks.

Marqeta’s research found:

  • Only 1-in-6 Millennials said they couldn’t imagine ever wanting to change from their current bank.
  • 58% of Millennials would consider banking with Amazon, Facebook or Google if these tech giants enter the banking space.
  • 48% of Millennials said they’d consider moving to an independent digital-only bank.

Millennials Are Digital Banking Early Adopters

More than half of Americans aged 18-34 (53%) have used mobile wallets to complete a purchase in-store or on their mobile phone. That’s higher than Americans aged 35-50 (39%) and more than double those aged 51-65 (22%).

It’s also noteworthy that:

  • More than half of Millennials (52%) said they were comfortable using TouchID and FaceID to authorize mobile wallet payments — almost double the number of Baby Boomers (29%) who said the same.
  • More than twice as many Millennials (57%) than Baby Boomers (27%) said that they have used peer-to-peer banking apps like Square Cash or Venmo.
  • Millennials (49%) were twice as likely as Baby Boomers (20%) to pay someone back using a peer-to-peer banking app than a physical currency like cash or check.

Banking Apps Are More Valuable Than Tellers to Millennials

When asked about what the most important service their bank provided was, Millennials reflected much different attitudes than older Americans: Millennials were twice as likely as Baby Boomers to list a mobile app as most important (27% v 14 %), while Baby Boomers were twice as likely to list in person presence (20% v 11%).

Millennials are also abandoning old-fashioned payment methods like checks en masse, with almost half (48%) saying that they couldn’t remember the last time they wrote a check for something other than utilities and rent.

Banks Set To Invest In Legacy Systems To Combat Challenger Bank Threat (Fintech Finance), Rated: A

More than three-quarters (80%) of bankers believe challenger banks are an increased threat to their business, while almost one-third (30%) believe they will be the single most disruptive threat in 2019. The survey, commissioned by fintech provider Fraedom, found that in response the challenger bank threat, bankers expect their organisations to invest heavily in updating legacy systems (44%) and new technology (26%) in 2019.

With investing in new technology high on the agenda for commercial banks, the survey found that over half (53%) of respondents believe AI and Machine Learning will be the technologies to have the biggest impact on commercial banking in 2019.

Atlantic Capital Bank Launches Fintech Partnership with Self Lender (Nasdaq), Rated: A

Atlantic Capital (NASDAQ:ACBI) announces its partnership with Self Lender, a leading Fintech company offering consumers a way to build their credit while saving money. Atlantic Capital provides innovative financial technology companies a banking partner that has significant operational expertise and processing scale to meet the demands of a rapidly growing national client base.  The Self Lender and Atlantic Capital partnership helps efficiently deliver the credit builder account to thousands of consumers across the United States.

Impact of Intelligent Technologies on the Finance Industry (CIO Applications), Rated: A

Source: CIO Applications

Consolidated Analytics Taps Industry Finance Leader Mike Jones as Chief Financial Officer to Facilitate Aggressive Growth and Transformation (PR Newswire), Rated: B

Consolidated Analytics, a one-stop provider of property valuation, asset management, due diligence, fulfillment and advisory services for the real estate finance industry, today announced the appointment of Mike Jones as Chief Financial Officer (CFO). In this role, Jones will be responsible for developing and implementing financial strategies that will support the company’s overarching M&A integration strategy and drive corporate transformation initiatives.

United Kingdom

RateSetter Reported ISA Exceeded Expectation in First Year By Attracting £175 Million of Subscriptions (Crowdfund Insider), Rated: AAA

UK-based peer-to-peer lender RateSetter recently announced its ISA has exceeded expectations in its first year, having attracted £175 million of subscriptions, and currently accounts for one-fifth of the platform’s £830 million funds under management. RateSetter unveiled its ISA in February 2018. It allows investments in peer-to-peer loans to be included in a tax-free ISA wrapper up to an investor’s £20,000 annual ISA allowance.

Zopa’s Latest Report Reveals 1 in 3 Brits in the Dark on Cash ISA Rate (Crowdfund Insider), Rated: AAA

According to Zopa, the research revealed that 1 in 3 British savers (30%) had no idea what interest they’re earning on their Cash ISA and there is a vast difference of knowledge by age with an alarming 42% of people aged between 25 to 44 being in the dark over the rate of interest they were earning on their Cash ISA, in contrast to 21% of over 55s. The research then noted that Generation Z’s were only slightly more aware than Millennials with 39% not knowing their rate of interest.

Is your money safe in an IFISA? (P2P Finance News), Rated: A

THE INNOVATIVE Finance ISA (IFISA) is starting to take off after a slow start – in the last tax year, subscriptions rose more than 700 per cent – but potential investors may still be unsure about the risks involved.

Money put into peer-to-peer loans – with or without the IFISA wrapper – is not covered by the Financial Services Compensation Scheme (FSCS).

Revolut Launches New Business Mobile App (Crowdfund Insider), Rated: A

Digital bank Revolut announced on Tuesday the launch of its new business mobile app. This news comes nearly one year after Revolut debuted its Revolut for Business. Revolut reported that through the mobile app, users may do the following:

  • Track corporate card spending in real-time
  • View card details and PIN on the go
  • Freeze or unfreeze card if it’s misplaced
  • Receive instant spending notifications after every card payment

Should bank-style stress tests for P2P lenders reassure investors? (P2P Finance News), Rated: A

Trade body the Peer-to-Peer Finance Association (P2PFA) requires its platform members to carry out bank-style stress tests on their loan portfolios, but how much confidence should P2P investors  have in these models if  the cycle turns?

P2PFA member Funding Circle has claimed its loanbook would hold up in a recession, after subjecting itself to the toughest Bank of England stress tests. The P2P business lender has said it could still deliver a three to five per cent return to investors in a downturn.

Leasing Foundation to host asset finance technology debates (Verdict), Rated: B

The newly formed Innovation Initiative from the Leasing Foundation is holding a series of breakfast debates this year to explore the asset finance industry’s relationship to technology.

The first event will feature James Alexander, co-founder of P2P lending company Zopa, as keynote speaker and will take place on 13 March from 8am to 10am at Metro Bank in Holborn, London.

Strabane firm funding 55 new homes with £7m from peer-to-peer lender (Belfast Telegraph), Rated: B

The N&R Devine Group is in the process of building the properties, which will go on the market at prices between £105,000 and £189,000.

Twenty of the homes will be built in Cookstown, 25 in Coalisland and the remainder in Sion Mills.

The Strabane-based builder secured the funding for the developments from peer-to-peer lender Assetz Capital.

China

China’s online P2P lending industry is undergoing a massive shake out (technode), Rated: AAA

China’s peer-to-peer (P2P) lending industry is in turmoil. In recent months, authorities have ramped up regulatory oversight of the world’s largest P2P lending industry. Investors are losing confidence at their stakes and pulling their funds, diminishing operators’ liquidity; many of them are facing insolvency.

This week, Chinese police froze RMB 10 billion worth of assets owned by over 380 lenders in a large-scale investigation spanning 16 countries. Dubbed Operation Fox Hunt, the investigation has led to the arrest of 62 suspects implicated in P2P fraud since last June.

The total value of the loans managed by online crowdlenders has fallen to RMB 1 trillion. Prior to the clampdown, in 2015, the total P2P loan amount was RMB 1.25 trillion, according to Chinese media (in Chinese).

Source: wdzj.com

China’s Recession-Proof Economy Heads to a Stress Test (Bloomberg), Rated: A

The reason for the slowdown isn’t clear. Uncertainty over trade with the U.S. — including tariffs, but also export controls and investment restrictions –— could be a factor, especially as other countries show signs of wariness toward Chinese technology companies. Bad investments in real estate and infrastructure could be coming back to bite. A crash in the peer-to-peer lending industry might be contributing.

Source: Bloomberg
European Union

European Marketplace Lender October Surpasses €100 Million in Loan Repayment (Crowdfund Insider), Rated: AAA

October, the European lending marketplace formerly known as Lendix, announced on Wednesday it has surpassed €100 million in loan repayment.

The online lender reported that since its launch more than €250 million has been lent to European companies and nearly 40% of this amount has already been paid into the accounts of both individual and institutional lenders through monthly repayments. October then revealed that the lenders have already supported 570 projects for an average amount of €460,000.

Machine learning: Part of Europe’s consumer loans business (AltFi), Rated: A

Machine learning technologies are widely used to establish consumer credit scores in Europe, a new report confirmed.

Around 70 per cent of financial institutions across the continent say they already use these data technologies to build consumer score cards, which dictate lending, said a survey called, Credit Risk Management 2019 – How Do You Stack Up?

The average coverage rate of non-performing loans in Europe was 46 per cent in 2018, according to the survey.

5 Fashion E-commerce Trends Helping Retailers Build a Cult Following (Klarna), Rated: A

How can you get consumers as psyched about your brand as you are? Get inspired by these five fashion e-commerce trends that are powering more meaningful engagement.
International

UK-based GBG Acquires IDology in $ 300 Million All-Cash Deal (Finovate), Rated: AAA

Identity verification and fraud prevention specialist IDology has been acquired by U.K.-based identity data intelligence firm, GBG, for $300 million (£233 million) in cash.

The deal will give GBG broader reach into the North American market; in a statement, the company said 99% of IDology’s revenues come from the United States.

Are Peer-to-Peer Loans (P2P Loans) the Best Option for a Small Business? (ForexTV), Rated: A

One of the biggest issues that every entrepreneur will have to face at some point is finding financial backing. Money is going to be essential for your business launch, and there are a variety of methods for obtaining that much-needed financial support. One of the most popular solutions is Peer-to-Peer lending (P2P). This is a useful way of getting the money you need without going through the traditional route of obtaining interest only bank loans. Those banks loans can be slow and expensive, so does P2P offer a viable alternative option? Here’s the rundown of everything you need to know about P2P loans.

Australia

Payday loans increase as households pushed into risky credit from non-bank lenders (ABC.net), Rated: AAA

Debt-stressed home owners and renters are increasingly turning to alternative lenders offering so-called “payday” loans and consumer leases, as falling property prices plunge more households into negative equity and banks crack down on credit.

Asia

5 of Vietnam’s Top Funded Fintechs (Fintech News), Rated: AAA

Fintech development is accelerating in Vietnam with companies in the sector attracting US$117 million last year, the maximum funding in Vietnamese startups in 2018. Fintech surpassed e-commerce at US$104 million and other sectors, according to funding data by local accelerator Topica Founder Institute, showcasing the eagerness of investors to take part in Vietnam’s fintech opportunity.

Source: topicafi via Facebook

Tima – US$3M

Founded in 2015, Tima is a consumer financial marketplace and peer-to-peer (P2P) lending platform. The company has signed partnerships with financial institutions, including VietinBank and Nam A Bank, and claims to have disbursed about US$1.7 billion in loans to 2.8 million borrowers and over 30,000 lenders on its platform.

Tima claims to have raised a US$3 million Series B funding round in October at a near US$20 million valuation and recently began the process of raising a Series C investment round after hiring former LendingClub COO John Donovan to its board of directors.

Short Term Loans: For Your Quick Financial Concerns (US Updates), Rated: A

In such a case, availing instant Short Term loans from an online lender may help you in different ways.

No fear of bad credit scores – These loans are available irrespective of credit score status. The Short Term poor credit loans are in possible reach of the bad credit borrowers. You do not have to face rejections due to bad credits.

Authors:

George Popescu
Allen Taylor

The post Thursday February 21 2019, Weekly News Digest appeared first on Lending Times.

Thursday February 14 2019, Weekly News Digest

OnDeck revenues

News Comments Today’s main news: SoFi invests in Apex Clearing. Zopa chairman steps down. Ratesetter ISA tops 17M GBP in first year. Assetz Capital surpasses 700M GBP in lending. Revolut denies getting Lithuanian bank license to influence politics. Today’s main analysis: OnDeck’s Q4 earnings review. Today’s thought-provoking articles: What’s happening with auto loans. How Amazon controls small businesses with lending. Banks […]

The post Thursday February 14 2019, Weekly News Digest appeared first on Lending Times.

OnDeck revenues

News Comments

United States

United Kingdom

European Union

International

Other

News Summary

United States

SoFi held talks to acquire a fintech company backing some of the hottest robo advisors as it eyes expansion beyond its lending roots (Business Insider), Rated: AAA

OnDeck Q4 2018 Earnings Review (Lend Academy), Rated: AAA

The company achieved much of what they set to do in 2018 and posted another solid quarter as they rounded out the year. Q4 2018 net income came in at $14 million on gross revenues of $109.5 million. The company ended the year with a total of $27.7 million in net income. Below is a snapshot of their Q4 and 2018 full year highlights.

As of Q4 2018 the company still had $246 million of excess debt capacity.

BB&T and SunTrust merger; Tech in Bank Earnings (PeerIQ), Rated: AAA

The Fed’s January 2019 Senior Loan Officer Survey showed that banks tightened standards for commercial real estate (CRE) loans. Overall, banks tightened standards for credit card borrowers. However, lending standards for most categories of consumer loans and C&I loans remained unchanged. Banks also reported weaker demand for both business and household loans.

Source: Federal Reserve, PeerIQ

BB&T agreed to buy SunTrust for $28.2 Bn – the first major mega-bank deal in a decade. This deal will create the sixth-largest US retail bank. The M&A is supported by a constructive regulatory environment fostered by the OCC and CFPB, among others. The previous large acquisition was the JP Morgan acquisition of Bank One in 2004.

A major motivation for the deal was the ability of both banks to pool resources to build better digital offerings. SunTrust has a FinTech focused fund and has partnered with FinTech lenders to provide home improvement and small business loans. Banks are investing billions in digital tech spend to maintain relevance with customers that are increasingly eschewing bank branches for a seamless, online, full-service banking and wealth management customer experience.

