Varo Money made the news in July 2017 when it applied for an OCC Charter. The goal was to capture a bigger share of the services pie at a national level and applying for a state-by-state license, which was a tedious, slow, and ineffective process. Though some startups have also considered the Industrial Loan Company […]
Varo Money made the news in July 2017 when it applied for an OCC Charter. The goal was to capture a bigger share of the services pie at a national level and applying for a state-by-state license, which was a tedious, slow, and ineffective process. Though some startups have also considered the Industrial Loan Company route through Utah, OCC provided a more transparent route to attaining a bank charter to operate national level online lending and banking firm. Moreover, the young upstart applied for a full bank charter as compared to a fintech charter. This charter would allow Varo to operate on a national level as a full scale digital bank and would be on par with other traditional banks.
The company launched in 2015 with a vision to provide new age banking solutions. Varo provides a wide range of financial and banking products through its app. The San Francisco based company is led by its founders Colin Walsh (CEO) and Kolya Klymenko (CTO). The Varo team comprises of experienced professionals coming from leading brands like Amazon, American Express, Apple, Citi, McKinsey, and Instagram. Its social mission is to reduce the cost of banking, which is why Varo does not charge any service fee from its customers. It does not charge any monthly maintenance fees, foreign transaction fees, or ATM withdrawal fees. The company has raised almost $80 million in funding from marquee investors like Warburg Pincus and The Rise Fund.
Varo Money made history in September when it received preliminary approval from the OCC for a national banking charter. It is a huge milestone for the company, but also for the industry as it highlights that regulators are considering fintech players seriously for national level banking plays. The OCC’s preliminary approval came after a reported push by the U.S. Treasury to allow financial innovation at a national level. The Trump administration has openly encouraged the alt-lending industry as it has allowed credit to flow to small and medium businesses.
A New Era in the Banking Industry
This is the first ever charter granted to a fintech company and has raised a lot of excitement. However, the Office of Comptroller of the Currency has only given a conditional approval for the formation of Varo Money as a national bank. If approved, it will make Varo the first mobile-only national bank in the Unites States. OCC first requires Varo to raise $104 million as additional capital within 12 months and the completion of a Community Reinvestment Act plan. But with moneybags like Pincus bankrolling the company, the investment part looks to be easiest of the conditions. Varo Bank will also be required to take approval from the FDIC and obtain Federal Reserve membership.
Approval of the OCC charter enables Varo Money to set up its own bank, making it the first ever truly digital bank. Why is the OCC banking charter special? As compared to the fintech charter, it allows Varo to accept deposits. Though it wont be FDIC insured (that is a different approval process), deposits are a huge step forward for Varo. Moreover, it would rid itself of state regulations and Madden Vs Midland would become redundant.
Varo Bank shall focus on reducing the excessive costs charged by its brick and mortar counterparts. It will be able to streamline its operations and look to leverage the national charter for aggressive growth throughout the country as its competitors keep applying for state-by-state licenses. Varo has been privileged to receive this charter, since after the financial crisis, very few new companies have been granted the charter.
Soon after receiving the approval from OCC, Varo announced its tie up with Temenos, a European banking tech platform, for core processing services. Jo Ann Barefoot, CEO of Barefoot Innovation Group and former deputy comptroller of the OCC commented, “This preliminary approval from OCC is a signal that regulators recognize the value technology can bring to banking for all Americans.”
“This is a historic moment and marks the start of a new era in banking,” said Colin Walsh, co-founder and CEO Varo Money. But the ride will not be easy. This decision is an encroachment on the turf long held dear by small banks. And true to form, the Board of Conference of State Bank Supervisors (CSBS) recently started litigation against OCC for allowing special banking charters for fintech firms.
It has also recently been announced that Varo withdrew its FDIC application, an important hurdle in reaching the full banking status. The application was pulled earlier this year, and it has been reported that they will reapply by year end as they have more clarity since the OCC approval.
The Rubicon has been crossed with this approval. Varo Money will inspire the more established fintech lenders to start their application process and a case by CSBS would not be enough to stop alt lenders dreaming of a national footprint. The ability to work on a national level creates a level playing field for fintech banking and lending startups and allows them to pursue their agenda of online banking targeted at millennials with renewed vigor. The industry should see a flurry of deals as companies raise money to bulk up before and after the application process.
News Comments Today’s main news: Kabbage lends $4B to over 130K small businesses. RateSetter loses 23M GBP in ad investment. RateSetter to launch IFISA in February. Klarna, WorldPay partner on invoice and credit-based payments in Europe. Two new crypto-asset backed fiat loan platforms. Toss to expand into southeast Asia. Today’s main analysis: LendingTree’s monthly mortgage offer report. Today’s thought-provoking articles: […]
Kabbage hits $4B SMB lending milestone. AT: “This is still small compared to the amount of small business lending overall. For instance, the SBA reports that in June 2015 alone, small business loans of $1 million or less totaled $599B. Still, Kabbage leads the alternative lending sector by far. Congratulations.”
Learning all about machine learning. AT: “Not specific to the lending industry, let alone alternative lending, but machine learning is going to be a huge part of the financial services ecosystem going forward. This PYMNTS article has some interesting insight into AI and machine learning all around.”
Banks are getting concerned about doomsday defenses. AT: “The interesting thing here is that banks aren’t relying on the government to bail them out if cybersecurity threats get the best of them. They’ve developed their own defense, but is it strong enough?”
Lloyds, Royal Bank of Scotland are closing branches. AT: “We could see a spiraling effect: As digital banks become more popular more brick-and-mortar bank branches will close and as more traditional branches close the more people will use mobile banking apps.”
Kabbage Delivers $ 4 Billion to More Than 130,000 Small Businesses (Kabbage Email), Rated: AAA
Kabbage, Inc., a global financial services, technology and data platform serving small businesses, has extended over $4 billion to more than 130,000 small businesses, serving the largest customer base than any online small business lender. These landmarks represent an approximate 30-percent increase in total funding and total customers served since the company’s last milestone announcement in April 2017. With over 1.5 million live data connections with its customers, Kabbage’s high growth is attributed to its fully-automated lending technology as it continues to be a trusted lending partner to tens of thousands of small businesses across all industries in all 50 U.S. states.
Robert Sharpe also joined the company as its chief operating officer. Sharpe has more than 20 years of executive leadership in North America, Europe and Asia. He has successfully held various C-level positions, including president, chief executive officer and chief operating officer with multiple global consumer goods companies, each serving tens of thousands of customers and generating billions of dollars in revenue. With an additional ten years of commercial banking and corporate finance experience, Sharpe will be responsible for Kabbage’s continued growth and operational oversight as the company expands internationally and scales its services to serve more and larger small businesses.
During 2017, Kabbage reached major milestones, including:
LendingTree today released its monthly Mortgage Offers Report which analyzes data from actual loan terms offered to borrowers on LendingTree.com by lenders on LendingTree’s network. The purpose of the report is to empower consumers by providing additional information on how their credit profile affects their loan prospects.
November’s best offers for borrowers with the best profiles had an average APR of 3.75% for conforming 30-year fixed purchase loans, unchanged from October. Refinance loan offers were down 1 bps to 3.69%. Mortgage rates vary dependent upon parameters including credit score, loan-to-value, income and property type.
For the average borrower, purchase APRs for conforming 30-yr fixed loans offered on LendingTree’s platform were down 1 bps to 4.30%, the lowest since November 2016. In contrast, the loan note rate of 4.18% was unchanged from October when it reached the highest since July. We prefer to use the APR as lenders often make changes to other fees in response to changing interest rates.
Consumers with the highest credit scores (760+) saw offered APRs of 4.16% in November, vs 4.43% for consumers with scores of 680-719. The APR spread of 27 bps between these score ranges was 5 bps wider than in October and the widest since July 2016. The spread represents nearly $13,400 in additional costs for borrowers with lower credit scores over 30-years for the average purchase loan amount of $233,127. The additional costs are due to higher interest rates, larger fees or a combination of the two.
Refinance APRs for conforming 30-yr fixed loans were down 2 bps to 4.24%. The credit score bracket spread widened to 19 from 16 bps, amounting to $9,500 in extra costs over the life of the loan for lower credit score borrowers given an average refinance loan of $235,973.
Average proposed purchase down payments have been rising for 8 months and reached $62,409.
Certainly, the mountains of data are becoming larger by the day. Seven years ago, the total amount of information produced on a global scale passed one zettabyte. The scale shakes out thusly: If a single cup of coffee holds a gigabyte, then the Great Wall of China stores a zettabyte. In just three years, the tally will be 44 zettabytes, or 44 Great Walls of China, as estimated by global market intelligence firm IDC.
Along with the impressive growth in data created, stored and used on a global scale, so too is AI poised to grow in leaps and bounds. It will create nearly $37 billion in annual revenues for companies of all stripes, sizes and sectors, according to market intelligence firm Tractica.
Within that figure, machine learning is a sector that will see $15.3 billion in revenue in 2019, as noted by BCC Research and cited by business process outsourcing company TeleTech, with an average annual growth rate of 19.7 percent. The savings for U.S. companies could be as high as $60 billion in 2020, Forbes noted. In addition, AI is expected to add $8.3 trillion in economic activity for the U.S. by 2035, according to projections by business management consultancy Accenture.
Consider a financial institution processing credit card information. The transaction data is passed to the machine learning system as soon as it is entered at the terminal or point of sale, and the system then analyzes the transaction against the system on which it has been trained. The historical data offers a way to glean what “normal” behavior of a transaction looks like.
To combat a payments fraud adversary that is evermore fluid with bad actors’ tactics and operates in a card-not-present (CNP) world, the machine deployed by a financial institution must be able to “explain” what it is doing, Feedzai said. The “learning” should result in explaining the reasoning so the logic behind the decisions is transparent and meets compliance needs.
On Friday of last week, LendingClub announced that it closed a new kind of transaction. It was a whole loan transaction structured as a tradable pass through security called a CLUB Certificate.
This was an initiative that was investor led. Basically, they had a potential investor who did not want to invest in whole loans. They are not for everyone, given they are an illiquid investment that has a duration of several years. What this investor wanted was a security that acted like a whole loan but one that had liquidity.
While LendingClub would not share details of this deal we did learn that these were both three and five year loans of one particular loan grade. They customized this deal to meet the investors exact requirements.
LendingClub claimed that this was a first of its kind deal in marketplace lending but in my research I discovered this piece on Asset-Backed Alert from April 2016 that talked about a similar structure that Prosper was working on last year.
However, when the lending process is digitized the amount of paperwork is reduced dramatically. This is because account activity, credit history, income history as well as tax compliance can be fed into the system with the click of a button. This has made the collection and verification of information quite easy. Besides streamlining the application process, the amount of time it takes to get a loan has also reduced.
In addition, some lenders have developed some innovative mobile solutions that enable customers to submit an application from anywhere. The most outstanding feature about mobile loans is that there is a constant interaction between the lender and the borrowers. This goes a long way in improving service delivery.
Courtesy of technology advancements, now it’s possible to view the status of your loan application as well as your account status with a lender. This helps borrowers to stay updated during the entire online installment loans process. In addition, you can get instant communication about any requests that a lender may have that is critical to the borrowing process.
When bankers complain about the security risks of sharing data with fintechs, they get an eye roll. Such complaints tend to be regarded as a cover for an ulterior motive: unwillingness to give customer details to competitors.
After a number of months of testing and refining an alternative way to bank, Ally Bank launched Ally Skill. “It was ready for prime time,” said Diane Morais, president of consumer and commercial banking at Ally Bank. Since mid-November, a customer can ask Alexa — in their own words — what their balance is, what the price of something costs in hours worked, and notably, to move money.
Since Capital One announced its skill in March of 2016, U.S Bank, American Express and several credit unions announced Alexa skills in addition to Ally. Others have been testing Alexa, including bank innovator USAA. Even smaller banks are readying to launch skills. FIS, one of the biggest bank vendors that has been testing Alexa since 2016, said about a dozen of its thousands of bank customers are on track to roll out a bank skill for Alexa by Christmas. Most recently, Amazon announced Alexa for business, and Capital One is one of its launch partners.
US regulators appear to be paying more attention to the opaque world of initial coin offerings.
The Securities and Exchange Commission announced Monday it halted a fraudulent ICO “falsely promising” over 1,000% returns. The regulator said this was the first case filed by its brand-new cybersecurity unit, aptly named Cyber Unit.
US banks and other financial companies are preparing for a lightening of their compliance burden in areas from payday lending to mortgages as President Donald Trump tightens his grip on a powerful regulator set up to protect consumers.
“Virtually the entire range of regulations previously adopted by the CFPB could be subject to review,” says Quyen Truong, a former senior figure at the agency who is now a partner at law firm Stroock & Stroock & Lavan. “There’s no particular set of rules that would be considered sacrosanct.”
In an early sign of his intent, Mr Mulvaney instituted a 30-day freeze on new initiatives within hours of assuming office.
Reforms that Mr Cordray had yet to introduce that would extend the CFPB’s reach into new areas, including mooted restrictions on small business lending, are now unlikely to see the light of day.
As we noted when we first covered the final draft of the payday lending rule, Congress retains the power to keep the rule from ever making it into the books, so to speak, through the power of the Congressional Review Act. The CRA not only would prevent the payday lending rule from going into effect, but it would also prevent any similar rule changes from being considered for the next five years.
After some dormancy on the issue, the House of Representatives passed a CRA resolution Friday that would effectively kill the payday lending rule in its cradle.
The move comes as a bi-partisan effort – somewhat surprising, given the general tenor of Congress at present, particularly when it comes to consumer protection issues – with three Republican and three Democrat co-sponsors.
Mulvaney has won the first round in court, as a U.S district judge rejected English’s request for a temporary restraining order to prevent Mulvaney from taking over. But English has said she intends to fight on and will seek a preliminary injunction against Mulvaney and the administration.
Congress has only 60 legislative days from the publication of the rule in the federal register to invoke the CRA, and the rule passed on Nov. 17.
I have been, far more often than not, on the same side of policy issues as the leading consumer and civil rights groups. But I disagree here: Maddenis not just legally wrong; it is also bad public policy, because it moves us further away from creating a more effective and inclusive financial system. Bipartisan, bicameral proposals have already been introduced in Congress to fix Madden. Congress should pass them.
LendingTree (NASDAQ: TREE), the online loan marketplace, announced today that it has entered into a multi-year subscription for segmentation analysis and database scoring with Gordian Knot Analytics Group, utilizing their unique segmentation methodologies and proprietary machine learning toolset. Gordian Knot offers proprietary marketing analytics machine learning tools that help LendingTree more effectively target and engage with the right consumers to drive the business forward and maximize value for current and future customers.
Socially responsible online lender OppLoans received top rankings in Glassdoor’s 2018 Best Places to Work award. The start-up was named the sixth-best place to work nationally for small- to medium-sized businesses.
PeerStreet, a marketplace for investing in real estate backed loans, is honored to announce that its Co-Founder and CEO, Brew Johnson, has been named to HousingWire’s 2017 list of Vanguard Award winners. HousingWire’s 2017 Vanguard Award recognizes top leaders from all areas of the mortgage industry, including those in lending, real estate and investing.
If Affirm was used to finance a purchase from the Republic Online Store, all carted items, including shipping, must be financed through Affirm. Shipping charges are not refunded by Republic Wireless. This means that you will still be responsible to Affirm for any shipping costs you financed and interest that has accrued.
Ratesetter slumped to a £23 million loss for the year after a disastrous investment in an advertising business.
The loss was due in large part to a £14 million write-off on Adpod Limited, which the lender ended up owning after using its own capital to prevent a huge default on its peer-to-peer loan book from hitting investors.
The loss is sharply higher than the previous year’s figure of £5.3 million.
PEER-TO-PEER investment platform Orca is one of 18 firms that have been accepted into the third phase of the Financial Conduct Authority’s (FCA) regulatory sandbox scheme.
The FCA received 61 submissions for the third phase of the scheme, of which 18 met the eligibility criteria and were accepted to move towards testing.
One of the successful applicants is Orca, which is developing an intelligent peer-to-peer investment platform which lets users diversify across multiple P2P platforms, lending sub-sectors and borrowers.
Squirrel, a personal finance app designed to help users have more control over their money, announced this week that it now processes £1 million a month. The company reported that it processed its 10 million last week.
Israeli Shachar Bialick spent the first decade of his working life founding and backing start-ups before he dropped everything to move overseas and take an MBA.
He started Curve, a fintech company, to simplify personal finances with a single bank card for multiple accounts from different providers.
“We have too many cards, too many accounts, and too many products and services we use to manage our money,” he adds. “Curve is my biggest, most ambitious business so far. We are aiming to create an entirely new category in the banking system.”
Curve has raised $12m in venture capital funding and added corporate partnerships to extend the services it offers, such as an expense filing system provided by Xero, the online accountancy service.
Aire partners with retailer N Brown as more retailers become lenders for shopping middle class (Aire Email), Rated: A
Aire, which provides a more accurate way for lenders to understand and score new applicants, today announces a first-of-its-kind partnership with online retailer N Brown, as research data reveals the ‘new norm’ of UK shoppers choosing to spread the cost for their retail purchases over time.
The new agreement will see Aire provide its augmented credit assessment technology to support N Brown, which operates online stores such as JD Williams, in analysing the full picture of online customers and the true benefits and risks that come with them. Aire combines technologies of Artificial Intelligence with data science and deep knowledge of credit, which will enable N Brown to reach a wider group of customers without increasing its risk. After recent announcements about new partnerships in the p2p lending and car finance spaces, Aire’s expansion into the retail sector means that it is adding another new market to its portfolio in under six months.
– New partnership between Aire and online retailer N Brown for customers who choose to open a new credit account
– Aire adds retail finance to its growing portfolio
– New research finds that UK adults pay off on average of £40 per month for retail purchases
– 9% of UK adults increased their monthly commitments in the last two years
The new research by Swedish payments provider Klarna delves into the views of more than 2,000 consumers, and reveals that Brits today are so stressed out in the extended run up to Christmas that they’re overwhelmed when the day itself arrives.
In-store crowds were the number one stress for a quarter of respondents, whilst finding the perfect gift was the biggest source of stress for 20% of those surveyed.
These pressures could have a big impact on the bottom line of merchants if they’re not addressed; more than a third of consumers have previously walked out of a shop in frustration as a result. This is not just a bricks and mortar issue – 1 in 10 respondents have abandoned their online basket in frustration when the process is too complex, suggesting there’s still work to be done to smooth the purchase process online.
Wealth Migrate, (KPMG Global Fintech Top 50), a global online real estate marketplace, today announced the opening of a new office in the U.K. and the appointment of a new country CEO, as the firm continues to build on its global presence as part of a strategy to meet growing demand from investors.
To better serve its community of investors in this region, Wealth Migrate has opened a new office in London.
Adding to the news of this expansion, Wealth Migrate additionally announced the opening of their U.A.E. office and the appointment of a new U.S. based CEO this week.
To head up the new office, Wealth Migrate has appointed Ken Williams as its CEO of Wealth Migrate, U.K.
China’s online lending boom has sent a steady stream of new clients to Guangzhou lawyer Luo Aiping in recent months: the parents and siblings of young men trapped or ruined by usurious debts.
Zeng Hong, from Hunan province, is a typical client. She went to Luo for help because she had been harassed by calls from debt collectors for months after her 27-year-old brother ran away, leaving behind a two-year-old son and more than 300,000 yuan (US$45,400) in debts.
Zeng wanted to help repay her younger brother’s loans, but 300,000 yuan is a big sum for a poor family and her husband strongly opposed her plan. She approached Luo to ask whether the debts and interest her brother had incurred were legal.
You see, in an effort to fuel economic growth over the past few years, China has taken on a lot of debt. Since 2008, China’s debt as a percentage of economic output has increased from around 160 percent to around 280 percent at the end of 2016. (By comparison, the total debt in the U.S. as a percent of economic output is upwards of 300 percent.)
Why it matters: China is BIG and getting bigger
With a GDP of US$11.2 trillion, China is already the world’s second-largest economy (it will soon be the largest), and it has the second-largest stock market. The country will also soon have the world’s biggest middle class, totalling over 550 million people by 2022. To put this in perspective: That’s 1.7 times the entire population of the U.S.
Consumer loans (such as peer-to-peer (P2P) lending and payday loans) have grown rapidly recently. For example, consumer loans jumped 300 percent compared to last year.
Lufax, the online wealth manager that’s among the world’s biggest startups, has hired five banks to work on a Hong Kong initial public offering of as much as $5 billion, according to IFR.
Lufax is the world’s 10th-largest unicorn, or startup worth at least $1 billion.
Lufax had a loan balance as of Sept. 28 of more than 158 billion yuan ($24 billion), more than three times the 43 billion yuan held by China’s second-biggest P2P lender, New York-listed Yirendai Ltd., according to wdzj.com, a Chinese website that tracks online financiers.
What happened: The Ping An-backed online wealth management firm Lufax has hired five banks to work on an up to $5 billion Hong Kong IPO.
Why it’s important: A major player in China’s P2P lending market, Lufax will join a number of fintech companies that go public in recent months. It was eyeing an IPO as early as last year but later delayed the process due to market challenges and regulatory uncertainties, the CEO told Bloomberg last year. —Rita Liao
CreditEase, a world-class financial technology conglomerate based in Beijing, China, specializing in inclusive finance and wealth management, announced today that its venture fund, CreditEase FinTech Investment Fund (“CEFIF”) has recently been ranked No. 7 by CB Insights as “Top 10 Most Active VC Investors in Global FinTech Companies” and No. 1 by FT Partners as “Most Active FinTech Investors (Corporate VC)”.
Particularly, Ning Tang, CEO of fintech firm CreditEase, is lending consumers cows in a bid to reach those living in rural areas who might have limited access to credit and financing.
The rural population accounts for 48% of China’s total, with agriculture accounting for about 8.6% of the the nation’s Gross Domestic Production in 2015, according to the World Bank. Income in rural China has also been on the rise, with urban income narrowing to 2.7 times that of rural income from 3.3 times in 2009. And though migration toward the city has been on the rise and the nation’s dependence on farming and livestock is on the slide, rural populations and agriculture are still a significant part of the country’s economy.
iQiyi, which is backed by Chinese internet giant Baidu, adopted the tactic first and developed it into a commercial product when it broadcast the 1930s tomb-raiding adventure tale “The Mystic Nine” last year. The first batch of advertisers ranged from iQianjin, a peer-to-peer lending app, to PepsiCo, which showed characters chowing down on Lay’s and gulping Pepsi.
The other major services, Alibaba Group’s Youku Tudou and Tencent Holdings‘ video platform, have embraced the tactic too. At iQiyi, the cost for embedding one such commercial in an episode ranges from $150,000 to $530,000, depending on projected viewership, Yuan says.
Worldpay, a global leader in payments, has announced that it will partner with Klarna, a leader in invoice and credit based payments, to further enhance its product portfolio. From today, Worldpay customers trading in Austria, Finland, Germany, the Netherlands, Norway, Sweden and the United Kingdom, and wishing to accept payments on invoice or instalments, will be able to use Klarna’s invoice and credit based payments from Worldpay. This will help eCommerce businesses to improve conversion rates by up to 20% and provide a fast and smooth checkout process.