Auto Loans in High Gear (Liberty Street Economics), Rated: AAA

Total household debt increased modestly, by $32 billion, in the fourth quarter of 2018, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Although household debt balances have been rising since mid-2013, their sluggish growth in the fourth quarter was mainly due to a flattening in the growth of mortgage balances. Auto loans, which have been climbing at a steady clip since 2011, increased by $9 billion, boosted by historically strong levels of newly originated loans. In fact, 2018 marked the highest level in the nineteen-year history of the loan origination data, with $584 billion in new auto loans and leases appearing on credit reports, up in nominal terms from 2017’s $569 billion. In this post, we take a closer look at the composition and performance of outstanding auto loan debt using the New York Fed’s Consumer Credit Panel (CCP), which is based on anonymized Equifax credit data and also the source for the Quarterly Report.

Amazon’s lending perpetuates the tech giant’s control over small businesses (Tearsheet), Rated: AAA

Amazon runs a marketplace with 2.5 million sellers, 24,000 of which had more than $1 million in sales on the platform in 2018. These sellers represent the potential customer base for the company’s lending model.

From this base of borrowers, Amazon has been able to reportedly lend over $1 billion in 2017, exceeding  $3 billion in total lending volume from its inception in 2011 to 2017. As for 2018, in its annual report, the company reported receivables outstanding from their lending program of $710 million, up from $692 million a year prior.

With access to detailed information and data on each seller, Amazon is able to mitigate lending risk substantially. Seller metrics only available to Amazon are utilized to determine a small business’s creditworthiness. Sales history, product offerings, customer service feedback, and shipping metrics enable Amazon’s lending business to have better insight into how to accurately issue loans. This allows Amazon to have an understanding of the health of each small business on its seller marketplace.

Goldman Sachs, Point72 and others invest $ 44 million in business credit startup Nav (Reuters), Rated: A

Nav, a startup that gives small businesses free access to their credit reports, said on Monday that it had raised $44 million from investors including Goldman Sachs Group Inc (GS.N), Point72 Ventures and Experian Ventures (EXPN.L).

Well Fargo Outage Points to Opportunity in Digital Banking (Lend Academy), Rated: A

Wells Fargo is still digging out from a PR disaster last week when the bank went offline for a large segment of customers due to a fire alarm triggered in a server facility in Minnesota. Customers could not access the mobile app, the website or ATMs. The incident has been used to highlight how big an opportunity there is for fintech firms or more nimble banks.

What the outage shows is that bank infrastructure is still stuck in the past, analysts rightly askedwhy Wells Fargo did not have the bank running on a cloud based system.

Digital bank Chime seemed to benefit from the news with more than 10,000 accounts being opened, a record 24 hour period for the startup.

new survey by Fraedom says 80 percent of banks believe challengers have impacted their business and 30 percent say they are their biggest threat.

Susan Ehrlich of Earnest (Lend Academy), Rated: A

Our next guest on the Lend Academy Podcast is Susan Ehrlich, the CEO of Earnest. They are one of the largest student loan refinancers in the country and they also offer personal loans. Back in 2017 Earnest was acquired by the student loan servicer Navient which was itself spun out from Sallie Mae in 2014.

Government Shutdown Slows SBA Lending Volume, Approval Percentage Dipped Slightly in January (GlobeNewswire), Rated: A

Business loan approval rates dropped three-tenths of a percent at regional and community banks in December 2018. Small bank approvals dropped a full percentage point from 49.9% in December 2018 to 48.9% in January.

Small business loan approval rates for big banks remained at a record high 27% in January 2019, according to the Biz2Credit Small Business Lending Index, which examines more than 1,000 small business credit applications made via its online lending platform.

Goldberg added that since reopening on January 28, her office has guaranteed more than 200 SBA loans worth $59.3 million.

Institutional lenders climbed up to 65.1 %, a jump of three-tenths of a percent from December’s mark of 64.8%.

Loan approval rates among alternative lenders rose from 56.6% in December to 57.3% in January, a jump of seven-tenths of a percent.

Citi rolls out new personal loan, online savings account (American Banker), Rated: A

Citigroup has launched a new consumer loan product and a new high-yielding savings-account as part of its rollout of its new digital bank.

The New York bank recently introduced Citi Flex Loan, which allows select existing Citi credit card customers to convert part of their credit lines to a loan with a fixed annual percentage rate, Mark Mason, Citigroup’s incoming chief financial officer, said Tuesday at an investor conference.

Square’s banking bid avoids backlash that doomed Walmart’s (American Banker), Rated: A

As Square seeks federal approval for a Utah industrial loan company, the fintech’s bid has so far avoided the kind of loud, public opposition that marred past ILC bids by higher-profile nonbanks.

Community banks still criticize the ILC charter as a banking loophole for non-financial firms, and the Independent Community Bankers of America opposes Square’s application.

Almost 60% of small business owners launch with less than $ 25,000 (CNBC), Rated: A

At least that’s according to entrepreneurs polled recently by Kabbage, a financial services and data platform serving small businesses. More than half of those polled, or 58 percent, started their businesses with less than $25,000. A third started with less than $5,000.

These numbers track with the latest data from the U.S. Census Bureau, which found that the median cost to start or acquire a company is about $25,000. It did find fewer businesses that begin with less than $25,000, only 46 percent, though that could be due to its inclusion of new owners who purchase existing operations as well owner starting from scratch.

LoanStreet Adds Commercial Lending Features for Financial Institutions (Crowdfund Insider), Rated: A

LoanStreet, an online platform that enables traditional finance like banks credit unions and other direct lenders to streamline the process of sharing, managing, and originating loans, has added new features. The SaaS platform now offers commercial loan origination and administration solution for any size financial institution, loan or deal volume.

LoanStreet’s new lending features include:

  • Built-in collaboration tools offering the flexibility to originate the loan best suited to your borrowers’ needs without sacrificing the ability to invite other financial institutions into the deal.
  • Single access point allowing all parties, including borrowers, lenders, attorneys and auditors, continuous and secure access to the same information.
  • Integrated platform from origination to maturity avoids re-keying, duplication of efforts and eliminates transfer errors and other critical information loss that occurs over time.
  • Efficient process management enabling online, borrower self-service of key administrative tasks — including online payment acceptance — while improving internal controls and information flow.
  • Automated reporting facilitating completion of all applicable regulatory and financial entries for you and every investor.

Velocity Investments sues woman for breach of contract, seeks ,500 in damages (Louisiana Record), Rated: A

Velocity Investments LLC, assignee of Lending Club Corporation, filed a complaint against Heather Darling on Feb. 12 in the 24th Judicial District Court. According to the lawsuit, the plaintiff states that the defendant has failed to pay off the balance of $22,495.23 plus interest on a contract between the parties. The defendant is accused of sums due on an open account and breach of contract.

Online Loan Companies Are No Easy Fix for Desperate Borrowers (Real Daily), Rated: A

Lending Club is currently the largest online lender in the world. By some estimates, Lending Club, which launched in 2007, facilitated anywhere between $35 billion and $55 billion in online loans in 2018.

Now as more financial institutions are beginning to extend loans, Americans are falling even deeper into debt again. Americans, as individuals and households, owed over $13 trillion dollars, collectively, in 2018.

Best News We’ve Heard All Day: More Single Women Own Homes Than Single Men (Pure Wow), Rated: A

Online loan marketplace LendingTree reports that on average, single women own around 22 percent of homes, while single men own less than 13 percent. The study states that the gender gap in housing across the country is particularly interesting “given the average woman in the U.S. only makes 80 percent of what the average man does.” Interesting, indeed. (We can think of another word for it.)

Thoma Bravo Is Buying Digital-Focused Mortgage Company (WSJ), Rated: A

Thoma Bravo LLC has agreed to buy mortgage software firm Ellie Mae Inc. for $3.7 billion, the latest indication that challenges in the home-lending market are spurring consolidation across the industry.

The transaction will give the private-equity firm control of a company whose technology has been used to help automate the closing of millions of home loans. Based in Pleasanton, Calif., Ellie Mae handles the technology that underpins the entire home-loan origination process, and its services are used in

INSIKT Changes Name to Aura (Business Wire), Rated: B

INSIKT, a mission-driven financial technology company that offers affordable loans to hard-working families, today announced that it has changed its name to Aura to expand its focus on creating greater financial health, independence and economic stability for millions in America.

Roostify Expands Advisory Board with Investment Virtuoso (Roostify), Rated: B

Roostify, the San Francisco-based digital lending platform provider, announced today the addition of financial services consultant Marshall Lux to its advisory board. Lux, a distinguished consultant, advisor and educator, brings more than 30 years’ experience in private equity to the rapidly expanding business and reflects Roostify’s commitment to perfecting a scalable operational model and further developing an ecosystem of technology partners and strategic alliances.

LendIt Fintech USA 2019 (LendIt), Rated: B

April 8-9
Moscone West
San Francisco

HIGHLIGHTED KEYNOTES

Sallie Krawcheck
CEO & Co-Founder
Ellevest

Rob Frohwein
CEO & Co-Founder
Kabbage

Steven Streit
CEO
Green Dot

Mike Cagney
Co-Founder
Figure

United Kingdom

Zopa chairman Giles Andrew to step down after 15 years (Independent), Rated: AAA

Zopa’s co-founder Giles Andrew is to step down as chairman after 15 years at Britain’s oldest peer-to-peer lender.

Zopa appoints Virgin veteran McCallum as chairman (Finextra), Rated: A

P2P lender Zopa has appointed former Virgin Management CEO Gordon McCallum as chairman as it gears up for the forthcoming launch of its new banking venture.

Ratesetter ISA tops £175m in first year (AltFi), Rated: AAA

The peer-to-peer lending platform said its ISA accounts for one-fifth of its £830m of funds under management.

Peer-to-peer lending platform Ratesetter said it has been “blown away” by the popularity of its first ISA product, which has hit £175m of subscriptions a year after launch.

Assetz Capital surpasses £700m lending mark (Bridging and Commercial), Rated: AAA

Assetz Capital has now lent over £700m to SMEs and property developers since launching in 2013.

The P2P lending platform has enjoyed significant progression, providing over £200m of funding in the eight months since it surpassed the £500m lending milestone in June 2018.

Former Assetz Capital founder launches fintech consultancy (AltFi), Rated: A

The co-founder of one of Europe’s largest peer-to-peer lenders has launched a fintech consultancy to help young firms “avoid some of the mistakes made by the early incumbents of the industry”.

Former Assetz Capital chief credit officer Andrew Holgate will lead a team of City veterans at consultancy Equitivo, which will help growing fintech firms raise cash, focus on strategy, trim operations and boost performance.

‘There is no magic bullet, people will get P2P over time’ (FT Adviser), Rated: A

The chief operating officer of peer-to-peer platform Relendex, Max Lehrain, has concerns about the Financial Conduct Authority’s crack down on P2P lenders and crowdfunding platforms.

UK challenger bank Starling secures £75m for European expansion (Fintech Futures), Rated: A

Life is sweet for UK challenger bank Starling as it has raised £75 million in funding for its expansion plans in Europe.

It got £60 million in a Series C round led by Merian Global Investors, including the Merian Chrysalis Investment Company.

Monzo Launches First 100 Business Accounts (Crowdfund Insider), Rated: A

UK challenger bank Monzo announced on Monday the launch of its first 100 business accounts. This news comes just a few months after Monzo revealed it was considered business banking, with Founder and CEO, Tom Blomfield, stating 2019 plans included business accounts. Speaking about the new accounts, Monzo reported:

Main Street banks say fintechs like Monzo, N26 and Chime pose the biggest disruptive threat to their businesses (Business Insider), Rated: A

Main Street banks believe upstarts like Monzo, N26 and Chime, known as challenger banks, pose a significant threat to their business, according to a recent survey.

Fraedom, a credit card specialist who works with companies like Visa, SunTrust, and Bank of Montreal, surveyed bankers on what some of the biggest impacts to their business will be in 2019. The vast majority (80%) believe challenger banks have an increased impact to their business, and 30% pegged the new competitors as the biggest disruptive threat to their business in 2019.

Tandem Bank boss calls for rate cut to kick-start UK economy (AltFi), Rated: A

Ricky Knox, chief executive of app-only lender Tandem Bank called on the central bank to cut rates to kick-start growth, as currently savers are locking away cash in specialist higher interest accounts.

Peer-to-Peer Lending and Brexit (4th Way email), Rated: A

Shares plunged and the pound plummeted to a 31-year low when the UK voted to leave the EU. More recently chaotic Brexit negotiations indicate a disorderly exit that could see investors avoid traditional investments in the UK, but what does this mean for peer-for-peer lending and should lenders be worried?

Bank and P2P lending is far less volatile than equity investing, because:

  • It is short-term orientated.
  • Lenders easily diversify widely across thousands of investments – loans – as opposed to a typical stock investor who diversifies across hundreds of shares through share funds.
  • In P2P lending, buy/sell price swings, often fuelled by uncertainty, are usually irrelevant, since lenders hold loans for the full term.
  • Lenders are usually in a better place in the queue compared to equity investors when recovering losses is involved, which can mean smaller losses on individual investments (loans) that go wrong.
  • With lending being data driven, recession conditions are easier to plan for. A turbulent P2P Brexit would mean a tripling of defaulting loans in some kinds of lending and cut-price sales of borrowers’ assets. Interest rates and reserve funds are prepped for most disasters, leaving a very low chance of a sizeable overall loss on a well-diversified, low-risk lending portfolio.

Most investors in peer-to-peer lending are using platforms that are run by people with relevant banking experience. The banks, when we look at their bread-and-butter lending, have found it easy to maintain net profits even during multiple downturns over the past 20 years, which includes the Great Recession. This is across the spectrum of lending, from buy-to-let mortgages to personal loans and credit cards. Perhaps surprisingly, retail and small business lending combined was still profitable for the UK’s high street banks during the 2008 and 2009 crash.

Learn more about 4th Way here.

Mojo Mortgages secures £7million to revolutionise the UK mortgage experience (Manchester Digital), Rated: A

Mojo Mortgages, a fintech start up based in the North West has secured £7million in Series A funding to transform the mortgage experience.

Mortgage Brain boosts user numbers (Mortgage Introducer), Rated: A

Mortgage Brain welcomed over 2,000 new customers during 2018 with a host of national networks, corporate firms and individual adviser firms choosing to use one or more of its products and services.

A number of new customers – including Censeo, Intelligence Mortgage Solutions, Your Expert Group, Affinity Mortgages and Your Mortgage Solutions – as well as a number of contract renewals and user license increases, have all contributed to Mortgage Brain’s growth throughout 2018.

UK inflation below official target for first time in 2 years (Miami Herald), Rated: A

Lower energy costs as well as a waning impact from the pound’s sharp fall in the aftermath of the country’s Brexit vote have helped consumer price inflation in Britain fall below the Bank of England’s target of 2 percent for the first time in two years.

The Office for National Statistics said Wednesday that consumer prices rose by 1.8 percent in the year to January, down from the 2.1 percent recorded in the previous month. Inflation has been consistently falling since August as the effects of the pound’s decline drop out of annual comparisons. The latest decline was further accentuated by a fall in the price of electricity, gas and other fuels.

Inflation is now at its lowest since January 2017, when inflation was also 1.8 percent.

Arbuthnot Commercial ABL delivers £12m refinancing facility (Bridging Loan Directory), Rated: B

Arbuthnot Commercial Asset Based Lending Ltd. is delighted to announce it has completed a £12m refinancing for L&C Limited, trading under Red 7 Marine (“R7M”), provider of nearshore access solutions to the UK marine construction and maintenance industry, and an investee company of Perwyn Private Equity (“Perwyn”).

European Union

UK fintech unicorn Revolut forced to deny links to Russia (Business Insider), Rated: AAA

Unicorn challenger bank Revolut has strongly denied claims that its activities in securing a banking license in Lithuania are attempts to interfere in the country’s politics.

Revolut was granted a European Banking License in Lithuania in December but has since faced claims of interfering in the country’s political processes by Lithuanian Member of Parliament Stasys Jakeliūnas, chair of the Lithuanian parliament’s budget and finance committee.

German Lending Marketplace auxmoney Overtakes Midsize Banks in Consumer Loan Origination (Crowdfund Insider), Rated: AAA

Düsseldorf-based Fintech auxmoney has surpassed its targets in 2018. Loan volume increased by 74 percent compared to 2017. Raffael Johnen, Founder and CEO of auxmoney, commented:

“While the major German banks are in crisis mode, the leading German fintechs are always setting new records. With our continuously strong growth, we managed to be the first credit marketplace to catch up with medium-sized banks in Germany.”

It issued new loans totaling €551 million last year.

Auxmoney Now Stands for 0.5% of the Market of German Consumer Loans (P2P-Banking), Rated: A

German p2p lending marketplace Auxmoney announced that it has facilitated 551M EUR in consumer loans in the year 2018. Up 74% compared to 2017. Approximately 73,000 loans were financed. That would mean Auxmoney now stands for a market share of roughly 0.5% of the market.

Gymshark teams up with Klarna to announce pay later service (RLI), Rated: B

Fitness wear brand Gymshark has announced the launch of a pay later service in the UK, Sweden, Norway, Finland and Denmark. The company is now in a partnership with Klarna, a payments provider which will offer Gymshark the new payment option. The payment service will allow online shoppers to try on items at home before paying for the order.

Instantor releases report on how machine learning is revolutionising credit risk management in Europe (Fintech Finance), Rated: B

Instantor, the 3rd. fastest growing Swedish FinTech who makes tough calls easy within credit risk management presents “Credit Risk Management 2019 – How Do You Stack Up?”, a report based on a survey conducted by Instantor across Europe among top executives within leading financial organisations. The report reveals that two-thirds of these players are well underway to implementing machine learning (ML) and the majority benefits from its implementation within credit risk management.

International

30 Under 30 Europe: The Young Money Merchants Shaping Financial Markets In 2019 (Forbes), Rated: AAA

Finance is hardly known for its youthfulness, yet this year’s Finance 30 Under 30s are proving that an old industry can learn new tricks. These young venture capitalists, fintech entrepreneurs, crypto enthusiasts and Millennial bankers, with an average age of just 27, are reshaping the sector and transforming our relationship with money.

The Next Global Financial Meltdown Is Just Around the Corner (Equities.com), Rated: AAA

As Bloomberg reported last year:

Shadow banking in China has ballooned into a $10 trillion ecosystem which connects thousands of financial institutions with companies, local governments and hundreds of millions of households. The practice is now at the center of a Chinese government-led regulatory crackdown aimed at defusing financial risks that threaten the wider economy. Unlike in the U.S., traditional commercial banks drive shadow banking, or unregulated lending, in China. That’s because the banks have been able to keep shadow-banking assets off their balance sheets, thereby sidestepping regulatory constraints on lending.

About 169 million Chinese, or about 12 per cent of the population, have invested in wealth management products online, a rise of 66 per cent from two years ago, according to a Moody’s report published this month. Essentially, they are putting money into the shadow banking system.

“The picture is different in the European Union. Here, the shadow sector now accounts for perhaps 30–40% of total financial intermediation. But it is growing. Between 2012 and 2016, shadow banking as broadly measured expanded by almost 40% in the eurozone.

Atlanta-based IDology to Be Acquired by GBG for $ 300m (PR Newswire), Rated: A

GBG, the UK-headquartered Identity Data Intelligence specialist, today announces that it has conditionally agreed to acquire the entire issued share capital of IDology, a US-based provider of identity verification and fraud prevention services, for $300m (£233m) in an all-cash transaction.

Nexo lending to offer crypto-backed loans with Blockport exchange (Bankless Times), Rated: B

Blockport users will be able to use the Nexo platform to get crypto loans, offering them another alternative to selling their cryptocurrencies for fiat currencies. Instead of selling they cryptocurrency assets, Blockport users can now keep their crypto, with all potential upsides, and leverage them to get instant access to cash.

Australia

Next Growth Wave: Fintech (Seeking Alpha), Rated: AAA

In this article we look at some fintech companies, beyond investor’s normal horizon of the United States. In Australia there is a small cluster of listed fintech companies that have started to explode. Some have made gains of 400% in a year and more than 1,000% on the back of strong revenue and turnover growth. Moreover because Australian companies lack access to large scale V.C. investments, technology companies often need to capital raise through a public listing.

Zip Co. (ASX: Z1P)

Zip Co. is quite similar to Afterpay and in some ways its closest competitor with an established market position. However in addition to payment splitting, it also offers interest based loans and is different in other ways.

  • Zip Co. is smaller with a market capitalization of $380 M AUD (about $266 M USD), but still has 12,600 retail partners including most of Australia’s largest retailers, however it hasn’t yet entered the U.S. or the U.K.
  • Zip Co. has Zip Pay, which provides a payment splitting application with no interest, but with more flexibility in length of time or repayment amount than Afterpay’s solution.
  • Zip Co. also has Zip Money also provides loans for purchases above $1,000 AUD, with a 3 month interest free period, but with an establishment fee of up to $99.
  • Source: Seeking Alpha

Labor’s negative gearing policies could hurt first-home buyers (Your Mortgage), Rated: A

“Despite Australia’s tight regulations on foreign investment, other overseas property markets are tighter – including China, Canada and New Zealand,” Driscoll said. “Unlike in Australia, the Chinese lack many appealing alternative investments at home and, due to government crackdowns on peer-to-peer lending, private equity funds and with the majority of their property being leasehold, many investors are forced to look elsewhere.”

India

India’s fintech future looks bright, but it needs to find its raison d’être (India Times), Rated: AAA

Yet there is more room for growth. The market in India is still small; far more deals are being done in China, and for far higher valuations. Last year alone, venture capital investments into Chinese fintechs were more than 10 times larger than those in India, with 75 percent more deals.

Although the value of investments in India declined by 21 percent in 2018 over the previous year, the number of deals actually rose 12 percent, making 2018 the most active year on record for fintech financing.

RBI may change Rs 10 lakh lending cap on P2P platforms, say P2P players (India Times), Rated: A

Peer to Peer or P2P players are hopeful that the comprehensive financial data sought by the Reserve Bank of India might help the regulator to take some major policy decisions concerning the industry.

Asia

Hundreds of unlicensed P2P lenders still operating in Indonesia (The Jakarta Post), Rated: AAA

The Financial Services Authority (OJK) has found that 231 illegal peer-to-peer lending (P2P) providers, including those from other countries, have been operating in the country since January.

An Overview on Peer-To-Peer Lending in Indonesia (Legal Business Online), Rated: A

Two years following the enactment of Financial Service Authority (Otoritas Jasa Keuangan/”OJK) Regulation No. 77/POJK.01/2016 of 2016 (POJK 77/2016), Peer-to-Peer Lending (P2P Lending) has grown popular in Indonesia. Based on data from OJK per Oct. 2018, a total of 15,990,143,141,355 rupiah has been distributed to the borrowers in P2P Lending. It has grown 432.5% from Jan. 2018 until Oct. 2018. Until Dec. 2018, the number of P2P Lending Platform which has been registered and supervised by OJK has reached 88 companies, one of them has been given a license.

Canada

Finastra announces Siobhan Byron as new Head of Technology Enabled Managed Services (Finastra), Rated: A

Finastra has appointed Siobhan Byron as Senior Vice President and Head of Technology Enabled Managed Services (TEMS). In this role, she oversees planning and execution, sales and marketing, research and development and product management across four lines of business including Checks, Enhanced Services, Student Lending and Canadian Mortgage Technology, all in the Canadian market. She oversees more than 1,300 employees that make up Finastra’s TEMS business.

Authors:

George Popescu
Allen Taylor

The post Thursday February 14 2019, Weekly News Digest appeared first on Lending Times.

Thursday October 18 2018, Daily News Digest

Major US Banks Active Mobile Banking Users

News Comments Today’s main news: Upgrade to debut ABS bond. KBRA assigns preliminary ratings to Upgrade Receivables Trust 2018-1. Funding Circle launches free iPad incentive. China’s P2P lending is in trouble. Today’s main analysis: State laws put installment loan borrowers at risk. (A MUST-READ) Today’s thought-provoking articles: SoFi’s data science head on machine learning and non-traditional lending. LendingClub’s Bill Walsh says […]

Major US Banks Active Mobile Banking Users

News Comments

United States

United Kingdom

International

Other

News Summary

United States

Online lender Upgrade prepares debut ABS bond  (International Financing Review) Rated: AAA

Upgrade, an online lending company started by former LendingClub founder Renaud Laplanche, is looking to sell a debut asset-backed bond deal, four people with knowledge of the deal told IFR on Wednesday.

KBRA Assigns Preliminary Ratings to Upgrade Receivables Trust 2018-1 (Business Wire) Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to four classes of notes issued by Upgrade Receivables Trust 2018-1 (“UPGR 2018-1”). This is a $286.390 million consumer loan ABS transaction that is expected to close October 30, 2018.

This transaction represents the first ABS securitization collateralized by unsecured consumer loans originated through the online marketplace lending platform operated by Upgrade, Inc. (“Upgrade”) and the first from the Upgrade Receivables Trust (“UPGR”) shelf. Upgrade Receivables Trust 2018-1 (“UPGR 2018-1” or the “Issuer”) will issue four classes of notes totaling $286.390 million. The proceeds from the sale of the notes will be used to purchase the loans and related rights from Upgrade Receivables Depositor LLC (the “Depositor”), who purchased the loans from the unaffiliated transferors, to fund the reserve account and to pay transaction expenses. The Depositor will in turn sell the loans to the Issuer.

Preliminary Ratings Assigned: Upgrade Receivables Trust 2018-1

Class Preliminary Rating Expected Initial Class Principal
A A (sf) $187,308,000
B BBB (sf) $32,569,000
C BB (sf) $28,440,000
D B (sf) $38,073,000

SoFi’s data science head: Opening the funnel to non-traditional borrowers with machine learning (Thomson Reuters) Rated: AAA

ANSWERS: What are some of the issues in machine learning that you are working to solve for right now?

WU: I think where machine learning plays the biggest role is in datasets that have extremely high numbers of dimensions, very low signal ratios and very sparsely populated values. For example, people in lending use data from the bureau. There are millions and millions of rows, there are thousands and thousands of columns. Each specific field has very little to no signal and each person has very few things that are actually populated. Those are opportunities where machine learning, particularly deep learning, has an extremely high potential.

ANSWERS: How can machine learning assist with lending decisions, and how does one keep bias from creeping into that?

WU: When making a decision on creditworthiness, machine learning can help lenders look at metrics beyond FICO and income. Whether it’s adding more information to traditional metrics versus determining creditworthiness of applicants without a full credit history, machine learning can drive tighter risk management while assessing borrower’s creditworthiness where traditional models cannot.

LendingClub’s Bill Walsh: ‘At its core, marketing is a data problem’ (Tearsheet) Rated: AAA

Today’s marketer on the hot seat is Bill Walsh, LendingClub’s general manager and head of marketing for personal loans. Bill brings an engineer’s approach to marketing. The MIT grad began his tenure at Lending Club in an operations role, where rigorous problem solving was used to solve some of the biggest problems in the business. Now that he’s leading marketing on the consumer side, he brings a similar approach.

We talk about how LendingClub defines marketing and approaches channels. We pay particular attention to a recent TV campaign you might have seen over the summer of 2018. Measuring and responding to the signal is core to LendingClub’s approach and in the course of this four week broadcast campaign, Bill’s team iterated twice. This puts ad agencies on notice — this is the new data-driven fintech marketing world.

Mobile banking is reaching a saturation point in the US (Business Insider) Rated: AAA

JPMorgan Chase counted32.5 million active mobile banking customers in Q3 2018 — an 11% year-over-year (YoY) increase from 29.3 million in Q3 2017.