These new payment options will allow consumers to decide when to pay for the items once they have received their goods. Instead of a request for credit or debit card details at the point of checkout, consumers are prompted for their email address and postcode, ensuring a quicker checkout process and leading to lower cart abandonment. The solution allows consumers to manage the terms of their payment, be it 14-day payment by invoice, by fixed or flexible instalments, spreading the cost over several months.
The move into credit and invoicing payments follows demand from customers wanting to expand the breadth of payment methods offered. Worldpay is one of the first payments companies to deploy this new payment integration, providing superior market coverage as well as faster time to market since there is no need for a new plug-in when legacy technology is updated.
Savings specialist Raisin continues to gain momentum. The savings account marketplace now has itself 100,000 customers. The company is also integrated with more than 40 banks, from across 18 European countries, including a number of challenger banks and even an online lender (Younited Credit). SolarisBank is its newest partner.
Lativan p2p lending marketplace Mintos just launched a cashback campaign running for the remainder of December. Investors investing in new loans with a term of at least 24 months on the primary market will receive a cashback of 2% to 5% depending on term length. The cashback will be credited within 6 days says Mintos.
Important: To be eligable an investor needs to enroll once for the campaign by clicking on the promotion banner inside the Mintos dashboard.
Typically, when we think of taking a loan, we think of going to a bank, filling out a ton of paperwork and then getting denied the loan unless a guarantor or cosigner signs as well. However, blockchain banking startups like Salt and Coinloan aim to change this by creating a peer to peer lending platform on the blockchain. These platforms allow users to leverage their bitcoin and other cryptocurrencies as collateral for fiat loans.
Salt hails from the land of the free, a.k.a Denver, Colorado, USA.
On the other hand, Coinloan has Baltic roots and is headquartered in Estonia.
Salt will be starting straight out of Denver, Colorado and is set to launch their blockchain backed lending platform, BTC collateralized loans and loan fund by the end of 2017. In 2018, they will be launching ethereum collateralized loans in Q1, credit cards in Q2 and altcoin collateralized loans in Q3.
By contrast, Coinloan is still currently running their ICO. By 2018, they hope to obtain payment licences in Q2, develop mobile applications for IOS and android by Q3 and enter the Asian market in 2019.
In about 2 weeks, Lendoit will launch its official token Pre-sale, but it can’t wait to reveal the secret that will change the future of decentralized BTC lending, which the company has entered together with the largest and most promising blockchain-based project, The RSK Project.
Right from Argentina is Rootstock or popularly called RSK. This company is well-known for its open-source smart contract stage which has a 2-dimensional peg to Bitcoin. Amazingly, RSK uses merge-mining to reward bitcoin miners and give them the chance to be part of the smart contract ecosystem.
The Goal? To ensure that the highest level of functionality and value is added to the entire bitcoin ecosystem through the use of smart contracts, increased scalability, and near-instant payments.
Lendoit removes all intermediaries in the lending process, creates a trusted and secure platform for participants through the smart contract, and gives users a decentralized, anonymous platform where upscaling, lending, and borrowing are done hassle-free.
PNC, a top-10 US bank by assets, is live on RTP, The Clearing House’s new US real-time payments system, using Finastra’s payment services hub, Fusion Payments.
“The ability to make an immediate payment at any time, on any day of the week, with a real-time confirmation of the payment significantly transforms the way businesses and consumers make payments in the United States. Emerging technologies such as RTP are creating opportunities for banks and clients to re-imagine our business models.”
Morgan Stanley expects India’s digital payments penetration to increase from 5 percent today to 20 percent, and the e-commerce market to reach $200 billion, with 475 million e-commerce shoppers, adding up to a GDP upwards of $6 trillion — all by 2027.
India now has 800 million mobile phone users with 430 million having internet connectivity. According to Morgan Stanley, the number of internet users is expected to grow to 915 million by 2027.
In 2016, China’s digital payments were already 50 times America’s. Alibaba and Tencent understand ecosystems better than anyone else in the world, including American companies.
After emerging as one of the top fintech start-ups in Korea, Viva Republica, the company behind Korea’s top peer-to-peer transfer app Toss, is zeroing in on Southeast Asia as its next target market.
“While more than 70 percent of the population is using smartphones, their financial services are equivalent to that of Korea in the 1980’s. Our goal is to bring our story and product to Southeast Asian countries such as the Philippines and Vietnam and to improve the level of financial services in the market.”
As of November this year, the accumulated transactions through Toss reached 10 trillion won ($9.2 billion). In November alone, the platform handled more than one trillion won, a feat that comes just two and half a years since it launched in February 2015. The company said its annual sales will come to 20 billion won by the end of this year and reach the break-even point sometime next year.
Mexico’s Senate on Tuesday approved a bill that would regulate its fast-growing financial technology sector, including crowdfunding and cryptocurrency firms, paving the way for a vote by the lower house.
The bill, which seeks to promote financial stability and defend against money laundering and financing of extremists, is expected to pass in a final lower house vote by Dec. 15, said three sources familiar with the measure.
In 2005, Saliha Madden, a New York occupant, opened a Visa account with Bank of America. The account cardholder agreement had a Delaware choice-of-law clause whereby the parties involved stipulated that Delaware law would oversee the agreement. Madden defaulted on the loan and her account was later sold to debt buyer Midland Funding, LLC. Midland’s […]
In 2005, Saliha Madden, a New York occupant, opened a Visa account with Bank of America. The account cardholder agreement had a Delaware choice-of-law clause whereby the parties involved stipulated that Delaware law would oversee the agreement. Madden defaulted on the loan and her account was later sold to debt buyer Midland Funding, LLC. Midland’s member endeavored to collect the obligated amount with a default interest rate of 27%.
In 2011, Madden sued Midland and its subsidiary accusing the company of using oppressive and out of line debt collection practices under Federal law and charging high interest under New York law (which states that rates surpassing 25% every year are criminally usurious). Midland retaliated saying that, as a national bank assignee, it was entitled to preemption of state usury laws granted to national banks by the National Bank Act (the “NBA”). The district court agreed with Midland and entered judgment in its favor. Madden appealed to the Second Circuit. The Second Circuit reversed that holding on appeal, reasoning that preemption applies only where the use of state law would undermine a national bank’s exercise of its power under the NBA. While Bank of America is a national bank, Midland or its partners are not. The US Supreme Court refused to hear the case, and on February 27, 2017, Judge Cathy Seibel of the Southern District of New York gave the borrower a key victory by holding that New York law and not Delaware law would apply to the case.
This has led to bills being introduced to untangle the uncertainty created by the court’s decision. The “Madden-Fix” bills are now a source of heated discussion. Below, we will analyze how it will affect the marketplace lending industry.
Bone of Contention: Choice of Law
In spite of the fact that the cardholder agreement chose Delaware law to oversee the legally binding relation between the parties, the District Court determined that New York law should be applied. The Court found there was no reasonable connection between the parties or the transaction with the State of Delaware. In addition, the Court noticed that New York’s usury restriction “constitutes a fundamental public policy” against exorbitant interest rates. Therefore, use of Delaware law would contradict that policy.
Impact on Alternative Lending Market
The District Court’s decision will completely take out “choice-of-law” clause from the credit agreements with New York borrowers unless the lender is a national bank. This will adversely impact alternative lenders as they extensively deal in consumer and credit cards loans, and most of their loan agreements carry interest rates in excess of 25%.
Additionally, the verdict adds another layer of vulnerability among lenders and debt purchasers who work in the Second Circuit (New York, Vermont, and Connecticut). Before Madden, it was broadly comprehended that loans that are “valid when made” are not made invalid when assigned or sold to another party. The District Court’s verdict weakens this guideline, rendering a valid- when-made loan possibly unenforceable to the degree it negates the law of the borrower’s home state.
The logic used in this case can have significant bearing and could be used beyond the sale of delinquent loans to debt collectors including, maybe, to any secondary sale of loans to non-national bank purchasers. Specifically, this verdict could unfavorably affect the MPL industry. There still might be a possibility for the originating banks to authorize the terms of a high-interest loan agreement, but the debt collection agencies might not be able to collect in the future. This could make banks downsize their primary lending (especially at higher interest rate), which will, in turn, reduce the supply of loans available for refinance by MPL. With the uncertainty hovering over the enforceability of existing loans, it has had a ripple effect on their value in the secondary market as well. Vulnerability additionally increases the risk of loss, thus making investments through companies or platforms that extensively invest in loans made to New York borrowers less appealing.
Madden “Fix” Bill
Lending, especially by MPLs, has plummeted in Second Circuit states following the Madden decision. Intense lobbying has seen Congress propose the Protecting Consumers Access to Credit Act of 2017, which is awaiting approval in both the House and Senate. This will enforce the validity of a loan after it is bought by a non-bank, basically recognizing the “valid when made” doctrine once again, and will give impetus to MPL but will also help in normalizing the lending in Second Circuit states. These bills will also go a long way in removing the bias between primary and secondary loan markets, and will also assist the securitization market and other avenues where the loans are sold to non-bank entities.
Obviously, there are apprehensions with regards to these bills. Adam Levitin, professor of law at Georgetown University, has voiced his opinion in an article in American Banker in which he widely criticized the bills saying they are overly broad and will help in facilitating predatory lending. But a consumer seeking credit will get it any which way they can and MPLs are at least regulated in comparison to illegal lending sharks and payday lenders.
Though Madden has not been applied to MPLs, the industry will be closely monitoring the ongoing proceedings. The possibility of class action is particularly worrying as it could open the Pandora box of litigations and deliberate defaults. Meanwhile, it will be a good idea for industry players to assess their lending activities to see whether they come within Madden’s reach or not, particularly in the Second Circuit states of Connecticut, New York, and Vermont.
News Comments Today’s main news: RateSetter receives full FCA approval. PayPal’s market value eclipses American Express’s. Lending Club files 8-K entry into material definitive agreement. Some of Zopa’s loans are up for sale by P2PGI. Hexindai sets terms for U.S. IPO. PolicyBazaar becomes most-funded insurance aggregator worldwide. Today’s main analysis: Big bank earnings, IMF global growth forecast. Betterment vs. Wealthfront. Today’s […]
Its market capitalization stands at about $83 billion, nearly double the $47 billion value it had when it spun off from eBay Inc. a little over two years ago.
PayPal is even gaining ground on Wall Street titans. Its market value is now about $6 billion less than Morgan Stanley’s and about $10 billion less than that of Goldman Sachs GroupInc.
PayPal, which reports earnings on Thursday, now trades at a multiple of about 32 times forward earnings, according to FactSet. So although its market value is about half that of MastercardInc. and about two-fifths that of VisaInc., its earnings multiple is far dearer. Visa trades around 27 times forward earnings and Mastercard is around 29 times. AmEx, meanwhile, trades just shy of 15 times.
Ron Suber: Innovation cycles take 50 years. PayPal started it in 1998, Lending Club and Prosper accelerated it in 2006 by giving people reasons to borrow and lend online … similar to how AOL and EBay gave people reasons to go on the World Wide Web in the early internet days. And now we are in the Golden Age of Fintech which is the middle 10 years of the 50 year innovation cycle.
How does this fit with the online lending space? Can early MPL/Online Lenders remain competitive? And what do they need to do to remain competitive?
Ron Suber: Yes, The keys (KPI’s = key performance indicators) continue to be:
A) Loan Performance
B) Equilibrium between capital and borrowers
C) Committed Long term, low cost of capital
D) Unique, diversified and low cost methods of acquiring borrowers
E) Increasing Life Time Value (LTV) with multiple loans and additional products
F) Platform efficiency, customer experience and profitability
G) Scale and Brand.
What is next for you? Was Lend360 really your final appearance as the “Godfather of Fintech”? Or is this the intermission before the next act?
Ron Suber: Lend360 was my last presentation in North America … I am heading back to Australia and Southeast Asia for the remainder of the year … then to Patagonia for a Q1 vacation and then onto Africa to do some teaching about lending and entrepreneurship with Opportunity International (OI). OI provides entrepreneurs around the world with access to loans, savings, insurance and training – tools that empower them to work their way out of poverty…..a hand up, not a handout.
On October 10, 2017, LendingClub Warehouse I LLC (“Warehouse”), a wholly-owned subsidiary of LendingClub Corporation (the “Company” or “Lending Club”), entered into a Warehouse Credit Agreement (the “Warehouse Agreement”) with certain lenders from time to time party thereto (the “Lenders”), a large commercial bank as administrative agent (the “Administrative Agent”), and a national banking association as the collateral trustee (in such capacity, the “Collateral Trustee”) and as paying agent. to the Warehouse Agreement, the Lenders agree to provide a $250 million secured revolving credit facility (the “Credit Facility”) to Warehouse, which Warehouse may draw upon from the Credit Facility closing date until the earlier of October 10, 2019 or another event that constitutes a “Commitment Terminate Date” under the Warehouse Agreement. Proceeds under the Credit Facility may only be used to purchase certain unsecured consumer loans from the Company and related rights and documents and pay fees and expenses related to the Credit Facility.
During an unusual period of global synchronized growth, the IMF raised its Global Growth Forecast for 2017 and 2018 by 10 bps to 3.6% and 3.7%, respectively. The IMF also named nine banks that will struggle to achieve profitability.
In securitization news, Marlette Funding Trust 2017-3 is expected to close at the end of October with $298 Mn in loans. MFT 2017-3 is the fifth ABS from this platform and the fourth on the MFT shelf (the first was on Citi’s CHAI shelf).
In this week’s newsletter, PeerIQ dives into the earnings and loan loss provisions for the major money center banks.
The big money center banks released earnings this week to a mixed reception although YTD stock performance is strong. FICC trading revenues were down year-over-year across the board. ROE levels for the big banks remain mired in the low double-digit area or lower.
JP Morgan is currently the largest US Bank ranked by total US Deposits, which has grown 9% year over year.
JP Morgan credit card costs were up about $200 Mn year-on-year driven by the successful Sapphire launch, and higher net charge-offs.
Q3 2017 provision for credit losses was $1.5 Bn, up from $1.3 Bn in the prior year. Currently at 3.3%, credit card allowance to total loans rose every quarter this year.
Citi built approximately $500 Mn in card loan loss reserves this quarter:
$150 Mn from regular seasoning and volume growth.
$50 Mn from hurricanes and other natural disasters.
$300 Mn attributable to forward-looking NCL expectations.
Citi expects NCL rate on branded cards to increase 10 bps in 2018 to 295 bps.
Citi shifted away from rewards oriented products and more towards value products due to heavy competition in rewards products (see Chase Sapphire Reserve). These cards typically have non-yielding promotional balances in the near term.
Bank of America
Quarterly profit rose 13% year over year.
Provision for loan losses increased by nearly 15% quarter over quarter while allowance for loan losses decreased 1.7% over the same period.
Allowance for loan losses as a percentage of total loans decreased to 1.15% from 1.19% last quarter and from 1.29% last year.
Wells Fargo was the only reporting bank that had decreasing negative returns YTD and a ROE decline YOY.
Revenue fell 2% year over year, and Wells is the only reporting bank to have falling revenues.
Traditional Wall Street firms are keeping financial technology humming as they set their sights on developing technologies of their own. The third-quarter saw the second highest financing deal count ever, with 412 total transactions, according to a report from investment bank FT Partners.
Still, some areas are hotter than others. Banking — which includes peer-to-peer lending — and payments reported the most deals in the period. The largest was Softbank Group Corp.’s $250 million investment in online lending startup Kabbage Inc. Payments startups Toast Inc. and Raise Marketplace Inc. were also in the top 10 deals with $101 million and $60 million investments, respectively.
In the battle for assets under management (AUM), incumbent wealth management firms have faced significant pressure from insurgent robo-advisors, as investors have poured over $1.6B into robo-advisors across 151 investments since 2013.
The two largest of these robo-advisors, Betterment and Wealthfront, have collectively raised $405M in aggregate funding to date and have both voiced the long-term goal of going public. Nearly a decade after launch, Betterment and Wealthfront together manage approximately $15.9B of assets for over 495K client accounts.
Some of the key takeaways from our analysis include:
Betterment continues to outpace Wealthfront in client accounts. As of Q1’17, Betterment managed approximately 330K accounts, nearly 2X as many accounts as Wealthfront (at 165K accounts).
Wealthfront has a higher growth rate than Betterment. As of their respective filings in Q1’17 and Q2’17, Wealthfront had added 65K accounts, representing 65% growth, while Betterment added 52K accounts and grew 19%.
Betterment has raised more than 2X the amount of funding as Wealthfront. Betterment has raised $275M total as of its latest investment (a $70M Series E – II round in Q3’17), while Wealthfront has raised $129.5M as of its last funding (a $64M Series D in Q3’14).
Betterment has taken the lead over Wealthfront for total AUM since 2015.
Wealthfront has consistently had a higher AUM per client. Wealthfront clients average $40.9K per account, compared to Betterment’s account average of $27.4K.
CLIENT ACCOUNTS: WEALTHFRONT COULD SURPASS BETTERMENT IN 3 YEARS
An analysis of the data shows that while Betterment leads Wealthfront in number of client accounts today, Wealthfront’s higher growth rate suggests that Wealthfront could surpass Betterment within 3 years. Wealthfront added 65K accounts in H1’17, representing 65% growth, while Betterment added 52K accounts and grew only 19% over the same period.
Comparing average AUM per client, Wealthfront has consistently had a higher AUM per client ($40.9K invested per account, vs. Betterment’s average of $27.4K), and as it continues to add additional services like PATH and the portfolio line of credit, that average could grow over time.
ASSETS UNDER MANAGEMENT (AUM): BETTERMENT GROWTH SLOWS
Betterment grew AUM by approximately 13% since their last filing, their slowest quarter for growth. Again, this comes on the heels of the backlash against changes in Betterment’s fee structure in Q1’17. In contrast, Wealthfront set a new record for AUM growth in Q2’17, adding approximately $1.76B in AUM since the previous quarter. This was Wealthfront’s largest quarterly dollar increase in AUM.
Marketplace lending is, in many respects, an evolution of the privately funded mortgage market, which has co-existed with mainstream lenders without posing much threat for years.
Technology used by marketplace lenders offers deeper insights and transparency into transactions, while more easily connecting investors and borrowers in disparate locations.
LendingHome has raised $110 million in venture capital since it was founded in 2013 and is looking for more. It’s done six bridge-loan securitizations totaling $183 million and has a marketplace lending vehicle where accredited investors can purchase fractional interests in loans.
This suggests that the legacy of fintech and marketplace lenders will not be defined by drawing lines between this new breed of lenders and mainstream incumbents, but rather by how those lines are blurred.
Income&, while reaching out directly to investors, is working to serve retirees potentially more interested in accessing the mainstream mortgage market’s lower-risk cash-flows than taking on more risk in order to reach for yield the way marketplace lenders’ investor bases tend to.
The company structures the investments through a twist on traditional securitization.
“With SoFi’s leadership in transition, we’re withdrawing our application with the FDIC for now,” SoFi spokesman Jim Prosser said in a statement to Reuters. “A bank charter remains an attractive option when the time is right. This decision does not change our plans to make deposit accounts available through partner banks in the near future.”
Barclays Plc will need to defend its advantages in the payments business from encroachment by technology companies including Amazon.com Inc. and Apple Inc., according to Chief Executive Officer Jes Staley.
A fund LendingHome began setting up earlier this year raised $100 million in commitments and established a $300 million credit facility that brings its total potential assets to $400 million.
LendingHome Opportunity Fund II is committed to buying more than $1 billion in high-yield bridge loans over a two-year period, but the company also will continue to sell loans to other investors through other existing channels.
A: Pefin understands a user’s complete financial situation, including their current spending patterns, their debt and investments and their goals. An interactive chat experience helps users plan for life events that matter to them- like buying a home, having kids, sending them to college, and retiring in comfort. Pefin then incorporates the economy, markets, social security rules, federal and state taxes and much more to craft a thorough financial plan tailored to each user, showing the affordability of their plans. It provides ongoing advice on how they can save to achieve their plans, when they should repay debt, and whether investing is appropriate. If it is, Pefin also offers investment advice and portfolio management services through its SEC regulated subsidiary, Pefin Advisors. Pefin does not require that users invest through its platform, but if they choose to do so, it tailors each portfolio to help users achieve their plans.
Q: Who are the primary users of Pefin and what are some of the key challenges you are helping them solve?
The typical human advisor charges between $2,000 – $,5000 for a one-time financial plan and being static, it is obsolete moments after it is created. Robo-Advisors, while affordable, are unable to offer a comprehensive financial plan, instead focusing on recommending a generic portfolio (one of 10 or so static investment portfolios), primarily based on a risk level the user picks. Pefin’s AI stays on top of 2-5 million data points per user and updates plans real-time, ensuring the advice users receive is current and anything but generic. And Pefin does all this, for $10 a month. As for investments, Pefin requires no minimum investment size, and fees are 0.25% of assets under management, with the first $5,000 managed for free.
Q: Can you give us more insights into your Artificial Intelligence powered solution?
The neural network understands these financial rules and relationships, and propagates them forward in time, up to 80 years depending on the age of the client. The network starts with a user’s current finances and projects how they change over time with market conditions, inflation, taxes, government rules, and their plans. For any given user, the network evaluates anywhere from 2-5 million data points, depending on the complexity of their financial situation and financial plans are available 24/7.
BlueVine is expanding its reach in online business lending with new debt financing of up to $130 million and a new additional line of credit product that allows business owners to make monthly, instead of weekly, payments, over 12 months.
BlueVine secured major funding as the company rolls out a 12-month business line of credit based on monthly payments, a new offering that would make it easier for business owners to meet their everyday funding needs.
BlueVine introduced the new product in response to client requests for a longer-term business line of credit with monthly payment plans. The new financing underscores the fintech pioneer’s commitment to innovation based on customer needs.
The new product gives business owners 12 months to repay each withdrawal in full, meaning lower payments each month.
Goldman Sachs, arguably the world’s leading investment bank, has not been the greatest success story of recent times. After all the challenges of the 2008 financial crisis and the post-crisis regulatory glut, its profitability has declined sharply.
Today its stock market valuation, though far stronger than most banks, puts it on a so-called price-to-book valuation of 1.1 times. That is to say, its shares are worth 10 per cent more than the value of its net assets.
Compare that with the market’s view of Lending Club, the upstart peer-to-peer lender. Despite a scandal last year founded in slipshod controls, and a fall in the group’s share price from a 2015 high of more than $25 to barely a fifth of that today, it is relatively far more valuable than the Wall Street titan, with a price-to-book multiple of 2.6 times.
All that has yet to follow is a re-rating of Goldman stock — from bank to fintech. Though with barely $1bn of Goldman’s near $1tn balance sheet so far devoted to online lending, it may have a while to wait.
In a sign that the fintech business is maturing into more sophisticated areas, “regtech” is among the fastest-growing areas, accounting for a chunk of applications to the Future of Fintech awards.