That’s up from the 31.7 million active mobile customers in Q2 2018, but is also a slight deceleration from the 12% YoY growth in Q3 2017— following several quarters of decelerating growth: Chase has been adding around 800,000 mobile users on a quarterly basis.

Wells Fargo counts 29 million total active digital customers — 22.5 million of which use mobile banking. This marks an 8% annual increase in mobile banking customers, but a 4% YoY increase in total digital customers, demonstrating that most of its new customers are coming from mobile channels.

Source: Business Insider

State Laws Put Installment Loan Borrowers at Risk (PEW) Rated: AAA

Pew’s analysis found that although these lenders’ prices are lower than those charged by payday lenders and the monthly payments are usually affordable, major weaknesses in state laws lead to practices that obscure the true cost of borrowing and put customers at financial risk. Among the key findings:

  • Monthly payments are usually affordable, with approximately 85 percent of loans having installments that consume 5 percent or less of borrowers’ monthly income.Previous research shows that monthly payments of this size that are amortized—that is, the amount owed is reduced—fit into typical borrowers’ budgets and create a pathway out of debt.
  • Prices are far lower than those for payday and auto title loans. For example, borrowing $500 for several months from a consumer finance company typically is three to four times less expensive than using credit from payday, auto title, or similar lenders.
  • Installment lending can enable both lenders and borrowers to benefit. If borrowers repay as scheduled, they can get out of debt within a manageable period and at a reasonable cost, and lenders can earn a profit. This differs dramatically from the payday and auto title loan markets, in which lender profitability hinges on unaffordable payments that drive frequent reborrowing. However, to realize this potential, states would need to address substantial weaknesses in laws that lead to problems in installment loan markets.
  • State laws allow two harmful practices in the installment lending market: the sale of ancillary products, particularly credit insurance but also some club memberships (see Key Terms below), and the charging of origination or acquisition fees. Some costs, such as nonrefundable origination fees, are paid every time consumers refinance loans, raising the cost of credit for customers who repay early or refinance.
    Source: PEW

Read the full report here.

Bank Of America’s Zelle Boosts P2P Transactions 138 Pct In Q3 (PYMNTS) Rated: A

Bank of America cut expenses and reduced its provision for credit losses as the financial institution also beat analysts’ revenue and earnings expectations. Bank of America, in reporting its latest financials on Monday, also said that Zelle P2P payment transactions increased 138 percent year over year.

Revenue increased about 4 percent year over year, hitting $22.8 billion, higher than analyst expectations of $22.67 billion. The financial institution reported earnings per share of 66 cents, which represents a 43 percent year-over-year increase and is above analyst expectationsof 62 cents. Net income grew 32 percent to $7.2 billion.

Bank of America said its provision for credit losses decreased $118 million during the third quarter of 2018, to $716 million. “The net reserve release was $216 million, driven by continued improvement in consumer real estate and energy portfolios,” the bank said in its Q3 financial report.

As digital banks proliferate, so do risks (American Banker) Rated: A

Facing intense deposit competition from online-only banks such as Ally Financial and Goldman Sachs’ Marcus, many traditional banks are looking to turbocharge their deposit gathering by launching — or considering launching — digital banks of their own.

PNC Financial Services Group is the latest big bank to join the fray, recently rolling out a digital-only bank in markets where it lacks a brick-and-mortar presence. Like JPMorgan Chase, Citizens Financial Group and a number of other regional and community banks, PNC is counting on its digital bank to attract low-cost deposits to fuel loan growth while also helping it reach new demographic groups.

Early results have been promising — PNC CEO William Demchak said Friday that he’s been “pleasantly surprised” by the response in the Kansas City, Mo., market — but with the space becoming so crowded, industry watchers are beginning to question if the U.S. marketplace can reasonably support so many new digital banks.

Source: American Banker

Outside Financial Launches to Help Consumers Save up to $ 3,000 on Auto Loan Packages (PR Newswire) Rated: A

Outside Financial, an independent auto loan marketplace, launched its consumer-first platform today to bring transparency to auto finance. The company is the first to offer full auto loan packages outside of the dealership, which can save customers $1,000 to $3,000, along with time and hassle. Outside Financial also arranges refinances for existing borrowers.

In 2017, Americans racked up $568.6 billion in auto loans1, yet 60 percent of buyers don’t know they can bring their own financing to the dealership. The company’s new Outside Financial (OF) Markup Index* reveals that, on average, new car buyers are charged $1,717 in hidden markups when arranging their loans through a dealer.

Individual Investors Can Now One-Click Invest in Commercial Real Estate with CrowdStreet’s “Blended Portfolio” Offering (Benzinga) Rated: A

CrowdStreet, which operates the largest and most diversified online marketplace for direct equity investment in U.S. commercial real estate, is now raising $25 million for the company’s first CrowdStreet Blended Portfolio investment offering. To provide individual investors and registered investment advisors another way to diversify their investments with commercial real estate, the company plans a series of diversified and specialty portfolio investment options that will collectively raise and invest up to $170 million.

The first CrowdStreet Blended Portfolio’s proceeds will be deployed across 30-50 pre-vetted projects on the CrowdStreet marketplace, representing a broad range of commercial and multifamily asset types, risk profiles and geographies.

Credible.com Unveils First Truly Consumer-Centric Mortgage Marketplace (Business Wire) Rated: A

Credible.com, the leading online loan marketplace, announces the launch of its first-of-its-kind mortgage marketplace. Credible.com is the only mortgage marketplace that provides actual rates from top lenders in 3 minutes (without affecting a borrower’s credit score), and a streamlined digital origination process. The platform is designed to save borrowers frustration, time and money.

The Credible.com mortgage marketplace builds on the success of the company’s marketplaces for student loans, student loan refinancing, and personal loans, which have facilitated more than $1.6 billion in loans to date. The first product offered through the mortgage marketplace is mortgage refinancing, which went live today in 20 states that collectively represent 65 percent of mortgage originations.

Talking Regulation at the Online Lending Policy Summit (Lend Academy) Rated: A

The big topic of the day was the OCC’s Special Purpose National Bank Charter also known as the Fintech Charter. The topic was laid out for the audience by the first keynote speaker, Grovetta Gardineer, the Senior Deputy Comptroller for Compliance and Community Affairs at the OCC. She talked about the history of the OCC going back to 1863, with the National Banking Act, when the dollar supplanted state currencies as the sole currency of the United States, a revolutionary idea back then. Ms. Gardineer reaffirmed the authority of the OCC to introduce a national fintech charter and talked about how companies should proceed if they are interested. While she would not comment on specifics she did say that the OCC is currently having preliminary conversations with fintech companies but no formal application has been received yet.

The new head of the CFPB’s Office of Innovation, Paul Watkins, talked about the importance of the regulatory sandbox concept. He was one of the architects of the Arizona fintech sandbox and he is bringing that knowledge with him to Washington. He talked about the two main tools to help facilitate innovation at the CFPB: their trial disclosure program and the no action letter.

How Dealstruck Arrived, “Disrupted,” and Died – A Cautionary Online Lending Tale (deBanked) Rated: A

A self-described member of the “lucky sperm club,” a not-even 30-years-old Senturia went on to successfully raise $30 million of investor capital to fund his business, enough to fuel his rise and price-shame his competitors for years. But it wouldn’t last, as he detailed in book, Unwound, about the behind-the-scenes chaos that ravaged Dealstruck until the company closed for good in late 2016.

AFR Wholesale announces partnership with Floify (Housingwire) Rated: B

AFR Wholesale and Floify shook hands on a partnership, and AFR will now use Floify’s point-of-sale technology.

AFR’s goal in partnering with Floify, a 2018 HW Tech100 winner, is to reduce origination time and increase broker productivity. According to the release, Floify’s POS platform can save up to 15 hours of processing time per loan.

This is only one of an ever-increasing number of companies partnering with software companies or developing their own tech solutions in hopes of increasing productivity and getting some breathing room in the margin department in this tough mortgage market.

iintoo Launches Principal-Protection Product for Retail Investors Supported by Insurance Provided by Everest (iintoo Email) Rated: B

Online Real Estate Investment Management Company iintoo Investments Ltd. (“iintoo”) launched Epiic (Equity Protection Investment Community), the first-of-its-kind real estate investment product that provides principal protection for private accredited investors. Supported by insurance provided by an affiliate of Everest Re Group, Ltd. (NYSE:RE), a leading international reinsurance and insurance organization with operations that span the globe, and a social community pool, Epiic offers two layers of protection for investors’ principal.

iintoo opens up access to real estate investments that were once exclusive to professional funders and high-net-worth individuals. Starting at $25,000, accredited investors can invest in ownership shares in projected high yield, premium real estate projects.  Each project undergoes a rigorous due-diligence and approval process provided by iintoo.  In order to assess the risk factors in real estate investing, iintoo also conducted a thorough analysis of the real estate market in the United States, taking into consideration all sectors in all 50 states over the past 30 years.

TRANSACT Tech San Francisco to Examine the Impact of Software Providers on the Payments Industry (PR Newswire) Rated: B

The Electronic Transactions Association (ETA) will bring together executives from leading banking, payments and FinTech companies on November 1, 2018 for TRANSACT Tech San Francisco at the Wells Fargo Connections Center. The event will explore how software services are changing the way key ecosystems players – processors, banks and hardware manufactures – serve merchants and channel partners.

The day-long conference will kick-off with a fireside chat with Secil Watson, Executive Vice President and Head of Digital Solutions for Business at Wells Fargo. “Customer expectations are changing rapidly, and pace of change in technology is accelerating.” said Watson. “Yet we still have cash and checks. What can we learn from today’s customer experiences to build a better payments ecosystem for tomorrow?

Finicity Partners with Freddie Mac to Provide Industry-Leading Automated Income and Asset Assessment Solution (Finicity Corp) Rated: B

Finicity, a leading provider of real-time financial data aggregation and insights, announced today it has been selected as a third-party service provider for the new Freddie MacLoan AdvisorSM automated income and asset assessment capabilities, which provide a faster, easier way for lenders to verify loan application data upfront. Finicity’s digital verification reports greatly improve efficiency and accuracy, while also providing a simpler, more pleasant borrower experience.

Freddie Mac announced its new income and asset assessment capabilities at the Mortgage Bankers Association Annual Convention & Expo earlier today. Finicity’s verification reports are integrated within Freddie Mac Loan Product Advisor®, the cornerstone of Loan Advisor Suite.  When the capability goes live later this quarter, asset verification will be generally available and income verification will be available as a limited release.

United Kingdom

Funding Circle launches ‘free iPad’ incentive (Peer2Peer Finance) Rated: AAA

LISTED peer-to-peer platform Funding Circle is enticing new investors by offering a free iPads. But there’s a catch – they have to add at least £30,000 to their Funding Circle accounts before 16 November.

The P2P platform is also offering a number of other cashback and ‘giftback’ incentives to lenders who invest lower amounts of money.

Investors who add £20,000 to their Funding Circle accounts will receive £200 in John Lewis vouchers, while those adding £15,000 will get an Amazon Echo.

LendInvest Update: Accelerates BTL Production Application Volume Thanks to Rate Reductions (Crowdfund Insider) Rated: A

UK-based online lender LendInvest announced last week it has reduced rates and product fees across its Buy-to-Let product range. According to LendInvest, the pay rate for its five year fixed rate product has dropped to 3.60%, with the ICR calculation at a pay rate of 3.60%. Meanwhile, product fees for all BTL mortgages on standard property and HMO cases have been reduced to 1%, with borrowers who prioritize leverage in mind.

The lending platform also reported that for a limited time, valuation fees have been reduced to £100 for all standard property cases. LendInvest will now cover the borrower’s legal fee scale costs for standard property, standard conveyance cases, where dual representation is selected.

You think it’s going to be easy challenging the big banks? Think again (The Times) Rated: A

here has never been a more opportune moment for the pack of digital upstarts looking to topple the institutions that dominate the financial industry. Rarely does a week go by when a big bank does not suffer an IT meltdown, spewing sensitive data into the ether or freezing customers out of their accounts.

A decade after the collapse of Lehman Brothers, public distaste for the high street banks remains at elevated levels. Two thirds of Britons do not trust big banks to act in the best interests of society, according to a recent YouGov poll. The advent of smartphones, meanwhile, has fundamentally altered consumers’ expectations of their relationship with service providers.

Amex brings SME financing to UK with ezbob (Banking Tech) Rated: A

American Express (Amex) has partnered with online financing platform ezbob to offer UK SMEs competitive access to finance.

Through this partnership, eligible Amex business clients will receive a referral to apply for up to £300,000 in finance from ezbob at a fixed annual interest rate from 3%.

Carlos Carriedo, senior vice-president of global commercial services at Amex, says: “We know agility is crucial for smaller businesses to help retain a competitive advantage but accessing the finance needed to react swiftly to changing customer demands, or seize an opportunity, can be a challenge.”

Amex customers taking out a loan with ezbob will also benefit from a 40,000 Membership Reward points offer, the company adds.

Connect for Intermediaries announces new panel (Mortage Strategy) Rated: A

Connect for Intermediaries has announced the launch of a new unsecured lending panel.

Comprising Funding Circle, iwoca, Whitoak and Fleximise, the panel will be open to all of Connect’s AR members, and Connect will be able to obtain terms on behalf of other brokers as referrals.

Loans from £5,000 to £250,000 for up to five years will be available from 1.5 per cent.

Connect sales director Kevin Thomson says: “We have seen an increased demand for unsecured loans for trading businesses, as increasingly, brokers are coming to us with business clients who are looking to ease cashflow or expand their businesses.

P2P Lending Investment Returns Outstrip Many Market Competitors (CL News) Rated: A

P2P lending arrived in the UK back in 2010 with the launch of Funding Circle. The idea was simple. In the wake of the financial crisis, banks were – and still are – paying abysmally low rates of interest to savers. P2P platforms allowed savers to collectively lend money to businesses and individuals, usually over relatively short periods of time. By cutting out the middleman (or to be more precise, banks and other traditional lenders), P2P lenders were able to offer competitive rates to borrowers and superior returns to investors.