Community banks are typically a better bet for small businesses in search of a loan, with approval rates higher than those at larger financial institutions. But the latest data on SMB lending in the U.S. suggests a shift is ahead.
Earlier this month, Biz2Credit released its monthly Small Business Lending Index and found that approval rates at large banks increased more than they did at smaller community banks. And while community banks’ SMB loan approval rates are still higher than those at large banks (49.1 percent compared to 24.8 percent, respectively), separate analysis from the Federal Reserve, also published earlier this month, concluded that community banks are beginning to reexamine how small businesses fit into their broader loan portfolios.
The Fed found that small business lending at community banks actually declined in 2016, while SMB lending at big banks increased over the same period.
SIX SENATE DEMOCRATS have asked the Treasury Department’s inspector general to investigate whether Keith Noreika, head of the Office of the Comptroller of the Currency, is illegally serving in office.
Noreika planned to serve temporarily until Joseph Otting, former CEO of OneWest Bank and Trump’s nominee for the OCC, was confirmed. But that hasn’t happened yet; Otting’s nomination has sat on the Senate calendar for over a month.
Special government employees are limited to 130 days of service over a 365-day period. The OCC contends that the number only refers to business days, meaning weekends can be taken off and Noreika still has until November to go. But “business days” appears nowhere in the statute.
I’ve seen a lot of folks passing around that article about how Trello failed to build a billion dollar business. It’s stunningly obtuse.
The premise is that the software that was sold for a $400m acquisition was a failure because it wasn’t worth $1b.
When Fog Creek spun Trello off as its own entity, the amount of money they raised was $10m. That was the only money they ever raised, and it was all they needed to raise.
For almost anyone with a sincere connection to reality, a $400,000,000 exit is an amazing win.
The “Trello Failed” take is not only wrong…
Really, what is the issue with an exit that large, after a fundraise that small? I believe there’s a level of unicorn fetishism at play here that’s more than a little depressing. To think that on any level a company either reaches a billion dollars or has “failed” is to denigrate the work of entrepreneurs building amazing products and achieving amazing things.
I have no real interest in billion dollar companies. I’m interested in companies that serve their customers, build amazing products and make money. If they happen to reach a billion, that’s great. But getting to a billion is not a goal that keeps me up at night.
So, what are we doing in a world where less (stuff) is becoming more (valuable) and access is trumping ownership?
First, we are lightening our balance sheets, both personal and corporate. People are carefully considering which assets they actually need to own, and what stuff actually creates more value than its cost of ownership.
Second, we are using our intangible assets, like skills, ideas, technology, and particularly relationships, to serve us in ways never before possible.
Third, we are identifying our own professional skills and differentiators for the gig economy.
Nonbank Fintech lenders are not currently chartered at the federal level. Instead, each Fintech lender is required to charter in each the state in which it originates loans. Each state sets its own regulations with regards to interest rates. Such a patchwork of different regulations means that Fintech lenders often cannot lend to customers in other states at the same interest rates that they lend to their in-state clients. This puts Fintech lenders at a competitive disadvantage, as solely state-chartered firms cannot offer consistent products nationwide that can provide benefits from economies of scale.
Over the last decade, fintech companies have launched robo-advisers, digitized lending, improved fraud detection and created virtual currencies. In short, fintech firms have helped change our understanding of what is possible in financial services.
However, the fintech revolution has largely ignored the financial needs of the bottom third of the U.S. population. For instance, fintech companies have so far failed to successfully create an alternative to credit scores for the 51% of people with subprime scores. Secondly, fintech firms have yet to help move our national savings rate in a positive direction. Thirdly, the amount of money that lower-income households have left over every month after paying their expenses is still declining despite fintech apps’ promise to help people budget. According to data from the Pew Charitable Trusts, the typical low-income household had $1,500 of income left over after expenses in 2004. In 2014, they were $2,300 in the red after expenses.
One explanation: Consumer spending dictates the preponderance of innovation and investment, and spending by 5% of households with the highest income now directs one-fifth of gross domestic product.
A fintech company could use artificial intelligence to identify patterns in someone’s past family financial behavior — both successful and unsuccessful — to recommend an easy-to-follow budget, send reminders or prompts, and eventually, say, help someone consistently lower expenditures and increase savings. Digit, for instance, is one example of a fintech company paving the way to do just that. The digital service mines someone’s checking account data to determine what he or she can afford to save and then Digit automatically transfers that amount into someone’s savings account.
Improve government-issued benefit cards
Each month, 52.2 million Americans receive government benefits — and most of them receive the benefits on a payment card. Most of these payment cards lack associated mobile apps that could make it easier for someone to check balances, track spending or fund savings. The cards also fail to let someone pay utility or phone bills directly.
Peer-to-peer platforms that enable lending between friends and family
PeerStreet, an award-winning platform for investing in real estate backed loans, is excited to announce the appointment of Louis Nees as Head of Capital Markets. He will be based in the firm’s headquarters in Los Angeles, California.
In this role, Nees is responsible for leading PeerStreet’s Capital Markets team, which plays a crucial part in interfacing with the growing number of investors seeking to invest in loans on PeerStreet. The company recently surpassed half a billion in cumulative loans funded, all with zero losses to investors, and monthly origination volumes now reach above $50 million.
With his deep Wall Street background, Nees will provide key guidance on multiple and varied capital sources for PeerStreet.
Centana Growth Partners (Centana), a unique growth equity firm focused on the future of financial services, today announced an expansion of its investment team with the hiring of Tom Davis, Principal, and Matthew Alfieri, Vice President. Mr. Davis and Mr. Alfieri join the firm after the successful close of its $250 million fund earlier this year.
Mr. Alfieri joins Centana from Goldman Sachs where he spent nine years, most recently as a Vice President with the Principal Strategic Investments team, where he invested in financial technology and enterprise technology companies.
NEW analysis by investment and financial planning group Tilney has revealed that the wealthiest households have experienced a much higher rate of inflation over the last two decades than everyone else.
In its household inflation index report, Tilney calculated that the top 10 per cent of households – those with incomes above £78,500 a year – have seen overall inflation of 64 per cent since 1997. That’s compared to 50.7 per cent for typical households (those with incomes of £26,900 to £30,000 a year) and 53.8 per cent for the lowest income families (less than £10,400).
Inflation has grown sharply in recent months, hitting a higher-than-expected 2.9 per cent in August, making it ever more difficult to savers to find an inflation-beating return from conventional savings accounts, adding to the allure of the peer-to-peer lending market.
WELENDUS, the peer-to-peer payday lender, has received full authorisation from the Financial Conduct Authority (FCA.)
The milestone comes a year after the company was formed.
The platform, which wants to shake-up the payday lending market by offering more reasonable interest rates than its competitors, launched a crowdfunding campaign on Seedrs in January to raise £300,000, but closed that campaign two weeks ago and instead started a new one to raise £100,000.
Moneyfarm is one of the new kids on the block. Founders Giovanni Dapra and Paolo Galvani left behind their City careers to set it up in 2011. It’s an app-based digital wealth management platform, which expanded into the UK from Italy last year. Dapra, the firm’s chief executive, is on a mission.
Since moving to London, the business has doubled its user base, now managing £260m in assets across the UK and Italy.
As well as a partnership with Allianz Global Investors, and launching separate partnerships with Uberand Revolut, Moneyfarm is in the process of launching a pension product.
Fewer people are saving into a private pension plan than at any point for the past 60 years. Auto-enrolment has gone some of the way to curing this ill, yet still there is a reluctance to think ahead.
One banking leader said that the rise of fintech and challenger banks had forced his and other large scale banks to collaborate more widely while all assembled agreed that universities and business leaders should work together more closely for the benefit of students as well as their respective organisations.
Pete Sumners, director of corporate structure finance at Clydesdale Yorkshire Bank, said that recent innovations in disruptive lending technology has meant that the banking sector at large had had to admit it did not have the technology to offer certain services and as such was forced to work with fintech companies: “In terms of banking, not just CYBG, collaboration has been forced on us by competition.
Simon Pilling, partner at Bond Dickinson, agreed that the rise of artificial intelligence had meant professional services had needed to change their business model but that there was still a need for skilled lawyers in all ends of the process.
There are two categories; the Impact Award is for larger and more established fintech companies, which are starting to have an effect on the financial services industry, while the Innovation Award is for newer fintech companies that are bringing out novel solutions.
Funding Circle, a direct lending platform that connects investors to borrowers, is shortlisted for the second year running for our Impact Award. With valuation of more than $1bn it is one of the UK’s “unicorns” and the largest British online “peer-to-peer” company by cumulative amount lent. More than £3bn has now been lent through the platform, with £1.1bn of that in 2016.
THE JUDGES SAID:
“The company is big enough to be making an impact in small business lending now.”
“This is clearly one of the most innovative and impactful fintech companies of the moment, changing the landscape completely.”
California based Ripple, founded in 2012, has grown to be one of the world’s biggest blockchain networks. It allows businesses to transfer money globally at low cost using its own cryptocurrency XRP.
THE JUDGES SAID:
“This is no longer a prototype. Ripple is actually sending blockchain payments through. Many of these are still test payments but it is further than a lot of others.”
EFL Global provides alternative credit scoring for people who have previously been outside the banking system.
THE JUDGES SAID:
“There were many credit scoring entries and we liked what many of these were doing in terms of giving more people access to finance. However, we particularly liked the way EFL went beyond traditional credit score information.”
Digital Reasoning uses cognitive computing techniques to detect rogue traders at financial services companies.
THE JUDGES SAID:
“We thought this idea was cool. Cutting rogue trader activity and fraud at banks is a serious issue with consequences beyond just the banks themselves.”
Micro finance lending platform QCash Financial was founded by the Washington State Employee Credit Union as an alternative to expensive payday loans.
THE JUDGES SAID:
“We liked this because it was an alternative to payday lending and an instance of an established financial institution doing something innovative.”
Token is creating an open banking platform aimed at making it easier for people, businesses and financial institutions to move money around. Using digital identity and smart tokens it offers a way for people to give third parties access to their account details in a secure and simple way.
THE JUDGES SAID:
“This is solving the problem that PSD2 brings, where banks need to provide APIs to authorised third parties. Token simplifies the many APIs and is already integrating 10 banks into the system.
RSRCHXchange was founded in 2014 as a one-stop-shop for asset management firms to purchase research services from banks, brokers and boutique providers. It will be particularly useful in helping banks comply with the EU’s new Mifid II rules, which come into force at the start of 2018.
THE JUDGES SAID:
This is solving a problem that comes with Mifid II. A more sophisticated solution than others in the market.
Bricklane.com is an online property ISA allowing anyone to participate in the housing market with an initial investment of as little as £100.
THE JUDGES SAID:
“We liked this because it is creating a new product. The founders say the main competitor is cash, with most of their funds coming from people transferring their ISAs.”
Castlight Financial is aiming to prevent another credit crunch by providing a more accurate way to assess what a consumer can afford to borrow. It collects data in real time from customers’ banks accounts, including income and expenditure, and uses these to build a clear picture of a their monthly disposable income. People who may have previously been refused loans because banks had too little data about them may become eligible for credit. Castlight says it can also speed up the mortgage decision process from six weeks to 10 minutes.
THE JUDGES SAID:
“The idea of better credit scoring is attractive and it is significant that the company has made a profit from the first year and has not had to take any financing.”
ALMOST half (44 per cent) of small- and medium-sized enterprises (SMEs) have never checked their credit score, new research from RateSetter Business Finance shows.
The study, released on Monday, found that a further six per cent have opted against checking their score in the last year, while less than one in five (18 per cent) have checked the score in the last six months.
The peer-to-peer lender pointed out that credit scores are an integral part of establishing whether a business has a decent record of repaying debt, and have a significant impact on their chances of getting further finance.
Leeds search specialist Epiphany has been appointed to help improve the brand perception of payday loan company Wonga.
Epiphany will work in partnership with Wonga’s content agency, Cedar, on brand perception and delivering a customer-first multi-channel content strategy. The agency will also be responsible for driving traffic and enquiries from organic search.
Hexindai, a Chinese marketplace for peer-to-peer lending, announced terms for its min-max US IPO on Monday. The offering is being made on a best-efforts, min-max basis and therefore will not be included in our IPO stats.
The Beijing, China-based company plans to raise at least $30,000,000 by offering a minimum of 2.7 million ADSs and a maximum of 8.9 million ADSs at a price range of $9 to $11. At the midpoint of the proposed range, Hexindai would command a fully diluted market value of $487 million.
Credimi: four asset management funds renovate and increase the commitment up to €72.5 million (Credimi Email), Rated: AAA
Barely a year after the launch, Credimi – the digital financing platform for SMEs that makes liquid the working capital in short time at low costs – has renewed the agreement with the four primary investment funds. They committed up to 72,5M€ to purchase the entire portfolio of commercial credits originated by the fintech platform.
Credimi is a fintech company officially authorized by the Bank of Italy to the public financing activity according to the dispositions contained in the new art.106 of the Banking Consolidated Law. The company will be able to provide funding to SMEs up to €300 million in the next months .
The four partners previously involved, Anima Sgr, Anthilia Capital Partner Sgr, BG Fund Management Luxembourg S.A. and Tikehau Capital, have decided to renew the agreement. Credimi is therefore reinforcing the attractiveness of its notes, which are the among the most profitable and diversified asset class among investments with a comparable risk profile. In fact, the notes combine an average life of the underlying invoices of less than 3 months with a spread around 450 base points and credit losses of 0.3%. Credimi finances hundreds of SMEs with average ticket of 20,000€, creating a low risk, diversified portfolio.
The portfolio subscribed by the four noteholders is untranched and pays a quarterly coupon. Additionally, Credimi continues to keep a stake of around 5% (as fifth noteholder alongside with the other four) to have ‘skin in the game’. This is not requested by law as the note is untranched and is ensured by Credimi to the noteholders on a voluntary basis.
Since launch on the market, Credimi has achieved outstanding results, exceeding initial expectations: €40million of loans have been delivered to Italian SMEs and more than 2.000 invoices have been financed. The same strong results have been obtained with the Supply Chain financing: by signing deals with corporations – such as Ariston Thermo, Jab group (Jimmy Choo and Bally), Pittarosso and few others – Credimi helps large enterprises to finance their suppliers at competitive prices and with an unmatched flexibility.
Lenddo and EFL Team Up to Lead Financial Inclusion Revolution (Lenddo Email), Rated: A
Lenddo and EFL have individually facilitated over 5 million credit assessments since inception, allowing more than 50 financial institutions to disburse over $2 billion USD in credit to people with limited information. The combined company will work directly with banks, telcos, retailers, microfinance institutions and insurers to serve individuals and small businesses.
The first joint product offering goes live in Asia and Latin America today, with additional products and features scheduled for release in the coming months.
A leading member of Australia’s fintech community has backed the view of veteran bankers that technology giants will be dissuaded from setting up shop in Australia and taking on the big four. But the disrupters see different reasons for Google’s absence.
SocietyOne CEO Jason Yetton said for the tech companies with the resources it wasn’t a question of whether they could disrupt the incumbents but whether they should do so.
In Australia there is a raft of smaller companies looking to carve out their own share of the financial services market including personal loans company Ratesetter, layby purchases Afterpay and online lender Zipmoney.
Tyro is a payments and technology company that also lends to small businesses. It also has Australia’s newest banking licence and is therefore subject to the same oversight as other authorised deposit taking institutions (ADIs).
Prospa, an Australian online lender for small businesses, has formed a partnership with Gandel-backed retail marketplace MyDeal, which will allow retailers on its platform to apply for loans of up to $250,000.
Senvirtne and his MyDeal team will be receiving a 1-2% small commission for every loan that comes through the marketplace.
On Monday, Bengaluru-based micro-lending startup KrazyBee said it had raised $8 million in a Series A round led by Xiaomi Technologies and Chinese venture capital fund Shunwei Capital. The funding raised was a combination of equity and debt, with participation from Essel Group’s E-City Ventures and RK Group.
The funding announcement comes within a year of the firm raising $3 million pre-Series A round in January from Plum Ventures. Prior to this, KrazyBee had raised a seed round of $2 million in May 2016.
Until July this year, the company claimed they had disbursed 80,000 loans and processed close to 170,000 loan applications. As of October 2017, the company had disbursed close to 150,000 loans and processed above 200,000 loan applications. The founder claims that of this number, 75,000 loans have already matured with steady settlement.
The average size of loans by KrazyBee is around Rs 15,000 with the maximum tenure being 12 months.
Many lenders find P2P platforms attractive because of their potential for giving higher returns, compared to fixed and savings bank deposits. In fact, these platforms also market their services by comparing the returns from P2P lending with returns from mutual funds. It is important to note here that these platforms cannot guarantee any return.
Thus, the RBI imposed limits on how much can be lent and how much can be borrowed by individuals from these platforms—to limit the risk exposure of individuals.
If such a person was to take a personal loan from a bank, it would come at 16-17%. Through P2P lending they can get that loan at around 14%. Those with low credit scores typically go to other NBFCs, and get loans at 22-23%.
No borrower can have loans of more than Rs10 lakh, from all the P2P platforms combined; and no more than Rs50,000 from one lender. All loans through P2P platforms come with a payback period that cannot be more than 36 months.
Markel International, the specialist insurer, has unveiled a fintech policy offering comprehensive protection for businesses in the financial technology sector in Asia, having successfully launched it in the UK early last year.
Coverage also extends to the costs involved when sensitive documents or data are lost.
On top of the professional indemnity core cover, the policy offers protection for three additional perils to protect clients against their key exposures:
Directors’ and officers’ liability cover protects against claims of mismanagement, which could be brought by shareholders, employees, creditors or regulators.
Theft option covers the insured against the stealing of money or other financial instruments, through both electronic and non-electronic means, including through extortion. It will also cover the cost of rectifying computer systems following a theft.
Cyber liability and loss cover provides protection if the insured suffers a network security incident, such as a hack, denial of service attack, or a computer virus, and will also cover business interruption losses arising from such an incident. This section includes cover for the cost of rectifying computer systems following a network security incident.
In addition to his knowledge in DCM matters, McGrath brings to Baker McKenzie a practice that covers a wide range of areas, including securitisation, leveraged and general finance, peer-to-peer lending, insolvency and restructuring, blockchain, and smart contracts.
News Comments Today’s main news: Equifax cans two executives. Credit Karma to launch free ID monitoring tool. Funding Circle’s new lending options now in effect. Wealthsimple expands into the UK. HighRadius raises $50M. ID Finance launches Mexico operations. Today’s main analysis: Multifamily REITs reduce leverage, development pipelines. Today’s thought-provoking articles: The next crisis will start in Silicon Valley. RateSetter’s Rhydian Lewis […]
Equifax sends two executives packing. AT: “You never know whether these types of incidents will claim the life of a career. In this case, it does. But it doesn’t appear too bad for those being forced out as they are retiring. It probably time anyway.”
The next crisis will start in Silicon Valley. AT: “There is a lot of doom and gloom surrounding alternative lending, but fintech in general. I understand it. On the short-term, there is good evidence that we could be headed toward something akin to a bubble bursting. Those old enough will remember how hot the Internet in the 1990s, then suddenly, pop! The turn of the century resulted in a lot of companies folding, investors losing money, and entrepreneurs scrambling for the next opportunity. now, almost 20 years later, Internet commerce is better than ever with no signs of declining. I’m optimistic for online lending, and fintech in general, long-term. After all, markets move in waves.”
Is new legislation looming to overrule Madden v. Midland? AT: “This wouldn’t be too out of the ordinary, actually. Litigation usually means there is some legal gray area, and when new technologies lead to new market sectors, there is always some concern about competition, fraud and abuse, and consumer protection. This leads to legislation that attempts to clear up the matter.”
The Equifax data breach has claimed its first two executives. The company late Friday announced the immediate retirement of David Webb, its chief information officer, and Susan Mauldin, its head security officer. They will be replaced, respectively, by Mark Rohrwasser, who joined Equifax last year as head of the company’s International IT operations, and Russ Ayres, most recently vice president of IT.
Credit Karma Inc is launching a new free service that will alert customers if their identity data has been compromised in hacks, the San Francisco-based fintech company said on Friday in the wake of massive breach at credit monitoring agency Equifax Inc(EFX.N).
The new ID monitoring service is being tested and will be available in October, the company said on Friday.
CreditKarma saw a 50 percent spike in sign-ups to its platform in the weekend after the hack, it said.
Stronger credit profiles and balance sheets provide the multifamily REITs rated by Morningstar Credit Ratings, with flexibility to withstand substantial market disruptions.
New apartment supply is pressuring multifamily fundamentals, and REITs on average are lowering their exposure to new construction.
Morningstar expects net operating income among multifamily REITs to moderate after years of solid gains.
Since 2016, Net Operating Income (NOI) growth has slowed amid additional supply.
Multifamily REITs rated by Morningstar reduced their leverage and their exposure to new construction, positioning themselves for the impending completions and an environment where borrowing rates are expected to rise.
Rental growth among multifamily properties should be subdued for the next two years. While fundamentals remain sound, surplus inventory of new units likely will keep rent increases in check.
It has been 10 years since the last financial crisis, and some have already started to predict that the next one is near. But when it comes, it will likely have its roots in Silicon Valley, not Wall Street.
Since 2007, a tremendous wave of innovation has swept across the financial sector, affecting almost every aspect of finance. New robo-adviser startups like Betterment and Wealthfront have begun dispensing financial advice based on algorithmic calculations, with little to no human input. Crowdfunding firms like Kickstarter and Lending Club have created new ways for companies and individuals to raise money from dispersed networks of individuals. New virtual currencies such as Bitcoin and Ethereum have radically changed our understanding of how money can and should work.
But revolutions often end in destruction. And the fintech revolution has created an environment ripe for instability and disruption. It does so in three ways.
First, fintech companies are more vulnerable to rapid, adverse shocks than typical Wall Street banks.
Second, fintech companies are more difficult to monitor than conventional financial firms.
Third, fintech has not developed the set of unwritten norms and expectations that guide more traditional financial institutions.
Enova International (NYSE: ENVA), a financial technology company offering consumer and small business loans and financing, today announced that its Board of Directors has authorized a share repurchase plan for up to $25 million of its common stock through December 31, 2019.
Inc. magazine ranked Prime Meridian Capital Management 554 on its 2017 annual Inc. 5000, which ranks the fastest growing private US companies in all industries. Amongst asset managers in the finance industry, Prime Meridian ranks near the very top of the list. The list represents a unique look at the most successful companies within the American economy’s most dynamic segment— its independent small and midsized businesses. Companies such as Microsoft, Dell, Domino’s Pizza, Pandora, Timberland, LinkedIn, Yelp, Zillow, and many other well-known names gained their first national exposure as honorees of the Inc. 5000.
The 2017 Inc. 5000, unveiled online at Inc.com is the most competitive crop in the list’s history. The average company on the list achieved a mind-boggling three-year average growth of 481%. The Inc. 5000’s aggregate revenue is $206 billion, and the companies on the list collectively generated 619,500 jobs over the past three years.