The market has evolved over the years. AltFi – which provides specialist news for the alternative investment industry along with a range of analytics services – says the market is growing rapidly. For instance, in 2015, P2P lending platforms brokered around £1.1bn in loans. In the first half of 2018 alone, the figure was £3bn. Separate figures from the Peer to Peer Finance Association reveal that its members have, to date, originated loans to a value of £9bn.

11:FS Foundry’s launch brings digital to banks (Banking Tech) Rated: A

Consultancy firm 11:FS has launched 11:FS Foundry, an approach to delivering digital banking services through a modular core banking architecture. It kicks off with the partnership with DNB, Norway’s financial services group, which has also become an investment partner.

DNB has invested £3 million for a 5% stake in 11:FS Foundry. This investment represents the long-term commitment between 11:FS and DNB to change how banks deliver digital banking services, the two companies say.

Watchdog warns payday lenders over customer complaints (Financial Times) Rated: A

The UK’s Financial Conduct Authority encouraged payday lenders to proactively compensate past customers; the industry has come under a lot of heat in recent months after a surge of complaints; companies say a lot of these complaints are bogus and a pushed by professional claims management companies (CMCs)

Wonga was forced to shut down a few months ago after they saw a significant rise in complaints, complaints now cost companies more than $725 per complaint after the first 25 complaints; the rise in complaints has come after new rules were put in place in 2015 where high cost lenders we ordered to drop fees and adhere to stricter standards; a new survey by Kantar TNS showed that 60 percent of payday loan customers still pay more than anticipated.

Fintech offers fresh ways to finance an MBA (Financial Times) Rated: A

According to David Simpson, admissions director at London Business School, MBA students spend just as much time trying to find funding as they do trying to find the right program; while struggling to find his own financing Prodigy Finance CEO Cameron Stevens though there had to be a better way so he started Prodigy with two former classmates.

The company is now growing fast by offering a service few others do, while also collecting credit records from across the globe; “You have talented people who have proved their potential in receiving offers to business school,” says Mr Stevens to the FT. “The only barrier for them is funding, because the banks are still incredibly localised, as they were in the 1500s.”

Arbuthnot Banking Group PLC Third Quarter Trading Update (Arbuthnot Group) Rated: A

Customer Lending balances are 28% higher than at the same time in the prior year and originations of new loans are 18% higher. However, as previously stated, the Group remains committed to maintaining its discipline in both credit underwriting decisions and return on capital when extending credit.

The newly launched Asset Based Lending division continues to develop ahead of the original business plan and has a strong pipeline of new opportunities. The Specialist Finance division has now completed the hiring of its core team of six employees and is currently setting up its operations based in Manchester. It is expected that it will write its first deals toward the end of the fourth quarter or early 2019.

OakNorth appoints form PRA director to board (Finextra) Rated: B

OakNorth – the bank for entrepreneurs, by entrepreneurs – today announces the appointment of Martin Stewart, the former Director of Banks, Building Societies & Credit Unions at the Bank of England, as an Independent Adviser on its advisory board.

Stewart joined the Bank of England in April 2013 and spent five and a half years there. In addition to supervising UK banks, building societies, credit unions and new entrants into UK banking, he was a Member of the PRA’s Executive Team responsible for PRA regulatory policy. His regulatory experience also includes spending three years at the FSA between 2010-2013, where he was a member of the leadership team that defined and implemented the UK’s post financial crisis prudential regulatory regime that now underpins the work of the Prudential Regulation Authority. In addition to this, he has almost two decades’ board-level experience having been Managing Director of a group of European subsidiary companies of the IFG Group PLC for almost four years, and as Chairman of the International Credit Union Regulators’ Network for the last six years.
China

China’s P2P Lending Sector Is in Serious Trouble (Money Makers) Rated: AAA

P2P lending has been lucrative in China with little constraining regulation. The industry is worth as much as $120 billion and has been high-risk, but high return.

Chinese regulators have been clamping down on debt and financial risk, the number of loan defaults is rising, capital investments are running out of the sector, and Chinese citizens are losing money. And getting pretty angry about it.

In July 2018, 114 P2P lending platforms in China were shut down or had funds suspended, without warning, by China’s regulators over liquidity concerns. Since June 2018, 243 online P2P lending platforms have gone bust.

Several Chinese Peer-to-Peer Lending Companies Have Submitted Self-Inspection Reports (Capital Watch) Rated: A

With hundreds of peer-to-peer (P2P) lending platforms having collapsed at the beginning of this year, different district-level financial bureaus recently rolled out a tougher reform on all P2P platforms’ risk compliance to ease a growing panic among investors.

This industry reform involves three major steps. First, all platforms have to complete a P2P Compliance Self-Inspection Report and submit it to the bureau by the end of October. Then, companies will be inspected by its local Internet Finance Industry Association, a non-state association. This will be followed by verification of inspection results by district-level Municipal Bureau of Financial Work with field inspection and a possible final check by higher-level government organizations.

New York-listed Hexindai Inc. (Nasdaq: HX) and PPDAI Group Inc. (NYSE: PPDF) both announced that they have completed and submitted the report.

European Union

A risky investment (Euro Weekly News) Rated: AAA

MANY UK nationals living part of the year in Spain, or visiting often, might spend months here but still retain tax residency in their home country.

This means those looking for investment opportunities can still take advantage of UK tax efficient products such as Finance ISAs – ones which use peer-to-peer lending to offer high rates of return. They may be nothing new but one legal justice firm has upped the ante offering returns of up to 8 per cent a year.

International

Advantages of P2B platforms in lending to SMEs (Lendit Conference Blog) Rated: AAA

In the EU and Australia, SMEs comprise 99.8% of all the firms and employ about 67% of the workforce. To tell the truth, SMEs might be rightfully called the economy, not just the backbone of it. A few other facts that follow are paradoxical. 2 years ago, International Finance Corporation (under World Bank) presented statistics that the gap for underfinanced SMEs around the world stood at 2.6 trillion $. One might expect, the situation got better in recent years with the global economy picking up and showing better and better numbers. On the contrary, most recent statistics from the same institution shows that the gap has widened to 5.2 trillion $.

P2P platforms make lending process global

P2B platforms can connect a business on one side of the world with an investor from another side of the world, and with a third party providing a service from yet another part of the world. All applications for loans can be made online, processed, assessed and the decision made within a matter of a few hours. Compare it to a similar process with the banks and the difference, that of speed and efficiency becomes clear. As an asset (loan) is put on the platform, investors can start investing within a matter of seconds. In such a way, a local business, somewhere in Eastern Europe can get funds from someone (or institutional investors) in UK or Germany and be able to use the collected amount for business operations within a couple of days.

4 developments that will shape the future of fintech (Business Matters) Rated: A

Within the past decade, we’ve seen the landscape of fintech move from a few disruptive start-ups to an industry that’s changing the landscape of business altogether. Consumers are becoming more and more accepting of technology as part of their day-to-day finance, a factor that has stretched the services sector and levelled the playing field with traditional institutions.

For instance, there has been a monumental shift in the way that consumers are managing their money. PwC’s Global Fintech Survey 2017 found that 84% of incumbent financial services providers believed their customers were already making payments with fintech companies, 68% thought customers were conducting fund transfers, and 60% said their clients were using fintech for their personal finances.

Quona Capital leads $ 5 million round for Brazilian small business lender BizCapital (Impact Alpha) Rated: A

Brazilian fintech firm BizCapital launched operations in January to help Brazil’s small business owners secure capital necessary for the day-to-day and growth needs of their businesses. Quona Capital, a financial tech investment firm that spun out of Accion, has led the company’s R$20 million ($5 million) investment round. Two existing investors, Monashees and Chromo Invest, both based in Brazil, also participated.

Roughly 70% of Brazil’s micro and small business owners are shut out of mainstream bank lending and instead resort to taking personal loans, which can carry interest rates as high as 200%. BizCapital offers short-term loans for up to R$150,000 ($40,000) at annual rates in the mid-double digits. The company hasn’t disclosed the size of its loan book but says it’s received more than 100,000 credit requests and serves customers in all 26 Brazilian states.

Australia

Global corporate lending platform, Trade Ledger has warned the Federal Government of substantial weaknesses in its proposed Open Banking implementation plan, when compared to the global best-practice model.

These primarily include the lack of an independent implementation and governance organisation, and limited consumer and small to medium-sized enterprise representation in the development of industry standards.

According to Trade Ledger, these omissions “risk a scaremongering campaign around data security that could stall progress and reduce the scope of the changes, leaving the door open for overseas financial markets to take over our local markets in the new era of Open Banking”.

India

UIDAI Asks Non-Banking Fintech Companies To Stop Aadhaar-Based Services (Inc 42) Rated: AAA

After getting telecom companies to submit their exit plans from Aadhaar-based services, the Unique Identification Authority of India (UIDAI), the Aadhaar regulatory body, has now asked digital payment companies to stop offering any sort of Aadhaar-based service on their platforms.

In a letter, the UIDAI also directed digital payment companies to submit confirmation of closure of Aadhaar-related authentication and their alternative plans to exit from the Aadhaar-based ecosystem.

According to reports, the UIDAI has sent the letter only to non-banking companies such as PayPoint, Eko India Financial Services, and Oxigen Services, among others.

Citing unnamed sources, an ET report stated that banks and payment companies such as Paytm, which have obtained banking licences, have not received the notice.

Africa

Kenya built a reputation as a pioneer of financial inclusion through its early adoption of a mobile money system that enables people to transfer cash and make payments on cellphones without a bank account.

Now, a proliferation of lenders are using the same technology to extend credit to the banked and unbanked alike, saddling borrowers with high interest rates and leaving regulators scrambling to keep up.

This week, the finance ministry published a draft bill on financial regulation which covers digital lenders for the first time. A key aim is to ensure that providers treat retail customers fairly, it said.

Authors:

George Popescu
Allen Taylor

Thursday September 21 2018, Daily News Digest

Chinese companies surge on debut after US IPOs

News Comments Today’s main news: LendingClub spent $6.4M to relocate two executives. Funding Circle to price IPO between 420-530 pence. Funding Circle to set valuation at $2.4B after IPO. Qatar fund to invest in Lufax. X Financial completes IPO. Today’s main analysis: Fintech investors like ‘stodgy’, not ‘sexy’. Prospa has written $750M in loans. Today’s thought-provoking articles: How machine learning helps P2P […]

Chinese companies surge on debut after US IPOs

News Comments

United States

United Kingdom

China

Other

News Summary

United States

Some Companies Spend Plenty to Lure Executives Willing to Relocate (Wall Street Journal) Rated: AAA

Some businesses have gone so far as to shell out millions to move key players from miles away. LendingClub Corp. LC -2.63% spent nearly $6.4 million to bring two new top officers and their families to the San Francisco Bay Area in 2017, according to an analysis of data from company proxies by research firm Equilar Inc. That sum largely reflects $3 million in relocation bonuses for Steve Allocca, the new president, and Thomas Casey, LendingClub’s chief financial officer. Both men moved from less-costly cities in Texas.

Source: Wall Street Journal

Fintech investors like ‘stodgy more than sexy’ (Financial Planning) Rated: AAA

A good chunk of the money being invested in wealth management and banking technology is going toward funding artificial intelligence-driven tools.

But forget the popular concept of conversational, British-voiced computers, chatbots or even cute robot assistants greeting customers at branches; the applications that investors want in on are focused on improving operational efficiency.

The industry’s current methods of handling compliance issues, back-office processing, clearing and settlements, he says, are ripe for reinvention.

Source: Financial Planning

How Does Machine Learning Help Peer to Peer Online Marketplaces Succeed? (Tech Pluto) Rated: AAA

Machine learning technology brings a real ROI to peer to peer marketplace owners. Airbnb, a company known for their personalized approach to each customer has seen a significant growth in the number of bookings after they started using machine learning. Other popular P2P marketplaces such as Etsy, Uber, Lending Club also apply intelligent algorithms to increase their conversion rates and acquire a competitive advantage.

Machine learning helps leading marketplaces and companies that provide AI consulting services develop features that bring tangible value to business and consumers. So how exactly do P2P marketplace companies use this cutting-edge technology? Let’s find out.

Predicting which products a user will like is a widely adopted use case for machine learning. A variety of digital products today have recommender systems powered by this technology. In the past product recommendation systems were based on hard-coded rules. Those rules determined what item to show to a user based on some predefined scenarios. For example, if a user buys a fancy red dress, she’s likely to also buy shoes that match this dress.

SoFi’s Former Head Of Venture Strikes Out On His Own (Benzinga) Rated: A

For this installment, Benzinga interviewed an intriguing fintech venture capitalist: Logan Allin, general partner at Fin Venture Capital and former head of venture at SoFi.

Allin’s career has been largely spent “in and around” financial services, he said, including stints at SoFi, City National Bank and Invesco Ltd. IVZ. He launched Fin Venture Capital in April with a focus on the global fintech sector, greenfield areas and B2B and B2B2C players in particular.

BZ: Fintech funding rounds are getting larger, some consolidation is occurring and the space in general is maturing — is there still room for small startups to have a major impact? What verticals are ripe for disruption?

According to Pitchbook’s data, the U.S. funding environment is skewed increasingly to growth and late stage startups and is on pace to surpass $100 billion in deal value for the first time since the dot-com era.

Indeed, there was $57.5 billion of VC invested in U.S. companies through the first half of the year, and the second quarter of 2018 is higher than six of the past 10 full-year totals. Despite the volume, the deal count has remained stable due to later-stage entry points and larger round sizes, and as a result, deployment is at a slower pace than seen in 2013-2015.

You’re seeing a move toward larger fund sizes with the same investment period as they’ve always had, five years, which leads to larger check requirements per deal and thus a move downstream to growth and late-stage rounds where the valuation math and round sizes align.