Regulatory uncertainty will continue to be a significant challenge going forward. Practices will be shaped by the standards imposed on fintech and other non-bank entities, which in turn, depends in part on the outcome of the tussle between the Office of the Comptroller of the Currency (OCC), which has begun offering a special purpose national charter, and state regulators who believe they are best suited to protect consumers. The industry may soon also be impacted by legislation introduced recently in the Senate and the House that would overrule the 2nd Circuit’s Midland v. Madden decision denying purchasers of high-interest loans the benefit of preemption of state usury laws afforded their sellers under federal law. Despite the ongoing debates, there appears to be momentum for more uniform and streamlined laws in the future that will provide greater certainty and, consequently, cost advantages for marketplace lenders.
dv01, the data management, reporting, and analytics platform that offers institutional investors transparency and insight into lending markets, today announced the launch of a cashflow engine for securitizations, with full waterfall and collateral model support. dv01’s cashflow engine is available for a library of 30 consumer unsecured, student, and small business deals, covering over $10 billion of securitizations from originators including Avant, Lending Club, Marlette, Prosper, SoFi, and Upstart.
dv01’s cashflow engine is powered by deal waterfall models that operate on loan level data sourced directly from originators. All projections are performed at the loan level and tied out to trustee reports, ensuring accuracy across the entire waterfall, down to the residual.
Within the cashflow engine, investors have access to full deal structure models to generate tranche and residual cashflow projections. This includes a wide array of functionality, including cohort-level control over assumptions; price, yield, and spread re-computation directly from the results screen; and price-yield matrix calculations. The output computations include a projected paydown chart and cumulative prepay/loss plots, all of which show both historic actuals and projected values.
The cashflow engine is integrated directly into dv01’s Securitizations solution, which offers investors 24/7 access to a reporting and analytics portal populated with loan level securitization data. When analyzing a securitization, users have access to deal-specific detail, collateral, and performance pages, as well as the ability to download updated loan tapes to track the evolution of a pool over time. Additionally, users can use dv01’s Pool Explorer to construct curves using historical platform data.
Mom and pop business owners often struggle to find enough capital to get their ideas off the ground and succeed, research shows. Kiva Dayton’s recently launched crowdlending platform aims to help solve this problem.
Now, the Downtown Dayton Partnership is offering to commit the first 20 percent of each Kiva loan to help potential business owners build buzz and raise more funds through the platform.
According to a study by the U.S. Small Business Administration’s Office of Advocacy, inadequate capital is the major obstacle facing small businesses when it comes to growth, expansion and wealth creation.
All Kiva loans are zero percent interest and they’re small, with no loans over $10,000.
New survey data from online student loan marketplace LendEDU suggests that younger consumers in the United States are more interested in investing in bitcoin.
Of those between the ages of 18 and 24, 35.9% said they plan on investing in bitcoin, versus 43.5% who said no and 20.5% who weren’t sure. For the 25-34 age group, the “yes” figure grew to 40.4%, with 31.7% of respondents in that demographic saying no.
Less than a month after Funding Circle announced the new versions of its existing Autobid and Autosell lending tools, the online lender revealed the new changes have officially gone into effect.
As previously reported, as part of these changes, Funding Circle will be eliminating the option to manually choose which businesses an investor may lend to and which loan parts to sell will be withdrawn. This is a significant shift in operation of the peer to peer lending platform as it begins to operate more like a fund.
Wealthsimple, a digital wealth manager, continues to make smart investing accessible and low-cost to more people with today’s announcement of the company’s expansion to the United Kingdom. UK residents can now open an account and have access to diversified investment portfolios in less than five minutes on wealthsimple.com or by downloading the iOS or Android app.
At launch, clients are able to open ISAs (Individual Savings Account), JISAs (for children) and personal accounts with a 0.7% management fee.
The London-based team is led by Fintech entrepreneur Toby Triebel, the former CEO and co-founder of the global online lending platform Spotcap. Triebel joined the Wealthsimple team in September 2016, leading the company through regulatory approval and initial beta testing, which saw over five thousand people sign up for early access to Wealthsimple through an online waitlist.
In May, Wealthsimple raised an additional C$50 million from Power Financial group of companies, a strategic partner, bringing Power’s total investment to C$100 million thus far in support of Wealthsimple’s global ambitions.
Since he and co-founder Peter Behrens set up the online exchange from a flat in 2010, it has handled the loans of £2 billion.
‘I’ve come to realise the importance of emotional intelligence to give other forms of intelligence the chance to come out right.’
It makes so much more sense for lending to be funded by investment as opposed to by an instrument called the deposit’ – not least because of the strictures imposed by regulators.
So far, 50,000 people have lent money through RateSetter, with £1.3 billion of loans repaid. Turnover this year should be £30 million; the headcount is 260. ‘Our ambition is that in due course the rates exchanged on RateSetter will be seen as benchmark rates,’ he says. And one day he would like peer-to-peer lending be ‘a crowd-sourced Libor’.
A REPORT has been published that aims to tackle advisers’ confusion and misunderstanding of debt-based securities (DBS), following their acceptance into the Innovative Finance ISA (IFISA) in 2016.
The CPD-accredited report, published by Intelligent Partnership, identifies some of the opportunities in the market and the role DBS can play in a diversified portfolio.
The term is used to describe a variety of different models for deploying capital, usually involving a borrower, lender and interest rate over an agreed period. DBS are increasingly arranged through crowdfunding platforms.
The report explains the investment types available, how to evaluate risks in varying market conditions, tax wrapper options, fees and returns, the difference between DBS and peer-to-peer lending, and due diligence issues.
Alternative debt-based securities (DBS) will become more popular thanks to regulatory pressure and greater demand for diversification, therefore it is vital advisers understand the products, research provider Intelligent Partnership has said.
In a fresh attempt to raise more money, a Peer to Peer (P2P) lending scheme is being proposed whereby people can loan £5,000 to the scheme which, the group say, would generate a 4% gross interest return per annum.
In recent weeks, Chinese central bank officials, banking and securities regulators have tightened oversight of a range of investing and technology platforms used by individuals to trade virtual currencies, invest in online loans and rapidly shift cash in and out of mutual funds.
A surge of Chinese investment—possibly more than $600 billion in the past two years—has gone into these so-called retail products, according to data from online platforms, financial information aggregators and cryptocurrency research houses.
In August, regulators placed limits on the growth of mutual funds made wildly popular via China’s mobile-payment platforms.
More than 700 online-loan platforms, known as peer-to-peer lenders, closed in the last year ahead of new caps on their operations that take effect this month that dimmed their prospects for profitability.
However, despite the fact that Hong Kong is one of the major global financial hubs, so far we still don’t have clear guidelines or any specific regulatory regime for crowdfunding, thereby hindering the development of our tech industry.
As far as equity crowdfunding and P2P lending are concerned, since they involve financial returns and yields, they are usually subject to legal regulation. Yet, in order to ride the global crowdfunding wave, major financial markets such as the US, Britain, Japan, South Korea, Singapore and Australia have all eased restrictions on crowdfunding in recent years.
At present, Hong Kong doesn’t have a single and comprehensive piece of legislation that deals specifically with crowdfunding. Instead, it is regulated separately by different existing laws such as the Securities and Futures Ordinance, the Money Lenders Ordinance as well as the Companies Ordinance.
Nevertheless, according to the same study, Hong Kong is lagging far behind other major financial centers when it comes to crowdfunding volume. In 2015, we raised a mere US$9.3 million (HK$72 million) through crowdfunding compared to US$28.4 billion, US$4.33 billion, US$360 million and US$240 million in the US, Britain, Japan and Australia, respectively.
As such, I suggest that the new regulatory framework for crowdfunding be more flexible. For example, the administration can consider exempting crowdfunding initiatives that involve less than HK$20 million from certain requirements that currently apply to public companies such as the need to submit a prospectus to the Securities and Futures Commission for scrutiny before launching any investment offering for sale to the public.
The evaporation of trust in the banking system following the financial crisis fostered the growth of digital platforms offering peer-to-peer investment opportunities in the US, Europe, and China. In Europe, as the debate about the capital market union progresses (European Commission 2017), policymakers see the possibilities for the digital investment and lending industry to help foster a unified capital market, which has been missing for so long.
Data show instead that over the years, default rates in the platforms have decreased steadily and are much lower than those in the traditional banking system. Lending rates have gone down (though still remaining attractive for investors), and trade volumes have steadily increased.
Britain’s impending exit from the European Union has put a “question mark” over the country’s attractiveness to financial technology firms, according to the head of France’s biggest peer-to-peer lender.
The French firm, Younited Credit, has just raised an additional 40 million euros ($48 million) to finance its expansion into another seven European countries, only to postpone its decision on entering the U.K. until the economic consequences of Brexit become clearer.
A new private equity ICO resembles a typical PE fund structure more than it does any blockchain innovation. Ethereum-based FundCoin (FND), which was developed by Dutch fund of hedge fund manager Finles Capital, is scheduled to make its debut as the industry’s maiden private equity token ICO on Sept. 30.
FundCoin, which is targeting EUR 100 million in its ICO, describes itself as bridging the gap between the blockchain and private equity, but there’s one problem. FundCoin doesn’t appear to have attached itself to any blockchain innovation.
Citing a lack of clarity on the designation of digital tokens as securities, U.S., Singaporean and EU investors are excluded from the FundCoin crowdsale, as per the white paper. Finles Capital says the ban will be revisited as regulation takes shape.
Loans issued in August 2017 came in at €2,926,457. The figure is well above the running average for the year. August was the third strongest month for originations in 2017 outpaced by only January and March.
As usual Estonia was the leader on loans issued amounts. However, the total share of the country was slightly lower than many previous months. The country represented less than 60% of the total share reaching 59.91%. Meanwhile, Spain came in at 17.57% and Finland represented nearly a quarter of the total with 22.51%.
Alpha Payments Cloud is unveiling its comprehensive rebranding and new corporate identity as Alpha Fintech.
The rebrand aims to crystalize Alpha’s positioning as fintech‘s first end-to-end middleware, connecting the merchant buyer and vendor supplier across the entire payments, risk and commerce spectrum through a single API and UI.
Hyderabad-based HighRadius, a player in cloud-based integrated receivables software space, announced that it had raised $50 million in growth funding from Susquehanna Growth Equity. Founded in 2006, this is the first external funding round that HighRadius has raised in its journey and the company aims to leverage it to grow its global footprint and also expand the team.
Fastforward to 2017, HighRadius works with hundreds of Global 2000 companies, including brands like Adidas, Starbucks, Procter & Gamble, Johnson & Johnson and Warner Bros. Their integrated receivables platform optimizes cash flow through automation of receivables and payments processes across 6 categories- credit, collections, cash application, deductions, electronic billing and payment processing.
HighRadius currently employs over 500 people across US, India, and Europe. Narahari explained that USA is currently their largest market, with about 90 percent of their business concentrated there and a small percentage in Europe.
For agriculture, the rise of Fintech means easier access to funds, new competitors in financial services and a global reach. Selling cattle or produce? Fintech and digital markets can now connect farmers directly to buyers on a mobile platform, doing away with the middleman. Important to note is that Fintech not only minimises the dependency on traditional banks as the middlemen, but increases the use of peer-to-peer lending, growing and strengthening the sharing economy model. Good examples are M-Pesa and FarmDrive in Kenya, where FarmDrive connects smallholder farmers to loans and financial management tools through their mobile phones.
In Mozambique, the Institute of Cereals of Mozambique (ICM), which is responsible for regulating and promoting agricultural production and commercialisation under the remit of the Ministry of Industry and Trade, recently joined forces with FinComEco to link agriculture to the latest financial technology.
ID Finance grows footprint in Latin America with launch of Mexico operations (ID Finance Email), Rated: AAA
Mexico would regulate its fast-growing financial technology sector, including firms that use crypto-currencies like bitcoin, to protect consumers and spur competition, under a proposed bill seen by Reuters.
The proposed legislation, which Mexican President Enrique Pena Nieto said this month would be unveiled in the Senate before Sept. 20, seeks to ensure financial stability and defend against money laundering and financing of extremists.
Financial services firms envisage massive potential growth in Latin America’s No. 2 economy by reaching the more than 50 percent of Mexico’s roughly 120 million citizens without bank accounts.
News Comments Today’s main news: CFPB issues first no-action letter to online lender. SoFi defends its mortgage underwriting standards. Was SoFi’s FICO-free zone really FICO-free? RealtyShares raises $28M for commercial real estate investing. Betterment partners with Goldman Sachs, BlackRock. JustUs receives full FCA authorization. Raisin offers term deposits to businesses. Earthport partners with Cross River Bank. Reserve Bank of India waiting for government […]
SoFi defends mortgage standards denying Fast Company’s allegations. AT: “These allegations put SoFi on the defensive and will likely be a bigger public relations bruise for the company than the sexual harassment allegations that recently came to light. In fact, there seems to be a shift away from the salaciousness toward the actual business practices of the company, and that’s a good thing. But not for SoFi.”
SoFi’s FICO-free zone may not have been so FICO-free. AT: “This is an interesting allegation and may not actually be as bad as it seems. Depending on the timing of SoFi’s announcements to revert back to using FICO scores, it could have just been the case of a company changing its mind. However, erasing all evidence of making the announcement in the first place is a bit suspect. I have a feeling this is going to be in the news cycle for a while.”
Betterment partners with BlackRock, Goldman Sachs. AT: “The portfolio partnership with Goldman Sachs is interesting given the larger company’s interest in online lending through Marcus. I wonder why they didn’t just roll out a product of their own to compete with Betterment and Wealthfront.”
The imperative of self-sovereign identification. AT: “This is one of the most interesting ideas I’ve read on data security yet. I’m suspicious of biometrics. I can’t really see that they’re a lot more secure than passwords (maybe a little). And, of course, with digital technology, there is no 100% secure solution. I’m sure some smart hackers will figure out how to break the blockchain. Nevertheless, this idea seems much more practical on the surface. If we could just get widespread adoption of the blockchain.”
The Consumer Financial Protection Bureau on Thursday issued its first no-action letter to online lender Upstart Network Inc., allowing the company to continue using alternative credit data to evaluate borrowers in exchange for providing data to the federal consumer finance watchdog.
SoFi, also known as Social Finance, adamantly said it doesn’t shy from criticism, stepping up to defend itself amid the recent negative news coverage on the company’s alleged toxic workplace environment.
Included in Fast Company’s coverage of the fintech company is a bold claim that “in the first round of SoFi mortgages, some homes lacked appraisals.”
According to a SoFi spokesperson:
In late 2014, we tested a simplified version of our home mortgage product that used paystubs for income verification and did not require home appraisal. The test did not proceed into a launched product, and we launched our mortgage product with requirements for full income verification and home appraisal, which is still the case today. All of these mortgages met the ability-to-repay standards promulgated by Dodd-Frank and none of these pilot mortgages were ever sold to investors, and we continue to hold those loans on our balance sheet.
According to conversations with numerous former SoFi employees, the company’s “FICO-Free Zone” loan product actually relied quite heavily on evaluating applicants by their FICO score. After very publicly announcing in early 2016 that SoFi would no longer use FICO scores to evaluate loans, sources tell Dealbreaker that the company saw defaults tick up and made the internal to decision to reintegrate FICO data. No announcement of the shift back was ever made, the “FICO-Free” language disappeared from the website and some evidence of the SoFi’s move away from FICO was even scrubbed from the company’s blog.
I’ve sat on panels that discuss all the benefits the aforementioned Silicon Valley approach brings to housing. Having SoFi around isn’t one of them, if their underwriting standards are as bad as some claim.
Ainsley Harris writes: “In the first round of SoFi mortgages, some homes lacked appraisals.”
Why on earth would a lender not get the value of the collateral it was lending to? Did SoFi think in-depth valuations where unnecessary? Do investors know that SoFi doesn’t know how much these homes are worth in the event of an REO?
Let me say this, whatever the reason to potentially forego appraisals, SoFi’s investors will disagree with that decision. The Fast Company revelation is so baffling that SoFi’s plan for an IPO will be delayed, perhaps indefinitely.
Let’s hope so. A company that plays fast and loose with its own people is shameful. A company that plays fast and loose with prudent lending practices is downright dangerous.
SoFi has published a public letter addressing the allegations leveled by NYT.com earlier this week.
The letter is republished in its entirety below. (Ed. Note: Excerpted by Lending-Times)
Mortgage: The story cites unnamed sources saying there was some period where we were “not doing enough” to validate income for mortgage borrowers. This is an incredibly vague claim, and we have no idea what this means. We underwrite our mortgage loans consistent with market standards, which includes rigorous income verification, and consistent with the ability to repay requirements put in place by Dodd-Frank.
Personal Loans: The story implies that our personal loans business grew in part because of a change in the way loans were approved: that customer service reps were approving loans rather than underwriters. That view reflects a lack of understanding of our business. We underwrite loans using a highly automated platform where all credit decisions are made by a pre-defined algorithm that analyzes each applicant’s credit profile and ability to pay.
A Thriving Business: The story did mention our business performance, and indeed, SoFi is thriving. Since inception, we have funded more than $20 billion in loans, $3.1 billion in the second quarter alone. In Q2, we had $134 million in revenue, up 67% year over year, with adjusted EBITDA of $61.6 million, up 60% year over year. We have more than 350,000 members, and they like what we do – our products run Net Promoter Scores in the 60-80 range, among the highest in financial services.
RealtyShares is raising a $28 million Series C round led by Cross Creek Advisors, with participation from existing investors including Union Square Ventures, General Catalyst Partners, and Menlo Ventures.
Founder and CEO Nav Athwal says that RealtyShares has over 120,000 users on the platform. The startup says it has deployed over $500 million across more than 1,000 properties since it was founded in 2013.
In a recent op-ed in American Banker (derived from a longer blog post), professor Adam Levitin argues that the recent legislative proposals to “fix” the repercussions of the United States Court of Appeals for the Second Circuit’s Madden v. Midland Funding decision are “overly broad and unnecessary and will facilitate predatory lending.” The legislation Levitin opposes would restore the ability of banks to sell loans to nonbanks and have the loans remain valid on their original terms, the type of transaction on which the Madden decision has cast doubt. I disagree, at least with regard to marketplace lending. There are compelling legal and policy arguments to undo the Madden decision that Congress should consider.
Levitin is certainly right that the Nichols case and the similar 19th-century cases reflect a different fact pattern than was presented in Madden. It does not necessarily follow, however, that the principle of valid-when-made should not also apply under the Madden facts.
The issue at question in Madden, the interest charged on the loan, was set by the bank at the loan’s inception. The borrower got the benefit of the federal regulatory regime, which includes the incorporation of the bank’s home state usury law, when the loan was created, and the relevant characteristics did not change. So why is there suddenly a problem?
The impact of Madden on innovative credit is harmful to borrowers
Madden also appears, as would be expected, to be reducing access from marketplace lenders to credit for borrowers with lower credit scores. Contrary to Levitin’s argument, a recent study shows a reduction in credit availability not just for borrowers with FICO scores under 625 (though that is where the reduction is most pronounced). The study indicates that borrowers in New York and Connecticut with FICO scores under 700 saw a reduction in availability relative to comparable borrowers outside the Second Circuit.
For example, it is important to keep in mind that the majority of marketplace loans are used to pay off bank-issued credit cards (which are not subject to borrower state usury laws) or consolidate existing debt. Denying borrowers access to these loans does not leave the borrowers unencumbered by debt; it leaves them in the situation they view as worse than taking out this new loan. This is especially true given that there is evidence that marketplace lenders can help provide expanded access and competition, services in areas that have few banks, and better pricing for some borrowers than they would receive from banks. Cutting off access isn’t protecting borrowers, it is leaving them with fewer, perhaps inferior, tools to protect themselves.
Usury caps can lead to loan arrangements being distorted in ways that make the loans legal but worse for the borrower. We see examples of this in the shift from payday to “payday installment” and subprime auto loans, where lenders bound by interest rate caps change the loan principal amount or repayment schedule to make the loans viable. These loans can actually be more expensive in total because the lower interest rate is applied to a higher principal over a longer time period. Larger loans also can be more expensive for borrowers if they pay them off early or go into default. Borrowers also could be forced into using suboptimal options like pawn shops or illegal loans, or find themselves without credit altogether.
Betterment, the largest roboadviser with $10 billion under management, has enlisted the support of financial juggernauts Goldman Sachs and BlackRock for two new portfolio options.
The portfolio managed by Goldman Sachs is a smart-beta option, providing users with a more aggressive alternative to Betterment’s core portfolio, which allocates money to stocks and bonds, according to Arielle Sobel, a spokeswoman for the firm. It will be more exposed to emerging markets and REITs, according to a press release.
The other portfolio option is an income-based portfolio, managed by BlackRock, the largest fund manager in the world with $5.7 trillion under management. It provides investors a more conservative option and delivers target income.
As we have known for a long time now, it is no longer good enough to use customer’s personal information for account access. After Ashley Madison and so many other incidents (Tesco Bank, Lloyds Bank, JPMorgan Chase, SWIFT, the Federal Reserve, the IRS, the Department of Homeland Security eBay, Yahoo, Google, Adobe, Target, Neiman Marcus, Home Depot …), surely we should be moving away from this antiquated system. Bear in mind it’s been used for almost two decades, it’s no wonder the system is no longer working.
So the banks add second-factor authentication (2FA) with secure entry pads and PINs, but they still rely on personal information for account access when you ring their call centres, and this is just annoying.
Is there a solution?
First is biometrics and TouchID, voice, eyes and more can easily be used for authentication via a smartphone. Why banks aren’t incorporating these into their onboarding and access mechanisms beggars belief …. or maybe not, as banks would need modern systems to use such radical authentication techniques, and that’s a big ask. Far easier to rely on name, address, date of birth and all the information the hackers stole from Equifax.
Emerging technologies (particularly blockchain, although not exclusively) are making the development of “self-sovereign identity” a real possibility.
The basic idea behind self-sovereign identity is that rather than have our information held by third parties (often without us even knowing what that information is) and used to guarantee our identity and make decisions that affect us; we could turn the entire model on its head and give each individual control over their own digital identity.
With self-sovereign identity, you would hold all of the different elements of your online identity in a “box” or “wallet”, and would then be able to choose which of those elements to reveal in any given context.
PayPal’s global head of product communications Anuj Nayar has left to become head of communications at peer-to-peer investment company Lending Club.
In his new role that starts on Monday, Nayar will be in charge of the team running all internal and external communications, as well as social media, for the $2.5 billion publicly-traded fintech company.
Last night we learned that Goldman Sachs is poaching roughly 20 employees from online lender Bond Street, which seems to have paused making new loans, according to The Wall Street Journal.
It is indicative of Goldman’s strategy that the bank has forced its way onto the AltFi (“Alternative Finance”) homepage three times this week. Those incursions were tied to its £100m investment in UK employee benefit lender Neyber, its $300m deal with home solar financing firm Mosaic, and the announcement that it plans to launch an online bank in the UK.
So its latest decision, to nab 20 workers from the dormant Bond Street, is not without precedent. But Bond Street is not a consumer lender. It offers term loans of up to $1m to small businesses. Could Goldman, then, be sizing up an expansion into small business lending for Marcus?