Goldman Sachs nears deal to sell its fintech app – WSJ (Reuters) Rated: A

Goldman Sachs is in advanced talks with several financial companies to spin off ‘Simon’, its three-year-old app that sells financial products to retail investors, the Wall Street Journal reported on.wsj.com/2OzaWmf on Wednesday, citing people familiar with the matter.

JPMorgan Chase, Barclays, HSBC Holdings , Credit Suisse, Wells Fargo and insurer Prudential Financial have expressed interest for a stake in the business, the report said.

The deal, which would value the app at around $100 million, is likely to be finalised in the coming weeks.

Lendio Franchising Growth Soars, Doubling Amount of Loans Funded Quarter Over Quarter Since Inception (Lendio) Rated: A

LendingTree Announces Startup Innovators Program at LEND360 (PR Newswire) Rated: A

LendingTree®, the nation’s leading online loan marketplace, today announced it will sponsor a $10,000 award to be given at LEND360 to the fintech startup with the most cutting-edge solutions propelling the online lending ecosystem forward.

As the desire to enter the fintech space continues to heat up, LEND360’s Startup Innovators Program will highlight startup organizations’ crucial part of the fintech ecosystem, bringing new and innovative thinking to the industry.

LEND360 will be held October 8-10, 2018 at the Sheraton Grand Chicago.

iCapital Buys Bank of America Alt Feeder Fund Ops (Wealth Management) Rated: A

Alternative investing platform iCapital Network announced it has entered into a definitive agreement with Bank of America to acquire the bank’s alternative investment feeder fund operations. iCapital expects the volume on its platform to more than quadruple as a result, growing from $6 billion in invested capital across 14,000 underlying accounts to $25 billion across nearly 70,000 accounts.

Bank of America’s Merrill Lynch and U.S. Trust account holders and advisors will continue to use their existing interfaces and their client relationships, but the inner workings of the system will be improved, said Lawrence Calcano, CEO of iCapital.

More Americans With Low Credit Scores Buying Homes (Laredo Morning Times) Rated: A

If you have a low credit score and want to buy a home, your odds of getting a loan have improved. A study by the Fair Isaac Corporation (FICO) shows that credit scores for new mortgage originations have been dropping, suggesting that lenders are slowly relaxing the tight credit policies imposed after the housing crisis.

According to the study, new mortgage loans with credit scores less than 700 increased from 21.9% of all mortgage loans in 2009 to 29.7% in 2017. These include scores in the subprime market that can reach down into the 400s. (While the typical lower credit score limit is 620 for conforming loans and 500 for FHA loans, loans may be granted at even lower credit scores with extenuating circumstances.)

The shift in average credit scores is driven by FHA loans – as expected by the lower acceptance criteria for FHA loans. The latest Origination Insight Report from Ellie Mae shows that only 16.7% of conventional mortgage loan originations in July 2018 were associated with FICO scores less than 700.For FHA loans, over 65% of FHA loans went to borrowers with scores below 700.

2Wheel Partners With Affirm to Offer 0% Financing (Motorcycle & Powersports News) Rated: A

Affirm Inc., a financial technology company, provides transparent alternatives to traditional credit. Customers can select the Affirm payment option at checkout and quickly and easily receive real-time approval of their loan amount. The payment terms are clearly stated with no hidden fees or compounding interest.

5 Surprising Traits of Digital Banking Winners (Financial Brand) Rated: A

Ever since JP Morgan declared itself a technology company that provides financial services — not the other way around — analysts and investors have been scrambling to discern which banking companies are doing tech well, and which are not. They know the institutions that harness the power of artificial intelligence, machine learning and big data, and more importantly, the applied business insights these technologies can generate, will be the banks that will be the winners in the long run.

“Long term I think this will determine the split between winners and losers,” one investor told the Financial Times in a story on AI and banking earlier this year.

New Research Indicates Non-Prime Hispanics Have a Leg up on Financial Health (Market Watch) Rated: A

When it comes to personal finances, Hispanics in the U.S. are more stable and optimistic than other groups studied. A newly released study from Elevate’s Center for the New Middle Class (CNMC) found that non-prime Hispanics – or those with credit scores below 700 – experience higher levels of employment and less volatile monthly income. When compared to the broader non-prime community, non-prime Hispanics in the U.S. are:

  • 65% more likely to plan for major expenses
  • 86% more likely to feel financially stable
  • 38% more likely to save money each month
  • 20% less likely to have had a vacation expense in the last 12 months
  • 23% less likely to spend on routine medical expenses
  • 50% more likely to be able to cover a $1200 unexpected expense
  • 3x more likely to regularly pay using a smartphone
  • 20% less likely to have a credit card
  • 25% less likely to have a personal retirement account
  • 2x more likely to regularly give money to a child or grandchild
  • 40% more likely to be employed

Why those high-profile bank glitches just won’t stop (American Banker) Rated: A

The glitch that left SunTrust customers without access to mobile and online banking for two days is just the latest digital snafu to afflict the banking industry. Upgrades by banks or their vendors that went haywire have resulted in multiple outages this past year.

So it begs the question: If there’s such potential for an upgrade to go wrong, why aren’t banks more prepared for the eventuality, instead of scrambling to get service back up and running?

Industry experts bear some bad news about the state of technology in banking: Banks can’t really be proactive enough to prevent the problems.

Why do state regulators want to limit consumer choice? (American Banker) Rated: A

The decision by the Office of the Comptroller of the Currency to begin accepting applications for special purpose national bank charters from fintech companies promotes innovation, gives consumers and businesses greater choice and creates economic growth and opportunity.

It is also good for America’s dual banking system, which the president of Conference of State Bank Supervisors and the superintendent of the New York Department of Financial Services ignore in their recent articles and statements.

Fed will have the say on key parts of OCC’s fintech charter (American Banker) Rated: A

The Federal Reserve is under increasing pressure to provide clarity on whether nonbank fintech firms that receive a special federal charter will have direct access to central bank lending and to the U.S. payment systems.

The Office of the Comptroller of the Currency confirmed in July that it would accept applications from fintech firms for a “special-purpose” national bank charter, although the new license has been legally challenged by state regulators.

But many experts say the OCC’s charter would lose value if the Fed did not allow direct entry to fintech firms. Those firms now, for example, can access the payments system only through bank partners.

White Oak Healthcare Finance Refinances Texas SNFs for Granite Investment Group (Digital Journal) Rated: B

White Oak Healthcare Finance, LLC (“White Oak”), today announced it acted as sole lender and administrative agent on the funding of a $33.2 million senior credit facility for Granite Investment Group (“Granite”). The funds were used to refinance a portfolio of four skilled nursing facilities in Texas.

Granite Investment Group is a privately held, real estate investment firm focused on multi-family, senior housing, and post-acute care.

AlphaFlow Continues Expansion with Launch of New York Office, Hiring of Fintech Executives Stephan Leccese and John Woodruff (PR Newswire) Rated: B

AlphaFlow, the first automated alternative investment platform for real estate, announced today the opening of a new office in New York City. The office launch and expansion operations will be helmed by recently hired fintech executive Stephan Leccese, who joins the firm as Vice President of Partnerships & Servicing.  John Woodruff, a former credit fund senior analyst, will be joining Stephan in New York, serving as Vice President of Investments.

United Kingdom

Funding Circle to price 71.4 mln IPO shares between 420-530 pence (Nasdaq) Rated: AAA

British peer-to-peer lender Funding Circle plans to sell up to 71.4 million new shares in its initial public offering for between 420 pence and 530 pence per share.

Funding Circle, which expects to list in October with a valuation of more than 1.5 billion pounds ($1.92 billion), said it plans to raise gross proceeds of about 300 million pounds.

Peer-to-peer lender Funding Circle to be valued up to $ 2.4 billion after IPO (CNBC) Rated: AAA

Peer-to-peer lending platform Funding Circle announced the pricing range for its initial public offering (IPO) on Wednesday that could value the company up to around £1.8 billion ($2.4 billion).

The British fintech firm said the price range of the offer has been set at 420 pence to 530 pence per share. The flotation will comprise a maximum of 71.4 million new shares and a secondary component to be determined.

After the completion of the IPO, the issued share capital of the company is expected to comprise between 329.7 million and 345 million shares.

Is real estate crowdfunding the investment option for you? (Born2Invest) Rated: A

Equity crowdfunding has been a great alternative investment for many, but there are other principles that branched out from it. Some investors direct their funds not only on startups that offer unique products or services as others become virtual landlords through property crowdfunding.

Platforms like LendInvest, Landbay and Lendy have risen to make real estate investing more interesting because of higher returns. Some sources suggest that peer-to-peer lending (P2P) schemes like crowdfunding in real estate allow for returns in excess of 5-6 percent compared to traditional real estate investment trusts (REITs).

There are three ways to get into real estate crowdfunding: P2P, debt crowdfunding and virtual buy-to-let.

China

China’s Online Lender Lufax Attracts Potential Investment From Qatar Fund (Gooruf) Rated: AAA

China’s online lender Shanghai Lujiazui International Financial Asset Exchange Co. (Lufax) has attracted a potential investment from sovereign wealth fund Qatar Investment Authority (QIA).

QIA has been negotiating the probable purchase of a minority stake in Lufax with an estimated price range of about US$500 million to US$1 billion, said Bloomberg citing the source.

The company has been aiming to file for an initial public offering in Hong Kong since 2017, but only to witness its flotation on ice because of Beijing’s probes into online lenders.

Fintech / Peer to Peer Lender X Financial Trades on NYSE (Crowdfund Insider) Rated: AAA

Chinese peer to peer lending platform X Financial (NYSE: XYF) completed its initial public offering (IPO) today trading shares on the New York Stock Exchange. Deutsche Bank Securities Inc. and Morgan Stanley & Co. were joint book runners on the IPO.

The IPO saw the Class A ordinary shares priced at $9.50. The offering was for 11 million American Depository Shares (ADSs) thus representing a raise of about $104.5 million. Shares initially traded much higher jumping to over $20/share at one point but are now currently hovering around $13/share.

The underwriters have been granted an option to purchase up to 1,650,000 additional ADSs at the IPO price less the underwriting discount.

X Financial on IPO: We Have Built One of the Strongest Fintech Businesses in China (Crowdfund Insider) Rated: A

Earlier today, China based X Financial (NYSE:FXE) traded on the New York Stock Exchange (NYSE) in its initial public offering raising approximately $104.5 million as 11 million shares were floated at $9.50/share. The shares quickly jumped higher in early trading and eventually closed about 25% higher than the offer price. X Financial, a peer to peer lender and Fintech platform, is part of a growing group of Chinese firms deciding to list their shares on US exchanges. In fact, this was the 9th Chinese company to list on the NYSE this year.

X Financial reports experiencing dramatic growth in the past few years. Top line revenue was approximately USD $270 million for all of 2017. As of the first six months of 2018, the company had already topped this number (USD $279.3) as it appears to be on track to double the year prior total.

Investors Love Chinese Tech Stocks (Bloomberg) Rated: AAA

Peer-to-peer online lender X Financial soared on its first day of New York trading, adding to a string of frenzied U.S. debuts by Chinese technology companies.

Source Bloomberg

Banks give China’s Web lenders a second life (The Business Times) Rated: A

China’s online lenders have found an unlikely lifeline. Investors are fleeing the country’s US$200 billion peer-to-peer (P2P) lending sector as regulators crack down. The funding squeeze has pushed many companies to team up with traditional banks that they once sought to disrupt.

Beijing is reining in the country’s non-bank lending sector. Strict rules, such as caps on loan balances for sites matching small borrowers with individual investors, have shut down hundreds of unruly upstarts. Regulators delayed a June deadline for companies to apply for licences, putting larger groups in legal limbo. New York-listed Yirendai has seen its market value more than halve to US$1 billion since the start of the year.

The stakes are huge. Chinese consumer finance – which includes credit card loans, e-commerce credit, and unsecured personal loans – is on track to top 11 trillion yuan (S$2.2 trillion) by 2020, up from four trillion yuan in 2015, according to Oliver Wyman. But banks prefer to lend to customers with credit histories, which much of the population lacks. They often spurn private corporate borrowers for similar reasons. That has opened the door for P2P operators as well as Web giants like Ant Financial.

Lending hand (Breaking Views) Rated: A

China’s online lenders have found an unlikely lifeline. Investors are fleeing the country’s $200 billion peer-to-peer (P2P) lending sector as regulators crack down. The funding squeeze has pushed many companies to team up with traditional banks that they once sought to disrupt.

Beijing is reining in the country’s non-bank lending sector. Strict rules, such as caps on loan balances for sites matching small borrowers with individual investors, have shut down hundreds of unruly upstarts. Regulators delayed a June deadline for companies to apply for licenses, putting larger groups in legal limbo. New York-listed Yirendai has seen its market value more than halve to $1 billion since the start of the year.

The stakes are huge. Chinese consumer finance – which includes credit card loans, e-commerce credit, and unsecured personal loans – is on track to top 11 trillion yuan ($1.6 trillion) by 2020, up from 4 trillion yuan in 2015, according to Oliver Wyman. But banks prefer to lend to customers with credit histories, which much of the population lacks. They often spurn private corporate borrowers for similar reasons. That has opened the door for P2P operators as well as web giants like Ant Financial.

China Rapid Finance to Participate in DBS Fintech Corporate Day (Acrofan) Rated: B

China Rapid Finance (NYSE: XRF), a leading online consumer finance platform in China, today announced that its Chief Executive Officer Zane Wang will participate in the DBS Fintech Corporate Day, to be held at the Fullerton Hotel in Singapore on Thursday, September 27, 2018.

The Company will also host investor meetings throughout the day.  Attendance at the conference is by invitation only.  Interested investors should contact your DBS sales representative to secure a meeting time.