Year-to-year, community financial institutions have become more conservative about consumer lending. So as to not open themselves up to additional risks, many of these institutions tend to only service consumers with prime and super prime credit. However, consumers with non-prime credit make up a solid portion of the consumer lending market, so this desire to stick with “safer” loans leaves quite a few loan opportunities on the table. And when many community financial institutions are dropping their rates to as low as 0% in order to compete with large national lenders for prime and super prime consumers, missing additional revenue opportunities for your loan portfolio is not a small matter.
Market disruptors like retail lenders (i.e. Costco), mobile lenders (i.e. AutoGravity), and peer-to-peer lenders (i.e. Lending Club) are finding ways to bypass the existing banking system, credit bureaus and financing requirements to lend to this highly sought after demographic.
Fidelity Investments introduced a program Thursday that will let employers make regular payments to their employees’ student loan accounts, much the way companies already pay into their workers’ 401(k)s or health care savings accounts.
Some smaller financial services companies already facilitate this type of benefit program, such as First Republic Bank and startups like Student Loan Genius and SoFi.
But the entry into the market of Fidelity Investments — one of the country’s biggest mutual fund, money management and financial planning companies — is a sign that student debt relief may soon become a mainstream benefit that employers will have to offer to remain competitive.
If you’re living paycheck to paycheck, on the other hand, even small unexpected expenses can put you in the red. The two weeks between paychecks is an eternity for an hourly worker whose credit card is already maxed out, or who doesn’t have one to begin with. Every parking ticket and hospital co-pay is a potential crisis. By the time payday comes, it’s too late — the next crisis has already arrived.
Financial technology startup DailyPay thinks giving people in this situation more frequent access to wages would go a long way toward solving this problem and putting them on the path to financial security.
DailyPay’s solution works like this:
1) The startup integrates with a company’s established payroll and time-tracking systems. Instead of going directly to an employee’s bank account, paycheck deposits are set up to go through DailyPay first.
2) An employee can withdraw wages he or she has earned but not yet received throughout the two weeks or month before formally getting the paycheck. DailyPay fronts the money for a small fee, and keeps the expense on its balance sheet.
3) Come payday, DailyPay deducts whatever money the employee has already withdrawn, and sends the rest of the paycheck through to the employee’s bank account.
Perhaps Lee likens his service to an ATM because the more obvious comparison — a payday loan provider — is often considered predatory.
One key difference is that DailyPay interfaces directly with employers, positioning itself as an HR benefit. DailyPay’s pitch to other companies is that flexible payroll reduces turnover, which is good for the bottom line, and the service is free to implement. One internal study of 20 DailyPay clients found that turnover shrank by 40 percent on average after they adopted it.
Since I run an opportunistic portfolio that seeks out high upside “Fat Pitches” (soon to be a subscription service), it may seem as though I, too, would be stumped; however, I continue to find opportunities, albeit in sectors a bit off the beaten path.
While “value” and “high-growth tech,” may seem anathema to each other (wait till you see the next section), the three public fintech companies – Lending Club, Ondeck, and Elevate Credit – all seem undervalued today relative to their potential, and each have posted strong results in the recent quarter.
Ondeck, which lends to small and medium businesses, also recently decided to scale back its growth, raise rates, and cut staff. The company lowered orginations last quarter by 19% sequentially last quarter, but loss provisions as a percentage of revenues also fell from 8.7% to 7.2%. After implementing a $45 million cost reduction program, the company’s losses declined to only $1.5 million, down from $16 million in losses a year ago.
Speaking of acceptance, it may seem on the that the company that serves the subprime market – thought to be the riskiest of all – is the most profitable of the three. Elevate Credit has been doing everything right – though you wouldn’t know it by its languishing stock price. Last quarter, Elevate grew originations 29% and revenues by almost 19% (due to a higher mix of lower rate, but higher-quality loans), expanded its core RISE product to the state of Kansas—its 16th state, and was able to lower its interest rate on its high-cost funding from Victory Park Capital.
The teams at FinTech startup LendUp and Oakland-based Beneficial State Bank think very differently about that relationship. As LendUpCEO Sasha Orloff and Beneficial State Bank Co-CEO Kat Taylor told PYMNTS in a recent interview, banks and FinTechs need each other, and a very large segment of the population living on the margins of financial services in the United States need these two groups to work together as well.
That constituency, Orloff noted, isn’t always easy to serve – or to serve profitably – without relying on a business model that counts on its customers to fail and then charging sky-high fees for those failures. LendUp and Beneficial State Bank have a different approach: They want to invest and make money on their customers who are succeeding financially and are able to participate in the full spectrum of the financial system.
Fifty-six percent of Americans have a sub-prime credit score, meaning mainstream banks likely can’t approve them for their products; more than half of all Americans could not find $400 in the event of an emergency; and two-thirds of millennials have not started building any kind of credit score, in a system in which having no score or a poor score can cost a person $250,000 over their lifetime.
Lending money beyond what people can bear is the hallmark of predatory lending, she emphasized, and that’s not going to help the customer.
That alternative – the L Card, issued by Beneficial State Bank in partnership with LendUp – is a low annual fee card (starting at $0 and capped at $5 per month or $60 per year) that offers consumers a grace period for payments and even caps late fees (at $7). It has a higher interest rate – 19.99 percent to 29.99 percent – for a credit card than the national average, but according to The PEW Charitable Trusts, is a fraction of the payday lending rate, which is around 400%. Credit limits range from $300 to $1,000 based on credit score, and a year of timely payments and responsible behavior allow customers to double the limits.
Jay Coleman, a Wall Street banker focused on equity raises and initial public offerings, has joined online lender CommonBondas chief financial officer, according to the company’s co-founder David Klein.
While still small, the company had lent about US$1bn to 12,000 borrowers as of May 1, according to Moody‘s Investors Service.
eOriginal, Inc., a rapidly growing financial services technology company, has named Timothy Wall Chief Revenue Officer (CRO).
As CRO at eOriginal, Wall will be responsible for all aspects of the company’s sales organization and revenue development, including direct sales, channel sales, sales engineering and customer success.
Former Iowa Congressman Jim Nussle today said Iowa’s 94 not-for-profit credit unions have filled a void as banks throughout the country and in Iowa continue to consolidate.
More than 1.1 million Iowans are members of a credit union and the state’s credit unions have about $16 billion in assets, according to Nussle.
Nussle indicated the “speed of change” and stress in the industry has been rather dramatic, not only because of the “Great Recession,” but because of incidents like Wells Fargo’s admission that its employees created fake accounts without customers’ permission. The recent growth of on-line “peer to peer” lending presents credit unions with an opportunity rather than a challenge, according to Nussle, because credit unions are member-driven.
GDS Link, a global provider of credit risk management solutions and consulting for multiple verticals within the financial services industry including marketplace lending, retail finance, alternative financial services, credit card, auto, and business leasing, announced its role in bringing the fourth annual LEND360 to Dallas.
“The LEND360 Dallas host committee, co-chaired by Ken Rees, Chief Executive Officer of Elevate Credit, Inc. and Paul Greenwood, President and Co-founder of GDS Link, and supported by other influential members of the fintech community, has been meeting since late 2016 to ensure a valuable attendee experience for the upcoming conference, assist with speaker development and engage innovative industry leaders to take part in the event,” according to a LEND360 press release.
The Online Lending Policy Institute (OLPI), the leading voice for policy analysis, in-depth research, and education for the online lending industry, today announced its roster of speakers for the Second Annual Summit on Sept. 25 at the Renaissance Hotel in Washington D.C. The Online Lending Policy Summit provides an opportunity for industry participants to share insights, propose standards, and have an open dialogue with regulators and policymakers to build consensus viewpoints on the regulation of online lending. Keynote addresses will be delivered by the following four policy leaders:
Keith Noreika, Acting Comptroller of the Currency. Mr. Noreika advocates for the need to embrace innovation while ensuring that new products and services do not present undue risk to the financial system. He will discuss how regulators and industry can work together on “responsible innovation” and with principles for governing the rapidly growing financial technology sector.
Congressman Gregory W. Meeks (D-NY-5), now in his tenth term, serves one of the most diverse constituencies in the nation. Mr. Meeks is known for being an effective, principled, and commonsense leader. Congressman Meeks is a senior member of the U.S. House Financial Services Committee, and is the lead Democratic sponsor of important legislation dealing with the Madden v Midland Funding court case.
Congressman Tom Emmer (R-MN-6) represents Minnesota’s 6thDistrict in the U.S. House of Representatives. He began his congressional career on January 6, 2015 and serves as a key member of the U.S. House Committee on Financial Services. Prior to his congressional service, Mr. Emmer practiced law for several years, and followed his entrepreneurial calling and opened his own law firm. In 2004, he was elected to the Minnesota House of Representatives and re-elected by overwhelming majorities in 2006 and 2008. After a narrow loss in the 2010 gubernatorial race, Tom entered the radio business as a conservative radio host.
Peer-to-peer lending platform JustUs announced this week it has received full authorization by the Financial Conduct Authority (FCA). The online lender revealed that the full authorization is a pre-requisite to offer the JustUs Innovative Finance ISA (IFISA) and registration forms have been submitted to HMRC with a planned launch of the ISA in October.
Crowd2Fund, a relative newcomer to the alternative finance industry, is accusing Funding Circle, one of the market leaders, of turning its back on the whole ethos of peer-to-peer lending.
The row follows an announcement last month by Funding Circle that it will no longer allow investors on its platform to choose which specific companies they want to lend their money to. Instead, the platform will automatically spread investors’ cash across a group of businesses looking for funds – much as a professional collective fund manager in any other asset class chooses investments on behalf of its investors.
Crowd2Fund said Funding Circle’s move reflected the larger platform’s increasing focus on large institutional investors in peer-to-peer lending, as well as concern about the growing regulatory scrutiny of the sector.
ARCHOVER’S chief executive Angus Dent (pictured) has urged small business owners to be more confident in taking on debt, after new figures showed that 80 per cent of small- and medium-sized enterprises (SMEs) are refusing to apply for new finance.
The boss of the peer-to-peer business lender said that while their caution was understandable, it is the “wrong attitude” for SMEs that want to scale up.
LendInvest has received public support from three major industry bodies for its property development academy.
The Centre for Entrepreneurs, Homes for Scotland, and the Home Builders Federation have each praised the academy, which was established in 2016 to help develop the skills of aspiring and new small-scale housing developers.
Birmingham, the site of LendInvest’s latest Property Development Academy, is a perfect example of this. Time and again we heard from attendees of just how exciting the city is for property development currently, and why they are so desperate to get cracking with their own development projects.
It’s notable that in last year’s Emerging Trends in Real Estate report from PwC and the Urban Land Institute, which looked specifically at which European cities present the best opportunities for investors, Birmingham was the best performing UK city. It ranked 22nd, ahead of cities like Manchester, Edinburgh, London, Brussels and Rome.
All of this has led to a thriving rental sector. Our most recent Buy-to-Let Index found that the city currently boasts a rental yield of a very strong 5.03%, with capital gains of 4.97% over the last year.
The latest UK Economic Outlook report from PwC named the West Midlands as one of the housing hotspots, predicted to see house price growth of 4.5% this year, compared to a UK average of 3.7%.
Democratic Progressive Party Legislator Lin Chun-hsien (林俊憲) yesterday urged the Financial Supervisory Commission (FSC) to curb bad debts stemming from fraud and loan sharking on Internet-based peer-to-peer lending platforms.
Online lending platforms have existed for years in other nations and have caused many problems, Lin said, adding that in China they are blamed for generating an estimated 60 billion yuan (US$9.2 billion) of bad debt.
Like electric cars, whose era of global dominance has yet to arrive, the app-driven insurance industry is more of a concept than reality. That doesn’t mean investors should dismiss the Hong Kong initial public offering of ZhongAn Online P&C Insurance Co., despite its hefty price tag.
Bankers are currently sounding out investors for an IPO that could raise as much as $1.5 billion, giving ZhongAn a valuation of $11 billion. That’s well above CLSA’s $8 billion estimate, which already ranks the online insurer as China’s third-most valuable fintech company after Ant Financial, an affiliate of Ma’s Alibaba Group Holding Ltd., and Lufax, the peer-to-peer lender owned by Ping An Insurance (Group) Co.
ZhongAn is the world’s sixth-most-valuable e-finance company, at about $8 billion.
So here’s the bad news. ZhongAn is tiny. Its net written premiums were a mere 3.4 billion yuan ($520 million) last year, or 0.5 percent of China’s insurance industry, according to Bernstein Research analyst Linda Sun-Mattison.
It’s also expensive. The $11 billion valuation implies an adjusted price-to-book level of 4.3 times, Smartkarma analyst Ke Yan estimates.
Pan-European marketplace Raisin continues its trailblazing expansion. Having penetrated new geographies with international and localized services in 2016, the Berlin-headquartered startup is now broadening its offering to address a new customer segment: small and medium-sized enterprises (SMEs). Starting September 14, businesses can open term deposit accounts on Raisin’s German site www.weltsparen.de, or more precisely, on www.weltsparen.de/geschaeftskunden.
Earthport (AIM: EPO), the leading payment network for cross-border transactions, is pleased to announce its partnership with Cross River, a US-based bank, to provide inbound cross-border payment services across the US market, adding to its existing capabilities to process payments in the US.
The partnership will facilitate the execution of inbound ACH payments through Cross River, and further strengthen Earthport’s global payment network, enabling high volumes of low-value payments originating outside the US to be serviced more efficiently.
Half the world is unbanked. That’s the provocative title of a 2009 research paper published by the Financial Access Initiative (FAI), a consortium of researchers from New York University, Harvard, Yale and Innovators of Poverty Action.
Their study also provided an empirical grounding that, although it is possible to serve low-income communities at scale with financial services, there are still billions left to reach. According to figures from the World Bank, as of 2015 there are still 2bn people who lacked access to any formal financial services.
The advent of mobile technology along with increasing smartphone penetration, especially in developing countries, has opened up a new portal of possibilities.
This newfound access in countries across South East Asia and Africa has provided the perfect ecosystem to initiate financial inclusion.
Nick Ogden – founder and Executive Chairman, ClearBank
The number one thing that’s going to occur in 2018 is fragmentation of the marketplace as we know it today. The days of big banks delivering everything and being specialists in everything are over. Some of them might still not accept that but the reality is that it’s happened.
Karen Kerrigan – Chief Legal Officer, Seedrs
Rather than looking at a specific technology, have a look at a particular sector. There are a lot of challenger banks out there at the moment – Starling Bank, ClearBank, Monzo, Tandem – and they’re all vying for the same space. They’re all doing things slightly differently, but ultimately are taking on the banks.
Tokens may not be available to all persons in all jurisdictions as certain offering restrictions may apply. In particular, no tokens will be available in the US, Singapore or the EEA. Offering and trade restrictions, as well as the rights of holders of FundCoin, will be set out in further detail in the offering memorandum.
That little snippet is from the last page of the “whitepaper” for FundCoin, which deserves a spot in the pantheon of initial coin offerings (ICOs) to which regulators should be paying more attention. FundCoin is “the first private equity token ICO” and is the creation of Finles, a 40-year-old Dutch fund of hedge funds manager that has decided to turn to the crypto markets to raise money.
Cryptocurrencies are the most undervalued asset class in the world, says Farzam Ehsani, leader of Rand Merchant Bank’s blockchain initiative.
The combined market capitalisation of all cryptocurrencies was only about $120bn, Ehsani said on Thursday at the Business Day/Financial Mail Investment Summit, held in partnership with Old Mutual Wealth.
By comparison, the market capitalisation of all stock markets is about $68.5-trillion, according to figures from the World Federation of Exchanges.
The Reserve Bank is waiting for a gazette notification from the Government on getting the peer-to-peer lenders under its regulatory ambit before coming out with guidelines on the sector, a senior official said on Wednesday. “Following up on the consultation paper we did last year, we are shortly going to come up with guidelines on peer to peer lending,” RBI’s executive director Sudarshan Sen said at an industry event here.
According to the official, the P2P lending interface will come under the purview of RBIs regulation by defining these platforms as NBFCs under the RBI Act by issuing a notification in consultation with the Government.
Indonesian peer-to-peer (P2P) lending platform Investree announced that it has been appointed by the country’s Ministry of Finance to run a pilot project that aims to develop online transaction system of state securities for retail investors.
According to a DailySocialreport, through the project, users will be able to purchase state securities through the Investree platform.
India’s demonetization experiment has been declared a failure by economic pundits. However, it has expanded India’s tax base and fast-tracked the digitization of payments, which is a good thing.
Some nine-million-odd new taxpayers came into the fold thanks to the scheme. Around 20 million new bank accounts were created by Indians panicked by the possibility of having their cash holdings voided.
Second, the scheme accelerated the digitization of payments in India, with a vast swathe of merchants forced to accept digital payments in lieu of cash.
The global crowd-funding industry generated about USD 34.4 billion in 2015.
Apart from raising capital, crowdfunding is also a way to create awareness among the masses and support for a project from the people around you.
Crowdfunding has exploded new ways to raise funds for start-ups, social sector, real estate, inventions and so on.
In India, transaction value in the “Crowd-funding” segment amounts to a meagre USD 6 million in 2017.
Transaction value is expected to show an annual growth rate (CAGR 2017-2021) of 24.8 percent resulting in the total amount of USD 16 million in 2021.
The most used method for real estate crowdfunding is “equity crowdfunding” which helps individual become partial owners in distinct properties, allowing them to participate alongside real-estate companies who acquire, redevelop, or build.
Another type of crowdfunding used for real estate is syndicated debt crowdfunding. This fast growing platform takes some or all of an existing real-estate loan, secured by a deed on the underlying property, and syndicate it out to a network of individual investors at a fixed rate of return.
IOU FINANCIAL INC. (“IOU” or “the Company”; TSX-V:IOU), a leading online lender to small businesses (IOUFinancial.com), announces today that Canadian Business and PROFIT ranks IOU Financial as the fourth-fastest growing company on the 29th annual PROFIT 500, the definitive ranking of Canada’s Fastest-Growing Companies. Published in the October issue of Maclean’s magazine and at CanadianBusiness.com, the PROFIT500 ranks Canadian businesses by their five-year revenue growth.
IOU Financial makes the 2017 PROFIT 500 list as the fourth fastest growing company with five-year revenue growth of 8,600%.
News Comments Today’s main news: SeedInvest to host live crowdfunding at LendIt Europe. Funding Circle says ‘good-bye’ to smaller brokers. DBRS upgrades SoFi Professional Loan Program Transactions. Credibly to manage BizFi’s portfolio. Fundrise re-opens Income eREIT. Laplanche to keynote at LendIt Europe. Today’s main analysis: France, Sweden scooping up bigger share of Europe’s fintech deals since Brexit. Today’s thought-provoking articles: France, […]
Funding Circle cuts off smaller brokers. AT: “This is likely an attempt to optimize and refine business efforts. If the time spent catering to smaller brokers costs Funding Circle more than it gains in business, then it’s a sound business decision.”
As Chinese globalize, banking landscapes change. AT: “The interesting thing is that U.S. and European banks are retreating into the domestic closet as Chinese banks spread outward. This will have long-range geopolitical effects if the trend continues.”
CREDIBLY SELECTED TO SERVICE BIZFI’S $ 250M PORTFOLIO (Credibly Email), Rated: AAA
Credibly, a leading findata small and medium-sized business (SMB) lending platform, announced today that the company is now servicing BizFi’s $250 million portfolio and 5,200 merchants. Since 2005, BizFi had been a leading capital provider to SMBs and in 2016 was one of nation’s top three largest originators of merchant cash advances. Numerous SMB direct lenders vied for the BizFi portfolio. Credibly was chosen due to their proprietary data science driven portfolio management strategy.
Credibly also announced that it has crossed the $500 million milestone in capital deployed to tens of thousands of SMBs across the U.S. This is separate from the $250M portfolio the company is now servicing from BizFi.
In addition to servicing the BizFi portfolio, Credibly is working with both sales partners and merchants to provide additional working capital to the businesses in BizFi’s portfolio. Credibly’s data science team has the ability to analyze BizFi’s twelve years of data and remittance history, which will allow Credibly to better service both the BizFi and Credibly portfolios. Further, BizFi’s data enhances Credibly’s risk management, scoring models, and portfolio management tools.
The Small Business Association (SBA) estimates that traditional banks still reject approximately 90 percent of SMB loan applications. Since 2010, Credibly has emerged as a proven platform that leverages data science and analytics to provide SMBs with a simple and intuitive way to access critical working capital. The company addresses the fundamental capital needs of SMB owners across a broad credit spectrum and through every stage of a business’s life cycle.
Main Street SMBs across a wide variety of industries that include restaurants, retail stores, salons, spas, dry cleaners, auto body shops, and doctors’ offices, all rely on Credibly to secure the necessary capital they need to grow.
Fundrise, the very first real estate crowdfunding platform in the US, has re-opened its Income eREIT to investors.
According to Fundrise, the Income eREIT has performed quite well, so far. The Income eREIT has generated 10% or higher in annualized dividends since Q2 of 2016. As of Q3 2017, the fund has posted a 10.5% annualized dividend which compares favorably to the FTSE NARET Composite REIT Index at 4.2%.
These bills are strongly pro-consumer. They will help ensure that consumers can continue to refinance their higher interest rate debts, saving consumers significant amounts of money through lower interest costs. Furthermore, these bills clearly cannot facilitate predatory lending because they do not change the rate or terms on which any entity in this country (regulated at the state or federal level) can lawfully lend money. The language of the bills simply reaffirms one of the fundamental principles of contract law — that valid loan contracts can be sold on the secondary market.
We have a situation created by the Second Circuit decision where responsible lending has been reduced in three states (NY, CT, VT). Demand has not been reduced in these states.
Trizic, the fintech company behind a B2B wealth management platform, has signed on as the technology provider to Fidelity National Information Servcs IncFIS 0.21%, connecting the Bay Area startup with the banking sector.
Trizic Digital Advisor — an open-API platform for registered investment advisers, enterprise clients, banks and credit unions — is a product built from the ground-up, CEO Drew Sievers told Benzinga.
The platform’s features include trading, portfolio management, cash management, billing and compliance reporting
LendingTree, Inc. (NASDAQ: TREE), operator of LendingTree.com, the nation’s leading online loan marketplace, has announced two key promotions within its leadership team. J.D. Moriarty, who joined LendingTree earlier this year as SVP of Corporate Development, has been promoted to Chief Financial Officer, and Gabe Dalporto, who previously served as the company’s Chief Financial Officer since 2015 and as LendingTree’s Chief Marketing Officer from March 2011 to June 2015, has been elected to the company’s board of directors.
Word that full implementation of the Department of Labor’s contentious fiduciary rule has been delayed for two years — until July 2019 — may not have shocked many observers but it’s still deeply significant, say industry experts on both sides of a debate that’s raged across two very different presidential administrations.
That’s if it ever even happens, grumbles Rostad, whose organization wants all financial advisors to be client-first fiduciaries as a matter of public service. He says the Trump administration and the brokerage industry despise two provisions of the DOL rule — the right for investors to sue advisors and firms for breaches of the rule, and the best interest contract exemption, which lets advisors continue receiving commissions if they agree in writing to continue acting in the client’s best interests and make a full disclosure of options other than commission-based business available. And the administration and brokerage industry will be working overtime between now and mid-2019 to get the provisions watered down or eliminated altogether, says Rostad.
Meanwhile, the Financial Services Institute, a Washington D.C.-based advocacy group for “a healthier, more business-friendly regulatory environment for our members” — mainly broker-dealers and their advisors — sees the delay as an opportunity for needed refinements.
Don’t consign personal financial management apps to the ash heap of technology just yet.
Granted, on Thursday Prosper Marketplace is discontinuing Prosper Daily, an app formerly known as BillGuard that helped users monitor their finances and credit scores. And the next day Capital One Financial is set to close the money management app Level Money.
Currently, the value of all the Bitcoin in the world is around $90 billion, much less than individual companies such as Amazon ($474.41 billion market cap), Google ($649.49 billion) and Apple ($815.39 billion). However, with the current trend, some investors predict cryptocurrencies to be worth $5 Trillion by 2022.
As cryptocurrencies are becoming more common, new blockchain powered platforms are emerging to change the way we invest. The success of these companies may create a scenario in which fintech companies like Robinhood, Fundrise, Quantopian and others – currently considered the most disruptive companies in the world – will become outdated in a few years.
Real.markets – Disrupting real estate crowdfunding
REAL is an Ethereum Smart-Contracts governed ecosystem that focuses on creating the best conditions for Real Estate investment eliminating costs due to unnecessary intermediaries, providing transparency and liquidity, alleviating tax inefficiencies and easing cross-border transactions under a unified crowdfunding platform.
NASDAQ LINQ – Trade private companies
Almost two years ago NASDAQ launched LINQ, a digital ledger technology that leverages a blockchain to facilitate the issuance, cataloging and recording of transfers of shares of privately-held companies on The NASDAQ Private Market in collaboration with Chain.
enigma – machine-based investing platform and infrastructure for crypto-assets
From 2009 to 2015 alone, the amount of assets under management (AUM) by quantitative hedge funds grew at a rate of 14% year-over-year, nearly double the 8% year-over-year growth of assets managed by traditional hedge funds.
Following the rising demand for crypto-currencies, enigmabelieves an interesting opportunity arises: algorithmic trading on crypto-assets. Many exchanges already offer the ability to place orders through RESTful APIs, permitting users to run their trading algorithms locally.
From mobile payments, app based investing platforms, to online banking solutions, financial technology (FinTech) has revolutionized not only how consumers receive financial services but also how they expect to receive such services.
A recent studyshowed that 59 percent of senior financial services executives believe that we will see an increase in the use of digital solutions to improve operations, with 56 percent of executives citing technological disruption as a component of their business strategy. From an operational perspective, findings have shown that core financial institution activities including Deposits and Lending and Investment Management are expected to be radically reconfigured as a result of technological innovation. Consumers have also begun to shift their preferences towards FinTech, with statistics indicating that in 2016 a third of consumers reported regular use of financial technology services, with such use doubling from two years prior. Furthermore, more than 52 percent of consumers are expected to use FinTech services in “the near future.”
A recent study found that two-thirds of Americans cannot pass a basic financial literacy test, with the number of those who can pass such a test decreasing annually. Globally, the figures reflect similar trends; in 2015, only 35 percent of men and 30 percent of women were classified as financially literate.
Greenlight’s flagship product is a debit card for children that utilizes mobile app technology to provide parents with a customizable and monitorable solution to facilitate purchases.
TS: Greenlight is free for 30 days and then just $4.99/mo. for the whole family to use (all parents and up to 5 kids). Each child receives their own Greenlight Card with their name on it and a unique PIN. Parents use our app on either their iOS or Android smartphone, and can easily manage all of their kids’ cards from one place.
Parents can load and transfer money onto their kids cards instantly from anywhere with no additional fees. That money can be limited to specific stores or websites, or be spent anywhere depending on what parents decide. Greenlight provides real-time mobile alerts to tell parents where and when their kids are making a purchase and can even automate allowances.
Kids can also use the Greenlight app on their smartphone. They can visually see their balances, request money, and communicate what they’re purchasing with their parents. When a parent receives a funding request from one of their children, they can easily approve or decline the request in the app.
The U.S. Consumer Financial Protection Bureau has received at least 293 complaints about Coinbase Inc., according to data reviewed by Bloomberg.
More than a third of the grievances came from individuals who said they were unable to access their money when promised. Many people also complained about other transaction or service problems. Accusations of fraud represented less than 15 percent of the complaints.
LendingCalc, Inc., a direct investment platform providing global access to digital specialty finance for institutional investors, announced the appointment of Terry Tse, the former Chief Risk Officer of the leading Chinese P2P platform, Dianrong, as strategic adviser for the firm. In his role, Terry will help build LendingCalc’s global investment gateway and platform due diligence framework.
Redwood Bank, Britain’s newest business bank for SMEs (small and medium sized enterprises), has announced that just over four months after securing its initial banking licence, it has completed its “Mobilisation” phase and has now opened for business, offering secured SME mortgages for business owners, as well as for experienced commercial and residential property investors. It has also launched a competitive business deposit account.
Its speed to market is the result of a combination of factors, including having a very experienced and proven management team, and the fact that it’s the first business bank with 100% cloud- based infrastructure, which improves efficiency as well as security.
New research from Equifax Touchstone, an intermediary database provider, illustrates an enhanced focus among investment advisors on delivering consistent investment outcomes to customers.
Of 141 surveyed investment advisors, 82 per cent were found to have a centralised investment process, meaning that a consistent approach to allocation and monitoring exists for all clients.
However, 76 per cent use model portfolios, which are bespoke to a customer’s risk-reward preferences, and which are automatically rebalanced regularly to bring returns in line with expectation – even if the broader approach to investment management is the same for all clients. These model portfolios are comprised of a diversified pool of mutual funds that invest in a variety of assets, ranging from large and small stocks to REITs.
But in its shift to passive strategies, P2P is perhaps less closely aligned with investment advisors. Equifax Touchstone’s survey shows that advisors still very much value active investment vehicles. While passive investing plays a part for 82 per cent of advisors, the majority invest 25 per cent or less in passives, with11 per cent of advisors investing more than 50 per cent in them.
If you’re looking to raise finance for your business, there are a few options you can explore including secured or unsecured debt, private equity, venture capital investment, peer-to-peer (P2P) lending and crowdfunding.
Some of the more popular crowdfunding models include reward-based, donation-based, micro-lending, P2P, peer-to-business and equity.
Equity crowdfunding as an industry, over its six-year lifetime, has raised about £600m in the UK, with close to half of that having been raised by Crowdcube. Equity crowdfunding facilitates investment into start-ups, early stage businesses and growth companies in return for a pro-rata equity stake in the business.
Investments can be made from as little as £10 with no maximum in place, which typically culminates in pro-rata ownership of the company via ordinary or B investment shares.
You may have also seen the likes of BrewDog, River Cottage and Grind raise money through bonds on Crowdcube. This is where a company launches a funding round starting from at least £250,000.
BrewDog raised £10m through a bond in December 2016, offering 8% interest to the investors. Over 2,700 people backed BrewDog in three weeks and should see interest payments for the next four years; the length of the bond term.
Real estate has been booming around the world, particularly in the UK, with new housing, apartment and condo complexes being built at a phenomenal pace.
Abdullah Iqbal, Co-Founder of the Knightsbridge based start-up PropTech Crowd.
While there existed property crowdfunding companies already, Abdullah and his dad saw an obvious vacuum in the market. “None of the property crowdfunding platforms were Shariah compliant at the time, due to them being involved with interest. Our motivation was to take the banks out of the equation, enabling investors to have shares and democratising the property market for everyone, while conforming to the Islamic prohibition of interest”, emphasises Abdullah.
The company’s core mission is to revolutionise property investment through innovative crowdfunding technology, allowing everyday investors to access high-ROI opportunities that they may have been priced out of in the past.
I learned that Mufti Abdul Kader, a renowned Islamic scholar and expert in Islamic finance, is a Shariah Compliance Advisor at PropTech Crowd. His duties entail making sure that all elements of the business are Shariah compliant, visibly and consistently.
At LendInvest we have been clear that the housing market will look a lot healthier when there is less emphasis on the major developers, when we instead have a market which encourages small- and medium-sized (SME) developers to build homes too. Our studies have found that SME developers are excluded from much of the government support that exists for SMEs from other industries, something which has to change.
The Bank of England should not keep interest rates at their record low as an insurance policy against the risk of a “bumpy Brexit” and it needs to start raising borrowing costs now, BoE policymaker Michael Saunders said.
But at the same time the Brexit hit to sterling has pushed up inflation above the BoE’s 2 percent target, leading to the split among the central bank’s rate-setters.
Earlier this month, they voted 6-2 to keep rates at 0.25 percent and the BoE warned that Brexit was weighing on the economy.
We see five major key success factors for the future China fintech market:
Data abundance and application – Business models in financial services will be increasingly data-driven, and data will be at the core of the value chain.
Large customer base
Availability of proprietary and comprehensive products
Strong knowledge of financial services and risk management – A strong combined core of financial services expertise and risk management capabilities remains a prerequisite for success, allowing for more efficient identification of useful data and building of effective risk models.
“Fin plus tech” organization and culture
Niche Fintech Players should expand and perhaps transform their business models. The first and most intuitive way is to grow organically beyond a niche. Qudian, for example, has expanded beyond its legacy focus on university borrowers to develop an e-commerce ecosystem driven by a consumer finance model.
SeedInvest and LendIt, the roving Fintech conference, have partnered on live crowdfunding for the upcoming LendIt Europe event scheduled for this coming October. The live event is being billed as a European first. LendIt Europe participants will be able to invest directly in companies participating in the PitchIt portion of the event taking place in London.
SeedInvest previously powered several live investment crowdfunding events in Europe with noted success. SeedInvest’s partnership with Jason Calacanis, and his LAUNCH Festival, reportedly raised $7.5 million from 3900 individual investors. This will be the platform’s first foray beyond the US borders though and may be a sign of a strategic push for the company.
LendIt announced that Renaud Laplanche, the CEO of Upgrade and former CEO of Lending Club, will join the keynote speaker roster for LendIt Europe 2017.
He will be giving the opening keynote speech on the second day of LendIt Europe where he will be giving an update on Online Lending 2.0 and discussing the US fintech market, where the online lending industry is today and how it fits into the broader fintech sector trends going forward.
Global cross-border capital flows have declined 65 per cent since 2007, and half of that is explained by a drop in cross-border lending flows. The largest global European banks, and some US ones too, are in retreat from foreign markets. But financial globalisation is far from finished — rather it is broadening and becoming more inclusive as developing economies, most notably China, step into the breach.
The eurozone has been at the forefront of the retreat from foreign markets among banks in advanced economies. The foreign claims of eurozone banks have fallen by $7.2tn, or 45 per cent, since 2007, and nearly half of that has been claims on other borrowers in the eurozone — particularly other banks, new MGI research finds. UK and Swiss banks have sharply reduced foreign assets since the crisis as well. US banks, which have always been less global than their European counterparts, have re-focused on growth at home.
In contrast, China’s four largest commercial banks have seen their foreign assets grow 12-fold since 2007 to more than $1tn. And that’s still only 9 per cent of their total assets. Foreign assets make up 20 per cent or more of the total assets in the largest banks in all advanced economies; if China’s largest banks follow that path, they could see tremendous growth in foreign lending ahead.
But as financial technologies continue to expand, legacy players have come to accept the disruptive role of fintech startups and the need to work together. In recent years, the relation between banks and fintech startups has evolved from marginal investments to closely knit collaboration and integration.
Banks are now getting involved at different levels to help fintech companies get off the ground. This includes an increasing number of buyouts, mergers and partnerships.
An example is Goldman Sachs, a banking firm that has invested more than $570 mln in fintech companies since 2012. Last year, the banking giant acquired Honest Dollar, a digital retirement savings platform, in order to expand the startup’s brilliant solution to millions of its customers. Along with Standard Charter, Goldman also helped Momo, a Vietnam-based mobile wallet and payment app, raise $34 mln in two rounds of funding. Goldman also launched its own online lending service Marcus last year, a move that is inspired by the fintech culture. The service has so far doled out more than $1 bln in loans and expects to cross $2 bln by the end of this year.
On the other end, fintech startups are helping banks adopt new technology. Ezbob, for example, is a UK-based startup that provided online lending services to SMEs before white-labeling its technology and changing its business model to a Lending as a Service (LaaS) platform. The Royal Bank of Scotland has leveraged Ezbob’s technology to launch Esme, its automated lending platform which allows small and medium-sized businesses to obtain loans quickly, even outside working hours.
Automated wealth platforms or robo-advice is not likely to find its success by just digitalising its services, says Thomas Davenport, a professor of information technology and management at Babson College. The future lies in a hybrid model that uses the efficiency of big data with the softness of personalised human advice.
Around 60 per cent of consumers would rather have a live person in charge of their finances instead of relying on automated technology, according to a survey from Legg Mason Asset Management.
A recent report added to the portfolio of MarketResearchReports.biz presents a detailed analytical account of the global market for peer to peer lending. The report, titled “Global Peer-to-peer Lending Market Size, Status and Forecast 2022,” states that the market will exhibit growth at an exponential pace over the period between 2017 and 2022.
This report presents detailed insights into the market and its expansion across the globe from 2017 to 2022.
In 2016, KPMG suggested US$24.7 billion was invested in fintech companies globally. Data accumulated by Financial Technology Partners, an investment bank focused on fintech, cites $36 billion across over 1500 funding deals from over 1700 unique investors (not taking into account M&A deals) as a more accurate figure.
As it has done throughout history, the banking and lending industry is dominating the fintech landscape, with payments and e-commerce a formidable rival.
The financial services and technology sectors are set for changes as the budget proposed a series of measures to encourage innovation in the fintech industry. This includes new legislation which, if implemented, is likely to allow crowd-sourced equity funding, tax concessions for start-ups and angel investors and fewer barriers to licensing of finance firms. The traditional banking sector could see more digital disruption arising from these changes which could subsequently create demand for top finance and technology talent.
Credit insurance provider Atradius recently launched its new digital platform ‘Atrium’, which provides customers and distribution partners with real-time data to better understand buyers, credit limits and risk. The platform is designed to drastically improve the user experience, including time efficiency – operations that used to take 15 minutes now only take three.
Then there is Lenddo, an Asia-based fintech platform that uses non-traditional data to provide credit scoring and verification to economically empower the emerging middle class around the world.
Secure payments data platform, EFTsure, recently announced a new collaboration agreement with PricewaterhouseCoopers Australia. Under the agreement, PwC can advise certain clients of EFTsure’s innovative real-time payment verification technology and best practice payee management solution to help those clients to mitigate the risk of fraudulent or erroneous electronic business payments.
Other companies making inroads include UBank, one of Australia’s leading digital-only banks, which recently unveiled RoboChat, Australia’s first virtual assistant to help potential home buyers and refinancers complete their online home loan applications.
FinTech, the abbreviated form of financial technology, is that segment of the start-up culture that deals with good old finance and banking business but through the more novel methods of crowdfunding, peer-to-peer models, mobile payments, loans and even asset management. They squarely fall under the definition of Non-Banking Financial Companies (NBFCs), and considered against the Indian banking scenario they do not meet the legal definition of a bank as is outlined in the Companies Act 2013 or even the Companies Act, 1956.
If a recent Accenture report is anything to go by, fintech that was in a near-nascent state back in 2008 globally shot up in value from $930 million to about $12 billion by the start of 2015.
The other advantages are:
Cheaper business setup and expansion costs;
Quick rolling of funding rather than the drawn out method of first talking to investors;
Cheaper cross-border transfer of money (a fine example is that of UK-based TransferWise);
Simple registration process backed by minimal documentation, sometimes not requiring any Net Worth or collateral information (as is the case with LendingKart);
Even foster efficient fraud and anti-money laundering management in real time across products, channels and customers (as IndusInd has been successfully pioneering since quite some time now).
Why FinTechs need NBFC licenses to operate?
Since NBFCs are principally in the business of providing loans and advances, insurance, acquisition of shares, debentures and stocks, leasing, hire-purchase and even receiving deposits under a set arrangement or scheme, they fulfil the popular 50-50 test and are required to obtain the ‘Commencement of Business’ certificate from RBI (as per section 45 l (a) of the RBI Act).
The 50-50 test that is the basis of the principal business conducted by an NBFC finds application when a company’s financial assets constitute more than 50 percent of the total assets and income from financial assets constitute more than 50 percent of the gross income.
At the same time, our commitment to offer alternative investment channels was reinforced when we saw how the global flow of funds and individual investors continued to cause disruptions in house prices in many major cities.
Crowdfunding and peer-to-peer lending have been touted as among potential alternative platforms that can give small developers access to funding. We saw a number of such platforms used in many countries and they helped solve some of the funding needs.
On June 18 2015, we were deeply encouraged by news that Wanda Group (one of the largest commercial developers in China or the world by now) announced that it had raised five billion yuan (RM3.4 billion) from investors online in just three days to fund the construction of three malls. Investors were able to take part in the projects by investing as little as 1,000 yuan. This is truly opening up access to real estate.
Firstly, digital tokens created on blockchains are technically very difficult to hack and all transactions and documents are transparent. Secondly, in transaction using digital tokens, especially those involving completed properties, a lot of middleman fees can be reduced. More importantly, such digital tokens can be traded much like shares are traded on stock exchanges. This makes real estate a liquid instrument.
“Data analytics offer efficient ways of analysing credit history and behaviour of a prospective borrower to make lending fast and easy on the digital platform,” says Rishi Mehra, CEO, Wishfin.com. Smartphones have made digital transactions seamless and by including a lending option, the ‘right now’ generation has it going for them like never before.
A P2P lending portal works in a way wherein lenders can make offers to fund borrower’s requirements which are accepted on first come, first served basis. Borrowers can seek to raise money from multiple lenders. A formal contract is signed by the lender and the borrower once they reach an agreement. The good news is that RBI has finalised P2P lending norms, which means there is nothing illegal or fishy about these loans. This format of lending is fast catching up, especially among the youth because many of them don’t have a credit score that will make them eligible for borrowing as soon as they start earning.
Some new loan-makers are dabbling in tech to help them gauge a potential borrower’s creditworthiness.
For potential borrowers it finds here, the lender will set artificial intelligence loose on the trove of data that the booking website serves up, like how busy the applicants’ inns are.
Japan Net Bank, an online lender, also uses technology to sift through big data when screening potential borrowers. Partnering with freee, a Tokyo-based online accounting software provider, the bank recently began using AI to quickly pick up and analyze data concerning potential borrowers’ financial situations as well as how well their businesses are doing.
Where isn’t a global fintech hub these days? Count Bahrain among the multitude of claimants. The Central Bank of Bahrain (CBB) has announced the first members of its new regulatory sandbox: NOW Money and Tramonex.
Dubai-based NOW Money claims to be the first company in the Gulf region to offer a mobile banking solution to users, including accounts and a range of low-cost global money transfer options for low-income workers.
Tramonex is a business-facing solution, helping companies to process and transfer funds online. Its focus is on facilitating conversion and settlement services to automate cross-border transactions.
International law firm Simmons & Simmons continues to advise on cutting edge payment platform projects and the emerging regulation of payments. The Middle East TMT team, led by partner Raza Rizvi and senior associate Neil Westwood, advised Mercury Payments Services LLC (Mercury) on the phased roll out of an innovative payment service through cards issued by the Roads and Transport Authority of Dubai (RTA).
South Africa ranks among the highest in fintech users globally and reports one of the highest incidences of intended use, a new study finds.
At 35%, fintech adoption in South Africa beats the global average of 33% and is mostly in line with its emerging market peers, who boast large tech savvy but financially underserved populations. Domestically, 6% of fintech users use five or more services and are classified as super users.
At 41%, adoption among consumers aged 25 to 34 is highest, closely followed by those aged 35 to 44 at 40%. The largely digital native 18 to 24 year-old category lags behind at 36%, mostly due to them having less sophisticated financial needs. Adoption gradually declines from age 45 upwards.
EY found that fintech adoption is highest among South Africans who earn $50 000 to $80 000 per annum at 51%, with usage at 50% among those who earn more than $150 000 annually. Adoption of all five services – money transfer and payments, financial planning, savings and investments, borrowing and insurance – is highest among the former income bracket. Surprisingly, those that earn more than $150 000 are the highest users of borrowing services, possibly due to their ability to leverage off their earnings.
Brazil’s central bank has proposed allowing financial technology companies to lend money, without taking deposits as commercial banks do, as part of new rules for the fast-growing fintech industry in Latin America’s largest economy.
The rules,which will be assessed in public hearings over the next 2-1/2 months, should not require congressional approval, central bank director Otávio Damaso said on Wednesday. Commercial banks will be allowed to create their own fintechs once the rules are in place, he said.
News Comments Today’s main news: Prosper performance update for July 2017.Top Mozido executives quietly left company.White House OKs delay of fiduciary rule.Funding Circle kicks off 12M marketing campaign with TV ad.LATTICE80 to open London fintech hub.Klarna profits up 130%+.RateSetter hits 2,000 broker milestone. Today’s main analysis: Millennials prefer auto, personal loans to credit cards. Today’s […]
Factors that push millennials toward auto, personal loans instead of credit cards. AT: “The larger story could be that digital lending is so disrupting credit card usage that we could be witnessing the decline of bank cards altogether. It’s still too early to tell, but Gen Z is coming up behind Gen Y (millennials) and they were born the year the World Wide Web went commercial. That means Gen Z is the first truly digital native, and who knows where they will stand on credit cards? The future of bank cards may be the mobile app. In fact, I would say it is likely the mobile app.”
Non-prime boomers struggle financially, but less than other generations. AT: “This study is a nice complement to TransUnion’s study on millennials and Gen Xers. It follows, of course, that non-primes of any generation will struggle more than primes, and I would expect that older generations have figured out some way to cope with their financial struggles more so than younger generations, so I’m not sure we learn much from this research.”
How Gen Z will affect the future of the P2P economy. AT: “Beyond P2P lending, this touches on many aspects of the sharing economy. Gen Z could be a greater economic force to reckon with than the millennials, but they are just becoming of age so it remains to be seen exactly how they will impact the economy and how they will use financial services technology. My guess is that Gen Z will accelerate what Gen Y started, but by how much?”
Our risk team implemented a credit tightening in July aimed at removing certain populations of borrowers from originations on a go-forward basis. As a result of this credit tightening, the overall distribution of the book shifted slightly towards lower risk loans. This slight shift resulted in an overall portfolio coupon decrease of 45bps and an overall return estimate decrease of 26bps.
Additional highlights from the July Update include:
Charge-off levels in 2016H2 vintages continue to show meaningful improvement compared to 2016H1 vintages.
Periodic delinquencies moved higher for 2016 and 2017 vintages.