International

Growth of Investor Numbers on P2P Lending Marketplaces (P2P Banking) Rated: AAA

The disadvantage of showing indexed numbers for growth is that it gives smaller, younger an advantage as their percentage increase of investor base is likely still higher because they come from smaller absolut numbers. An example for this effect is Peerberry where percentage growth of investors is rapid, but the absolute number as of Sep, 1st has reached only 2468 investors as it is a very young marketplace.

Source: P2P Banking

ETHLend Blockchain Crypto Lending Launches New Tech Firm Aave To Induce Innovation (Bitcoin Exchange Guide) Rated: A

Decentralized, peer-to-peer (P2P) financial marketplace, ETHLend has recently revealed the launch of a new tech firm dubbed, Aave. The reason for creating Aave is to induce consumers to come up with innovative ways to expand on “evolving and imaginative technology”. Simply put, the team is working towards bridging the gap centralized players like PayPal and Coinbase have left behind.

Aave will serve as the parent company for ETHLend and the team will remain the same. In other words, the CEO for Aave will be that of ETHLend, Stani Kulechov, Jordan Lazaro will serve as COO, Nolvia Serrano is the CMO, Mika Soyring is the CFO and Ville Valkonen is the CCO.

Australia

Fintech Prospa has now written $ 750 million in loans (Business Insider) Rated: AAA

Fintech Prospa, a lender to small business which in June postponed an ASX-listing after being pinged about unfair loans terms, says it has now written $750 million in loans.

Loans for the year to June were $367 million, a 70% increase on the previous 12 months and 9% higher than prospectus forecasts with strong momentum in the fourth quarter.

For the six months to June 2018, loans hit $211 million, up 16% on prospectus forecasts and up 61% on the previous corresponding period.

MENA

OurCrowd Still on Track to Top USD $ 1 Billion in Investment Crowdfunding (Crowdfund Insider) Rated: AAA

In many ways, OurCrowd epitomizes the aspirations of what investment crowdfunding has the potential to deliver for both issuers and investors. By providing access to quality deals to smaller (accredited) investors, OurCrowd has opened up an asset class previously closed off to all but the very fortunate. On OurCrowd, you can find yourself investing alongside some of the biggest names in venture capital – at the exact same terms – an important distinction. It is also important to note that OurCrowd has skin in the game for each offering it lists on the platform – thus interests are aligned: OurCrowd wants the company to succeed and it also very much wants to see a return on its own investment. These qualities make OurCrowd a compelling option for investors that are willing to shoulder an element of portfolio risk that can also drive some outsized returns.

OurCrowd is based in Israel – where many of its investments are made – but its vision is to empower investors globally and fund companies regardless of geographic borders. This is what you want to see in the digitized, internet fueled Fintech age.

Build a real estate portfolio starting with as little as $ 1000 (AME Info) Rated: A

Real estate crowdfunding comes to Dubai in the form of Smart Crowd

In the US, investors are utilizing crowdfunding sites like Realty Mogul, CrowdStreet, and Fundrise to start and/or build their portfolios, Investopedia notes.

Smart Crowd, an innovative new digital real estate investment platform that supports crowd-funding endeavors in the real estate sector, is trying to fill in a similar role in the region.

Asia

P2P operations launched in Hyderabad (Telangana Today) Rated: AAA

LenDenClub, a peer-to-peer (P2P) lending platform, launched its operations in Hyderabad. It will also expand to other cities later.

LenDenClub chose Hyderabad as the city is a major hub of the IT industry and houses a large number of young professionals, who are among the largest users of digital lending services in the country. It expects 10 per cent of its loan requests originate from Telangana in the next six months.

It is aiming to disburse loans worth Rs 100 crore in 12 months.

European Union

INLOCK Signs MoU with Institutional Lending Provider – Partners with Major CEE Crypto ATM Manufacturer to Test Its Platform (Bitcoin News) Rated: B

INLOCK, a crypto lending platform where licensed lenders can compete for borrowers who want to use their cryptocurrency as collateral for loans, announced today that it has signed a Memorandum of Understanding (MoU) with an institutional lending provider and entered a partnership with one of the Central and Eastern European Countries (CEE) region’s biggest crypto ATM manufacturers to test its Minimum Viable Product (MVP). The company launched the ICO for its ILK token on September 15, the anniversary of the Lehman Brothers collapse.

The CEE region’s crypto ATM manufacturer plans to integrate INLOCK’s services into all of its machines, enabling users to directly take out loans and receive funding in cash within hours. The crypto ATM manufacturer will act as a matching service provider by forwarding customers to INLOCK.

Authors:

George Popescu
Allen Taylor

Monday August 20 2018, Daily News Digest

transition states

News Comments Today’s main news: SoFi is shopping for $1B credit line. KBRA assigns preliminary ratings to Prosper Marketplace Issuance Trust, Series 2018.2. Monzo headed to unicorn status. China Rapid Finance debuts up to $20M share repurchase program. Today’s main analysis: Forcasting cash flows using machine learning. Today’s thought-provoking articles: Report sheds light on early success of real […]

transition states

News Comments

United States

United Kingdom

China

International

Other

News Summary

United States

SoFi Eyes $ 1B Credit Line, Post Q2 Loss (PYMNTS), Rated: AAA

Student loan refinancing company Social Finance (SoFi) is looking for a loan of its own: The company is in talks with banks to secure a revolving credit line of as much as $1 billion after posting a second-quarter loss.

KBRA Assigns Preliminary Ratings to Prosper Marketplace Issuance Trust, Series 2018-2 (Business Wire) Rated: AAA

Kroll Bond Rating Agency (KBRA) assigns preliminary ratings to three classes of notes issued by Prosper Marketplace Lending Issuance Trust 2018-2 (“PMIT 2018-2”). This is a $500.5 million consumer loan ABS transaction.

Preliminary Ratings: Prosper Marketplace Issuance Trust, Series 2018-2

Class Preliminary Rating Initial Class Principal
A A+ (sf) $335,500,000
B BBB (sf) $59,950,000
C B+ (sf) $105,050,000

Forecasting Cashflows using Machine Learning, Strong Retail Sales Report (PeerIQ), Rated: AAA

The price of a loan is the present value of the loan’s cashflows (after accounting for losses and prepayments), discounted by an appropriate discount rate:

Source: PeerIQ

Cashflow Modeling with Credit Models

The inputs of a credit model are loan attributes and borrower factors such as:

  • Originator of the Loan
  • Term of the Loan
  • Interest Rate on the Loan
  • Original Principal of the Loan
  • Age of the Loan (Months on Book)
  • Loan Grade
  • Prior Loan Status
  • Borrower’s Credit Score at Origination

The sparse transition model assumes 7 possible loan statuses which describe the performance of the loan:

  1. Current (or Status C)
  2. 1 Month Delinquent (or Status 1)
  3. 2 Month Delinquent (or Status 2)
  4. 3 Month Delinquent (or Status 3)
  5. 4 Month Delinquent (or Status 4)
  6. Default (or Status D)
  7. Paid Off (or Status P)
Source: PeerIQ

Once a loan arrives at a terminal absorbing state (“Defaulted” or “Paid Off”) there is no future possible transition as there are no further cashflows. Therefore, the probability of a loan remaining defaulted is 100%.

Source: PeerIQ

Model Calibration

Source: PeerIQ

PeerIQ CEO Ram Ahluwalia on OCC Fintech Charter: Consumers Win if it is Implemented Correctly (Crowdfund Insider) Rated: A

We asked Ahluwalia who will benefit from the OCC Fintech Charter and whether it was big tech, Fintechs or other.

“The long-term winner of the charter is the US consumer who will benefit from greater competition, innovation, and access to the financial system. New technology and entrants will also promote the dynamism and resilience of the US financial system,” stated Ahluwalia. “Payments companies that seek to compete with Visa / Mastercard also stand to benefit. Payments arms of firms like Google, Apple, Amazon, and PayPal would fit the profile, as well as large non-bank lenders that can demonstrate sustainable profitability de-risked their business models. Fintech lenders are a major winner as well as they’ll be able to compete on a more level playing field. Big technology firms have an opportunity to expand their role in financial services as well.”

New Research Sheds Light on Early Successes  of Real Estate Crowdfunding (EquityMultiple Email), Rated: AAA

Some of the survey’s key findings include:

  • A full 65 percent of respondents plan to allocate at least 10 percent of their portfolios to real estate crowdfunding sites, with nearly 40 percent expecting to allocate at least 20 percent
  • More than 60 percent of respondents report typical annual returns of at least 8 percent
  • Respondents considered “transparency and details with respect to investment opportunities” the most critical factor in a crowdfunding platform, exceeding all other choices, including “attentive customer service” and “diversity of investment opportunities”
  • With respect to individual investments, “geographic focus” (i.e. where a property is located) matters less to investors than “sponsor/lender experience”, the property’s upside potential or several other factors
Source: Real Estate Crowdfunding Investor Preferences

Read the full report here.

Key Facts About the SBA (Email from SmartBiz Loans ) Rated: AAA

Source: SmartBiz Loans

Many Fintech Names on the Inc. 5000 List of Fastest Growing Companies (Lend Academy) Rated: A

Of the 5,000 companies on this year’s list exactly 233 are in the financial services category. Below is a screenshot of the top 10 companies in this category. Leading the list is Fundrise, the real estate platform for individual investors, a name that would be familiar to Lend Academy readers (I interviewed CEO Ben Miller on the podcast last year). Another well known name is Fundera, the small business lending marketplace, who were the third fastest growing company in our category. I encourage you to explore the complete list here where you can search for specific companies or filter by industry, state and many other criteria.

Source: Lend Academy

Treasury’s plan to legitimize online lenders is good for small businesses (The Guardian) Rated: A

Companies in this industry such as KabbageLending Club and BlueVine have grown significantly over the past few years by offering financing to many small businesses that otherwise would not be able to get loans. Their deals are quick to approve, rarely require collateral and are usually tied in to a customer’s financial systems for close monitoring.

Last month, the Office of the Comptroller of the Currency announced that it was moving ahead with its plan to allow online lenders to apply for banking charters. When recognized as a bank, those types of financiers would no longer have to comply with state laws and would instead be subject to federal banking regulations. “Companies that provide banking services in innovative ways deserve the opportunity to pursue that business on a national scale as a federally chartered, regulated bank,” Joseph Otting, the comptroller of the currency, one of the country’s top financial regulators, told the Los Angeles Times.

RPT-‘Fintechs’ sound cautious note on offer of U.S. bank charter (Rueters) Rated: A

Financial technology companies that lend online are sounding a cautious note on a U.S. banking regulator’s plan to offer them special federal charters because of concerns over legal challenges and requirements that are more onerous than expected.

The Office of the Comptroller of the Currency said last month it would accept applications for banking licenses from the likes of LendingClub and OnDeck Capital Inc, online lenders that do business outside the traditional banking system. They then could operate nationwide under one banking license rather than a patchwork of state-specific regulations.

Fintech executives lobbied for the license and applauded the OCC’s decision, but they are not immediately rushing in, they told Reuters.

CRA-like standards for fintechs could reduce access to credit (American Banker) Rated: A

As reported in American Banker, consumer advocacy groups are concerned that financial inclusion expectations for fintechs chartered as special-purpose national banks may not perfectly mirror the requirements of the Community Reinvestment Act.

This possibility exists because the final version of the Office of the Comptroller of the Currency’s licensing manual supplement for fintechs lacks the same level of specificity as the draft manual that was published for comment last March. Consumer advocates have been steadfast in their insistence that the substance of the CRA, which by its terms applies only to depository institutions, be applied to nondepository fintech national banks. Yet imposing CRA-like requirements on these institutions would likely result in reduced credit opportunities for low-income communities.

Walmart And Others Offer Workers Payday Loan Alternative (NPR) Rated: A

So when Loving heard about a company called PayActiv, a tech startup that helps companies get their workers emergency cash for very small fees, “I thought to myself, now that’s a good idea,” he says. And he signed up.

“Our data analysis showed that it was close to $150 a month being paid by the working poor — per employee or per hourly worker in this country,” says Shah. “That’s a substantial sum of money because it’s about $1,800 or $2,000 a year.”

Venmo competitor Zelle wants to let you pay businesses, too (Payment Source) Rated: A

Zelle, a Venmo-style app that lets consumers send money to friends, roommates and babysitters, is working on ways to ensure that customers can safely pay small businesses as well, according to people familiar with the situation.

Zelle, backed by Bank of America Corp., JPMorgan Chase & Co. and other banks, is beefing up its risk-assessment tools as part of the effort, according to one of the people, who asked not to be identified because the feature hasn’t been announced. The idea is to help protect users when they’re paying businesses like gardeners and hairdressers.

TransUnion Unveils Solution to Extend Real-Time Credit Offers (DSNews) Rated: A

To meet the evolving needs of consumers, Chicago-based TransUnion has announced the launch of credit offers through a simplified, SMS-initiated, mobile experience. The technology seamlessly integrates real-time credit decisioning with consumer and device authentication, creating a secure, personalized, and dynamic user experience.

Credit Karma acquires US lendtech Approved (Fintech Futures) Rated: A

Credit Karma, based in San Francisco, has 80 million members across North America, almost half of which are millennials and 80% of which access the service via their mobile devices.

Andy Taylor, founder and CEO of Approved, says it started the firm with a “vision that borrowers could visit an open house not having even talked with a lender, find the home of their dreams, and get fully pre-qualified on their mobile device before a listing agent offered them a business card”.

With this joint mobile mentality, both firms will be looking to cash in from the crowded US mortgage market. Approved says it has done nearly $5 billion in loan originations.

RealtyShares and Novaya Real Estate Ventures Exit Industrial Property Investment (Herald Courier), Rated: B

RealtyShares, an online platform for commercial real estate investing, has announced that one of its investment syndicates recently exited an industrial investment property—1 Distribution Center Circle in Littleton, Massachusetts—in partnership with Novaya Real Estate Ventures, an established Boston-based operator of commercial real estate throughout New England.