The top two executives of Mozido, a financial technology company that raised some $300 million to develop a mobile payments business, have quietly left the company.
On its web site, Mozido currently lists Todd Bradley as its CEO, but Bradley said in a brief interview that he left the company in June. Bradley’s departure appears to have left Mozido without a chief executive officer. Bradley has also left Mozido’s board but the company’s web site still lists Bradley as a director.
Scott Ellyson, Mozido’s chief financial officer who is listed on Mozido’s web site as its second-most senior executive, has also left the company, according to Bradley. Ellyson’s LinkedIn page currently does not mention his time at Mozido. He did not respond to a request for comment.
Three weeks ago, Michael Liberty, the founder of Mozido, was sentenced to four months in prison and a $100,000 fine by a federal judge. Liberty pleaded guilty in November 2016 to making illegal campaign contributions.
As the first generation to be fully immersed in mass-market digitalization, Millennials are slowing their credit card usage while increasingly using other credit products such as personal loans. A just-released TransUnion (NYSE:TRU) study found that Millennials are carrying on average two fewer bankcards and private label cards than Generation X (“Gen X”) consumers at the same respective ages. Conversely, Millennials’ appetite for new auto and personal loans has grown at a faster rate than Gen X borrowers at the same age points.
Credit Cards Out of Fashion; Cars and Personal Loans in Style
The study found that, in addition to carrying fewer credit cards than Gen X consumers, Millennials also are maintaining lower balances on those cards. TransUnion analysts believe that this is partly driven by the CARD Act of 2009, which limited the marketing of credit cards on college campuses. The increased use of debit cards also plays a role in this shift. The study pointed to recent Federal Reserve data, which found that debit card transactions grew from 8 billion in 2000 to 60 billion in 2015. In contrast, credit card transactions only increased from 16 billion to 34 billion in that same timeframe.
Millennials and Mortgages
Among all major credit products, the mortgage market has been the slowest to recover from the Great Recession, with home ownership rates still below levels observed in 2009. Overall, homeownership is down 0.8% since the Recession, but this number grows to -1.6% for 35-44 year olds and -2.1% for those under 35.
As a result of credit access being limited and, per the U.S. Census Bureau, affordability being affected by income gaps between the two generations, TransUnion’s study found the percentage of Millennials opening mortgages between the ages of 21-34 (5%) is nearly half of the Gen X group (10%) when they were that age. TransUnion observed a smaller but still material gap (13% for Millennials vs. 16% for Gen X) within the Super Prime risk tier, suggesting that this dynamic is not driven solely by credit supply.
TransUnion’s study found that access to mortgages has declined dramatically for 21-34 year olds. In 2000, 39% of mortgage originations in this age range were comprised of non-prime borrowers. In 2016, non-prime borrower originations declined to 20%.
Further impacting mortgage originations to Millennials are lower income levels. Per the U.S. Census Bureau, median household income of consumers ages 25-34 declined from $60k in 2000 to $57k in 2015. The impact can be seen in the housing status of these consumers: a larger portion of younger adults ages 25-29 are living with their parents, rising from 15% in 2000 to 25% in 2014.
Despite these challenges, a TransUnion survey of 1,340 consumers in July 2017 found that nearly 75% of Millennials ages 23-37 said they plan on purchasing a home in the future.
The Office of Management & Budget of the White House has approved the Department of Labor’s request to push back the final implementation date of its fiduciary rule — originally scheduled for January — to July 2019, the Wall Street Journal reports.
Being a key transmission mechanism for savings, investment and spending, the banking sector is worth watching as a barometer for the health of the overall economy. Lately it has been acting as one would expect toward the end of an expansion phase.
Most glaringly, after strong lending growth for several years, momentum clearly is slowing. In its quarterly report on the sector, the Federal Deposit Insurance Corp. found that total loans and leases by banks and other insured institutions rose by just 3.7% from a year earlier at the end of June. That is the third consecutive quarterly deceleration and is down from a 6.7% pace of growth a year ago.
After a period of strong lending, it is also typical for defaults to start ticking up as levels of indebtedness rise and bills come due. This is indeed happening, at least among consumers. Credit-card charge-offs soared by 24.5% in the second quarter, according to the FDIC, marking the seventh straight increase. Charge-offs on loans to commercial and industrial borrowers, however, declined by 9.7%, possibly due to a recovering energy sector.
The Madden case held that National Bank Act preemption of state usury laws applies only to a national bank, and not to a debt collector assignee of the national bank. The decision has potentially broad implications for all secondary markets in consumer credit in which loan assignments by national banks occur: securitizations, sales of defaulted debt and rent-a-BIN lending.
Unfortunately, the “Madden fix” bills are overly broad and unnecessary and will facilitate predatory lending.
The actual “valid-when-made” doctrine provides that the maker of a note cannot invoke a usury defense based on an unconnected usurious transaction. The basic situation in all of the 19th-century cases establishing the doctrine involves X making a nonusurious note to Y, who then sells the note to Z for a discount. The discounted sale of the note can be seen as a separate and potentially usurious loan from Y to Z, rather than a sale. The valid-when-made doctrine provides that X cannot shelter in Y’s usury defense based on the discounting of the note. Even if the discounting is usurious, it does not affect the validity of X’s obligation on the note. In other words, the validity of the note is a free-standing obligation, not colored by extraneous transactions.
A small business lender knows that a certain percentage of loans will become NPLs and typically has parameters the business must stay within to remain profitable. The lender may pursue NPLs on an in-house basis indefinitely past the charge-off date or turn them over to a collections agency at some point. Both options create problems in the fintech business model.
The best recovery option for online small business lenders is to manage NPLs in-house until they become charge-offs, then use the services of a reputable commercial debt buyer. This is how it works.
The lender works with the commercial debt buyer on a one-time basis, periodically, or in a forward-flow relationship where NPL information is sent regularly to the buyer.
A non-disclosure agreement (NDA) is signed and the lender provides information to the buyer on the pool of non-performing assets. This includes the number of accounts and amount of outstanding balances.
Buyer assigns a value to the NPLs and offers a price.
Lender signs the purchase agreement. Typically, buyers in forward-flow relationships will send payment within 24 hours.
Reputable buyers then work to collect the debts over time, without using the lender’s name and in a sensitive manner, and without reselling the debt.
Ten-X Commercial, the nation’s leading online real estate transaction marketplace, today announced that it has partnered with Money360, a technology-enabled direct lender focused on commercial real estate (CRE), to offer financing for properties available for sale. The partnership will expand the investor pool for commercial properties listed on Ten-X by giving prospective buyers assurance they will be able to procure the necessary financing to fill the deal’s capital stack, while providing sellers and their brokers increased confidence that once terms are agreed upon, buyers will be able source a loan and close the deal.
Under the agreement, Money360 will work with Ten-X to determine which commercial properties listed on the Ten-X platform are appropriate for pre-arranged financing, and will then pre-underwrite bridge and/or permanent loans for qualifying properties. The lender’s offers will be listed on the Ten-X property detail page, informing prospective buyers about the available financing terms. After the property trades, Money360 will work with buyers to underwrite, process and close the loans to facilitate the transaction.
Despite the widespread perception that Baby Boomers (ages 51-64) are struggling to make ends meet more than any other generation, new research from Elevate’s Center for the New Middle Class has found that Baby Boomers are actually struggling the least. In fact, Baby Boomers are the most likely to have steady employment and run out of money less often, compared to data from previous studies.
“These findings come as a surprise, as they are counter-intuitive to many of the trends we have seen widely covered around Baby Boomers,” said Jonathan Walker, executive director of Elevate’s Center for the New Middle Class. “Recently, it was reported by the Federal Reserve that Baby Boomers are leaving the workforce in such large droves that they are skewing employment numbers, but we’ve found that 60 percent of non-prime Boomers have had no employment change in the last 12 months, compared with 59 percent of Gen-X and 43 percent of Millennials.”
But even though they struggle less than other non-prime generations, they are still facing challenges in the new economy, especially when compared to their prime counterparts. Non-prime Boomers are more likely to hold more than one job and are 10 times more likely to run out of money every month.
Additional key findings include that – compared to their prime cohorts – non-prime Boomers are:
2.2x as likely to say that their finances cause them significant stress
4x as likely to live paycheck to paycheck and 1 in 6 use payday loans
14x as likely to express difficulty predicting monthly income and are 2.5x more likely to overdraft on bank account
3x as likely to take a loan against their 401k
46 percent less likely to go on vacation
More likely to be living in households with 3 or more working adults
Born in the mid-1990s to late 2000s, Gen Z accounts for one-quarter of the U.S. population. They are considered the most diverse and most multicultural generation the U.S. has ever seen. The highly influential Gen Zers are the first digital native generation. They are already impacting the current peer-to-peer (P2P) economy and will have an enormous effect on how this economy evolves.
A Gallup study found that about 8 in 10 students in grades 5 through 12 reported that they wanted to be their own boss rather than work for someone else.
Additionally, a millennial branding studyreported that 72% of high school students and 64% of college students want to start their own business.
The SEC may suspend trading in a stock when the SEC is of the opinion that a suspension is required to protect investors and the public interest. Circumstances that might lead to a trading suspension include:
A lack of current, accurate, or adequate information about the company – for example, when a company has not filed any periodic reports for an extended period;
Questions about the accuracy of publicly available information, including in company press releases and reports, about the company’s current operational status and financial condition; or
Questions about trading in the stock, including trading by insiders, potential market manipulation, and the ability to clear and settle transactions in the stock.
Online real estate marketplace RealtyShares announced on Tuesday the closing of two industrial real estate financing transactions in San Francisco and Boston MSA. The amount raised between the deals was $10.3 million.
RealtyShares stated it secured $8.7 million industrial debt loan for a San Francisco located mixed-use, industrial warehouse and office space in the city’s South of Market (SoMa) neighborhood.
Following impressive results using Clear FraudTM to mitigate losses in targeted auto lending transactions, Westlake Financial Services has expanded its relationship with Clarity Services to strengthen its auto portfolio nationwide.
Westlake, which has a network of more than 50,000 new and used auto and motorcycle dealers throughout the United States, began testing Clear FraudTM a year ago in select markets. The California-based finance company has enhanced its profitability by using Clear FraudTM to provide loan terms that are more attractive to both consumers and dealers.
By incorporating Clarity’s credit data, Westlake is able to more accurately price and structure deals with profitable loan terms, and determine down payment requirements. Westlake’s use of Clear FraudTM helps the lender evaluate subprime applicants with credit scores below 600. Clear FraudTM also makes it easy to integrate scores into Westlake’s existing scorecard.
AirFox, the company making mobile data and the internet more affordable for millions of people, today announced it closed its $6.5 million ICO pre-sale weeks earlier than scheduled. The ICO will open at 10 a.m. ET on September 19, 2017. AirFox will use the ICO funds raised to further develop and launch its new blockchain consumer platform, AirToken (AIR), in order to tokenize mobile access by unlocking mobile capital from the smartphone for the underserved and underbanked prepaid mobile subscribers in emerging markets.
Not too long ago, when small- to mid-sized business (SMB) Orion First, a business credit ratings firm, needed a loan, its only option was to visit a local bank, fill out myriad application forms and wait several weeks or months to (maybe) get approved. Fast forward to today, and the small business lending process has undergone a significant overhaul.
With a growing number of FinTech players competing in the lending space, small businesses now have improved access to a range of loan options — and, in most cases, funds are disbursed in as little as 24 hours.
New services that can expedite the lending process for companies like Orion First are already gaining popularity with SMBs and consumers who need short-term loans. The Innovative Lending Platform Association (ILPA), a trade organization representing several companies in the space — including prominent players like small business loan provider Kabbage and financial consultant and insights provider PayNet — says its member companies have distributed more than $14 billion in capital loan disbursements to small businesses to date.
The millennial population is estimated at roughly 83 million, and a recent survey found almost half of millennials (49 percent) plan to start their own businesses within the next three years.
A recent survey by YouGov found 81 percent of both retail consumers and SMBs who turned to digital lenders said the ease and speed of completing a loan application were the reasons they made the switch. In the same survey, 77 percent of respondents cited the rapid pace of loan decision making as the key appeal for these platforms.
Online lenders have faced increased competition from other more established fintech companies. Furthermore, banks such as Goldman Sachs have started their own lending arms
Publicly traded firms have made great strides in improving financials; the analyst consensus has Lending Club moving into positive GAAP earnings by year end in part driven by securitizations as a lower-cost source of capital
SoFi has made strides towards becoming more bank-like after adding mortgage loans, wealth management services and acquiring (and subsequently shuttering) online bank and money transfer service Zenbanx
As the latest PitchBook fintech analyst note points out, some of the most notable companies are becoming more like banks, with SoFi the most prominent example, as it expands from student loan refinancing into unsecured consumer credit, wealth management and more. Yet as some online lenders establish a foothold, there are still significant hurdles to overcome.
LATTICE80, a fintech hub owned and operated by Singapore-based private investment firm Marvelstone Group, announced on Monday it is set to open a fintech hub in London as part of its global expansion. The organization revealed that as of August 2017, its UK entity has been registered, but a suitable hub space remains to be found. It is currently in talks with relevant parties in the private and public sectors, with plans to secure and open a hub by 2018.
In particular, the UK market has lots of new entrants (now in excess of 100 providers) but the number of clients seems to be static at about 40,000-45,000. In order to remain competitive, lenders are required to compete on price and terms, which increases their risk and often reduces their return.
Customers also have more choice in the market, in that they have access to working capital both from banks and alternative lenders such as peer-to-peer (P2P) platforms. Consumers are becoming increasingly aware of the non-traditional players in the market that are harnessing technology. The new generation of borrowers is more tech-savvy and more comfortable embracing P2P capabilities, which makes new players more attractive.
Richard Spielbichler, ABL director North West, Independent Growth Finance
“The main pitfall to consider is whether the business has a USP that will protect their position in the market. Many businesses suffer from ‘me too’ syndrome, where their USP is very similar to an existing organisation.”
Angelika Burawska, COO, Startup Funding Club
“It depends on the type of financing. In the case of loans and various types of trade finance, the main pitfalls lie in payment terms, such as how much and when, late payment fees and what happens if a company fails to pay.
“In the case of equity funding, businesses have to pay attention to the valuation they raise which may be too high or too low; and the control rights they give to investors.”
On 25th August, Zhushang Financial, a P2P lending platform specialize in providing auto financing services, announced the closing of Tens million RMB in series A funding. Toulang Capital led the round, with participation from Cailang Capital. The “Zhushang Financial” brand has been upgraded from the “Zhushang Dai” brand and announced with this round of financing.
Zhushang Financial is based in Chengdu, a developed city in west China, providing P2P auto financing services for small companies and individuals. Currently, it has established branches in many western cities, including Chongqing, Guizhou Province, Kunming, Xi ‘an, Taiyuan and Lanzhou. Also, the company has signed agreements on depository with both Zhejiang Mintai Bank and Hunan Rural Commercial bank (Youxian Branch). Up to now, the total volume of the platform has reached over 500 million RMB.
According to the report of Central Bank, China’s auto financing market reached 700 billion RMB in 2016 and may exceed 1.85 trillion RMB in 2018. Its rapid growth comes not just from the wave of “car service”, but also from the policy support. Actually, according to the policy issued last year, the net loan assets must be small and dispersed, and since then auto finance has become a new hotspot of P2P lending industry.
August 29, the first financial reporter from a block chain technology business executives were informed that the China Securities Regulatory Commission recently to some of the block chain enterprises on the ICO (Initial Coin Offering, virtual currency initial public offering) for advice, the current In the stage of collecting comments and discussions, the SFC expressed particular concern about ICO projects for pyramid schemes in the name of virtual currency.
On Friday the company reported sales and profit results for the first half of 2017 that represented gains of 21% and 138%, respectively. The strong financials come amid a series of headlines that show the Swedish payments company making strides on a number of fronts. This includes rumors that Klarna is partnering with Stripe to better access the U.S. market. Such a partnership would make Klarna the only non-credit card option available on the platform, and enable customers to take advantage of Klarna’s signature “pay after delivery” service. A deal between Klarna and Stripe also would provide what an anonymous source quoted in Nordic Business Insider referred to as “potentially an important piece of the puzzle” of Klarna’s plan for expansion in the U.S.
Last year, Klarna launched the “Smoooth” campaign with a series of award winning and critically praised advertisements showing just how smooth payments should be. Now Klarna takes the next step by fully implementing the concept of “Smoooth” across all aspects of the brand. This includes not only a new logo, graphic identity and checkout touch-points but towards a completely new user experience – transforming rational payment transactions into an emotional shopping experience for consumers.
Ice-cream melting on warm car hoods, shampooed long-haired dogs and pencils being pushed into huge jelly pastries. Klarna`s new identity is definitely not your average bank speaking.
“We are on a journey to transform Klarna from a traditional payment provider to a stronger consumer brand. Our new identity is more modern and expresses our focus on the consumer experience, innovation and simplicity in payments. It’s time for a new kind of bank.” Sebastian Siemiatkowski, CEO of Klarna
This is not only an update of the visual identity of Klarna but also changing the way consumers interact with the company. The concept of “Smoooth” will be evident when watching an ad or pushing a button to pay in the Klarna app. Every Klarna touchpoint has a new unique graphic and will be smarter and more intuitive. That will ensure a better user experience for consumers, but will also support in driving growth, conversion and consumer loyalty for all Klarna merchants.
There are three intuitive ways to shop with Klarna:
Pay now. – Pay directly at checkout. No credit card numbers or passwords to remember.
Pay later. – Try first, pay later. Klarna lets you have 14 days or more to decide if you want to keep your goods or not.
Slice it. – Get all your payments on one invoice and choose how much to pay each month.
As of today, Klarna has released all touchpoints that can be updated automatically, and over the coming months will continuously roll out “Smoooth” updates to the touchpoints of all merchants.
Submit your application to PitchIt, a competition for fintech startups, taking place at LendIt Europe–one of the largest international lending and fintech conferences in Europe. This exclusive programme will nurture emerging talent throughout the competition, provide selected finalists with unparalleled access to industry expertise as well as invaluable exposure, branding and more at the event.
The August edition of the PYMNTS.com Disbursements Tracker™, powered by Ingo Money, highlights several notable developments that explain the waning influence of the paper check, and how new disbursement tools could impact the workplace, pension systems and mobile payment options.
The August edition of the PYMNTS.com Disbursements Tracker™, powered by Ingo Money, highlights several notable developments that explain the waning influence of the paper check, and how new disbursement tools could impact the workplace, pension systems and mobile payment options.
Hike recently added a digital payments wallet to its app, allowing money transfers between customers using the country’s United Payments Interface (UPI) service. Skype is another messaging service helping users quickly send money to one another using popular payment option PayPal. The partnership between Skype and PayPal enables users to send money to fellow Skype users in 22 countries, including the U.S., Canada and more than a dozen nations in Europe, through PayPal in the Skype mobile app.
Australian businesses are turning to crowdfunding, peer-to-peer (P2P) lending and online loans for finance, according to new research from Businessloans.com.au. The Small Business Credit Survey, conducted by ACA Research, found that the most sought-after alternative funding source was equity finance (34%), followed closely by online lenders (30%) and P2P business loans(21%).
However, while small- to medium-sized enterprises (SMEs) are embracing alternative sources of capital, not all of them are receiving the loans they hope for. The survey revealed that while 84.1% of businesses were successful in their applications, less than half of those (38.9%) of those were approved for all of the credit they applied for.
It is interesting to note that the number of businesses which were declined a loan is only 1.6% of respondents. The remaining 14.3% of the “unsuccessful applicant” group was approved for less than half of the loan they had asked for. Over one-third of this group (35%) had applied for more than or equal to $250,000.
The survey found that a rejected application seriously affects a business. Respondents that did not receive the full amount applied for delayed or could not expand their businesses (34%), delayed or were not able to fulfil existing orders or contracts (27%) or did not hire new employees (17%).
Peer-to-peer lender RateSetter has accredited 2,000 brokers on its lending platform, amidst a rise in P2P popularity within the general public.
Lending volumes through the broker channel, especially in auto and home improvement loans, are doubling every six months, according to the lender’s most recent settlement figures.
Across the direct and broker channels, RateSetter has also passed $150m in lending facilitated since 2014. In the last five months alone, lending grew 50% across both channels, passing the $100m milestone in March.
The other “illustrative outcomes” are developing alternatives to banks and improving access to capital for MSMEs through ‘Peer to Peer Lending’ and ‘Crowd funding’, providing a credit rating mechanism for MSMEs to provide them easier access to funds, addressing the problem of inverted-duty structure and also balancing it against obligations under multilateral or bilateral trade agreements, studying the impact of automation on jobs and employment, ensuring minimal/zero waste from industrial activities and targeting certain sectors to radically cut emissions.
Dianrong and FinEX Asia today announced the launch of Asia’s first financial technology (fintech) asset management platform. FinEX Asia was established in 2017 to connect Asian investors with US consumer lending assets, such as credit card loans.
FinEX Asia combines its risk management expertise with Dianrong’s advanced fintech capabilities to give Asian investors access to a diverse and attractive portfolio of U.S. consumer lending assets. FinEX Asia’s fintech solutions offer advanced risk modeling capabilities, blockchain data security, performance monitoring, and secondary marketplace liquidity.
This seminar looks at the regulation of P2P lending in the US, People’s Republic of China, Japan, and the UK, and discusses how regulators can help develop P2P as a safe and effective source of financing for SMEs.
Top VC funds in Fintech in Argentina (TechFoliance), Rated: A
Currently, Argentina has four major investment funds that have Fintech companies within their portfolios.
Kaszek – Founded in 2011, it recently announced the release of a third fund of $200 million to be used for young technology throughout the region. To date, Kaszek has invested USD 1.4 billion in 43 companies, including Nubank, Brazil’s largest digital bank.
Canada’s largest bank has announced that its mobile banking app will soon provide users with “actual insights about our client’s financials and a fully automated savings solution that uses predictive technology to identify money in a client’s cash flow that can be automatically saved.”
Dubbed ‘NOMI Insights’ and ‘NOMI Find and Save,’ the services are currently in a pilot release. A full launch is expected later this fall.
IOU FINANCIAL INC. (“IOU” or “the Company”) (TSXV: IOU), a leading online lender to small businesses, announced today its results for the three and six month period ended June 30, 2017.
Loan originations for the second quarter ended June 30, 2017 were US$26.2 million versus originations of US$31.8 million for the same period last year. Loan originations decreased by 17.8% due to changes made to the Company’s lending policies in response to increased delinquency levels. We anticipate that these changes will have a positive impact on our loan portfolio over the course of 2017. For the first half of 2017, loan originations amounted to $48.2 million, representing a decrease of 15.7% over the origination of $57.1 million for the same period last year.
As of June 30, 2017, IOU’s total loans under management amounted to approximately $65.7 million as compared to $79.6 million in 2016. On June 30, 2017, the principal balance of the loan portfolio amounted to $41.6 million compared to $35.5 million in 2016. The increase is consistent with the Company’s strategy to retain more loans on its balance sheet. The principal balance of IOU’s servicing portfolio (loans being serviced on behalf of third-parties) amounted to approximately $24.1 millioncompared to $44.1 million in 2016.