United Kingdom

Monzo poised to join ranks of Europe’s fintech ‘unicorns’ (Financial Times) Rated: AAA

Monzo, the British digital bank popular with millennials, is set to become the latest European fintech “unicorn” with a fresh round of fundraising expected to put a valuation on the company of up to $1.5bn.

The east London-based online bank, known for its distinctive pink cards, is signing up 18,000 customers a week and aims to reach as many as 4m customers in the next couple of years, according to Tom Blomfield, its chief executive.

Seven out of 10 people in UK now bank online (Financial Times) Rated: AAA

While email is still the most common reason people use the internet, online banking is the fastest-growing use. According to a survey by the Office for National Statistics — looking at the UK population, not just internet users — 69 per cent said they banked online, almost double the proportion recorded 10 years ago (35 per cent).

The ONS began running its survey in 1998. In the case of internet usage, people were asked about their use in the January, February and April before the survey.

Source: Financial Times

How P2P plugged the funding gap for small businesses (P2P Finance News), Rated: A

BEFORE the global financial crisis, banks were the lender of choice for Britain’s small businesses, and perhaps the only option they would consider.

Since then, banks have become more risk averse and are pulling back from lending in some parts of the market, especially since the EU referendum. Peer-to-peer, or rather peer-to-business (P2B), lending has stepped in to fill the gap.

The Peer-to-Peer Finance Association (P2PFA) says the industry provided £660m of new lending to businesses in the first quarter of 2018 and, since the third quarter of 2017, there has been a 35 per cent increase in net lending.

US-based payday loan giants Curo, QuickQuid and Lending Stream could face legal action in ‘bigger scandal than PPI’ (Daily Mail Online) Rated: A

Giant American payday lenders could face legal action in the UK today after they were accused of mis-selling loans to up to a million Britons.

Paydayrefunds.co.uk are preparing legal action against Quickquid, Curo and Lending Stream after the US-payday lending giants have so far refused to disclose information on customers who could be due tens of millions of pounds back in compensation.

The company issued a letter of action six months ago, which is due to run out next Friday. Paydayrefunds.co.uk revealed they have already appointed a barrister in preparation for issuing an injunction at the High Court against the lenders.

Income investing, inflation and P2P lending (Investors Chronicle), Rated: A

Emma Aygemang gives us a report on the Financial Conduct Authority’s study on peer-to-peer (P2P) investing, and there’s a discussion on the implications of restricting the sector to private investors, and where P2P providers need to up their game.

Crypto Lending App Lndr, Adds PayPal Integration to Increase Adoption Rates (Bitcoin Exchange Guide), Rated: B

A new cryptocurrency lending app called Lndr is planning integration with one of the most popular financial services in the world: PayPal. This integration will open the ownership to digital assets to 100 million people around the world, which can cause an unseen widespread of cryptocurrency usage even for people who never before considered using cryptocurrencies.

China

China Rapid Finance Debuts Up to $ 20 Million Share Repurchase Program (Crowdfund Insider), Rated: AAA

China Rapid Finance Limited (NYSE: XRF), one of China’s largest consumer lending marketplaces, announced earlier this week the launch of its new share repurchase program, which allows the lender to authorized the repurchase of its ordinary shares in the form of American depositary shares with an aggregate value of up to $20 million.

China regulator orders bailout of peer-to-peer lenders by managers of distressed assets (SCMP), Rated: A

During a Wednesday meeting in Beijing, the China Banking and Insurance Regulatory Commission asked four managers of distressed assets – Huarong, Cinda, Great Wall and Orient – to extend their mandate to non-performing loans owed by peer-to-peer (P2P) lending platforms, according to a source familiar with the matter. The meeting was first reported by Reuters on Thursday.

Regulations help resolve P2P plight in China (Global Times) Rated: A

In July, a total of 165 platforms reported problems, among which 65 percent had difficulties in investments withdrawal, while executives of 8.72 percent of those firms stole money and ran away, according to a report released by domestic industry website wdzj.com on August 1.

Accumulated transactions in the domestic P2P industry had reached 7.48 trillion yuan by the end of July, the report said.

On Wednesday, the China Banking and Insurance Regulatory Commission asked the country’s four State-owned asset management companies to help address rising risks in the P2P sector, according to media reports.

China orders bad-loan managers to help failing P2P lenders (Financial Times), Rated: A

China’s banking regulator has instructed the country’s four state-owned bad loan managers to deal with failing peer-to-peer lending platforms, a sign of Beijing’s concern about possible financial and social instability from the shadow banking sector.

Hundreds of P2P platforms have collapsed in recent months due to borrower defaults and fraud by platform operators. The defaults have sparked panic among investors, some of whom have sought early redemption of their investments.

European Union

European IPOs may shake off sluggish start with a fall bonanza (Gulf Times) Rated: AAA

European markets are set to see a slew of big initial public offerings this fall. Potential mega listings – from companies such as Aston Martin, Volvo Cars and Spanish oil firm Cepsa Trading – could help Europe overcome a relatively slow first half. IPOs there have raised about $31bn in 2018 so far, compared with almost $38bn in the same period last year, data compiled by Bloomberg show.

Still, volatile markets threaten to spook investors and owners away from new share sales. Concerns that turmoil in Turkey could hurt the region’s lenders has added to pressure on European stocks from the US-China trade spat. Commodities have tumbled along with US equities, fuelling fears that the sell- off may be the start of a broader market correction.

International

Disruption or evolution? Why blockchain is the future of global lending (IT Pro Portal), Rated: AAA

Global spending on blockchain solutions is estimated to reach $2.1 billion this year, but for there to be a blockchain revolution, many barriers – technological, political, organisational and societal – need to be overcome first.

Currently, citizens in Europe have the lowest levels of ‘complete trust’ in traditional banks. This is worrying, given money is simply a means of exchange, built on the trust bestowed upon it.

However, some bankers will tell you the traditional financial system is ‘global’ and ‘efficient’ as it is, despite being fully aware of its flaws. In our industry, lending, if you’re currently a non-bank lender who would like to diversify your global lending potential, you will find that it is punitively expensive, time-consuming and exclusive to large funds and traders. This ultimately reduces the potential reward for non-bank lenders through fees.

Given the astonishing fact 39 percent of the world’s population are unbanked, blockchain technologies and associated crypto currencies could open the door for anyone, anywhere to lend, borrow and invest. All you need is internet access.

Australia

Aussies borrow money not knowing how personal loans are assessed, study finds (Daily Telegraph) Rated: AAA

AUSTRALIANS have borrowed $46.6 billion in personal loans over the past 12 months, research has found, but experts claim many are unaware of how loan applications are assessed and how they may affect their own credit scores.

RateCity analysed Australian Bureau of Statistics data from the past 12 months and found personal loan numbers were up 6.4 per cent year on year, with more than half a million Australians using them to buy cars in that period. The total borrowing for new cars was $8.33 billion at an average loan size of $36,341; while a further $5.88 billion was borrowed for used cars.

On top of this, we borrowed $6.05 billion for debt consolidation and $2.54 billion for household goods, but despite the huge outlay, many borrowers are confused about how personal loans work and why they may not be offered the low interest rates they see on advertisements.

India

P2P has great potential, but too early to compare with equities (India Times), Rated: A

People with zero or poor credit score find it hard to get a loan from NBFCs and banks. P2P aims to serve such unbanked and underbanked population. Tell us how do you do it?
NBFCs and banks also lend to people ‘new to credit’. These people typically have a financial transaction whether in form of a bank account or income data, whether salaried or self-employed, and can be validated on the risk ratios, basis the information.

Asia

Cambodia Establishes New Fintech Association (Crowdfund Insider) Rated: AAA

Cambodia Fintech Association also reported it undertakes four major streams of work on behalf of its members, which are the following:

  • Champion: Advise government and regulators on policy change that supports Fintech innovation and growth
  • Assist: Provide research, legal/regulatory help, service provider discounts and other benefits that help our members build and scale their Startups
  • Match: Get customers to buy, investors to invest, and talent to get involved in Fintech solutions
  • Bridging: Connect ventures (capital), talents (education) and other stakeholders within the Cambodia Fintech ecosystem and provide connections to overseas hubs through our network Events and Partners

According to the Phnom Penh Post, CFA Vice President, Eddie Lee, stated that Cambodia is currently progressing in its fintech, but startups are slowly starting to surface in the country. Lee also explained that CFA has also signed a Memorandum of Understanding with the Taiwan Fintech Association, Thailand Fintech Association and Singapore Fintech Association to establish bridges with similar groups in the region. He added that the next step is to register the CFA with the Asian Fintech Network.

Authors:

George Popescu
Allen Taylor

Lenders Bet On Artificial Intelligence for Credit Scoring

Lenders Bet On Artificial Intelligence for Credit Scoring

Banks have to struggle with a lot of challenges – from issuing credit to operational risks, and technological troubles to good old fashion fraud. In addition to the risks of yesteryear, modern banks face falling long-term rates, growing fintech competition, and low profitability. In this challenging environment, savvy modern banks focus more of their attention […]

Lenders Bet On Artificial Intelligence for Credit Scoring

Banks have to struggle with a lot of challenges – from issuing credit to operational risks, and technological troubles to good old fashion fraud. In addition to the risks of yesteryear, modern banks face falling long-term rates, growing fintech competition, and low profitability. In this challenging environment, savvy modern banks focus more of their attention to mitigating risks.

Chief among these challenges are low-performing loan portfolios, which are a constant thorn in the side of lenders. For example, European non-performing loans stand above €1 trillion with more than one third of banks having NPL ratios above 10% (ECB, 2017).

This minefield of factors has driven lenders to seek out new ways to increase profits and cut funding costs in order to stay competitive.

Artificial Intelligence in Fintech: Will it take over?

AI is a powerful tool for banks, thanks to its ability to harness vast quantities of data to learn more about customer patterns and behaviors”, says Steve Ellis, head of the innovation group at Wells Fargo.

As powerful as artificial intelligence (AI) is, traditional banking is still heavily reliant on statistical methods that were developed over half a century ago. Lenders determine creditworthiness based on 20+ data points, which leave otherwise worthy customers behind.

Modern machine learning (ML) makes it possible to go much deeper when analyzing data, and allows lenders to extract valuable insights from available data patterns.

According to a McKinsey report, a number of European banks have already replaced the antiquated statistical-modeling approach with machine-learning techniques. The results speak for themselves: a 10% increase in the sale of new products, 20% savings in capital expenditures, and a 20% decline in churn.

Source: thefinancialbrand.com

The data doesn’t lie: Lenders are betting on AI. Evidence of this modern trend can be seen in numerous ‘banks and fintech collaborations’ and AI-based software releases:

  • JPMorgan Chase pioneered a Contract Intelligence platform designed to “analyze legal documents and extract important data points.”
  • American MobileBank deploys AI software to lend to thin-file millennials.
  • Canadian TD Bank uses Layer 6’s AI engine for scoring and cybersecurity.
  • Deutsche Bank came out with new AI-based equities to predict their pricing and volume more accurately.
  • Wells Fargo employs its own AI team to provide more personalized services and strengthen digital offerings.
  • Bank of America Merrill Lynch implements HighRadius’ AI solution to speed up receivables reconciliation for their large business clients.

Logistic regression is no longer the de facto standard

Nine times out of 10, logistic regression is used to build scoring models and solve classification issues. Before it can take over and provide predictive results, there’s an important step of preliminary analysis and data quality control that must be taken. If the dataset contains:

  • imperfect and missing values, outliers and unstructured data;
  • numerical and categorical values (age, income vs marital status, education);
  • raw data that doesn’t fit strict parameters(data with fractions or decimals, etc.)

data analysts will spend days (if not weeks) just to preprocess the data before it can be assessed. Cutting corners and ignoring such data may lead to the loss of valuable insight and incorrect predictions.

How modern AI/ML methods build better risk models

Today, lenders have the ability to collect more data than ever about their clients. In addition to traditional socio-demographic data, this may include transactional data, records from credit bureaus, social media, Google Analytics, as well as other non-traditional sources.

Processing and interpreting this data so that it can be used to issue loans to worthy credit seekers is where modern ML/AI methods give banks the edge they need.

Machine learning techniques like gradient boosting, random forest, or neural networks can better find hidden dependencies in a dataset, which helps to gain more accurate predictions. This assists banks in determining how collected parameters in a dataset should be weighed to predict whether borrowers will consistently repay their loans on time.

This is made possible by data signals, which define significant parameters that affect the power of a scoring model. Depending on the type of business, geography, target audience, and data authenticity, significant parameters may differ. Modern ML can determine which data points contain the desired signal.

Traditional data sources like credit bureaus still remain an important part of the process and provide the data that contain the above-mentioned signal. Unfortunately, they do not cover noteworthy market segments such as millennials, self-employed entrepreneurs, small business owners, immigrants, or the unbanked.

The team at GiniMachine carried out pilot projects to build accurate scoring models with minimal data points and without access to an applicant’s credit history. Some of the most promising and predictive parameters included the applicant’s industry and occupation, the size of their company, the total years they’d been in business, the size of their family, and data from social networks like their overall activity, as well as the quantity and quality of their connections.

The team at GiniMachine has proven that it is possible to capitalize on information about borrowers that is collected from alternative sources to accurately and efficiently assess borrower’s credibility and make effective lending decisions.

Modern ML methods can build more accurate risk models because of their capacity to:

  1. use built-in ‘raw’ data pre-processing tools
  2. find hidden dependencies of arbitrary complexity
  3. harness unstructured, big data, and data from alternative sources

The financial world, and lending businesses in particular, have seen major changes throughout the last few years. Using ML and AI in concert with traditional practices is the way forward for banks that want to remain competitive in the modern world. It’s clear that making good loans to the people of the future requires a futuristic helping hand.

Author:

Dmitry Dolgorukov is a CEO and co-founder of GiniMachine & HES, a technology entrepreneur, and an investor with over 15 years of executive experience in software development and fintech. In 2018, Dmitry was ranked as one of the top 200 Fintech leaders in Europe that contribute to the industry as influencers through action.