IOU recorded gross revenue during the second quarter of $4.4 millionversus $3.5 million for the same period last year, representing a 24.5% increase. The increase in gross revenues was primarily driven by a 55.3% increase in interest income from $2.4 million in 2016 to $3.7 million in 2017, as a result of an increase in the size of the loan portfolio. For the six-month period ended June 30, 2017, gross revenues improved to $8.7 million compared to $6.8 million for the same period in 2016.
Interest expense during the three-month period ended June 30, 2017increased by 44.3% to $1.0 million, up from $0.7 million over the previous year. The increase is attributable to an increase in borrowings under the credit facility partially offset by a reduction in the cost of funds borrowed versus the previous year. For the six-month period ended June 30, 2017, interest expense amounted to $1.9 million compared to $1.3 million in 2016.
Provision for loan losses (net of recoveries) increased to $2.4 million for the three-month period ended June 30, 2017, up from $1.2 million for the previous year. The increase is primarily attributable to an increase in defaults by borrowers and partially due to an increase in the size of the loan portfolio. To improve loss performance, IOU Financial has made changes to its lending policies and deployed its next generation proprietary IOU Risk Logic Score. In addition, the Company has implemented certain process changes to improve its servicing and collections which includes an aggressive litigation process against businesses who intentionally default on their loan obligations. For the six-month period ended June 30, 2017, IOU recorded a provision for loan losses of $4.3 million compared to $2.0 million in 2016.
Excluding non-recurring costs, operating expenses decreased 18.1% to $2.5 million for the three-month period ended June 30, 2017 as compared to $3.1 million for the previous year. During the quarter ended September 30, 2016, the Company adopted a plan to reduce operating expenses. The Company is on track to achieve its target of quarterly operating costs of $2.0 million to $2.2 million on a normalized basis in the third quarter. In the second quarter, IOU recorded non-recurring costs of $0.5 million related to vendor contract cancellations and impairment of intangible assets. For the six-month period ended June 30, 2017, operating expenses amounted to $4.9 million, excluding non-recurring costs, compared to $6.0 million in 2016.
IOU closed its second quarter 2017 with a net loss of $2.1 million, or $0.03per share, compared to a net loss of $1.5 million or $0.02 per share during the same period of 2016. For the six-month period ended June 30, 2017, the net loss amounted to $3.1 million versus $2.8 million in 2016.
IOU closed its second quarter 2017 with an adjusted net loss of $1.3 million, which excludes certain non-cash and non-recurring items, compared to an adjusted net loss of $1.1 million in the second quarter of 2016. For the first half of 2017, the adjusted net loss was $1.9 millioncompared to an adjusted net loss of $1.6 million for the same period in 2016. Assuming the cost reduction plan was fully implemented on January 1, 2017, IOU’s pro forma adjusted net loss for the three-month and six-month period ended June 30, 2017 would have been approximately $0.8 million and $1.2 million, respectively.
The same quandary that now faces established banks stood before landline telecoms operators 15–20 years ago. In terms of fintech, it seems likely that the answer will become clear over the next few years, as different banks adopt different strategies.
Global consultancy Accenture calculates that fintech threatens more than a third of traditional banks’ revenue. Due to the march of technological innovation and the emergence of more attractive investment regimes, the challenge posed by fintech is only likely to grow.
Fintech is not just a threat to established banks but also to other companies in the financial services sector. Visa, for instance, is built on technology developed during a previous financial technology revolution, and should be able to capitalise on the fintech boom.
Other attempts to integrate the two worlds include PayDunya, an online payments system that allows African e-businesses to accept payments from credit and debit cards, as well as mobile money wallets. Similarly, Yoco provides retailers with an integrated card acceptance and point-of-sale solution, incorporating a mobile app, and either wireless or plug-in card reader.
Some established banks have sought to compete by becoming incubators for fintech. Standard Bank and Barclayshave both launched startup support programmes, with the most successful companies taken under their wing at the end of their periods of support.
News Comments Today’s main news: Prodigy Finance raises $240M in debt and equity. RateSetter withdraws from UK Peer to Peer Finance Association. OCC motions to dismiss lawsuit. Funding Circle offers manual investment in Self Selected Loans. Lufax turns profit ahead of IPO. N26 has half a million customers. Today’s main analysis: Regulatory clarity RE: Madden v. Midland; Q2 earnings season […]
In a motion to dismiss the lawsuit, the OCC states;
“The Complaint by the Conference of State Bank Supervisors represents a fatally premature attempt to invoke the jurisdiction of this Court to remedy a speculative harm that CSBS alleges may arise from future action by the Office of the Comptroller of the Currency – action that the OCC may never take. The CSBS Complaint challenges:
(1) provisions of an OCC regulation amended in 2003 to authorize special purpose charters that have, to date, never been used to charter a bank; and
(2) a series of public OCC statements as part of an ongoing policy initiative that CSBS alleges to be a final decision by the OCC to make charters available to “nonbank” financial technology (“fintech”) companies.
CSBS’s denomination of these public statements as a “Nonbank Charter Decision,” Compl. ¶ 52, is wrong in two fundamental respects: it ignores that the proposal contemplates a form of national bank charter and that no final decision has been reached.”
UK-based online lender Prodigy Finance has raised $240 million in equity and debt funding, as it seeks to speed up its expansion in the United States.
The funding round comprises of $40 million in equity led by venture capital firm Index Ventures, with participation from Balderton Capital and AlphaCode, and $200 million in a debt facility led by a global investment bank, Prodigy Finance said on Monday.
Congress may clear up the regulatory uncertainty introduced via Madden V. Midland before year end. Representatives Gregory Meeks, (D-NY) and Patrick McHenry (R-NC) introduced Protecting Consumer’s Access to Credit Act of 2016. The bill reaffirms the “valid when made” doctrine, which holds that interest rates originated by a national banks are legal even after a loan is assigned to a third-party. Political insiders assign favorable odds to the passage of the bill due to its bipartisan support.
Research has shown that the Madden V. Midland district court ruling has “significantly reduced credit availability for riskier borrowers”. PeerIQ has also observed a significant reduction in the willingness of warehouse lenders to finance loans subject to “Madden Midland” risk.
Bulge Bracket Banks
Compared to a year ago, all of the banks have increased their focus on lending business lines as revenue from trading continues to come under pressure.
Non-Bank Lenders & FinTech
OneMain is leading the pack in YTD stock performance by a large margin. OMF has improved ROE and NIM while keeping charge-off rates to mid-single digits.
Except for Enova, all of the non-bank lenders increased their reserves as a % of total loans outstanding.
We see a trend of higher net-charge off rates and increased reserves. We believe this reflects prudent risk management and responsiveness to changing borrower behavior (e.g., stacking, greater access to credit, late stage credit cycle dynamics, etc.)
However, recent earnings releases from each of three public fintech stocks — Lending Club(NYSE:LC), OnDeck Capital(NYSE:ONDK), and Elevate Credit, Inc.(NYSE:ELVT) — show the tide may be turning. Here are three positives each company showed in the quarter.
While Lending Club began tightening standards well over a year ago, OnDeck did so more recently. While originations declined 19% sequentially, loss provisions also declined from 8.7% to 7.2%. That, combined with a $45 million cost-reduction plan, led to an adjusted net loss of only $1.5 million, a huge improvement over the $16 million loss in the prior-year quarter. If not for a $3.2 million severance charge, the company would have recorded positive GAAP income.
In Lending Club’s case, tightening credit attracted banks back to its platform in a big way. Banks funded 44% of loans in the quarter, compared with 13% in the third quarter of 2016.
While Lending Club took a year to repair controls and rebuild investor trust, last quarter’s loan originations were up 10%, both sequentially and year-over-year. Even better, revenue was up 35% year over year, as the company was able to earn more revenue per loan.
And while OnDeck deliberately slowed down in a big way this quarter, the company still grew revenues 25% year-over-year.
Finally, while Elevate’s revenue growth slowed to 19%, this is mainly due to the rapid growth of its Elastic product, which carries a lower interest rate than its other products; however, Elastic typically has a better-quality customer, with lower chargeoff rates. Originations grew 29% year over year, which is still very healthy.
ActiveProspect, a SaaS provider of lead acquisition solutions, is partnering with LendingTree, the nation’s leading online loan marketplace, to independently certify its web leads using ActiveProspect’s TrustedForm product.
According to a news report in CNBC, BlueVine CEO Eyal Lifshitz said that when meeting venture capitalists in recent years, the company has had to have a good story as to why it is different from other online lenders in order to get funding — something it didn’t have to deal with three years ago.
BlueVine, which is an online lender that is focused on the small business market, raised funding last year and has secured a total of $188 million in venture capital funding since 2013.
Online lending startups looking to raise money now have to answer one important question that didn’t get asked much in the past: how do avoid the fate of early pioneers like Lending Club or On Deck, which have lost nearly 80 percent of their value since going public in 2014.
According to CB Insights, the number of funding rounds in the online lending space is on pace to hit a 5-year low in 2017. The dollar amount is also expected to drop to $2 billion in 2017, less than half of the $4.4 billion the sector saw in 2015.
One investment fund that intrigues Kaal is LendingRobot, which invests in lending marketplaces such as Prosper Funding Circle and Lending Home. What fascinates him is that its trading is automated, an algorithm based on investor risk preference. Due to blockchain technology, all transactions are a matter of public record, in compliance with best execution obligations. This facilitates the location and auditing of trades, internal investigation, and reporting to regulators.
Blockchain might very well diminish the role of banks in the asset management industry. As Kaal writes, banks charged $1.7 trillion in processing fees in 2014. But with blockchain “financial transactions can be executed instantaneously at near zero transaction costs, increasing the efficiency for businesses and individuals exponentially.”
A recently formed group representing 31 data aggregators and fintech companies, called Consumer Financial Data Rights, says banks still aren’t forking over as much data as they should be. The group is meeting with bank regulators to plead their case and trying to get consumers to petition regulators on their behalf, urging them to send a Tweet that says, “.@CFPB protect Americans’ ability to grant access to their financial information. #handsoffmyfinancialdata.”
The leaders of the CFDR accused banks of pushing bilateral agreements that restrict the types of data that will be shared and the use cases under which it can be shared. They also said large banks refuse to even talk with them about these issues. They say they would like to see the industry coalesce around a set of principles such as the European Union’s General Data Protection Rule.
Banks say they have no intention of restricting data sharing, that they want to let customers decide with whom their bank account data should be shared, and that they want to make sure that data is secure.
Americans apply for more than 250 million new financial products each year, but the majority of those applications are completed on paper or over the phone. A startup called Original Tech wants to change that by providing white-label software to improve loan applications completed online.
It enables borrowers to apply for loans on desktop, tablet or mobile devices without needing to go through the manual process of filling out paper applications or fax documents to the financial institution.
For lenders, Original Tech takes care of the data collection, fraud prevention and compliance enforcement. But its system is designed to work within lenders’ existing workflows and allows them to apply all their own underwriting rules.
n Friday, P2P lending platform RateSetter announced it has withdrawn from the Peer-to-Peer Finance Association (P2PFA). This news comes less than a month after the online lender was hit with a series of significant operational challenges as several large loans have struggled.
As previously reported, RateSetter hit an operational hurdle that culminated in approximately £80 million worth of loans being taken over by the platform. The online lender apparently lent £36 million to the Vehicle Trading Group Limited and the company has since fallen into administration (bankruptcy) after taking on too much debt. Additionally, £12 million was lent to an advertising company Adpod and £8.5 million of the loans are still outstanding and should not have cleared its own credit policy.
UK p2p lending Marketplace Funding Circle announced today that from September 18th, there will be an important change to how investors can invest on the marketplace. From that date Funding Circle will withdraw the option to manually choose which businesses to lend to and which loan parts to sell. Instead Funding Circle says it will launch a significantly improved and upgraded version of existing Autobid and Autosell lending tools.
Investors will be able to choose one of two new lending options based on their personal preference. Both options will be available as a Funding Circle ISA, which Funding Circle intends to launch later this tax year.
Balanced: you will automatically lend to the full range of creditworthy businesses (A+ to E), aiming to achieve an attractive, stable return. This will allow you to build a balanced portfolio similar to the makeup of small businesses in the UK today. The projected return is estimated to be 7.5% per year after fees and bad debt.
Conservative: you will focus on lending to businesses that have been assessed as lower risk (initially A+/A) but with a lower projected return. The projected return is estimated to be 4.8% per year after fees and bad debt.
To the authors, there are three ways finance operates through the economy: 1) credit intermediation 2) credit-multiplication and 3) credit generation.
“Credit-multiplication” they note is the most familiar counter-example. This encapsulates the theory of fractional reserve banking, the idea that the banking system lends out more than it receives in investor deposits and holds only enough of the latter to handle anticipated daily withdrawals. The rest is continuously lent out.
If banks are free to create money from thin air, what then are the limitations?
The authors argue since credit outstanding is not fundamentally dependent upon—or, therefore, limited by— pre-accumulated investment capital, it must be limited only by investment opportunities which are viewed as potentially profitable. “In other words, credit is endogenous rather than subject to exogenously given, pre-accumulated funds.” If the opportunities are there, banks will generate the funds (on effectively maximum leverage by way of an accounting trick) to find ways to finance them.
What’s really interesting, however, is how it applies to the budding fintech sector, which aims to increase its independence from the official sector by recreating models based on loanable funds (credit intermediation) assumptions.
While the authors note it’s probably too early to decisively write off fintech, the way things are proceeding seems to support their theory. In short, they believe that if these systems are to expand beyond their peripheral place, they will have to reintegrate into the core finance franchise system eventually.
The Peer to Peer (P2P) lending market has risen from zero, around 10 years ago, to an outstanding investment level of more than £8.7bn of loans in the UK alone.
An obvious point perhaps, but the first thing to understand about P2P platforms is that no two operate the same model. Despite residing in a busy market-place, every platform takes a different approach to security, risk assessment and its lending processes.
1) Pre-approval of loan: The checks put in place to ensure that high-quality loans are approved, where the loan can be afforded by the borrower but still recoverable in case one day it is not.
2) Post-approval of loan: The measures put in place to deal with loans defaulting and the recovery of capital in that situation.
LendingCrowd is offering both new and existing investors the chance to earn £150 cashback when they invest £2,500 or more before 31 August.Lending Crowd offers two investment products, which are both eligible for the £150 cashback offer.Both can be included within the company’s Innovative Finance ISA.The Growth Account automatically invests funds in a diversified portfolio, which offers a target rate of 6% a year (after fees and bad debt). You need a minimum of £1,000 to invest.The Growth ISA and Self-select ISA allow you to invest up to £20,000, with the target returns being tax-free. The platform also allows transfers in from existing ISAs.
Advancements in mortgage technology have been made but it seems they have yet to revolutionise the mortgage process – but every one knows they will.
The ideal is a digitally joined up housing, mortgage and legal process allowing the consumer to transact in a way which is convenient to them, and in a shorter time frame – but this has yet to be achieved.
Full online integration of APIs in the UK mortgage lending market is being worked on by a handful of stakeholders, although attendees said that behind closed doors a lender is close to rolling out its application-free mortgage process.
Investing in peer-to-peer lending is one way to improve the return on your savings, but for investors who don’t want to go through the trouble of setting up their own account with a peer-to-peer lending platform and micro-managing each debt investment, P2P Global Investments (LSE: P2P) offers an alternative route for savers to gain access to the sector.
Shares in the investment trust have gained 12% since April, after the fund manager announced a review of its performance in light of falling returns.
At a current price of 861p a share, P2P Global Investments currently trades at a dividend yield of 5.6%.
Boden founded her British fintech start-up in 2014, shortly after she left one of Ireland’s biggest financial institutions, Allied Irish Bank, where she worked as the chief operating officer.
“I started thinking about a bank that really focused on doing a couple of things well, that was all about everyday transactional banking, the daily banking business, and what (would happen) if you used the information on each transaction, to give people insight into their overall lives.”
Boden believes that the challenger bank’s smaller scale operation gives it an edge over larger players, by significantly reducing the costs of running a bank.
Shenzhen-based financial conglomerate Ping An Insurance Group said Friday that its online lending operator Lufax Holdings was no longer loss-making as it prepares for an initial public offering.
Established in 2011 with the help of Shanghai municipal government, Lufax, or Shanghai Lujiazui International Financial Asset Exchange, is currently the largest peer-to-peer lending platform in mainland China in terms of outstanding loans, totaling 1.5 trillion yuan ($225 billion) as of Friday, according to industry consultant WDZJ.com.
Of Ping An’s nonstandard debts, 56.9% were exposed to infrastructure investments, followed by 27.7% to non-bank financials and 12.3% to real estate.
Compared to last year when Ping An netted 9.5 billion yuan from a restructuring, net profit of its internet finance business fell 94.7% to 420 million yuan in the first half. That represented 0.9% of the wider group’s net profit, which totaled 43.43 billion yuan in the first half, up 6.5% from a year ago.
Lufax has gone from a simple peer to peer lending platform that launched in 2012 to a diversified wealth management platform with over $60 billion in assets under management. They are a true success story and how Greg and his team have done this is simply fascinating.
How Greg, an American, ended up in China becoming the CEO of a fintech company.
What was the opportunity that Greg and the Ping An chairman saw that led to the founding of Lufax.
What they really wanted to do and why they ended up deciding to start with a P2P lending platform.
Yunfeng Financial Group (0376.HK) said it would be the main investor in a $1.7 billion acquisition of insurer MassMutual International’s Hong Kong unit – a deal that sent shares in the Jack Ma-backed finance firm soaring as much as 30 percent.
Yunfeng will own 60 percent of MassMutual Asia. The rest will be owned by other investors such as Ant Financial Services, an affiliate of billionaire Jack Ma’s Alibaba (BABA.N), as well as Singapore sovereign wealth fund GIC Private Ltd and Chinese Internet and telecoms firm SINA Corp (SINA.O).
In April, a sophomore in Xiamen, Fujian province, killed herself because she was unable to repay 570,000 yuan ($85,448) she had obtained via a peer-to-peer lender, according to reports in Fujian Daily.
Earlier this year, the Inner Mongolia Morning Post reported that about 900 university students in the autonomous region were cheated out of more than 9 million yuan after they signed up for a “promotion” that purported to offer iPhones for 800 yuan, rather than the usual price of about 2,000 yuan. In fact, they had unwittingly applied for loans from a peer-to-peer platform and were quickly pressured to repay the money at high rates of interest.
Although there are no nationwide statistics related to criminal incidents linked to peer-to-peer lending, a number of provinces and regions have released data that illustrate the gravity of the situation.
In May, police in Jilin province said they had handled 193 cases related to the issue, busted three gangs and detained 31 people suspected of using the system to defraud would-be recipients.
Tianjin-based Gongming Zhongtai International Assets Leasing, operator of online and mobile automobile leasing platform Laiyongche (literally “Come Use a Car”), has won RMB 100 mln in Series A funding, according to an announcement from CEO Lu Yuquan at a press conference in Beijing. The round was led by P2P lending platform Meili Jinrong (Meili Finance) and mobile gaming company Jinke Culture Industry (300459.SZ), with participation from Xingyi Capital and Xu Xuepeng, founder of Yuehui Capital.
As blockchain, AI and other emerging technologies become ever more prevalent in Hong Kong finance, demand for specialist tech candidates is heating up and firms have to offer more – both financially and in terms of career development – to prospective employees.
In short, we need to build a larger financial technology talent base in Hong Kong – not just developers and engineers, but also fintech entrepreneurs and creative thinkers.
IVC, one of the original venture capital firms on Sand Hill Road in Silicon Valley, is poised to take a substantial stake in Fintech unicorn Transferwise. This is a according to a report by Sky News that indicated IVP would invest approximately $60 million in the young firm that is an express route to disrupt the banking industry.
Options, a provider of cloud-enabled managed services to capital markets, has received nearly $100 million in investment from New York-based private equity firm Bregal Sagemount. The money will be used for growth and platform innovations.
Instamojo, an India-based digital payments platform for SMEs, has raised undisclosed pre-Series B funding from Japanese payments company AnyPay.
Dutch financial services provider Aegon is partnering with online lending platform FundingCircle.
BUNDABERG-based Auswide has criticised how lending regulatory caps are impacting small banks, saying they will partially suppress its own loan growth in the next six months.
The comments come as the 23-branch lender reports a rise in profits and dividends.
Auswide accelerated lending in the second half, and its loan book rose 4.01 per cent for the year to $2.773 billion. That remains off industry averages of 5.4 per cent, according to Reserve Bank of Australia statistics.
Auswide profits rose from $11.7 million to $15.1 million – expenses from merger activity in fiscal 2016 were not repeated. On its preferred underlying result, earnings rose from $14 million to $15.6 million.
Bengaluru-based digital lending platform Capital Float has raised $45 million (Rs 293 crore) in its Series C round of funding led by Silicon Valley-based fintech-focussed venture capital firm Ribbit Capital.
Existing investors SAIF Partners, Sequoia India and Creation Investments also participated in the round, Capital Float said in a statement.
There are currently two crowdfunding models that are of interest to regulators. The equity-based model allows for a stake in the venture via private placement. And peer-to-peer (P2P) lending, which falls under the Reserve Bank of India’s (RBI’s) purview, connects lenders and borrowers who may mutually agree upon either a fixed interest rate or a variable one. Both operate via third-party digital platforms.
Other benefits are less obvious. In a 2016 paper for the US government’s small business administration, Research On The Current State Of Crowdfunding: The Effect Of Crowdfunding Performance And Outside Capital, Venkat Kuppuswammy and Kathy Roth found that crowdfunding success served as proof of concept and made it easier to subsequently access capital from more traditional sources such as banks, venture capitalists and angel investors.
The immaturity of digital crowdfunding globally and the start-up sector in India mean that these come with plenty of caveats, however.
Fintech has emerged as the most attractive sector in which to invest with remarkable growth figures in 2016, having received USD$ 129 million in investments. M&A activity has also been intense lately, which contributed to the overall progress of the ecosystem. Payment still accounts for the largest pool of fintech startups. Foreign and local startups could easily break into new sectors, namely InsurTech (insurance), Wealthtech (wealth), and Regtech (regulation). Vietnam has even set up a steering committee on fintech led by the Central Bank with the purpose of supporting the State Bank of Vietnam Governor in his policies.
The Bangko Sentral ng Pilipinas (BSP) is studying new digital solutions as financial technology platforms proliferate, opening up new markets and access for broader segments of society while also increasing the risk of harm to unwitting consumers and investors.
Espenilla said the BSP was considering two solutions: An API system, which streamlines the reporting requirements between the BSP and regulated entities such as banks, and an automated complaint handling portal, which establishes a direct link with customers.
Middle East investment companies are ramping up their lending to businesses, providing a lifeline for small and medium-sized firms struggling to secure finance from banks that tightened credit after a suffering rise in bad loans.
Industry participants estimate non-bank lenders in the region could provide around $1 billion over the next three to five years, including secured loans, mezzanine debt, preferred shares and convertible loans and bonds.